Risk of obsolescence

Emotional attachment to scrips can lead to sudden loss

Before the advent of mobile phones, for a brief period, we had pagers as a means of communication. They enabled only one-way communication. All those who had invested in equity shares of companies that made pagers would likely have suffered losses due to obsolescence of technology.

In the above example, technology changed and that made older technology obsolete. In other words, outdated.

There could also be a situation where a particular company does not adapt to newer trends. For example, in the automobile industry, the makers of the Ambassador and Premier Padmini (popularly known as Fiat) cars did not adapt to newer conditions and hence, were complacent. The Ambassador car was manufactured by Hindustan Motors Ltd. If I recall correctly, once upon a time it was a blue-chip scrip and part of the Sensex. Today, I doubt if the company is on any investor’s list of top stocks to watch.

There is also the example of watches made by Titan Company Ltd. When they were introduced, HMT watches completely controlled the market. However, Titan redefined ways of doing business. Some time ago, there was a business news item that said HMT Ltd. had stopped manufacturing watches.

An example of a manufacturer of metal tubes also comes to mind. All of us in our 40s and older recall that our toothpastes, medicines, etc., used to be packed in metal tubes until laminated tubes became an alternative. I don’t think there are any toothpastes available in metal tubes today. Companies that were manufacturing those metal tubes got outdated and unless they adapted to newer materials, they are probably out of business.

During the lockdown, cloud kitchens and food delivery companies gained momentum. Similarly, various online aggregators have also gained. Online shopping gave a thrust to digital payments.

They say, “The only constant in life is change”. This applies to products and industries also.