MONEY Master the Game: 7 Simple Steps to Financial Freedom (5 page)

In spite of the diversity of these financial challenges, in 28 full consecutive years, Paul has never had a single losing year. I’ve been working with Paul for the last 21 of those years. He is truly unmatched in his ability to find the way to victory. I’ve had the privilege of being shoulder-to-shoulder with him while he made money consistently, no matter how volatile the market. Through him, I’ve learned more about the real world of investing and how decisions are made in tough times than I could get from a hundred MBA courses.

I’m also incredibly blessed to not only work with Paul during this time but also consider him one of my dearest friends. What I love and respect
about Paul is that he not only creates financial results for himself but also is one of the most extraordinary philanthropists in the world. Over the years, I’ve watched him grow the Robin Hood Foundation from the simple idea of harnessing the power of free markets to alleviate poverty in New York into what
Fortune
magazine has called “one of the most innovative and influential philanthropic organizations of our time.” So far Robin Hood has distributed more than $1.45 billion in grants and initiatives, changing millions of lives in the process.

I’ve also learned my own lessons along the way, some through the pain of my own trials and errors—which this book is designed to help you avoid as much as possible. I’ve earned my own scars on Wall Street. I took a company public when I was 39 years old and watched my personal net worth soar to over $400 million in a few weeks—and then plunge back to earth with the dot-com crash of 2000!

But that stock market “correction” was nothing compared with what we’ve all been through in recent years. The meltdown of 2008–09 was the worst economic crisis since the Great Depression.
Do you remember how it felt when it looked like our financial world was coming to an end?
The Dow Jones Industrial Average plunged 50%, dragging down your 401(k) with it. The bottom fell out in real estate, and the price of your home may have plummeted by 40% or more. Millions of people lost the gains from a lifetime of hard work, and millions more lost their jobs. During those terrible months, I received more phone calls from a greater variety of people needing help than ever before. I heard from barbers and billionaires. People would tell me they were losing their homes, their savings were gone, their children couldn’t go to college. It just killed me because I know what that feels like.

I’ve worked hard and been blessed with financial success, but it wasn’t always that way. I grew up with four different fathers in California’s dusty San Gabriel Valley. I can vividly remember, as a kid, not picking up the phone or answering the door because I knew who was there—it was the bill collector, and we had no money to pay him. As a teenager, I was embarrassed to have to wear school clothes we bought for 25 cents at the thrift shop. And kids can be pretty brutal when you are not “hip.” Today the thrift-store shopping would be a sign of coolness—go figure! And when I finally got my first car, a
beat-up 1960 Volkswagen bug, the car had no reverse, so I parked on a hill, and there was never enough money for gas.
Thankfully, I didn’t buy the theory that this is just how life is. I found a way to overcome my circumstances.
Because of my own experiences, I can’t stand to see anybody suffer. It makes me crazy. And 2008 brought more needless economic suffering than I had seen in my lifetime.

In the immediate aftermath of the stock market crash, everybody agreed that something had to be done to fix the system. I kept waiting for those promised changes to happen, but years later it was still business as usual. And the more I learned about the roots of the financial crisis, the angrier I got. My personal tipping point came after I watched an Academy Award–winning documentary called
Inside Job,
narrated by Matt Damon, about the Wall Street gunslingers who took crazy risks with our money and nearly toppled the economy. And their penalty? We the taxpayers bailed them out, and somehow the same cast of characters was put in charge of the recovery. By the end of the film, I was seething with frustration, but I converted my anger into a question: “What can I do?”

This book was the answer.

There is no friend as loyal as a book.

—ERNEST HEMINGWAY

It wasn’t an easy decision. I haven’t written a major book in almost 20 years. Last year, on average, I was on a plane once out of every four days traveling to more than 15 countries. I run a dozen companies and a nonprofit. I have four children, an amazing wife, and a mission I love and live. To say my life is full would be an understatement. Both
Unlimited Power
and
Awaken the Giant Within
were international bestsellers, and that was enormously gratifying, but I haven’t felt compelled to write again until now. Why? I love live events! I love the total-immersion experience, the immediacy and flexibility of communicating with 5,000 to 10,000 people at a time, going deep and keeping their focused attention for 50 hours in a weekend. And that in a day and age when most people won’t sit for a three-hour movie that someone spent $300 million to make. I can remember vividly Oprah telling me that she couldn’t stay for more than two hours—and 12 hours later she was
standing on a chair and shouting to the camera, “This is one of the greatest experiences of my life!” Usher told me he loved my work, but certainly he wouldn’t last through an entire weekend. Just like Oprah, he ended up having the time of his life. Fifty hours later he said to me, “This is like going to one of the greatest concerts of my life! I was writing notes like crazy, and you made me laugh my ass off!”

My live-event experience is filled with so much emotion, music, excitement, and profound insights that people are moved to take massive action. They don’t just think, they don’t just feel, they
change, they transform.
And my body language and my voice are essential to my style of teaching. So, I’ve got to confess, when I sit down to write words on a page, I feel like there’s a gag over my mouth and one hand tied behind my back! Heck, I found that I could reach more than ten million people through one TED Talk alone.

So what made me change my mind?

The financial crisis caused tremendous pain, but it also made us reevaluate what’s most important in our lives—things that have nothing to do with money.
It was a time to get back to basics, to the values that have sustained us through troubled times before.
For me, it made me remember the days when I was sleeping in my car homeless and searching for a way to change my life. How did I do it? Books! They helped to establish me. I’ve always been a voracious reader: as a young man, I decided I was going to read a book a day. I figured leaders are readers. I took a speed-reading course. I didn’t quite read a book a day, but over seven years, I did read more than 700 books to find the answers to help myself and others. Books on psychology, time management, history, philosophy, physiology. I wanted to know about anything that could immediately change the quality of my life and anyone else’s.

But the books I read as a child made the deepest impression. They were my ticket out of a world of pain: a world with no compelling future. They transported me to a realm of limitless possibilities. I can remember Ralph Waldo Emerson’s essay on self-reliance, and the lines “There is a time in every man’s education when he arrives at the conviction that envy is ignorance; that imitation is suicide; that he must take himself for better, for worse, as his portion.” Another was a book by the philosopher James Allen,
As a Man Thinketh,
echoing the biblical proverb “As a man thinketh, so his
heart will be.” It came to me at
a time when my mind was a battlefield filled with fear.
He taught me that everything we create in our lives starts with thought.

I devoured biographies of great leaders, great thinkers, great
doers,
like Abraham Lincoln, Andrew Carnegie, John F. Kennedy, and Viktor Frankl. I realized that the great men and women of the world had experienced pain and suffering much greater than my own. They weren’t just lucky, or even fortunate; somehow there was something in them, an invisible force that would not let them settle for less than they could do, or be, or give.
I realized that biography is not destiny; that my past was not equal to my future.

Another favorite was an American classic from 1937, Napoleon Hill’s
Think and Grow Rich.
Hill spent two decades in the early 20th century interviewing 500 of the world’s most accomplished individuals, from Andrew Carnegie, to Henry Ford, to Theodore Roosevelt, to Thomas Edison, finding out what made them tick. He discovered that they all shared a relentless focus on their goals, and a combination of burning desire, faith, and persistence to achieve them. Hill’s message that ordinary people could overcome any obstacle to success gave hope to a generation of readers struggling through the Great Depression.
Think and Grow Rich
became one of the bestselling books of all time.

Napoleon Hill’s quest has been an inspiration to me. Like his classic, this book is modeled on seeking out the best of the best in the world, from Warren Buffett to Sir Richard Branson—and including the man that experts in the field have called the Edison of our day: Ray Kurzweil, who invented the first digital music synthesizers, the first software to translate text into speech; he’s the man behind Siri on your iPhone. He developed a device that allows the blind to walk the streets and read road signs and order from any menu. Today Ray is head of engineering development for Google. But I wanted to write a book that went beyond the psychology and science of achievement to come up with a real plan, with real tools that you could use to build a better future for yourself and your family. It would be a handbook, a blueprint, an owner’s manual for the new economy.

As I began to reassociate to the power of a book, I thought, “I need to put these answers in a form that’s available to anyone.” And with today’s technology, this book has a few great advantages to help push you along the way. It has electronic segments where you can go online to see some of the men and women I interviewed and hear their words. We have an app that’s designed to trigger you to walk through the 7 Simple Steps so you don’t just learn the ideas but follow through and get the financial freedom you truly deserve.

By the way,
when I began this adventure, people told me I was crazy.
Many so-called experts—and even friends!—warned me I was nuts to try to bring the complex world of finance to a wide audience. Even my publisher begged me to write about anything else.

But I knew I could pull it off if I found the best voices to guide the way. Most of the people I’ve interviewed here do not give interviews, or if they do them, they’re extremely rare. They might speak in Davos, Switzerland, at the World Economic Forum, or for the Council on Foreign Relations, but bringing their knowledge to the general population, in their voices, has never been done before. Sharing their critical insights in a way that anyone could act on became the mission of this book.

I’ve been honored to have great relationships with some of the most influential people in the world: friends in high places who were willing to make a few calls on my behalf. Before long I found doors opening to me, and I was getting access to the masters of the game.

Welcome to the jungle . . .

—“WELCOME TO THE JUNGLE,” Guns N’ Roses

So where do I start? I decided to start with a person who most people have never even heard of, even though he’s been called the Steve Jobs of investing. But ask any of the world’s financial leaders, whether they’re the chairwoman of the Federal Reserve, the head of an investment bank, or the president of the United States, and they all know about Ray Dalio. They read his weekly briefing. Why? Because governments call to ask him what to do, and he invests their money. Same with pension funds and insurance companies. He’s the founder of Bridgewater Associates, the world’s largest hedge fund, with $160 billion in
assets under management (AUM)
at a time when a large hedge fund might manage $15 billion. It used to take a net worth of $5 billion and an initial $100 million investment just to get in
the door. But don’t bother trying; he won’t take your money—or anybody else’s—at this point.

Ray Dalio came from an unlikely background, born in Queens, New York, to a jazz musician father and a homemaker mother. He started as a caddy who picked up his first stock tips at the local golf course. Now he’s worth about $14 billion and is the 31st richest man in the United States. How did he do it? I had to find out! Here’s a man whose Pure Alpha fund, according to
Barron’s,
has lost money only three times in 20 years, and in 2010 he produced 40% returns for his key clients. Over the life of the fund (since launching in 1991), he’s produced a 21% compounded annual return (before fees). If there’s anyone I wanted to ask, “Can the average investor still make money in this crazy, volatile market?” it was Ray. So when he told me, “There’s no question you can still win,” I was all ears! How about you?

It’s not that easy to get access to Ray Dalio. But as it turns out, Ray already knew who I was, and he was a fan of my work. One afternoon I sat down with him in his surprisingly modest house on a wooded island off the Connecticut coast. He got right to the point, telling me that individual investors like you can win—but only if you don’t try to beat the pros at their own game.

“What they gotta know, Tony, is you
can
win,” he said. “But you can’t do it by trying to beat the system. You don’t want to try. I have fifteen hundred employees and forty years of experience, and it’s a tough game for
me.
This is poker with the best poker players on earth.
”

Ray is 65 years old, speaks with a soft New York accent, and uses his hands like a conductor when he talks. He reminded me that poker, like playing the markets, is a zero-sum game. For every winner, there has to be a loser. “As soon as you’re in that game, you’re not just playing poker against the guys across the table. It’s a world game, and only a small percentage of people make real money in it. They make a lot. They may take money away from those who are not as good at the game,” he said. “So I would say to your investors, the average guy: you don’t want to be in that game.”