I had been broke all of my life. Now this cash was sitting in my account. I had cashed out. Cash.
June 20, 2019
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[Altucher Confidential]
"I had been broke all of my life. Now this cash was sitting in my account. I had cashed out. Cash."
[3am]
How I Went From $0 to $15 Million and Then... Ugh
By James Altucher
Â
Iâm burning my $300,000 bonus check
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[James Altucher]Dear Reader,
I had no business experience at all.
My job was to go out at 3 a.m. once a week and interview people: âWhat are you up to at 3 a.m.?â
I did that for four years. Once a week Iâd put up the best interviews for that week on the HBO website.
It was a web show called III:am.
I had never done interviews before. I was always nervous just going up to someone in the middle of the night and saying, âHi! Can I ask you what you are doing?â
I had a photographer with me.
One time I went up to a transvestite prostitute and she said the night was the only time she could leave her house.
She said she grew up in foster homes and was raped in every home since she was a kid.
âI didnât know what sex I was by the time I got kicked out of foster care. The only place I could go was the street.â
A car went by and flashed its lights.
âYoohoo!â she yelled at the car and it stopped and she got in.
Another guy was always out at 3 a.m. I ran into him no matter what part of town I was in.
I called him 24-Hour Kahadi.
He said, âPeople are trapped in the day. They wear their prison uniform. They go to their prison jobs. They go back home to their prison TV shows. They sleep. They repeat.â
He said, âFor me, the people in the night are real. Each person is unique. Each night is a story.â
For him, 3 a.m. was a religion. A way of life.
For me, it started to be a way of life as well. The idea that the day has its strict societal rules but the night is for people who want to make their own rules.
Later HBO asked me to shoot a pilot for III:am.
Jon Alpert, a well-known documentary producer, was assigned the task of being my babysitter and producing the pilot.
He told me, âNo talking heads ever!â Meaning: no interviews. We only shoot action.
I watched him do his magic. He put a mic on a prostitute so we could hear her with customers.
We once found a group of homeless kids at Tompkins Square Park, and when he found out they were upset at another group of kids, he suggested they all fight.
We went to Rikers Island, the jail. Thereâs a bus that goes every hour, 24 hours a day, from one stop in Queens to Rikers. No matter what time of day, if a prisoner got bailed out, he was released right then.
At the stop in Queens there were drug dealers and prostitutes always hanging out. They were waiting for their best customers to be released from jail.
One time I spoke to a girl who was a prostitute who was waiting for the bus. We were lit up by the neon lights from the Donut Time store that was the only store open at 3 a.m.
She was skipping up and down, happy, while she was talking to me. A small guy walked up to her and stood in between me and her.
Suddenly she shouted, âOoohhhh!â like all the breath and life came out of her. She fell to the ground.
The guy said, âHisss!â And she limped away, around a corner where it was just dark, and later, when I went to look, I couldnât see more than two feet in front of me.
He said to me, âSheâs none of your business.â
A construction worker with a neon vest and a hard hat came up to me. He flashed a badge. âWeâre all over.â
The bus came, the doors opened, I got on it.
We kept the cameras hidden under the seats. A woman and her daughter were on the bus. âOur boy needs to get bailed out.â
âWhat did he do?â
âSomebody did something to someone,â said the daughter.
We got to Rikers Island. It was quiet. Everyone was quiet. The door opened and everyone got off.
Guards dragged a guy who had burns onto the bus.
The doors closed.
I sat down next to the guy with burns. âYou OK?â He didnât speak.
When the bus got to Rikers, he didnât move. The bus driver said, âOh geez.â
The guy was blinking. But he didnât want to get off the bus. The driver called 911.
Police and the fire department and an ambulance showed up. âYou have to get the cameras out of here,â yelled someone.
They carried the guy off the bus and put him in the ambulance. Put on the siren, and drove off.
âAnother night,â the bus driver said, and he put the bus in gear and pulled away, back to Rikers Island.
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One time Comedy Central asked me to do for them what I did for HBO.
I had created HBOâs first intranet. I put all of its databases online and I installed Netscape on everyoneâs computer. Most of the employees had never seen a web browser before.
On one page I set up, they could click in an actorâs name and see all the movies and shows he had been in. Click on a show and see all of the actors.
This was before IMDb.
The most popular page? I put on the database that managed the menu of HBOâs cafeteria.
Click on a day and see all the items on the menu.
Now the woman in charge of Comedy Centralâs IT department said, âWeâll pay you.â
I said, âGive me the 3 a.m. time slot so I can do a talk show.â
âReally? Weâll pay you whatever you cost.â
âI only want the time slot. You only have infomercials there.â
âLet me ask.â
A week later she called me. âIt went all the way up to the CEO,â she said. âHe said no.â
My brother-in-law had a CD-ROM business. CD-ROMs were the same as CDs that had music but instead of music they had games or interactive presentations.
He was going out of business. I showed him what the web was. One Saturday I brought him to HBO and showed him the intranet I had made.
He had a friend of a friend who introduced us to Shlomo, who ran a wholesale diamond business on 47th Street.
Shlomo said, âI could be killed if they knew I was doing this.â
âTheyâ were the 500 diamond retailers, mostly Hasidic Jews, who sold diamonds out of every storefront on 47th Street, between 5th and 6th Avenue. The Diamond District.
He explained to me everything about diamonds. The â4 Cs.â How he found cheap diamonds. How they were cut and cleaned and made ready for rings.
We made the website. Itâs still at âdiamondcutters dot comâ although it looks different now after 24 years.
[Diamond Cutters]
He gave us $35,000 in a brown paper bag. My brother in law took $17,500 and left me the rest in the bag.
I had $0 in my bank account. I was living in an apartment in Astoria, Queens and my only furniture was a foam mattress.
It was summer and I had no air conditioning (I donât even think I had electricity) and every morning Iâd wake up and my sweat would be soaked up by the foam of the mattress. The mattress was perpetually moist from my sweat.
I took my $17,500 and got a room at the Chelsea Hotel, which was known for letting artists, drug dealers, and prostitutes live there.
Stanley Bard, the owner, took my bag of cash and said, âAre you a drug dealer?â
"No," I said, "I work at HBO."
âCan you get us free cable?â
âOf course.â
He let me move in. It was illegal to live in a hotel but there were no rules at the Chelsea Hotel.
It was the best place Iâd ever lived. I lived there for many, many years. Itâs the only place I ever lived where most of my friends lived in the same building as me.
Itâs the only place I ever lived where nobody told me the truth about anything.
[Chelsea Hotel]
The Chelsea Hotel
Now that I lived right in between HBO and my brother in law, we were in business. We called our business Reset.
Time to reset your business to take advantage of this new thing.
âWhat new thing?â everyone asked. JPMorgan asked. Sony asked. Warner Brothers asked.
âThe internet,â I said. And then started to explain.
One for them. One for us.
Weâd do Con Edisonâs website for $300,000.
Then weâd do Fine Line Films for $1,000.
Weâd do The Matrixfor $250,000.
Then we made a website for fun called Shoebox. Two friends of mine from the Chelsea Hotel came over. One was a dominatrix and the other was a professional submissive.
They brought over 100 pairs of shoes. We photographed them licking each otherâs shoes. We photographed Maria tied up while Veronica stood in 8-inch stilettos with a whip giving Maria water to drink.
One company, a Fortune 500 very conservative company, looked at Shoebox and said, âMake us a site like that!â
[Newsweek 96]
Nobody knew what they were doing.
We charged a lot of money.
We did websites for Loud Records (the Wu-Tang Clan), Bad Bad Records (Puffy), Interscope Records, Jive Records, BMG, Sony, we did Time Warner dot com, and many of New Line Cinemas movies.
We did Miramax (everyone was terrified Harvey Weinstein would hate the website). We did HBOâs website.
We were known in the industry for being the best at entertainment websites.
One time, Vadim, our first employee, came back from a shoot he did with Loud Records.
He walked in red and sweating. âThatâs it!â he said, âI am not going to any more shoots where guns are randomly firing.â
I wanted to sell the company.
A year earlier I had written to Felice Kincannon, who was head of mergers and acquisitions at Omnicom and was focused on this new breed â the interactive agency. The web agency.
Omnicom had invested in Razorfish, Agency dot com, and a few others.
I met her for breakfast at the Palace Hotel, owned by the Sultan of Brunei. I loved the pancakes there.
âMaybe you are too small for us now,â she said.
âI understand,â I said and for the next hour I asked her questions about herself, her job, what she was looking for, details about the ad agency business, which I knew nothing about.
I knew nothing at all about any business.
[Wu Tang]
We did the websites for the Wu-Tang Clan back 1997
For the next year I would send her a monthly letter. We got X new clients. We went up Y% in revenues. We moved offices to handle our growth, etc.
Every six months weâd meet for breakfast. I asked her more questions.
I met with accountants to learn what deals looked like.
What sort of money did companies pay? Oh! They pay also in stock? Oh! They sometimes pay over time to make sure we keep our customers?
I didnât know that. I didnât know anything.
Every week I would arrange lunch or dinner with different competitors. Companies who also made websites.
There were only a few of us. We all knew each other. We all competed on every single deal.
We were frenemies. We were co-opetition.
Weâd ask each other questions. We tried to make deals with each other. Iâll give you these clients if you give me those. You heard what about who? He got that client? You are using what technology?
New industries grow up together. We were all in the same sandbox. Iâm still better friends with some of my competitors from then than some of my best friends from then.
Later, whenever one of us got acquired, we all got acquisition offers.
Finally, Felice at Omnicom was interested in buying Reset.
She introduced me to various agencies that Omnicom owned.
We got four offers. My mom said, âWho is going to pay for your business?â
âBut Mom,â I said, âWe just got a $9 million offer.â
A stockbroker from Prudential kept calling me. I never called him back.
Finally I picked up the phone and he said, âJesus, youâd think your Warren Buffett, you never call me back.â
He wanted to help me sell my company. He wanted a 5% cut. âOK,â I said.
He set me up on three meetings. All of them visited our office. I set up a map and put needles in all the parts of the world where we had clients.
Werner, who made an offer, looked at the map and said in his thick German accent, âThereâs a lot of business in New York City. You donât need to travel all over.â
I learned so much from people with 40 more years' business experience than me.
Then the worst period of my life (up until then) began.
âWeâll close the deal in just a few weeks,â he said. âItâs just legal paperwork.â
I was so happy. I had never had money before.
I had paid for my college. I graduated in three years to avoid another year of borrowing. I had taken six courses a semester and took two courses every summer while working 40 hours a week to survive.
I moved to NYC in 1994 with nothing in my pocket. My first room in NYC was a room I shared with Elias, a chess hustler from Washington Square Park. He slept on the couch, I slept on the futon.
I had a garbage bag full of clothes. Every morning Iâd pull a crumpled suit out of the garbage bag and then walk to HBO so as to save on the $1 subway money.
Elias and I would play chess all night.
It was one of my favorite times in life. And I had zero money at all.
âJust a few short weeks,â Werner promised in March 1998.
It was horrible. Every week there were new delays. New tricks. New traps.
To sell a company, you have to get approval from your landlord. Why? Because now they will have a new tenant.
Our landlord didnât want to give approval. He was a âgarmentoâ who worked on 38th and 9th.
Iâd sit outside his office all day and wouldnât leave until he gave approval. Werner kept calling me, âDid you get your landlordâs permission?â I would say, âYes.â âOK, send it over.â And Iâd hang up. And wait. And at night I would cry. I was afraid.
âTell me the stock buying you,â the landlord finally said. He wanted to buy it.
I didnât know what to say. I said I can tell you as soon as deal is done. He signed the permission.
We had to sign a document saying that all of our employees had been insured.
But Adrian had forgotten to pay insurance for the past few months. All of our employees thought they were insured but they werenât. And our insurance company wouldnât take us back.
I didnât know what to do. I forget how we solved that problem. If we even solved it or just signed the document anyway.
Russia debt collapsed in the summer of 1998. The market was going straight down.
âThe internet might be over!â Werner told me on the phone.
âNo,â I said, âit isnât. We are getting more business than ever.â
But, in truth, our clients were disappearing or not renewing with us.
âLet me see your contracts,â Wernerâs lawyer would say. But we had no contracts.
We had agreed to the deal in March. April, May passed. July 4 passed. August.
I couldnât sleep anymore and would walk around all night. And I was still doing my III:amshow for HBO.
I used to be a morning person. But now I was one of the 3 a.m. people.
[Matrix]
We did the website for the Matrix for $200,000
âDo you need money?â Werner said. âWe could give you a loan.â
âNo,â I said, although I was dying to say âYES!â But I thought it was a trap.
âAre you sure?â he said.
It was definitely a trap.
I made many, many mistakes. Mistakes every day. If I listed all the mistakes it wouldnât even be a book. It would be a horror movie.
One mistake, though: I said we were a âweb services agency.â
But lazy people make more money than hard workers.
I was lazy and I had built all sorts of software to help me quickly make websites.
Think Wordpress but it was 1998 instead of 2015. My software allowed me to pick templates and add all sorts of features to a website and upload images and designs with just a click.
But I didnât tell anyone because it would only take me an hour or so to do a website and weâd charge $270,000 as if it had taken us months.
I thought I was smart.
But software companies were going for hundreds of millions of dollars. Software can scale. Agencies canât.
We sold on August 31, 1998 for $6 million in stock.
I was so happy.
The stock went up and down. In 1999 I bought the most expensive apartment I could buy in NYC.
It was three blocks from the World Trade Center. Nancy, the real estate agent, said, âPrices will never go down. Manhattan is an island and you will live in the best location.â
I said to Nancy, âBut what if a plane hits the World Trade Center and the building comes down?â I wasnât being prophetic. Just paranoid.
âYou canât live your life that way,â she said. So I bought the apartment.
[Old Apartment]
My apartment back then
The low of the stock after I sold Reset was $2 a share. I had 450,000 shares.
In February of 2000 the stock reached a high of $48. I sold almost all of my stock then.
I looked at the money sitting in my Prudential stock market account.
I kept hitting reload. I couldnât believe what I was seeing.
âWeâre done,â I said to my then-wife. âWe did it.â I had been broke all of my life. Now this cash was sitting in my account. All cash. I had cashed out. Cash.
I had a daughter. I loved her. I loved everything.
Two years later I was dead broke. I was losing my home. The smoke from the old World Trade Center was still shooting itself into the sky a few blocks away.
Many things happened between 1998 and 2002. Amazing, exciting things. I have many stories. I made many friends.
In the summer of 2002, none of those new friends were around anymore. They all disappeared. Nobody would return my calls.
I didnât want to think that people liked me for just money. But many people liked me just because I had money.
One time I needed to buy diapers for my daughters. I forgot which brand so I used a payphone to call my then-wife.
I picked up the phone and put it next to my ear but there was no dial tone. Something felt sticky in my head and ear.
I pulled the phone away. It was covered in shit. My ears and hair and cheek were now covered in shit. I hung up the phone and went home.
I forgot how to smile. I forgot how to find happiness tucked away in the laughter of my daughters. I wanted to be alone. I was nothing.
I was dead broke and needed to figure out a way to bounce back.
That was then.
Sincerely,
[James Altucher]
James Altucher
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