Coco Gauff and Her Nonexistent Debt
Coco Gauff’s win at the US Open earlier this month was exciting for a lot of reasons. The matches were fun, and Gauff herself is easy to root for. She’s only 19, and young athletes always bring excitement and relatability to sports. She seems… normal. She gets nervous and excited! She watches anime! She posts on TikTok!
Except, one way in which she’s not normal is in her finances, as came up when she asked her fans on TikTok what she should do with her prize money:
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“Somebody said pay off debts…. I’m 19, I don’t have any debt. I’m not in debt. Like, I don’t have — I live with my parents, still, so I’m not in debt. I didn’t go to college, so I don’t have any student bills to pay. So I’m not in debt, I’m too young.”
The quotes themselves really don’t capture how funny the video is, where Gauff is laughing so hard at the notion of her being in debt that she can’t get through her response. She seems to even struggle with the word “debt,” occasionally pronouncing the “b,” because the concept is so unfamiliar to her.
Gauff got some flak for this video, as some people thought her reaction was a little insensitive to millions of Americans who DO struggle paying off their debts. And it’s true that plenty of 19-year-olds are in debt, either from student loans or credit cards (the other major sources of debt, medical debt and mortgages, usually don’t come up for teenagers). But I think this is really representative of confusion about the role debt plays in the economy.
Because look, when you hear Gauff talk about anime and living with her parents, it’s easy to forget that she’s a professional tennis player who has won over $11 million in prize money since she turned pro in 2018, plus whatever she’s earned via endorsements. Even before winning the US Open, she was very rich. And for rich people, debt is not the same as it is for normal people.
It doesn’t even really make sense to talk about rich people being “in debt,” the way workers can be in debt. You see this come up in debates about student loan forgiveness, where advocates push for forgiveness as a relief for people struggling, then opponents say that student debt is held by rich people (since people who go to college generally earn more), and then advocates say rich people are not in debt.
But, of course, rich people DO carry debt. In fact, they carry most of the debt, because they are the ones who own the assets to borrow against. And for that reason, the debt simply isn’t as burdensome for them.
The difference, as usual, comes down to the difference between labor and capital. When your income comes primarily from labor, then debt is always scary, because an interest rate is just another cost you’re adding to your budget. If you borrow a dollar at 3% interest, then every day you don’t pay that dollar back is a day the price goes up. But when your income comes from capital, then your interest rate is offset by whatever rate of return you are earning on that capital. If you borrow a dollar at 3% but then reinvest in something that earns a 5% return, then every day you don’t pay that dollar back you are still making money.
Let’s go back to Coco Gauff. She still lives with her parents, but let’s imagine she bought a $3 million house back in 2019 (15-year-olds don’t really need their own house, and probably shouldn’t even be living alone, but just bear with me..), using money from her early wins and endorsements as a down payment, and she got a mortgage rate of ~4%, which was pretty standard that year. In that scenario she would have debts she could theoretically pay off with her US Open winnings…
But that would be crazy! A 4% interest rate is super low right now! You can get more than that from a 10-year Treasury bond, one of the safest investments imaginable (or, if Gauff is one of those people who thinks the US government is secretly days away from defaulting, she could get a higher rate from a CD at almost any bank). In other words, Gauff could invest her winnings very conservatively, use the proceeds of those investments to pay off her debts, and STILL come out ahead.
This is a fundamental difference between workers and capitalists. For laborers, who have few assets besides their finite working hours, debt is an emergency measure to cover consumption that is urgent but pricey — whether that’s health care or a college education or US Open tickets — with the hope that you can use future earnings to cover the difference. But for capitalists, debt is just a matter of arbitraging interest rates.
When you see it this way, you quickly realize why high-earning workers like LeBron James and Alex Rodriguez are so eager to become capitalists. It’s so much easier! You don’t have to do shit!
Eventually, for these reasons, Gauff herself will become a capitalist, if she hasn’t already. And I can’t begrudge her — she has too much money NOT to become one. The problem is not rich people, or specific capitalists; the problem is a system that reserves capital ownership for a privileged class. The problem, in other words, is capitalism.