Kanye’s debt isn’t a crisis — it’s an opportunity.
Kanye West’s tweet announcing his $53 million in personal debt caused a major stir. Setting aside our freakouts over how Yeezus ended up with so much debt: Is this really such a bad thing?
I write this to you my brothers while still 53 million dollars in personal debt… Please pray we overcome… This is my true heart…
— KANYE WEST (@kanyewest) February 14, 2016
Kanye’s debt is the result of investments he made in his businesses (particularly his fashion lines), rather than reckless extravagance in his personal life. Kanye reportedly invested $40 million of his own money in his Yeezy sneakers alone, despite Nike backing their development.
Like so many entrepreneurs before him, Kanye invested much of his personal finances into his endeavours, and he’s apparently found himself in debt. But this debt doesn’t necessarily represent a business mistake. After all, how can you expect external investors to invest in your brand if you don’t believe in it enough to invest in it yourself?
The risks of building a business
While there’s inherent tension in Kanye on the one hand proclaiming himself a uniquely gifted genius and on the other publicly seeking funds, there’s always an element of risk in building a business. Entrepreneurs can’t be risk-averse. Debt is often part of the journey.
Contradiction also fuels publicity and discussion, which is an area in which Kanye is clearly skilled. From interrupting Taylor Swift during her VMA acceptance speech to proclaiming his own importance during interviews, even announcing his intent to run for president — Kanye certainly makes his presence known.
He also has a massive online following and popularity that’s measurable in all the positive numbers associated with his career. He’s won 21 Grammys and had seven (soon to be eight) best-selling albums that sold over 21 million copies in an environment where artists find it difficult to get us to even pay for recorded music. And in an age where social media is a direct measure of influence, he has 26.9 million followers on Twitter.
Can debt lead to greater returns?
That huge audience means that he can make a virtue of even being in debt. Take Kanye’s part ownership of music-streaming service Tidal. Tidal has struggled to compete in a market dominated by such streaming giants as Spotify and Apple (which offer similar services at lower prices). Not only that, but since Tidal’s launch the app has been plagued with technical bugs.
However common this knowledge, Kanye’s debt-related Twitter rant (which pleaded for subscribers) saw interest in Tidal increase so substantially that it reached the top spot on Apple’s free apps chart. What major brand wouldn’t want to collaborate with an individual possessing the ability to generate such a public response?
Kanye’s approach to finance has always been unconventional. He’s guilty of some of the most common money mistakes Americans make, such as not finishing college and excessive gambling. Yet he can’t be accused of leaving the money management to his partner: Kim Kardashian has reputedly made $100 million from her highly successful app.
Either way, it’s a knee-jerk reaction to simply assume that the $53 million in debt is a bad move that will permanently blight him. It’s part of a business-building strategy. Who knows what he might have achieved in the long run if his debt right now was $530 million?
Picture courtesy David Shankbone; licensed under Creative Commons Attribution-Noncommercial-ShareAlike 2.0 Generic (image cropped).