With Tony Robbins, Life Success Coach, Author of MONEY Master The Game: 7 Simple Steps to Financial Freedom
Tony Robbins is a strategic advisor to world leaders, a successful life and business strategist, and a New York Times bestselling author, who discusses his book, MONEY Master the Game: 7 Simple Steps to Financial Freedom.
Tony writes that “Money, ultimately, is a set of feelings about what money is going to give you, like certainty and comfort.” While most think of money as a thing, it means different things to different people. For instance, it can be a source of certainty, of variety, of significance, of growth, or of love and of contribution. Money can also be abused but, if used properly, it could be a major force for good.
Research For The Book
Before writing MONEY Master the Game, Tony interviewed 50 of the smartest people in the world, from Nobel laureates to self-made billionaires, to understand wealth creation so he could help others, such as baby boomers who think they can’t retire or millennials who want to get out of tuition debt.
Become An Investor, Not Just A Consumer
The first step towards financial freedom is saving money and investing it. As Tony says, if the government imposed an additional 20% tax, we’d bitterly complain but still find ways to live on lower earnings. He cites the example of Theodore Johnson, a UPS worker who never made more than $14,000 a year but retired with $70 million; his mantra, “Don’t be a consumer; be an owner. You gotta take your money and invest.”
Likewise, we can all become wealthy if we take 20% of our income, put it in an investment account, and compound it over a lifetime.
Become An Insider
The next step to financial freedom is becoming financially literate. Most people invest in 401(k) approved mutual funds without knowing that 96% of all mutual funds fail to match index funds. Finding that 4% of successful funds is an exercise in futility.
Tony emphasizes the importance of working with a fiduciary, who places your interests first and typically charges less than 1%, well below the 3% average you’d pay to a mutual fund. That 2% difference may not sound like a lot but, when compounded over 50 years, adds up to the equivalent of getting a car for $20,000 versus $350,000 for the exact same car!
Know what you’re investing in, understand fees and expenses, and don’t get taken for a ride.
Give Your Savings A Raise
In Money Master the Game, Tony Robbins urges 401(k) investors to increase their savings every time they get a salary raise. While the media always highlights stories of the smoker who lived to 106 or the lottery winner, true wealth creation happens through one’s saving and investing discipline.
Make the game winnable by knowing exactly how much you need for these five things: your mortgage, utilities, transportation, food, and basic insurance. Once those five basic needs are taken care of, you’ll feel financially free and wealthy.
In addition, your wealth can go to others more in need than you. Tony segues into Feeding America, his non-profit dedicated to feeding the 49 million Americans, including 17 million children, who go to bed not knowing when their next meal’s going to be. All proceeds from Tony Robbins’ MONEY Master the Game go to Feeding America.
Getting back to investing, the world’s best investors do not take on more risk for the probability of higher returns but look for asymmetrical risk-reward with the least risk for the highest reward. For example, Paul Tudor Jones, a top hedge fund manager, focuses on 5x returns and isn’t content to make just 10-20%. And Richard Branson, of Virgin Group, got rich by always protecting his downside.
Dalio’s Secret Formula For Financial Success
Ray Dalio, who manages $160 billion, gave Tony the secret formula to an all-weather portfolio that’s made money 85% of the time and failed only 15% of the time, losing an average of just 1.6%.
Tony Robbins did not divulge that formula but said readers could look it up in his book, MONEY Master the Game: 7 Simple Steps to Financial Freedom. So head to your local library for a free copy or, better yet, buy it for $20, have proceeds go to Feeding America and set your portfolio up for financial freedom.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: Tony Robbins has been a strategic advisor to world leaders, a successful life and business strategist, and a New York Times bestselling author. He’s with me today to discuss his new book, MONEY Master the Game: 7 Simple Steps to Financial Freedom. Let’s meet him and discuss this important book. Hey, Tony, welcome to the program.
Tony Robbins: Thanks for having me on, Steve.
Steve Pomeranz: Before we really get started, you write, “Money, ultimately, is a set of feelings about what money is going to give you, like certainty and comfort.” What are some of the other needs that we have that money will help us with?
Tony Robbins: Well, I’m really glad you put that out because people think of money as a thing, and today, it’s literally 0s and 1s and computers. Really what it is is—whatever we think about it or associate to it—it’s a source of certainty for people, right? They’re hoping, “I don’t have to work for the rest of my life.” It’s a source of variety. It gives you choices that you won’t have without a surplus of money or a certain amount of money. It’s a source of significance for many people to feel like, “I’m unique. I can do special things for my family.” It’s a source of growth because, in order to make money, you have to expand your knowledge or your ability. Most importantly, I think, it’s a source of love and of contribution because money is portable power. It’s a capacity that’s used properly. Listen, we all know it can be abused. Money can be used to destroy a community or destroy a company or destroy an economy, or it can be used to light people up and create dreams into reality. Money is whatever we put onto it, but, I think if we use it properly, it could be a force for good.
One of the things I wanted to do when I wrote this book is I wanted to be able to help people really understand the subject because for most people it seems so complex. I interviewed 50 of the smartest people in the world: Nobel laureates, self-made billionaires, people who started with nothing and built them billions. I wanted to simplify it into a process they could use. Then I thought, if I can make that so I can help a baby boomer who thinks they can’t retire to really retire, or maybe a millennial that’s coming out of college with all this debt thinking, “I’ll never be free; show me how to do it,” it’d be a worthy project.
It took four years, but after interviewing these people, this book is not my ideas. This is literally the Carl Icahns of the world. This is the Ray Dalios. This is from the best of the best on Earth saying, “Here are the steps that I would do if my own son or daughter, or my uncle, or my brother, or my sister, or my aunt … If I was gonna help them, this is exactly what I’d have them do,” and that’s why I wrote the book.
Steve Pomeranz: Yeah. I like the way you take the book and you bring it down to some very basic, but important concepts. You call them the 7 simple steps to financial freedom. Step 1 is: Make the most important financial decisions in your life. Become an investor, not just a consumer. Take us through that.
Tony Robbins: Whenever you go to someone and you talk about investing, first of all, we all have these busy lives, right? We’re trying to take care of our family, we’re trying to do our work, maybe do something in your community, maybe have a moment for yourself, highly unlikely, but possible. Where am I going to be an investor? The second problem people say is, “But I don’t have any money anyway.” The best way to teach a man is, I feel, when I asked Warren Buffett, “What made you the richest man in the world?” he said three things. He said, “Living in America.” He said, “Having good genes, and compound interest.” Now we’ve all heard of compound interest, but let me give you an example that makes it real for you. There’s a gentleman that worked for UPS, named Theodore Johnson. You’ve probably never heard of him because he never made more than 14,000 a year, but he retired with $70,000,000, Steve.
Steve Pomeranz: Unbelievable.
Tony Robbins: And he gave away $35,000,000 while he was still alive. Now you say, “Did he inherit?” No. Here’s what he did. A friend of his said, “Don’t be a consumer; be an owner. You gotta take your money and invest.” He said, “I don’t have any money to invest. I can barely live on what I have.” He said, “Yes, but here’s what I want you to know: If the government passed a tax that added 20% more tax to you, you’d hate it, you’d scream, but you’d pay it because you have no choice.” He said, “I’m gonna make you wealthy. I’m gonna take 20% of that money before you ever see it, off the top, put it in an investment account, and we’re gonna compound it over your lifetime.” That’s how he got that $70,000,000.
Anyone can do it. You got to begin the journey, but the second step is: You got to become an insider. What you don’t know in the financial area will hurt you. I’m really glad to see President Obama, these last few days, has been bringing up one of the biggest issues I’ve talked about in this book, which is most people don’t know what to do. They have a 401 (k). They put their money there, and they have no idea what they’re doing, and as a result, they get hugely taken advantage of by a more sophisticated person that understands the system.
Let me give you two examples, Steve. One: mutual funds. Most people put their 401 (k) money in a mutual fund, and, yes, all the statistics show, Nobel laureates have shown this, that 96% of mutual funds fail, I repeat: fail to match the basic market you could get for pennies on the dollar, called an index. You’re spending all this money for advice that doesn’t work. Only 4% succeed. Now you say, “I’m gonna find the 4%.” Well, the 4% is always changing. It’s like … Do you play blackjack, Steve? You ever play blackjack?
Steve Pomeranz: Sure.
Tony Robbins: Well, if you play blackjack, and you got two face cards, and your inner idiot says, “Hit me. I’m gonna get an ace. I’m feeling lucky.” You have an 8% chance of getting an ace. You only have a 4% chance of getting the right mutual fund. Here’s what’s even worse, and it’s what Obama’s trying to address, the President sees this—most people don’t even know this. The difference in fees is insane. Most people right now are represented by a wealth advisor, a broker, there are 300 names for them, but there’s only one person that’s legally required to make sure they put your needs ahead of their own. They’re called a fiduciary. It’s a big word, the F word, but just think of it this way: If you go to a person that is a butcher, you know he’s going to sell you meat. He’s not a bad guy; he sells meat. But if you went to a dietitian, they would say, “Look, hold off on that red meat. You’re gonna get cancer. Let me tell you what to do.” Well, a registered investment advisor, a fiduciary, will tell you what to do, and they have a flat fee, and the fee’s usually 1% or less, if you’re going for the right person. Let me tell you the different between an average mutual fund, which is 3.1% in fees, which sounds like nothing, but those compound, also.
Steve Pomeranz: No, that’s a lot.
Tony Robbins: Versus 1%. The difference over 30 years is 50% of your money that would’ve been in your pocket, goes to hidden fees in someone else’s pocket. Fees matter.
Steve Pomeranz: So, Tony, let me back up a little bit. The first thing is you’ve got to start saving. You said in your book that you want to start saving and make it in an automated fashion. Have that money taken out before you even see it, and you also have a save more tomorrow idea, or you related someone else’s idea that says, “Every raise you get, make a pledge to save that extra money if you can’t really save much today.”
The idea number 1, is to benefit from that compounding, is to get that money invested. Number 2, you’re saying, is keep your fees low, and try not to be the smartest guy to try to beat, you know, at the poker table. You’re not going to beat those guys at the poker table. They know their business, so just stick with index funds. Keep them inexpensive; it keeps your taxes low and just let that compound. Am I right?
Tony Robbins: Those are the first two steps, and just so people understand how important those fees are, you can get the same exact product, the same stocks, and pay 3.12%, or you can get them for .17, less than 20% of 1%. To give you an idea, that’d be like going and buying a Honda Accord for $20,000, and your neighbor paying $350,000 for the exact same Honda Accord. That’s the percentage difference. People do this every day because they’re uneducated. They’re getting the same product, but they’re paying ridiculous prices because they’re uninformed.
Steve Pomeranz: Well, the media is also telling them a story about how to get rich. There’s the story of buying Apple stock at $3 a share or Google at $70 a share. It’s now, let’s say, $1,000 a share. There’s this idea that, if you can just throw the right dart, then you will become rich, but you’re basically saying a message that’s contrary to that.
Tony Robbins: Well, all the science shows that that is like the person who lives to 106 and they smoke cigarettes every day. There’s a few of them, but there’s very few out of 7,000,000,000 people. What you really want to be able to do is look at the reality. The people that win lotteries, those athletes that have these mega salaries, the vast majority, when you do the follow-up, you find that they’re broke, and it’s because what you earn won’t make you rich.
What you want to do is stop trading time for money. That’s the worst investment you can ever make because you’ll never get time back. You want to trade money for money, but you want to do it efficiently. Not only that, but you also got to set up a game where you know what you’re winning for. I tell people a third step is: Make the game winnable. Most people, they hear from somebody, “You got to accumulate this huge amount of money to be financially free,” and they’ve never sat down to figure out, “What would be a first step?”
I say to people, Steve, “Tell me something. How would you feel if you had enough money saved that you never had to work again, just to cover five things? You never had to pay for your mortgage ever again. As long as you live, your house was taken care of. Never had to pay for utilities, never had to pay for transportation, never had to pay for food for your family, and you had basic insurance.” I said, “That’s not not working, but not working for all five of those things, how would you feel?” Most people say, “That’d be incredible.”
Well, I call that financial security, and you can figure out the exact dollar amount of that, and it’s about 60% or 65% less the amount you need to be totally financially free and not work. Here’s the truth: Statistics show that if you retire at 55, you think that’s your dream, you’ll die within 10 years. If you retire at 65, you’ll die within 10 years. If you don’t retire at 65, you’ll live an average to 85, 20 years. We all need a purpose, and what you want to do today is you want to be able to save up so that you can not have to work, but then you do work at something you really love, and that’s what makes people really feel financially free and wealthy.
Steve Pomeranz: Well, the voice is unmistakable. The person is Tony Robbins. The book is MONEY Master the Game: 7 Simple Steps to Financial Freedom. Now you mention, “What is the money for?” The money is for in the future, you want that money to be able to support you, right?
Tony Robbins: Honestly, you and your family, and maybe do well enough to give back to others. I will tell you that when I wrote this book, I’m meeting these self-made billionaires, and I’m watching Congress cut food stamps. Just blows my mind. I was one of those families—we had no money. When I was 11, my family was fed on Thanksgiving, or we wouldn’t have had a meal, so I never forgot it. When I was 17, I fed 2 families, then 4, then 8, then eventually 1,000,000 people.
This year, I donated all the profits of this book in advance. Every dime goes to charity, and it goes to feeding America. I asked them, “If I gave all the money in advance, what could I do?” I can feed 10,000,000 people, and as the year went by, I got more and more inspired, so I’m personally guaranteeing and feeding upfront. I’ve already fed 50,000,000 people this year, and I have matching funds to feed 100,000,000 people. We’re at 71,000,000 right now. So if you get this book for yourself, it’ll change your life financially, but it’ll also feed 50 people in need, as well. In the richest country in the world, 49,000,000 people, including 17,000,000 children, go to bed every night not knowing when their next meal’s going to be. So, if you’d like to change your own life, and help somebody else, this book could be a great investment for you.
Steve Pomeranz: That’s just not acceptable. How do people sign up? Is it a website for that?
Tony Robbins: Well, no. As soon as you buy the book, I’ve already donated in advance, but if you want to match it, you want to do something else, I match it. The website is there, and it’s feedingamerica.org.
Steve Pomeranz: Okay. Let’s get back to investing here. Do you really have to take huge risks in order to make big rewards in the market? There’s always that feeling that, the more risk, the more reward, and the opposite, as well. Someone said to me, “Listen, I’ve taken more risk; how come I wasn’t rewarded?” And I said, “Well, because you took more risk.” Risk doesn’t guarantee reward. It gives you the possibility of more reward. What do you do? How do you make a good return, without taking huge risks?
Tony Robbins: That’s a great question. When I talk to all these investors, especially in the world today, where if your money’s in the bank, you get .33 basis points, a third of 1%. If you got bonds today, you might get 3%. It’s crazy, Steve. When I talk to these investors, there was something I really learned. You’d think these big hedge fund guys are huge risk takers, but I interviewed the best of the best, the multi-billionaires, guys that made, for example … John Paulson made $4,000,000,000 in 1 year.
What I found out was, they all believe in what’s called asymmetrical risk reward. It’s a big word, but what it means is they want to take the least amount of risk for the highest level of reward, and they’re always looking for what that is. For example, I worked for 21 years coaching Paul Tudor Jones. Paul Tudor Jones is one of the top 10 investment hedge fund guys in the world. He’s not lost money in 21 years.
The reason he doesn’t lose money is when he invests a dollar, he’s trying to make 5. If I were to risk a dollar, I got to make 5. Not 10 cents, which is 10%, or 20 cents, 5. He knows he’s going to be wrong many times, so if he risks a dollar and he’s wrong, he now risks 2, and still makes 5, he’s doing great. He can risk 4 and make 5, and do great.
Kyle Bass took $30,000,000 of other people’s money and turned it into 2,000,000,000 in 2 years in the middle of a credit crisis, the worst in 80 years. When I asked him how he did it, I spent 3 hours going through it, but I could summarize it for you in 1 simple thing. He never risked more than 6 cents to make a dollar. Not 6 cents to make 7 cents, 6 cents to make a dollar. He could be wrong 15 times, Steve, and still make money. That’s called asymmetrical risk reward.
Richard Branson does the same thing. Everybody thinks he’s a crazy risk-taker. He is with his life, but not investment. His life, he gets in rockets, and things like that. He goes in balloons. But in business, for example, when he was starting Virgin Air, he went to Boeing and said, “I’m not gonna take this, unless you promise me that if I fail within 2 years, I can give the jets back at no cost to me,” and he got them to agree to it. He’s always protecting the downside.
In the book, I show you the specific investments these guys make to make sure they have the least amount of the risk with the greatest reward. I’ll tell you one specifically. Ray Dalio is the largest hedge fund investor on Earth. A big hedge fund, where rich people put their money, it might be 15,000,000,000 in assets. That’s huge. Ray Dalio has 160,000,000,000, 10 times more than anybody else. He manages money for countries.
When I met with him, I found out that 10 years ago, you had to have a $5,000,000,000 net worth, and $100,000,000 to even talk to him and invest with him. Today, 10 years later, he won’t take your money, no matter how rich you are, so why am I telling you this story? I got 3 hours with him, and I asked him this question at the end.
I said, “If you couldn’t give your money to your family … I want to help the average person, so let’s say you couldn’t give a dime to your kids. What would you give them instead, in terms of a plan or a strategy that would guarantee financial freedom?” He said, “Well, I worked on the answer to that for 10 years, Tony.” He said, “It’s called my all-weather portfolio. I have figured a way to make money in almost any market,” and he said, “When you backtest it for 75 years, it’s been successful 85% of the time and the 15%, when it’s not been successful, it only lost an average of 1.6%.”
He tells me this formula, but he doesn’t give me the numbers, and I said, “Look, Ray, it’s great to understand how this works, but the average person would never know how much to put in each one of these investments or tools, and that’s what matters. It’s the allocation that matters.” He said, “I know, Tony, but that’s my secret sauce. I get billions for that.” I said, “You haven’t taken billions in years, and you’re gonna give away half your net worth.” I said, “Give me the secret sauce!” I teased him and pushed him.
He literally got chills down my spine, after about 30 minutes of conversation, he gave me this formula that he’s custom designed for the average person, where they can do it 15 minutes a year. When you backtest it, and past performance doesn’t guarantee future performance, but 75 years of performance is pretty amazing, it’s again 85% successful, 15% of the time drop. The biggest drop in 75 years was 4%. Mind–boggling. Last year, the S&P 500 is 13 and change, this strategy does 15 and change.
Steve Pomeranz: Wait, Tony. Stop, stop. What is the secret formula, Tony?
Tony Robbins: Well, I want to tell it to you here on the air, I’m not holding back because you need to understand how it works. But you can go to the library and get the book for free or go buy the book for $20 and feed somebody. It’s available to you.
Steve Pomeranz: It’s in the book, huh?
Tony Robbins: I’m not holding it back in any way.
Steve Pomeranz: Okay, sure. It’s in the book. My guest, of course, is Tony Robbins. The book is MONEY Master the Game: 7 Simple Steps to Financial Freedom. Tony, thank you so much for taking the time to join us today.
Tony Robbins: I really appreciate your time, Steve.Thank you.