Editor's Desk

By Michael Hughes

Fun and risk with numbers

The halls of journalism are notoriously antagonistic toward the mathematical arts.

The battered, frumpy newspaperman (or woman) bragging about how he made it through college without touching algebra is almost a cliché. And remember, these are the folks you often rely on for news about economics and business.

This was always quite perplexing. Even from a young age, numbers were fun – that's how you picked out the best baseball players and best baseball cards to own. Age and a few college calculus classes – yes, I took them as electives – convinced me that much of civilization rests on the foundations of mathematics.

Many take basic engineering such as flush toilets and hot running water for granted. But Boy Scout camping trips and visits to developing countries revitalized my appreciation.

This brings us, in a roundabout way, to this month's cover story, "Adding Dimensions to Portfolio Management," which starts on Page 28. The crux of John Cogliandro's piece is a big, long equation. Well, at least it's a long equation for us English majors.

From time to time, we get manuscripts that abound in highly technical equations. Usually, they are encouraged to submit to one of IIE's five outstanding journals. (You can find information about them at www.iienet.org/publications.) But this article has only one, easily explainable bout of those squiggly lines.

What's more, it drove home an important, threefold point: Sustainable organizations must grow; growth comes from risk; force risk into your planning, be it for buying new equipment, research and development projects, mergers, operating budgets, partnerships, hiring or the plethora of other things executives and managers must decide.

Cogliandro's model embraces, rather than avoids, that risk. Busy managers can examine both developing projects and current products on a single, 3-D diagram that explains their projected or actual benefits, their likelihood of continuing or coming to fruition, and where they are in their life cycle.

So examine the forward-leaning, risk-adjusted future value portfolio management method. See what you think. And for the sake of your organization's future,take some calculated risks.

Michael Hughes is managing editor of IIE. Reach him at mhughes@iienet.org or (770) 349-1110.