A Conversation with Dr. Harry Markowitz

  Estimating   Manufacturing  

Dr. Harry Markowitz, of the Harry Markowitz Company and a professor at the University of California at San Diego, has been credited as one of the creators of portfolio management theory. In the 1950s, he wrote that a portfolio of diverse investments is more likely than individual investments to reduce risks and produce a higher rate of return. His Modern Portfolio Theory (MPT) revolutionized the way investments were viewed. With new tools for estimating risks and returns, investment managers were able to create funds designed to suit investors' individual risk thresholds while attaining desired returns. For his work, Dr. Markowitz was awarded the Nobel Prize in Economics in 1990.

Project Portfolio Management (PPM) arises largely from Dr. Markowitz's work in portfolio theory. The treatment of projects as investments, managing groups of projects in portfolios and overseeing their execution and value to the organization as a group is at the core of PPM. In this light, Dr. Markowitz gives us some of his thoughts about the application of financial portfolio theory to corporate project management.

gantthead: What are your thoughts regarding Project Portfolio Management (PPM)?
Markowitz: I'm not directly familiar with this management theory; my work has been primarily in the equities markets. The notion that projects can have expected returns, variances and covariances of …

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