Why DEI and Emerging Markets Are a Recipe for Financial Disaster
When Jerry Buss purchased the Los Angeles Lakers in 1979 for $67.5 million (as part of a package deal that included the Forum and Los Angeles Kings), he stepped into a league in deep turmoil. The NBA was struggling with declining television ratings, a sharp 26% drop in national viewership from the year before, lagging attendance, and a perception that the sport was too individualistic, racially divided, and less “family-friendly” than the NFL or MLB.
Despite inheriting a marquee team with Kareem Abdul-Jabbar on the roster and a title just seven years prior, Buss's gamble was far from safe. The financial health of the NBA was fragile, with team valuations volatile and league profitability highly uncertain. Buss had to not only inject capital but reinvent the game-day experience itself.
To this end, he pioneered a groundbreaking blend of sports and entertainment. He introduced the Laker Girls, installed courtside music acts, cultivated celebrity attendance, and transformed Lakers games into the place to be in Hollywood. His ownership ushered in the "Showtime" era, and the Lakers would go on to win ten NBA championships under his leadership.
In pure business terms, Buss turned $68 million into roughly $10 billion, cementing the Lakers as one of the most recognizable global sports brands. That sounds like an incredible success—until you compare it with passive alternatives.
The Passive Paradox: Great Brands vs. Great Businesses
While Buss built a DEI-era sports empire through hands-on management and reinvention, a passive $68 million investment into the S&P 500 index in 1979 would today be worth over $13 billion—$3 billion more with no active involvement, no operating costs, and no cultural revolution required.
Cultural Value ≠ Capital Efficiency
While Buss built the Lakers into a cultural icon, the comparison reveals a harsh truth for investors: extraordinary operational involvement and cultural impact do not necessarily translate to superior returns. The Lakers required decades of active management, operational losses in early years, and continuous reinvestment—not to mention the unpredictable risks of player salaries, collective bargaining, and public sentiment.
And even with all of that, Buss’s $10 billion result underperformed passive stakes in businesses that quietly compounded cash for decades, without celebrity involvement or ESPN coverage.
Investment Performance (1979–2025, Approximate):
Lakers (active ownership): ~$10B
S&P 500 (passive): ~$13B
Apple: Over $800B
Costco: ~$63.5B
Starbucks: ~$28.4B
Nike: ~$47.6B
→ Despite championship rings and cultural impact, the Lakers underperformed passive index funds and top compounders like Costco or Apple.
→ Buss’s investment compounded around 10.5% annually — respectable, but not elite.
2. Modern DEI Investing – Strong Mission, Weak Returns
Public Market Funds:
A 2019 study found that 17 of 18 ESG funds underperformed the S&P 500 over a 10-year stretch.
SHE ETF (focused on gender diversity in leadership) has trailed the S&P in most timeframes.
DEI/ESG funds typically charge higher fees (average ~0.69%) than broad index funds (~0.09%).
Many have higher concentration and volatility, with no consistent outperformance.
Private DEI Funds and Startups:
Backstage Capital: Founded to fund underrepresented founders. Couldn’t scale. Downsized in 2022.
The Wing: Raised $118M as a women-focused coworking startup. Shut down in 2022.
WCEO & WOMN ETFs: Low assets, underwhelming performance.
→ DEI funds and socially-driven startups often generate media attention, but not alpha.
→ Social impact ≠ financial outperformance.
3. Emerging Markets – The Global Growth Mirage
The Pitch (2000s):
BRICs (Brazil, Russia, India, China) were supposed to dominate global growth.
EM funds surged in the 2000s as China and Brazil boomed.
The Reality (2010s–2020s):
MSCI BRIC Index: ~5% total return over a full decade (2012–2022).
S&P 500 in same time: +232%
Goldman Sachs shut its BRIC fund in 2015 due to weak returns.
MSCI EM Index delivered just 3.7% CAGR from 2010–2019.
Currencies, governance issues, and volatility eroded gains.
China’s tech crackdown and economic slowdown crushed investor returns.
→ EM economies grew, but investors didn’t profit.
→ U.S. equities — especially tech — outperformed by a wide margin.
4. Key Takeaways
Capital efficiency beats cultural relevance over time.
Jerry Buss built a $10B asset — but it underperformed Apple, Costco, Nike, and the S&P.
DEI and ESG strategies often carry higher costs and lower returns.
Emerging markets were heavily promoted, but delivered disappointing long-term results.
Compounders quietly create generational wealth — often without headlines.
If your goal is to build wealth, invest in simple, capital-efficient businesses.
Once you’ve done that, you’ll have the resources to fund social change — or even buy a sports team.
But if you skip the compounding step, the story usually ends with underperformance.