Wednesday, December 24, 2014

Never Stop Learning

Tony Robbins, self help guru/motivational guru extraordinaire, has published his first new book in two decades, Money: Master the Game: 7 Simple Steps to Financial Freedom. Robbins began his career working for motivational speaker, Jim Rohn, the man who would ultimately become his mentor. He learned Neuro Linguistic Programming, an offshoot of Ericksonian hypnotic techniques combined with the teachings of family therapist, Virginia Satir, and others. For many years he marketed the resulting product on endless infomercials we have all seen on late night TV at one time or another. Robbins is also known for mixing a little side show humbug into his performances, most notably fire walking as proof of positive thought.

Whatever I think about Tony Robbins, he has accomplished much in his life. His net worth is somewhere North of $480 million. He has served as a “life coach” to a U.S. president, celebrities, and famously successful businessmen. It doesn’t surprise me that he has written another self help book. It doesn’t surprise me that he has chosen personal finance as a topic. So many Americans suffer from the effects of financial illiteracy. What I find a pleasant surprise is how Robbins did his research. He used his connections with the rich and famous to learn from the masters, men who have net worth beyond his paltry $480 million.

Even after achieving great success, he still believes he has something to learn.

I haven’t yet read this book but it looks like the men he interviewed Buffet, Icahn, Dalio, Schwab, and Bogle steered him in the right direction. His first step is “Make the decision to become an investor, not a consumer. By this he means the same thing I do when I say buy things that pay you to own them rather than things that cost money to own. My example is buy Verizon or AT&T rather than a new smart phone with an expensive contract.

Step 2 is become an insider on investing. Understand what you are buying and what fees you are paying to own it. Ultimately the only thing you can control is the cost of your investments. Market forces, politicians, and disruptive technologies are all beyond your control, but you decide how much you pay to own a mutual fund or how much you are willing to pay in brokerage fees.

Step 3 is make the game winnable. Set and plan to reach small obtainable goals rather than giving up before you start.

Step 4 is evaluate your asset allocation. Robbins learned that evaluating and controlling risk can be more important than finding the perfect investment.

Step 5 is Create a lifetime income plan. Robbins observes, “Income is all that matters. Assets won’t buy you food. They won’t let you travel. You have to focus on income. The investment community wants you to think about keeping your money in assets.”

Step 6 is invest like the .001% Here he means learn and apply what you can from the practices of men like Warren Buffett.

Step 7 is just do it, enjoy it, and share it.

Critics of Money: Master the Game: 7 Simple Steps to Financial Freedom point out a number of contradictions contained in a book that runs over 600 pages. For example while focusing on Modern Portfolio Theory, investing in an age appropriate balance of low cost index funds, Robbins lionizes the accomplishments of some super hedge fund managers, leaving the reader with idea that these genius investment managers are worth the high fees they charge.

Robbins also stepped on a hornets’ nest by quoting Elliot Weissbluth, CEO and founder of Hightower Advisors. “I am teaching people what to do, but they are going to look to someone for advise, I want to make sure the person they talk to is a fiduciary someone who is legally required to put your interest first.”

The Dodd Frank bill gives the Security and Exchange Commission the power to change the regulatory standard for brokers from “appropriate” to fiduciary. Right now your broker is not required to make recommendations based on your best interests. He is a commission salesman who can legally pitch products that are in his best interests or the best interests of his company as long as they are deemed “appropriate.” If this reform is implemented your broker will be required to sign a fiduciary oath guaranteeing that he will act in your best interests even if he suffers personal loss as a result. It is difficult to predict how such a fundamental change in the way Wall Street gets its money from the small investor might play out in the real world. Needless to say successful commission salespeople consider it a very bad idea.

I expect I will read this book at some point in the future. Tony Robbins has celebrity status. A lot of people are likely to read this book. They will have questions. It is the sort of thing I should know something more about than is contained in this essay.

However, the key takeaway for me is, “Never stop learning.”

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