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Affording an early retirement and taking it

The news in business and sports has been filled with surprising early retirements last week. Four men stepping away from lucrative careers while in their prime show a curious paradox of success.

Patrick Pichette, 52, the chief financial officer of Google, will step down once a replacement is in place so that he can travel the world with his wife. Three NFL players stunned the sports world with retirements of their own: Patrick Willis, 30, a San Francisco 49ers linebacker, could have probably played a few more years for a credible shot at the Hall of Fame; Jason Worilds, 27, a linebacker for the Pittsburgh Steelers, was on the verge of an eight-figure free-agent contract; and Jake Locker, a Tennessee Titans quarterback, has had a short and injury-plagued career but is only 26 and has showed flashes of promise at the game’s most important position.

The real question is not why these four men are all retiring while still at a prime working age for their field. Each has his own rationale (Pichette spelled it out in a post on Google Plus, Willis in a news conference.)

The real question is why more people in a similar position - those working in highly lucrative fields who have already made enough money to support their families very comfortably for decades to come - don’t do the same. The reason is the economic principle of diminishing marginal utility.

Someone who is broke and comes into a million dollars can radically improve his life, buying a house and a car and so on. The next million dollars after that is still nice to have, but doesn’t improve living conditions nearly as much; now we’re talking about a somewhat nicer house and nicer car, which are good to have but not life-changing.

Now jump ahead to people with the kind of net worth that the CFO of one of the United States’ most valuable companies has (Pichette owns $87 million worth of Google stock, according to tabulations from SEC filings). Or consider someone who has earned tens of millions of dollars in the NFL like Willis (who has received a total of $42.6 million in cash compensation, according to Spotrac, and assuming that he has saved a good chunk of it).

At that level of wealth, each additional million dollars in income results in very little net improvement in quality of life. For Pichette it might mean upgrading his private jet time share from a Gulfstream IV to a Gulfstream V; for Willis, it might be a giant mansion versus a really giant mansion.

It is easy to imagine that those feel like small improvements relative to the trade-offs: for Pichette, the opportunity to travel the Earth with his remaining days living on it, and for the football players, better odds of being able to walk unassisted in middle age. (Pro sports, and the NFL in particular, carry a different set of incentives for early retirement than the corporate world, where you butt heads with colleagues only figuratively.)

The reason that the early retirement news this week seems so surprising, and that decisions like it are so rare, gets to the paradox.

To attain a net worth of eight or nine or 10 figures, it really helps to be wired differently from most of us. Google is not going to replace Pichette with somebody who merely has a decent mind for numbers and puts in a solid workday. It is a safe bet that he or she will be extraordinarily smart, driven and committed to the fullest, whatever the consequences for lifestyle, family or basic sanity.

Similarly, to succeed in the NFL, it is not enough to be strong and fast. Witness all the college players who exhibit all the physical skills they need in the league’s draft who never succeed as professionals. Rather, the best players display a certain manic competitiveness such that they keep playing. The Denver Broncos’ quarterback, Peyton Manning, has won a Super Bowl and made $230 million from football alone, and he looked to be in physical pain at the end of last season. Yet he intends to come back next season at age 39.

The paradox of success is this: The mental wiring that enables a person to claw to the tippy-top of Corporate America or sports or entertainment or any other field that offers vast wealth is the same wiring that most of the time leads people not to retire before they have to - no matter what the diminishing marginal utility of the money.

In some ways, the rest of us are better off with this state of affairs. Presumably U.S. companies are better run when the most talented executives put in a 50-year career than if they put in only 20 or 30. The NFL and other top sports leagues are more entertaining when the best athletes play for as long as their bodies will let them.

At the same time, there is a depressing message for the rest of us: Maybe the fact that you would even consider retiring to a life of luxury at a young age is a sign you aren’t going to succeed at a high enough level to make that an option.