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In [[finance]], the '''capital structure substitution theory ''' (CSS)<ref>{{cite journal |last= Timmer|first= Jan |authorlink= |coauthors= |year=2011 |month= |title=Understanding the Fed Model, Capital Structure, and then Some |journal= |volume= |issue= |pages= |url=http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1322703 |accessdate= |quote= }}</ref> describes the relationship between earnings, stock price and [[capital structure]] of public companies. The CSS theory hypothesizes that managements of public companies manipulate capital structure such that [[earnings per share]] (EPS) are maximized. Managements have an [[incentive]] to do so because shareholders and analysts value EPS growth. The theory is used to explain trends in capital structure, [[valuation (finance)|stock market valuation]], [[dividend decision|dividend policy]], the [[monetary policy|monetary transmission mechanism]], and [[volatility (finance)|stock volatility]], and provides an alternative to the [[Modigliani–Miller theorem]] that has limited descriptive validity in real markets. The CSS theory is only applicable in markets where share repurchases are allowed. Investors can use the CSS theory to identify undervalued stocks.
Four or five years ago, a reader of some of my columns bought the domain name jamesaltucher.com and gave it to me as a birthday gift. It was a total surprise to me. I didn't even know the reader. I hope one day we meet.<br>Two years ago a friend of mine, Tim Sykes, insisted I had to have a blog. He set it up for me. He even wrote the "About Me". I didn't want a blog. I had nothing to say. But about 6 or 7 months ago I decided I wanted to take this blog seriously. I kept putting off changing the "About Me" which was no longer really about me and maybe never was.<br>A few weeks ago I did a chapter in one of the books in Seth Godin's "The Domino Project". The book is out and called "No Idling". Mohit Pawar organized it (here's Mohit's blog) and sent me a bunch of questions recently. It's intended to be an interview on his blog but I hope Mohit forgives me because I want to use it as my new "About Me" also.<br>1. You are a trader, investor, writer, and entrepreneur? Which of these roles you enjoy the most and why?<br>When I first moved to New York City in 1994 I wanted to be everything to everyone. I had spent the six years prior to that writing a bunch of unpublished novels and unpublished short stories. I must've sent out 100s of stories to literary journals. I got form rejections from every publisher, journal, and agent I sent my novels and stories to.<br>Now, in 1994, everything was possible. The money was in NYC. Media was here. I lived in my 10�10 room and pulled suits out of a garbage bag every morning but it didn't matter...the internet was revving up and I knew how to build a website. One of the few in the city. My sister warned me though: nobody here is your friend. Everybody wants something<br>
 
And I wanted something. I wanted the fleeting feelings of success, for the first time ever, in order to feel better about myself. I wanted a girl next to me. I wanted to build and sell companies and finally prove to everyone I was the smartest. I wanted to do a TV show. I wanted to write books<br>
==The formula==
But everything involved having a master. Clients. Employers. Investors. Publishers. The market (the deadliest master of all). Employees. I was a slave to everyone for so many years. And the more shackles I had on, the lonelier I got<br>
 
(Me in the Fortress of Solitude<br>
The CSS theory assumes that company managements can freely change the capital structure of the company – substituting [[Bond (finance)|bonds]] for [[stock]] or vice versa – on a day-to-day basis and in small denominations without paying transaction costs. Companies can decide to buy back one single share for the current market price P and finance this by issuing one extra corporate bond with face value P or do the reverse. In mathematical terms these substitutions are defined as [[File:CSS equilibrium color.gif|thumb|upright=1.5|right|alt=test1|CSS equilibrium conditions: (1) companies fulfilling the equilibrium condition are found on B-B", (2) companies cannot issue debt with interest rates below 'Aaa' rated bonds on line A-A", (3) high valued companies with E/P<R*[1-T] are not expected to hold long term debt, pay no dividends and are found on line A-B.]]
Much of the time, even when I had those moments of success, I didn't know how to turn it into a better life. I felt ugly and then later, I felt stupid when I would let the success dribble away down the sink<br>
 
I love writing because every now and then that ugliness turns into honesty. When I write, I'm only a slave to myself. When I do all of those other things you  [http://www.pcs-systems.co.uk/Images/celinebag.aspx http://www.pcs-systems.co.uk/Images/celinebag.aspx] ask about, I'm a slave to everyone else<br>
<math>\left[\frac{\partial D}{\partial n}\right] _{\text{x,t}} = -P_{\text{x,t}}</math>
Some links<br>
 
33 Unusual Tips to Being a Better Write<br>
where D is the corporate debt and n the number of shares of company x at time t. The negative sign indicates that a reduction of the number of shares n leads to a larger debt D and vice versa. The earnings-per-share change when one share with price P is [[share repurchase|repurchased]] and one bond with face value P is [[bond (finance)#Issuing bonds|issued]]:
"The Tooth<br>
# The earnings that were ‘allocated’ to the one share that was repurchased are redistributed over the remaining outstanding shares, causing an increase in earnings per share of: <math>E/n</math>
(one of my favorite posts on my blog<br><br>
# The earnings are reduced by the additional interest payments on the extra bond. As interest payments are tax-deductible the real reduction in earnings is obtained by multiplying with the tax shield. The additional interest payments thus reduce the EPS by: <math>P\cdot R\cdot [1-T]/n</math>
2. What inspires you to get up and start working/writing every day<br>
 
The other day I had breakfast with a fascinating guy who had just sold a piece of his fund of funds. He told me what "fracking" was and how the US was going to be a major oil player again. We spoke for two hours about a wide range of topics, including what happens when we can finally implant a google chip in our brains<br>
Combining these two effects, the marginal change in EPS as function of the total number of outstanding shares becomes:
After that I had to go onto NPR because I firmly believe that in one important respect we are degenerating as a country - we are graduating a generation of indentured servants who will spend 50 years or more paying down their student debt rather than starting companies and curing cancer. So maybe I made a difference<br>
 
Then I had lunch with a guy I hadn't seen in ten years. In those ten years he had gone to jail and now I was finally taking the time to forgive him for something he never did to me. I felt bad I hadn't helped him when he was at his low point. Then I came home and watched my kid play clarinet at her school. Then I read until I fell asleep. Today I did nothing but write. Both days inspired me<br>
<math>\left[\frac{\partial E}{\partial n}\right] _{\text{x,t}} = -\frac{E_{\text{x,t}}}{n}+\frac{P_{\text{x,t}}\ R_{\text{x,t}}\ [1-T]}{n}</math>
It also inspires me that I'm being asked these questions. Whenever anyone asks me to do anything I'm infinitely grateful. Why me? I feel lucky. I like it when someone cares what I think. I'll write and do things as long as anyone cares. I honestly probably wouldn't write if nobody cared. I don't have enough humility for that, I'm ashamed to admit<br><br>
 
3. Your new book "How to be the luckiest person alive" has just come out. What is it about<br>
where
When I was a kid I thought I needed certain things: a college education from a great school, a great home, a lot of money, someone who would love me with ease. I wanted people to think I was smart. I wanted people to think I was even special.  And as I grew older more and more goals got added to the list: a high chess rating, a published book, perfect weather, good friends,  respect in various fields, etc. I lied to myself that I needed these things to be happy. The world was going to work hard to give me these things, I thought. But it turned out the world owed me no favors<br>
*  E is the earnings-per-share
And gradually, over time, I lost everything I had ever gained. Several times. I've paced at night so many times wondering what the hell was I going to do next or trying not to care. The book is about regaining your sanity, regaining your happiness, finding luck in all the little pockets of life that people forget about. It's about turning away from the religion you've been hypnotized into believing into the religion you can find inside yourself every moment of the day<br><br>
*  R is the nominal interest rate on corporate bonds
[Note: in a few days I'm going to do a post on self-publishing and also how to get the ebook for free. The link above is to the paperback. Kindle should be ready soon also.<br>
*  T is the [[corporate tax]] rate
Related link: Why I Write Books Even Though I've Lost Money On Every Book I've Ever Writte<br>
EPS is maximized when substituting one more share for one bond or vice versa leads to no marginal change in EPS or:
4. Is it possible to accelerate success? If yes, how<br><br><br>
Yes, and it's the only way I know actually to achieve success. Its by following the Daily Practice I outline in this post:<br>
<math>\frac{E_{\text{x,t}}}{P_{\text{x,t}}}=R_{\text{x,t}}\ [1-T]</math>
It's the only way I know to exercise every muscle from the inside of you to the outside of you. I firmly believe that happiness starts with that practice<br>
 
5. You say that discipline, persistence and psychology are important if one has to achieve success. How can one work on improving "psychology" part<br>
This equilibrium condition is the central result of the CCS theory, linking stock prices to interest rates on corporate bonds.
Success doesn't really mean anything. People want to be happy in a harsh and unforgiving world. It's very difficult. We're so lucky most of us live in countries without major wars. Our kids aren't getting killed by random gunfire. We all have cell phones. We all can communicate with each other on the Internet. We have Google to catalog every piece of information in history!  We are so amazingly lucky already<br>
 
How can it be I was so lucky to be born into such a body? In New York City of all places? Just by being born in such a way on this planet was an amazing success<br>
==Capital structure==
So what else is there? The fact is that most of us, including me, have a hard time being happy with such ready-made success. We quickly adapt and want so much more out of life. It's not wars or disease that kill us. It's the minor inconveniences that add up in life. It's the times we feel slighted or betrayed. Or even slightly betrayed. Or overcharged. Or we miss a train. Or it's raining today. Or the dishwasher doesn't work. Or the supermarket doesn't have the food we like. We forget how good the snow tasted when we were kids. Now we want [http://en.search.wordpress.com/?q=gourmet+food gourmet food] at every meal<br>
The two main capital structure theories as taught in corporate finance textbooks are the [[Pecking order theory]] and the [[Trade-off theory of capital structure|Trade-off theory]]. The two theories make some contradicting predictions and for example [[Eugene Fama|Fama]] and [[Kenneth French|French]]  conclude:<ref>{{cite journal |last= Fama|first= E.F. |authorlink= |coauthors= French, K.R.|date=December 2002|title=Testing Tradeoff and Pecking Order Predictions About Dividends and Debt |journal=Review of Financial Studies |volume=15 |issue= |pages=1–33 |ssrn=199431 |quote= }}</ref> ''"In sum, we identify one scar on the tradeoff model (the negative relation between leverage and profitability), one deep wound on the pecking order (the large equity issues of small low-leverage growth firms)..."''. The capital structure substitution theory has the potential to close these gaps. It predicts a negative relation between leverage and valuation (=reverse of earnings yield) which in turn can be linked to profitability. But it also predicts that high valued small growth firms will avoid the use of debt as especially for these companies the cost of borrowing (''<math>R_{\text{x,t}} </math>'') is higher than for large companies, which in turn has a negative effect on their EPS. This is consistent with the finding that ''"…firms with higher current stock prices (relative to their past stock prices, book values or earnings) are more likely to issue equity rather than debt and repurchase debt rather than equity"''.<ref>{{cite journal |last= Hovakimian|first= A. |authorlink= |coauthors= Opler, T., Titman, S.|year=2001 |month= |title= The Debt-Equity Choice|journal=Journal of Financial and Quantitative Analysis |volume=36 |issue= |pages=1–24 |url= |accessdate= |quote= }}</ref>
Taking a step back, doing the Daily Practice I outline in the question above. For me, the results of that bring me happiness. That's success. Today. And hopefully tomorrow<br>
 
6. You advocate not sending kids to college. What if kids grow up and then blame their parents about not letting them get a college education<br>
==Asset pricing==
I went to one of my kid's music recitals yesterday. She was happy to see me. I hugged her afterwards. She played "the star wars theme" on the clarinet. I wish I could've played that for my parents. My other daughter has a dance recital in a few weeks. I tried to give her tips but she laughed at me. I was quite the breakdancer in my youth. The nerdiest breakdancer on the planet. I want to be present for them. To love them. To let them always know that in their own dark moments, they know I will listen to them. I love them. Even when they cry and don't always agree with me. Even when they laugh at me because sometimes I act like a clown<br>
The equilibrium condition can be easily rearranged to an [[asset pricing]] formula:
Later, if they want to blame me for anything at all then I will still love them. That's my "what if"<br>
Two posts<br>
<math>P_{\text{x,t}}=\frac{E_{\text{x,t}}}{R_{\text{x,t}}[1-T]}</math>
I want my daughters to be lesbian<br>
 
Advice I want to give my daughter<br><br><br>
The CSS theory suggests that company share prices are not set by shareholders but by bondholders. As a result of active repurchasing or issuing of shares by company managements, equilibrium pricing is no longer a result of balancing shareholder demand and supply. In a way the CSS theory turns asset pricing upside-down, with bondholders setting share prices and shareholders determining company leverage. The asset pricing formula only applies to debt-holding companies. Some companies are offering [[stock selection criterion|stock screeners]] based on the CSS theory.
7. Four of your favorite posts from The Altucher Confidential<br>
 
As soon as I publish a post I get scared to death. Is it good? Will people re-tweet? Will one part of the audience of this blog like it at the expense of another part of the audience. Will I get Facebook Likes? I have to stop clinging to these things but you also need to respect the audience. I don't know. It's a little [http://www.Google.co.uk/search?hl=en&gl=us&tbm=nws&q=bit+confusing&gs_l=news bit confusing] to me. I don't have the confidence of a real writer yet<br>
==Fed model equilibrium==
Here are four of my favorites<br>
In the US, a positive relationship between the average earnings yield of the [[S&P 500]] index and government bond yields has been present over the last several decades. This relationship has become popular as the [[Fed model]] and states in its strongest form an equality between the one year forward looking E/P ratio or earnings yield and the 10-year [[government bond]] yield. The CSS equilibrium condition suggests that the Fed model is misspecified: the S&P 500 earnings yield is not in equilibrium with the government bond yield but with the average after-tax interest rate on corporate bonds. The CSS theory suggests that the Fed equilibrium was only observable after 1982, the year in which the [[United States Securities and Exchange Commission]] allowed open-market repurchases of shares.<ref>{{cite journal |last= Grullon |first= G. |authorlink= |coauthors= Michaely, R. |date=August 2002 |title=Dividends, share repurchase, and the substitution hypothesis |journal= Journal of Finance|volume=LVII |issue= 4 |pages=1649–1684  |url=http://forum.johnson.cornell.edu/faculty/michaely/final%20version.pdf |accessdate= |quote= }}</ref>
How I screwed Yasser Arafat out of $2mm (and lost another $100mm in the process<br>
 
It's Your Fault<br>
==Monetary policy==
I'm Guilty of Torturing Wome<br>
An unanticipated 25-basis-point cut in the [[federal funds rate]] target is associated with a 1% increase in broad stock indexes in the US.<ref>{{cite journal |last= Bernanke |first= B.S. |authorlink= |coauthors= Kuttner, K.N. |date=June 2005 |title=What Explains the Stock Market’s Reaction to Federal Reserve Policy? |journal= Journal of Finance|volume=LX |issue= |pages=1221–1257 |url=http://www.math.uncc.edu/~zcai/bernanke-buttner.pdf |accessdate= |quote= }}</ref> The CSS theory suggests that the monetary policy transmission mechanism is indirect but straightforward: a change in the federal funds rate affects the corporate bond market which in turn affects asset prices through the equilibrium condition.
The Girl Whose Name Was a Curs<br>
 
Although these three are favorites I really don't post anything unless it's my favorite of that moment<br>
==Beta==
8. 3 must-read books for aspiring entrepreneurs<br>
The CSS equilibrium condition can be used to deduct a relationship for the beta of a company x at time t:
The key in an entrepreneur book: you want to learn business. You want to learn how to honestly communicate with your customers. You want to stand out<br>
The Essays of Warren Buffett by Lawrence Cunningha<br>
<math>Beta_{\text{x,t}}=\overline{R_{\text{t}}}\cdot\left[\frac{P}{E}\right]_{\text{x,t}}\cdot[1-T] </math>
"The Thank you Economy" by Gary Vaynerchu<br>
 
"Purple cow" by Seth Godi<br>
where <math>\overline{R_{\text{t}}} </math> is the market average interest rate on corporate bonds. The CSS theory predicts that companies with a low valuation and high leverage will have a ''low'' beta. This is counter-intuitive as traditional finance theory links leverage to risk, and risk to ''high'' beta.
9. I love your writing, so do so many others out there. Who are your favorite writers<br>
 
"Jesus's Son" by Denis Johnson is the best collection of short stories ever written. I'm afraid I really don't like his novels though<br>
==Assumptions==
"Tangents" by M. Prado. A beautiful series of graphic stories about relationships<br>
* Managements of public companies manipulate capital structure such that earnings-per-share are maximized.
Other writers: Miranda July, Ariel Leve, Mary Gaitskill, Charles Bukowski, Celine, Sam Lipsyte, William Vollmann, Raymond Carver. Arthur Nersesian. Stephen Dubner<br><br>
* Managements can freely change the [[capital structure]] of the company – substituting bonds for stock or vice versa – on a day-to-day basis and in small denominations.
(Bukowski<br><br><br><br><br><br><br><br><br>
* Shares can only be repurchased through open market buybacks. Information about share price  is available on a daily basis.
Many writers are only really good storytellers. Most writers come out of a cardboard factory MFA system and lack a real voice. A real voice is where every word exposes ten levels of hypocrisy in the world and brings us all the way back to see reality. The writers above have their own voices, their own pains, and their unique ways of expressing those pains. Some of them are funny. Some a little more dark. I wish I could write 1/10 as good as any of them<br><br>
* Companies pay a uniform corporate tax rate T.
10. You are a prolific writer. Do you have any hacks that help you write a lot in little time<br>
 
Coffee, plus everything else coffee does for you first thing in the morning<br>
==See also==
Only write about things you either love or hate. But if you hate something, try to find a tiny gem buried in the bag of dirt so you can reach in when nobody is looking and put that gem in your pocket. Stealing a diamond in all the shit around us and then giving it away for free via writing is a nice little hack, Being fearless precisely when you are most scared is the best hack<br><br>
*[[Beta (finance)]]
11. I totally get and love your idea about bleeding as a writer, appreciate if you share more with the readers of this blog<br>
*[[Capital asset pricing model]]
Most people worry about what other people think of them. Most people worry about their health. Most people are at a crossroads and don't know how to take the next step and which road to take it on. Everyone is in a perpetual state of 'where do I put my foot next'. Nobody, including me, can avoid that<br>
*[[Capital Structure]]
You and I both need to wash our faces in the morning, brush our teeth, shower, shit, eat, fight the weather, fight the colds that want to attack us if we're not ready. Fight loneliness or learn how to love and appreciate the people who want to love you back. And learn how to forgive and love the people who are even more stupid and cruel than we are. We're afraid to tell each other these things because they are all both disgusting and true<br>
*[[Dividend]]
You and I both have the same color blood. If I cut my wrist open you can see the color of my blood. You look at it and see that it's the same color as yours. We have something in common. It doesn't have to be shameful. It's just red. Now we're friends. No matter whom you are or where you are from. I didn't have to lie to you to get you to be my friend<br>
*[[Fed model]]
Related Links<br>
*[[Modigliani–Miller theorem]]
How to be a Psychic in Ten Easy Lesson<br>
*[[Share repurchase]]
My New Year's Resolution in 199<br><br><br>
*[[P/E ratio]]
12. What is your advice for young entrepreneurs<br>
 
Only build something you really want to use yourself. There's got to be one thing you are completely desperate for and no matter where you look you can't find it. Nobody has invented it yet. So there you go - you invent it. If there's other people like you, you have a business. Else. You fail. Then do it again. Until it works. One day it will<br>
==References==
Follow these 100 Rules<br>
{{reflist}}
The 100 Rules for Being a Good Entrepreneur<br>
 
And, in particular this<br>
== External links==
The Easiest Way to Succeed as an Entrepreneu<br>
* https://valuemystock.com/screeners/
In my just released book I have more chapters on my experiences as an entrepreneur<br>
 
13. I advocate the concept of working at a job while building your business. You have of course lived it. Now as you look back, what is your take on this? Is it possible to make it work while sailing on two boats<br><br>
{{DEFAULTSORT:Capital Structure Substitution Theory}}
Your boss wants everything out of you. He wants you to work 80 hours a week. He wants to look good taking credit for your work. He wants your infinite loyalty. So you need something back<br>
[[Category:Financial terminology]]
Exploit your employer. It's the best way to get good experience, clients, contacts. It's a legal way to steal. It's a fast way to be an entrepreneur because you see what large companies with infinite money are willing to pay for. If you can provide that, you make millions. It's how many great businesses have started and will always start. It's how every exit I've had started<br>
14. Who is a "person with true moral fiber"? In current times are there any role models who are people with true moral fiber<br><br><br>
I don't really know the answer. I think I know a few people like that. I hope I'm someone like that. And I pray to god the people I'm invested in are like that and my family is like that<br>
I find most people to be largely mean and stupid, a vile combination. It's not that I'm pessimistic or cynical. I'm very much an optimist. It's just reality. Open the newspaper or turn on the TV and watch these people<br>
Moral fiber atrophies more quickly than any muscle on the body. An exercise I do every morning is to promise myself that "I'm going to save a life today" and then leave it in the hands of the Universe to direct me how I can best do that. Through that little exercise plus the Daily Practice described above I hope to keep regenerating that fiber<br><br>
15.  Your message to the readers of this blog<br>
Skip dinner. But follow me on Twitter.<br><br><br><br>
Read more posts on The Altucher Confidential �
More from The Altucher Confidentia<br>
Life is Like a Game. Here�s How You Master ANY Gam<br><br>
Step By Step Guide to Make $10 Million And Then Totally Blow <br><br>
Can You Do One Page a Day?

Latest revision as of 23:14, 28 February 2014

Four or five years ago, a reader of some of my columns bought the domain name jamesaltucher.com and gave it to me as a birthday gift. It was a total surprise to me. I didn't even know the reader. I hope one day we meet.
Two years ago a friend of mine, Tim Sykes, insisted I had to have a blog. He set it up for me. He even wrote the "About Me". I didn't want a blog. I had nothing to say. But about 6 or 7 months ago I decided I wanted to take this blog seriously. I kept putting off changing the "About Me" which was no longer really about me and maybe never was.
A few weeks ago I did a chapter in one of the books in Seth Godin's "The Domino Project". The book is out and called "No Idling". Mohit Pawar organized it (here's Mohit's blog) and sent me a bunch of questions recently. It's intended to be an interview on his blog but I hope Mohit forgives me because I want to use it as my new "About Me" also.
1. You are a trader, investor, writer, and entrepreneur? Which of these roles you enjoy the most and why?
When I first moved to New York City in 1994 I wanted to be everything to everyone. I had spent the six years prior to that writing a bunch of unpublished novels and unpublished short stories. I must've sent out 100s of stories to literary journals. I got form rejections from every publisher, journal, and agent I sent my novels and stories to.
Now, in 1994, everything was possible. The money was in NYC. Media was here. I lived in my 10�10 room and pulled suits out of a garbage bag every morning but it didn't matter...the internet was revving up and I knew how to build a website. One of the few in the city. My sister warned me though: nobody here is your friend. Everybody wants something
And I wanted something. I wanted the fleeting feelings of success, for the first time ever, in order to feel better about myself. I wanted a girl next to me. I wanted to build and sell companies and finally prove to everyone I was the smartest. I wanted to do a TV show. I wanted to write books
But everything involved having a master. Clients. Employers. Investors. Publishers. The market (the deadliest master of all). Employees. I was a slave to everyone for so many years. And the more shackles I had on, the lonelier I got
(Me in the Fortress of Solitude
Much of the time, even when I had those moments of success, I didn't know how to turn it into a better life. I felt ugly and then later, I felt stupid when I would let the success dribble away down the sink
I love writing because every now and then that ugliness turns into honesty. When I write, I'm only a slave to myself. When I do all of those other things you http://www.pcs-systems.co.uk/Images/celinebag.aspx ask about, I'm a slave to everyone else
Some links
33 Unusual Tips to Being a Better Write
"The Tooth
(one of my favorite posts on my blog

2. What inspires you to get up and start working/writing every day
The other day I had breakfast with a fascinating guy who had just sold a piece of his fund of funds. He told me what "fracking" was and how the US was going to be a major oil player again. We spoke for two hours about a wide range of topics, including what happens when we can finally implant a google chip in our brains
After that I had to go onto NPR because I firmly believe that in one important respect we are degenerating as a country - we are graduating a generation of indentured servants who will spend 50 years or more paying down their student debt rather than starting companies and curing cancer. So maybe I made a difference
Then I had lunch with a guy I hadn't seen in ten years. In those ten years he had gone to jail and now I was finally taking the time to forgive him for something he never did to me. I felt bad I hadn't helped him when he was at his low point. Then I came home and watched my kid play clarinet at her school. Then I read until I fell asleep. Today I did nothing but write. Both days inspired me
It also inspires me that I'm being asked these questions. Whenever anyone asks me to do anything I'm infinitely grateful. Why me? I feel lucky. I like it when someone cares what I think. I'll write and do things as long as anyone cares. I honestly probably wouldn't write if nobody cared. I don't have enough humility for that, I'm ashamed to admit

3. Your new book "How to be the luckiest person alive" has just come out. What is it about
When I was a kid I thought I needed certain things: a college education from a great school, a great home, a lot of money, someone who would love me with ease. I wanted people to think I was smart. I wanted people to think I was even special. And as I grew older more and more goals got added to the list: a high chess rating, a published book, perfect weather, good friends, respect in various fields, etc. I lied to myself that I needed these things to be happy. The world was going to work hard to give me these things, I thought. But it turned out the world owed me no favors
And gradually, over time, I lost everything I had ever gained. Several times. I've paced at night so many times wondering what the hell was I going to do next or trying not to care. The book is about regaining your sanity, regaining your happiness, finding luck in all the little pockets of life that people forget about. It's about turning away from the religion you've been hypnotized into believing into the religion you can find inside yourself every moment of the day

[Note: in a few days I'm going to do a post on self-publishing and also how to get the ebook for free. The link above is to the paperback. Kindle should be ready soon also.
Related link: Why I Write Books Even Though I've Lost Money On Every Book I've Ever Writte
4. Is it possible to accelerate success? If yes, how


Yes, and it's the only way I know actually to achieve success. Its by following the Daily Practice I outline in this post:
It's the only way I know to exercise every muscle from the inside of you to the outside of you. I firmly believe that happiness starts with that practice
5. You say that discipline, persistence and psychology are important if one has to achieve success. How can one work on improving "psychology" part
Success doesn't really mean anything. People want to be happy in a harsh and unforgiving world. It's very difficult. We're so lucky most of us live in countries without major wars. Our kids aren't getting killed by random gunfire. We all have cell phones. We all can communicate with each other on the Internet. We have Google to catalog every piece of information in history! We are so amazingly lucky already
How can it be I was so lucky to be born into such a body? In New York City of all places? Just by being born in such a way on this planet was an amazing success
So what else is there? The fact is that most of us, including me, have a hard time being happy with such ready-made success. We quickly adapt and want so much more out of life. It's not wars or disease that kill us. It's the minor inconveniences that add up in life. It's the times we feel slighted or betrayed. Or even slightly betrayed. Or overcharged. Or we miss a train. Or it's raining today. Or the dishwasher doesn't work. Or the supermarket doesn't have the food we like. We forget how good the snow tasted when we were kids. Now we want gourmet food at every meal
Taking a step back, doing the Daily Practice I outline in the question above. For me, the results of that bring me happiness. That's success. Today. And hopefully tomorrow
6. You advocate not sending kids to college. What if kids grow up and then blame their parents about not letting them get a college education
I went to one of my kid's music recitals yesterday. She was happy to see me. I hugged her afterwards. She played "the star wars theme" on the clarinet. I wish I could've played that for my parents. My other daughter has a dance recital in a few weeks. I tried to give her tips but she laughed at me. I was quite the breakdancer in my youth. The nerdiest breakdancer on the planet. I want to be present for them. To love them. To let them always know that in their own dark moments, they know I will listen to them. I love them. Even when they cry and don't always agree with me. Even when they laugh at me because sometimes I act like a clown
Later, if they want to blame me for anything at all then I will still love them. That's my "what if"
Two posts
I want my daughters to be lesbian
Advice I want to give my daughter


7. Four of your favorite posts from The Altucher Confidential
As soon as I publish a post I get scared to death. Is it good? Will people re-tweet? Will one part of the audience of this blog like it at the expense of another part of the audience. Will I get Facebook Likes? I have to stop clinging to these things but you also need to respect the audience. I don't know. It's a little bit confusing to me. I don't have the confidence of a real writer yet
Here are four of my favorites
How I screwed Yasser Arafat out of $2mm (and lost another $100mm in the process
It's Your Fault
I'm Guilty of Torturing Wome
The Girl Whose Name Was a Curs
Although these three are favorites I really don't post anything unless it's my favorite of that moment
8. 3 must-read books for aspiring entrepreneurs
The key in an entrepreneur book: you want to learn business. You want to learn how to honestly communicate with your customers. You want to stand out
The Essays of Warren Buffett by Lawrence Cunningha
"The Thank you Economy" by Gary Vaynerchu
"Purple cow" by Seth Godi
9. I love your writing, so do so many others out there. Who are your favorite writers
"Jesus's Son" by Denis Johnson is the best collection of short stories ever written. I'm afraid I really don't like his novels though
"Tangents" by M. Prado. A beautiful series of graphic stories about relationships
Other writers: Miranda July, Ariel Leve, Mary Gaitskill, Charles Bukowski, Celine, Sam Lipsyte, William Vollmann, Raymond Carver. Arthur Nersesian. Stephen Dubner

(Bukowski








Many writers are only really good storytellers. Most writers come out of a cardboard factory MFA system and lack a real voice. A real voice is where every word exposes ten levels of hypocrisy in the world and brings us all the way back to see reality. The writers above have their own voices, their own pains, and their unique ways of expressing those pains. Some of them are funny. Some a little more dark. I wish I could write 1/10 as good as any of them

10. You are a prolific writer. Do you have any hacks that help you write a lot in little time
Coffee, plus everything else coffee does for you first thing in the morning
Only write about things you either love or hate. But if you hate something, try to find a tiny gem buried in the bag of dirt so you can reach in when nobody is looking and put that gem in your pocket. Stealing a diamond in all the shit around us and then giving it away for free via writing is a nice little hack, Being fearless precisely when you are most scared is the best hack

11. I totally get and love your idea about bleeding as a writer, appreciate if you share more with the readers of this blog
Most people worry about what other people think of them. Most people worry about their health. Most people are at a crossroads and don't know how to take the next step and which road to take it on. Everyone is in a perpetual state of 'where do I put my foot next'. Nobody, including me, can avoid that
You and I both need to wash our faces in the morning, brush our teeth, shower, shit, eat, fight the weather, fight the colds that want to attack us if we're not ready. Fight loneliness or learn how to love and appreciate the people who want to love you back. And learn how to forgive and love the people who are even more stupid and cruel than we are. We're afraid to tell each other these things because they are all both disgusting and true
You and I both have the same color blood. If I cut my wrist open you can see the color of my blood. You look at it and see that it's the same color as yours. We have something in common. It doesn't have to be shameful. It's just red. Now we're friends. No matter whom you are or where you are from. I didn't have to lie to you to get you to be my friend
Related Links
How to be a Psychic in Ten Easy Lesson
My New Year's Resolution in 199


12. What is your advice for young entrepreneurs
Only build something you really want to use yourself. There's got to be one thing you are completely desperate for and no matter where you look you can't find it. Nobody has invented it yet. So there you go - you invent it. If there's other people like you, you have a business. Else. You fail. Then do it again. Until it works. One day it will
Follow these 100 Rules
The 100 Rules for Being a Good Entrepreneur
And, in particular this
The Easiest Way to Succeed as an Entrepreneu
In my just released book I have more chapters on my experiences as an entrepreneur
13. I advocate the concept of working at a job while building your business. You have of course lived it. Now as you look back, what is your take on this? Is it possible to make it work while sailing on two boats

Your boss wants everything out of you. He wants you to work 80 hours a week. He wants to look good taking credit for your work. He wants your infinite loyalty. So you need something back
Exploit your employer. It's the best way to get good experience, clients, contacts. It's a legal way to steal. It's a fast way to be an entrepreneur because you see what large companies with infinite money are willing to pay for. If you can provide that, you make millions. It's how many great businesses have started and will always start. It's how every exit I've had started
14. Who is a "person with true moral fiber"? In current times are there any role models who are people with true moral fiber


I don't really know the answer. I think I know a few people like that. I hope I'm someone like that. And I pray to god the people I'm invested in are like that and my family is like that
I find most people to be largely mean and stupid, a vile combination. It's not that I'm pessimistic or cynical. I'm very much an optimist. It's just reality. Open the newspaper or turn on the TV and watch these people
Moral fiber atrophies more quickly than any muscle on the body. An exercise I do every morning is to promise myself that "I'm going to save a life today" and then leave it in the hands of the Universe to direct me how I can best do that. Through that little exercise plus the Daily Practice described above I hope to keep regenerating that fiber

15. Your message to the readers of this blog
Skip dinner. But follow me on Twitter.



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