An Olympic Investment

Like most things in 2021, the Tokyo Olympics have been shrouded in controversy. Whether or not they should have taken place, and regardless of your opinion on the events that have transpired before and during the games, we can all agree that this incredible worldwide stage has borne inspiring performances and incredible feats. But that stage didn't appear out of thin air - the host city had to build the appropriate venues and prepare the proper infrastructure. And behind the transcendental moments where limits are pushed, ceilings are smashed, and history is made, you'll find massive amounts sacrifice and cost on the part of the athletes, as well. While many of these feats of strength, endurance, and power are accomplished in a matter of minutes or even seconds, they are built on years and years of sweat, tears, and investment - emotionally, mentally, physically, and financially. Considering the Olympics from a financial perspective, we explore what the host cities and athletes reap from these incredible investments. 

Host City Investment

The host city for each Olympics is chosen by the IOC, or the International Olympic Committee. Cities must bid for consideration by submitting an application to the IOC, and from this pool of options the active members of the committee cast a secret vote, unless they are affiliated with the city being voted on. The majority vote wins the honor of hosting the esteemed event. But taking a deeper look at the costs associated with hosting the Olympics, it’s hard to imagine why a city would bid for the opportunity in the first place. Here are the estimated costs of the most recent Olympic games, including the projected cost of the games in Tokyo:

• Sydney 2000: $4.7 billion
• Athens 2004: $10 billion
• Beijing 2008: $42 billion
• London 2012: $11 billion
• Rio de Janeiro 2016: $11.2 billion
• Tokyo 2020: Projected to be over $20 billion

Yeah, you read that correctly - billions of dollars. Surely these cities are making some sort of profit though, right? Well...Studies suggest that the 2016 games in Rio might have generated $5-6 billion in total revenue, but a lot of that goes back to the IOC. London is estimated to have brought in $5.2 billion, and Beijing $3.6 billion. The cities don't earn anything from the broadcast of the Olympics beyond publicity, and the tourism isn't nearly enough to offset the cost.A huge part of the cost associated with hosting the Olympics comes from building the infrastructure to accommodate the events, such as stadiums, roads, and public transit. (Los Angeles is among one of the only cities that generated a profit from hosting the Olympics, largely because the infrastructure already existed.) The improvements made to the city persist even after the games end, and the community can continue to benefit from them. While this doesn't exactly translate to dollar signs in revenue, it's still a version of a return on the city's investment.The publicity a city earns from hosting the event is another intangible benefit. Between the opening ceremony and the coverage of their community, a city is able to showcase their vitality and culture which can generate tourism in the future - and also just feel pretty damn good. While hosting the Olympic games is not the wisest investment financially speaking, and fewer cities have bid to host in recent years, there are some things money can't buy - and flexing on a worldwide stage is one of them. 

The Athlete's Investment

Speaking of things money can't buy, the athlete's investment might not breach the $1 billion mark, but the sacrifices that an athlete makes to compete at the Olympic level are physical, social, emotional, and mental, and arguably cost way more.  An Olympian's journey begins at a young age - usually between 2 and 5 years old. It’s estimated that it takes at least 8-9 years of intense training to fully master a sport, and that’s just the physical side of it. Training and performing at a high level comes with psychological and emotional demands as well, from the self-discipline and focus required to dedicate yourself to one skillset and train consistently, to the anxiety and pressure of competing in the spotlight.Taking the idea that it takes 10,000 hours to master any skill, and assuming that athletes have long surpassed that threshold by the time they reach the Olympics, you can figure that any athlete would be well-off if they were paid for their time at all, even at minimum wage. But the actual financial payout for most Olympians is suprisingly low.If an athlete places at the Olympics to earn a bronze, silver, or gold medal, many countries offer prize money in tandem with the award. For example, in the US, a gold medal earns roughly $38,000. But that's a one-time payment, not a residual salary. You don't have to be a number-cruncher to know that $38,000 in exchange for 10,000+ hours of work is not exactly what most labor unions consider a fair wage - and the vast majority of athletes competing in the Olympics don’t place in their event at all. Another revenue stream for athletes comes by way of endorsements, and in the case of superstars like Michael Phelps, Simone Biles, and other household names, these endorsements are worth multiple millions of dollars - making that front-end investment 0f their time, bodies, and childhoods well-worth their time. But again, these endorsements are only extended to the highest performing athletes, so the vast majority of Olympians won't receive this kind of payout. Instead, on top of grueling training schedules that could easily be considered a full-time job in their own right, most Olympians hold other jobs. Engineers, lawyers, teachers, customer service associates, real estate agents, and NBA players, the careers that Olympians hold are sometimes related to their sport, but often are completely unrelated. Regardless, it's amazing that these individuals are able to maintain a grueling training schedule after they clock out, when most of their colleagues are reaching for a drink or taking a nap.

You Can't Put a Price on Prestige

So, the Olympics is not exactly the most lucrative investment for host cities, or the athletes that we stay up til 2 AM to watch. In the absence of a financial incentive, the sacrifices that the athletes make become even more inspiring. Purely driven by passion, these athletes commit to hours and hours of training, combined with mental and emotional preparation.While they are competing at professional levels year-round, undoubtedly earning some prize money and endorsements in their niche fields along the way, the Olympics represents the pinnacle of an athlete's career. Only the best can gain access to the competition, let alone place for a medal. The Olympic games have been a part of human history ever since we began recording our civilization, and while supporters tune into sports that they love year-round, the Olympics is the only time where the entire globe's attention is captivated, and we collectively hold our breath as our favorite competitors cross the finish line or stick a landing.The Olympics is one of those rare things that don't require financial justification, because it's reputation transcends it, and the prestige associated with the games connects with something innate and primal. Whether or not it's financially smart to compete at the Olympics is a moot point, because you can't put a price on inspiring the world by transcending human limits. The Olympics might not pay out financially, but they do make it clear that passion and prestige are more powerful than money.At NEST, we understand that money is a means to living out your passion. Connect with us by emailing info@nestfinancial.net to optimize your finances and start manifesting the lifestyle that you've always wanted.DISCLAIMER: We are legally obligated to remind you that the information and opinions shared in this article are for educational purposes only and are not financial planning or investment advice. For guidance about your unique goals, drop us a line at info@nestfinancial.net.Find NEST on:LinkedIn   Facebook   Twitter  Yelp