Some of my posts feature fictional heroes like Superman and most recently, Captain Kirk. This time around, let’s call on a real life icon. A few weeks ago, Yahoo ousted Susan Decker as CEO. This reminded me of Microsoft’s $31/share bid for Yahoo back in 2008. Jerry Yang, founder and Chief Yahoo, rejected the deal. I know hindsight is 20/20 and anyone with a pulse would have jumped at the deal now especially since Yahoo is now trading below $15. But if you were Jerry Yang, could you have accepted the deal?
Holding On Too Tight
We all have pride. But what happens if it is magnified 1000 fold? Imagine if you were an internet pioneer, rock star, revolutionary all rolled up into one. Over the past few years, Yahoo got outworked and replaced by Google. But Yahoo was still Jerry’s baby. Could you walk away from your baby? Holding on too tight caused Jerry to miss the best deal going. His judgment was clouded and he mistakenly believed he could turn the ship around and recapture Yahoo’s old glory. Not only should this mistake be avoided in business, it should be avoided all aspects in life.
Stock Market
In stock investing, if you fall in love and marry a stock, all logic goes out the window. If your company falters and no longer performs, you will be blinded to the warning signs and forget your exit strategy. Most likely, you will ride it all the way down, hoping and praying it will turn around. Sadly, in most cases, it doesn’t. Don’t let this happen to you. Keep your emotions out of your stock investing decisions.
Real Estate
If you fall in love with a new home outside your price range, you may overextend yourself and buy more house than you can afford. You may even foolishly get into a risky mortgage just to make it happen. If a bubble bursts or you lose your job, you could lose your home and damage your credit as you scramble to make ends meet. Once again, don’t let this happen to you. I know the home you are looking at is your dream home, but if it is way over your budget, it will quickly turn into your nightmare home. Excessive expenses, living paycheck to paycheck, and barely keeping your head above water is no way to live.
Final Thoughts
The ability to walk away is critical for everything you face in life. Whether it is running a business, investing in the stock market, or shopping for real estate. Just like playing cards, don’t forget the Gambler singing, “You’ve got to know when to hold ‘em. Know when to fold ‘em. Know when to walk away. Know when to run.” If you can’t walk away, you run the risk of being blinded to the facts. For example, your business is almost obsolete; this is the best deal you’re going to get. Your Worldcom stock is going to zero, sell. The mansion you want is way out of your budget, don’t squeeze into a Countrywide loan. Don’t get the wrong idea, I am all for being passionate about your business and investments. But if that passion blinds your decision making, the result could be very costly. Just ask Jerry Yang and his fellow Yahoo shareholders.
Stay Inspired!
Buck
Jerry lost his way a long time back! Sad how Yahoo’s become an also-ran. Considering the number of acquisitions Yahoo’s botched, they would’ve failed even without Google.
It’s amazing how quickly leaders can fall these days. Survival of the fittest? I think you’re right, they would have faded with or without Google.
I have a hard time letting go of bad investments too. It’s better to be analytic, but we are all human and our emotion gets in the way. Hopefully, Yahoo! can salvage some of their businesses. A break up is probably the way to go for them.
True, have to remember we’re human and not robots. Sure hope they can. Still love Yahoo Mail and Yahoo Finance. What else do they have? Yahoo Messenger?
Good points! Walking away is a technique in negotiation too. Jerry Yang and Yahoo lost an opportunity and now Google is huge. It is very hard to compete when the other guy has momentum.
I have to remember walking away in negotiations. Thanks! You’re right. Don’t think anyone will touch Google for awhile.
Essentially what you are indicating is not to get emotionally attached to a thing which may lose value. Tell me if someone offers you $5k to sell this blog, what would you do?
I’d toy with the buyer forever, and then say sorry. It would be so fun.
Sam the practical joker. Sounds about right, haha!
You hit it on the head. Same thing can be said about a car. Great question. If I was strapped for cash, I guess I would have, too. But since I am not, I wouldn’t. Perhaps this would be a good exercise, “What is the minimum, realistic price, you would sell your blog?”
Jerry is gonna ride Yahoo to ZERO!
Poor guy and poor Yahoo!
I love that song!! Those lyrics are so true. Thanks for including the video. I’m going off to sing now….You’ve got to know when to hold ‘em. Know when to fold ‘em. Know when to walk away. Know when to ruuuuuun…. -Sydney
I listened to the lyrics. Pretty interesting story and the message is so true. Thanks for the serenade!
Getting emotionally attached can cost a lot of money. Over time, I have learned to try and separate emotion but it can be difficult at times. I was a shareholder at the time, and $31 per share would have been a nice profit. Oh well, I still got out on the positive side.
You can say that again. The main thing is you got out with a profit. Can’t complain especially in this environment. Guess better learn more about options!
My brother and sister-in-law bought a house based on two incomes, only to have my sister-in-law stay at home after they started having kids. Now they are struggling to make ends meet with this huge home. It wasn’t their only mistake mind you. They also have failed to radically change their lifestyle. Sad for them, but I have learned a great lesson. Walking away from a really nice house may be the best advice for many.
Wow looks like this lesson hits close to home. Unfortunate, but I’m glad you learned the lesson. Can your brother downsize?
Great post Buck. For me and walking away, the hardest one is people. There has been some friendships I have had in the past that now seem to be a dud. I always seem to have to put in the effort and it is never reciprocated. Really it is time to walk away and move on. I just have such a hard time giving up though.
Didn’t think of this, but yes this applies to relationships, too. In a weird way, friendships can be viewed as investments. Ideally everyone benefits. But if you are getting less than what you put in, it may be time to walk away!
I think it’s important to accept the fact that emotion plays an important part in our decision making. Many times we don’t realize it, so it’s good to have someone who can point it out to us.
Great advice. Recognition is key. Can’t completely turn it off, but if we can maintain some control, we’ll be better off. Thanks!
Interesting perspective. I agree with your sentiment, and acknowledge how difficult it can be to distance emotions from economic realities. I wonder how much sentiment foreign investors have towards the U.S. dollar?
I’m thinking everyone is looking at everyone else with blank stares thinking no one is safe.
Perhaps it would help to practice walking away with less critical situations, like at a garage sale. Do some bargaining with a plan to walk away if you don’t get X price. Do the same on ebay. Practicing controlling our emotions could help when more is on the line. I think this would help those who are not used to bargaining.
That’s great advice. I’m a horrible haggler. Will keep this in mind!
Superb article. It is so important to stay on your toes and take nothing for granted.
So true. We all should try our best not to get complacent and oblivious to reality. Thanks!
weighing the pros and cons is very important in all decision makings, it helps make the right judgement. Great post Buck
We’re on the same page. Thanks!
Emotion is a killer. Sure that Jerry Yang should have taken the deal, but he’s too emotionally invested.
Yes it is. I guess can’t be too hard on him. Most people would probably do the same, especially with the deep emotional attachment.
I learned an important lesson with an IRA I had setup to trade some stocks. I tried to get clever and it bit me in the arse. I still have the IRA account but am not so clever anymore! One positive thing that came out of that experience was that I learned how to use stop loss orders.
Funny, I tried to be clever and I got bit, too. Sometimes the simple approach produces better results. Guess greed often gets the best of us!