The Power of No: Profitable vs. Life-Changing Digital Asset Investments

An important question digital asset investors in general and domain investors in particular tend to overlook is precisely this one: do I want my investment to be profitable or life-changing? It is a more straightforward question in our industry in light of the fact that domain names are not commodities (even if some categories such as specific short domains are sometimes traded in a manner which indicates that they're perceived as commodities or at least close enough) but those who invest in other digital assets are by no means immune from it.

For example, the popular "HODL" meme of the bitcoin/crypto world illustrates rather well that a certain subset of the investor population intends to hold until their assets can be sold for truly life-changing amounts. After seeing fellow crypto investors have the foresight of getting in at let's say $50 per coin but deciding to book seemingly healthy profits at $500 or even more extreme examples (such as those who mined let's say 1,000 bitcoin on their laptops and ended up selling in the single or double digits for consumption-related reasons), these investors are determined not to settle for "profitable" investments and prefer to essentially either go down with the ship or only exit their positions should life-changing returns be on the table.

The Benefits of Saying No

In his recent DomainSherpa interview, Michael Saylor explained that the key to sealing the deal at $30,000,000 for revolved around rejecting a $22,000,000 offer and explaining to the then-potential buyer why the asset was indeed worth $30,000,000 or more. Now is obviously a blockbuster domain even among blockbuster domains but the exact same principle of saying no generated impressive sales for less stellar names, for example when Rick Schwartz sold the domain name to CNN for $750,000 back in 2008, easily one of the most impressive sales (perhaps THE most impressive one) in terms of the gap between how much the domain was worth on the reseller market at the point and the final sales price.

But did Rick Schwartz or Michael Saylor care about the reseller market valuation of their domains when negotiating? Of course not. They simply said no until the buyer was willing to meet them at an extraordinary price. People would have still congratulated Rick if he would have secured let's say $150,000 for the domain and the same way, would still have been a landmark sale at $10,000,000... yet the two investors firmly held on to their position. Few things are certain in the world of domain investing but this statement most definitely is: it's impossible to obtain $x if you do not ask for $x.

Why Is Saying No Difficult?

On the surface, simply saying no until you can sell an asset for life-changing amounts doesn't seem that difficult... but then, why don't more people do it? The answer to that question revolves around various dimensions of a person's existence in terms of economics:

  1. The "existing commitments" dimension or the fact that many investors have various financial commitments to stay on top of, anything from having to pay their mortgage to taking care of family members.
  2. The "emergency" dimension, which forces people to embrace the exact opposite strategy and liquidate assets at fire sale prices. A debilitating illness that comes along represents a very common example of why investors are sometimes forced to liquidate for... well, whatever they can get.
  3. The "panic" dimension or the fact that during perhaps a financial crisis, investors end up panic selling due to the fact that they expect prices to continue falling.
  4. The "consumption" dimension or the fact that some people simply choose to go on that fancy trip or get that expensive car. Some do so ignorant of the opportunity cost risks, whereas others are well aware of the fact that they might regret the decision later on but choose to accept this possibility and consume regardless.

For the reasons outlined above and many more, it tends to be difficult to say no in a manner consistent with the strategies of investors such as Michael Saylor and Rick Schwartz. So difficult, in fact, that for every example of an investor who held a blockbuster one-word dot com domain continuously since the nineties or a bitcoin investor who bought perhaps $100 per coin but hasn't sold a single unit, there are thousands upon thousands of examples of investors who didn't say no... either because they were forced to say yes by various circumstances outside their control or because they simply made a decision.

Can Saying No Be Learned?

This tends to be a tricky question to answer because at the end of the day, it's not so much a matter of learning how to say no as it is a matter of reaching a position financially speaking where saying no makes more sense. To put it differently, the most obvious strategy associated with increasing your tolerance with respect to refusing tempting offers is... as some might have guessed, net worth enhancement.

If you purchased 100 bitcoin at $100 each for a grand total of $1,000 and your net worth was $25,000 (with it being even lower for many of the young people who dabble in crypto), it will obviously be far more difficult to say no to $1,000 per coin than for someone who purchased the same number of coins at the exact same amount, yet had a net worth ten times greater. Therefore, "learning" how to say no becomes a lot more effective if it is accompanied by net worth increases. Does it sound obvious? Of course, because it is.

Can Saying No Prove to Be a Mistake?

It can indeed, and it is crucial to come to terms with the fact that there are few certainties in the world of investing. To illustrate why saying no and being ultra-aggressive in terms of price targets rather than booking profits earlier on can work against you, it makes sense to introduce the concept of survivorship bias. In other words, Michael Saylor and Rick Schwartz or any other success story for that matter revolves around people who "survived" and are now doing well. They are in the spotlight, people respect their success and naturally so!

But for every Michael Saylor or Rick Schwartz, there are countless others who regret their decision of being too aggressive when perhaps a "once in a lifetime" opportunity came along. Domain investors who for example said no to a 100x return, only to be forced to sell the domain at break-even at one point or another in the future due to being forced to do so by personal circumstances such as the ones that have been outlined earlier on in this article. To understand this issue in a meaningful manner and get the full picture, it is important not to limit ourselves to only reading case studies involving the "survivors" and instead, try to analyze the landscape from a wide range of perspectives.

Or to provide a data point (even if anecdotal evidence) unrelated to investing in domain names, there is the story of a crypto trader who shall remain nameless floating around the crypto Twitterverse and Redditverse who:

  1. Started out with $2,xxx.
  2. At the height of the 2017 bubble, traded himself to a $2,xxx,xxx net worth.
  3. Didn't take money off the table.
  4. Made trading mistake after trading mistake in the bear market and lost it all.
  5. Got a minimum wage job, raised $xx,xxx and started trading again.
  6. Lost it all again.

The purpose of such stories isn't scaring aggressive investors but rather pointing out that it can and in many cases does backfire as well. Make of them what you will.

To Refuse, or Not to Refuse?

... that is the question.

And the answer is that... well, there is no such thing as a one-size-fits all solution. The burden of figuring out what best approach is for your specific situation ultimately rests exclusively on your shoulders. Should you take impressive returns and tackle your personal finance problems? Should you take money off the table when a deal seems almost too good to be true but instead of consuming, invest that money in other digital assets?

The list of questions you should be asking yourself could go on and on. The purpose of this specific article isn't to convince you to join one proverbial side or another because again, the burden of figuring that out lies on your shoulders and nobody else's. Instead, its main goal is simply pointing out a few aspects which will hopefully help you with the decision-making process, aspects which constitute the conclusion of this article:

  1. The fact that you will never receive $x unless you ask for it and this will involve saying no.
  2. The most impressive deals/results will always be associated with people who have said no aggressively.
  3. Saying no can unfortunately also work against you and lead to missing out on opportunities that are never coming back.
  4. It's important to understand this dimension of investment-related decision-making by analyzing case studies involving both those who have succeeded and those who have failed, thereby reducing the likelihood of making decisions based on survivorship bias narratives.
  5. Your ability to realistically say no will, without a doubt, go up along with your net worth. It is far easier for someone who is financially secure to be aggressive in terms of price targets than for indebted or otherwise financially vulnerable investors.