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When Yahoo founder Jerry Yang received a call saying that his fierce rival, Microsoft, wanted to buy the company, his initial reactions were outrage and rejection, writes Michael Jackson.

Yet Yahoo has underperformed in terms of share price and trading performance, and the offer by Microsoft was generous, being significantly higher than the previous day’s share price.

The bid prompted Google to start talks with Yahoo. While it’s obvious that any deal here would be vetoed as anti-competitive, one suspects that prejudice against Microsoft has gained the upper hand.

Now I am not saying that Yang is wrong to reject the bid, but I bet you anything that emotion or – dare I say it – prejudice played a large part in the decision. Nor can you necessarily blame Yang; after all, Microsoft has been a massively aggressive competitor for all software and internet-based companies for over two decades.

Understanding Yang’s reaction is one thing, but that doesn’t necessarily make it right. Yahoo is a public company and the board has a duty to consider any offer for the company with as much detachment as possible.

When I was young and impetuous, I was a non-executive director of a small listed property company. The business had performed well, but some two years after its IPO it was still hovering around its float price. Then along came an offer from a private hotel group that wanted a listing and some additional cash, which they could generate from selling some of our properties.

The rest of the board were for the deal. I was against because I was not being offered a board seat on the combined entity, and I felt that some dirty tricks had gone on behind my back as I was the last to know about the deal. So what did I do? I tried my best to scupper it and (for once) succeeded.

But I was completely wrong. It was a good deal for us and, had we accepted, we would have probably got a good 25 per cent uplift. Instead, we limped along for another 12 months and sold out adequately, but certainly not well.

Like Yang, I was acting in my own interest rather than in the interest of all shareholders. I’m sure I’m not alone – human nature being what it is. But there are lessons to be learnt for the businessmen who really want to succeed:

• When taking over a small public company, always make sure that you have got all the target company’s directors, including non-executives, on board. At the moment there are a lot of interesting small Plcs around on AIM at very good prices, so this could be an interesting area for potential acquirers.

• When hiring, people are often prejudiced by age, sex and colour. Now I am not a human rights agitator but confess to finding it difficult to accept that really bright individuals in their early 30s have the experience to deliver big results. However, I know I am wrong because this is exactly the age you want for an executive at many early-stage technology businesses. Interestingly enough, there is also a prejudice against hiring people from other business sectors or business disciplines.

• Don’t constantly focus on competitors. Some businesspeople spend all their time reacting to the competition and not enough time developing their own initiatives. In general, a lot of businesspeople are prejudiced against their competition, not really analysing what is good about them and adopting their best attributes.

• Don’t stick to old technology or business models just because they have always worked in the past. Not charging for something that has always been free because ‘we never have done’ is not good enough in today’s competitive environment.

• Sourcing products or services from overseas is another area in which some companies left it almost too late. Many didn’t realise that if they did not go to low-cost overseas production while their competitors did, it was only a matter of time before the competition won out.

Misplaced prejudice is as bad in business as it is everywhere else in society.

Michael Jackson is chairman of Elderstreet Investments, the leading technology venture capitalist which he founded in 1990. He was formerly chairman of Sage, the FTSE-100 accounting software group with which he was closely involved for over 20 years, since its unquoted days. He is also chairman of PartyGaming, one of the largest online poker businesses in the world.