John Rothmann –  I’m John Rothmann. And you are listening to the Retire With More program. We’re delighted to have you, and we have a very special program today, a very special guest. Mitch, take it away.

Mitch Tuchman –  Well today, we are honored to have Tony Robbins on our show. And so instead of introducing Tony directly with all of the things I could say, I’m going to ask you a question, Tony, just to get this conversation going, okay?

Tony Robbins – Okay.

Mitch Tuchman –   So, Tony, you are the world’s leading authority on leadership psychology. You’ve coached and inspired more than 50 million people, CEOs like Marc Benioff, a local guy here who’s done a lot of great stuff in San Francisco, and some of the world’s most high-achieving people around. More than 4 million people have gone to your live events, and Oprah even calls you superhuman. So Tony, against all advice from friends, even your publishers, you as an outsider decide to go write a book, and I’ve read it, and I’m in the financial services business. It’s complex. Six hundred pages. You try to distill the complex world of finance. Why on earth would you go and write Money: Master the Game?

Tony Robbins – Well, it’s interesting. It began because of 2008. I grew up dirt poor, and we had no money for food at times, even at Thanksgiving. It’s one of the reasons I fed 42 million people over the years, and 100 million people this year, and I did it with proceeds from this book, that was part of it, and I added a bunch of money to it.

But what drove me was seeing all these people literally losing their net worth, half of it overnight, seeing people losing their homes en masse. Those weren’t statistics to me, I mean, I lived that life. I’m fortunate enough to have a privilege, and that’s access.

I’ve been coaching a man named Paul Tudor Jones, who many people know as one of the top 10 financial traders literally in the history of the world. This is a guy who in 1987, when the stock market drop, percentage-wise, still in history, 20% in a day, made 200% for his clients that year, made a fortune that day.

I was working with him and have been working with him for 21 years. He hasn’t lost money in those 21 years. I mean how many people do you know his scale on earth can say that? And not only that, in 2008, when the markets as you know were down 51% from peak to trough, he made 28%. So I have a tremendous level of insight because I’ve been coaching him for 21 straight years, literally every day, he writes to me, I see him in person.

So the level I’ve been able to absorb in the financial area is beyond what most people have a chance to know in their lifetime, and I thought if I could add to that by, say, interviewing 50 of the smartest, most brilliant financial minds in the world, Nobel laureates, self-made billionaires, hedge-fund founders, if I could find out what the common denominator is, I’d really have something of value. I could help a millennial who is just getting out of college who thinks they’ll never be financially set or free, and what do I do with all this debt, or even a baby boomer who maybe didn’t do so well in 2008 and they haven’t gotten back in the market and they think I’ll never retire.

If I could help them, it would be a worthy task. And then if I could take this and find a way to help people who society has forgotten, the 49 million people in this country, including 17 million children, who wake up every morning not knowing if they are going to have food or not, then it would be something I could sink my teeth in to.

So it was a four-year journey and I loved it. But you’re right, everyone told me not to do it. Paul Tudor Jones told me not to do it. He said it’s too complex, there’s no way you going to do this. He’s one of my dearest friends and, obviously, my publisher and he said, “Tony, I’ll give you a sizeable additional bonus if you don’t write this book.” I said, why would you say that? And he said, because it’s an industry and it’s a category that’s been picked to death like a scavenger. There’s nothing left. And I said that’s because there hasn’t been a great book in this area because it’s based on individuals’ opinions.

None of this book is my opinion, other than how to shift yourself psychologically and emotionally, because that’s been my 38-year expertise, around the world, with tens of millions of people. But when it comes to the financial side I’m going to be bring the best there is on earth, people who made money in the worst times and who made money in the best times. And simplify how it can be done. So it came together and I actually saw my publisher and the book’s been No. 1, the New York Times No. 1 business bestseller for four straight months, 17 straight weeks, and I saw him just a couple of weeks ago, and he said there are fewer words in the English language better than “I was right.”

I don’t want to be right, I’m just glad it all worked out. So I feel really grateful that people who will normally not open their doors were able to give me this much time. I asked for 45 minutes and my average interview was three hours. Jack Bogle I spent four hours. There’s a quote in the book where he said, “Tony came by for 45 minutes and four hours later I had the most provocative and profound discussion of my life about by career and my insights.”

Ray Dalio gave my insights that he has not shared with anyone — he’s made that very clear — in his entire history, 23% returns for 21 straight years, so I’m really pleased to be able to bring this to the general public, and if you’re unsophisticated you can start with this book and if you’re sophisticated you can go straight into the greatest masters of finance and see directly what they have to say.

Mitch Tuchman – Well, one thing I just loved about it is you’ve rattled off a lot of very sophisticated investors like Paul Tudor Jones but no one has heard of Paul Tudor Jones unless you’re ultra-wealthy or you’re running an endowment and you know or have access to his fund, which I am sure…I bet he’s been closed for a long time.

Tony Robbins – He has been, yes.

Mitch Tuchman – But at any rate, what you’ve done though is you’ve interviewed all these people and then you’ve brought down it to the guy with a couple hundred thousand IRA or 401(k). That’s what I love about it. One of the first steps that you’ve said in the book is, if you want to master the game, let’s get on the inside, let’s become an insider and know what the rules are. And you start to dispel all of these myths that rob people of their financial dreams.

I’d just like to discuss a few of them. I know you went through nine of them and we probably don’t have a lot of time here to go through all nine. We on this show talk quite a bit about the $13 trillion lie, that beating the market is a myth, it’s just gotten harder and harder. And on our Rebalance Investment Committee Charley Ellis has written lengthy articles recently about why it has even gotten harder over the years. At Rebalance we talk a lot about fees. We bring our clients fees way down, but those are like a cancer in your portfolio. It’s insidious how they erode value. I love the way you address the concept of “I’m your broker, here to help.” I love the way you address some of the things about how returns are misrepresented in the media. And it’s legal to do, and some of those things. Can we go through and click off, I’ll guide you on a few, and I’d love to talk about it.

Tony Robbins – Sure.

Mitch Tuchman – What about the broker thing? The conflicts of interest in the business.

Tony Robbins – I made it a mission to teach people the “F word,” and the F word in my sense is “fiduciary.” It’s not a word the average person may have heard and it sounds really complex but here’s the crazy thing. You think, okay, everyone is going to tell you, give me your money and we’ll beat the market. You’ve already said it, this doesn’t happen. Ninety-six percent of all mutual funds over any 10-year period of time fail, I repeat, fail to beat the market.

So the 4% that do, what’s your chance of finding that mutual fund that’s in the 4% that beats the market? Well, if you play blackjack, and you get two face cards worth 20 and you’re playing 21, and your inner idiot says, “hit me,” you have an 8% chance of getting an ace. You have a 4% chance of buying the right mutual fund. So it’s just not true.

There are a few I would look at as these weird, unicorn exceptions like a Ray Dalio, like a Paul Tudor Jones, but as you said, the average person can’t get access to them, so they’re not practical. I think the first thing you’re going to do is, you’re not going to beat the market. The second thing you mentioned is fees.

Let’s be specific. You used the right word, “cancer.” That is about as direct a word as you can use. It destroys your financial future. And here’s the simple thing: This is one of the only industries in the world where you can pay 1,000 times more than another person for the same product and not know it. If I said to you, you can buy a Honda Accord for $20,000 and I sold it to your neighbor for $350,000, you would think, he’s an idiot and I’m a crook. But that happens every single day in the financial markets because you can go get the index from Jack Bogle at Vanguard for 0.17%, or you can go get some the exact same stocks and pay the average mutual fund 3.1%.

It’s the same ratio as a $20,000 Honda for $350,000. Or, another way of saying it would be- if you started a 30-year goal with $100,000 and you got two other friends and you all get a 7% return, and you keep compounding at 7% for 35 years and you’re going to retire at 65, what do you have? Well, if you have 1% set of fees, you have $574,000. Your $100,000 went to almost $600,000. Pretty nice return.

But if you get the same return on the same investments but you had 3% in fees, now you have $324,000. You’re literally almost losing, almost giving 50% up in fees to someone that added zero value. I mean there are so many people out there right now, and I know you guys are exceptions, what you do in your firm, you know, “retire with more.” But the idea is you’ve got people that say, “Oh, we’ve got Vanguard funds and Vanguard charges 0.17% and then they add 60 basis points, or more than half a percent on top. There’s one I just saw recently, a 401(k) plan, 110 basis points. They only charge you 0.17% and Vanguard does all the work, and these guys who are telling to buy Vanguard charge you 500% on top of that.

Mitch Tuchman – I know. It’s insidious.

Tony Robbins – It’s insane. So you’ve to educate yourself. You’ve got to become an insider. The reason I did the book is to give you that. The part about the broker. “I’m your broker, I’m here to help.” Here’s what’s true. Most people in any industry, including in the financial industry have integrity. The majority do. The majority really do care.

The problem is that a broker, which by the way there were 327 names that I was to identify for “broker,” everything from wealth manager on down. They’re just still a broker. What is a broker? Well, the broker may have good intent, but if you go someone who is a butcher and you say, “What’s for dinner tonight?” he’s going to sell you meat. And that’s because that’s all he carries. He’s not a bad guy. He probably eats the meat himself. He’s probably an expert on that meat.

But he’s got a limited selection. If you went to a dietitian, they would say to you, “Wait a second, I don’t make money off meat and you don’t want to be eating this much meat. You’re going to get cancer eating this much meat. We need to put some salad in here, maybe you have some fish. Let’s cut back on these things and that’s really what a registered investment advisor does, or a fiduciary because, legally, that broker might have a total positive intent, but legally he doesn’t have to put your needs ahead of his own. He just needs to show that whatever you’re investing in is suitable.

What is suitable? Well, it aligns with your goals to some extent. You’ll never get sued for that. Versus the fiduciary, if he says “buy Apple today” and later he buys Apple at a cheaper price on the same day, he’s got to give you the stock he got cheaper because he had to put your needs first. He couldn’t be making a benefit off you in that area. So it’s a unique approach fiduciaries have and there aren’t that many. You’re one and you understand as a registered investment advisor. 

Mitch Tuchman – Sure.

Tony Robbins – I’m a giant promoter of saying, look, it’s not enough to have somebody be sincere. They could be sincerely wrong. You need somebody that is tied legally to put your needs first. And I would add one more piece.

Mitch Tuchman – Okay.

Tony Robbins – And that is, some people would be better off, frankly — and I know Charley Ellis would agree with me, I also know David Swensen from Yale, who is the greatest institutional investor, I would say, in history, took them from $1 billion to $24 billion in 30 years, it’s mind-boggling — I know they’d agree that a lot of people, maybe they’ve got a small amount of money, maybe they just put it directly in index funds.

I know that some people are self-doers. But my experience is, if you get somebody who is a fiduciary, who can give you the expertise they have at a reasonable price, under 1%, that person can usually do a really great job for you, as long as they are not getting a commission.

So I’ve created a site called PortfolioCheckup.com. And at PortfolioCheckup.com you can go in and get the answer that most of us don’t know. You can link all your accounts in a few minutes wherever they are and then you can, “How much am I really paying in fees, and you get the reality check. You can look at that and you can say, okay, how much risk am I really taking? You can make a comparison, put all the portfolios on them and you can do that yourself or you can be recommended to an RIA like yourself or somebody who’s got integrity, but I think there are RIAs…

John Rothmann –  Tony, I had to interrupt, I’m the bad guy. We’ve got to take a break. We’re going to come right back. Remember, www.rebalance-ira.com, and when we come back, more with Tony Robbins.

John Rothmann –  I’m John Rothmann. And I’m Mitch Tuchman. And you are listening to the Retire With More program. Our guest is Tony Robbins, and Mitch, why don’t you pick up where we left off?

Tony, we were talking about your book, Money, Master the Game, the best-selling book, and it’s about money and finance and we were talking about some of the myths that you help dispel in the book and we were going through the last few ones on the list. What about the ones that you call “the lies that we tell ourselves?” I love that one.

Tony Robbins – Well, you know it’s interesting all of the things the financial industry does to make things complex and to make you just give up and basically give them their money so they can charge you these crazy fees. Again, a lot of people have enormous integrity in that business but the system is not set up for you to win. The system is private corporations, which, their job is to make a profit. So, they’re not evil. They’re trying to do what they are supposed to do, make money for their shareholders.

But that’s not making money for you. And I believe if you can get through all of that, then you have to get through your own limitations, which is, oh my gosh, money is the root of all evil, or if I make a lot of money, then I’m not spiritual. So what I try to do in the book is show you, if you’re going to become an insider you’ve got to understand how the game is played, but you’ve also got to understand what your own limits are.

I always find in any business or in any investment approach, people, the biggest limitation they often find is in themselves. So I give you a set of tools to uncover what they are and dispel those myths, just like you’re doing with the other financial myths that are out there. 

Really, one of the myths I think would be useful to highlight for a second if we could is… I interviewed all these people, and I’m talking some of the greatest investors, literally, in the history of the world. Some of them are people I interviewed before they passed, like some people may have heard of Sir John Templeton, the first billionaire investor, an extraordinary man. You know, Charles Schwab, Marc Faber, T. Boone Pickens, I mean, Ray Dalio, Warren Buffett. 

One of the things I found is that they all have different approaches to investing and so people say that’s confusing. Well, no, let me let me show you how to set yourself up to win the game and then let’s look at what best aligns with you. So, when I did that, there was one thing that was a myth that I had. And the myth was I thought these multi-billionaires who started with nothing must have taken gigantic risks to get where they are. 

And truth of the matter is they all live by one universal principle at that level. And it’s something most average individual investors never heard of. It’s called asymmetrical risk-reward. It’s a big word, what does it mean?

It simply means they do not risk a lot to make a lot. They are obsessed with finding what’s the least amount I can possibly take with the greatest potential upside. In other words, how do I risk a little and make a lot?

And the way in which they do that is really interesting. Paul Tudor Jones does it — I’ve worked with him for 21 years making sure he does this — is every time he makes and investment his question is, “Is this a 5 to 1? If I risk a $1, can I really make $5?”

Now he knows he’s going to be wrong. So if he risks a dollar trying to make five and he’s wrong he can now risk another dollar and he’s only risked two to make five. He can be wrong four times out of five and still be great.

A better example might be Kyle Bass. Kyle Bass is a man who is very famous because he took $30 million of other people’s money and he converted it into $2 billion in two years, if you can imagine that, and he did it in the worst economic crisis of our history.

I spent days and days with him. I know him very well, he’s a good friend now. But I can give the whole game of how he did it in one distinction: He never risks more than six cents to make a dollar. Most of us risk a dollar to make 10 cents, 10%. Or a dollar to make 20%, make 20 cents. He risked only six cents to make a dollar. In other words, if he was wrong, he could risk another six cents. He could be wrong 15 times and still make money.

I’ll give you a simpler example that might make sense. Most people admire Richard Branson, and most of you think of Richard, he’s a friend of mine, as a huge risk-taker. And you’d be right, he’s a risk-taker with his life, but not in business.

He’s crazy. He’ll go on balloon where he can kill himself or jump in a boat, we’re going you know on his spaceship together. And those opportunities are scary, crazy, take-your-life at risk. But when it comes to business his number one question is, “How do I protect the downside?” And when he does it, I’ll give you a perfect example of asymmetrical risk-reward, when he started Virgin Air, his biggest risk was you’re buying these millions, tens of millions of dollars Boeing jets. So he went to Boeing and made a deal that said if he failed, if the business didn’t work within two years, he could give back all the jets with no downside, no liabilities.

Check this out, no downside, and all upside. That’s the way these people do it. You might say, Tony, I don’t have access to hedge fund guys, so how am I going to do that? Well, if you work with somebody who is a really great registered investment advisor and they’re sophisticated, they might say to you, you know, you might look at some alternative investments, you might look at trust deeds. You could do a one-year trust deed and you could provide the money for that trust deed with the promise of payback and, today, I get 10% returns on one-year trust deeds in marketplaces where I know, I looked historically, in 2008, worst time in history, they didn’t drop 50%. They might have done it over three years but not in a year.

So my risk is extremely low, extremely low. It’s never happened in history. My upside is 10% vs. 4% on, let’s say, a junk bond, which a kind of crazy, and I’m getting a nice return with some asymmetrical risk-rewards. So there are many ways that you can do this without being involved in a hedge fund, and from what I’ve heard about what you guys do, Mitch, you’re looking at using ETFs, you’re looking for the greatest leverage with the least amount of risk, the least amount of cost possible, so it’s the same type of thing. But I think asymmetrical risk-reward is something for people to look at.

I’ll give you one final example. With Kyle Bass I said “How would you explain this to a child?” He said, “I had to explain it to my kid.”

I said, “Perfect, how’d you do it?” He said, “The answer is nickels.” What do you mean, nickels? He said, Tony, I ask myself a question that most investors don’t ask. I said, where can I get a riskless return, where on day one I have a 10% or 20% return on day one and I have no risk? Any one of us would say that’s impossible. But he’s obsessed, and so he came up with nickels and here’s what he figured out.

The U.S. government at that point was spending nine cents to make a nickel. You wonder why our government is in bad shape financially, right? Of that, he found that the actual nickel itself — it’s not just nickel, it’s the materials that they use  — was costing them more than a nickel, 20%. In other words, if he buys nickels, the day he buys them they are worth five cents. They’ll never be worth less than five cents. They’ll never go down in value. So whatever he invested, it’s never going to go down in value but, the day he bought it, it’s worth 20% more in just melt value.

You can’t really melt money today legally and he said, that’s true Tony, but look at what’s happening today with pennies. Used to use copper, and then it costs way too much to make a penny. The government finally woke up and they used tin, and now those one-cent pennies, some of them are worth 10 cents and the average one is worth two cents.

It’s a 100% return. He said, if I could push a button and convert all of my money into nickels tomorrow, he said, I’d do it.

So what I did with my kid was I bought $20 million worth of nickels. And he said, I went to the Federal Reserve and he said, I got 20 million nickels and I had my kids come in and see this room full of nickels. He said I just wanted to show them there is a way to have riskless returns that are guaranteed, if you think creatively enough. So nickels might be the ticket for some of these kids.

John Rothmann –  You know Tony, the way you’re talking I think we might want you to be the next Secretary of the Treasury.

Mitch Tuchman – Speaking of risk, what I learned from David Swensen, I read his book, it was a life-changer for me. We’ve been lucky enough at Rebalance to have Charley Ellis, who oversaw that committee, on our Investment Committee, but Charley recently said that Swenson’s greatest attribute is controlling risk and playing not to lose. So, as an authority on leadership psychology, I have a question for you: You deal with high-achieving people. You try to get people to become higher-achieving people, and that’s all about playing to win, right, playing to win.

And I find, though, that investing is more about playing not to lose. So when I talk to clients of Rebalance who are high-achieving people who have made enough money to invest and I say to them, This is about playing not to lose, this is about protecting the downside, let’s invest in the global economy, let’s keep our expenses low, let’s make sure we have exposure in all of the asset classes, all of the normal things you covered in your book, how would you recommend for me, as an RIA, that I talk to clients that are high achievers, that they’ve got to change their attitude from playing to win to playing not to lose.

Tony Robbins – Nobody likes that. That’s not a psychology most people like.  And yet what you said about David is absolutely true. I got to spend quite a bit of time with David and follow up with him a multiple times. Every one of these investors, Paul Tudor Jones’s first obsession is not losing.

The average investor will say, if you lose 50%, how much do you have to make to get even?  And the average investor says 50%, and you and I both know that’s not true. Start with $100,000 and you lose 50% you have $50,000. If you grow 50% you’re only at $75,000. You’ve got to make 100% to get even. People don’t understand the geometric impact.

So what I try to do is rather than start out with saying we’ve got to play protection, I usually start out by getting them to see that two things are important. Here’s what it really cost you if you lose and here’s what the greatest investors on earth know. Secondly, as I try to deal with those individuals is I get them to see, look, if you can put yourself in the position where you don’t lose and everybody else does, you are richer.

And I’ll give an example of that. I use what I call my “core four.” My core four I didn’t put in the book. It kind of evolved after that. Of all the things I’ve learned, the book takes you step-by-step through them all. But if I’m looking to build an asset allocation which as you know is the secret to all investing, the one thing in common other than getting into the game, reducing your fees, knowing how to win the game, knowing the numbers that are going to win the game vs. the way you were probably taught traditionally, things come down to asset allocation.

And when I do it I look at my core four. And my core four is number one, and I’ve learned this, every investor, every RIA, every person that advises me, my first question to them now is how do we not lose money. And the way I educate them about that use I use all of the investors I’ve talked about, I give them examples just like I did with you here, of Sir Richard Branson.

Everybody thinks there giant risk takers but they’re not. They’re just not. They protect themselves first. So I get everybody anchored on that. Then the other thing I do is, Okay, where is the asymmetrical risk-reward? My assets, I want to make sure there’s a significant amount in there where I have a huge upside with very little downside. I question them. Show me that. Show me where it is. Can we find the right mix that can allow me to do that?

And my third one came from, really, from David Swensen more than any other. I asked David, if you want to get greater returns, what are the things you can manipulate? You can only manipulate a few items. You can manipulate which stock selection you make. You can manipulate the timing. And he said you can manipulate asset allocation. And of those three, asset allocation is the only one that matters. Because you’re going to be wrong on timing and it’s costs you money to get some advice and you’re going to be wrong on a lot of those pieces.

So, asset allocation is the most important thing. Diversification is the most important thing, like you guys are teaching. But he said the other one is, really, making sure that you also, the third principle I’d use, is tax efficiency. Because you and I both know, it’s not what you earn that matters, it’s what you keep that matters. You can’t spend what you earn. You can only spend what keep. So tax efficiency, he would not have the returns he has, David Swenson at Yale, $1 billion to $24 billion, if he paid taxes.

I’ll use an example in the book. Most people know compounding. If you compound $1 it’s $2. Compound it the next year its $4. Compound it, $8. So you do that 20 times and you have $1,048,000. But if you just paid 33% tax each year and most of us pay more than 33% tax, especially people listening in California, so if it’s 33% tax each year what do you end up with? People think, well, 33%. It was $1,048,000. I get what $700,000? 600,000? I don’t know. You have $28,000 left instead of $1,048,000.

John Rothmann – Tony, I’m glad you doing this because April 15 is fast approaching and, of course, we have to take another break but I want to remind our listeners that we’re very fortunate to have with us Tony Robbins here on the Retire With More program and you can find out more by going to www.rebalance-ira.com. And, when we come back, Mitch would ask you to continue the line of questioning with Tony, and Tony all I can say is I’m so glad you’re with us, right here, on the Retire With More program.

John Rothmann – I’m John Rothmann. And I’m Mitch Tuchman. And you’re listening to the Retire With More program. Our guest is Tony Robbins. Those of you who’ve been listening to the first two segments know he is a phenomenal guest, someone who really knows what we’re talking about. We want everyone to retire with more. So Mitch take it away, let’s go into the next segment.

Mitch Tuchman – So we’re talking to Tony about his best-selling book Money: Master the Game. Tony there’s a whole section, one of the seven steps, that to me is an intersection of what you learned by interviewing 50 luminaries in the investment business and what you’ve been doing for a living for all these years in leadership psychology. You have found that most people have no idea how much their dreams to achieve financial security and independence really cost. You gave a great example of that kid you asked, what do you want” “I want to be a billionaire.”

And when you got right down on it you found that the kid could achieve everything he wanted with $10 million. And you provide some exercises in the book about how to drive these dreams deep into one’s mind. It reminds me of that old book Think and Grow Rich, which I read many times as a young man. Can you talk to us about how we can define our dreams and make the game winnable? I just love that, make the game winnable, because dreams are dreams unless you have a plan. I’d love to hear more about that.

Tony Robbins – Well, it’s interesting. The vast majority of people have been given advice that is 20 or 30 years old and inaccurate. In fact I saw in USA Today two weeks ago there was a story in there saying how much do you need to set aside for retirement, and the person said eight times your income. And I thought where on earth do they come up with that?

I remember, they used to say 10 times your income. Meaning, if you make $100,000 a year you need $1 million dollars to retire. Well, to do that, most of us know the 4% rule is dead, but for simplicity’s sake but just use simple math. Where are you going to get $100,000 a year out of $1 million? The means you are going to be getting the 10% return, if you’re not going to be reducing, especially if you’re younger, and most of us are living much longer than we ever dreamed of living and that’s going to get geometrically better since the digitized more of our DNA and digitized health just like digitization has changed the tech industry. The tech industry is now about change our biochemistry on a major scale.

So everyone is living longer than they ever were and we’re about to see a geometric change in that again. So you’ve got to think in terms of where am I going to get a 10% return in a secure environment? Or 12%?  It’s just not going to happen, not in the world we live in today with suppressed interest rates.

So I look at this and I say here’s what you’ve got to do first. First, you’ve got to break this into multiple goals, usually it’s what your number? Here’s what you’ve got to know. You need to start with a small goal, a goal that’s within reach, so you can achieve a well built-in success without a built-in failure. If you got this huge number in your head well okay, what’s really real? Well, what’s really real is probably 20 times your income. Twenty times my income! If I make $100,000, what are you saying to me? Are you saying I’ve got to have $2 million? Well, on a 5% return for the rest of your life, that’s probably closer to reality. You going to have a quality of life but there are also going to be inflation. You’ve got to remember that also.

What’s interesting is that seems so big. Here’s what I do with people. Let’s start with the short-term goal called financial security. The thing about the word financial security vs. financial independence vs. financial freedom. Which one is higher? Security or freedom? It’s not hard to figure out. Security is a lower level goal. So let’s define it in very specific terms: here’s what I have people do. Ask people how would you feel if you had enough money, enough income coming off your investments in a secure environment, you don’t have to think about it, where the income itself would provide for six things: It would pay for mortgage for as long as you live, you’d never have to think about your mortgage payment again, it would pay for all your utilities, provide food for your family, transportation and your basic insurance, those five things. How would you feel? Most people go “My God, that’s most of my expenses in life, that would feel incredible!”

You’re right. And here’s what’s cool. That number is at least 60% less than the number you would normally think of. I mean, you would still work. But you would work not because you have to, for those major things. You work for those things that you really enjoy. Here’s what I know. If you look at all the research today, when I was growing up, the goal was to get rich and retire when you’re 40 or 50 or something, right? Today the goal…my friends, Marc Benioff, a dear friend, he’s 50 years old. I know he’ll be working when he’s 75, there’s no question. My friends are 75. Steve Wynn, in Las Vegas, multi-multi-billionaire, he works more today than he ever has.

Warren Buffett is in his 80s. He’s what, 84 now, 85? He works more now than he ever did. The goal today is, if you love what you do, research shows, people that make $750,000 a year, if you make that much money, 90% of those people say they’ll never retire or are the earliest they would a 75. Most healthy 75 year olds that I know work not because they have to. The goal in finance is to get to a place where you don’t have to work. It’s not not to work. There was a statistic that was done, it was published in a medical journal in Britain recently, that showed that if you retire at 55, the average person dies in 10 years.  If you retire at 65 it’s larger than that, I think it’s 14 or 15 years.  It’s like if you’re tired but you don’t have a meaning for life, you don’t have a greater purpose, that’s not the goal.  The goal is, do what you love, and if you don’t have to work, you work differently.

So I said to people let’s get so that you don’t have to work for these five items and then let’s work part-time for the other stuff. And then let’s set a middle goal, financial independence, where it’s the lifestyle you have today without working. That number is going to be a bigger number, and maybe there’s something called financial freedom that’s a better lifestyle than today without ever having to work. I’ve been fortunate to hit that goal a long time ago my life. I work harder today than I ever did when I had to work. But I do it because I love it.

And I’m able to do things like feed 100 million people. I mean, it’s inspiring. Taking care of yourself and buying toys or cars or planes or all that stuff is really a great privilege. But it will never excite you as much as thinking that you can change someone’s entire life, or you can change a community, or you can change somebody, and that you have the resources to do it. Economic resources. Time resources.

I’ve got people who set very specific measurable goals. And you can figure out what financial security is by adding up the cost of your mortgage, your utilities, your average monthly food, what are your costs for basic travel and basic insurance. And you’ll know what that number is and what I show you next is how you can put together the asset allocation that can really get you there.

Mitch Tuchman – It’s greats, it’s great. I also love how deeply address about how to really deeply internalize those goals so they manifest themselves while you are doing whatever you do. And it comes from goals that you believe are achievable, deep down inside.

Tony Robbins – Yeah, the term is absolute certainty.  You see it, if you watch the NCAA championships, if you watch any time, and you watch a player go out there and you go, “He’s going to miss that free throw.” And most people paying attention know he’s going to miss. How do you know? Because you feel that while he has the talent, he is missing the certainty that will get you to execute. If you’ve got a goal but you don’t have a plan that makes you certain you can achieve it, you’re not going to execute. You’re not going to follow through. You are going to have this idea you keep talking about. And I think that’s the biggest challenge for most people, they just don’t get started.

So when you make the goal reachable, when you make the goal where you feel you know you can do it, then you’re willing to take action. And when you take action on the first results, now you reach for the larger one. And everybody gets momentum, right? You can’t build on failure. You can only build on success.

When you make this goal that’s this huge goal like the kid who told me I need $1 billion to be financially secure. What it did him was, I told him, tell me everything you want. He wants the Gulfstream. He wants the island. And I’m fortunate enough to have those things, so we went through what the price of those things really were, add them all up. He could have all those things for $10 million in terms of the interest on it would pay for those things, to have that lifestyle. You don’t have to be a billionaire to have an extraordinary lifestyle. You just have to understand what it’s really going to take and until you sit down and put a price in your dreams and find out what they really are….

To me, why would you buy a brand new plane for whole when he could just charter the plane for the 10 trips a year he wants to take with his family? There’s a big difference between $56 million for a plane or $4,000 an hour. It’s a different game, and that’s part of what I really show people how to do in the book.

Mitch Tuchman – Let’s go back to these interviews. You did these 50 interviews with these legendary financial experts, even with our own Rebalance Investment Committee member Burton Malkiel. And I gotta tell you, which you said in in the book was great. You said of listening to Burt talk about investing was like listening to Bruce Springsteen playing acoustic guitar in your apartment, playing “Born to Run.” And I’ve got to tell you that our Investment Committee meeting in New York last January, we gave Burt a lot of grief about that one. It was very funny, and he said that even his kids and grandkids were teasing him endlessly to this day about that comment. I don’t know that his grandkids even know who Bruce Springsteen is, but that was great. But of all of these guys that you talked to and, again, some of them are hedge fund guys, which of the interviews when you’re talking to regular everyday person with a few hundred thousand dollars working for retirement, which ones stand out the most that gave a few pearls of wisdom for that person, that they can execute.

Tony Robbins – There are so many, but I think that if I had to narrow it down, I would say Ray Dalio. Again, the average investor has probably never heard his name but wealthy people that have money, they tend to go to hedge funds. And hedge funds have the ability to invest in the market on the way up, on the way down, in a variety of assets they might be involved with, and a really large hedge fund might be, let’s say, $15 billion. Ray is the largest hedge fund and the world, but he is 10 times bigger than the largest one. He’s $160 billion. He manages money for China. It turns out he was a fan of my work and listened to my audio programs for decades, so he really opened up and gave me the time. And for my last question for all of them at some point in the interview, I asked all of these investors, if you couldn’t give up any of your money to your kids, not a dime, and you wanted them to succeed what would be the portfolio, what would be the asset allocation, what would be a set of principles that you would teach your kids to make them financially successful for a lifetime?

And Ray had the most interesting response. He said I spent a decade of my life answering that question and I have the answer. I said wow, what is it, and he said he said, well, there’s an illusion that most investors have. They go to a traditional financial planner, and they say as I get older we’re going to change your asset allocation. We want to make it so that you’re more protected. So we’re going to do 60%, let’s say, in equities stocks and maybe 40% in bonds, the typical example, and you have now a “balanced” portfolio, or 50/50. The problem is nobody pays attention to the fact that when we have these giant drawdowns, like 2000 and 2008, where you had peak-to-trough a 51% drawdown, that they basically lost money on their bonds and their stocks. They weren’t protected at all. This whole theory is total bull is what he said.

He said what happens, though, is the market eventually comes back and all the advisors just focus on the fact that market’s doing well. Nobody addresses it. I decided to address it. It took 10 years to do it, and I discovered something. When people say they are in a balanced portfolio, they’re not balanced at all. They’re balanced in the amount of money but they’re not balanced in the amount of risk, and risk is what makes you or breaks you. So he created something called “risk parity,” and here’s what it is: If you’re 60/40, say 60% in equities and 40% in bonds, since equities are three times for volatile than bonds, he showed you that you are you’re 90% at risk and 10% protected. This is something very few people on Earth understand.

So what he did was, here’s what’s interesting, he said there’s only four things that change the market. Changes in inflation or deflation move prices of all assets, and whether the economy is growing or shrinking. Those of four elements, up or down inflation, inflation or deflation, a growing market or decreasing market or economy, I should say, are what move different assets. And they all do well at different times. They all have their own season. So he said I created over the years this approach that allowed me — he called it “all weather” — to make money no matter what market it is. So, if a little bit less return, he’s known for making 23% return for 21 straight years before fees, but he said I decided I want something where I can make a 10% or 11%, a 12% return on average, but where you didn’t have the volatility, you didn’t have the “stomach problem.” 

John Rothmann – Tony, I hate to do this to you but I have a break that I have to take. We’re 75% done, you get 25% more. Our guest is Tony Robbins and we’re on the Retire with More program, right here on Talk 910.  I’m John Rothmann. And I’m Mitch Tuchman. And we are the Retire With More show. And we are delighted to have Tony Robbins with us, his bestselling book, Mitch in this last segment I know you have some critical questions for Tony.

Mitch Tuchman – Sure, so Tony we were talking about your best-selling book Money: Master the Game, you interviewed all these legendary investors, and we were talking about Ray Dalio, and I had to interrupt you before the break, but you’re talking about the “all weather” portfolio. So why don’t you finish that thought, it was really great.

Tony Robbins – So here’s what’s interesting, Ray’s whole idea was, how do I, without knowing what the market is going to be 20 years from now, when I’m gone, be able to have something that will prosper for my kids and for all the philanthropic things I’m involved with? In other words, I’ve got 1,500 people right now at Bridgewater, at his fund, working around the clock to have the best ideas. But if I wasn’t here how could we win? And what he said was, listen, the average person can’t take the volatility. Dalbar did a research project that showed last 20 years in the market, the S&P did 9.2% compounded but the average investor saw 2.5%.

That is insane. How is that possible? Fees, and we all do the opposite. We sell when we should buy and we buy when we should sell. It’s the volatility that kills us. So he said I went and said, how do I get less volatility with the greatest return? So he created this “all weather” and he’s done that for his top clients.

So explain to me the details and how it works and I said I’m going put this in the book. There’s just one problem. You told me the principles that you haven’t told me the percentages. And we all know when it comes to asset allocation, you live and die by your percentages, right? You get a wrong percentage and you’re not going to work. And he said Tony, you’re asking me to give my secret sauce. That’s what I get billions of dollars for. You have to have $1 billion net worth at least $100 million for me to start, for me to even take any money 10 years ago and today I won’t take your money no matter who you are. 

I said that’s my point. Give me the secret sauce because I’m going to give it away to the average person. I’m giving it all away. I’m not even going to make any money on it. I’m giving the book away. We’re going to feed people with this book. I said, you can’t take any more people. You’ve got the insight. Give me the secret sauce. Otherwise you telling me to build a chocolate cake, use chocolate, use sugar…well yeah, how much?

Mitch Tuchman – Right, right.

Tony Robbins – He started laughing, any he finally got him laughing so hard and intrigued him. I said, you’re going to give away half your net worth anyway. You’re one of the most generous human beings. Give me the formula. And he goes well, it wouldn’t be perfect. And I said, your idea of not perfect, this is the guy they called the Da Vinci of investing, the Steve Jobs of investing.  Your idea of not perfect will be better than anybody else’s. 

And he said well, I don’t want to do it with leverage. And I said design one without leverage, because “all weather” has leverage. And he says will do this “all season.” And he started listing this and I got chills down my spine. We went out and we got it tested by an outside firm. You know most people back-test something and see how it did, and we always say the past doesn’t guarantee the future, but most people back-test for five years or 10 years. We back tested this for 75 years, the entire modern period of investing. Seventy-five years. And in 75 years it made money 85% of the time. But here’s the real killer: When it was wrong, when it didn’t make money, the 15% it was wrong, it only lost an average of 1.6%.

If you think about the last 10 years, say 2000 to 2008, 50% drawdowns, the largest drawdown in 75 years was 2.95%, less than 3%. It gets better. I put this out and last year there were some people, a couple bloggers that were in the IRA business one guy managed $100 million dollars, not $1 billion, not $160 billion. He said, Tony made this up. Ray Dalio would never do this. And of course he’s completely wrong. But to give you an idea as you know last year the S&P was up 13.69%. This all season was up 15.3%.  And if you remember October of last year when the Dow lost 1,000 points and people were freaking out, the market, the S&P was down 6%, this was up 0.2%.

You come to the first of this year January 2015, and you probably remember the first seven days of this year, you’re in the business, the S&P was down 3%. This was up 1%. Today, I looked it up this afternoon, the iShares S&P 500 is up 1.35%, the all season is up 2.98% — more than 50% better. Now, it’s not supposed to beat the market everywhere, but if I was saying what’s an asset allocation with the least amount of risk and a significant, nice upside that has averaged over 75 years just under 10%, with the least amount of volatility, this is something I would certainly look at as a portion of somebody’s portfolio, and it’s a gift from one of the greatest investors in history and it’s something he’s never, ever shared. So it’s quite a privilege. I just spoke to Ray today about it.

Mitch Tuchman – That’s very interesting. I found the concept of long Treasuries in that portfolio a very interesting idea. Obviously there’s something to it. Ray Dalio is one of the kings of investing. Let me ask about women, Tony. As RIAs, in our business, we’re told by the industry, hey, women are underserved because so many brokers in a very male-dominated business women feel that oftentimes they are talked down to, that they ask questions of their adviser and they are not given a straight answer, that there’s all kinds of mumbo-jumbo and finance speak, yet that the industry is waking up and saying women control a whole hell of a lot of money and we have to learn to talk better to women.

You just wrote the book. You interviewed a few women. You’ve probably gotten a lot of feedback from women. As a matter of fact, Allegra, in our office, she calls you the “financial babe” of the financial services industry. But, women, let’s talk about women for a minute. I mean, what have you learned, what have you seen, what are your observations and what can people in our business and at our firm, Rebalance, how can we better empower women to do better with their investing? 

Tony Robbins – To me, I would hire some women as your other RIA members of your team, me personally, because women deserve to ask somebody they can identify with, who’s talented, and here’s the cool thing. I interviewed Mary Callahan Erdoes, because when you get to this level of the people that literally manage billions, and in our case she’s the first $1 trillion woman, she the CEO of the JP Morgan asset management division. And since she has been there, if I remember right in 2009 I think is when she really took over, there’s been a 30% growth. I meant, they brought in half a trillion, with a T, dollars of business. She manages $2.5 trillion, okay?

Mitch Tuchman – Wow.

Tony Robbins – So she oversees the employees who helped build this thing. I just think there aren’t a lot of women who had been dominant in this industry, but people like Mary Callahan Erdoes, they’re forces of nature, and she’s proof. And I asked her, how did you make it in such a male-dominated business? And she said Tony, the great thing about Wall Street is, she said, it’s an illusion that it’s a male-dominated business. It’s only dominated because women don’t participate and compete.

She said, if you can produce results, the great thing about the financial business it doesn’t care what your color is, what your background is, all it cares about is results. If you can produce results, you move up. It’s an illusion, it’s your own lie that your gender will be there. But the problem is not enough women get into the business, from her perspective, because they’re intimidated. Or they have beliefs like, “I’m not good with numbers.” She was fortunate to have a father in the business. And she’s to go to his work and she used to dream about mastering that business, like anything else that can be mastered. I think the one thing that’s been proven financially is that women tend to be better investors.

Mitch Tuchman – Yes.

Tony Robbins – Because men are overconfident. We think we have all the answers. Like, I came back with Ray Dalio’s strategy, right? And these bloggers in the investment advisory business either say it wasn’t true or say Ray is wrong, and their managing…

Mitch Tuchman – Nothing. A rounding error.

Tony Robbins – A full-page blog saying Tony Robbins is giving terrible advice. We all know he’s telling you to put the majority of your money in bonds and bonds are going to go down because interest rates have only one place to go and they don’t understand. They’re looking at the ratio, not the risk ratio, the dollar ratio. They don’t understand a damn thing about what they’re talking about.

Women will read that. It all makes sense to them. And they’ll invest in it. Men will think, I’ve got a better idea. I’m going to do better than Ray Dalio, a guy who manages $160 billion with 23% returns in 21 straight years, and they’re going to criticize him and say it’s wrong. I mean, that’s how stupid men can be.

John Rothmann – We’re winding down in terms of time and Mitch told me you had a final secret that we had to discuss and I just, in the last few minutes, have to ask you, what is the final secret?

Tony Robbins – Gosh, maybe the best way to describe it is to tell you the final little story. I personally when I was building my business like a lot of people, you know, you struggle for many years, you’re trying to add so much value. I was at a point where I was very, very frustrated and I was driving home at midnight in this place in California, on 57th street, I remember this vividly, in my 1968 Baja bug Volkswagen.  And I literally pulled over on the side of the freeway and I had this insight. It was such a simple insight. I still have it today, the journal I wrote, the full-page journal I wrote, “The secret to living is giving.” 

I realized that I was so frustrated because I was focused on what I wasn’t getting. I wasn’t focused enough when I was giving. I was giving a lot, but I was focused more on what I wasn’t getting. And I just shifted my entire focus to giving. And the next 12 months were incredible until I ran into a partner who stole a bunch of money from me, so I found myself in a place where I lost everything.

I moved into this little 400 square foot bachelor apartment in Venice, California. I was washing my dishes in the bathtub because I had no kitchen. Cooking on a hot plate sitting on top of a trashcan in this tiny little room. And I was literally down to my last $20, $21, $22 and change, whatever I had. And I realized I don’t have enough to feed myself. This is going to be a few weeks before this thing is going to be resolved. I don’t have enough money for my rent. So instead of going out to eat and driving my car I parked my car and I walked three miles and I thought I’m going to go to this all-you-can eat salad bar at a place called El Chirito, and I’m going to load up for the winter here. I’m going to eat everything I can to make this last…$5.95, I think it was, I don’t remember the real number, it was like six bucks if I remember right. But I’m going to sit there and look out at Marina Del Rey at all these boats and all those beautiful ocean area in this environment of abundance.

So I go there and I eat two plates worth of food and I’m loading up, and what changed my life was a simple moment when the door opens, this beautiful woman walks through the door — that got my attention, quite frankly — but what got my attention more was I waited to see the man she was with, and I looked down and he’s this little eight-year-old kid. He’s in a three-piece suit.  He holds the door for his mom. He pulls the chair out for her. He was listening and talking to her with such presence I was truly moved. I paid my bill, whatever it was. I’ve got whatever was left in my pocket $14, $15, $13.50, whatever it was.

And I go up to this young man, and I just said, “I really want to meet you. You’re an impressive character, taking your lady out to lunch like this.” And I shake his hand and he goes, “She’s my mom!” Well, that’s even more impressive you take her to lunch. He goes “I’m only eight. I don’t have a job yet. I can’t take her to lunch.” And, I didn’t have a plan for this. It was just spontaneous. It was one of those moments that change your life, and I said “Yes you are, you’re taking her to lunch.”

He looked at me, and I just reached in my pocket. I took all the money I had in the whole world, put it down on the table in front of this boy, his eyes got his big as garbage can covers and he said I can’t take that and I said yes you can and he said how come? And I said because I’m bigger than you are. And I got him laughing. And I didn’t even look at the woman. I wasn’t doing it for it acknowledgment. He giggled so hard. He was so lit up. And I flew out that door and I didn’t have my car. I’ve got to walk three miles. I should’ve been thinking, hey, that was really nice, but what the hell are you going to do, you don’t have any money for food, what are you going to do?

But it was the first time in my life when there was not scarcity in my nervous system. I went home, I’ll never forget, and I got up the next morning, had no plan how I was going to have money for breakfast or eat. The mail comes and there’s a man I’d loaned more than $1,000 to maybe six months before, when I was doing okay, and I’d reach out to him probably five times in the last two weeks and he’d never return my phone calls, so frustrated and angry, and here I get this mail, snail mail, I open it up.  It’s a letter from this guy apologizing, gives me my money back, and hands me interest on it.  In those days it would’ve been enough to support me for three weeks.

But here’s the kicker. I’m sitting there crying, holding this thing, like okay, I’m set, and I just talked to myself. What does this mean? And I realized, in that moment, I did what was right. I didn’t do something for positioning. I didn’t do it to look good. I didn’t do it because I have this great strategy. I just did what felt right, and in that moment, giving what was right, in other words, no more scarcity. I mean I’ve had 22 businesses with at least $5 billion a year revenue in all my companies. And I had up times and down times, horrific times, good times. But I’ve never gone back to that moment of scarcity and it changed my entire life

John Rothmann –  The book is Money: Master the Game, Seven Simple Steps to Financial Freedom. Our guest Tony Robbins. I want say thanks, Tony, it’s been great. I’m John Rothmann. And I’m Mitch Tuchman. And this is the Retire With More show.