What Is a Pyrrhic Victory?
A Pyrrhic victory is a success that comes with great losses or unacceptable costs. The term may be used to describe a business move that has costs that far exceed its rewards, such as an extravagantly expensive hostile takeover bid.
- A Pyrrhic victory comes at an unacceptably high price to the apparent winner.
- In business, Pyrrhic victories often result from lengthy and expensive lawsuits or hostile takeover bids that succeed only at too great a cost.
- A prolonged lawsuit may result in a Pyrrhic victory, particularly when a business spends too much in legal fees while taking on a larger company with greater legal resources.
- The term gets its name from King Pyrrhus of ancient Greece, who defeated the Romans in battle but suffered huge losses in doing so.
Understanding a Pyrrhic Victory
The army of King Pyrrhus of ancient Greece defeated the Romans in battle, but only after suffering terrible casualties. According to the historian Plutarch, Pyrrhus said, "If we win another such battle against the Romans, we will be completely lost."
A Pyrrhic victory occurs when the toll on the winning party does not offset the rewards of success.
In the business world, Pyrrhic victories often occur in the courtroom when a company wins a judgment but at a cost that far exceeds any monetary rewards. This situation may occur when a business sues a larger company with more funds and a legal team at its disposal. Even if the smaller business wins, it may suffer great damage due to the expenses of a lengthy lawsuit.
A Pyrrhic victory may also occur if the buyout price to execute a hostile takeover escalates during negotiations or when an acquired company does not live up to the acquiring company's anticipated returns.
An even more straightforward example may be found in the corporate defensive strategy known as a poison pill. A company struggling to fend off a hostile takeover may deliberately take on a mountain of debt or dilute its own stock shares in order to make itself unattractive as a target.
The takeover of Time Warner by AOL in 2001 is a Pyrrhic victory for the ages in the business world. The merger of a then-giant of the internet and a traditional publishing titan occurred months before the tech bubble burst, erasing billions from the valuation of the combined company.
Pyrrhic Victories in the Stock Market
King Pyrrhus might have a pointer for stock market investors anxious to avoid a Pyrrhic victory: Don't overpay. Many investors jump right in after a short down period in the markets, pleased to buy shares of a stock that was considerably higher yesterday, or last week, or last month. Or, they see a stock climbing steadily and jump into it, thinking it looks like a winner.
They think they've won, but their victory may be short-lived. They have grabbed at the chance of a big gain without considering the equal or greater chance of a big loss.
How to Avoid a Pyrrhic Victory
Whether you're considering an investment, a lawsuit, or a career change, you can avoid a Pyrrhic victory. Think through the risks as well as the benefits of your actions before you make a decision.
Once you identify the risks, consider whether and how they can be limited.
Real-World Examples in a Courtroom
In 2001, Microsoft won a Pyrrhic victory in its antitrust case when an appeals court decided that the software giant should not be forced to break up. However, as a result of the case, Microsoft was deemed a monopoly, and as such, was subject to more intense regulations going forward.
In 2011, Hank Greenberg, former CEO of American International Group (AIG), filed a lawsuit against the U.S. government alleging that the terms of the government's bailout of his insurance company were harsher than those imposed on other financial institutions after the financial crisis of 2007-2008.
After four years, during which Greenberg is estimated to have spent millions of dollars on legal fees, the judge agreed with Greenberg's premise but did not award him any monetary compensation. Greenberg spent millions, got his Pyrrhic victory, and walked away considerably poorer.
Real-World Example in a Hostile Takeover
Early in 2000, the online company AOL announced a merger with the publishing giant Time Warner in a takeover valued at more than $160 billion. The acquisition was hailed by AOL as the deal of the millennium.
Shortly after the deal closed, the tech bubble burst. The new, combined company AOL Time Warner lost $200 billion in market capitalization over the next two years.
After years of trying to synchronize the operations of two distinctly different companies, Time Warner spun off its AOL holdings in 2009, ending what is considered to be one of the least successful mergers of all time.
What Is the Origin of the term Pyrrhic Victory?
King Pyrrhus, who died in the year 272, was the ruler of Epirus, a part of the Grecian empire. Determined to expand his kingdom, he waged war against various neighbors, rivals, and former allies. He was at war more or less constantly and often won because he was evidently willing to suffer enormous casualties to do so.
Pyrrhus is remembered primarily for lending his name to the Pyrrhic victory, which defines a win that comes at an unacceptable cost.
Does a Pyrrhic Victory Have Any Benefits?
You would certainly think so, given that people have been going for them for at least 2,000 years. The Pyrrhic victory is often sought by an underdog who has a slim chance of winning. Presumably, the underdog believes that it's worth the effort.
The Battle of Bunker Hill is frequently cited as a classic example of a Pyrrhic victory for the British. The British won that early skirmish with American revolutionaries, largely because the rebels eventually ran out of ammunition and were forced to retreat. But the British lost about 1,000 troops, compared with light losses on the American side.
The result was an enormous morale boost among the revolutionaries, and a determination to keep fighting. On the British side, General William Clinton is said to have remarked, "A few more such victories would have shortly put an end to British dominion in America."
What Is the Opposite of a Pyrrhic Victory?
There doesn't seem to be an English phrase that precisely expresses the opposite of a Pyrrhic victory.
The question was debated in an online forum, Stack Exchange. One suggestion was the word gambit. This is an opening move in a game of chess that is a deliberate sacrifice, usually of a pawn, in order to gain a compensating advantage later in the game.