The media and marketing industry, much like the financial industry before it, has become blinded by metrics that they don’t understand. Somehow,the notion ofaccountability has morphed intoa misguided quest for thesure thing in the form of ROI metrics for just about everything.
This is silly.In actuality, when we talk about marketing ROI, individual actions don’t account for much. What really matters is portfolio performance andthat’s what both buyers and sellers need to focus on.
To see why,we only have to look at the mess thefinancialindustrymade when theyignoredthe simple fact that every investment involves risks that can’t be quantified.
In 1962,Harry Markowitz published his paper onportfolioselection, which was to have great influence on the development of modern finance. The basic idea was that investors should not onlyseek returns, but look to minimize risk. This was a much different way of looking at finance.
Healso showedthat by diversifying, better returns could be gained with lower risk. In fact, buying an uncertain security could be a very good idea if the risks are uncorrelated with the rest of the portfolio.In effect, sometimes an investment which is volatile by itself can increase overall portfolio stability.