Jack Nicklaus retired from professional golf in 2005 after one of the most successful careers in PGA history. In addition to winning every major tournament numerous times, Nicklaus began a parallel career as a designer of golf courses in the mid-1960s, when he collaborated with Pete Dye in creating The Golf Club in the suburbs of Columbus, Ohio.

Shortly after retiring, Nicklaus decided to take stock of the empire he had created by assigning a numerical monetary value to it. Eventually, he hired a group of advisers to come up with that figure and after roughly two years of consultation they valued Nicklaus’s design, trademark, and endorsement business at roughly $296 million. At this point, Nicklaus made a fateful decision. He decided to turn wealth into money.

In an affidavit which got filed in the Supreme Court of New York, Nicklaus explained that “I wanted my family to retain control of those businesses during my lifetime and beyond, so I decided to monetize a little less than half of the value of the businesses as part of estate planning for the benefit of my children and their families.”1

Nicklaus’s team then started looking for “a partner who would help the company grow beyond where Nicklaus had taken it,” and they found that man in Howard Milstein, who owned Emigrant Bank, and was willing to buy a minority share (49 percent) in Nicklaus’s design and endorsement business. In order to facilitate the transfer, Nicklaus worked closely with his lawyer Jim Schnare to create a new company known as Nicklaus Companies, LLC, which consolidated “all of Nicklaus’s course design, trademarks and endorsement businesses, plus some smaller companies, and bundle them up and sell them to the new company, of which Nicklaus would own 51% and Milstein 49% through his Emigrant Bank.”2 In exchange for granting Milstein a 49% stake in his operation, Nicklaus “would receive $145 million in cash for what he called estate-planning purposes and 51% equity interest in the new company.”3

At this point, the facts of the case begin to collide with each other. It turns out that the $145 million which Nicklaus received “for estate planning purposes” was a loan, “which bore interest of 8.5%” granting Milstein “the right to convert that loan to a 49% equity stake in the company.”4 Nicklaus had signed an agreement which, as he admitted in the legal affidavit, “I obviously did not understand or foresee what that would lead to over time.”5 Blinded by the size of the payout, Nicklaus failed to see that he had just saddled his operation with a $145 million debt at 8.5 percent. Not only that, he had also agreed that the “first $12.325 [million] of the company’s net income each year would go to Emigrant Bank to cover interest.” Golden Bear International, Nicklaus’s company, was entitled to the next $12.835 million of net income “so long as the loan wasn’t in default.”6 Nicklaus also agreed that GBI would provide payment in kind notes, which amounted to a transfer of equity from Nicklaus to Milstein, “if the company did not have enough net income to pay Emigrant [Bank] all of the interest due at any point.”7 Alex Miceli, author of the article, describes payment in kind notes as “part of the higher math of financing, not for the faint of heart but something that would have clearly been in Milstein’s bailiwick as a graduate of Harvard Law School, a successful financier and owner of Emigrant Bank,” which is a polite way of saying that Nicklaus was out of his depth when he signed the agreement and Milstein intended to use the complexity and opacity of the agreement as a way of stealing Nicklaus’s business from him.

Shortly after the deal was signed and the original payment of $145 million was transferred to Nicklaus in 2007, the economy entered what has come to be known as the Great Recession. Because the $145 million payout was really a loan, all of the risk landed in Nicklaus’s lap because there is no shared risk in a loan. This means that Milstein used the loan to whittle away at Nicklaus’s equity in his own company until finally Nicklaus lost control of his own operation. According to Nicklaus’s affidavit, “By 2011, GBI and NFD [a membership reciprocal network of Nicklaus-designed golf courses] had no real equity in the company, as the Class A Units were underwater by a lot.” At this point, Milstein “used the company’s poor financial condition to obtain a majority of seats on its board of managers, which gave him control over the company’s board and operations.”8 Milstein then entered into a new agreement which “gave Emigrant Bank governance and control of the board of managers and made Milstein the board’s co-chairman,” giving him “the controlling vote of all major decisions.” At this point Nicklaus discovered not only that he had no control over the organization that he founded, he also discovered that he no longer had the right to talk to potential clients. “Once Howard had permanent control of the company, he acted as if he owned me,” Nicklaus said in his affidavit. “He tried to control every aspect of my life, from what I did, to whom I spoke with, to where I went, as if I was his property. I always tried to be respectful, but there was no respect in return. I also tried very hard to make the relationship work, but it became increasingly obvious that I had aligned myself with a person who didn’t respect me as a human being.”

On November 23, “a Manhattan judge” sided with Milstein and effectively ruled that Nicklaus cannot use his “own name, image or likeness in connection with commercial ventures in which I am involved in the future.” Nicklaus was 82 years old when he filed his affidavit in May 2022. He was at the end of what everyone conceded was a “fabulous career,” but during the six decades it took to build up his company, Nicklaus, in his own words, “went from being the company’s owner to being a disrespected employee. I made a deal that I thought would allow me to continue controlling the business I had built” but ended up signing an agreement that granted Milstein “ownership of me for the rest of my life.”9

In order to understand what happened to Jack Nicklaus we have to ask fundamental questions based on fundamental economic concepts like usury, labor, money, wealth, and surplus value. It’s clear that Nicklaus had no real understanding of any of those terms, nor is this surprising. I wrote Barren Metal to explain those categories from the point of view of moral philosophy, which is the genus to which the species economics belongs. Economics is not physics, although it has pretended to be just that ever since the late 18th century when Adam Smith wrote The Wealth of Nations and turned Isaac Newton’s understanding of gravity and inertia into self-interest and competition.

Wealth is an ambiguous term. Sometimes it means money; sometimes it refers to the thing which is the source of the money. The conventional dictionary explanation of wealth invariably confuses it with money, which is precisely what Jack Nicklaus did when he accepted a “payment” of $145 million in exchange for a 49 percent stake in his business. In his book, Rich Dad Poor Dad, Robert Kiyosaki defines wealth as “the ability to survive a certain number of days forward” without working.10 Wealth involves not just money; it involves the generation of money. “When it comes to wealth,” Kiyosaki continues, “money may or may not be important. For instance, if you have a lot of money, but at the same time you have a lot of debt and high expenses, you may not be wealthy. This is because you can only survive for a short period of time rather than a longer period.”11

Aristotle recognized the difference when he said that money is sterile. Money was created as a means of exchange to facilitate trade. Before the invention of money, trade meant barter, and barter meant complex and wearying negotiations about how many bushels of wheat equaled a side of beef, to give one hypothetical instance. Money solved that problem by becoming the common denominator or medium of exchange between any possible range of goods. In the 8th century BC, Gyges of Lydia created the first coin, which was a lump of precious metal with his image stamped on it. The image of the sovereign on a coin guaranteed both the weight and purity of the metal in the coin, thereby facilitating trade by making weighing and assaying the coin’s metal unnecessary.

Gold was intrinsically valuable, a fact which further confused the distinction between wealth and money. Money is a medium of exchange, a store of value, and a record of account. Gold is a very good store of value but a very bad medium of exchange. It is simply too valuable. No one wants to let go of it. Can you imagine putting a gold coin into a vending machine?

Building on Aristotle’s understanding that money is sterile, St. Thomas Aquinas said if you put three gold coins in a drawer and come back six weeks later you will find three gold coins and nothing else. If, however, you put a male and female mouse in the same drawer and return in six weeks, you will find a lot of mice. Coins do not copulate. Money does not produce wealth. Money must be used to purchase labor in order to produce wealth because labor is the source of all value. According to Adam Smith, “It was not by gold or silver but by labor that all of the wealth of the world was originally purchased and its value to those who possess it, and who want to exchange it for some new production is precisely equal to the quantity of labor which it can enable them to purchase or command.” Karl Marx agreed with Adam Smith on this point, so did John Locke; so did Pope John Paul II. Given their diverse backgrounds and even more diverse political views, the only basis of agreement is the truth of the statement. Labor is the source of all value. Nature is the product of God’s labor. Nature, or more specifically land, is a source of wealth, but land can only produce value through the application of labor. Man did not create the deer in the forest. God did that. But in order to turn that deer into wealth, man must apply labor by killing and dressing the deer. Gold from this perspective is congealed labor. “An ounce of gold, mister,” says one of the characters in The Treasure of the Sierra Madre, “is worth what it is because of the human labor that went into the findin’ and the gettin’ of it.”

There is, of course, a group of people which has felt throughout history that coins can copulate. Their paradigmatic representative is Shylock, the main character in Shakespeare’s play The Merchant of Venice. When Antonio, who is a Christian, confronts Shylock by asking him if “your gold and silver” are “ewes and rams.” Shylock responds by saying, “I cannot tell. I make it breed as fast.” …..

[…] This is just an excerpt from the February 2023 Issue of Culture Wars magazine. To read the full article, please purchase a digital download of the magazine, or become a subscriber!

(Endnotes Available by Request)