Winners Curse

The other day I spotted ( On TV - sipping a cold Bud) a rather relived Vijay Mallya watching Yuvraj Singh pulverize the hapless Delhi Daredevils bowlers in their first game of the IPL at Sharjah. Yuvi had been bought by Mallya for the Royal Challengers Bangalore at a staggering INR 14 Crores and many felt that Mallya had lost it and overpaid for an ageing, overweight yesteryear hero at the IPL auction. Warren Buffet, for many years the richest man in the world and quintessential super investor offers us some sage advise - "Stay away from auctions", he says, simply because in the ensuing excitement we tend to over call, spend too much and regret our decision later. The 'Winners Curse' has caused grief to many. The person who wins a bid at a stupendous price eventually is left looking foolish when he/she realizes that they have overpaid. Mallya faced fair flak for his spending on Yuvraj Singh. How does one mitigate the winner's curse? Buffet offers excellent advise - he says, " Decide on your maximum bid, reduce it by 20 % and do not over step that mark". Simply walk away from an auction if your price is not met and congratulate yourself that you were not left holding the can at the end of it all, because that winning smirk on your face can melt away pretty quickly when the mallet pounds or the penny drops. As for Mallya, what with his King Fisher Airlines and the ensuing brouhaha I hope the deal on Yuvi pans out well and RCB is not shortchanged. For you and me, tread warily when you choose to head to an auction, because the Winners Curse is real and ruthless!