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Tim FerrissTony Robbins Interview: Part 2 (Full Episode) | The Tim Ferriss Show (Podcast)
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CHAPTERS
- 0:00 – 5:36
Asset Classes and the Math of Losses
Tim and Tony discuss why stock picking and index funds sit in the same asset class, and how average returns mislead. Tony shows how a 50% loss and gain leaves an investor well below break-even.
- •Stock picking and S&P index investing are both in one correlated asset class
- •A 50% loss requires a 100% gain to recover
- •Average rate of return hides what happens to real dollars
- •Tony's example turns $100,000 into about $37,000 after swings up and down
- 5:36 – 10:39
Automating Savings and the Mutual Fund Lies
Tony explains becoming an owner by automating savings, using the example of blue-collar workers who raised their savings rate. He then goes through marketed Wall Street lies: 96% of mutual funds fail to match the market, and fees compound against investors.
- •Automating a percentage of future raises avoids the sense of loss
- •Workers who saved 3% reached 16% in twelve years
- •96% of mutual funds fail to match the market over 10 years
- •Average fees of 3.1% compound; Bogle called it a $13 trillion lie of marketing
- •A DALBAR study found the average fund owner made 2.5% net versus 9.7% for the market
- 10:39 – 12:49
Why Fees Matter and Why the Book Is Long
Tim shares his own experience with incentives, math aversion and a misleading guidance counselor, and explains why a book of this length works. Tony says stories make the numbers digestible and that the key lesson is that fees matter.
- •Humans respond to incentives, as with the guidance counselor and the mutual fund friend
- •Tim says the book builds logically from block to block
- •Stories take the abstraction out of numbers
- •Three investors with the same 7% return but 3%, 2% and 1% fees end up with very different results
- 12:49 – 18:52
Ray Dalio's Background and the All Weather Approach
Tim asks about Ray Dalio and asset allocation. Tony recounts Dalio's path from Queens and the 1970s, then explains his four-seasons framework and why a 50/50 stock-bond portfolio is really about 90/10 in risk.
- •Dalio grew up in Queens and was shaped by the volatile 1970s and the Nixon Rally
- •Four forces move prices: inflation, deflation, growth and shrinkage
- •The All Weather Fund was back-tested to 1925
- •Stocks are three times more volatile than bonds, so a 50/50 portfolio is effectively 90/10
- 18:52 – 21:45
Getting Dalio's Simple Strategy and Testing It
Tony describes coaxing a simplified version of Dalio's strategy out of him. He had it back-tested over 30, 40 and 75 years and found it was positive 85–86% of the time with small losses, so he put it in the book rather than keeping it for a business.
- •Dalio first said the exact percentages were his business
- •Tony persuaded him to share a no-leverage version for the average person
- •Back-testing showed gains 85–86% of the time with a worst loss of 3.95%
- •The strategy averages just under 10% return with low volatility
- •Tony chose to publish it in the book
- 21:45 – 26:57
Context, Stronghold, and Swensen's Portfolio
Tony explains why he won't give the portfolio out of context and describes the Hightower and Stronghold tool that lets people check fees, returns and volatility. He also covers David Swensen's higher-return but more volatile portfolio.
- •Without knowing risk tolerance, goals, fees and taxes, the portfolio return won't help
- •The online tool aggregates accounts and shows real costs, returns and volatility
- •It compares an investor's portfolio against others, including Dalio's design
- •It is free for people with under $25,000 in investable assets
- •Swensen's Yale portfolio returns more than Dalio's but with much more volatility
- 26:57 – 30:44
Planning for Crashes, Power Laws, and Diversification
Tim and Tony discuss anticipating crashes, automating decisions, and the idea of uncorrelated buckets. Tim compares mutual funds to venture capital, where top investors hedge. Tony relays Dalio's warning that any asset class will eventually drop 50–70%.
- •Losers react, winners anticipate; history rhymes
- •Having a plan to sell prevents buying high and selling low
- •Venture capital resembles mutual funds, with a power law distribution of returns
- •Top tech investors hedge with shorts against their concentrated holdings
- •Dalio says any asset class will drop at least 50%, likely 70%
- 30:44 – 34:58
Security vs. Growth Buckets and Real Risk Tolerance
Tony explains his bucket theory of secure and growth money, balanced by risk tolerance, time horizon and cash flow. He uses a make-change exercise and the story of a leveraged condo developer who lost heavily in 2008 to show how people misjudge risk.
- •The secure bucket is steady while the risk-growth bucket takes bigger risks
- •Real risk tolerance differs from what people think it is
- •Allocation depends on risk tolerance, time and cash flow
- •A friend who skipped the secure bucket went from $750 million to minus $400 million
- •Tim says investing is about maximizing quality of life, not return
- 34:58 – 37:35
Becoming Financially Literate and Using Heuristics
Tim argues everyone is already an investor through their time and money choices. Tony says people trade time for money and should educate themselves briefly, then rebalance rarely, while both share rules of thumb.
- •Making no decision is also a decision
- •Most people make a bad trade by swapping time for money
- •Education takes about a chapter a day for a month
- •Rebalancing might take 15 minutes a year
- •Heuristics: every investment should be able to return the fund, and assume your favorite asset will fall 50–70%
- 37:35 – 40:03
Funny Moments, Hunger, and Systems
Asked for a funny story from the research, Tony recalls Carl Icahn throwing his video crew out and introducing Icahn to Jack Bogle. He says the top performers share an unquenchable hunger, and Tim adds that they rely on principles and systems.
- •Icahn removed Tony's crew and allowed no audio
- •Tony introduced Icahn to Bogle, who were fans of each other
- •Top players share an unquenchable hunger and energy
- •Systems protect against lesser instincts, whether in investing or eating a cupcake
- 40:03 – 42:21
Rapid-Fire Questions
Tim asks quick questions. Tony names Richard Branson as a successful person, says he thinks of changing his mind as updating, and describes himself as a softie underneath.
- •Richard Branson comes to mind for living on his own terms and being socially conscious
- •Tony prefers 'updating' to 'changing' because identity resists change
- •Small two-millimeter upgrades can have the biggest impact
- •Tim cites Marc Andreessen's 'strong opinions weakly held'
- •Tony says he's a love bug who is moved to tears by people doing the right thing
- 42:21 – 50:44
Confronting President Obama
Responding to Tim's 'punchable face' question, Tony tells of a meeting with President Obama at a Silicon Valley gathering. He questioned the president on political division and Simpson-Bowles, and was later asked to work with Romney.
- •Tony voted for Obama but pressed him on demonizing the other side and on Simpson-Bowles
- •A Secret Service agent stepped in, and Obama said Tony created creative tension
- •Reid Hoffman said he had wanted to ask that question forever
- •Obama offered a one-on-one visit with his chief of staff, but Tony then worked with Romney
- •Tony says compromise is both sides' responsibility, though he thinks the president must lead it
- 50:44 – 58:55
Dark Moments, Experience, and Where to Find the Book
Tim asks about doubt, and Tony describes his wife's motion sickness and the inner conflict it created. He credits trusting his gut, hydration and rest, and turning pain into helping others. He closes with where to find the book and Tim's praise.
- •Tony's dark days came from an inner conflict between his work and his wife's suffering
- •Her motion sickness eased after Oneness meditation work in India
- •Trust your gut, hydrate, and rest, because low energy breeds doubt
- •Pain is inevitable but suffering is optional; experience beats belief
- •The book is Money: Master the Game; tonyrobbins.com, with bonus fast-track videos for receipts
