The sellers, the Buss family, bought the team for $67.5 million in May 1979. 

 

Surprisingly, that profit represents only an 11.5% annual compounded return.

 

In comparison, during the same period, the S&P 500 (the most representative basket of American stocks) returned an 11.99% annual compounded return.

 

That means if the Busses had put that money into a standard index fund and forgotten about it…they’d have the same amount.

 

I find this incredible. The most glamorous, valuable sports team in the world or the most boring, vanilla index stock fund you can imagine both give you the same return.

 

Now, that was the return on the team's sale. The Lakers have made a ton of money for their owners in the last 45 years. And Jerry Buss didn’t pay cash—it was a leveraged purchase using loans secured by his real estate. 

 

But the big picture is this: it’s not what he bought, it’s how long he held it.

 

The first rule of compounding, famously stated by Charlie Munger, is never to interrupt it unnecessarily.

 

And that’s easy to do when you own a sports team. It’s fun, and the kids are happy to inherit and keep it. It’s a little harder not to touch a building or stock portfolio for almost half a century.

 

That's why I tell investors and homebuyers to buy buildings they like, and then put it under management. It reduces the odds of you selling and your kids asking you why you sold that Hollywood apartment building or that Los Feliz mansion in 1996, robbing them of their generational wealth.

 

Lori and I are in the process of doing 1031 exchanges on several properties I bought years ago. One of our goals is to find “heirloom quality” real estate—pretty and profitable—buildings our kids will want to keep!