#TBT - How to Invest for Income and Achieve Real Freedom w/ James Altucher

You are the average of the people you spend your time with. Life is short. You need to be cutthroat about the people you love and value and spend time with.

Hey, capitalists. In traditional throwback Thursday fashion, we're re releasing one of our most popular episodes that we've had on capitalism dot com. Enjoy. James Altucher. Welcome to Freedom Fast Lane.

Thanks for hanging out with us, Ryan. I am so glad to be here. We've interacted on a couple of occasions and I know our teams have sent emails back and forth. And finally we get to be on a podcast together.

We might break the Internet with so much handsomeness.

I'm on purpose in a silhouette so you can't see me.

When Ryan first discovered James Altucher, James was writing about pain and loss. So Ryan kicked off the discussion by asking him about the challenges of being a high achiever, which led to some very insightful advice on four key areas of health that we entrepreneurs need to focus on to continue to be successful.

I was wondering if you could talk a little bit about the challenges of being a high achiever like most of us are if we're listening to podcasts.

Yeah. From 2002 to 2010, I was almost exclusively writing about finance and investing and I wrote several books in the area. I was on CNBC twice a week. I built up a website that had millions of unique visitors a month and sold that. And I was on Yahoo. Finance video every. Every week. So I had kind of a whole prior life. But I think you're right. I think nobody really should care about investing. Like that should be kind of the low stress part of someone's life. The high stress part of someone's life is what we all experience at some point, which is that we all want to achieve things where what gives us personal pleasure and life satisfaction also could generate an income. It doesn't have to be a high income, it doesn't have to be wealth, but enough to say, hey, I get to do what I love. And I do it so well that people pay me money for it. And that might be a lot of money. Again, it might be a little money or it might be enough money, whatever it is. And hopefully it gets to be more and more money as you get better and develop a skill set and so on. And when you're on that path, as many people realize, bad things happen because, you know. And so I'll just tell my own story. I was really into computers and the Internet. So my very first company, I built websites for entertainment companies. So I built websites for hbo, Time Warner, Warner Brothers, but also many record labels like Loud Records, Bad Boy, Death Row, Interscope, Jive. I built many websites, had a big company, built it, sold it, made a lot of money. But then I thought, because I was smart in one area of life, I thought to myself, ah, I must be smart in every area of life. If I make it here, I can make it everywhere. It turns out I can't even make it there anymore. So I almost immediately lost every dollar I made. The almost part involves the timing, but the every dollar I made is true. I lost every dollar I made. So here I had generational wealth created and I was such an idiot without realizing it. And I lost every dollar I had. And I lost my home. I had to move far away. A lot of your listeners have heard this story, so I don't want to repeat it too much, but suffice to say, it happened not just once, but several times. Several times I made money, a lot of it, and then lost all of it. And so finally I had to say, what is going on here? Why am I such an idiot all the time? I seem to be smart enough to make it, and particularly when I'm really desperate, I seem to be able to make it enough to, you know, so that I can still buy diapers for my daughters. Although I was really close at least twice and not being able to to buy diapers for them after making millions, which is crazy. Like, I, at some point I must have been addicted to some sort of drama involved in this, like getting on this roller coaster so much. But I'll leave that for my therapy sessions. But I think what I realized was that when on the way up in each time is that there's very important but basic things that I had to keep track of, which was I had to be physically healthy, meaning I had to eat well, not like drink alcohol, not take drugs. I just had to take care of myself. I had to be in shape. I had a lot, have a lot of energy to execute on my ideas and so on. So when I describe this, people sort of say, okay, okay, I get it, physical health. But that's really the most important part. Then just as important as the most important part is emotional health. You have to be around good people who are striving to achieve something in their lives. So one time I was doing a podcast with Mike Massimo. So he's an astronaut, or he was an astronaut. He fixed the Hubble Space Telescope when it was broken. Like many astronauts, he had a hard time finally getting accepted into the program. Then once you get accepted, you have to get into space. So in the course of me interviewing him, he told me at one point early on in his career, he took this MIT class on robotics, and he got a PhD from MIT in robotics. He said four of the 10 people in that class eventually made it into outer space. That really struck me, because 10 people is not a lot of people. And also, if he was in some random bar in Boston instead of at a class, he would never be able to say, four of the 10 people sitting around this bar are eventually going to make it into outer space. That's such a clear example that you are the average of the people you spend your time with. And you need to be cutthroat about it. Life is short. You need to be cutthroat about the people you love and value and spend time with. And he said, this is who I'm gonna spend time with. And that's how he got into outer space. That was two things. Physical health and emotional. Third type of health is creative health. You need to every day be creative, because creativity is a muscle. If you're not. If you wait for inspiration, you're already too late. Inspiration came and went, and you're just sitting around waiting for it. You have to be creative every single day. You have to do something that's creative every single day. It's not enough to think of ideas. You have to write them down. You have to think about how to execute them. You have to do things that are fun, that you enjoy, that.

Are new and unique, and you have to exercise that muscle every day. And then finally, for lack of a better phrase, I'll call it spiritual health. But it's really this idea that I like how Jocko Willnick calls it in his book Extreme Ownership. If something goes wrong, you have to own it. It's your fault no matter what. If someone walks straight up to you and shoots you in the face, sure, you're a victim. But in terms of making sure that doesn't happen again, assuming you live, you need to take ownership of what happened and what you could do differently and how you can live your life in a different way and improve. Part of that involves being okay with what just happened, not saying, oh, it's great that someone just shot me in the face. I. But you have to say, okay, that happened now. Life still exists for me, and I need to make the best of it. I can't complain about what happened in the past. I can't regret anything. I have to live my life the best way I can right now and move forward. And the most successful people I know and I've interviewed hundreds or thousands of them and look, I have had success in my areas of life. That kind of what Jocko calls extreme ownership is extremely important. So those four things I realized everyone wants a trick. But yeah, I get all that. But should I use this SEO trick to sell my product and what products are selling right now? None of that is important because if all those four types of health are working, you will automatically figure out things to sell, things to invest in, people to associate with. Money will come pouring in because you'll be doing things you love around the people you love doing them with. And you'll be creative and you'll be healthy enough to have the energy to execute on your ideas.

James believes he is more free than Elon Musk. Why would he reject Elon's life? Keep listening to find out.

I'm what I call a choicest. So let's say every day you make 10,000 choices. Here's what time I'm going to wake up. Here's what I'm going to have for breakfast in the morning. Here are the first articles I'm going to read or books I'm going to read or content I'm going to consume. Here's my first blah, blah, blah blah blah. You have 10,000 choices you make some small, some larger. Let's say most of the choices you make, like 95% of the choices you make are things you don't really care about or.

It doesn't really matter to you that much. For instance, if you're taking the subway in New York City, which subway car you enter is a choice, but it's not a choice you care about. And some choices you actively dislike making. Like I don't want to have to make a choice about making a decision on this tax thing. I have an accountant for that. He can make the choice and I trust him for it because I've worked with him for 20 years. So I'm a choicest in the sense that I want as large a percentage as possible of those 10,000 choices to be choices that I love making and that I actively care about. Just by having that awareness, you can start changing your life immediately. Some things take time to build up systems so that you could trust the choices that are made. So for instance, I don't make choices on my tax stuff. I have an accountant I work with as the example I just mentioned. He makes the choices. I've outsourced those choices that I hate to make to him. So maybe once every five years now I have to make a choice, whereas other people might have to make thousands of choices a year regarding taxes. You know, oh, do I take this kind of income, do I sell this investment now, do I move to this state, or do I get a mortgage because of the tax write off or whatever? I don't make any of those choices, even if sometimes it negatively affects me. I. I just don't like to make those choices. But that's one example. There's lots of choices I don't like to make. I very much focus on my activities during the day are almost all choices I really love to make and to do. And so what I try to do today is make better choices than I made yesterday to do better at the things that I love doing. So that doesn't involve hustling, it doesn't involve arriving, it doesn't involve making it. So let's take my podcast as an example. So I have a podcast just like you have a podcast. And I want my podcast to be great and not just like, oh, I want to have on great guests and I want to have a lot of downloads and I want to sell a lot of advertising and I want people to talk about my podcast. I just want to go in and I want to create an experience for myself and for my guest or guests and for the listeners where they all say, oh my gosh, that was such a fun, unusual, great experience for me. And I just have fun doing that. So then I'll start to make choices. Well, okay, maybe I want to focus more on this type of guest. Or maybe I'm going to move from Skype to an audio studio so nobody ever tells me again about the audio quality. Because that's a choice I don't want to have to think about anymore. Or I'll spend more money than I need to, but I'll hire a super executive producer to help me find the type of guests that I could find, but that I would never be able to find on my own, even if I'm almost overpaying for a producer. Or maybe I want to switch format up a little bit so it's a format no one's ever seen before in the podcast world because we're so new here. Or maybe I do one episode a week. Maybe I'm going to do eight episodes a week and see what that feels like. Because I notice I'm having more fun with podcasting lately than with writing. So I'm going to quadruple down on that choice and reduce this choice, that's an example of choices at work where it has nothing to do with hustle, and it has nothing to do with making it or building up the size of my audience. And by the way, it might have to do with making an income, because I do sell ads and the podcast is profitable. I don't like to do things that are, you know, you measure the value you deliver people by. Money is one metric for that, and I don't think it's a bad metric. So I like my podcast to be profitable also. Or maybe I'll sell my own other products in the ad inventory on my podcast. So now I link businesses together to help each other to make my choices easier.

Yeah, it totally makes sense to me that I guess arriving or just getting to the point at which you are powerfully at choice is when you are really free.

Yes, but I had that with money on many occasions and made bad choices and lost the money. So money is not the critical factor in freedom. Money is a part of it. Because, like you say, I could take business class instead of coach, or I could stay at an Airbnb instead of renting, even if it's a little bit more, although it might be a little bit less, too. Sometimes it's hard to say. Money is not. Money is never the critical factor in freedom. I am more free than Elon Musk. Elon Musk has to wake up at five in the morning. He's got six companies he's the CEO of. He's got spaceships blowing up in outer space. He's got solar panels that are government subsidized. So he has to figure out how to play that game. He's building an electronic car, making a big bet on the future of energy, which he's probably correct, but it's still a huge, scary bet. And he's got to manage thousands of people from 5 in the morning till 10 at night. He might love every second of it, and he might, for him, he might call that freedom. For me, that would be total enslavement. I would hate that life with a passion. And if having $12 billion means also, you know, doing that kind of life, I would completely reject that path for myself.

Since freedom, Fast Lane is all about helping high achievers build businesses and invest the profits to build wealth. Ryan made sure to ask James about his strategy for investing. James offered two pearls of wisdom in this part of the conversation.

So I want to ask you about investing. If you could go back and actually give yourself advice on either what to invest in or the investment strategy that you would recommend your younger self follow. What would you tell young James?

Well, I would tell him two things. One thing is related to what I do right now because I certainly want to give advice on something I wasn't doing right now. But the other thing is, is how I got to right now. That involves the past, which is I'll call this plus, minus equal. So the plus of that equation is find the people better than you and learn from them. Now, it might mean that sometimes people think that means a mentor in person. That's a tiny bit of it. For investing in particular, I read hundreds and hundreds of books. And I'm not exaggerating, it's at least 200 plus books. And then of course, thousands and thousands of articles and interviews. And I read books from the 1600s about investing. 1700s, 1800s, 1900s, 1970s, 1980s, 1990s. Not only did I read the history of investing, I read the books from each historical period of investing to see how the analysis of that history evolved. And then I read everything about all of the best investors out there. And of course, investing ultimately is about ownership. So when you invest in something, you're owning a piece of a company. So I read everything about. I knew already a lot about business, having run and sold a business, but I knew 1/1,000th of what I needed to know. So I wanted to learn everything. So I read the best biographies of top businessmen and studied top businessmen. And of course, a great starting point is the essays of Warren Buffett, because not only does he run a business with tens of thousands of employees, he's also the greatest investor of all time. So this guy, Lawrence Cunningham, compiled his best essays. And that's a great starting point. But again, I would recommend everything from my story by Bernard Baruch to Market Wizards by Jack Schwager, which is more trading oriented to books about convertible arbitrage, merger arbitrage, height frequency trading. So Michael Lewis, Flash Boys from a Pop Investing Point of View, or Moneyball also, which is even though it's about baseball, it's really kind of also about stat arb and investing. Like all the stat arb guys in investing read Moneyball and immediately knew what he was writing about, even though he was writing about baseball. But then I would get into much more technical stuff. But just read everything, learn everything, talk to whoever you can, get in front of whoever you can, listen to whoever you can. There's ways I write about in my writings how I did actually get mentors and good solid mentorship in the investing space. And I wrote about that repeatedly and it's in all my books and everything. So that's the plus part. Then there's the equal part, which is find people who are at my level. And we're constantly challenging each other, like, oh my gosh, this just happened. This company just had these earnings. What do you think? Let's analyze it together and figure out a strategy and figure out what happens. Let's write software together to model the markets. Oh, you wrote this software. Here, try this idea. Try this idea. And so your peers that are equals, you could evolve very quickly through generations of ideas because you're constantly sharing. The plus is you're just downloading what they know. With the equals, you're coming up with ideas and evolve and the ideas are mating with each other and having baby ideas, and then they're mating with each other. And so with your equals, you're going through thousands of generations of ideas in an era you love very quickly. And then of course there's the minus, which doesn't mean anything negative. It just means if you really think you know something, teach it. Because a, that'll force you to keep beginners mind because you have to explain things in layman's terms. And it forces you to always understand from the basics. What people always need to know reminds you of all the basics. And people who are beginning might ask questions you've never thought of in all your hundreds of books of reading. So that's why I started writing about investing, because it always kept my ear to the ground like, not only this is what's happening and I had to always study the news every day, and I had to always study every investment strategy out there every single day in order to write. It also forced me, unlike many investors, to learn every single investment strategy because I was writing about all investment strategies. And so that minus became almost the most important thing because later on I started a fund of hedge funds, meaning I invested in the best hedge funds across every investing strategy, which allowed me to do due diligence on all these great hedge funds, which got me pluses because I was interviewing all the best hedge fund managers before I invested in them. So it all worked together. But that's how I finally developed a skill set in investing over, over a long period of time. But what I do now related to all I do all of that. So I invest across many different strategies that I've successfully learned. But the most important thing, which I would tell young James, and I tell myself this every day, is you are the biggest stupid idiot ever. I look in the mirror. And I say, you're the biggest stupid idiot ever. And I'll repeat it as long as it takes for me to believe it, because I will never invest in anything ever again, thinking I'm the smartest guy in the room, because I'm not. And it's really hard to be the smartest guy in any room. And so I always invest in things where I check the box in so many ways that there's a very high probability that people smarter than me have invested alongside of me at an equal, roughly equal level, and they're in it with me. And that has drastically, I would say that has reduced my chance of failure from 95% to probably around 10% on anything I invest in right now.

So does that mean that you're looking at private companies that are backed by people that you respect, or does that mean that you're looking at the investment strategies of Berkshire Hathaway, saying, if they invest in it, then I'm going to go buy Apple?

Both. Because you shouldn't have just one investment strategy. You should diversify. A lot of people think diversification is, oh, I'm going to buy a basket of stocks. That's not diversification in today's world, because all industries in the US Stock market are correlated with each other more than ever before in history. So, by the way, understanding history of how industries are correlated over the past 200 years helps me make that determination. So then I say to myself, well, okay, I need to diversify across.

An uncorrelated basket of strategies. So I might say, well, Warren Buffett bought apple at 600. I'm just making this up. Warren Buffett might have bought Apple at 600, and now it's at 400. So lo and behold, Warren Buffett is like my intern. He's like my free intern. He came to work, he got me coffee. He told me, by the way, James, Apple is a good buy at 600, and now it's at 400. He told me that because it's a public filing, he had to tell me that legally. So he might tell me that. And then I'll say, well, Warren, you're a pretty good investor. You've only made $60 billion off of your investments. I'll consider it at 400. So, yes, I will do that with Berkshire Hathaway and Warren Buffett, or I will take a private company. And I'll say, huh, The CEO has built and sold a similar company in the exact same space, and now he's raising around at a very low valuation. Maybe the market's crashed, so all valuations are low for some reason. And, oh, look who's investing alongside me. The seed investor in Google, the seed investor in Facebook, the seed investor in PayPal. I think I'm just going to tag along for the ride and let all these guys figure it out. So when this CEO, who has not only created value in the space, but he knows how to extract value, it's very hard to sell a company. Even if you're good at making a company, it's very, very hard to sell a company. So this guy made a company and sold it in the same space. If he ever has a problem, he doesn't need to call me. He'll call the seed investor in Google instead. I never want to get a phone call from anybody. If anybody calls me, I immediately, I keep track of all my investments in a notebook. I immediately cross that company off the list. It's worth zero. Once the CEO has called me, oh, they can call me for a coffee just to be social. That's what a lot of CEOs do. But if they call me for, like, really hardcore advice, then that's a really bad sign.

Well, what I'm hearing you say, James, is that you're betting on the jockey, not the horse. You're betting on people. And you've said in Choose Yourself that you are the best investment that you can make. That ultimately people are investments more than strategies.

You can only bet on people. You probably know this from building your own business. When I'm involved with a business and there's a big decision to make, the decision is usually not, should we launch this product? Should we stop this product? Those are easy decisions. The big decisions usually involve. Let's talk for an hour about how you're going to interact with this potentially large customer. What's his psychology? What's your psychology? How do you start the meeting? How do you anchor pricing? So much of the discussion and running a successful business does not involve product or market. It involves the psychology of everybody you're dealing with. Customers, shareholders, partners, employees, media. There are so many different constituencies of any business that most of management of a business is talking about the psychology of these constituencies. And you, I'm sure you must know this from your own business because it happens in every single business. But most people don't realize that until they are neck deep in a business. And it's not like I'm just investing in one jockey. So when you invest the way you described it, oh, I'm not betting on the horse. I'm Betting on the jockey. That's not true either. In the example I described about the private company, I'm betting on the CEO and his prior experience. So by the way, all the job, all the jockeys who invested him in him before and then all the jockeys who acquired him before, I'm investing in his bench. Like if he dies, who are all these people? Can they take over and be as good as him or is my money flushed down the toilet if he, if he's gone? And I'm investing in all the jockeys who are the most my co investors. And ideally they're not just investors, they're investor operators. So they built and sold businesses in the past or helped businesses get sold in the past. So I know that they're keenly aware of how to extract value from an investment. When I'm an investor, I'm not in there building a company. I need to at some point extract value. And so I want to make sure all these 30 jockeys that we just spoke about are all good at that. Like I was in a situation six months ago where it was very unclear what, what the business was going to do, what direction it was going to go in, whether it was going to succeed or fail. And I was scared because I have like almost post traumatic stress over every other time I failed. I remember it viscerally when I was on the floor crying after a failure and it's like brings it all back. But I was invested in the company and I thought to myself, huh, I personally don't really like what I'm seeing but I took a step back and I called an equal. I called somebody that I regularly bounce ideas off of on investments and we went through it. Oh, the CEO sold a company in the exact same so exact I can't even describe how exact. But he sold a company for $4 billion that he built from scratch and that's the CEO right now. And my co investors sent in the best scientists in the world when they were doing due diligence. And by the way they're extremely successful in their own areas of expertise, including investing, including this area.

By the way, it was an area I have no knowledge about at all. It has nothing to do with technology, nothing to do with anything I've ever invested in before. I only invested in the jockeys. I had no clue at all about the industry I was investing in. Zero clue. Fast forward six months. The company has totally been successful beyond their wildest imaginations. And you know, now I'm just waiting to see what happens next. I'M just sitting back and enjoying the ride now.

James, what is your end game besides just being powerfully at choice? Do you have one or is it to just get better every day?

My end game is just to get just to get better at physical health, emotional health, creative health, and spiritual health every day. Not even to get better because physical health ultimately declines as you age. There's aspects of emotional health and creative health that change as you age. But to know that I'm doing better at maximizing these things as best as I can every single day. Kind of like the first derivative of getting better that's improving every day. I might not be getting better every day, but my ability to try and get better is improving every day.

James, I know you blog, write podcasts, but where would you recommend that people look you up?

Just Google me and you can see the best place for people to find me is on the Ryan Moran podcast. That's the best place in the world for people to find me, right?

Very good, James. It's great to connect with you again. Keep on changing the world, buddy. Appreciate you.

You too. Thanks Ryan By.

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