Tony Robbins does not want you to fear the next bear market or panic during a stock market crash. His latest book, Unshakeable, was just released this week in an updated paperback edition and is based on interviews he’s conducted with 50 of the world’s best investors, including Warren Buffett, Jack Bogle, Ray Dalio and Carl Icahn.
Robbins is the world’s top life & business strategist, a New York Times best-selling author, an entrepreneur and a philanthropist. He has coached more than 50 million people through his book and audio programs and 4 million people have attended his live events (next up is the New York area in November).
In this exclusive interview, I asked him about his best and worst investments, what he’s learned from the world’s greatest investors, why we shouldn’t be afraid of bear markets, and perhaps most importantly, how to become emotionally wealthy.
Karl Kaufman: What was your motivation for entering the financial education space?
Tony Robbins: I saw a documentary called Inside Job, which won the Academy Award in 2011. It showed how, during the financial crisis, a small number of people put the entire world economy at risk and the punishment was…we gave them more of our money!
I was angry and I thought, “I have access to some of the smartest financial minds in the world. What if I interviewed 50 of them and got the unassailable view on what the system is really like? Can you still make money? How do you win?”
I wrote Money: Master The Game and that was a best seller. Then I wrote Unshakable because I wanted something that people could read in a weekend to prepare themselves for the next bear market.
If I could write a book that is coming from the best minds of the planet, that can be read in a weekend and can provide a game plan whether the reader is a millennial or a baby boomer, then I have something that will be of great service.
We’re donating 100% of the profits, just like the last book, to Feeding America. We’ve served 400 million meals in the last four years alone and we’re going to serve one billion meals over the next six years.
Kaufman: What were the biggest takeaways from talking to legendary investors like Ray Dalio, Warren Buffett and Carl Icahn? Was there a common theme among them?
Robbins: There were four things that all of them had in common.
The first one sounds basic but it’s a mistake that the average investor makes: most investors are focused on how to make money. The smartest financial minds in the world universally want to make money but their first focus is on how to not lose money.
If you lose 50% of your money, how much money do you need to get back to even? Most people would say 50% but it’s not true. If you lose 50% of 100 grand, you’ve got $50,000. A 50% return on that would leave you with only $75,000. You’d need to make 100% of your $50,000 and that could take years.
The best investors know they’re going to be wrong. Unlike the talking heads who say “I know for sure what’s going to happen,” the best investors say “I don’t know exactly what’s going to happen. I know what I believe is going to happen. I know for sure I’m going to be wrong at some point, so I need to protect myself through asset allocation. Even if I’m wrong, I’ll still do well.”
The second thing is they’re all obsessed with asymmetrical risk/reward. Most people think these billionaires took gigantic risks, but when you actually study the best investors, that’s not how they operate.
They take on the least risk possible for the highest possible return. Billionaire hedge fund manager Paul Tudor Jones wants to risk a dollar to make five. He knows he’s not going to be right all of the time, but if he risks a dollar, he’ll be fine, if he risks another dollar, he’ll be fine and when he makes five, he’s in incredible shape. He can be wrong four out of five times and still be okay.
When it comes to investing, the best investor’s number one question is: what’s the downside?
The third thing they have in common: they’re very tax-efficient in their thinking. They structure their business so they get the most net profitability for their investments.
Finally, they don’t put all their eggs in one basket. They look at asset allocation as a science.
They’ll diversify across asset classes and within asset classes. They want diversification across markets and economies and across time.
Kaufman: You’re an investor in an app called Blast. Can you talk about that and how it encourages gamers to save money?
Robbins: First of all, I’m invested in Team Liquid, which is an eSports franchise. People don’t understand that more people play eSports each day competitively against somebody else online than all other sports combined.
People used to say to their kids “stop playing video games,” but our average eSports player makes a million dollars a year playing and coaching kids on YouTube. It’s a small advertising base right now, but the advertising is going to grow.
Blast is an opportunity for kids to try different games, get paid to play them and have that money put aside in an investment account. A lot of parents now say “keep playing those games.” Kids earn some money to set aside to start compounding and that’s why I thought this was a great company to invest in.
Kaufman: What were the best and worst investments you’ve ever made?
Robbins: I was 23 years old and just getting started. There was a place in Marina Del Rey in California where all the wealthiest people went to do their dry cleaning. I would go there just to see all these people drive up in their fancy cars in the ’80s.
One day this woman rolled up in a brand new Rolls Royce convertible and she was gorgeous. The car was gorgeous. I asked her “what do you do for a living?” and she said she and her husband owned a penny stock company.
I asked her for a stock tip, so she gave me one and I took $4,000 or so, put it all in the stock and of course, it went to zero. Went out of business. Just so stupid.
My best investment is the investment I made in myself. When I asked this question to Warren Buffett, he had the same answer.
My teacher, Jim Rohn, taught me that the greatest investment you can ever make is in your own growth because from that, everything else expands. I always tell people to work harder on yourself than at your job. Invest in yourself.
As far as a physical investment, I’ve hit some wonderful home runs but one of the best has been a company that’s involved in stem cell research.
We raised a quarter of a billion dollars to start one. But more importantly, it saved my shoulder from three different surgeons that all wanted to operate on me. Instead, all I had was three injections and some IVs of the highest quality stem cells and my body is completely healed. I look at this as an investment that not only enhances economics but enhances life.
It’s quite miraculous. Medicine is going to be completely transformed over the next three to five years. So you’ll want to do well financially because you’re going to live longer!
Kaufman: Why did you call the book Unshakeable?
Robbins: After the financial crisis ten years ago, people were afraid to invest. Being unshakeable means you’re not freaked out when there’s a correction or a bear market. You’re able to stay strong and make the right decisions in the middle of all that without fear. This book can really help people do that.
We just need to understand that there are patterns. There’s a correction every year on average and the average correction is 14%. It’s scary as hell, but 80% of them don’t become bear markets. There’s a bear market about every three to five years — we haven’t had one in forever but there’s one coming. They last an average of a year long and average a 33% drop.
When Hitler invaded Poland, which began World War II, Sir John Templeton bought every stock he could that was under a buck. He became a billionaire because he understood that only during times of maximum pessimism do you make the most money. When the market is heading to the floor, people will sell and take whatever they can get. That’s where the opportunities are.
Every bear market becomes a bull market in the history of the United States. You can’t afford to not be in the marketplace and you don’t want to live in fear because, as Warren Buffett said, “you don’t want to bet against the American economy.” For over two centuries, despite two World Wars and economic meltdowns, we as a nation keep growing.
Kaufman: In the final chapter of Unshakable, you write about the state of mind needed to become emotionally wealthy. What does the average person need to know about the psychology behind wealth?
Robbins: The most important distinction is that money will not make you happy. It makes you more of what you are. If you’re mean, you have more to be mean with. If you’re generous, you’ll have more to give and love with.
Of all the billionaires I interviewed, I would say the majority were happy. But that’s not because they’re billionaires but because that’s who they are.
Money doesn’t change people the way they think it’s going to. What does change is how you spend your money. The secret to living is giving. If you really focus on giving, you don’t have to worry about receiving, there’s plenty of receiving going on. So find a way for you or your business to add more value and to do more for others than anybody else does.
As we finished the interview, I asked Robbins for one last suggestion for how someone can prepare themselves for success.
His response: “We all develop a certain level of happiness and you can train yourself to be appreciative no matter what happens. Being able to find the beauty in life is the most important thing you can do to be emotionally wealthy each day.”