Ask Altucher EP01: Is Entrepreneurship an Innate Ability or Influenced by Environment?

0:00Look, as a manager of people, as an employer, as an entrepreneur, and as an investor in startups, I can tell you the most important thing for your business is the quality of the quality of people. you hire. The best part is that great candidates are already on LinkedIn. Employees hired through LinkedIn are 30 % more likely to stick around for at least a year compared to those hired through the leading competitor. And I will tell you that the great thing about LinkedIn is that you're not just looking at random people. You're able to see the people who your friends and trusted peers and colleagues who they trust and who they've hired in the past and who they recommend.

0:42And hiring doesn't have to be complicated. Realistically, when you have a business to run, you don't want to spend hours on hiring. You want to hire the right person as quickly as possible. That's why LinkedIn Jobs AI Assistant suggests immediately 25 great big candidates daily so you can invite them to apply and keep things moving. Hire right the first time. Post your job for free at linkedin.com slash altature. then promote it to use LinkedIn Jobs' new AI assistant, making it easier and faster to find the top candidates. That's LinkedIn.com slash Altucher. Post your job for free. Terms and conditions apply.

1:19This isn't your average business podcast, and he's not your average host. This is the James Altucher Show.

1:36So, welcome to the newest episode of Ask Altature. I used to do this as like another podcast, and I did it for about a year or so, a couple hundred episodes, did it three times a week, and people would ask me questions, or they would email questions, or ask me questions on Twitter, and then I would just answer them. So right now, people are asking questions on either Twitter or Notepad, N-O-T-E-P-D.com. Jay just showed me the spreadsheet of questions. I have not seen them before. And I'm going to answer them. The questions could be about anything. Like a lot of times people think, oh, I got to ask about stocks or crypto or writing or podcasting.

2:16But I, you know, like anybody else, I have my opinions and you can ask about anything, you know, for better or for worse. I've failed a lot. I've started lots of businesses. I've, this is my third marriage. so you could listen to what I have to say or not about relationships, but people are asking about that. I have a lot to say about writing and books and interviewing and anything. Jess, I can answer a lot of questions about Jay, my podcast producer. Although, I don't know everything about Jay. Like, Jay, how's it going with your new girlfriend? Good? Yeah, good. She's chilling out here. Oh, she's there right now?

2:55Yeah, yeah. She's just chilling because she's like, I need an accountability partner so she can work. I mean, same with me too. All right. Accountability. That's a good use case for a relationship. Robin always comes in here and says, are you playing chess or are you getting ready to do some real work? So here we go. She holds me accountable. You need someone to check in on your life once in a while. Yeah. That's very important. It's just like, you know, you are who your five closest friends are, right? It's true. And you are who the several trillion bacteria in your body are. Yeah. But I have a question for you, James.

3:34I briefly spoke about this before the show. Do you think entrepreneurship or entrepreneur skill is innate or do you think is influenced by environment? The reason why I ask this is because I grew up in a family that always believed in working nine to five on a steady job and have savings and that's it. But with the inflation rate going, like the way it goes, all your savings is going to be worth 8 % less every year, right? It's around 8%, I would say. Well, no. Inflation today, the inflation data said 5%. And normally inflation is 2%, which is what they're aiming for right now. But who knows what it'll be in the future.

4:14But regardless of that, let me answer your question. Very good question. For one thing, a steady, stable job is no longer steady and stable. Look at how many people, like people think, oh, well, if I'm in tech, it's steady and stable. No, look how many, there's 150 ,000 layoffs so far in the past few months in the tech industry. So no job is stable. And you're right, you do make a point that often the salary does not go up either as fast as inflation or as fast as you would like it to go up. Maybe you want it to go up faster because you want to buy a house or whatever. The best way to create wealth is to own a large chunk of something and hold onto it for a long time.

4:55So that's the opposite of a job and the opposite of day trading, for instance. So for instance, if you're an entrepreneur, you own a big chunk of a business, you hold onto it for a long time, you sell it, and that's how many people have created wealth. Many, many, many people. or like Warren Buffett, you could own a large chunk of a company and hold it for a long time, which is, you know, an investing style that, that he's mastered. But to really answer your question about entrepreneurship, I don't think you're born with it and nor do I think it's related to environment. It's a little bit related to environment.

5:28First off, you could be born into what seems like an entrepreneurial family. Like let's say your dad started the biggest car company in the world, like your dad was Henry Ford. Well, his children or his grandchildren, they had all the opportunities in the world and they weren't good entrepreneurs. They couldn't even run, some of them couldn't even run the Ford Motor Company. Ford Motor Company's gone bankrupt. So just because you're born into an entrepreneurial family doesn't mean anything. Now, environment, yes, if you live, or this used to be the case, if you live in Silicon Valley, everyone around you is an entrepreneur or a venture capitalist.

6:05So it's probably easier to start a business in Silicon Valley than in Bangladesh. I'm just making that up. I have no idea about the entrepreneurial. I don't know what Silicon Bangladesh is like, but the reality is if you're in Silicon Valley, it's easier to start a business now. But your real question was about entrepreneurial skill. And here is my opinion on that. there's a saying necessity is the mother of innovation. So when you need money and you don't have a good source of money, like let's say you just got laid off and you need money, or in some ways you need to start a company or, or, uh, you have a problem that you need to solve and you can only, and there's no solution out there.

6:55So you start a company to solve this problem. That is what makes an entrepreneur desperation, need curiosity, love. So I'll tell you like my first off, my very first company, I always talk about the first company that was successful, but my very first company I started when I was in college, it was called college card and we created a debit card for college students. This was before banks were giving debit cards to college kids. This was in 1987. So about a thousand students signed up. Their parents sent us money for some reason. And I wrote all the software to keep track of the money in the bank, who spent what and which.

7:38I convinced every restaurant and movie theater in the town I lived in to accept our college card. And I programmed the point of sales machine so people could go to the local Greek diner and which didn't accept credit cards at all, but they accepted the college card. And, and I convinced every restaurant to give a discount, a 20 % discount to any student who used a college card. And so I said, you'll be the exclusive Greek diner. You'll be the exclusive movie theater. You'll be the exclusive gym that we use. And that would be free advertised for you because thousands of people will get our college card.

8:14So we had about a thousand people and we charged their parents$21 a semester to be, to have a college card. So we had a fee, but we didn't take any transaction fees. So that was my first business and it totally failed. It was, you know, a thousand people paying$21, this 21 ,000 a semester. So about$7 ,000 a month, let's say a semester is three months. And then there's a summer where there's nobody. So we ran for about two semesters and I tried to sell the business to the local bank. I was like 19 years old and they said no. And one company was interested. I called MasterCard and I told them what we were doing.

8:54They wanted to visit and check it out. And my business partner said, no, no, no, they'll steal the idea. Well, a year later anyway, they launched debit cards and started issuing them to college students. Why do you think that business failed? Well, like I said, it was only making, I had zero money in the bank. So it was only making, you know,$21 ,000 every three months and no money in the summer. So it was making the equivalent of about$3 ,500 a month. Well, and I had partners and I had expenses. We, we had expenses. We had to buy all these point of sale machines. We had to, you know, buy the computer that, uh, it was an old fashioned computer.

9:31I won't even describe it. We had to buy the computer that did everything We paid for marketing. I had an idea where to raise some money, I sold the back of the debit card as advertising space. So the local radio station and the local bank advertised on the back of the college card. And I learned a lot about the college card business and about, you know, essentially how to hack like a credit card because, you know, there's all this information on the magnetic stripe and that's how the point of sale machine would read the magnetic stripe, send the information to our computer through a network that, you know, there was no internet really.

10:07I mean, there was an internet, but nobody was using it. So I made my own like networking software. By the way, I had never programmed before in my life. This was my first experience at programming. I switched my major after this to computer science because I loved it. But anyway, it didn't work because we just didn't have enough money to keep it going. and I mean, I was paying myself$100 a month. So that was nothing. I had to get like a real job. I had no money in college at all. I paid for all my tuition from loans and I worked four or five jobs. I took six courses a semester in order to graduate a year early.

10:44So I wouldn't have to pay for another year. And so I needed to make more than$100 a month. But I didn't think I should have been more entrepreneurial. I should have said, oh, I'm going to start another business and figure out how to make money that way. But I got a little burnt out on entrepreneurship. Second business I tried to start, it's still an ongoing business. There was a free game server called ICC, Internet Chess Club. This was, again, before the web. And it was a way for people to log on to the internet and play chess. And this one guy wrote part of the code. I wrote some of the code.

11:17Danny Slater was a professor at my school. This is when I was in graduate school. he uh started the whole thing and then i suggested him let's do it as a business so we figured okay let's do it as business but i lost interest and i just i i more i more enjoyed playing chess on icc than running it as a business do you sell your do you sell your part though or did they not make any money no no i didn't even know what that meant to sell my part so i think danny was a little nervous later i was going to ask for a piece because it did become a successful business for a while it still exists but it's not that successful anymore because chess dot com uh totally became more successful it's a much better site but so that was the second one and by this point i kind of got a little burnt out on entrepreneurship i said to myself never again i don't even care about money that much and so just a little brief history then i got two job offers in new york city uh one was jp morgan and the salary offer was 80 000 a year which in 1994 this was like a lot of money i mean my highest salary before then was like 27 000 a year as a programmer after i left graduate school so i got a job over for 80 000 a year from jp morgan with bonus and that you know there would be a bonus to come and then i got another job offer from HBO for 40 ,000 a year.

12:42And I took the HBO job for half the money. It's not enough money to live in New York city. As you know, I know very well. Yeah. And it wasn't even enough money then. It certainly is not enough money now, but, uh, I took the HBO job because I wanted to stay true to myself. I loved HBO's TV shows. I thought they were the only creative television network at that time. And I was really impressed with them also how often the heads of other media companies started their career at HBO. So they were doing something right. They were like a training ground for CEOs of other media companies. So I knew this would be like a good place for me to go.

13:23And also I was really interested in writing. I was writing every single day. So let me ask you one thing, James. You didn't take the JP Morgan job, right? So what if we go back time, you took of JP Morgan jobs, remember we have a Wall Street Insane series, right? Talk about fraud and all that stuff. Do you think you would be one of the person that became insider trader? No, no, because it was an IT job. Well, first off, I would never do insider trading. Believe me, I have had, you know, I ran a hedge fund. So I have had many opportunities to do insider trading. I never have done anything even remotely illegal.

14:00Yeah. Well, remember the episode with Kelly, Richmond Pope, some they have the accidental perpetrator or whatever. Yeah. Yeah. So like, do you think you would fall into that trap at all? No, no. You're not, you're not doing anything, but like, would you accidentally? No, no, because for two reasons. One is, as we described in the Wall Street Insane series, we had so many opportunities to break the law and we were the only hedge fund we knew that never broke the law. Like we were, we were too innocent to a fall. Like we couldn't break the law even if we tried. Second, I would have been in the IT department, which is not like where all the insider trading stuff happens.

14:37I would be making the trading software maybe or doing some other boring job. I don't even know what I would have been doing there, but it would have been boring. I would have had to wear a suit every day. I would have done nothing that I enjoyed for years and years just for the money. Have you not watched Mr. Robot? No. Okay, never mind that. Then the jokes will land. Yeah, because Mr. Robot, what happened is become a hacker from a panel, whatever. Right. I know that much of it. But let me finish the entrepreneurial thing. How entrepreneurs are made and not born or not the environment. So I really loved the web at this point.

15:18And nobody had a website. I had to convince HBO to buy HBO.com. Somebody else owned it. Guess how much they paid for it in 1995? I would say$3 ,500. $250 ,000. Wait, what? Holy shit. But was that before the dot-com boom, right? Yeah, it was before. Everybody thought it was going to be just a fad. Nobody had a website. And so I made HBO's first website. That's a whole other story. I'll talk about it some other time. Then my sister calls me. She tells me my brother-in-law is having troubles with his business. He was like a graphic designer. He made something called CD-ROMs. Can I help him? And so I showed him this brand new thing called the web.

16:04He had never heard of it. So he's playing around. He got obsessed with it. He got really good at like designing for the web, but there were no websites. But then American Express wanted to build AmericanExpress.com. So they called their accounting agency, a firm called Arthur Anderson that has since gone out of business. Arthur Anderson didn't know how to make a website. They called like some digital IT firm. They didn't know how to make a website. They called some, you know, new media consultant. He didn't know how to make a website. He called my brother-in-law who knew how to design for a website, but didn't know how to make a website.

16:38He called me and suddenly I reluctantly said, okay, I'll do it. You know, it was good. I didn't have a single dollar in the bank. American express.com was willing to pay this crazy amount of money. And I did not want to make a website. I did not for someone else. I was very focused on, I wanted to make a TV show for HBO. And I was in the process of making a TV show for HBO, which, which they were excited about called 3 AM. That's another story, but I helped my brother-in-law. We made some money. I finally had enough money to move into an apartment in New York city. We made another website. We got paid, some diamond website on 47th street.

17:21We made that. Then HBO wanted my brother. They didn't know I was involved with them. They wanted my brother-in-law to make the HBO.com. I was in charge of HBO.com. So I essentially hired my brother-in-law and me to make HBO.com, but I still didn't want to leave. So, so we were starting to get clients and we were starting to hire employees. We made time Warner.com. We made newlinefilms.com, Miramax.com. We made websites for the Wu-Tang Clan, Loud Records, Bad Boy Records, Death Row Records, Interscope. So all these entertainment companies. We actually spoke to JP Morgan about making their website.

17:57They wanted us to make their website. But my typical bad habit, which I have to this day, which is I don't return phone calls. I forgot to return their phone calls. And so we lost the JP Morgan deal. But it was miserable. I was miserable because I didn't want to leave my job. I loved working at HBO and I was pitching this TV show. I wanted to make a TV show. So for 18 months, I stayed at HBO and then all night long, I would work at this business on the side I was starting. I felt like I would work there until my brother-in-law had enough employees and wherewithal to run the business on his own.

18:34But I turned out to be the main salesperson for, like, I would work at HBO. Then I would go to the bathroom, dress up in a suit and go across town to, you know, meet with some ad agency about doing websites for all their clients. So I was juggling at the same time, like I was working 20 hours a day, working a full-time job and being an entrepreneur. And then finally I left, we had like 30 employees. I left to go full-time. The company was called reset. And you know, we, we built up, I was getting clients all over the place. We sold a year after I started there full time and it was hard, but that's how I became an entrepreneur.

19:19It was basically necessity. Like I was helping. I had a combination of, I loved this brand new technology, the worldwide web, triple W dot whatever. I knew how to make a website. There were five people in New York city who knew how to make a website at that time. I needed to help my brother-in-law because I wanted to be a good family member. And he, I should mention he didn't really speak English, so he really couldn't do sales. He needed me to do the sales. And, and also I was the software guy. So I would do the software and we grew a business. And so finally it was enough money. I had to go full time.

19:57And that was that, that, that's how I kind of became an entrepreneur. I had a couple of failures and then had that success.

20:16Look, as a manager of people, as an employer, as an entrepreneur, and as even an investor in startups, I can tell you the most important thing for your business is the quality of the people you hire. The best part is that great candidates are already on LinkedIn. Employees hired through LinkedIn are 30 % more likely to stick around for at least a year compared to those hired through the leading competitor. And I will tell you that the great thing about LinkedIn is that you're not just looking at random people. You're able to see the people who your friends and trusted peers and colleagues, who they trust and who they've hired in the past and who they recommend.

20:59And hiring doesn't have to be complicated. Realistically, when you have a business to run, you don't want to spend hours on hiring. You want to hire the right person as quickly as possible. That's why LinkedIn Jobs AI Assistant suggests immediately 25 great fit candidates daily so you can invite them to apply and keep things moving. Hire right the first time. Post your job for free at linkedin.com slash altature, then promote it to use LinkedIn Jobs new AI Assistant, making it easier and faster to find the top candidates. That's linkedin.com slash altature. post your job for free. Terms and conditions apply.

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22:47Also, like I felt like, you know, you interview a ton, a ton of entrepreneurs, right? Yeah. Most of the entrepreneurs that have one low point in their life, like Dan Martel, do you remember his story? So like he had to feel so much. He has to like steal things. Like even JT McCormick, like his life is not perfect. Like it's like... Yeah, JT. JT, who is the CEO of Scribe Media, his dad was a pimp and he would drive around with his dad. When he was like five years old, he'd drive around with his dad while his pimp was collecting money from the prostitutes and hitting them and whatever. Even our good friend, Wally Green, you know, he was in a gang for a long time.

23:30And then now he runs, he owns Spin, right? He owns Spin New York? Well, he's a partner in it, yeah. Yeah, he partnered with Spin. So I felt like I just need to have a low point in my life and then I can be an entrepreneur. Well, I don't think that's necessary. I think a lot of people don't have low points in their lives. But I think you do have to realize that the standard rules don't work. So the standard path that we all grew up with is go to college, maybe go to graduate school, get a job, work hard at your job, get promotions. Maybe once or twice in your career, you switch jobs to get a promotion or whatever, and then you retire.

24:06But A, college is less relevant than ever right now. I'm not gonna make the usual argument against college, like do whatever you want, but trust me, it's less relevant than ever, while tuitions are higher than ever. And jobs are less stable than ever and make less money than ever versus inflation. So being an entrepreneur, it's important. It doesn't mean you have to start a thousand person company. It doesn't mean you have to raise a lot of money. Maybe you just start off making, running social media for your friends or doing seller financing and buying real estate with no money down, as they say in the ads.

24:41Like we had that one website with Roy Weaver where he talked about how he had no money and he started getting into real estate. Our side hustle Fridays are all about side hustles that could potentially turn into real businesses. So again, for me, it was, I'll tell you this, I've only succeeded at entrepreneurship when I was starting a company that I loved. Like I loved the internet and I love making websites for entertainment companies. So I loved it. And then I had lots of failures and the next successful business I started was 10 years later and it was called Stock Picker, which combined my interest in investing.

25:18I loved investing. I was running a hedge fund. Combine my interest in that with website building. Like I knew how to build a website. Note, I said I was running a hedge fund. So that was another business I started, but I hated it. I hated it. And of course, I don't want to say it failed. It did make me money, but it wasn't like great. It wasn't like some people love running a hedge fund and it becomes great for them. Like we've had Ray Dalio on the podcast or David Rubenstein. These people love, Steve Schwartzman. These people love the hedge fund business. I did not. And even though I was a great salesperson for websites, for some reason, I was a horrible salesperson when running a hedge fund.