The experience of an international student

I forgot one thing last time. When I was proposing the plan for Microsoft to wait for half year or one year before making an offer again, I said Yahoo wouldn't go anywhere during this period, so it's OK for MS to wait. But I didn't mention what MS should do if Yahoo did do well during this time and its stock went up a lot. The reason was simply because I didn't have an answer for it then. But I got one now: if MS drop the offer and Yahoo do very well over the next half year to one year, and nonetheless MS still want to buy Yahoo, it means that most likely MS needs Yahoo more than Yahoo needs MS.

Another simple tactic to go along with the plan I proposed: if MS plans to buy Yahoo for $44 billion, then it may make the first offer at $40 billion or so, and raise to $44 once rejected by Yahoo. This way it'll look much smoother.

Now let's talk about why Jerry Yang hates MS so much, and why it's not wise for Ballmer to bully Yang like what he did. In a nut shell, it's all about "saving face", or finding a graceful way out. Specifically, it's a twofold concern.

First, Yahoo was the flag bearer of the internet age. It's the representative of a new trend, a new world that aims at overthrow the old world. Besides Yahoo, this new world includes Excite, Looksmart, Alta Vista, AOL, Amazon, Ebay, Ubid, even ValueAmerica, etc. And the representative of the old world is, obviously, Microsoft. Yet before Yahoo and Jerry Yang could win the war against MS, a new generation came along and is blowing everybody away. That is Google. Eventually MS admits Google has become too strong to be defeated, so it seeks to unite Yahoo to fight for its own survival. But it's a hard thing for Yahoo to do to be bought by MS. Because MS is the old generation the Yahoo's tried to over take. Claiming defeat by the guy you picked the fight against is such a huge humiliation on loss of face, especially when the guy you are fighting against is the one you used to look down on, and when you are the leader of the group that originated the fight. In this sense, it's much easier for Yahoo to accept the acquisition by Google, because Google is the newer force, and there is not so much wrong with being defeated by the newer generation. After all, everybody hopes their descendents have higher achievements than themselves.

Second, we shouldn't ignore the fact that Jerry Yang is an ethnic Chinese. As such, more or less he would have some traditional Chinese trait, and a big one would be avoid losing face. Obviously he knows the future of Yahoo is not so bright, otherwise he wouldn't step up again and do all these Project Panama and layoff things. But he used to be a superstar, Yahoo used to be a superstar, even now they claim the largest user base in the world. In Chinese culture, even a star of the past deserves some respect, let alone Jerry Yang is still a powerful man. Even to the bare minimum, say the person is Mr. nobody, it's rarely a wise thing to do to publicly embarrass somebody, such as bullying him in Chinese social context. People just need to keep their dignity on the surface, sometimes even at the price of suffering a material loss.

These two things are just my "reasonable" analyses, but they explain pretty well why Jerry Yang rejects Microsoft so much that he would rather take the step toward suicide to work with Google instead of selling to MS for a good price. He said in response to Microsoft's ultimatum that he's not against a deal, but seeking a higher price. That's actually signaling MS what he wants: he's not really rejecting Microsoft and the money per se, but he wants a graceful way down, a way that'll save his face. But Steve Ballmer with his typical western mindset and the deep pocket doesn't care enough to decipher the subtlety of Yang's signals. In his mind, it's very simple: I have the money, and the price is more than fair, so why don't you seal the deal? It's like he's asking a girl out for a date but doesn't know what the girl is thinking. You can expect what's going to happen. It seems to be the personality of MS though. When MS first entered China in 1993, Bill Gates even bullied then President Jiang Zemin, urging him to change policies to accommodate Microsoft's business agenda. Of course President Jiang is not Jerry Yang. He rebuffed Gates right away, suggesting him to study Chinese culture and traditions first.

I think a better way to pursue this deal is what the analyst suggested: come in at a lower offer and raise the price eventually to what they really want to pay. This way MS is paying the same amount, and Jerry Yang saves his face, everybody's happy. It might not work, but certainly would have a better chance.

In our MBA training we learned to analyze the audience before making a presentation. In the Chinese book "The Art of War" it's said that one knows both himself and his opponents always wins. In the Microsoft vs. Yahoo drama, clearly Microsoft feels too good to study its opponent. If they don't realize their arrogance, their future could be seriously clouded. Again to quote lecturer Goldberg, ego will put you in trouble and pride will keep you there.