Losing a lot of money in a short time is painful. James Altucher, author and investor, learned some serious lessons when it happened to him.
His company built websites for entertainment companies such as Bad Boy Records, Miramax, Time Warner, HBO, Sony, Disney, Loud Records, Interscope, ConEdison and others.
First Company Worth $15 Million
The way Altucher tells it, “I did everything smart until I did everything stupid.” He sold his first company for $15 million, sold his shares so he had cash. He spent several million for an apartment, bought art and “played a lot of poker.” Then he began to invest in other companies, a million here and a million there. He put $2 million into an IPO and watched the $20 shares drop to nothing.
Then he started another company of his own in which there was significant outside investment. He started a VC fund and invested in more companies.
Then the Internet stocks began to drop. He couldn’t believe it. he had thought Internet was here to stay. He admits to knowing nothing about stocks or valuations or “anything resembling rational thought.” He doubled down, then quadrupled down, than octupled down.
Losing $1 Million A Month
From June 2000 to September 2001, he lost a million a month. The thing became addictive. “I was the worst idiot,” he admits. His ego was so tied up in financial success that he began to think that his life was over. Even going to the ATM was a disaster as the balance plummeted.
He lost his house, suffering a million dollar loss and was reduced to asking for help from his parents, who said no. They had footed college and felt that was enough. Things went from bad to worse as his health suffered and his mental stress multiplied. He felt he had failed his family.
“I went from feeling immortal to feeling dead all over, every day.”
The Financial Turn Around
The reversal was slow, but determined.
- He exercised every day and improved his eating.
- He spent time with those people who loved and supported him and broke ties with those who generated bad memories and frustrating feelings.
- He began to write software again.
- He studied the stock market and modeled what happens in different situations.
- He developed ideas for trading systems that he shared with hedge fund managers, some of whom were willing to give him money he could manage.
- He began to write articles based on his experiences with the Internet and stocks and over time was able to place them with Financial Times, Forbes, Yahoo Finance and other publications.
- He prayed and expressed gratitude for his daughters and other daily blessings he had discounted. He refused to wallow in regret and faced his reality.
Gradually he came up with new ideas for businesses. At 6 a.m., he went to a café and read and wrote. He started a hedge fund and a newsletter, did deals, broadened his store of acquaintances to expand his new network. He became involved in a mental health company that he later sold for $41 million. He started a website, stockpickr! Which attracted millions of users and found advertising for it. Later he sold it advantageously.
Altucher repeated the loss-rebuild-thrive-fail cycle once again. He blames that on the fact that he stopped using the fundamental techniques he had used to rise from the ashes the first time. Now he is on the uptrend again.
Bottom line:
“I hope I can keep on building. I hope I don’t revert back to my addictive tendencies. I think this time I have learned. Every day, without fail, I focus on physical, emotional, mental and spiritual health. But life brings with it many challenges and many things to learn. I surrender to whatever I need still to learn.”
