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.
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.
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.
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.