Sunday, February 1, 2015

Native American Gaming

Michigan has Native American gaming.  We have casinos in 23 different cities, Acme-through-Williamsburg.

Some are incredibly lucrative while others are not.  The most lucrative ones spin off $100,000 per tribe member, per year.

Some Native American kids grow up knowing that they will start receiving two thousand dollars a week the day after their eighteenth birthday.

Sounds like "Lived Happily Ever After"

What could go wrong?

One risk is that a surprising number of people suddenly discovered their "Indian" roots once the checks started hitting the mail.  This surge in the number of people claiming membership in the tribe dilutes the payouts.

Some tribal elders are addressing this influx of new "Indians" by making decisions about who is a tribe member and who was not.  So individuals face the risk of being un-tribed in addition to the risk of dilution.

Unfortunately, this pruning of the rolls can become a temptation to settle old scores.

Another threat is competition.

As competitive pressures increased, however, the need for strategic marketing plans soon became evident. Many of the tribes could no longer depend solely on their monopolistic status. In fact, it appears that Indian gaming may have become a victim of its own success.
Competition began to arise from not only the other tribes but by the increased legalization of state sanctioned gaming. Many states simply did not want to sit on the sidelines as the tribes were the only ones to benefit from gaming.  -Source
So will those kids get $2000 a week for the rest of their lives? It comes back to what your grandpa told you.  If it is too good to be true...then it is probably not true.

Those kids will hit the ground HARD when the money stops.

The geography and uselessness of reservation land were the biggest obstacles in attracting any type of economic investment. Reservation land consists mainly of throw away land from the old frontier days. Most tribal land is barren and isolated and cannot even support the simplest of agricultural crops. One of the few industries that they could attract was that of toxic dumping. Most tribes rejected this type of industry, however, due to their strict religious beliefs on the sanctity of land (Turner 1992).
Even if this land was rich in natural resources, it is held in trust by the U.S. government and thus cannot be used as collateral for loans. Therefore, without the capital for economic investment, the ability to start businesses was virtually impossible.   -Source

A good model

Consider Earvin "Magic" Johnson.  He signed with the Los Angles Lakers for an unprecedented one million dollars a year for 25 years.  From Wikipedia:

Johnson began thinking of life after basketball while still playing with the Lakers. He wondered why so many athletes had failed at business, and sought advice. During his seventh season in the NBA, he had a meeting with Michael Ovitz, CEO of Creative Artists Agency. Ovitz encouraged him to start reading business magazines and to use every connection available to him. Johnson learned everything he could about business, often meeting with corporate executives during road trips.
 Johnson runs Magic Johnson Enterprises, a company that has a net worth of $700 million;

$700 million dollars is 28 times greater than Magic Johnson's lifetime earnings.  That is an awesome rate of return.

Those kids would never notice if 25% of their new income were squirreled into a mix of local development and traditional investment portfolios.  That is, they would not notice until "Too good to be true" ends.

1 comment:

  1. Agreed.. Good times don't last forever, and you should squrrel away money whenever you have the opportunity.

    Some of our tribes have casinos, but the way they handle it hereabouts is that they close the tribal rolls before they break ground. If you're not in the tribe before the permits are obtained, you're not on the rolls when the money starts flowing. A child born afterwards to a tribal member is considered a member, but unaffilated adults need not apply.