Opinion: Tony Robbins doesn’t quite master the game of money in his new book

Opinion: Tony Robbins doesn’t quite master the game of money in his new book

Published: Nov 25, 2014 11:23 a.m. ET

While a lot of it is useful, the self-help guru contradicts himself and confuses readers

By

CullenRoche

I don’t usually review books, but when a book about money hits No. 1 on Amazon AMZN, -1.44% it’s worth taking a look.

“Money: Master the Game” by self-help guru Tony Robbins is a 600-page book that purports to provide the reader with the tools and understanding needed to become financially independent by following seven simple steps. This is a bold topic for Robbins, considering it’s not his area of expertise. There’s a lot to like about the book, but I came away feeling conflicted.

First, I am excited that someone of Robbins’ stature and reach is taking this topic seriously. The general public is so badly misinformed about money, any little bit of added education is a positive. The more we can turn the spotlight on this topic, the more informed we’ll all get. So, before I point out some criticisms of the book, I should note that the mere fact that Robbins wrote it is a good thing.

At the same time, money isn’t a “game,” and people like me who are professionals in this industry think it’s important to not only take this stuff seriously, but to get the details right in a fully transparent manner. So let’s explore the text:

Unfortunately, this is the problem with someone who’s an expert in something (life strategies, in this case) who suddenly tries to conquer a huge topic like money.

The first step in achieving financial success is getting in the game. Robbins is making a hugely important point here. Most Americans don’t even own stocks or bonds, so the decision to invest in the first place is the most important one. Robbins and his motivational style get the reader excited about getting involved in the markets and making smart decisions with your money. So bravo for step 1.

Robbins cites the importance of investing in yourself. Regular readers know that I think this is the most important investment you’ll ever make. So, again, Robbins makes a crucially important point here that everyone should digest.

Robbins stresses the importance of becoming an “insider” and steers the reader toward many of his own companies or companies he’s partnered with. This left me conflicted and feeling as though I was reading a commercial for a few firms that Robbins may or may not have a financial relationship with. I wish he’d spent less time promoting certain firms and more time providing unbiased and objective advice.

He regularly demonizes high fees, but goes on to recommend working with firms like Lifetime Income and Stronghold Financial. I called Lifetime Income to inquire about its products, and someone referred me to a California partner, who informed me that the fee structure starts at 1.5% and is often higher depending on the product. So the book promotes a low-fee approach, yet it recommends working with companies that will outsource you to high-fee firms. This is a contradiction that is difficult to reconcile, and it seriously undermines the credibility of the text.

The book is filled with contradictory strategic investment commentary. Robbins stresses the importance of using passive index funds, but also explains the importance of asymmetric returns and active strategies. He interviews supposed “insiders” who have totally contradictory approaches (stock traders, activists and indexers), while putting many high-fee hedge fund managers on a pedestal. He even cites his own market-timing calls over the years as if that adds any value to the text without mentioning that he has made some horrible stock market calls (see here for instance).

You come away thinking that these high-fee active managers are geniuses, but then you’re told at points that high-fee active managers are useless. Again, the commentary seemed to contradict itself consistently.

He does discuss one specific investment-allocation approach in great detail. He holds the Ray Dalio “All Weather” strategy up as if it’s some sort of genius asset allocation, but as I previously noted, the Tony Robbins “All Weather” is not really Dalio’s All Weather approach. In fact, it is nothing more than a cookie-cutter bond-heavy asset allocation. Robbins refers to it as a “never-before-revealed” strategy, but the All Weather strategy has been well-documented and is even replicated by many fund companies. But the Tony Robbins portfolio, which Dalio himself says is vastly oversimplified, is just a bond-heavy allocation that performed well over the 30-year period when bonds were in a bull market. Granted, you could do worse than this approach, but the way Robbins presents the strategy, you’d think Dalio has offered up some Holy Grail for investing or a secret that he has never disclosed. But that’s not the case.

Robbins promotes structured notes, annuities and market-linked CDs throughout the book, stressing “guarantees” in the products. Well, you pay for those guarantees. There is no free lunch here.

At one point he goes on about the dangers of the national debt. It’s not the first time he’s done this. I wrote a post that was critical of a video he produced in 2012 talking about how the U.S. was on the verge of a fiscal crisis. Unfortunately, this is the problem with someone who’s an expert in something (life strategies, in this case) who suddenly tries to conquer a huge topic like money. You have a tendency to oversimplify and misunderstand macroeconomic concepts. People who say the U.S. government is bankrupt or running out of money lack the most basic understanding of macroeconomics. I’ve been writing papers, books and posts about this topic for years trying to educate people about the solvency risk of the U.S. government. But the message clearly isn’t getting out to “insiders” like Tony Robbins.

There are more minor issues with the text that bother only a nerd like me. For instance, he doesn’t ever define money or talk about where it comes from. I find it odd to write a book about money without defining what money is or describing the system in which it exists. He also stresses the idea of saving, but makes the classic fallacy by misunderstanding that aggregate saving cannot lead to more saving. Things like this make me seriously wonder if Robbins really has a good grasp on these topics.

I’m being hypercritical, but this is a very important topic, and Robbins is influencing a lot of people. And while he certainly moves the ball in the right direction, I think the book comes up a bit short. I hate to sound negative because I am certain that Robbins has good intentions, but in order to understand money, we need to have a really honest discussion about it.

After all, that’s what money is in a modern monetary system: credit, from the Latin word “credere” meaning “to believe.” Unfortunately, for me, the contradictions on fees, products, gurus, strategies and basic misunderstandings don’t add up, thereby reducing the credibility of many of the core concepts.

Cullen Roche is the founder of Orcam Financial Group LLC, a financial-services firm offering research, private advisory, institutional consulting and educational services. He is the author of “Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance” and “Understanding the Modern Monetary System.”

http://www.marketwatch.com/story/tony-robbins-doesnt-quite-master-the-game-of-money-in-his-new-book-2014-11-25