What's Common Between Mahindra and a Mobile Camera

I came across an interesting thread on twitter recently. It amplified the fact that no event is isolated and many things have to come together for something to happen.

In today's world, among the most envied people are social media influencers.

They are far ahead of traditional professions when it comes to pay scale. In fact, this recognition is new. It has happened over the past 3-5 years.

Now my question is this... Are these social media influencers successful because of their creativity or should credit be given to technologies like the iPhone, Instagram, Facebook, TikTok, etc.

Hold that thought...

Back in the 1970s, most digital photography was done through a technology called charged coupled device, or CCD. The problem was the images were blurry and it would consume a lot of power.

But since there was no alternative, it continued.

However, during the same time, an imaging scientist Tsutomu Nakamura was working hard to do something better.

And in 1985 he succeeded.

Using the advancement in semi-conductor technology, he came up with something called as an active pixel sensor (APS).

This technology was way better than the CCD. It was orders of magnitude smaller and could produce better images at a fraction of the power. And it could be miniaturized.

All of us would have thought that such an advancement would lead to betterment in technology. However for some reason, this advancement was completely forgotten.

However, in 1993, in Pasadena, California, NASA's Jet Propulsion Lab, they were working on a problem. Most cameras that went to outer space, was still based on CCD technology.

Nasa wanted something smaller, but cheaper and less power hungry.

While working on this problem an engineer in named Eric Fossum and his future wife, Sabrina Kameny, stumbled on the work done by the Japanese scientist.

The team improvised on the technology to such an extent that it became possible to build a camera on the chip.

Suddenly, cameras were no longer big bulky devices. You could now reduce the camera to the size of a cell phone.

However, there was another problem. The problem of size.

The images taken by the camera were still so big, that a normal computer could only store 2 or 3 images. And until they could be compressed, it would have little practical application.

Back in 1983, in unrelated events, realising that imagery on a computer was the next big thing, a group of people at ISO, had already started working on a compression algorithm.

The team that worked on it was called the Joint Photography Experts group. And in 1992, they released the compression algorithm. They called it JPEG.

Suddenly you could reduce the images by 100 times, without compromising its quality.

Now that you had a technology which could...

1. Improve the quality of images drastically.
2. Mount a small camera on your phone.
3. Not worry about the size of the images (you could reduce the size by 100 times) which could be transferred to your computer (JPEG).

There was one piece missing in the entire jigsaw puzzle. The most important factor in any technology advancement which was acceptability. People still doubted the reason why someone would want to publish a photograph from a phone.

That too instantly. What would be its purpose? Why would someone want to do it?

That question was answered in 1997 in maternity ward in California. Serial inventor, Philippe Khan was working on a web photography solution called as Picture Mail.

And he wanted an image to test it. Around this time, his wife went into labour and was rushed to a hospital.

Standing outside, our man linked his phone to a camera, and uploaded a picture of his new-born daughter to the world, in what became the first camera- phone photo.

Suddenly, everyone realised that taking photos with a phone was revolutionary.

Social media influencers owe their success to all these people.

Now, let me relate this story to stocks. Let me give you an example of a company which I used to track during the early days of my career. It was around 2015.

Mahindra and Mahindra (M&M) had always been a strong corporate house. But the stock's performance was average to say the least. Just like any other passenger car or tractor company, their fortunes were dependent on the auto cycle.

While they were and have always been, the undisputed leaders in the tractor segment, the problem point was passenger cars.

Also, the biggest problem in my opinion was that M&M as a company was in to everything. Back then, the company had 150 subsidiaries.

Yes, 150 different business.

The cash cow which was the tractor segment with high ROCEs funded the losses of these subsidiaries and the product development of the passenger vehicle business. That was the reason M&M didn't get a high PE multiple despite the best corporate governance practices.

However, the situation has changed over the past 3 years, after Anish Shah took over as the MD and CEO.

So, what went right?

Just as a confluence of unrelated things was instrumental in making what digital photography is today, the same is the case with M&M.

The company's focus was crystal clear.

1. After a reasonable time for turnaround, if the subsidiaries didn’t make money or the profitable ones didn’t achieve a threshold ROI, it was time to shut them.
2. The focus was on design and revamping the entire range of passenger vehicles. I’m sure you must be aware how nice M&M cars look today compared to what they were 5-10 years ago.
3. The cash cow, the tractor business, was not used to fund losses of subsidiaries.
4. A rebranding of the organisation.

The confluence of all this factors led to a re-rating of Mahindra as a stock. In fact, the stock price has tripled over the past 4 years.

That's quite a task for a large-cap company and at a time when the auto cycle was down in the dumps.

If you want a company to outperform its industry and peers, a confluence of things is required.

As an investor one should find such companies to make disproportionate wealth. It can be in the form of management change or industry tailwind.

Most of the time, in my experience, it's in the form of a change in management.

Warm regards,


Aditya Vora
Research Analyst, Hidden Treasure