Millionaire Who Went Broke Several Times Explains 8 Rules On How To Prevent His Mistakes
James Altucher is not your typical self-help writer. He’s an entrepreneur, angel investor and chess master but every day when he wakes up, he tells himself that he is stupid. It’s his mantra, he says, and he reminds himself of it all day.
Altucher has a top-10 rated podcast, The James Altucher Show, launched in 2014, with millions of listeners and nearly 40 million downloads.
He has reinvented himself from personal catastrophe so many times in his 52 years that he has turned failure into a career.
During the’90s dot-com boom, Altucher made millions of dollars designing corporate websites, then lost it all on gambling and disastrous investment decisions.
He lost everything so many times that he says he became wary of the American Dream. A graduate of Cornell and Carnegie Mellon universities, he scorns homeownership as a terrible deal for homeowners, hedge funds as a scam and higher education as an overpriced luxury. He’s never had credit card debt because he’s never had a credit card.
As part of his radical self-creation, he lived in AirBnB rentals and discarded everything except 15 things that he carried in a small canvas bag.
“I was probably losing about a million (dollars) a week for an entire summer,” he told Nick Gillespie, editor at large of the libertarian magazine Reason. “I just made every stupid decision in the book.”
He has started and run more than 20 companies and is invested in more than 30. He wrote 18 books, including Wall Street Journal bestsellers “The Power of No” and “Choose Yourself.” His latest, “Reinvent Yourself” was No. one in the Amazon store.
This millionaire who went broke several times explains in a LinkedIn post some of his 15 rules on how not to make the mistakes he made. Here are eight of them.
Listen to all 15 on the full podcast episode on Spotify.
1.If you’re the smartest person in the room, you’re in trouble
Altucher said he never invests unless there’s someone smarter than him investing.
“Sometimes I look at a company and I think to myself, ‘Man, I’m glad nobody else knows about this!’ And I structure a deal where I get a huge equity stake because there’s no competition to invest.”
This is an Altucher recipe for disaster and he wants you to recognize it: “‘I’m super smart and everyone else is stupid so I better invest RIGHT NOW!”
When he thinks that way, he said, “100% of the time I’ve lost money.
“If there is no competition to invest and you invest, then you are about to lose money. All of it,” he wrote.
Hence, he tells himself he is stupid and encourages others to do the same.
2. Altucher: There’s nothing honorable about failure
It’s hard to make money and harder to make it after you’ve made it and gone broke, Altucher says. Going broke sucks. It’s worse than grieving the loss of a loved one, and he said it gives him no pleasure to write that. “I am upset I wrote that but it’s true,” he wrote.
3. Nobody wants to make you money
“In the history of the planet, zero people have woken up and said, ‘I can’t wait to make James Altucher rich today!'” Altucher wrote, and he urges readers not to believe the hype.
If anyone tried to tell you that, he says, “hang up the phone.”
4. Ask for help
Altucher says he wishes he had found “just one person to ask what I should do with my money. And I wish that magical person had said to me: ‘Don’t do anything right now. Wait. Enjoy life a little bit. Travel. Learn. Do a project just for the fun of it. Get excited about something you’re passionate about.”
He says wishes someone had told “just keep the money in the bank for at least one year. Let the money marinate your soul for a little bit.”
He has since given this wished-for advice to many people: “Just put all the money in the bank and don’t change ANY part of your lifestyle. Don’t buy things, don’t invest things.”
5. The 1 Percent Rule
Don’t invest more than 1 percent of your net worth in any one deal, even if it’s the next Google or Uber.
If the deal fails and goes to zero, “No big deal. I just lose 1 percent of my net worth.”
Altucher says he regrets putting 30 percent of his net worth in 2000 into a device for deaf people to text each other and another 20 percent of his net worth in an online marketing company right before that industry blew up.
“The day I was forced to move out of my expensive apartment (which was 150 percent of my net worth with the loan), we were all standing around the elevator. I was carrying Mollie, who was a baby. She was crying. I couldn’t believe this was happening. Everything I worked for was down the drain.
“The elevator came. We got in and went down. We drove 70 miles away to a house a quarter the size of our old apartment. There was a blizzard. I pretended all was OK but it just wasn’t. And it wouldn’t be for a long time.”
6. Altucher: risk is greater than opportunity
In 2000, Altucher says he had millions of dollars from selling a business but he was mentally ill. “In my head, I was dirt poor,” he said. “It’s a cliché but somehow I didn’t like myself. I had this hole inside of me that was not fulfilled by the money.”
Thinking he needed 10 times more money to be happy, he took big risks and invested as much money as possible into a ton of deals. “Everything I touched went to shit,” he said. “It all went to zero.”
He says he learned that risk is more important than opportunities.
“Once you find a good idea or a decent opportunity, the goal is to not make as much money as possible, but the goal is to every day reduce risk.
“Always ask, “What is the worst case scenario? Eighty percent of the time, the worst case happens. Deal with it.
“Divorce. Disease. Depression. Business failure. Economic cycles. A one-year deal might turn into a five-year deal. A trend might not work out.
“After you deal with it, ask again, ‘What is the worst case scenario?’ Repeat.”
And remember Warren Buffett’s two rules, Altucher said:
- Don’t lose money.
- Don’t forget rule No. one.
7. No losers
Altucher talks about surrounding himself with good people and rejecting losers.
He defines “a good person” as “a person who listens. A person who is compassionate. And a person who has the courage to take disciplined risks.”
He defines a loser as “a victim. A loser wants a short cut. A loser always seems to have unavoidable accidents. A loser doesn’t know where the risks are. A loser compares and despairs. A loser blames and drains.”
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He describes how two people asked him for money. He gave them money but said they were both were losers.
“Can a loser change? Yes. Can you change a loser? No,” he said, adding, “I was a loser.”
8. Altucher on divorce and money
Altucher urges his listeners to ask themselves every day, “What did I do to improve my physical health, my relationships, my creativity, and my stress? Ask yourself, ‘Was I the hero in my story today?'”
To make money, you need all aspects of health, he said. He said writes about making this his daily practice in his book, “Choose Yourself!”
“You can’t make money without every day working on your physical health (eat, move, sleep well), emotional health, creative health (10 ideas a day), spiritual health (simply avoid trying to control the things you can’t control,” Altucher wrote.
“If you are getting divorced, expect a year or so of your life to be taken from you. If your business partner is getting divorced, then expect him to be not partner material for the next year or two.”