James Altucher, Wall Street's Keeper of the Pain

James Altucher, Wall Street's Keeper of the Pain
Bloomberg, 17-Nov-11
By Roben Farzad

Shaggy-haired, bespectacled James Altucher is a 43-year-old venture capitalist who puts money into tech startups such as Buddy Media—last valued at $500 million. He has also designed websites, worked as a financial columnist, and run a fund that invested in hedge funds. Along the way, he lost his savings and his marriage, and by his own admission suffered several nervous breakdowns.

Now Altucher has turned his misfortune into a source of wisdom and comfort for the despondent. He shares his insecurities and psychic traumas with 30,000 Twitter followers and on his blog, the Altucher Confidential, which he says has had 10 million page views since he launched it a year ago. His self-published book, I Was Blind But Now I See, has ranked as high as No. 2 this year in (AMZN)Amazon.com’s motivational books category, and he’s publishing a comic book about his life. “I think the role James fulfills in the post-crash world is beacon of hope,” says Joshua Brown, a financial adviser who blogs as the Reformed Broker. “I know it sounds corny, but no one has been more forthcoming about how the torn economic fabric of this country has affected him personally. The message is always centered around him still being here—that there’s life after financial near-death.”

While blogging is his passion, Altucher makes his living investing in tech startups as founder and managing partner of Formula Capital in New York. “The guy is too complicated to analyze, and I’m not a psychologist, but he knows his stuff,” says John Pappajohn, a biotech investor in Des Moines who helped found Caremark (now (CVS)CVS/Caremark ) and seeks Altucher’s insight on companies and the markets. “I don’t go to New York without asking him to breakfast.”

On a November morning, Altucher digs into pancakes at a diner near New York’s Grand Central Terminal, having just blogged from a (FDX)FedEx Office/Kinko’s. “A year ago I had a revelation,” he says. “I’ve failed time and again, hurt myself and others, woke up angry and scared at three every morning. I needed to open up and share.” In October 2010, Altucher started posting confessions on everything from business failure and sex to death and depression. Example: “I was completely lost, four years old, running around the department store looking for my parents who I was afraid had abandoned me. … I’m still wondering why they were thinking of entering the elevator without me.”

Shortly after launching his blog, Altucher learned that the top search query bringing readers to the site was “I want to die.” He realized that the Altucher Confidential had become much more than an exercise in self-exploration. “There is such a deep need out there to know you are not struggling alone,” he says. In one August post he wrote about the times he had pondered ending it all and how he managed to persevere. The essay prompted an outpouring of gratitude from grieving parents, laid-off breadwinners, and battered women. “I was just really f***ing sick of letting a man hit me,” wrote one reader. “So I left. And the fear I was living with died.”

Altucher’s path to this unlikely role dates to the mid-1990s, when the computer programmer launched a startup to build websites for media companies. In 1996 he successfully pitched (TWX)HBO on III: am, a Web series that had him wandering the streets of Manhattan late Tuesday nights to see what people were doing at that hour. “Altucher’s conversation with an Eighth Avenue transvestite prostitute brings out the desperation and loneliness of those who don’t (or can’t) fall asleep with the rest of us,” wrote a reviewer in Newsweek.

In 1998, Altucher was recruited to redesign the investor portal TheStreet.com. While working there he caught tech-stock fever and made millions speculating with the money earned from the sale of his media consultancy. He bought a big apartment in Tribeca, decorating it with expensive art. He says he played poker every day in 1998, including the night his first child was born—and took helicopters to Atlantic City to stave off boredom.

By the summer of 2000, with dot-com stocks imploding, Altucher says he was losing $1 million a month. He put his apartment up for sale. “I had two kids to feed,” he says. “I honestly thought I would kill myself—that I’d be better off dead if my family got my life insurance.” He hit bottom in 2002. “Cash was running out at the bank, expenses were going up, the house was standing still and nobody wanted to buy it, and eventually I would be unable to buy diapers and food for my children. This wasn’t just me. In the last decade this has happened to a lot of people.”

In desperation, he e-mailed money managers with his investing ideas. Jim Cramer of TheStreet.com hired him to write about stocks, and a hedge fund manager threw him some money to invest. Altucher also began writing for the Financial Times, and started his own hedge fund, as well as 10 investing websites. He sold the most successful one, Stockpickr, for $10 million in 2007; he wound down his hedge fund just before the financial crisis.

While Altucher had come back from the financial brink, he says he was an emotional wreck. By the end of 2008, his marriage was falling apart, and he found himself drinking heavily and holing up at the Hotel Chelsea. With the stock market in free fall at the beginning of 2009, TheStreet.com and the Financial Times let him go, and TV bookers stopped calling. “So once again,” he says, “I was lost.”

Altucher, now remarried, credits intensive yoga, Eastern philosophy, and introspection for rescuing him and changing his perspective. In a Nov. 8 blog post, he reflects: “How much happier would I have been if I had said in 1999, ‘You know what, I have enough cash now to live forever and pursue creative, charitable, or spiritual pursuits so I could become a better person.’”

“He’s at peace,” says Howard Lindzon, co-founder of StockTwits, and a former co-investor with Altucher on deals. “It’s all very cathartic for him.” Even so, Lindzon calls Altucher “a pain in the ass who would just disappear for months at a time. Would it have killed him to see the light back then?”

Homeownership and college education have become Altucher’s bêtes noires. He calls the mortgage industry “programming by the machine. By the banks, the corporations, the government, that wants you in hock.” Altucher, a Cornell grad, faults colleges for churning out “debt slaves” who take unhappy jobs just to service their loans. “If you could,” he says, “take half the people accepted into Harvard and tell them they can’t go to college. Then compare them in 20 years. It’s about ambition. Not the diploma.”

At his Formula Capital, Altucher says he is finding no shortage of promising opportunities in tech and media. He thinks the Dow Jones industrial average may hit 20,000 in a few years. “The economy is about to boom,” he writes. “Bernanke just printed up a trillion dollars and airlifted it onto the U.S. economy.” Even so, he does not believe individual investors have enough patience, discipline, or nerve to invest in stocks successfully. Altucher himself concedes his message is a work in progress that is rife with dissonance and contradictions. Not unlike the times.