Part IThe Story
At 5:03 on the afternoon of Monday, November 17, 2008, an e-mail went out from the chief executive's account at Yahoo! headquarters in Sunnyvale. The subject line read "update." The salutation read "yahoos –". Almost nothing in the body was capitalized. The board's name was lowercase, as were the company's, the chairman's, and the executive search firm Heidrick & Struggles. The only exceptions were a few first-person I's that seemed to have stood up on their own. "i strongly believe," the chief executive wrote, "that having transformed our platform and better aligned costs and revenues, we have a unique window for the right ceo to take ownership over the next wave of mission-critical decisions facing the company." Near the end came the line everyone would quote: "all of you know that I have always, and will always bleed purple."
Jerry Yang was 40. He had co-founded the company fourteen years earlier in a trailer on the Stanford campus, had been its chief executive for seventeen months, and was now announcing that he would stop being chief executive once someone could be found to replace him. Yahoo's stock had closed that day at $10.63. Nine months earlier Microsoft had offered $31 a share for all of it, and later $33. The market read the memo and bid the shares up more than 4 percent in after-hours trading. In effect, investors had valued his departure.
The lowercase was a habit, not a performance. It was how he typed, the way some men always wear the same sweater. Still, it is hard to look at it without thinking of the one piece of punctuation his company could never do without. When Yang and David Filo went to trademark their company's name, they found the word Yahoo already registered for a barbecue sauce, a line of knives sold by EBSCO Industries, and human-propelled watercraft made by the Old Town Canoe Company. So they added an exclamation mark, and the shout became a legal accommodation with what was already there. For three decades the company had a voice that was always slightly raised. Its founder seems to have spent the same three decades lowering his.
What follows is not quite a story of rise and fall, though there is plenty of both. It is closer to a story about a man who organized the world for strangers, and the question of whether such a man can also be the one who decides which parts of it to throw away.
By the Numbers
Jerry Yang and the Company He Couldn't Put Down
1Words of English Yang says he knew on arriving in San Jose in 1978: 'shoe'
$13Yahoo!'s IPO price on April 12, 1996; it closed the day at $33
$475Pre-split closing high on January 3, 2000
$1BPaid for 40% of Alibaba in August 2005, plus Yahoo! China
$44.6BMicrosoft's unsolicited offer, February 1, 2008
$8.94Yahoo! share price on November 20, 2008
$9.4BWhat Yahoo! realized in Alibaba's 2014 IPO
One Word of English
The word was shoe. Asked later what English he had when he arrived in America, Yang always gave the same answer: one word, and it was something you put on your foot. The rest took about three years.
He was born Yang Chih-Yuan in Taipei on November 6, 1968. His mother was a professor of English and drama. His father died when Jerry was two. In 1978 his mother brought him and his younger brother, Ken, to San Jose, where a grandmother and an extended family looked after the boys while she taught English to other immigrants. The American names came as part of the move: she became Lily, the boys became Jerry and Ken. Choosing an English name was the family's first act of classification in the new country, a matter of picking the category you would be filed under.
The house was a modest one-story place off Hostetter Road in the Berryessa district, on the city's northeast edge. A longtime neighbor, Bill Otto, remembered a "very congenial" boy heading off to Sierramont Middle School under an oversized backpack, and a husky in the yard. Then came Ruskin Elementary, Sierramont, and Piedmont Hills High School, the standard sequence of a Santa Clara County childhood in the years when the orchards were giving way to fabs. A boy whose mother taught English for a living, and who had arrived with one word of it, went on to Stanford and finished both a bachelor's and a master's in electrical engineering in four years.
In 1989, at Stanford, he met David Filo. Filo was older, from Wisconsin and Louisiana, an engineer's engineer who was later described as checking load times while Yang met Al Gore. The two shared an advisor's orbit, a field (computer-aided chip design), and an amused tolerance for one another. In 1992 they both went to Japan on a six-month Stanford exchange program. Also on the program was Akiko Yamazaki, born in Japan and raised in Costa Rica, studying industrial engineering. Yang married her. The marriage is one of the quietly constant facts in a life that has otherwise been loud. Over the years his biographical outline would add a fortune, a board seat, a congressional rebuke, and a collection of Chinese calligraphy, and through all of it, as one profile put it with some surprise during the boom, "he stayed married to his college sweetheart."
The facts line up neatly enough to be suspicious. A boy who learns a language one word at a time grows up to build the most famous index of the English-language web. A child who takes a borrowed name grows up to name a company after an insult from an Anglo-Irish satirist. Yang never pointed out these symmetries himself, and he was not given to self-mythology. When he was 29 and MIT Technology Review named him one of the world's top 100 innovators under 35, he gave the magazine the plainest available version of his story:
— Jerry Yang, quoted in MIT Technology Review, 1999It's a dream come true, and in many ways it's what America is all about: Nowhere else in the world could people like me do something like this.
People like me. The phrase does a lot of work. It could mean immigrants, or engineers, or graduate students who should have been finishing their dissertations. Most likely he meant all three and didn't feel the need to choose.
A Hierarchy of Everything
The trailer had no glamour, and it would be described so many times that it became legend. It was a construction trailer on the Stanford campus that housed university servers and, increasingly, two doctoral students who were supposed to be designing chips. The floor was covered in pizza boxes and loose paper. In late 1993 and early 1994 the World Wide Web was still an academic curiosity reached through a browser from the University of Illinois's National Center for Supercomputing Applications, and the two of them used it the way graduate students use most things, to avoid their real work. They tracked NBA statistics. They tracked statistics on sumo wrestlers.
Yang put up a homepage. It held three things: his name in Chinese characters, his golf scores, and a list of his favorite sites. The name, 楊致遠, carries a classical sense of reaching far. The golf scores were a joke on himself. The list was the beginning of everything else.
Then Filo added his favorites, and friends sent theirs, and the list stopped being a list. Two engineers trained to think in hierarchies (systems, subsystems, blocks inside blocks) started sorting the web the way they would sort a circuit, into categories, then subcategories, then sub-subcategories, each one a human judgment about where a thing belonged. By January 1994 it had a name, "Jerry and David's Guide to the World Wide Web." It was a directory, and the distinction matters. It was not a searchable index of pages built by a crawler. It was a taxonomy built by people. A machine could tell you that a page contained a word. Jerry and David could tell you what the page was.
The address was akebono.stanford.edu/~yahoo, and by spring of 1994 the guide had a new name. Yang and Filo would later accept a backronym, "Yet Another Hierarchical Officious Oracle," with "officious" reportedly a nod to the office workers who browsed it on company time. They insisted, though, that they had picked the word for its plain meaning, the one Jonathan Swift gave the brutish humanoids of Gulliver's Travels: "rude, unsophisticated, uncouth." The word was also college slang in Filo's Louisiana for a rural rube. Gulliver was a traveler among strange peoples, keeping notes. So were they.
By the fall of 1994 the guide was drawing about 100,000 unique visitors. By the end of the year it had logged a million hits. Stanford's network was groaning, and university officials told the two of them to find another home for their hobby. That was how the market first spoke to Jerry Yang: through an IT department asking him to leave.
They didn't immediately see a company in it. "Through most of 1994," Yang recalled, "even though we were playing with Yahoo as a hobby, we were looking for another startup idea. We really didn't think Yahoo could possibly be it. There was no real business model that fit it." Everything on the internet was free, so they couldn't charge users, and charging sites for listings felt wrong. The business they actually had in mind was a site for selling college textbooks. "David had it in his gut very early on," Yang said later, "that Yahoo could ultimately be a consumer interface to the Web rather than simply a search engine or piece of technology. We weren't really sure you could make a business out of it though."
What they did understand early was that ordering the web was a job, and that it needed people who took order seriously. Yahoo!'s fifth employee was a Stanford alumna named Srinija Srinivasan, and her title was "Ontological Yahoo." The joke was half a joke. Ontology is the branch of philosophy concerned with what exists and how existing things should be grouped. A company that later became famous for having too many products began by hiring someone whose job was to decide what went where.
The domain yahoo.com was registered on January 18, 1995. The company was incorporated on March 2.
Two decades later, sitting in a Stanford-produced video, Yang described the whole episode almost apologetically: "I was in the process of doing my PhD, almost finished I like to think, 3 or 4 years in, and then this little Yahoo thing got in the way." In 2009, when the University of Hawai'i gave him an honorary doctorate, its announcement noted that he was still officially on leave from Stanford's electrical engineering PhD program. He had left the dissertation the way you leave a room you plan to come back to, for fifteen years.
The Chief Yahoo Declines the Chair
The money arrived through a chain of introductions. Yang and Filo asked an entrepreneur named Randy Adams to recommend a venture firm. Adams sent them to Michael Moritz of Sequoia Capital, a former Time journalist turned investor, a Welshman with the habit of a reporter who watches the room more than the speaker. Moritz drove to the trailer. "We sat on the floor," he later told Forbes, "and all I could think of was getting out of there quickly to avoid getting the parking ticket that was usually involved in any trip to the Stanford" campus. He saw the mess as evidence. "The intense devotion to a pursuit that the state of that office indicated is something investors find very encouraging." The computers were working so hard that a reporter would describe them as practically smoking.
On April 5, 1995, Sequoia put in roughly $2 million, which grew to about $3 million over two rounds. By October 1998, Forbes calculated, that $2 million stake had returned $1.5 billion, a gain of 75,000 percent.
The next investor was stranger and bigger. In November 1995 Masayoshi Son, the Korean-Japanese founder of SoftBank, put in $2 million. Four months later he expanded it to $105 million for a third of the company. Son was another outsider who had made himself central to an industry by spotting where it was headed before its own natives did. He kept a low profile in Yahoo!'s affairs and let the founders remain the company's public face. The cap table now held a Taiwanese immigrant, a Louisiana engineer, a Welsh former journalist, and a Korean-Japanese telecom mogul, all betting on a directory named after a Swiftian insult.
Then came the decision that shaped Yang's next twelve years. In August 1995, the month the commercial site launched with advertising and Reuters news feeds, Yahoo! hired a CEO. Tim Koogle, a Motorola veteran with a Stanford engineering doctorate, took the corner office. Yang and Filo each took a title that has no meaning in corporate law, "Chief Yahoo."
"People always ask me why I took myself out of the day-to-day operating responsibility," Yang said a few years later. "That's never what I wanted to do, and besides, I knew so little about business that I didn't want to slow things down when the company began to scale up." He added a qualification that is easy to skip and shouldn't be: "Just because Dave and I didn't want to be Yahoo's CEO doesn't mean we lack the traditional founders' pushiness."
The arrangement suited both of them. Filo gave up his board seat in February 1996 so he could stay close to the systems. Yang became the strategist, the evangelist, the one who met partners and investors and appeared on magazine covers. A children's-shelf biography from 2001, Josepha Sherman's Jerry Yang and David Filo: Chief Yahoos of Yahoo, presents the pairing as an engineering fable. It was also an organizational choice, and a sharp one. Two founders in their twenties looked honestly at what they could and couldn't do and hired against their weaknesses before the weaknesses had cost them anything.
On April 11, 1996, the day before the IPO, a reporter from San Jose's Metro arrived at the company's Mountain View office for an 8 a.m. interview. In the lot was Filo's 1981 Datsun 310, its tailpipe hanging, bird droppings on the roof, the windshield sealed with putty. Filo, 29 and shoeless, had slept on the carpet by his desk. "It was easier than going home," he said, although his apartment was a few blocks away. "Besides, my girlfriend is out of town." Yang, 27, came through the door late and looked at his partner. "Sorry I'm late," he said, "but I like to go home at night and sleep in my own bed."
The same piece reported that AOL and Netscape had made acquisition offers that would have netted each founder more than $3 million. They declined. "We're not in this for the fast money," Filo said.
The next day Yahoo! sold 2.6 million shares at $13, raising $33.8 million. The stock touched $43 and closed at $33, up 154 percent. The company had 49 employees.
Two years later a Forbes reporter asked Yang his salary. He didn't know. Pressed, he guessed about $60,000. "This year I actually don't know what we're making," he said, and then, deadpan: "I hope David doesn't get paid more than I do." Between them the two owned a quarter of the company. Filo was worth $840 million and Yang $830 million, and the gap of $10 million existed because Yang had given some shares to family and friends early on. Even his net worth carried a trace of his mother's house.
At the height of the boom, profiles noted that he lived in a $2 million house in Los Altos, flew coach, ate at Taco Bell and pho shops, and had Sunday dinner at his mother's. The best detail, because it describes a method rather than a virtue, was that he still browsed the web on a 28.8k modem so he would know what the median user saw. The man whose name was on the most-visited directory in the world was choosing to wait for pages to load.
— Jerry Yang, Forbes, 1998The best thing is feeling like you're changing the world everyday. You wake up and say, 'Why am I up?' and then you think if you don't get to work something will happen to Yahoo!.
Everything, All at Once
A directory is a promise to send people elsewhere. A portal is a promise to keep them. Somewhere between 1996 and 1999 Yahoo! changed from the first kind of business to the second, and so did everyone else. Excite, Lycos, MSN, and America Online were all doing the same arithmetic. Pageviews meant ad inventory, and inventory meant revenue, so the goal was to keep a user on your pages as long as possible and give them as few reasons to leave as you could manage.
Yahoo! bought its way to stickiness. On October 8, 1997, it acquired Four11, an online communications company, for about $94 million in stock, and Four11's RocketMail became Yahoo! Mail. In June 1998 it bought Viaweb, co-founded by Paul Graham, for $49 million, and turned it into Yahoo! Store. ClassicGames.com became Yahoo! Games. A messaging service called Pager became Yahoo! Messenger. In January 1999 came GeoCities, a sprawling neighborhood of amateur homepages, for $3.6 billion. In April came Broadcast.com for $5.7 billion. By 1998 the company was serving 95 million pageviews a day, three times its nearest rival.
There was a pattern in how Yahoo! treated what it bought, and it caused trouble. Acquired services often got new terms of service. GeoCities users found that Yahoo! now claimed intellectual-property rights over content on its servers, and the backlash was strong enough that the company retreated. Taken together, the deals were a Yahoo! version of the immigrant's renaming: you came in under your own name, and soon you had theirs, an exclamation mark included.
Then the market went parabolic. Yahoo! stock doubled in December 1999. On January 3, 2000, it closed at $475 a share before splits. Sixteen days later, shares of Yahoo! Japan, the joint venture with SoftBank that Yang had championed, became the first stock in Japanese history to trade above ¥100 million, at ¥101.4 million, about $962,140 for a single share. On February 7, 2000, yahoo.com went down for several hours under a distributed denial-of-service attack. The next day the stock rose about $16, because the outage was blamed on hackers and not on Yahoo! itself. The market had reached the point where being attacked was good news.
Four months later, on June 26, 2000, Yahoo! signed a deal to power the searches on its own site with technology from a small company in Mountain View called Google.
Much of Yahoo!'s later reputation rests on its history with Google, so it is worth being precise about what the sources show. In 1998 Larry Page and Sergey Brin approached Yahoo! about selling their search engine for $1 million, and Yahoo! declined. In 2002, under CEO Terry Semel, Yahoo! negotiated to buy Google for a reported $5 billion, offered $3 billion at the end, and was turned down. Between those two dates, Yahoo! paid Google to run its search box. The directory company had concluded that the web was now too big to be organized by hand. It was right, and it outsourced the replacement for its own founding idea to the company that would eventually displace it.
Then the bubble burst. On September 26, 2001, two weeks after the attacks on New York and Washington, Yahoo! stock closed at $8.11, down more than 98 percent from its split-adjusted peak. That April the board had named Semel chief executive. He was a Hollywood studio veteran, and the New York Times would later say Yang had "hand-picked" him. Koogle stayed on the board. The company needed a dealmaker more than a builder, and Yang, characteristically, went looking for someone unlike himself.
The first significant layoffs came after the crash. Yang choked up announcing them to employees in the company cafeteria. People who were there remembered it years later.
Semel's tenure was not the failure it later became shorthand for. Yahoo! survived when most of its cohort did not. It bought Inktomi in December 2002 and Overture, along with AltaVista and AlltheWeb, in July 2003, and on February 18, 2004 it dropped Google's results and returned to its own search technology. It bought Flickr in March 2005 and del.icio.us that December. By the company's own figures, revenue grew nearly ninefold between 2001 and 2006, to $6.4 billion, and the audience grew from 170 million users to more than 500 million. Google, meanwhile, had learned to sell the search box, and was making more money from one text field than Yahoo! made from everything else combined.
Underneath, Yahoo! was taking on a familiar condition. It had become a large organization made of smaller organizations, each with its own goals, each with a product that was good and none of them decisive. Yang later used biological language for it. Past a few hundred people, he said, a company goes through "cell division" and has to specialize, "then pretty soon you have a bunch of goals that may or may not relate to each other." He described himself as the one in the room who kept asking, "Are we really tying all the goals back into the bigger goal?"
He asked. He wasn't the one who decided. For six years that arrangement suited him. It would stop suiting him.
The Tour Guide at the Great Wall
In 1997, on his first trip to China, Jerry Yang was assigned a tour guide. The guide worked for the government, at what Yang later called the Ministry of Foreign Investment. He was a former English teacher from Hangzhou who had failed his university entrance exam more than once and talked about the internet like a convert. His name was Jack Ma. He took Yang to the Great Wall. The two of them got on and talked about where the web was going. A few months later Ma founded Alibaba.
A photograph of the two men at the Wall that day still hangs in Alibaba's Hangzhou office. Nobody has had to explain why.
"In retrospect, what are the chances," Yang asked an audience at Fortune's Brainstorm Tech conference in Aspen in July 2018. Then he said something that sounds like modesty and is closer to accurate accounting: "I've always thought of myself as the luckiest person in the world because of the timing of my investment in Alibaba."
The investment came eight years after the tour. In August 2005, under Yang's direction although Semel was still CEO, Yahoo! paid $1 billion in cash plus the operations of Yahoo! China, valued at $700 million, for 40 percent of Alibaba. The implied post-money valuation was about $5 billion. Alibaba took over Yahoo! China. A Silicon Valley company had effectively handed its Chinese business to a local entrepreneur in exchange for a stake in that entrepreneur's future, which was an admission that it could not win there on its own.
That admission was the insight. Years later Yang explained it in terms that read as a critique of his own industry: "The West by definition kind of ignored" Chinese tech, he said. "They looked at China as they're just going to copy, they're not going to innovate." Left alone in what he called "an almost cut-throat market environment," the Chinese companies became "battle-tested." Elsewhere he described the Chinese startup market as feeling "like Mad Max and the Thunderdome—three go in, one comes out," with generations of founders who admired each other and "all want to kill each other."
Whatever else is true of Yang, he understood something about outsiders who learn the dominant language faster than the natives expect.
The rest is arithmetic. In 2012 Yahoo! sold part of its Alibaba stake back for about $7.6 billion. In 2014 it took in another $9.4 billion in Alibaba's IPO. Eric Jackson, the hedge-fund manager who had spent years criticizing Yang, called it "the best investment an American company has ever made in China," and added, without much enthusiasm, "Jerry deserves enormous credit for that." By then the Alibaba stake was worth more than Yahoo!'s operating business. Investors were valuing the company Yang had founded as a holding vehicle for the company his tour guide had founded.
There is a version of this section that ends here, on the photograph and the multiple. It would be incomplete, because the deal was signed in August 2005, and in September the other story broke.
Local Law
In April 2004, a Chinese journalist named Shi Tao, 37, received a directive at work. The government had instructed the domestic press not to cover the fifteenth anniversary of the Tiananmen Square protests on June 4. Shi took notes and sent them anonymously to a pro-democracy website in the United States from a Yahoo! e-mail account. Chinese security agencies asked Yahoo! for information about the account. Yahoo! gave them the IP address, the sender and recipient details, and the time of the message. Shi was arrested in November 2004 and convicted of "divulging state secrets abroad." He was sentenced to ten years.
The story became public in September 2005, a month after the Alibaba deal. Reporters Without Borders called Yahoo! "a Chinese police informant." Yang's defense was the language of compliance: "To be doing business in China or anywhere else in the world, we have to comply with local law[s]."
The sentence is technically correct and that was the problem with it. A directory makes a claim about where things belong. This was a claim about where responsibility belonged, filed under local law, and the categorization did not hold up.
The matter didn't go away. In February 2006, Yahoo!'s general counsel told Congress the company had not known the nature of the Chinese requests. In July 2007, evidence emerged that Yahoo! had received explicit government warrants. In April 2007, Wang Xiaoning and other dissidents filed a civil suit alleging that Yahoo! had aided the government, and that the result had included beatings, imprisonment, and torture. In November 2007, five months into Yang's tenure as CEO, he sat before a congressional committee. A congressional panel called the company's earlier testimony "at best inexcusably negligent" and at worst "deceptive." One lawmaker's line made the headline in Yang's hometown paper: "Morally you are pygmies."
Shi Tao's mother was in the hearing room. Yang turned to her and apologized.
A week later Yahoo! settled with the dissidents' families for an undisclosed amount. "After meeting with the families," Yang said, "it was clear to me what we had to do to make this right for them, for Yahoo, and for the future." That week he set up the Yahoo! Human Rights Fund to provide "humanitarian and legal support" to online dissidents. In February 2008, Secretary of State Condoleezza Rice said she had raised the cases of jailed Chinese journalists with her Chinese counterpart and cited a letter from Jerry Yang asking for her help in freeing them. In November 2008, the same month as the lowercase memo, a museum opened in Washington run by the dissident Harry Wu, who had spent nineteen years in China's laogai labor camps. It documented that penal system and was funded by the Yahoo! Human Rights Fund.
The case followed him well past his time at the company. In September 2020 a lawsuit was filed in federal court in San Jose on behalf of the activist Ning Xianhua against former Yahoo! executives, Yang among them, alleging that the company had handed his private e-mails to the Chinese government in exchange for access to more Chinese users.
It would be too neat to set the two stories of 2005 against each other as virtue and vice, the brilliant bet on a Chinese entrepreneur and the cowardly cooperation with a Chinese state. Both came from the same view: that China was a place where an American company could not dictate terms, where you would have to adapt, defer, partner, and comply. In one case that humility made him the most successful American investor in Chinese technology. In the other it put a man in prison for ten years. The deference was the same in both cases, and only the object differed.
What can be said for Yang is that when the bill came, he looked at it. Plenty of executives have apologized to a congressional committee. Fewer have turned in the chair to apologize to a prisoner's mother.
Too Nice to Be CEO
On June 18, 2007, Yahoo! announced that Terry Semel would become non-executive chairman, that Susan Decker would become president, and that Jerry Yang, co-founder, longtime director, and Chief Yahoo, would become chief executive officer.
The phone rang. It was Steve Jobs.
"I remember when I became CEO Steve Jobs called me and said 'congratulations Jerry, but you're making a huge mistake,'" Yang told an audience in San Francisco in 2019. "I said, 'why Steve?' He said 'you're too nice to be CEO, Jerry.'" Jobs had a prescription. "His advice was, you have to take your management team and fire every other one. 'How many VPs do you have? Get rid of half.'"
It is a good story, and Yang tells it against himself, which is typical. He told another one in the same conversation, unprompted, which amounted to a defense: "I don't really think about whether I'm nice or not. I think about whether I am treating people the way I would want to be treated. I don't like that asymmetry even though you can get away with that in a position of power. A lot of people use that asymmetry and get away with it."
There is a whole philosophy of management in that answer, and also a diagnosis of why the job was so hard for him. A chief executive is the asymmetry. The job is the power to decide things about people who can't decide things about you.
He started with energy. On the July 17 earnings call he said: "Although I've only been in the CEO role for about a month, I co-founded this company and I've been thinking about our place in this industry for over 15 years. I may not have all the answers as of today, but I have a pretty strong idea of where I want to go. There will be no sacred cows and we need to move very quickly." He promised a hundred-day strategic review. The company had 11,800 employees as of April 1. Google had just reported second-quarter net income of $925 million against Yahoo!'s $161 million. A Wharton management professor, David Hsu, gave the skeptics' view in one line: "Yang doesn't fit the CEO mold and lacks management experience."
He held meetings in the middle of the cafeteria. He talked openly with employees about the company's problems. He and Decker began meeting with a growing group of executives at the San Francisco offices of the consulting firm Stone Yamashita Partners, and they agreed on priorities quickly: make Yahoo! the starting point for consumers on the web, build the advertising technology to sell ads on Yahoo! and across other sites, and open the platform to outside developers. To make the case for focus, Yang invited Jobs to talk to about 300 Yahoo! vice presidents. Jobs told them that many people inside Apple had wanted to go after Palm's personal digital assistants, that he had refused, and that if Apple had chased Palm it might never have made the iPod.
The VPs listened. Then came the choices.
"You can't place your chips on every spot and every color and every number," said Dan Finnigan, who had run HotJobs before leaving. Travel, shopping, music, HotJobs: "all great products, but none were going to make a huge difference in the fight with Google." Everyone agreed something had to go. The trouble was that when executives brought Yang options, he stalled. "Instead of saying yes or no, there were no decisions," one person who attended many of those meetings told the New York Times. "These decisions are agonizing for him. It's his caring about the people and the company that make him both great for this job and difficult for the job."
In October 2007 Yang spoke to advertisers at a conference and said something unusually candid for a sitting CEO:
— Jerry Yang, October 2007, quoted in The New York TimesAs a founder everybody loves you. When you become C.E.O., you can tell somewhat the behaviors change. … You have to make tough calls.
He called the job "lonely."
A brief digression, because the coincidence is too good to pass up and says something. In 2007, the year one Jerry Yang became chief executive of Yahoo!, another Jerry Yang won the Main Event of the World Series of Poker. He was a Hmong psychologist and former social worker from California, born in Laos, whose family fled in 1975 and spent years in a Thai refugee camp before reaching the United States. He beat a field of nearly 6,400 players for about $8.2 million. His memoir, written with Mark Tabb, is called All In. Two immigrant Jerry Yangs in California, the same year, each sitting at a table where the stakes had suddenly become enormous. One pushed in everything. The other, as Finnigan might have said, kept chips on every number.
The hundred days ended. "He came on board, announced a 100-day strategic review and promised there would be no sacred cows," the Citigroup analyst Mark Mahaney said. "One hundred days went by, and no cows were slaughtered."
The cuts came on January 29, 2008: 1,000 jobs, 7 percent of a workforce of 14,300. In the same announcement Yang told investors he would spend more than expected on the business. The stock fell to its lowest level in more than three years and closed at $18.58 at its low that week. One senior executive, by then disillusioned, put it bluntly: "With the stock at $24 or $25, we'd be having a very different conversation now. But there were decisions made that were naïve that have left us in a position where we can't control our destiny."
Two days later Steve Ballmer called.
Thirty-Three Dollars
Microsoft had been circling for years. There had been merger talks in 2005, 2006, and 2007. Joe Nocera later reported that about a year and a half earlier Ballmer had offered Semel $41.50 a share, and that Michael Milken himself had advised Semel to take it. In November 1997, when Yahoo! was still a youthful phenomenon, Yang had stated his position on Microsoft plainly: "You never, ever want to compete with Microsoft. And even if they want to compete with you, you run away and do something else."
This time there was nowhere to run.
On January 31, 2008, Ballmer called Yang with an offer. On February 1 Microsoft made it public: $31 a share in cash and stock, $44.6 billion in total, a 62 percent premium over Yahoo!'s closing price. Ballmer's pitch was simple and fairly honest. Separately, the two companies were losing to Google. Together, they might at least be a real second place.
On February 11, Yahoo!'s board rejected the offer as "substantially undervaluing" the company's brand, audience, investments, and growth prospects. On February 13, Yang sent shareholders a letter of more than 1,000 words that was mostly about Yahoo! itself: its brand, its lead in display advertising, its "healthy" cash. "Today, Yahoo is a faster-moving, better-organized, more nimble company than it was just a few months ago," he wrote. On February 22, two Detroit pension funds sued the board for breaching its duty to shareholders. Yahoo! explored other partners: Google, News Corp, later AOL. Eric Schmidt said publicly that a Microsoft-Yahoo! combination might threaten the openness of the internet, and he probably meant it, though it was also good business to say so.
As Microsoft's share price fell, the bid's value fell with it, to $42.2 billion by April 4. The next day Ballmer sent a letter setting a three-week deadline, after which Microsoft would go to Yahoo!'s shareholders directly to elect a new board. Yahoo! replied that it was not opposed to a deal, only to this price, and that Microsoft's "aggressive" approach was hurting the chances of a friendly one.
Then the two men met. Microsoft said it would go to $33 a share, about $5 billion more. Yahoo! asked for $37. One of Ballmer's people summed up what he expected if Microsoft went hostile: "They are going to burn the furniture if we go hostile. They are going to destroy the place."
On May 3, 2008, Ballmer withdrew, in a letter addressed to "Mr. Jerry Yang, CEO and Chief Yahoo." It is a polite and very cold document. "I feel that our discussions this week have been particularly useful," Ballmer wrote, "providing me for the first time with real clarity on what is and is not possible." The $33 offer, he noted, "would have reflected a premium of over 70 percent." Yet "your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer." He said he would not pursue a hostile bid because he believed Yahoo! would, in the meantime, arrange to outsource key search terms to Google. In other words, it would burn the furniture.
On Monday, May 5, Yahoo! fell 15 percent to $23.02, and about $6 billion of market value disappeared.
The weeks that followed had the frantic quality of someone trying every exit. At the Wall Street Journal's D conference in Carlsbad on May 28, Yang said "the perception of us being a company under siege is just not accurate," described the continuing negotiations as "fun," and said he should remain CEO because he still "bleeds purple." On June 12, Yahoo! said all talks with Microsoft were over and, the same day, announced a non-exclusive search advertising deal with Google. A wave of executives left. On June 14, Joe Nocera of the Times published an open letter that would follow Yang for years:
"Here's the problem, Jerry. It's not your baby. It hasn't been since 1996, when Yahoo went public."
He added: "I haven't seen this much contempt for shareholders since Robert Nardelli ran Home Depot."
Carl Icahn started a proxy fight and settled on July 21 for three board seats, one for himself. On November 5, Google pulled out of the search deal under antitrust pressure. That evening Yang took the stage at the Web 2.0 Summit in San Francisco, and John Battelle asked him why he'd come back as CEO at all. "Why do that to yourself? Are you the right guy?" Yang said he was open to selling to Microsoft, that the two sides "weren't that far apart," that "it's not personal," that he had "a lot of respect for Steve." Then: "I don't regret any minute of what happened."
Twelve days later came the lowercase memo. Three days after that, on November 20, Yahoo! traded at $8.94.
!
Ten Months, Ten Dates
The Microsoft episode as it unfolded, from the first phone call to the 52-week low.
Jan 31, 2008
Ballmer calls Yang with Microsoft's offer.
Feb 1
Microsoft makes public a $44.6B bid, $31 per share, a 62% premium.
Feb 11
Yahoo!'s board rejects the bid as "substantially undervaluing" the company.
Apr 5
Ballmer sets a three-week deadline before a proxy fight.
May 3
Microsoft withdraws after offering $33; Yahoo! had sought $37.
May 5
Yahoo! falls 15% to $23.02; about $6B in market value lost.
Jun 12
Talks formally end; Yahoo! announces a search ad deal with Google.
Jul 21
Yahoo! settles Icahn's proxy fight with three board seats.
Nov 17
Yang announces he will step down as CEO.
Nov 20
Yahoo! trades at $8.94, a 52-week low.
The verdict at the time was harsh and nearly unanimous. "Jerry has done less than a stellar job," said Ross Sandler of RBC Capital Markets, "not just completely botching the Microsoft deal, but with poor execution and multiple company restructurings that have done little to restore confidence." "Jerry was a start-up guy," said Rob Enderle. "He wasn't a transitional [figure] and certainly not a turnaround guy. He didn't have the demeanor, personality, or drive." Charles King of Pund-IT offered the most perceptive version: "I think Yang was in a way trying to recapture some of Yahoo's glory days."
The defense came later, from an unlikely source, and it deserves a hearing. In February 2012, Eric Jackson, who had been among Yang's harshest critics, wrote that the accepted story was hindsight. In the spring of 2008, he said, almost nobody thought Yahoo! should take the first offer. Most commentators thought it was smart to hold out because Microsoft "needed" Yahoo!. Several of the largest shareholders explicitly opposed taking $31. Jackson knew one of them well: he wanted $40 and would, at worst, have accepted $36. "What no one saw coming," Jackson wrote, "was Steve Ballmer pulling Microsoft's offer." And then the sentence that matters: "That manager's name will never appear in public, whereas Yang will have to wear this failure like a scarlet letter."
Both accounts can be true, and probably are. Yang was negotiating the way founders, shareholders, and textbooks all said to negotiate. He also wanted Yahoo! to stay independent. Ballmer said so publicly, and an executive had described Yang's first question as CEO as whether the company could remain independent, which he answered yes. When the person setting the price wants the deal to fail, the final ask tends to drift upward. The extra $4 a share Yahoo! wanted was the size of the gap between what the company was worth to the market and what it was worth to him.
Rain
Carol Bartz, formerly of Autodesk, became CEO on January 13, 2009. Yang went back to being Chief Yahoo, the title he had held before, now with a different weight. In July 2009 Yahoo! agreed to let Microsoft power its search, and in August 2010 Bing's results replaced Yahoo!'s own. So the directory had now handed its search box to both of the companies it had once hoped to beat.
On May 16, 2009, Yang gave the commencement address at the University of Hawai'i at Hilo, where he was a part-time resident and where he received an honorary Doctor of Humane Letters. He opened by reading headlines: "College Grads Labor Against Shrinking Job Market." "America Broadens its Deployments in the Middle East." "U.S. Taxpayers To Spend Billions Bailing Out Failing Financial Institutions." Then he told the graduates the date. "Now, you might think that's today's headlines. In fact, that was in the year 1990, when I sat where you are now for my graduation. The future looked pretty bleak." He told them that Yahoo! had started in a downturn. He told them to do what they loved "even if it takes you down strange alleys." He said his most important point was the last one: Don't take yourself too seriously.
The Yahoo! story after that is a list of names: Bartz, fired by phone in September 2011; Tim Morse, interim; Scott Thompson, appointed January 4, 2012. On January 16, 2012, Yang wrote a two-paragraph letter to the chairman, Roy Bostock. "My time at Yahoo!, from its founding to the present, has encompassed some of the most exciting and rewarding experiences of my life," he wrote. "However, the time has come for me to pursue other interests outside of Yahoo!." He resigned from Yahoo!'s board, from all his other positions there, and from the boards of Yahoo! Japan and Alibaba, effective January 17. It was capitalized throughout, a formal letter. He left the company he co-founded nearly seventeen years earlier in proper case.
Thompson lasted 130 days and left over a résumé that claimed a computer science degree he didn't have. Ross Levinsohn served as interim. Marissa Mayer arrived from Google in July 2012 and bought Tumblr for $1.1 billion. Two breaches, one in 2013 and one in 2014, were disclosed in 2016, and the 2013 theft was eventually found to cover all 3 billion user accounts. Verizon agreed to buy Yahoo!'s operating business for $4.83 billion in July 2016, then cut $350 million from the price after the breaches came out, and closed on June 13, 2017. What was left, mainly the Alibaba and Yahoo! Japan stakes, was renamed Altaba, an invented word with the remains of Alibaba in it, and made its final liquidating distribution in October 2020. In 2021 Apollo bought the operating company for $5 billion and put the old name back on it.
The company Yang founded on a directory, whose most valuable asset at the end was a stake in his tour guide's company, ended up as a shell named after that stake.
He had moved on to rain. AME Cloud Ventures, founded in 2012, takes its name from the Japanese ame, meaning rain, a reference to the cloud and also, quietly, to his wife's language. When he described its founding principles, the first one could have been written as a note to his younger self: "anything that looks and smells like Yahoo! we won't do. We didn't do any consumer internet initially and we still haven't done much." The second was to invest early: "a lot of times we're the first or second check in." The third was to back companies with "deep science or deep tech." The firm has funded more than fifty companies, among them Zoom, Wish, Evernote, Wattpad, Tango, and Vectra Networks. "I missed being close to entrepreneurs at the beginning," he said, which is what a man says when he has learned which chair he belongs in.
He went back to boards, and in a way that is right for him: Workday and Lenovo from 2013, and Alibaba again from 2014. In 2021 the Stanford trustees elected him their chair, the first Asian American to hold the position, which he held until 2025. That same year he co-founded The Asian American Foundation, a $250 million effort against anti-Asian hate that its organizers called the largest philanthropic commitment ever made to the AAPI community. He had appeared in the PBS series Asian Americans the year before. Forty years after Hostetter Road, the boy who arrived knowing the word shoe was helping write the institutional record of the people who came the same way.
The philanthropy has a clear direction. In February 2007, months before he took the CEO job, he and Akiko Yamazaki gave Stanford $75 million, $50 million of it for a building for environment and energy research. In September 2017 they pledged $25 million to the Asian Art Museum of San Francisco, the largest gift in its history, and the pavilion named for them opened in 2020. In the summer of 2018 they lent more than fifty contemporary Chinese ink paintings to Stanford's Cantor Arts Center for an exhibition called "Ink Worlds."
At the center of it is a collection he started in the late 1990s, at the height of the boom, while his company was turning a directory into a portal and his net worth was making headlines. It is a collection of Chinese calligraphy, about 250 pieces. In late 2012 and early 2013 the Asian Art Museum exhibited selections from it. In 2014 the Metropolitan Museum of Art did the same, in a show titled "Out of Character: Decoding Chinese Calligraphy."
Chinese characters have no capital letters, no lowercase, and no exclamation mark. A character is made of strokes arranged in an order a child learns and a master spends a lifetime refining. Its meaning comes from where each line sits in relation to the others. In that sense it is a hierarchy, a small directory of marks.
Before Yahoo! had a name, before the trailer was famous, before the Datsun or the Great Wall or the hearing room or the $33, the first page Jerry Yang put on the web held three things. There was a list of other people's pages, arranged so a stranger could find them. There were his golf scores. And at the top, in a script without capitals, there were three characters: 楊致遠.
Part IIThe Playbook
What follows are twelve principles drawn from Jerry Yang's record as a founder, strategist, chief executive, and investor. Some are lessons from things that worked: the directory, the founders' honesty about their own limits, the Alibaba bet. Others come from things that did not: the hundred days, the Microsoft negotiation, the Shi Tao case. Yang is unusual among founders in that his failures are as instructive as his successes, and in that he has been more candid about the former than most people are about the latter. Each principle ends with a single tactic.
The principles
- 1.Organize before you monetize.
- 2.Hire against your own weakness while it's still cheap.
- 3.Pair the evangelist with the engineer.
- 4.Use the median user's modem.
- 5.Give the brand a wink, and protect it with punctuation.
- 6.Bet on the person in the market everyone else is ignoring.
- 7.Price the conscience before the request arrives.
- 8.Kindness is a value, not a decision procedure.
- 9.The other side's walk-away is a real option.
- 10.Don't let attachment set the price.
- 11.Scale yourself, or step aside, twice if necessary.
- 12.Define the second act by what you refuse to repeat.
Principle 1
Organize before you monetize
Yahoo! began with an act of order, not a business model. Yang and Filo spent most of 1994 categorizing the web by hand and looking for "another startup idea," because they couldn't see how a free directory would make money. They kept it free anyway. In 2015 Yang described the payoff: being free gave Yahoo! access to everyone who could get online, which made product and content providers feel "that their content needed to be advertised on Yahoo—otherwise it would not be found." It created a virtuous cycle.
The underlying point is that whoever organizes a chaotic domain becomes the gatekeeper to it. The Ontological Yahoo, the fifth hire, was not overhead. She was the product. Yang and Filo understood that the scarce thing on the early web was judgment about where things belonged, not content. That judgment built the attention, and the attention built the advertising business.
The flip side is also instructive. A directory scales with people, and the web eventually outgrew any number of people. Yahoo! saw this, licensed Google for search in June 2000, and in doing so handed its core function to the company that would replace it. Organizing first is how you earn the position. Keeping it requires noticing when your way of organizing has reached its limit, and owning whatever comes next.
Tactic: Before you design pricing, find the chaotic domain your users can't navigate and become the most trusted map of it. Then ask every year whether your mapping method will still work at ten times the scale.
Principle 2
Hire against your own weakness while it's still cheap
In August 1995, with the company months old and the founders in their mid-twenties, Yang and Filo hired Tim Koogle as CEO and gave themselves made-up titles. "I knew so little about business that I didn't want to slow things down when the company began to scale up," Yang said. This was early, before any crisis, before investors forced it. It was a founder's self-assessment done on the founder's own schedule.
That timing is what made it valuable. Founders who wait until the board makes the decision pay in control, morale, and reputation. Founders who decide while the company is small get to choose the person, set the terms, and keep a role that fits them. Yang kept the role of strategist, evangelist, and dealmaker, and from that position he championed Yahoo! Japan and Alibaba, the two investments that ended up outlasting the company.
The 2007 return to the CEO job is the counterexample that confirms the rule. When he took the chair he had passed up twelve years earlier, he didn't have the skills he had once recognized he lacked. Wharton's David Hsu said so on the record. Twelve years of strategy had not turned into twelve years of operating experience.
Tactic: Write down, today, the three parts of your current role you are worst at, and hire for at least one of them before anyone suggests it.
Principle 3
Pair the evangelist with the engineer
In the founding years Yang met Al Gore and Filo checked load times. Filo gave up his board seat to stay with the systems. Yang became the public face. "There may be a textbook on how to found a company," Yang said, "but we didn't read it. For David and me, it was as if we instinctively knew where to go and what to do." Contemporary accounts described the two as covering "the alpha to his omega," with the partnership itself as the company's emotional center.
The pairing worked because neither man wanted the other's job. That is rarer than it should be. Co-founder conflicts often come down to two people competing for the same visible role. Yang and Filo divided along the line between building and explaining, and both treated the line as an asset. Filo's indifference to visibility, shown in the Datsun, the floor, and the missing shoes, gave Yang room to be the face without anyone suspecting a power grab.
Note what happened when Yang moved into operations. The CEO job pulled him toward the engineering side of the line, the unglamorous work of deciding what to cut, and that was the half of the partnership he had always relied on someone else to carry.
Tactic: If you have a co-founder, write a one-page split of the visible and the invisible work, and revisit it whenever either of you starts doing the other's half.
Principle 4
Use the median user's modem
At the peak of the boom, when his stake was worth billions, Yang browsed the web on a 28.8k modem so he would understand what an ordinary user experienced. He flew coach. He ate at Taco Bell. These details have often been read as humility. They are better read as method. A product built for "ordinary netizens" needs a founder who keeps feeling ordinary friction.
Michael Moritz made the business case in 1998: "The mark of any great company... is that management is not distracted by material success." Competitors were "nibbling at Yahoo! from every direction," he said, "so the moment you get diverted, corrosion sets in." The modem was a guard against corrosion, a deliberate refusal to let wealth change what he could perceive.
The lesson goes beyond consumer internet. Every leader's experience of their own product degrades as they get senior, because their access, their equipment, and their staff all smooth out the edges. Yang's answer was to deliberately keep himself at a disadvantage.
Tactic: Once a month, use your product the way your least-advantaged customer does, on their device, their connection, and their plan, and write down three things that annoyed you.
Principle 5
Give the brand a wink, and protect it with punctuation
Yang and Filo named their company after Swift's word for brutes, "rude, unsophisticated, uncouth," and pretended to stand by a pompous backronym. The irreverence was the point. In 1999 MIT Technology Review credited "Jerry Yang's irreverent tone" with helping make the web accessible "to people who didn't consider themselves computer-wise." A name that laughs at itself tells newcomers they are not being tested.
Then the founders made the wink defensible. Faced with existing trademarks for barbecue sauce, knives, and canoes, they added an exclamation mark, a legal fix that turned into the most recognizable part of the brand. Personality was protected by a technical solution. Yahoo!'s marketing would later tell people to "live life with an exclamation point," but the mark started as a filing strategy.
The lesson is that brand and legal strategy aren't separate departments. The founders who treated the trademark problem as a design problem ended up with a better brand than the one they would have had with the plain name.
Tactic: When a legal or regulatory constraint blocks your brand, treat it as a design brief and look for the version where the workaround becomes the signature.
Principle 6
Bet on the person in the market everyone else is ignoring
In 1997 Yang met a government tour guide at the Great Wall. In 2005 he directed $1 billion and Yahoo! China into 40 percent of that guide's company. Yahoo! later realized about $7.6 billion from a partial sale and another $9.4 billion in the IPO. Eric Jackson called it "the best investment an American company has ever made in China."
The bet rested on a contrarian view Yang later stated outright: Silicon Valley "looked at China as they're just going to copy, they're not going to innovate," and so missed the "battle-tested entrepreneurs" coming out of a "cut-throat" market. Yang had grown up as an outsider who learned the dominant language faster than people expected, and he was well placed to recognize the pattern in someone else.
He calls himself "the luckiest person in the world." The luck was in the timing. The judgment was in giving up control of Yahoo! China to a local founder, admitting that an American company couldn't win there by itself. The most profitable decision of his career was, in structure, a surrender of control.
Y
Two Kinds of Deference
The same instinct, to adapt to a market you cannot dictate to, produced very different results.
| Decision | Year | What Yang deferred to | Outcome |
|---|---|---|---|
| Hire Tim Koogle as CEO | 1995 | His own inexperience | Compounded |
| Hand-pick Terry Semel | 2001 | The need for a dealmaker | Mixed |
| Provide Shi Tao's account data | 2004 | "Local law" | Cost |
| Invest $1B in Alibaba, cede Yahoo! China | 2005 | A local founder's advantage | Compounded |
| Reject $31, then hold at $37 | 2008 | Large holders and his own attachment | Cost |
| Step down as CEO | 2008 | The board and the market | Mixed |
| Found AME: "nothing like Yahoo!" | 2012 | His own track record | Compounded |
Tactic: List the markets your peers dismiss as derivative, then go meet the founders there in person and take the tour they offer.
Principle 7
Price the conscience before the request arrives
The same deference that made Alibaba possible put Shi Tao in prison for ten years. Yahoo! gave Chinese authorities the account data and Yang defended it in the language of compliance: "we have to comply with local law[s]." Over the next several years that position brought a Reporters Without Borders label of "police informant," a congressional rebuke calling earlier testimony possibly "deceptive," civil suits, a settlement, and a lawsuit filed in 2020, years after he had left.
What makes this a playbook lesson and not only a cautionary tale is the sequence. The company appears to have had no prepared position when the request came, so it answered with a legal category in place of an ethical decision. Afterward, Yang did what crisis managers rarely do: he apologized in person to the prisoner's mother, settled with the families, set up a human rights fund, wrote to the Secretary of State, and funded a museum documenting the prison system involved. The repair was real. It was also far more expensive than a policy decided in advance would have been.
The general principle is that any company operating across jurisdictions will eventually get a request that is legal where it's made and indefensible at home. The time to decide what you'll do is before it arrives, while the decision is abstract and nobody's name is attached.
Tactic: Write and publish your response policy for the three government requests you most fear before your first international launch, and get the board to vote on it.
Principle 8
Kindness is a value, not a decision procedure
Steve Jobs told Yang he was "too nice to be CEO" and advised him to fire half his vice presidents. Yang didn't. A colleague put it exactly: "It's his caring about the people and the company that make him both great for this job and difficult for the job." The hundred days passed and, in Mark Mahaney's words, "no cows were slaughtered." When the 1,000 layoffs finally came in January 2008, they came alongside higher spending, the stock dropped, and Microsoft moved.
Yang's own definition of niceness is worth keeping: "I think about whether I am treating people the way I would want to be treated. I don't like that asymmetry even though you can get away with that in a position of power." That is a sound ethic. It is not a way of deciding which businesses to close. The mistake is letting the discomfort of an asymmetric decision delay the decision. The delay itself becomes a harm, spread across everyone who has to wait.
The answer isn't to become Jobs. It's to separate how a decision is made from how it is carried out. Kindness belongs in the second part: the severance, the explanation, the dignity, the cafeteria announcement given with tears if that is what's honest. It doesn't belong in the first part, as a veto.
Tactic: For any painful cut, set a decision deadline that can't be moved and is kept apart from the execution plan, and spend your empathy on how it's executed, not on whether it happens.
Principle 9
The other side's walk-away is a real option
Eric Jackson's defense of Yang is the most useful analysis of the Microsoft episode because it is honest about what everyone expected. The consensus was to hold out. "After all, isn't it Negotiation 101 to never take the first offer?" Major holders wanted $40 and would have taken $36 at worst. Then: "What no one saw coming was Steve Ballmer pulling Microsoft's offer."
That failure of imagination is the lesson. A counterparty offering a 62 percent premium looks committed. Ballmer's May 3 letter shows a buyer who had come to believe Yahoo! would damage itself during a hostile fight ("burn the furniture") and who valued the target, as changed by its own defense, at less than the price. The $4-a-share gap between $33 and $37 cost the shareholders more than $20 a share within six months.
Every negotiation includes the chance that the other side leaves. Strong negotiators price that chance directly and don't assume it is near zero because the other side seems to need the deal. Need changes. Stock prices change. A buyer's view of what you would do in a hostile process can change in one meeting.
Tactic: Before each round of a negotiation, write down the probability that the other side walks, along with your value if they do, and refuse any counteroffer whose expected value is below that number.
Principle 10
Don't let attachment set the price
Nocera's open letter was cruel and partly unfair, but his central sentence holds up: "It's not your baby. It hasn't been since 1996." Several observers noticed the same thing. "I can't imagine Yahoo without him," said David Kenny. "It's his baby," said Ellen Siminoff. Yang's own memo of resignation closed with "bleed purple." Ballmer said Yang had no interest in the deal. An executive said Yang's first question as CEO was whether Yahoo! could stay independent, and that he quickly answered yes.
Love for a company is a founder's greatest advantage when the company is small and its greatest danger when the company belongs to other people. In 2008, the strongest pull on Yahoo!'s asking price may have been the founder's wish to avoid selling at any price. That is not a crime. It is a bias, and biases need structure to contain them.
The structural fix is to give price-setting to someone with no emotional stake. Independent board committees, outside advisors with clear instructions, and a stated walk-away number agreed before talks begin all serve this purpose.
Tactic: If you founded the company, recuse yourself from setting the final price in a sale, and agree in advance on the number at which you will recommend acceptance.
Principle 11
Scale yourself, or step aside, twice if necessary
Yang said this himself in the late 1990s, and it is the best sentence in the record: "To me, building an organization that scales smoothly is the true test of an entrepreneur. Often what it comes down to is how well the founders continue to scale themselves." Yahoo! grew from 49 employees at the IPO to about 14,000 or 15,000. The question was always whether its founder could grow with it.
He stepped aside twice. In 1995 he did it voluntarily, early, and on his own terms, and it worked. In 2008 the board pushed him, the decision was described as "mutual," and it was late. The difference was not that he had less self-knowledge the second time. The cost of leaving had gone up, because the second time meant admitting that the return had failed, and the delay added to that cost.
The lesson is to treat stepping aside as a repeated decision with a schedule, not a single crisis. If founders review their own fit against the company's next stage on a calendar, they can make the call while they still control it.
Tactic: Once a year, write a one-page memo to your board answering one question: is my current role the best use of me at this company's next stage? Ask them to answer it too.
Principle 12
Define the second act by what you refuse to repeat
AME Cloud Ventures started with a negative rule: "anything that looks and smells like Yahoo! we won't do." Its other two principles, invest early and invest in deep tech and data, follow from the first. The man who built the defining consumer portal of the 1990s chose to stay away from consumer internet. "I missed being close to entrepreneurs at the beginning," he said.
This is the reverse of how many successful operators approach a second act. The tempting move is to repeat the playbook that made you famous. Yang treated his own past as a set of known biases to avoid. The portfolio that followed, including Zoom, Wish, Evernote, Wattpad, and others, was built away from the territory where his instincts had both won and lost.
He also went back to the role he did best. As an early investor, board member, and trustee, he is again the strategist and evangelist, the Chief Yahoo without the Yahoo!. The second act corrected the first by getting the role right, not by trying the CEO job again.
Tactic: Before starting your next venture, write down the three businesses most like your last one and make them off-limits for at least five years.
Free playbook
Get The Business Model Playbook
58 business models, one visual page each: how the money flows, the metrics that matter, and who runs it. Free when you join the Faster Than Normal email.
Free. No spam. Unsubscribe anytime.
Part IIIQuotes and Maxims
In their words
— Jerry Yang, late 1990s, quoted in GoldSeaTo me, building an organization that scales smoothly is the true test of an entrepreneur. Often what it comes down to is how well the founders continue to scale themselves.
— Jerry Yang, Village Global, 2019I don't really think about whether I'm nice or not. I think about whether I am treating people the way I would want to be treated. I don't like that asymmetry even though you can get away with that in a position of power.
— Jerry Yang, Fortune Brainstorm Tech, July 2018I've always thought of myself as the luckiest person in the world because of the timing of my investment in Alibaba.
— Jerry Yang, after the November 2007 congressional hearing and settlementAfter meeting with the families, it was clear to me what we had to do to make this right for them, for Yahoo, and for the future.
— Jerry Yang, memo to Yahoo! staff, November 17, 2008all of you know that I have always, and will always bleed purple. i will always do what I think is right for this great company.
Maxims
- Order is the product. In a chaotic domain, the one who decides where things belong becomes the gatekeeper.
- Hire against your weakness early. A founder's honest self-assessment is cheapest before anyone else demands it.
- Split the visible from the invisible. Durable co-founder pairs divide explaining from building and don't compete for the same spotlight.
- Keep the slow modem. Leaders lose touch with their product as they rise, so build in friction on purpose.
- Turn constraints into signatures. The exclamation mark began as a trademark fix and became the brand.
- Look where others dismiss. The best bet of Yang's career came from taking seriously a market his peers saw as derivative.
- Decide on conscience in the abstract. Write the policy before the request arrives with a name on it.
- Be kind in execution, not in delay. Postponing a painful decision spreads the harm and doesn't reduce it.
- Price the walk-away. A large premium is not a commitment, and counterparties can and do leave.
- The company stops being your baby at the IPO. Love built it, and structure has to keep that love from setting the price.
