Burn through
Today we are going to talk about the phrasal verb “burn through.” Here’s how you heard it in today’s main lesson. The composer Ludwig van Beethoven would win lucrative contracts, collect a lot of money, and then burn through the money quickly.
This means he spent it quickly. When you burn through something, you use all of it quickly. It’s most often used when talking about money or, less commonly, time. Earlier in this lesson, you heard that Beethoven would make good money for his compositions, but then he would burn through the money he earned. That means, he spent it quickly.
It’s a common story with sports figures, too. A young, talented sports star signs a new contract and gets a signing bonus. He feels rich, on top of the world, but he burns through the bonus right away, buying a boat or fancy houses or something. Athletes have a small window of time in which to make a good income. The smart ones will plan to make that income last for their whole lives, and to leave a legacy after they’re gone. Others will burn through the money during their playing careers and end up in trouble later in life.
The lifestyle of a professional athlete makes it easy to burn through cash. There’s peer pressure. There’s the expectation that because you make good money now, you can afford to spend it all. If you’re a sports star making one, two, three million dollars a year, you seem rich beyond the wildest dreams of the people around you. There’s pressure to take care of other people—buy relatives a house, pay friends to be your security guards, invest in a cousin’s failing business. Athletes making three million dollars a year are not as rich as their friends think they are. It’s very easy to burn through a three-million-dollar salary as a pro athlete. The first thing to go is high taxes on that high income. Next is the commission to be paid to the agent. Then there’s the training and diet coaches they need to stay in peak condition—a lot of that is paid out of their pockets.
Now that three-million-dollar income might be something like eight hundred thousand—I’m guessing here, but I think about eight hundred thousand—after taking care of all those necessary expenses. That’s still good; don’t get me wrong. But it’s not riches beyond your wildest dreams. Now buy a relative a house, another one a car, help a buddy out, pick up the tab when out with friends, cover vacation costs for friends and family, private school tuition for a couple of nephews. Let me just tell you, it’s easy to burn through a three-million-dollar salary as a pro athlete when there are expectations to spend big and when there’s social pressure from friends and family.
COVID has been hard on many people; a lot of people are out of work. When you’re not working, you might get some government benefits. But most people will have to rely on their savings for some or all their living expenses when they’re not working. You can burn through your savings if you’re not working. In good economic times, you might have three, maybe six months of living expenses saved up for emergencies. But this pandemic has been going on for nine months now. A lot of people have burned through their savings because they can’t work and aren’t getting government benefits.
It’s not just people who can burn through money: companies can, too. When COVID hit, many companies saw their revenues drop by fifty, sixty, eighty percent—but their costs did not also drop. That means many companies were unprofitable—they were losing money every month. When a company “loses money,” the money has to come from somewhere.
Many companies will have cash reserves for situations like this. Well-run companies will have some flexibility, meaning they have cash saved up or they can borrow in emergencies. The airline industry has high fixed costs: employees, technology systems, fees paid to airports, leases on the aircraft themselves. When passenger levels dropped, airlines couldn’t just reduce costs. They still had to pay for the space in the airports; still had to pay leases on aircraft; still had to perform the same maintenance on their aircraft; still had to train the pilots; still had to pay salaries and benefits. So what happened? They lost an epic amount of money. They burned through $77 billion of cash in the second half of 2020, according to a trade organization. That’s equal to $300,000 per minute. Airlines were burning through cash at a rate of $300,000 per minute.
Startup companies, even in good times—heck, especially in good times—are experts at burning through cash. Here’s how many startups are born: a founder has an idea. The founder uses his or her savings to launch a minimum viable product. This is just to see if the idea is any good. If people like it, great: now it’s time to invest in developing the product into something bigger. The founder will often seek investors to provide cash. The investors give the company money in exchange for a percentage ownership and some control over the company. Now comes the fun part—and the hard part: spending the money.
The startup has to spend the money on developing the product and on marketing to attract new customers. The idea is that they need to get enough customers to become profitable before they burn through all the money the investor gave them. If they burn through all the money and they still don’t have enough customers, then they either go out of business or they convince some other investor to give them even more money.
Quote of the Week
Today’s quote is from Beethoven himself. He often wrote music for royalty, but, unlike many of his contemporaries in the music world, he didn’t idolize the princes and kings he served. Here’s a quote I loved. “Of princes there have been and will be thousands. Of Beethovens there is only one.” And that quote, let me remind you, is by Ludwig van Beethoven himself. “Of princes there have been and will be thousands. Of Beethovens there is only one.”
See you next time!
That brings us to the end of today’s lesson. Speaking of professional sports stars, Thursday’s lesson will be about Diego Maradona, the Argentine footballer who died earlier this year.
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