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

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.

[ REALTED: 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.

[ REALTED: 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. 

[RELTED: 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.

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

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Ep. 234: Charlie Hoehn – Getting Past Anxiety and Learning How to Play Again

Charlie was going to die. And he kind of deserved it.

“I could feel the alarm bells going off in my body. My vision… and my hearing felt weird. Sounds came in slowly, in waves… I felt like my body was falling apart.”

“We all experience anxiety on some level,” Charlie Hoehn told me on my podcast. “But not like this. This was different. This was debilitating. I found myself isolated. I didn’t want anybody I interacted with to catch this weird energy that I had. It felt like I was contagious. It felt like I was losing my mind. It felt like I was dying.”

He explained. And I started getting excited. Because he was describing me. I’ve not only been addicted to anxiety in my life, I’ve been addicted to anxiety prescriptions.

When I tried to get off my prescriptions, I would have panic attacks and seizures. They don’t tell you that when you first get anxious. “They” want you in the system, tracking the pills you take, the emotions you feel, the stress that their pills are trying to hold together or else you fall apart.

I knew what Charlie was going through. I felt like I had deserved to die also.

Everyone’s emotional state is unique to them. There are so many factors to consider:

Physical: We all absorb a different combinations or nutrients, sugars, fats, pesticides, antibiotics, probiotics, etc. Our bodies are different. My gut is different from your gut.  We don’t process information equally.

And the environment doesn’t help. Heck, they found anti-depressants in NY tap water last year. Chemicals are everywhere.

Emotional: We all have a different levels of support. And a different group of people we surround ourselves with… or a different level of isolation. We experience different stress. And the number of times I laugh in a day is different from you, too.

And then there’s history. What conditions have you been exposed to? What conditions have your family been exposed to? What did you see at age two that you have no memory of now?

What about spirituality or creativity or thought-process. Some people are agreeable, optimistic, hopeful and then have flashes of self-doubt, loss, anger, and so on. Others feel doomed or scared or cynical with traces of sarcasm and an ability to be so honest it translates as humor.

A woman bumped into me a day ago. And she said, “I’m sorry. I seem to be saying sorry to everyone these days.” I smiled and said, “You’re fine.”

“No I’m not,” she said with some underlying sense of joy. I couldn’t quite put my finger on it. She smiled. She seemed buoyant like she was somehow floating above the water in the midst of moving her two eldering parents to a new home right after one suffered a stroke. “Is there someone I can go to just lay down and cry,” she said.

The person at cash register overhead. “Yes,” she said.

So when I hear someone’s survival story — how they got out of “debilitating anxiety,” which is what Charlie called it, I get hopeful.

He told me how he climbed out of it. And I’ll tell you what he told me. But first I want to share with you how anxiety came in and highjacked his body to begin with.

“All in the same week, a close friend attempted suicide and a family member died so I took a week off,” he said.

He was working with Tim Ferriss. They just launched an event and Charlie was ON for months leading up to it.

“I said to Tim, ‘I’m a mess right now. I think I’ve really go to take some time off…’”

“I was shaking going into that meeting,” he said. “I was terrified I was burning a bridge that I worked so hard to build. I was at the point where I just had to take care of myself.”

Tim was supportive.

He took time off. A week turned into a year.

He tried everything. He saw a doctor who prescribed medicine. He read the side effects: insomnia, psychosis, anxiety… all the problems he was trying to fix.

He read forums and saw other people said the medicine was addictive. And didn’t always help. So he skipped it. “I realized whatever situation I was in, I knew I got myself into it and I could probably get myself out.”

I wish I had skipped it. But still…anxiety often feels worse than the cure.

He tried deep breathing exercises, therapy, journaling, all different supplements, exercise, psychedelic drugs, volunteering, prayer. He even took a course on “How to Overcome Anxiety.”

But none of it stuck… “I was constantly in fight or flight. I felt like my survival was constantly on the line,” he said.

It was as if he hit an internal tripwire. No one knew he was going through this. But he wrote about it in his book, “Play it Away.”

His friends read it and started apologizing. They had no idea he was going through constant dread.

Then he finally hit another internal trip write. And started coming back to life. “It was the ah-ha that lead to recovering in a couple of weeks.”

He was reading a book about play by Stuart Brown where he writes, “The opposite of play isn’t work, it’s depression.”

There’s a strong evolutionary component to play.

Our bodies were built to hunt and gather and move. Humans aren’t meant to stay still.

“The research is pretty clear,” Charlie said. “They have done experiments. They’ve deprived animals of play—they give them love, nurturing, food, shelter, all the things they need to survive— but when they deprive them of play, the animal inevitably grows up to be socially and emotionally crippled.”

Charlie calls it “chronic-play deprivation.” And I think many people suffer from that.

It’s the transition from childhood to adulthood. Statistically, children laugh an average of 300 times a day. But adults laugh an average of 3-5 times a day.

Charlie said he was approaching life “so seriously… so joylessly. And very much in terms of ‘what’s the output’, ‘what’s the income’, ‘what’s the money pay-off.’”

So I asked, “How did you learn to play again?”

 

Step 1: Do the play history exercise:

You can do this right now. List all the activities you would voluntarily turn to when you were child. These are things that no adult was making you do. There was no judgement or grade.

Charlie says, “It’s what you were just doing for the internal joy.”

For me it was playing chess, riding my bike, and I loved games—video and board games. For Charlie it was playing catch in his backyard. So he started integrating this in his work life (that’s the next step)

 

Step 2: Integrate play into your daily life:

I took Charlie’s book to heart.

I started doing 100% of my meetings over ping-pong, backgammon or chess.

I don’t let a SINGLE DAY go by without an hour or two of play. Even if I have no time. Even if the stress is too great. Even if I have too many responsibilities. I make the time to play. It’s that important.

A couple weeks ago I had a meeting over backgammon and in between games, I learned my backgammon partner’s company was going to get acquired. I never would have learned this in an “official” business meeting. We talked about our personal lives too.

I always leave these meetings with a sense of friendship. I get to see different sides to someone. In business, there’s one angle: money. But in play there’s a joy of being alive and that is what feeds the purpose of making a deal in the first place.

 

Step 3: Once a day

Charlie plays daily.

“Did you have to force it?” I asked.

“No, it transitioned nicely,” he said. Charlie replaced “let’s grab coffee” with hikes and catch meetings in the park.

Some parts of life are still. And that’s good. Being still has it’s own sense of aliveness. But sometimes, we’re still when we want to be moving. Pick one thing in your day. One monotonous part. And try replacing it with play.

Even if it’s just a 10-minute trade out. There’s always time.

As I write this, I’m getting ready for my “play” of the day. I’m going to go to StandupNy in the city and do 15 minutes of standup comedy. I love making people laugh. It feeds my soul.

Charlie said playing every day immediately had an effect. “Not just on how I felt but in how people responded to me.”

“I ultimately, made this book for myself… as a reminder,” Charlie said. “Or at least, that’s where it began.”

This was my favorite:

 

Links and Resources:

• Read “Play it Away” by Charlie Hoehn
• Charlie’s next book is “Play for A Living.” He launched it on Kickstarter. Join the waiting list here 
• Listen to his podcast “Author Hour with Charlie Hoehn” 
• Follow Charlie on
  • Twitter
  • Instagram
• And check out his website (he has a free guide “Top 10 Tips to Conquer Anxiety in 30 Days”

Also mentioned:

• “Play: How it Shapes the Brain, Opens the Imagination, and Invigorates the Soul” by Stuart Brown (this is the book that rescued Charlie from his “debilitating anxiety”)
• In the show, Charlie mentions a student of his, Darvinder, who came up with “Google Hobbies” – read his blog post on it here.
• Charlie also wrote about Darvinder’s idea here.
• “The Four Hour Chef” by Tim Ferriss
• “Opening the Kimono” (the event Charlie helped Tim Ferriss plan and market)
• Ramit Sethi’s New York Times bestseller, “I Will Teach You to Be Rich,” which Charlie ALSO helped market
• Our good friend Kamal Ravikant’s book, “Love Yourself,” which he self-published
• “Jesus’ Son” by Dennis Johnson (my favorite book. I’ve read it 200 times)
• Mary Karr (a great writer who’s also been on my podcast – Ep. 144 “How to Start Anything” 
• Book in a Box (which my friend Tucker Max founded and it’s where Charlie currently acts as the Head of Marketing)
• Steve Scott who’s written and self-published tons of books (he’s also been on my podcast and talked about how he STILL gets $40K-$50K a month from his book sales – Ep. 23 – “How To Go From $0-$40,000 a Month Writing From Home“
• Documentary: “Comedian” (we talked about this because Charlie also experimented in stand-up!)
• “Strategic Play: The Creative Facilitator’s Guide” by Jacqueline Lloyd Smith and Denise Meyerson (this is another book Charlie mentioned about play)
• Charlie mentioned he tried Modafinil right before he hit the anxiety tripwire… he used this for additional energy (but it also added to his exhaustion). I know other people who use it. But Charlie said, “I don’t recommend it or endorse it.” If you want to learn more, you can read about it from Dave Asprey, here.
• Erin Tyler Design (Erin helped me design my latest book “ReInvent Yourself” and she designed Charlie’s book too.)  

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The 5 Biggest Assumptions I’ve Made About Business

After starting about 20 businesses and being invested in about 30 more at this moment, I’ve probably seen most of what you can see.

I’ve been on the boards of billion revenue companies and tiny startups. I’ve written about hundreds of companies.

And you know what: I’m sick of it. I am sick and tired of the whole thing. The biggest assumption I ever made in business is that most people are telling me the truth.

Most people have no idea what truth is. I’m tired of it all.

That said, entrepreneurship and OWNERSHIP are the best ways to make money in today’s world.

When you are an employee, a boss, his boss, his boss, and her boss, take 95 cents of every dollar of value the lowest employee creates.

That’s their right. But it’s no good. You should try to make 100% of the value you create.

So avoid these top assumptions that most entrepreneurs mistakenly make.

RISK

Entrepreneurs don’t take risk. They do the opposite.

When I started my very first business I was so afraid of taking a risk that I refused to leave my full-time job for 18 months until I was sure we’d have the customers and income for me to support my family and employees (11 employees by the time I went to my own business full time).

When I started a hedge fund business I didn’t open up the doors until I had enough money raised to support myself and I had a strategy that I had tested with my own money for at least a year.

The best businesses I started, I started when I had customers, secured some initial income, and whatever else it took to reduce risk.

The myth that entrepreneurs take risk is wrong.

The risk is the salaried employee in an economy with shrinking corporations, more outsourcing, more automation, who get their stable paycheck and every month risk being fired.

A friend of mine told me recently that his company (a major media company) offered him a buyout that was a year’s salary. He was debating whether to take it.

“Take it!” I told him. “Then you have a full year to plan your next step, which should be enough”.

I’ve seen so many people not take a buyout and then get fired (with no buyout) in less than six months.

The economy forces all the risk on it’s poorest members – employees who have no control over their futures. Entrepreneurs get rid of risk so they can have more control over their future.

FAILURE

There’s the myth that failure makes you a better entrepreneur.

This is FALSE.

I’ve read so many articles and books by authors who are smoking the crack pipe of failure porn.

Life is a sentence of failures, punctuated only by the briefest of successes.

But, that said: failure is not pleasant. I hate it. It makes me feel depressed. It makes me feel like I’m never going to succeed. It makes me feel like I put all this time, and maybe money, into something that did me no good.

We only have a few years on this planet. If you spend some of that time with bad people, doing useless things, and not creating value from it, then that feels so bad it hurts.

It’s true that failure is a decent way to learn from mistakes.

When you play chess and you lose a game, you can study with a coach to see what moves you made were bad and how you could have improved.

And since you remember the pain of failure much more than the glory of success, this is a powerful way to learn.

But the key is not to fail. The key is to realize something is going to not work out very quickly, learn what you can, and then move on.

The worst times of my life was when what could have been a one month failure, or a six month failure, stretched into years and years of wasted life and regret.

[ RELATED: The 100 Rules For Being An Entrepreneur ]

FOCUS

I’ve heard this BS over and over again from people who know nothing about business: “focus focus focus”.

Holy ****. If business was about focus then almost every business we know about would have failed in it’s first or second year.

Amazon started as “the world’s biggest bookseller.”

Now they are also the largest retail chain that sells organic foods. They are also the largest online seller of shoes. And if you need extra computers to store your data, they are the largest seller of “cloud space”.

They also make this little device in my kitchen that says, “I’m sorry. I’m not connected to the Internet,” every time I say the word “Alex”.

And is Jeff Bezos focused on Amazon? Is one of the worlds greatest entrepreneurs focused on the company he is CEO of?

I don’t know: he also owns The Washington Post and he owns another me-too rocketship company to send tourists into space. And probably a dozen other companies.

Well, is he an anecdote?

Richard Branson started out “focused” on a music magazine. Now he owns an airline that also owns 300 other businesses. Did he know anything about airlines? Nothing.

Warren Buffett’s Berkshire Hathaway owns close to 100 companies ranging from a chocolate company to Fruit-of-the-Loom underwear to a brick company (Acme Bricks) to the Buffalo News to dozens and dozens of other companies.

If he wanted Berkshire Hathaway to stay focused in the 1960s he would be out of business. They made shirts. Their mills are abandoned now.

Well…what about Google? Don’t they make 99% of their revenues from advertising?

Yeah – but they also are a car company. They are making self-driving cars. They also just put $200 million into Lyft. They also make glasses. They also own satellite bandwidth. And an operating system they made for your phone is now the biggest operating system in the world – bigger than Microsoft Windows.

Google is specifically trying to get un-focused so they can continue to grow and dominate.

What about small entrepreneurs?

When I was running my first small business, a web services agency, every day we’d figure out what additional services we could offer. We expanded our offerings almost every week.

This allowed us to charge more to our customers, and also to get new customers. We also looked at new things we can do – we debated starting everything from an iced tea company to a record label.

And when it was too hard to diversify our services any more we knew we had only one choice – sell the company before our competitors caught up to us.

[ RELATED READING: The Warren Buffett Guide To Making Money ]

MYTH: 9 OUT OF 10 BUSINESSES FAIL THE FIRST YEAR

This is just simply wrong. There’s this myth that starting a business is very risky simply because most businesses fail.

There’s two ways to look at this: the first is…how many people incorporate a business and still have that business running a year later.

Let’s take a look at a chart:

What a surprise!

Most businesses are still around even after 3 years.

And this chart doesn’t really tell the story.

Many of the businesses no longer exist because they were either sold or because the founder made enough money or executed some other exit strategy (went to work for one of their clients, merged with a competitor, liquidated, made enough money, etc).

There are many reasons a business might end that are not related to failure. One time I had a business that was doing just fine, we were profitable, we had customers, etc. But we weren’t growing and I wanted to put more time into ventures I had that were growing. So we shut down the business. We didn’t “fail”. We were profitable and doing well when we ended it.

It’s true that a lot of venture funded companies fail. But that’s because venture capitalists are usually horrible investors and have no clue what they are doing.

The average company starts with a product or service that they can sell immediately and become profitable. These companies survive and usually do well.

THE ROLE OF PSYCHOLOGY

Many entrepreneurs focus on their product or service and how they can market it and deliver value to customers.

Fine.

But this is about 50% of the story.

The other 50% is the sheer amount of time you have to spend talking with your partners about the psychology of dealing with shareholders, employees, customers, board members, regulators, and on and on.

With every business I’ve ever been involved in, at least 50% of the time or more I spend talking about people rather than talking about the product. Maybe this is a bad thing and why I’m not running a trillion dollar company but I find this to be true of most small businesses.

One time I was on the board of a small but growing company in the social media space.

The CEO / founder was a very smart guy who had developed a great product.

But we didn’t have enough customers and his burn rate (his expenses were too high).

I called him after we got the quarterly board report. “You only have six months of cash in the bank,” I told him.

“Yeah,” he said, “We’ll raise money in four months and that will keep us going.”

“You don’t understand,” I said, “You’re already out of business. It’s too late.”

Six months is the MINIMUM amount of time required to raise money. It takes 2–3 months to visit investors. It takes 2–3 months to finish the legal. And that’s in a perfect scenario.

And if investors smell that you only have a month of expenses left they will not invest OR they will try to destroy you and all the prior investors.

I had to spend all my time convincing the other board members to then strategize how to convince the CEO to hire a bank and start selling the company.

He refused for a long time so we kept trying to figure out the psychology of how to deal with this.

Finally he sold the company when we were three hours away from missing payroll six months later. And even then, one of the board members didn’t like the deal and I had to be on the phone all night with him and his lawyer convincing him this was his only hope.

The CEO walked away with six million dollars in the bank. You’re welcome.

---

My brother in law and I were in the middle of selling our first company.

It was so stressful we couldn’t take it. Where were the lawyer’s docs? They promised them five weeks ago!

What was going to happen? Would we sell, would we go out of business, did we waste too much time focusing on the sale instead of getting customers.

I said, “let’s go”.

We went a block away to a gun firing range. We took lessons in firing rifles.

We spent an hour shooting at a target. While we were shooting I forgot about everything: lawyers, acquisitions, the customers that wanted to meet me to discuss this or that.

It was just my friend, partner, and brother in law and I shooting guns at a practice range, not knowing at all what we were doing. Just wanting to have fun.

If you can’t make it fun, it’s not worth doing.

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What does freedom mean? Plus what “things” I miss…

When I threw out all of my belongings and started living in AirBnBs (I don’t own or rent), people say, “Ohh! That must be so freeing!”.

I don’t know.

I know when I see something I want to buy, I feel relief. I have an easy answer: I can’t buy it. It won’t fit into my 15 possessions. Whenever I buy one thing, I throw another thing out.

If that freeing or imprisoning? I don’t know

Someone asked me, “Do you miss anything?”

Yes, every day. All the time. I had a drawing next to my desk of the superhero character from the 60s, Underdog. I loved it.

I had a Dr. McCoy doll from Star Trek. I had a photo album of photos from when I was a little kid. It had photos of me, my sisters, my parents. I had a collection of comic books built up over decades.

I miss them. I miss many things that I have lost in my life.

It feels like practice.

I practice “missing”.

Happiness is Reality divided by Expectations.

The less I expect, the happier I am.

When I wake up in the morning, I look out the window. I see a 3 dimensional city of vertical buildings reaching into the clouds. I see the sunlight. I feel like I want to sleep more but I know I have to get up because I want to write.

I’m going to write. I’m going to do some business. I’m going to disappoint some people. I’m going to make other people happy.

Then I’m going to play ping pong. I’m going to prepare for some work I have to do tomorrow. And I’m going to play backgammon.

I miss many things every day. This is freedom.

To live a life filled with things that I miss. To give myself permission to be both happy and sad at the same time. Melancholy is freedom. Happiness all the time is prison.

I used to lock myself in that prison. Surrounded first by my possessions. Then surrounded by my goals. And the opinions people had of me. And the opinions people had of me. And my anxieties about tomorrow, which always drained me of energy for today.

I wrapped myself in so many expectations they kept me in prison.

Today I’m going to play. I’m going to miss. I’m going to laugh. I’m going to forget things. I have permission.

I’m free.

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Regrets of the Living. More Important Than Regrets Of The Dying…

In six months I’ll be 50 but I already know what I’ll regret.

This is the cliche answer. “If anything had been different I wouldn’t be who I am today.”

If I wanted to, I could put an “!” at the end of that sentence. Like what I am today is so great I’d never want to change it.

But…

I wish I could’ve done some things differently in the past and still be the person I am today.

Life is pretty hard and complex. And our brains aren’t smart enough to figure it all out. Even the best baseball player in the world bats only 30%. And I’m mediocre at best.

KIDS.

I wish I had spent more time with my kids. Sure, I spend quality time with them now.

But I worked really hard and, I admit, I probably avoided them when they were really young and difficult to wake up and get ready for school when they were younger.

MONEY.

I wish for 15 years or so I wasn’t so focused on money. I only realized in the past few years that there’s two feelings in the body

– CHEST. When I do things I love, I feel it in my chest and I forget the rest of the world. If all I did was do the things that feel good in my chest, I’d be a happy person, nothing else would matter.

– GUT. This is where my anxiety and stress seem to live. For 20 years I lived in a world of all stress.

Now I wake up every morning a little bit nauseous. After all these years of just doing things that hurt in the gut.

I probably should see a doctor. Everyone tells me I should. But I haven’t gone to a doctor in 31 years so why should I now?

[ REALTED READING: The Ultimate Cheat Sheet For Doing What You Love ]

CREATIVITY.

I began my career in my 20s doing things that were really creative that I loved.

I was trying to write a novel. I was trying to do a TV show. I was always around people I loved so much. And I spent time with them because I loved them and not because I wanted anything else.

I wish I had stuck with that. I got sidetracked by starting an Internet business. I made money doing that but I wasn’t cut out for that life and I was miserable.

I was starting to get good at creative things. Now, in my 40s, I’m trying to catch up.

It’s never too late, of course. But this isn’t about “too late”. It’s about “regret”.

HUMILITY.

When I first made some money I became a bit arrogant. “A bit” is an understatement.

I started investing in all of these horrible companies and real estate and having horrible friends and horrible horrible. It’s the double-horrible that finally kills you.

If I were humble and just went back to what I loved, I bet I’d be happier.

I would have said, “I’m too stupid for this” and just got back to the things I loved.

CONFRONTATIONAL.

I couldn’t say “no” to people. I still have a hard time with that. I wish when someone does something that I don’t like or agree with that I would say “no” a bit more often.

There would be a few days of confrontation and then life would move on. I’ve gotten into a lot of bad situations because I didn’t say “no”.

Here’s two cases where I should have said “no” more often:

— When someone treats me bad.
— When I don’t want to do something but I feel bad about hurting someone.
— And sure, I’ll add a third: when it’s not a “hell, yeah!” I should say “no”. I’m better at doing this now.

Anyway.

If I had a time machine would I go back in time? I’m not sure. It’s ok to feel regret sometimes.

I thumb through it like I would a deck of cards with pretty pictures.

I would have held my daughter’s hand when she came home from school.

And I would have taken her for a walk around town. And she would’ve told me about her day. And I would ask her lots of questions.

I’d listen while she talked and talked. She would tell me everything.

And we’d walk for a really long time, until the sun went down and I’d try to tell her the names of all the stars above us. Even if I had to make it up.

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Ep. 233: Fred Stoller – Five Minutes To Kill: A Story About “Making It”

You have five minutes to kill. That’s it. Those five minutes can make or break a career.

I don’t think I would be able to handle the pressure. I’ve done a lot of public speaking. And now I’ve tried standup. For the past three months I’ve been going up once or twice a week.

It’s difficult. I thought 20 years of public speaking would help me. It doesn’t. It’s the Hunger Games on that stage.

So Fred Stoller is my hero. He was a standup comic 30 years ago, then he was a writer on Seinfeld, then he’s been a guest start on 60+ TV shows including Seinfeld, Friends, Everybody Loves Raymond, Scrubs, and every other show I can think of. He’s sitcom history.

And he wrote all about it in three excellent books, including his latest, “Five Minutes to Kill”, about his five minutes on the 1989 HBO Young Comedians Special and what happened to the specific performers of that show.

So I asked, “If everybody thinks you’re so funny, then why didn’t you have your own show?”

But I wasn’t the first person to ask Fred this… He asked himself the same question throughout his career.

So did his mom.

And it hurt his self-esteem. He said, “When I used to headline as a comedian, I’d feel sorry for the people lining up waiting to see me… like I was their weekend.”

Now he’s entering a new world. He’s writing. And learning how to embrace “this weird guy that I am… who got lost finding this place.” He’s learning how to express himself with his own voice.

He reinvented from standup to writing on the best sitcom ever. Then he reinvented again to appear on all the TV shows he’s been on.

Now he’s 59, and he’s reinventing again. He’s a writer. His books are excellent.

Reinvention is not something special people do. It’s not something for only a few. Fred has been frustrated and also exhiliarated down every path he’s chosen.

Reinvention IS the goal. Not a pathway to it. Reinvention is a habit. It’s what we do every day to bring out the fire inside that constantly wants to express itself.

That’s why I wanted to speak to Fred. Not because he wrote “The Soup” episode of Seinfeld. But because he’s still doing what he loves to do. And what he loves to do is constantly changing.

Here’s what I learned:

 

EXPECTATIONS VS. REALITY + Thanks

Fred’s first break in comedy was when he starred in HBO’s annual “Young Comedians Special.”

Jerry Seinfeld, Bob Saget, Judd Apatow (who wrote and produced all my favorite movies, “Super Bad,” “Knocked Up” and all the brilliant comedies with Seth Rogen), and many more all got their first shot on HBO’s “Young Comedians Special.”

Everyone thinks they’ll be a star after getting this chance. But not all do.

It comes back to the difference between your reality (what is actually happening to you, for yu and around you on a daily basis), and your expectations (how you think it should be). If your expectations are higher than your reality, it’s guaranteed you’ll be unhappy.

Fred says you have to reframe what you think is “normal.”

He lived in Hollywood. Everyone wants to be famous there. They have this saying, “It takes 5 minutes to read the Hollywood Reporter and a whole day to get over it.”

Everyone is competing and not everyone can “make it.” So redefine “make it.” Three years ago, I wouldn’t have dreamed of having millions of listeners. I could only hope to help one person a day.

And that one person let me keep my focus. I didn’t spread myself thin. I honed my skill. I got in the closet (my make-shift studio), and called up whoever had a story. Peter Thiel, Coolio, Cheryl Strayed. They answered. We talked. You listened. And together we “made it.” All of us.

So when do you stop trying? When can I stop chasing the dreams of being bigger than life? Right now. As I type these words and say thank you to every person who’s ever answered my call or pressed play.

Look at your reality. And look for the times that the world was on your side. Say thanks. Do this everyday.

Small celebrations is how Reinvention becomes a habit worth living.

 

GO WITH WHAT EXCITES YOU

Fred was really specific about this. He said you have two choices.

1. Resistance
2. Or Ease

Resistance are the opportunities you dream of. They’re out of your current realm of possibility. (It doesn’t mean it’s not possible, it just means it’s not possible right now.) Fred calls these “home runs.”

Then there’s ease. These are the incremental opportunities. An impromptu coffee with the friend you just bumped into or an airplane ride next Mick Jagger’s lawyer.

“I just realized,” Fred said, “Is it conscious to reinvent yourself? No. You go with what you have.”

“And you go with what excites you,” I said.

“Yes, exactly. You go where the energy isn’t resistant. People asked me why my book isn’t a documentary and I thought, well, I could do a documentary but then I have to get a line-producer and I’ve tried to do my own documentaries before and you don’t see eye-to-eye with the guy who put the money up or the guy who shot it and then you have to get the sound and the releases. It would be great as a documentary, but I said, ‘What can I do that I can do now?’”

He ended up pitching it to Kindle singles. And they loved it. And they were all bestsellers.

“Go where you can make a difference,” Fred said “Not where you think there’s a home run.”

 

DON’T BE DESPERATE

Fred’s landlord looked him up. He thinks Fred needs to pay more rent. Because of all the TV shows he’s been on.

Now his landlord wants him out.

“They say money doesn’t buy happiness. But to me money buys not being desperate… and the freedom to extricate,” he said.

“What do you mean?”

“Well, when I’m with my mother, I can just bolt. I went home for my father’s funeral. My mother tried killing herself. She took a plastic knife and it bent… and I said, ‘I’m going to a hotel.’ To me money buys the freedom to extricate and the freedom to be creative.”

But he didn’t start with this freedom. “I had anxiety years ago,” he said. He was afraid of getting kicked out and losing everything.

I don’t know a single person who just sky-rocketed to the top. I’ve interviewed over 200 people. Everyone has a beginning…

Fred is done chasing the screen. He’s taking his own advice. He asked himself one simple question and it lead to his reinvention.

“What would I like to do if I didn’t have to make a big sale? What would I do if I didn’t have to prove myself?”

And now he’s writing Kindle singles.

“Five Minutes to Kill” shows you the not-so-sad stories of other comedians who didn’t exactly “make-it.” It’s sort of a permission slip to look at your life with clarity. And to accept the way it is.

Fred’s comedic lens is combined with his experience of anxiety, desire, competition, Hollywood, fame, and all the stress that comes with having a dream and wanting more out of life.

I asked him, “What’s next?”

“I never had the confidence to write about my own experiences,” he said, “But now I’m embracing being a self-aware guy and writing as an outsider who doesn’t fit in.”

 

THEY HAVE TO LIKE YOU

Fred was waiting to get fired from Seinfeld. He wrote there for a year.

“I knew I wasn’t coming back so each day, I took more and more stuff home. When I was younger, I was like the 40-year old virgin. I had knick-knacks and action figures. And in my office I had my Whoopi Goldberg Star Trek figurine—I didn’t even like Star Trek—and then when it was the last day, I didn’t have to pack boxes.”

“Why were you fired?” I asked.

“I wrote this Kramer story, based on this eccentric guy I knew who didn’t want his refrigerator anymore. He wanted more space in his apartment. And I had this funny scene of his putting the refrigerator on his back and wobbling down the steps… physical stuff Kramer does.”

“Jerry and Larry rewrite your script when you hand it in so they really cut a lot of Kramer’s parts. So when I was at the table read, I thought Michael Richards (Kramer) was sulking because he didn’t have a lot to do. So I went over to him. I thought he was mad at me.”

Michael wanted the favor, “Can you tell Larry to put it back in for me?”

“I knew it wasn’t a good idea,” Fred said. “But I’m co-dependent, or whatever the word is where you want to please everyone.”

He asked Larry David to put more Kramer in the episode. “Michael Richards is upset,” he said.

Larry screamed. “You don’t talk to the actors! What the hell is wrong with you?”

Fred left Seinfeld. And went on to land role after role guest starring on TV.

He learned it’s easier (and better) to work with people who like you. But it’s not your job to make them like you.

He said it’s simple. “You know how you get a woman to like you? She has to like you…”

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Links and Resources:

• Read Fred’s Newest Book, “Maybe We’ll Have You Back: The Life of A Perennial TV Guest Star“
• Read Fred’s kindle singles:
  • “Five Minutes to Kill: How the HBO Young Comedians Special Changed the Lives of 1989’s Funniest Comics“
  • “My Seinfeld Year“
• Follow Fred on Facebook, Twitter, and Instagram
• And check out his website here
• You can find Fred on IMDb here 

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10 Things I Do To Guarantee Failure For Myself and Others

A) DATE SOMEONE WHO IS DATING SOMEONE ELSE

They are not trustworthy, which means I become untrustworthy.

They won’t be able to end it with the other person as easily as they say they will.

What goes around comes around.

B) SPEND TIME WITH TOXIC PEOPLE

Toxic people are contagious. Their thoughts get inside one part of my brain and then spread to every part of my brain and body.

Then I find I get tired and sick and I fail.

When I spent time with someone who drank every day, I drank every day.

When I spend time with people who lose money, I lose even more money.

When I spend time with people who gossip, people end up gossiping about me.

If someone borrows money from others and doesn’t return it, then they will do the same to you.

If someone spends time with other toxic people, then you are indirectly spending time with those toxic people because you will get the virus through your friend.

C) I GIVE ADVICE

Nobody wants my advice. Nobody listens anyway. And they shouldn’t.

I like to tell a story instead. THIS is what happened to me. I hung around with people who I knew I shouldn’t and then I lost a ton of money.

A short story about love, lust, greed, envy, and me.

That’s not advice. It’s a story. People can take what they want from it.

Another story: I dated someone who drank at least five to ten glasses of wine every day.

We started getting more serious. I thought she would stop.

Soon, I was drinking a lot every day. We’d get into huge arguments. I’d oversleep. I missed important meetings. I lost friends.

Bad things happened.

So I can’t say: “don’t hang out with bad people” because I did it many times and always thought the result would be different.

But I can tell the story of what happened to me and you can decide whether or not to follow.

Else, don’t listen to my advice.

D) UNDER PROMISE AND OVER DELIVER

People tell me proudly, “I under promise and over deliver”.

That’s amateur hour.

Under-promising is another word for “lying”.

This happened: “It can get done in two months”. And then they finished it in one month. I was not impressed.

Instead, I was disappointed for an entire month. And I mis-planned everything.

Whenever I had a client in my old business I’d first “over promise” and they would act with surprise: “Really?” and because of that they’d hire me.

And THEN I’d over deliver. Gives me two chances to amaze them and then they are a client for life.

And I’d surprise them with the truth.

The gift of truth is rare. People will treasure it and try to return that gift.

I try to do this in every area of my life.

Sometimes it doesn’t work but I try.

E) LIVE YOUR LIFE LIKE IT’S YOUR LAST DAY

What does that even mean?

Does it mean you should party with crack and hookers all day long? Or does it mean “don’t worry about the future”?

I have two kids. I have to think about the future. And crack doesn’t seem like fun. And I’d rather be with someone I love.

I try to do this instead: live life like it’s everyone else’s last day.

Then you learn to treat everyone with the highest respect. They are dying tomorrow!

Plus, I think I’m going to live forever. It’s been about 15,000 days give or take and I haven’t died yet.

So the odds are on my side. I will live forever. Unless something weird happens. Like dying.

F) I OUTSOURCE MY SELF-ESTEEM

I outsource almost everything else, why not my self-esteem?

I went out with a girl and I was always afraid she was going to fall out of “like” with me. I did everything I could to please her, even if it was making me unhappy.

She liked me initially because I was confident and funny.

But then I gave her my self-esteem. I said, “here it is”. And then she put me in her closet and shut me down until she needed me.

It was hard enough for her to handle her own self-esteem, let alone mine as well.

So we were both miserable until she finally broke up with me. And then my self-esteem was crushed even more. It took a long time to get it back. Maybe I never got it back.

But I won’t do it again.

G) QUIT THESE THINGS:

You can quit your job, you can quit a relationship, a career, a family, an organization, whatever.

Those things matter…but never as much as I initially thought (other than kids).

But one time I made a lot of money and I decided somehow, “ok, I did it! I don’t have to keep improving as a human being.”

And I lost track of all the things that were important in my life up until that moment. So I quit trying to improve:

PHYSICAL: Food Sleep Move (improve every day)

EMOTIONAL: Be around good people who love you and you love

CREATIVE: Write ten ideas every day no matter what. Creativity compounds

SPIRITUAL: Always have beginner’s mind in a world filled with experts.

There’s no finish line. There’s no end goal.

No growth = No life.

[ REALTED READING: How To Be The LUCKIEST GUY ON THE PLANET in 4 Easy Steps ]

H) TAKE OTHER PEOPLE’S ADVICE

Everyone has their own agenda. Everyone has their own list of stories.

You can listen. You can file away the story. You can think about it.

Everyone has investment advice. Health advice (no “gluten!”). Money advice (“401ks!”), Education advice (“Harvard!”). Career advice (“Wall Street!”), etc.

They are only telling you their dreams.

When I am unsure if I am making a good decision, I tend to ask too many people, “am I making a good decision?”

And then I get frustrated with their answers.

It turns out I was only asking them because I wanted validation for what I knew deep down was the decision I wanted to make. I never really cared about their advice.

My own dreams are deep inside, my secret wishes since I was a little boy. I can tell when I am moving in the right direction.

I get a feeling in my upper chest. A warmth and excitement. No matter what the advice is, that warmth and excitement and playfulness is the thing I listen to.

Plus, nobody follows advice anyway (as said above).

I) GOSSIP GOSSIP GOSSIP

It’s none of my business.

Words have value. “In the beginning was the WORD”.

When you gossip, you increase the supply of your words and reduce the demand for them.

Increase in Supply + decrease in Demand = Each word you say has Less and Less Value.

And then less people listen to me. And life gets worse. And I become unhappy.

Whenever I say anything bad about anyone else, they eventually find out anyway. And my life turns miserable.

This happens 100% of the time when I gossip.

And whenever I say something good about someone else, I turn out to be wrong.

So now I just sit there and listen. And when other people stop to gossip I leave.

J) DON’T LOOK FOR THE DEEPER MEANING

Every word someone says is the tip of the iceberg.

Underneath that word are thoughts, fears, emotions.

Underneath those emotions is history and experiences. A single word is the final outcome of all of that history.

There’s always a good reason and a real reason.

When my daughter says she wants to study in the library, that’s a great reason.

The real reason is there might be boys in the library.

When someone says, “We need to hire this guy. He’s got A, B, C skills” that’s a great reason.

The real reason is they might be married to each other’s cousins. Who knows.

The real reason might not be bad. But there’s ALWAYS a real reason that’s different than the good reason.

My job is to find out what.

---

Don’t listen to anything I say.

Life is an experiment. That’s the beauty of all of this. We’re all scientists in this giant laboratory.

Our life is a list of the experiments we try, the discoveries we make, the failures we encounter along the way to greater successes and rewards.

If you just listen, you never learn. If you just learn, you never do.

And the way to DO is to experiment and see what sets your heart on fire.

Sometimes I do these things. And then I fail. And then I learn (I hope). I feed the fire. The fire sends its light into the air, letting me see the entire world around me with clear eyes.

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Everything You Need To Know About Cyber-Hacking And the Russian Election Hacks

I’ve spent 30 years hacking computers. I’ve done just about every trick in the book.

Many people I’ve known over the years have spent time in jail or in some other capacity that is specifically unclear after their hacking was uncovered.

And many people I know have never been discovered.

A) THE ABCs OF HACKING

I want to stick to the basics so people can understand what they are seeing in the news and think intelligently about it.

I also want to underline what the real problems are and not just the isolated problems we saw in this past election (although they are serious and I use them to demonstrate why the real issues could be much more serious).

First: what is hacking? How do people hack? What’s the difference between the movies/TV and real hacking? What is legal in this particular situation and what is illegal?

First, the WHAT: How does someone hack in today’s world (and the rules and techniques change constantly since 30 years ago).

TECHNIQUES:

1) HOLES IN THE NETWORK

One time a friend of mine was playing a joke on a well known media company.

For the sake of explanation, let’s say that media company had the initials “M” “T” “V” and just for the purposes of why it would have such strange initials, let’s say that stands for “Music TeleVision”.

MTV had a hole in their network. Every network has thousands of “ports”, like a massive cruise liner.

An “open port” sends messages back and forth. Like someone waving from a cruise ship as it pulls away.

Most ports are simply closed. But some are open in order to receive various special messages.

For instance, there is a port that listens for requests for web pages.

Like when you type into your URL box: “http://mtv.com” a message is sent (usually) to port number 80 at a computer at MTV (or wherever MTV stores their web pages).

Then a special language is spoken between your browser and the server at MTV that is listening to port 80.

An example conversation in the special “HTTP language” might be:

(from the browser) GET /pages/index.html
(from the server after sending the html): HTTP 1.1 200 OK

(this is very rough and abbreviated).

There are other ports open to listen to other computers on the local network: requests for files to be transferred in non-HTTP protocols (like FTP), and most importantly, requests for email.

Some software will OPEN unassigned ports for their own nefarious purposes.

Malicious software that keeps track of every letter typed on the keyboard might open and use such a port. VERY common.

Back to: One time in 1995 I was having fun with a friend of mine. He was pulling a prank on MTV.

MTV had an open port that they weren’t protecting properly. It was the SMTP (EMAIL!) port.

I logged directly into it (rather than send an email) and pretended to be “legal@mtv.com” and then I sent an email to my friend from that address saying he was in “BIG TROUBLE” unless he called immediately and confessed.

Fun things happened.

Most companies (maybe 99.99%) have now covered up basic holes like that and it’s much more difficult.

That said, for every type of software that does any network communication, there are always holes in the ports that are forgotten until someone hacks them and then they are patched.

If there’s a new computer or phone, then there are new security breaches. 100% of the time!

2) PASSWORD LAZINESS

Again, 15 or so years ago, I was in charge of a particular website.

Someone was causing a lot of problems on the site. He was a massive troll and was harassing people.

I tried to reason with him, but he ignored me.

So this is basic hack #2.

Most people use the SAME password for everything, or for most things. Hackers know this.

I looked up the password he was using for my site. I then tried it out on his email site.

BING!

I logged into his email (yes…illegally) and learned everything about him. Then I “messed his email up”. I won’t describe what that means but he wasn’t a problem on the website anymore.

This is what happens to trolls: trolls graduate to worse things. 15 years later this person is now in jail for 30 years to life for first degree murder.

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This is a longish post because I’m explaining the basics of something that others have put their 10,000 hours into in order to get really good.

But #1 and #2 are the basics of almost all hacking right now.

There’s a #3 and #4 but they are infinitely more complicated and don’t really work except in the movies.

#3: For instance, “packet sniffing” is when someone hacks into the actual network pipes (or wireless) that sends information from outside of a company into a company.

If you can gather all the packets, and then like a giant puzzle, put them in order, you can see every password and piece of information going into a network. Which is a big assumption.

And then you have to assume that packets aren’t encrypted at the “firewall” level of a company, which they almost always are.

So this method is mostly useless.

#4: BOT ARMIES

This is related to other techniques and probably occurred (and is still occurring) with the Russian hacks.

A “bot” is a small piece of software that sits on your computer and sits on most of the other computers in your company’s network.

A Bot is malicious.

It has some code that is ready to do something bad to your network. It got into your computer through some other technique similar to the Russian hack which we will describe below.

Millions of bots exist on computers around the US. Maybe 70 or 80% of companies are infected with “bot armies”.

They are like sleeper cells waiting for a message to act.

Millions of hours of effort are spent identifying bots and eliminating them from networks.

I once visited a company manned by about 100 PHDs that were trying to figure out how to fight bot armies.

They told me something that stuck with me: “No matter how smart we are, the people creating these bots are smarter”.

The answer then is…who knows. Bad things are happening and there’s nothing we can do about it.

But since networks and security are constantly being updated in various unknown ways each year, it’s often hard for the bots to stay updated. This is probably the best defense. So a “sleeper bot” that infected a computer a year ago might be useless today.

What is the best defense against a bot army? There is really only one if you think you are infected.

THROW OUT your computers, throw out your routers and pipes and everything that created your network and buy totally new computers straight out of the warehouse and then you MIGHT be safe.

If your computer is logged onto the Internet for about ten minutes without any security then there’s a decent chance a bot has infected it.

There’s a #5, #6, #7 but they are more advanced versions of what I described above.

The one exception is not so much a hack INTO the network but a hack that destroys your network called a “denial of service attack”.

Since this is not related to the Russian election hack (yet) I’m not going to deal with it now.

The only thing I will mention is that often the reason a bot army is so dangerous is because they are very effective at initiating denial of service attacks to bring down a network.

When you hear something like, “Netflix was down from a hacker attack today” it usually means a massive bot army sent billions or even trillions of requests for “House of Cards” at the same second to Netflix and the Netflix servers went down.

And since the bot requests are coming from unsuspecting computers all over the world and hitting every open port at Netflix, it is very hard to block.

Congratulations! Those are the ABCs. Now for the more advanced stuff so you, too, can hack election systems on the world’s most powerful country.

B) PHISHING AND SPEAR PHISHING

As opposed to all the movies where hackers are trying to figure out passwords and do packet sniffing, etc. almost all hacking today begins with a Phishing email.

A Phishing email might look like this:

“Dear James,

Someone just tried three times in a row to unsuccessfully log into your Gmail account. At Google, we take security very seriously.

We will be shutting down your Gmail account effective immediately unless you log into our secure site and confirm that the Gmail log-ins were legitimate or not.

We also strongly suggest you change your password when you log into our security site.

Please click HERE to validate your account. Thank you.

– The Google Security Team
”

“HERE” is a link to a page that looks like Google and the URL might be a bit.ly link, which looks somewhat obscure but we are used to seeing obscure shortened links so we might not care.

Once you click on HERE, you did two things:

– you notified the hackers that you are the type of person who can potentially respond to a Phishing attack. So even if you don’t proceed further, you might on the next one (coming, say, from your bank).

– you might type in your password. In which case, not only do the hackers instantly download all of your emails and storage, etc but they have access to your password, which means they probably know your password for Facebook, twitter, your company accounts, etc. (see above).

Millions of these phishing attacks are sent out every day and you can find them usually in your Spam folder. Often the ISP that provides you Internet access will recognize these attacks and block them before you see them.

SPEAR IT:

Which is why SPEAR PHISHING is often more effective and is the technique used in the “Russia hacks”.

SPEAR PHISHING is when the mail is directed very specifically TO YOU. You are “speared”.

This happened when Russian hackers attacked Norman Podesta at the DNC and revealed his various unusual tastes that embarrassed the Democratic campaign of Hillary Clinton.

It’s a spear because very specifically emails were sent to officials at the DNC and although I don’t know what they said, they probably had enough information about the recipient to make it even more likely that they would pass through the network security servers and make it more possible for Podesta to click the link.

In fact, the email was so specific, he apparently sent it to his IT department and said, “Is this real?” and they wrote back right away, “RESPOND TO THAT IMMEDIATELY!” So he did.

He logged into a fake server. Typed in his password, and the rest is history.

Another example of a spear phishing attach worth mentioning:

MALWARE

instead of clicking on a link and typing in a password the Phishing email might say,

“Hey John, here’s the latest info on the delegates in Indiana you should know about”.

Then there’s an attachment. John clicks on it. It’s a simple Microsoft Word document and John is working on a Microsoft Windows machine.

Microsoft Word, every now and then, has a security breach.

MS Word can talk to other pieces of software on the computer. For instance, the software that controls the printer. Or the software that controls the web browser. Or the software that controls the calendar.

And some MS Word documents are much more sophisticated and can download applications right into the operating system.

These applications can never be detected.

For instance, a hack that I “have never done” is where you get someone to accidentally download a “keystroke logger”.

The keystroke logger is installed inside the operating system and can never be detected.

It opens up a new port (see above) and starts sending every key ever typed. So you can get every password for every service the person uses and then do whatever you want.

The port sends all the passwords to a server that is offshore and untraceable. The hacker logs into it and sees all the information about who ever has the malware.

The ONLY solution if you suspect you have been hacked this way: change every password and throw away EVERY computer and phone you own.

I can say for sure: this type of attack works and is more common than people think.

People who are good at this form of attack should never even be allowed to touch a computer or phone because it might only take seconds to execute in one form or other.

C) WHAT WAS THE RUSSIAN SPEAR PHISHING ATTACK

The true answer, despite the NSA leak, is that we don’t know and will never know.

All we know are these facts:

– Some election company was targeted by someone in sophisticated Spear attack.
– This was a “double spear” attack: once the first company was infiltrated, they used fake accounts at the first election company to then launch spear attacks at other election officials.

They speared and then went viral.

For instance, it’s one thing if you get a random email from someone. It’s another if you are an election official in Ohio and you get an email from someone who appears to be working at one of your election software vendors (the first company attacked and infiltrated) and they say, “Hey, we’re just testing the software to make sure Ohio is safe. Click HERE.”

The first successful Spear Phishing led to an even more successful Spear Phishing. Hence the “DOUBLE SPEAR”.

– According to the NSA leak, the initial Spear attack seems to have come from a Russian military team that is set up just to do Spear Phishing attacks against the US.

Similar to teams we probably have set up at the NSA, the CIA, the DIA, the FBI, and probably places with initials we don’t know.

What we DON’T KNOW:

– what information they received from us.
– how they infected the software of the election vendors or the election offices
– if they left any bots or malware behind (e.g. 2020 might be their target and not 2016).
– who told them to do this. This was probably their normal jobs. It’s probably not the case that Putin made a specific call and said, “hack this software election provider”.

It’s more likely they have a general mandate to disrupt our elections all of the time in every possible way. Just like we have teams that do the same. This is not excusing them. This is reality.

What we SUSPECT but DON’T KNOW

– Did Trump, or someone from Trump’s camp, talk to Putin, or someone from Putin’s camp and said “don’t just disrupt the election but do something specific that hurts Hillary and helps Trump.”

We simply don’t know that although the inference is often made because the attack on Podesta seems like this attack was very focused on Democrats.

That said, Podesta and his IT team were particularly foolish and even Obama, afterwards, said, no election services were effected. But….he would really have no idea. Nobody would.

– WHAT SPECIFIC VENDORS WERE ATTACKED AND WHAT DAMAGE COULD THEY CAUSE?

According to the NSA leak, it’s still very unclear. Some possibilities.

A) VR SYSTEMS (and probably similar companies)

VR Systems makes an electronic poll book. This has nothing to do with counting votes.

This has entirely to do with how people register to vote.

For instance, when people come into vote they are either registered to vote or not. A database needs to be checked (it used to be all on paper until fairly recently).

The electronic poll book allows for quick checking, and even registering of new voters.

Two very bad things can happen if pollbook companies like VR are effected:

A) REGISTRATION SCREWUPS

Any damage or interference on an electronic poll book could cause voter turmoil among a targeted class of voters (e.g. Democrats, or people from a specific county, etc).

It doesn’t stop people from voting (there are backup ways to find out who is registered) but can make it so inconvenient that people give up.

If the Russians wanted the Republicans to win, for instance, they can disrupt or slowdown the registration checking process in mostly Democratic counties.

B) DEEPER PHISHING

Companies like VR Systems are in email contact with election officials in every state. It could be that pollbooks / registration systems were not the final target but a leaping off point for a deeper Spear Phishing attack.

An election official in Indiana can get an email from VR (as described above) that says, “Doing a last minute check. Click HERE”. And now the entire Indiana election system is in question FOREVER.

Not only registrations but these election officials are presumably also in contact with the software companies that COUNT votes. These companies can now be targeted for future elections.

My guess is this is what happened and the attacks are far from over.

– WHO IS GUILTY?

Possible guilty parties that have been mentioned include Russia, rogue groups within Russa, the Russian military that operated independently from Putin.

On the American side, guilty parties mentioned include: Trump, Jared Kushner, other people working for Trump, the Republican party, rogue participants that wanted influence, etc.

It’s also possible that Putin wanted Trump elected, he got his people to hack, and he never notified Trump’s team of this at all. There is no law broken here. But if evidence is found that this is true, some punishment (sanctions, tariffs, cyber warfare) would have to be put in place.

What do we know?

Nothing.

What is legal?

Unclear.

It’s grossly illegal to effect a US election.

But it’s also VERY UNLIKELY Trump (or anyone hired by Trump) simply called Putin (or anyone working for Putin) and said, “use your hackers to make sure I win the election.”

That would be incredibly stupid and so obviously illegal as to defy belief.

Here’s the worst case scenario: someone maybe working for Russia (maybe!) called someone maybe working for Trump (maybe!) and said, “we can do something” and the Trump person most likely said, inappropriately, “I don’t want to hear about it but…I DON’T want to hear about it”. In other words, a wink.

But this is not illegal. If this happened (which is just my worst-case scenario guess), the American side could have said, “Don’t do anything” but that might be just as illegal also (to have any communication whatsoever with a bad participant).

This is where guys like Comey and Flynn get involved and we still don’t know the extent of what they knew and who they spoke to.

The law is very unclear on ALL of this and even Democrat-leaning lawyer Alan Dershowitz has stated no crime was committed by a US citizen in terms of this attack or any influence on the elections. And Barak Obama, probably prematurely, said there was no direct attack on the US election system.

But….we don’t know and never will.

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WHY IS THIS IMPORTANT?

So many US elections have been improperly influenced (Nixon 1972 is most prominent as an attempt to influence, Reagan 1980 and his pre-election discussions with Iran were an influence, Kennedy in 1960 in Chicago was an influence, and probably every pre-Kennedy election) that it is not a trivial issue.

Every year there are improvements to the systems to prevent any influence. A lack of faith in the election system would be a lack of faith in the entire republic that the system creates.

As much as I dislike the way the system is built and think there are opportunities to rebuild from the ground up, this is the reality and the law.

CAN HACKERS EFFECT THE SYSTEM?

Yes, and they probably have, and their ability to do so again is probably stronger than ever.

ARE AMERICANS INVOLVED?

No, probably not. When you let the thief in door, nobody is safe, not even people who think they are colluding. Everyone knows this.

BUT…Americans certainly hack the elections of others just like many attempt to hack our elections. This is my guess but why wouldn’t it be true?

CONCLUSION:

A) The US election system is hacked beyond belief.

– Passwords of top officials are known
– Computers are sending every keystroke to bad agents
– Bot armies are ready to shut down election centers at the press of a button
– registration software is probably hopelessly infected
– vote counting software is probably effected but this is much more difficult since there are many backup systems for storage and replication of counting.

B) Hacking is not difficult.

When a team of fairly intelligent people are spending 24 hours a day trying to infiltrate 100s of companies, bad things are unavoidable. There is no stopping this.

C) WHAT CAN WE DO?

1) Awareness is the key.

– party officials can be hacked and embarrassed (Podesta, Hillary, etc), grossly effecting elections.

– registration software can be hacked. Awareness includes backup systems that are disconnected from each other and used to check each other’s work.

– vote counting software can be hacked.

– electors, congressman, election officials can be blackmailed when their emails are read.

2) Punishment of bad parties

At the hint of any other government involvement (or even country involvement without the government being aware) we should threaten immediate sanctions that can’t be stopped without some sort of super majority in Congress.

This would incentivize other governments to work to prevent any hacking of our elections.

3) Mutual Assured Destruction

While cyber warfare is different than nuclear warfare, we should certainly scale up our own efforts to be “bad agents” towards every other government.

Knowledge is power and, unfortunately, hacking gets the knowledge.

4) What about fixing the problem on our side?

Answer: it CANNOT be fixed with better software. Again, however smart the “good agents” are, the “bad agents” are simply smarter and it’s easier to break in than to block.

HAVE I LEFT ANYTHING OUT?

Yes.

I’ve left many many things out. These are the basics.

But the basics provide enough knowledge to understand what is happening in the news, how to learn more about basic hacking, what actually probably happened in the US election, and what the probable involvement of everyone was.

I’m sure we’ll be learning more. But we’re not going to be learning that much more .

The reality is: we were hacked more than will ever be revealed. And the hacking will cause damage.

And like the 44 elections prior, most of which have been manipulated, the US will survive, flourish, and move forward like it always has done.

The post Everything You Need To Know About Cyber-Hacking And the Russian Election Hacks appeared first on Altucher Confidential.

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