We humans are terrible at predicting. We either overestimate or underestimate but rarely get the predictions right. For example, experts underestimated how electricity, aviation, mobile phone, social media will affect the world. And they overestimated and said population growth rates will exceed food production and therefore we will have constant famine and drought. India, they said, will not last as a country because we are the world’s most diverse country!

And this inability to predict afflicts both experts and laypersons.

I decided to share a few of the predictions that happened in our times. Even I have been wrong on several occasions.

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Tata Nano. When Tata Nano bookings were opened, there was a mad rush to get one. 200,000 people applied for one but only half of them would get one. People thought auto rickshaws would be dead and policemen thought the roads would be choked with Tata Nanos (they got the choked part right). 10 years after that magical launch, in 2018, Tata killed the Nano because of lack of sales. See my blog from 2018, here.

Online. In 2016, I remember reading an article which said that slowly restaurants, diagnostic labs and other businesses are all going online because of the high rental costs and because customers are all ordering via their smart phones. It sounded so convincing that even I thought this was going to happen. In 2023, there are still restaurants, there are still bank branches and more are getting added, there are still diagnostic labs where you can walk in for tests and so on.

Connected, Autonomous, Self driving and Electric (CASE). I remember watching a video by Tony Seba in 2016 where he predicted that – all cars would be electric, autonomous and connected. Sometime later he said that the data seems to indicate that he is even more bullish now. I look around and I see about 1 to 2% of the vehicles on the road electric.

I am not saying it will not happen. I have doubts that it will happen in the timeframe that most experts say it will.

Digital is divine. In 2016, the RBI introduced Unified Payments Interface. I remember discussing with a friend and he asked ” Is it evolutionary or revolutionary?”. Evolutionary as in, it will be a better version of what is already present and Revolutionary as it will be something that never existed before. Surely he was smart. But that day in 2016, he couldn’t see the exponential growth in UPI transactions.

Now, everybody says that Cash is dead while Digital is divine. In fact I asked my friends and family to guess what % of transactions were digital in India in 2023? The estimates range from 30% to 50%. The correct answer is 11%, only! To hide the shock, they say “wait for a few years and it will be many times bigger”. Or they say things like -“We are at an inflection point”.

Car ownership is dead. When Ola and Uber were growing like crazy in 2015 and 2016, everyone including me thought that car ownership is dead and in future…in fact the near future, we won’t need to own cars and instead use Ola and Uber. Today, car ownership is still as strong and car sales may be up one year and down another but the aspiration to own one is still very high.

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My humble submission to you is that we get super excited when experts present trends and forecasts. We humans want to believe something and if someone can package some such thought for us supported by data and expert opinions, why not?

Somebody asked me “kaunsa stock chalega?”. I was about to recommend an underwear company but he quickly asked “do you know any semiconductor company?”. So, apparently Semiconductor companies are the new Fintechs that can change the world. I asked: “What if owning underwear companies could be profitable without changing the world?”. He, of course, preferred chips over chaddis.

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Philip Fischer was a great investor and probably one of the early ones to present the idea of very long term investing. In his book (Common Stocks and Uncommon Profits) he metaphorically calls high margin businesses as “open jar of honey” that attracts bees. And this metaphor has often used for businesses that attract competition just like an open jar of honey attracts bees, simply because they are earnings supernormal margins.

One such business is Eicher Motors – the makers of Royal Enfield bikes. It earns many times the margins per bike sold than it’s competitors. And it is the most profitable 2 wheeler company in India and probably in the world. So naturally, competitors that earn little margins want a piece of the honey. So Bajaj has tied up with Triumph motors, Hero with Harley, TVS purchased Norton, Honda introduced Highness 350 and Mahindras have introduced Jawa and Yezdi. In fact when the launch of Harley and Triumph was announced, the price of Eicher motors’ shares dropped by some 10%! Surely, the experts must be right this time (about bikes that are yet to hit the roads)!

I am an investor in Eicher Motors and my friends like to rib me with the the jar of honey metaphor. Well, as I said we humans tend to overestimate or underestimate what can happen. And therefore the best thing to do is to keep an open mind (easier said) or form loose opinions that are subject to change. Imagine, the guys who sold Maruti Suzuki on the day the Tata Nano was launched in Jan 2008, and missed out on 10 X appreciation in share price since!

My current belief is that Royal Enfield enjoys a few competitive advantages such as a great brand name, a great recall, a large following, deep distribution etc. But there are always hungry robbers willing to go after this bank and anything may happen. Recent history suggests that robbers have failed to make a dent; that has not stopped them from trying again and again. If these robbers fail, other robbers will come in, again. ( Somehow, no expert has suggested how ChatGPT will take over biking; still waiting for that prediction.)

So, anything can happen. However the track record of experts at predicting hasn’t been too great and therefore I am not convinced that robbers will break in this time especially given that the bank is not lying still either. If they do, hopefully I’ll change my mind.

-Cheers!