Disruption: Much closer and much more Real than we think?

No amount of “advise” from well-meaning seniors/peers can be as hard-hitting and an eye-opener as hard-hitting evidence like this.

You are forced to sit-up and remove the “blinkers” in front of your eyes :slight_smile:

The message I took from both Prof Bakshi and Shri Vinay Parikh was to question very hard on the high multiples we are okay to assign to some businesses, without even giving a thought to how real or how close these businesses may be to disruption.

This was a rude wake-up call for all of us !!

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Even before this Video about the real disruptions (Tesla Electric cars in US Auto market, e.g.) was seen by us on the penultimate day, Vinay was hitting most of our long-term seemingly safe businesses, out of the park with sixers - some samples

Automobiles: You better take cover
Amara Raja: a favourite with some of us - jab normal car hi nahi rahega toh?
Suprajit: cables & acquisition of Phoenix lamps - outdated technology
and so on
Tyres may be the only automobile accessory known today to survive. Every other moving part is probable gone in 10 years :slight_smile:

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Disruption, that causes established businesses to go off the cliff suddenly, can come broadly from 4 main sources

  1. Technology
  2. Customer Preference
  3. Regulations

This is a very important project, we want to work on for next 6 months and form informed views on.
Hence this may remain a locked thread, till such time we have created a coherent but complete discussion flow. We do not want folks to clutter up this thread and/or get unduly influenced, either way

Please bear with us. We will keep populating with compiled Notes, and our original investigations/insights

Why have we put it up prematurely then?
Starting Food for thought for everyone, and a constant reminder for us to prioritiese

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e.g. on Pharmaceuticals, the long-term evidence is almost as conclusive as “Roti, Kapda aur Makaan”

Prof Jeremy Siegel in his book “Future for Investors” conclusively shows over 40+ years of Compustat Data in US, that the Top Long Term Investment Strategy has been to invest in Top Pharma, FMCG, and Tobacco companies.

I could relate to this immediately, and searched for what has happened in India, is there any documented study. Luckily Motilal Oswal Weath Creation Studies (in its 15th year then) came to my rescue. The MOST CONSISTENT wealth creators were again Top Phama, FMCG, and Tobacco Companies (if you excluded the IT pack …the bulk of the study period coincided with the Meteric rise of Inidan IT biggies).

So I would think again, on “Disruptability of Pharmaceuticals”, despite the enormous challenges that face the Industry. We need to think differently if some of our Indian companies have shown enormous skill in navigating the challenging territory so far …against all odds against Giant Innovators…will be naive to assume they are not preparing to deal/already dealing with Unknown/Known disruptive forces at play.

We need to think deeper, reach wider on Pharmaceuticals for sure.
Forgetting the Morality angle :wink: for a moment, Tobacco I stayed with very profitably from 2005-2014, with more than 20% CAGR. With the evidence/environment in India, conclusively deteriorating I gave up on Tobacco ( and ITC) in 2015.

Not for a moment, take this as my influence on “debunking Disruption”.
I am a very practical guy. I am concerned that more than 40% of Portfolio is in Pharma. I am the first one alarmed enough to scrutinise and sanitise my Portfolio.

The “Disruption Bulls” must continue their relentless pursuit of the truth too, and help ignoramus(es) like me READ UP more on Subject.

Everyone is encouraged to put up all types of Reference Material, that you think would be useful.
It will also be useful, if everyone can learn to argue on both sides - “The Skeptical” one and “The Realist” one and look for confirming and disconfirming evidence on both sides.

I have learnt to do that over the last few years; and I can tell you it is very very useful - enables you to make a decision, and live with peace, on subject.

Source: CSFB Report on Global Destruptive Technology March 2015

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Souce: CSFB Year Book 2015

While not fitting some investor morale, Tobacco business has survived more than 120 years with constantly creating wealth for investor.

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GoogleTalk of Daniel Kahnemaan on Thinking Fast and Slow - https://www.youtube.com/watch?v=CjVQJdIrDJ0

Came across this article from a search on “Disruption” in my RSS Feed Reader (InnoReader - Recommend as an alternative to Feedly Premium).

http://www.valuewalk.com/2016/08/disruption-the-companies-to-avoid/

The mention of the Credit Suisse report made me immediately search for it in google using the focused search terms shared during the meet.

site:doc.research-and-analytics.csfb.com + pdf

The 54th result (meaning on the 5th page) gave the actual report “The age of disruption”.

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1058629661&serialid=q9Cfg%2FtflZrtPm2ST0rHMqltrNaTGVxlKYuIEh4DYdQ%3D

Brief Summary:

As a result, we have collected the degree of business risk to each of the major disruptive forces for over c1,500 companies whose combined market capitalisation is similar to c75% of the MSCI AC World index.
Disruption is a fact of life, and it is not always positive for the disruptor and not always negative for the disrupted
History is full of examples of how new technologies disrupt existing industries and impact equity markets. For example, rail companies made up c50% of the US and UK equity markets in 1900. Today their sector weighting in these equity markets is minimal.

Future disruption likely dominated by three factors
■ First, we highlight the impact of globalisation. With China as the obvious mediumterm
threat and likely joined by India in the long term, we see continued pressure on
margins and reduced pricing power across a multitude of industries.
■ Second, we highlight technology. Technological innovation introduces new products
and services at a cheaper cost, which makes incumbents obsolete. Areas we see at
risk include both consumer end-markets as well as multiple industries (see Figure 34
for details) and the wider workforce as increased automation puts more jobs at risk.
■ Last, we highlight tightening regulation or government policies as key disruptive
forces. Stricter financial regulation, tighter environmental standards, rising minimum
wage policies and a greater focus on health-related policies all impact many
industries.

Who’s at risk and who’s not?
We refer to data from page 23 for an overview of the most and least exposed sectors and
companies, globally and by region. Figure 2 summarises the trends on a sector level. The
most and least exposed sectors are as follows:
■ Sectors that look most at risk from disruption include Energy, Autos,
Pharmaceuticals, Semiconductors, and Health Care Equipment.
■ Sectors that appear to be most insulated include Household & Personal Goods,
Transport, Telecoms, and Food, Beverage & Tobacco.

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Crazymama - fantastic, just for your efforts :v: :v:

Adding the additional term of disruption would have given me the PDF as the 1st result.

site:doc.research-and-analytics.csfb.com + pdf + disruption

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