Motley Fool Money - David Bowie, Financial Genius

Episode Date: August 11, 2020

The late, great David Bowie was not just one of the most influential musicians of the past 50 years. He was also brilliant at hedging financial risk. In her book An Economist Walks Into A Brothel: And Other Unexpected Places to Understand Risk, economist Allison Schrager explains how Bowie turned his song catalog into a bond. Learn more about your ad choices. Visit megaphone.fm/adchoices

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which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. With a Motley Full Money Extra, I'm Chris Hill. What do movie producers, prostitutes, and big wave surfers have in common? If they're successful, they're all good at managing risk. It's the central topic of Alison Schrager's book, An Economist walks into a brothel and other unexpected places to understand risk.

Schrager's an economist who profiled a number of people who, in their own way, managed risk to further their careers. including David Bowie. That's right. Bowie was one of the most influential musicians of the last 50 years, and he was an expert at hedging risk. When we talked last year, Schrager explained how David Bowie turned his song catalog into a bond. Bowie is interesting, and that when he was young, like just starting out,

got his first record deal, you know, usually what they do is they give you an advance and they own your royalties. And that's actually, it sounds horrible, and this is why musicians always say they're poor, even when they're successful, but it's actually a fairly good risk trade because most contracts are signed. That person will never make money,

but they get to keep their advance. So the music company is just taking a long shot that your royalties be worth anything, because odds are they aren't. But David Bowie, when he was young, he was like, I'm going to make it, and I will take a smaller advance. You didn't have much money.

And just because I want to keep my royalties, because I believe in that upside will go to me. And he was right, obviously, he became David Bowie. But then when he was in his late, late 40s, early 50s, he was really concerned. It was like Napster was coming out, and he was like, I don't think these royalties are going to be worth much going to a war.

This industry is going to totally change. Apparently, he just has amazing foresight, not only for the music industry, but when he was young about his potential. So he securitized his song catalogs. Like, he turned it into a bond. So then all of a sudden he took that money, and gave the upside to someone else.

I'm Chris Hill. Thanks for listening. We'll see you next time.