Curiosity Week '21
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Today at a Glance
📜 Quote of the day: Building Character
📈 Market Highlights: Red and Greens
🗳 Talk of Product: User Interview
🏭 Company Review: Cipla
🧠 Mental Framework: Commitment and Consistency Bias
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Quoting a Great:
“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved.”
Helen Keller (GoalCast)
Market Highlights:
Major Global Macroeconomic events:
US FED raises rates by 75 bps (Link)
Indian GDP growth is expected at 7.5%; inflation to stay above 6% till November (Link)
Talk of Product:
User Interview
Once upon a time, there was an entrepreneur. He was stumped because he couldn’t figure out why the user time of the app he built was falling. He had over 150 million downloads when the smartphone market was only over 800 million devices.
When he checked his Weekly Average Users Retention numbers, it was about 37% and he was extremely proud of what he built, considering the industry average is roughly 15-27%.
But once he checked the average session time for the users, he was shocked to learn that the time was roughly 2 seconds. He couldn’t figure out why this could be the case.
He reached out to the users for feedback about the app and how he could improve it. During one session he asked what nudges the participants to open the app as he noticed that it average session time was extremely low. The participant candidly told the interviewer that they mistakenly open the app as they mistook the icon to be Facebook.
It was during this interaction the interviewer learnt about this issue and they made some fundamental changes to the application.
The app in this case was Bump which was sold to Google in 2013 and was later built into the behemoth Google Photos which we use today.
Company review:
Background: Cipla is one of the leading pharmaceutical firms in India. They have a global presence in over 80 countries. It was established in 1935 and has over 1,500 products.
The company has 3 verticals under which it operates:
Economy: The pharmaceutical industry in India is presently valued at ~$50Bn, which is expected to reach $65Bn by 2024 and $120Bn. India exports to Africa 50% of its requirements, 40% of generic demand in the US and 25% of total medicine in the UK.
The export growth of the sector is phenomenal, with it growing 103% in a decade.
The government has set up a Production Linked Initiative scheme to boost the domestic manufacturing of drugs. This initiative is ongoing till 2030.
Due to the pandemic, the R&D spending was increased drastically by the Indian drug producers to fill the void created by the Chinese drug export.
Financial Position: The company has been stagnant in terms of performance till the PILs introduction. Even during COIVD, the stock price didn’t show much deviation from its previous range. Lately, the stock price has almost tripled from its low in April 2020.
The company has steadily grown its top line and bottom line at ~9% CAGR and ~16% CAGR respectively. EBITDA has been growing in the average range of ~13%.
EBITDA Margins have been more or less very constant, however, the ROIC has steadily grown, indicating a profitable return on invested capital. PAT has been very constant.
Mental Framework:
Commitment and Consistency Bias
We have a desire to appear constant and committed to what we have said, or done in the past. If we have a belief about a certain thing, we rarely ever change it, but also in light of new information, we try to defend our beliefs because, at a certain level, we think the new information is attacking our belief and is not coherent with what we previously know.
Suppose, if we look at the sky and were told that in urban skies, the brightest object is the International Space Station (ISS), except the moon. Even if Venus is shining in the night, we’d look at it and mistake it as ISS and when someone points it out, we’d be defensive as that goes against all our learning.
This is very prevalent in almost every space we go. Be it office, classroom, or even our thoughts. If we have taken a decision, we tend to stick to it and even if it is wrong, we have the tendency to justify it so that we don’t have a social black mark.
We can overcome this bias by simply being more mindful. Not every decision or thought has to be right. Maybe at a certain point in time, it may seem appropriate, but in light of new information, we should course correct ourselves.