Tony Robbins, Money Strategies Book Review

Tony Robbins has a new book titled Money: Master the Game. Tony interviews 50 “legendary financial experts” and asks them each what portfolio, principles and money strategies they would leave behind to family and friends if they could not leave them any money.

The first half of the book is Tony building the case why the strategies are important. This helps the reader fully appreciate the advice later in the book, instead of the strategies just being listed right at the beginning. This foundation covers:

  • The Deleterious Effect of Fees and Active Managed Mutual Funds
  • The Value of Compounding
  • Dollar Cost Averaging
  • Why taxes will probably increase in the future and how you can use a Roth IRA to pay taxes at todays low rates instead of in the future.
  • The need for different buckets, your safety bucket, risk bucket and fun bucket.
  • Why no ones consistently beats the market and what you can do instead of trying to beat the market.
  • The goal of investing is a lifetime income.
  • Why some fixed index annuities are great.
  • The difference between a fiduciary and a broker. A fiduciary is like a dietician who will recommend the best diet for you. A broker is like a meat salesman.

The middle of the book has specific strategies. For example, Ray Dalio recommends a balanced portfolio (generalized and without leverage because this is a book for the common man). Tony’s financial team back tests the portfolio for the past couple decades to prove that it works. Some of the strategies include:

  • The all seasons balanced portfolio that Ray Dalio recommends.
  • Investing in a market index fund, like a Vanguard S&P 500 index fund.
  • Investing in a fixed indexed annuity because it protects 100% of the principle and still lets you participate in some of the upside. The gains from the previous year are locked in each year. The book ecommends website http://www.lifetimeincome.com/
  • Investing in a fixed indexed annuity within a Roth IRA.
  • Fixed indexed annuities are backed by insurance companies, not banks. Individual insurance companies are backed by insurance guarantee
  • Why the order of returns are important, not just the average rate of return.
  • Immediate annuities are for people at retirement age and deferred annuities are for people not yet at retirement.
  • Private placement insurance is a tool of the ultra-wealthy. This is life insurance policy where the value is based on low-fee index funds that you can take a loan out against, instead of withdrawing. There is no tax consequence if you take out a loan. The value of the insurance policy is based on the investment growing. You can structure to pay off the loan in the future or have your life insurance pay off the loan when you die. Must be an accredited investor or buy through TIA-CREF for non-accredited investors. Remember to talk to your fiduciary or the TIA-CREF representative to fully understand what is offered.
  • “One of the simplest things to protect your family is to establish a living revocable trust.” The trust can own your house a brokerage account. The key benefit is when you die, then those assets will avoid probate, which is a costly and length process and makes everything public record. You can setup a trust inexpensively through Legal Zoom or for free at Get Your Shit Together. A will does not protect you like a living trust.
  • Asymmetric risk/reward.

The last part of the book is the transcript of Tony’s interviews with the legendary financial investors, including:

  • Carl Icahn
  • David Swensen
  • John C. Bogle
  • Warren Buffet
  • Paul Tudor Jones
  • Ray Dalio
  • Mary Callahan Erdoes
  • T. Boone Pickens
  • Kyle Bass
  • Marc Faber

Open Source Freechise

I was reading this Brick and Makers website and came across the term “freechise”. It is used as a term to describe an open source franchise business model. This particular website might be poorly worded in parts, but the concept of a freechise is interesting.

Some of the things that can be open sourced about a business are:

  • Logo – The open source franchise can have a logo and allow a small subset of the graphic to be specific to the individual operator.
  • Policies and Procedures – The policies and procedures manuals can be distributed via a repository like Github and forked or outright re-used by each franchise operator.
  • Software – The software that underpins the business can be open sourced, letting others freely use and contribute to its development.

Commercial franchises have strict rules that have to be followed or you can lose your franchise. For example, there is a certain standard that you must adhere to if you want to keep your McDonalds franchise. How should these types of controls work in an open source environment? The franchise is a brand and consumers expect the same quality and product from each franchise owner. When you go to one McDonalds, you expect the Big Mac to taste exactly like the Big Mac you had in a different city. It is not clear to me yet how this is enforced in an open source franchise.

What Insight Underpins Your Business

What insight underpins your business? Eric Schmidt says breakout products need a technical insight which is, “[a] new way of applying technology or design that either drives down the cost or increases the functions and usability of a product by a significant factor.” Google now simplifies this description even further with its 10x mantra, where they are looking at ways to make the product 10x cheaper or 10x more powerful. With technology and the context of the world today, if you are downplaying the need for a technical insight to help customers 10x more then you are far from realizing the potential of what your business could be doing for customers.

Are non-technical insights also needed? Yes. You can have business model insights or non-technological operational insights, but digitizing your business and technical insights will help enable execution of those other insights. For example, Netflix business model is supported by its technical insights to provide content you want to see on any device.