And Then I Made My First Million (Only To Lose It Later)

first million

There’s a lot of disgustingly bad books and articles about habits for millionaires. AWFUL.

I won’t say the titles. I have a lot of respect for the authors even though they have written useless books. It’s hard to write a book.

It takes a year out of your life while you do something totally unnatural for the body: sit in a chair and type buttons on a keyboard to put something on a screen. For 2 million years, primates didn’t do that. Now for 50 years we have.

Unnatural.

So….respect.

But the books are awful and dangerous.

A lot of the books are based on research. People who did X, Y, and Z for 50 years ended up with $ABC more money than other people.

I hate research. I admire experience.

I’ve made and lost millions several times. I didn’t do it just once, which might be luck or it might not be. I can tell you in each case how I went from scratch to millions.

And I’ve interviewed hundreds of people who have made and lost millions and gone on to achieve peak performance in their lives.

But I’m going to stick to my own story. Specifically: four times I started from $0 and made millions.

MILLION #1

Some of these are habits. Some of these are factors of what was going on in my life.

A) VISION.

I felt that eventually every company would have an Internet website.

I had no business experience at all other than books I had read. When I was a kid I read biographies of many businessmen: Rockefeller, Howard Hughes, Carl Icahn, Andrew Carnegie, and on and on.

But the biographies are just guideposts. You have to experience.
If I had experience I would have done many things differently.

BUT EVEN WITHOUT any experience at all, having a strong vision about the near and long-term future is enough to make a million dollars.

How can you get a vision?

Every day write down ten ideas of things you think will happen.

See what feels true inside of you. See what you can learn more about. Ask yourself over and over again why your vision will happen.

How it can be better?

Every day you have to make sure you are not smoking crack on your own vision. I am a crack addict of my own ideas so it’s important for me to always step outside and make sure I am not breaking bad.

B) COMMUNICATE 24 HOURS A DAY 

I told everyone I knew that I thought they needed a website. Small restaurants, big billion dollar companies, artists, stores, writers, friends.

I loved looking at well-done websites. There were only a few dozen websites when I first got on the web. I made my own website and put a short story I wrote on it.

What a mind blowing event it was from me when someone from Sweden reached out to me and said he liked my story. I felt connected to a larger world.

I told the opera they needed a website. I told schools they needed a website. I told every company they needed a website.

Eventually, some people wanted to pay me to do a website. A diamond dealer. Then a shoe company. Then a TV company. Then an electric company.

Then…American Express for $275,000. Then The Matrix for $250,000. And so on.

C) LEARN EVERYTHING 

There were no books about the Internet or making websites. It took me a long time to learn the basics.

First there was HTML. Then there was setting up my own web servers. Then learning C++ and how to write networking software. Then there was PERL. Then writing software to manipulate graphics.

There was no WordPress then. If I had been smarter or had more experience then maybe I would have made a WordPress-like site.

Instead, I learned how to make websites by reading the initial code of the first ever web server made by Tim Berners-Lee.

I learned everything about all the subtleties of the protocols. I learned what was inside a “gif”, I learned how to compress files.

I learned about how to process credit cards inside the code. I learned how to compress videos into unified format. And on and on.

D) PARTICIPATE

I spoke with the few other people out there who knew how to make websites. I got to know every company in our industry.

There were maybe four or five in NYC.

I had lunch with my competitors. Dinner. I’d go to their charities. We’d exchange notes. I felt such respect for them because I felt we shared something unique.

When you are in an area with a big enough vision (today: virtual reality, internet of things, genomics, etc), then there is no such thing as competition. The best players will share and do co-opetition.

I’d offer to host other companies. Or share the work on clients. When my company was acquired, I acquired the companies of my friends. And so on.

It was always about learning. We were creating something we felt was important. We were creating the commercial world wide web.

I still know these people. 22 years after I first advertised in Jason Calacanis’s tiny magazine, “The Silicon Alley Reporter”, Jason and I are doing a live podcast at Squarespace in a few weeks.

NEVER FORGET it’s a small world and the best people (your “scene”) will rise together not as competitors but as peers.

Build your scene.

E) NO RISK

I stayed at my job for EIGHTEEN MONTHS before I left to join my own company full time. We had a dozen employees by then but I did not want to take the risk of relying on my company for my survival.

Else I would panic too much.

I also de-risked by having many clients. And by offering more than just one service. We offered software, design, consulting, marketing, etc.

And we were constantly trying to come up with new ideas to market. We considered making a record label, a tea company, etc.

Millionaires don’t take risks. Non-millionaires buy lottery tickets.

Only when I took risks (later on in life) did I lose millions.

F) PROFITS

If I had more business experience I would have raised money, lost money, gotten revenues really fast, productized our service offering, and gone public and made a lot more money (e.g.: Audionet and Mark Cuban).

Smart people who had a deep understanding of market history took all the steps to be much more successful.

I did not have that benefit. I was a failed novelist, grad school dropout, computer programmer. Not a business guy.

So I focused on offering a service where I did work, got paid for it, and every piece of work was profitable.

People tried to invest money in Reset but I was profitable and growing – why did I need it?

Nevertheless, this was a special time in market history.

In the real world, the best way to make money is to build a growing profitable business where much of your time is spent on minimizing risk.

G) BE AROUND GOOD PEOPLE

My business partner was my sister. I trusted her and love her.

My employees were all people I truly loved. We got along like a family. 20 years later there are still reunions of my initial employees. We’re still like a family.

Whenever we partnered with someone we didn’t like, it was too stressful. We’d get rid of that relationship or minimize it. This is so important.

Most people don’t realize THIS about business: at least 50% of your time is spent talking about people:

partners, competitors, employees, shareholders, customers , etc.

The other 50% of time on your service.

BUT…if you work with bad people, 90% of your time is spent talking about people.

Don’t do that.

I) FOLLOW UP

One time we met with JP Morgan, the bank. They loved us.

They loved all of our ideas. “Let’s get started,” they said.

I never followed up. I’m bad at that. It’s a skill I don’t have.

We never closed that deal. We never did that business. Maybe we would have been a lot more valuable.

Another guy, one of my competitors, kept calling me. I never called him back. Finally he ran into me in the street.

“I have to tell you a story,” he said. “I was pitching the CEO of Toys R Us. I wrote him an email and called him. Within two hours he called me. He was on his private plane. He never had spoken to me before. We spoke for an hour and now we’re doing his website.”

His conclusion: “Good business people call each other back.”

Ugh. I always need to get better at this. Thanks Bill!

J) OVER PROMISE AND OVER DELIVER

Whenever I say this, people criticize me. They say, “over promising” is lying. Well, for me it isn’t.

1. I believe so much in what I am offering that I am happy to over promise to get the deal.
2. I like to set myself a challenge that none of my competitors are willing to set for themselves.
3. I like to over deliver and make the clients happy, even if it means working late nights and struggling for me.

You can only do this if you love what you do. BUT IT WORKS AND IS POWERFUL.

The over-promise/over-deliverer will always beat the under-promiser or the one who just delivers what they promise.

[ RELATED: 10 things Successful Business People Never Do ]

K) CHEAP

I was always cheaper than my competitors. More important to me was building the relationships.

I always wanted to do cool stuff. If October Films or Miramax wanted a website I’d almost offer to do it for free.

I knew that those would be fun for me and my employees, creative, and would be artistic and beautiful enough they would attract higher paying customers like American Express.

Money is a side effect of having a strong vision.

It doesn’t mean you always charge the maximum. It means that in the long run, sticking to your vision will make you money.

L) EMPLOYEES HAVE TO BE HAPPY

There are several things I wanted from my employees. And all of these were and still are important to me:

1) I had this dream that all my employees would go home each night and call their moms and say, “I can’t believe how much fun I had today!”

I don’t know why I pictured they called their moms and not their dads. But that’s the way it is.

2) I wanted all my employees to do their best possible work.

I never wanted to worry about what they did. This involved asking them what they wanted to do and always making sure they had opportunities to use their creativity as much as possible.

People are excited when they do activities that make them feel love in their chest. I wanted to be the match that set each heart on fire.

If I had to think too much about what an employee is doing, then usually they were not a good employee. Or they were not that interested in working with me.

3) Each employee needed to see a path to success.

Employees aren’t hammers. You pick up a hammer when you need to pound a nail and then you put it down when you are done.

Tools are there just to help you. But with employers and employees, it’s a two way street.

They are there to help me. But just as much, I am there to help them.

My best employees all ended up starting their own businesses, or being art professors, or writing books, etc.

My best employees learned at the same time I was learning it, what the pathway to success was.

I ran into one employee 16 years later. He has over 200 employees now at his business.

He told me, “When I walk the floor where my employees work I always think of two people: my commander in the Israeli Air Force…and you.”

This made me happier than just about anything else. Happy enough that I remember it and write it here now.

This shows me that the way I treated my employees was a good instinct and was a great contributor to any success I’ve had.

[ RELATED: 100 Rules For Being an Entrepreneur ]

M) ALWAYS BE SELLING

I mentioned above that I was always teaching people why they needed websites. This is one way to sell.

The other way to sell is to sell yourself. You want to be likable, you want people to do business with you, you want to offer value without expectation back so people know you are a partner and not just transaction-oriented.

And you also want to be always selling your business.

Not always literally. Sometimes you want to build your business.

But often, for me at least, and for many others, when your business is at the top it’s a good idea to take cash off the table.

To be a partner instead of a competitor.

Not that you will stop working at the business or work any less hard. But cash is king and you need to be rewarded for your efforts and your continued efforts.

I sold my first business at the very top of the Internet boom. People thought I was crazy. I could have kept building.

And, in fact, I did keep building. We went from 40 employees to ultimately over 1000.

And the person who bought my company in August 1998 I am still good friends with. Nobody regretted buying my business.

He went on to be a well known movie producer, producing Superman, 300, and a ton of other movies. I am huge fan of his.

We had lunch recently. The sign of a good partner and a good deal is if 20 years later you’re still able to be best friends with the people who put their faith in you and gave money to you.

“I take August off,” he told me when we had lunch, after I told him some of the situations I’m working through right now. “I’m putting it on my calendar that I will spend time thinking of how I can help you or at least come up with ideas for you.”

Always be selling” sounds selfish. But it actually means, “Always be helping people”. Always deliver value. Always fulfill the promise of your very initial sale.

Always make it so that even 20 years later, people are so glad they did business with you that they seek you out to do business with you again.

My current business partner has been with me since 1999. The guy who bought my first business is one phone call away. The guy who bought my third business I saw just the other day and we hugged each other, recalling good times.

But business is hard and I wish I had more experience on that first one (although, by definition, it was my first so all I can wish for is that I had more common sense).

Some bad things that happened. 

[RELATED: The Ultimate Cheat Sheet For Selling Anything ]

A) THREE SKILLS

There’s making money, keeping it, and growing it. Back then I only had “making it”. And I ended up not keeping it (then).

B) BURNOUT

Business is hard. It’s 24 hours a day. You can’t leave it at work.

I wish I had understood the psychology of it a little better. Every day being in the trenches with someone in a war can create a certain type of post traumatic stress.

I know I still have it. I have it and deal with it every day.

And perhaps this is why my first partner, my sister, and I no longer speak. I reached out to her a few months ago and a few months before that. I never get a response.

C) SOME REGRET

I had the knowledge and the tools and the ideas to make any product out there.

Many products that I thought of, and even built back then, were made into multibillion dollar businesses by others smarter than me.

I wish I had had the business savvy to realize it was more important to build value than create profits. I sacrificed value over profits because I didn’t know any better.

[ RELATED: Regrets of the Living. More Important Than Regrets Of The Dying… ]

D) FOCUS

Although I am not a big believer in focus, I went so quickly from Internet businesses to the hedge fund business that I do suspect I made a mistake.

The hedge fund business has been valuable for me and I gained a HUGE amount of knowledge and new skills and contacts that I’ve been able to use for much profit.

But I didn’t enjoy it. I didn’t feel it in my heart.

Money is in the gut. Passion is in the heart. And money should be a side effect of intelligently applied passion.

I enjoyed the Internet. I enjoyed the creativity of it. I enjoyed the ideas of it. I sort of wish I had stuck with that and kept building my knowledge and my skills and ideas.

But…that leads me to the second million.

Maybe one day I’ll write about it.

Oh, and I made an infographic a few months back on the 20 Habits of Eventual Millionaires. See it here.


(screenshot is from archive.org in 1998 and is one of the many websites we used for that first business).

  • airheart

    If someone is aware of what their flaws are, and those flaws still exist, why do they exist? Why doesn’t that person realize the flaws need to be changed, and just change them? If a person can figure out why they haven’t fixed their flaws, then eliminate whatever barriers stand between them and that success, then it will be like they have super powers. The most successful people in the world have taken a hard look at their flaws and made a conscious decision to fix them, then not given up till they had succeeded.

  • Yes successful people are constant failures, they just constantly fail every minute, at least, to become better the next day !!!

  • Al

    Sorry for a layman question, but what is it meant by value vs profits in the context of ‘C sone regrets’?

    • Custo SchwarzGlass

      From one layman to another, it would appear value is calculated based on the present value of projected revenue. If you took 10k that would be profit and invested in equipment each year, then your company and its revenue would grow. When the growth stops, the profit starts, in proportion to the company size.

      • Jorge Luis Perez Gomez

        As an economist I think I can answer this. Value is really what something is worth intrinsically, while profit is simply about money. Value is subjective: A glass of water when youre lost in the middle of the Sahara is more valuable than when youre at home and you have tap water readily available. What James means here is that he should have focused on making products that were really helpful, things that really improved people’s quality of life, instead of just concentrating if the company is profitable or not. If you concentrate in profitability, you might work in better marketing, leaner production processes, etc. But if you concentrate on value you can actually make a product that is so good and useful, that it sells by itself, even if you dont put any money in marketing. In a way, James learnt this lesson, as he is giving us advices here that are valuable, even though we dont pay for it. And by giving us value he makes us become willing customers. For example, after reading this, I totally feel like buying his autobiography, if he has one.

  • l lawson

    How can ideas be protected. For example, a fictional book, or a cookbook, or a spinner, or a hover board. What can be done when music and books are given away for free by companies gaining control of these industries to sell their other products. How can people resist losing money in music and writing

  • Really cool story. I linked it in my journal to my first million here: https://franciskim.co/1-year-1-million-month-2/

    Very much hoping that you write the follow up story.

  • James, do you want to get back into the internet business? And the finance business? I have a website http://maximum-pain.com and I am working on building machine learning algos in python for option data (everyone else is doing stocks). Would you be interested?

  • “Create your scene” This is a fundamental idea that few people understand because they are so caught up in their own ego stories. Brilliant!