Folding : Slide 17

The key element for portfolio management is thinking about folding projects, not holding projects. Projects come to a life of their own and are a legacy endowed to last forever. But, if we treat the research and development program like a night of poker, we abide by the following rules because poker is a game of folding, not betting. In poker, you always play the cards you have: you never play against the pot: you never bluff. It is also important to have enough money to be able to last the evening and not bet your entire stake on one hand. You will succeed by utilizing the law of large numbers, betting the hand you have, folding often , and only betting on those that you think will win.

Some good ideas can be had from warfare. Guerrilla warfare, as used in the Revolutionary War and Vietnam, is a warfare of attrition against the enemy's patience. There are several examples I would like to use. During the start of the Vietnam peace negotiations in Paris, all the Americans and Westerners got a hotel room. The Vietcong went to Paris and purchased a house. They were there to stay. The other story is, when equipment was sent down the Ho Chi Minh Trail, it took many months to get to the other end. The question was asked of the Vietcong and the North Vietnamese, "Do you realize that when you put a truck in this end, it may take a year to get to the other end?" The answer was, "Yes, but if we do not put them in this end, they'll never come out the other end." Research and development projects have to be numerous, put in the pipeline, maintained in the pipeline, and continuously pushed through the cycle, even though it may take many years for an incipient R&D program to succeed. Multiple programs will give products every month, every quarter, or indeed, in some cases, every week. The latency from inception to completion, however still stays long, The key element is multiple projects, continuous effort, and managing by resource, not by goal.

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