Cathie Wood (04:13):
In fact, when I was describing to people, friends, not in the business, the reason I wanted to start ARK and again, not in the financial business. So I had to explain it carefully. One response I got back was, “Oh, you mean the future of investing is investing in the future?” And I said, “Yes, you got it.” And I believe that’s changing because we are now in a period of disruptive innovation, the likes of which we have never seen, and it’s going to disrupt the traditional world order. So while the benchmark seem to beat active managers for nearly 20 years, maybe that’s a bit of an exaggeration, but it seemed like forever. Now we’re seeing truly active managers outperforming the benchmarks because they’re investing in the future and the future is going to dis-intermediate and disrupt the traditional benchmarks.

Trey Lockerbie (05:19):
So given that the focus of ARK is on disruptive technologies, some might think that the ARK investment approach is the direct opposite of the value investing style of someone like Warren Buffet, but ARK’s approach appears to have actually a few characteristics that might be unexpectedly similar, such as going big on high conviction bets, investing for the long-term, a circle of competence, clearly defined industry focus. Would you agree with this assessment or would you categorize ARK’s philosophy in a totally different way?

Cathie Wood (05:54):
No, I think you’ve hit on some very important points about what we do and the way we do it. At the beginning of last year, I remember saying frequently, if you give us a five-year time horizon, I will tell you with a straight face that ARK is a deep value asset manager. And I still believe that. Sure, we had great performance last year, as you said, but if our estimates are correct, given the number of exponential growth curves evolving at the same time right now, so five platforms, 14 technologies, I believe that as a value manager what we’re doing is discounting the future. Exponential growth is a very difficult concept right now because we really have never seen it without some perceived failure, and that was the tech and telecom bubble. That felt like at the time and I was right there, like exponential growth that would never end. And of course it did end in tears. It was too much capital chasing, too few opportunities, too soon.

Cathie Wood (07:08):
Now the seeds for everything we’re doing now were planted back then, they’d been gestating for 15 to 20 years. Now we believe and Amazon is the poster child for this, that there are companies that are going to be able to deliver 20, 30, 50, 60% compound annual growth in revenues during the next five to 10 years. This really has not happened in our lifetime and certainly not on the scale with all of these platforms and technologies. So I think that our role as a deep value manager is still very much in place.

Trey Lockerbie (07:50):
Okay. So are we talking about waiting for the companies to mature and scale to the point where they’re actually producing free cash flows? Or are we talking about the technology itself needing a lot of time to actually evolve?

Cathie Wood (08:05):
We’re speaking about two important characteristics of what we do. Back in the tech and telecom bubble, investors, they actually got it right. There were some momentous changes underway, and of course the internet was at the heart and soul of them back then. But what we saw was there were two problems, one, too much capital chasing, too few opportunities, too soon. Now why was that? The technologies weren’t ready. I mean, no one was talking about the cloud. And the costs were way too high, and to give you a good example of that one, DNA sequencing. To sequence the first whole human genome, it took 13 years of computing power and it costs $2.7 billion. Think about that, to sequence one person’s genomic profile. Today it takes roughly $600 and a few hours of computing power. Now, the first genome was sequenced in 2003, this is only 17 years, but during those 17 years cost came down and the technology improved dramatically.

Trey Lockerbie (09:26):
So what I’m hearing from you there is a little bit of Moore’s law, which most people know of as the computational power that should double every 18 months or so, but you also are touching on Wright’s law. And for those who don’t know, in 1936 and engineer named Theodore Paul Wright found that every time total aircraft production doubled, the required labor time decrease by 20%, this has become known as Wright’s law. And people might also find this concept in their everyday lives like driving to work without having to think about it, for example. So does ARK incorporate Wright’s law into its investment thesis?

Cathie Wood (10:05):
You’ve hit it. So Wright’s law is a relative of Moore’s law. Moore’s law as a function of time, as you said, every 18 months to two years. Now it’s two to three years and Wright’s law is a function of units. Wright’s law says, for every cumulative doubling, that’s the only thing I would change in what you said. For every cumulative doubling in the number of units produced, costs associated with a specific technology decline at a consistent percentage rate. So let me give you a few examples. Let’s continue with DNA sequencing. For every cumulative doubling. Now last year, I think we did roughly two point, no, this is going to be 2019. 2.6 million whole human genomes were sequenced around the world. Now, there are billions of people. So we are in the early days. So 2.6 meant that in the history of all time, if you add that to the sequences before, we had sequenced roughly altogether about four million whole human genomes in the history of all time.

Cathie Wood (11:19):
And it won’t be long before we’ll be at five now, so two and a half to five. Every time you get that cumulative doubling, those costs dropped by 40%. Think about it. That’s how you got from $2.7 billion to $600, and we’re going to a hundred, we’re going to a dollar and we’re going to 10 cents because the data is what’s going to become more important than the actual business of sequencing. And if you do the same thing for battery pack systems, for electric vehicles, for every cumulative doubling we’re at two million last year, so we’ll quickly be at four million and I should add all the other sales before, but we are so early here that we’re going to see a doubling in no time. For each cumulative doubling in the number of battery pack systems produced, cost declined by 28%. So within a very short time the average electric vehicle cost will be below that of the average gas powered vehicle cost. Already the total cost of ownership is lower.

Cathie Wood (12:28):
And if you do that, the same analysis on collaborative robots, that number is roughly 18% for every cumulative doubling. So these are rapid cost declines. And why is that important? Because with each cost decline, each step function down, a new technology unleashes waves of new demand. You can afford it. So back in the internet and the tech and telecom bubble, the technologies weren’t ready and the costs were way too high. Now we’re into from very low basis, everything that we are discussing and everything that we research is at a very low base today compared to where it’s going. The costs are declining dramatically, and the units are going to scale dramatically. And from a timing point of view, which many people say well, okay, you’re a thematic investor. I’ve known a lot of it or watched a lot of it, thematic investors and what they get wrong is the timing.

Cathie Wood (13:30):
Well, the reason Wright’s law is so useful to us is we know the cost decline. We can see if that’s on track, but the second question we have to ask to get the timing right is, for every percentage decline in price. So we are able to tell if demand is responding to cost the way we have been expecting, and if we’re wrong, we’ll have to figure it out. They started milking the cash cow, a thousand dollars per genome. Yeah, let’s just keep it there. Let’s keep it there. Now they’ve got competition as their patents are expiring. So in the innovation world, you can’t milk the cash cow. In fact, there should not be a cash cow and especially today because we’re in a world where winner takes most. And the reason for that is artificial intelligence. The companies with the most data and the highest quality data are going to win the game.

Trey Lockerbie (14:31):
So I find that incredibly exciting and also scary or intimidating because a lot of our listeners, myself included would consider ourselves to be “Value investors,” which is oftentimes referring to investing in very boring and reliable companies. But value stocks do have a tendency to underperform during certain economic environments. This last decade being the perfect example. And it sounds like you think this might be a secular trend, this under-performance might be a secular trend that’s here to stay.

Cathie Wood (15:03):
I think reversion to the mean, which value investing certainly is a play on that, happened regularly over the years when the world was not changing that rapidly. Now the world’s changing rapidly and many of the sectors that are going to be disrupted are what you would describe as value sectors, whether its financial services, a lot of health care that does not embrace these new technologies, sequencing, artificial intelligence, gene therapies, any industry associated with the internal combustion engine. So think about this, our entire infrastructure, the developer world’s infrastructure was built upon the internal combustion engine and that is going away. It’s going away, not only for environmental reasons. In fact, the reason it is going to go away much faster than anyone anticipated is how much battery technology is improving, cost-wise and performance wise. And so think about it. That’s autos, trucks, it’s rails, it’s ultimately airlines.

Cathie Wood (16:18):
So we see disruption touching roughly 50% of the S&P 500, and a lot of those are in the value space. What we believe is going to happen. I remember in the early days of our investing in Amazon at my last firm, I joined in ’01, we’re in the middle of the tech and telecom bust. We’re running away from one disaster after another and Amazon in 2000, we took our first position in it. And I remember announcing it at our morning meeting and other portfolio managers and analysts basically saying, oh, that’s ridiculous. Because the perception then was the internet had been nothing more than a figment of Wall Street’s imagination, and none of these companies would ever earn any money. And I remember back then saying to many in the firm, we’re value investors. I remember saying, “If I told you that Amazon’s revenue growth during the next 20 years was going to compound at a 25% annual rate and we dropped that into a dividend discount model, you would be buying this stock all day long.”

Cathie Wood (17:35):
And Bill Miller did, as you know, he was the value investor famous for buying Amazon. This is what I mean, deep value manager. Bill Miller, he basically, I guess he helped the world understand that if you have a long enough time horizon, some of these new technologies can be transformational. Online retail as a share of total retail today is still only, I think reaching 20% in the US. I don’t even think it’s there yet. Think about that. That’s when S curves go into overdrive and many value managers think they are sure that these retailers are in bargain basement territory, and online has done as much damage as it’s going to do. We don’t think so.

Trey Lockerbie (18:26):
Well, you’ve touched on a couple of the platforms that ARK Invest is focused on. I’d like to just step back and give you an opportunity to talk about all five of the platforms and how they came to be.

Cathie Wood (18:36):
They are … And before I tell you what they are, I’ll describe why they are innovation platforms from ARK’s point of view. They meet three characteristics. One, they’re technologically enabled and follow declining S curves. So that’s Wright’s law. Two is they cut across economic sectors and very quickly, by the way we present in one of our decks how quickly electricity cross sectors, it was very narrowly defined in the early days, and then wham, a big surprise. And we think because of this phenomenon, that traditional research departments are going to have to reorganize if they want to invest effectively in innovation, how are they set up right now? Very siloed, by-sector, sub-sector, even sub, sub-sector, and yet these technologies are going to evolve much more rapidly on these companies because they’re cutting across sectors. So if you’re very siloed and technology really has very little to do with what you’re doing, healthcare is a great example of that. You’re not really looking for the ramifications of healthcare.

Cathie Wood (19:54):
Each one of our analysts is extremely comfortable with technology. They have domain expertise, which is becoming deeper by the day, and they are in effect generalists around each innovation platform. We think that’s how research departments are going to have to reorganize, at least to pursue innovation style investing. So we’ve got Wright’s law, we’ve got cutting across sectors. And the third characteristic for these platforms is they are launching pads for more innovation. So DNA sequencing has been a launching pad for CRISPR/CAS9 gene-editing. Why? Well, in order to edit a genome, you have to understand where the mutations are. Until we sequence a genome, we cannot understand that. And in fact, we cannot understand mutations, which are the fundamental cause of disease at all. So healthcare is moving from guesswork because we didn’t have the science and knowledge and technology toward science and technology impacting healthcare decision-making.

Cathie Wood (21:09):
So now the five platforms, I’ve given you a preview with DNA sequencing. DNA sequencing, foundational, will transform healthcare. Energy storage is foundational. I just mentioned how it would disrupt the internal combustion engine and all the infrastructure associated with it. Robotics, costs are coming down to the point where robots and particularly collaborative robots. So think robot arms on an assembly line, workers will train them to take their jobs. And as we move back into a labor shortage, and we believe we will, those workers will be overseeing robots and their wages can go up. With increased productivity, can come increased wage gain. So robotics critically important here. Artificial intelligence. We believe that artificial intelligence is going to impact every line item of the income statement and the balance sheet, and that any company not embracing it for their own use and gathering as much data, not just from internally, but externally is going to be in harm’s way.

Cathie Wood (22:24):
And then finally, blockchain technology. Blockchain technology, many people associate blockchain technology with Bitcoin as we do. So Bitcoin is little b, blockchain technology or Bitcoin, that technology is capital B. And so we do believe that starting with the financial services sector, blockchain technology will be quite disruptive. The name for that today, or the shorthand name for it is DeFi, decentralized finance. And we’re seeing very early days, but amazing progress, amazing progress. I’ll just say, when we started the firm, we had four platforms. The last platform we broke into artificial intelligence and blockchain technology, because we think both of them are going to be quite profound in their ramifications. We originally called the category next generation internet, but we believed each of these should be broken out because they are going to be foundational going forward.

Trey Lockerbie (23:32):
Of the five platforms, which one excites you the most?

Cathie Wood (23:35):
Well, I think the one that is still the most misunderstood and it’s because of what I mentioned earlier, technology and healthcare have never gotten along really. And what I mean by that is in the financial markets. Technology analysts didn’t want to follow healthcare at all because it was too highly regulated, too slow moving. Healthcare analyst didn’t want to follow any technology because it was too fast moving and too volatile. So two different types of “DNA” in the market. Now we have a situation where technology is going to take over health care. And I still don’t think people understand how profoundly this is going to take place. I sometimes use an analogy and I don’t mean to make light of it, but just to help people understand how profound this is.

Cathie Wood (24:27):
So in the early days of advertising, so Mad Men, the CFO or the chief marketing officer would say, “I know that half of my advertising works, I just don’t know which half.” And now we know because of Google and Facebook and Twitter and all of the social networks, Snap. And so we’ve got a lot of precision there now. Today we can say, and it’s probably even more true than it was for advertising. I know that my healthcare spending works, I know that some of it is working, I just am not sure what is working. And in fact, until very recently, we couldn’t associate mutations with diseases and we’re at the earliest stages of this. I mean, you had the odd one, but it was guesswork before. It was just pure guesswork. We could not identify a needle in a haystack. We could not decipher the three billion lines of code in the genome, it was impossible and now it is.

Cathie Wood (25:36):
Now we can identify mutations. And why is that important? A mutation is the earliest manifestation of disease and so we are going to not only be able to identify the mutation, but thanks to new technologies like gene-editing, we will be able to edit those mutations. We’re in the earliest days, first human trials, we’re seeing the first cures for sickle cell disease and beta thalassemia, it is working. And until the last year, yes, there were trials in China that suggested that it was working, but the FDA would not accept those trials as evidence. So now we’re having human trials in the United States and we’re seeing cures and the woman, Victoria Gray famously has walked out of her trial one day and into an NPR studio and said, “I’ve been cured, I’ve been cured.” And a man who had beta thalassemia, he used to have 17 transfusions, blood transfusions per year. He hasn’t had one now in, I think more than 12 months, think about that.

Cathie Wood (26:55):
These are what they call functional cures, very early days. And I don’t think that investors understand this. I remember three years ago saying, “Wait a minute, there are three companies that have the foundational patent for CRISPR/CAS9 and we’re seeing diseases being cured in mice and in non-human primate. And yet these three stocks together collectively weren’t even reaching $5 billion in market cap. Today they’re roughly, I just did that calculation, 20 billion. Apple is a great company, 1.5, $2 trillion, but it’s not curing disease. And these three are $20 billion. So do you understand when I say the most either misunderstood or underestimated, I think is the genomic revolution and the foundation is DNA sequencing.

Trey Lockerbie (28:00):
Well, and speaking of misunderstood and underestimated, Tesla really comes to mind and you’ve become very well known for this prediction of a $4,000 stock price for Tesla. This is pre-stock split, five to one stock split. And you said this three years ago and it’s panned out like babe Ruth calling a home run, right? Even Elon Musk himself tweeted that the stock price was too high back in May of 2020 when it was around $750 a share, so what gave you the conviction in Tesla that even the founder himself failed to recognize?

Cathie Wood (28:38):
I think our focus on Wright’s law as the centerpiece of our research and the comfort of being able, even with quarterly reports to say, okay, are there any clues in that quarterly report? We understand everyone is focused on why a company, Tesla included missed gross margins by 35 basis points and the stocks down 30%. We’re looking at and look for clues, wait a minute, did their market share increase? Or what did they say about battery costs? Or what we’re interested in, did the demand for the cars go up as they cut the price while auto analysts are freaking out that they cut the price, they don’t understand that is what happens to new technologies. The price comes down and that’s why they proliferate. So having traditional auto analysts following Tesla was not a very good idea and still is not a very good idea.

Cathie Wood (29:37):
You need to have robotics analysts, energy storage analysts, artificial intelligence analysts, software as a service analyst. These are not auto analysts. We are very true to Wright’s law and maybe Elon didn’t study Wright’s law or take it far enough out, if he did. And in fact, this is why I think we have been so successful in becoming a part of the communities we’re researching. We are out there on social media and what are innovators doing? What’s Elon doing? Head down, trying to get that manufacturing facility to scale and produce these cars. He’s not there doing Wright’s law, we’re doing Wright’s law.

Cathie Wood (30:21):
And so I think that innovators have found our research very interesting because they’re heads down knowing they need to get this right and get it right as quickly as possible before someone else does. They’re not looking at Wright’s law. We are, they are taking our research though. And I think we are informing them and actually helping them in a way, size the ultimate market opportunity and how quickly it might be able to evolve if they’re able to scale the unit production.

Trey Lockerbie (30:54):
I’ve heard Elon Musk say that Tesla should be looked at almost like it’s 12 different startups. And if we do that, would you say that a $4,000, obviously pre-split stock price is appropriate and do you think there’s even more upside to be gained from today’s price?

Cathie Wood (31:13):
So that split price would be 800 and we’ve just crossed that, so that first estimate was back in the earliest days of ARK. We’ve done iterations since then that have put the price point higher. And because we’re about to put out another one, I think in about a month after our big ideas report comes out. So stay tuned for that, which will inform this question importantly, but anyone who looks at our ETFs, where we have to disclose our holdings at the end of every day, they will see that Tesla is still the largest holding in our flagship fund. So that should give you a sense that we think this story is well on its way, in a way, but has just begun in another way.

Cathie Wood (32:04):
After all, total auto sales are in the 85 million range globally. Last year there were two million electric vehicles sold. We think that’s going to 40 million in the next five years and we’ll take more than half or at that time, auto sales in total will probably be lower than 80, so they’ll take up to a half of sales by then, think about that. That’s five years, two to 40, that’s a 20 fold increase and Tesla is on the Vanguard of this movement.

Trey Lockerbie (32:39):
Well, another holding I noticed in your autonomous technology ETF is Baidu, which appears to have this support recently of the Chinese government behind it. And they have their own autonomous taxi, AI and service. Do you think that could hinder Tesla’s performance, especially in China moving forward?

Cathie Wood (32:57):
It’s very interesting. We recently looked at Baidu, they have an open source platform called Apollo. And so it’s up on GitHub. You can see what they’re doing. Now, they tell us that that is an older version and they’ve advanced it significantly for their own purposes, but they’re just trying to show the way for everyone. And what we’re noticing is, and what seems to be important to them and to China from an infrastructure point of view is vehicle to vehicle communication. We are actually thinking about that a little bit in the same way we’re thinking about LIDAR. There’s this vociferously debate out there about LIDAR. Tesla’s not using it, it’s using many other sensors, but relying importantly on radar, whereas almost everyone else is using LIDAR, which again met with quite a bit of derision out there in the day when we were fighting that controversy.

Cathie Wood (34:00):
We believe LIDAR is a crutch, you used a driving example earlier, I’ll use one here. So when I first was studying to get my license, I had all these facts in my brain about what I needed to do when I stepped into that car. And when I stepped into that car, now 16 years old, I was paralyzed, paralyzed by all of this stuff going on in my head. And as you said earlier, there are only a few things you really have to know and learn. We think that’s what LIDAR will do. It will stop the exponential trajectory of autonomous, we think. We think vehicle to vehicle might be doing the same thing. And that’s what Baidu is spending some time on. In fact, as we were talking about this very recently, I asked, I said, “Could this actually give Tesla a competitive advantage in China because if its not going to be using the LIDAR crutch and it’s not going to be the vehicle to vehicle crutch, which it doesn’t feel it needs. Might it just be able to sail through?”

Cathie Wood (35:07):
I doubt the government will allow that, but I will tell you just back to Baidu, we are impressed at how much they are doing on Apollo. Now, what had hindered Baidu stock was the base business, their search business, they’ve been losing massive share, but that might be finding a bottom here. So it’d be nice to have that as a tailwind, as autonomous takes off. China is determined to be number one in any innovation category, it’s been a part of their five-year plan for two plans now. Xi Jinping believes that this is going to catapult them to the number one economy in the world, as well as the demographics, of course. And we wouldn’t be surprised. They are very serious when it comes to innovation.

Cathie Wood (36:00):
One of my concerns has been, if they’re not joining the open source world, generally, Apollo is an exception for them at Baidu, but they’re not joining the open source world generally, certainly not the Bitcoin blockchain world. Are they going to be dealing themselves out of some important innovation? And I think they will be. And so we’ll have a bunch of innovation specific to China and they may lose their way a little bit in the rest of the world. But that being said, we are impressed with what we’re seeing on Baidu. And if what they say is correct, and that’s a bit outdated, then we’re even more impressed.

Trey Lockerbie (36:37):
Well, we have a tool on our website called the TIP Finance Tool. And what it does is basically does all the heavy lifting to do an easy internal rate of return calculation for you. And I was looking at Baidu and the financials look incredibly strong, but sometimes you hear about data coming out of China being somewhat suspect. And since it’s a foreign stock that might not be as familiar to US retail investors, how did they gain confidence investing in something like that? And how do you account for yourself?

Cathie Wood (37:08):
There are differences in accounting to be sure and differences in ownership structures as well. So if you think you own a share of stock, you really don’t own a share of stock, you own the right to participate in the profits of the stock, but there’s a different setup. What we have found and we’ve hired an Asian innovation analysts because we see how much innovation is taking place and how quick the uptake is in China. So we believe that there’s a big role for an Asian innovation analyst, we’re probably going to have two. As we are getting more involved with Chinese companies, what we see is a great openness to us, because we’re known for innovation and wanting to innovate, they answer questions in a very straightforward way. And the kinds of questions we are asking are often around technology.

Cathie Wood (38:01):
And we can tell if there’s any fudging or not, or if they really know what they’re talking about. And I would say even down to the IR people, it is interesting to me how much, how knowledgeable they are about technology. Elon Musk said, “Every mayor of every city in China is very tech savvy.” So I think this technology or this innovation streak is being cultivated widely and deeply. So yes, I’ll tell you what numbers I don’t believe at all. I don’t believe there are macro economic numbers at all. As I said, I have a background in economics and so I don’t believe any of them. I believe we learn more from multinationals who tell us what’s going on in China, but when it comes to these technologies and these companies really trying to innovate, I think we’re getting more straight talk. I think they also want to learn what we know as well. So it’s a good give and take.

Trey Lockerbie (39:08):
I’m trying to figure out the secret sauce here behind ARK Invest. And we talked about your focus on the future. I’m also curious about the company culture. One billionaire we study a lot on the show is Ray Dalio and the culture at ARK appears to embody similar traits to Bridgewater Associates, “Radical transparency approach.” Basically it’s just this focus on transparent communication and the search of truth. I’m curious if you relate to that. And also if you may incorporate the idea of meritocracy principle in which you’re getting the most credible feedback to make the best decision.

Cathie Wood (39:43):
Yes, I use radical transparency as well, but ours is different. First, everyone knows what we’re thinking. Our research is there for the having, it’s up on our website and our theme developers who basically participate in our brainstorming sessions on Fridays, they can even look into our models. And as you know, we are starting to put some of our models up on GitHub. My understanding is Bridgewater has built or Ray has built an incredible company, an institution. My understanding is they’re not quite as free with their thinking in that way. In fact, I would say quite the opposite and bordering on secretive in many ways. So I think we’re very different that way. Internally, I think we are very transparent. If you walk into our office, we’re all on one floor. Now it’s going to be two floors, but we’ve got stairs. We’re building stairs, there will be a link.

Cathie Wood (40:44):
And so the communication lines are completely open. And to be honest, we don’t go through the measures that I hear that Bridgewater goes through in terms of reinforcing this. However, if I, or anyone in leadership or anyone in the firm at all, we’re very flat, I should mention that, we’re very flat. If anyone feels that there is some dishonesty taking place or that’s too strong a word of winging it, or however you want to frame it, we are searching for the truth. So that is absolutely, we’re aligned with Bridgewater on that.

Cathie Wood (41:24):
And if we feel that anyone is veering from that search in any unhealthy way, we’re going to call each other on it and they’ll call me on it too, for whatever reason. I mean, I absolutely insist on that pushback. In fact, the people in the firm, I get along with everyone in the firm, I’m very happy to say, but I think those who push back at me the most, we have the, shall we say closest relationship, just because I know I can trust they’re going to catch me if I seem to be veering off in the wrong direction or seem to think I know more than I really do know. So it might be a little different that way. I think we call each other out because we want to get to the right answer as fast as we possibly can. And I do think, and you’ll hear these words thrown around at many organizations, but our trust in one another and our respect for one another, those are very high. I’ve never been in an organization where the trust and respect has been this high and it’s rising. It’s rising.

Trey Lockerbie (42:34):
Well, that’s why I bring it up because from running my own company, I’ve found how hard it can be to foster a culture like that with honest and transparent feedback and maintaining sort of a flat and level organizational structure. So I commend you for that. I think if you can accomplish that, it’s a tremendous competitive advantage. I’m also curious about how diversity plays, because looking at the team, it seems very diverse over at ARK, and I’m wondering if that’s intentional or if that’s just a by-product from what you’ve built today.

Cathie Wood (43:02):
Well, in the early days of ARK, the people who were attracted to ARK and even in the very early days, there was some self-selection. They wanted to do something meaningful. Most of them never intended to join the financial world. That was the dark side of the earth. And so I had to convince a few, if they really wanted to change the way the financial world works, make it a better environment and a more productive environment, then come to ARK and help me do this. Now, I have found that in the early days, the self-selection was so diverse, it was beautiful. It was so diverse and had this notion of, I want to do something that makes a difference. I didn’t know I was going to think about the financial world, but what you’re doing is interesting. They also were hungry and ambitious in the good sense, the really good sense.

Cathie Wood (44:02):
They saw a place at ARK where, because of collaboration, they actually would have a voice that was as strong as mine. Certainly when it came to research and investing, they would have a voice. If they thought that I was doing something wrong and this was in the early days, they would tell me. And I always ask those questions. You cultivate that kind of culture by saying, okay, tell me where I’m going wrong. We do not want to make a mistake. This is too big a call for us. And I think there was extra urgency in the early days too, because I funded the company myself for three years, three more than three years. And so everything takes all of the sense of urgency then. So I didn’t want to be wrong and I wanted to be called to the mat for any mistake that I was making.

Cathie Wood (44:56):
And I think, and that’s how the culture started. And that is still how it is. And you’ll find immigrants, there’s a lot of self-selection there because we have been willing to sponsor people who wanted to work in the United States and live in the United States. So we have immigrants and we have, if you go to our website, diversity, probably unlike any other investment firm, asset management firm, financial services firm out there. Now, we’re only 29 people, I’ve been asked the question, was it your objective to build a diverse organization? No, it was not. This is what has happened and it is accruing to our benefit.

Cathie Wood (45:42):
The one thing that has surprised me as we’ve scaled in these years was what I just described is true. Still very true, lots of immigrants, but what I’m finding on the research side, the investing side, the research side is, and we’ve remarked about this saying, what can we do to change this, 97% of the applicants or positions in research, and we have three open now or soon to be open, are from men. And we don’t understand it. So let this be a call out there for women who have domain expertise, love the innovation that we’ve centered the firm on, read our research, see if it excites you and come on, sign on.

Trey Lockerbie (46:41):
Well, another part of the diversity piece is the diversity of feedback. And you guys are out there open sourcing your research, putting it on social media and attracting a lot of attention in that way, which is great. But sometimes social media can become an echo chamber. So I’m wondering, how do you account for that? How do you sift through the noise to find high quality feedback as opposed to something more pedestrian?

Cathie Wood (47:05):
What’s been fascinating about, and this has been much better than what I envisioned when I first thought about this open research ecosystem in August of 2012, I never dreamed that there would be so many innovators out there. We didn’t know Twitter was going to be our most prolific social network. At that time, it was tweens, teens and celebrities. So I really didn’t think it was going to be, I thought maybe LinkedIn and Medium, and some other social networks that were evolving, but Twitter has been the biggest social network for us. And we have found professors who weigh in on our research and say, and often it will be with a DM because they want an answer. They want to engage with us. So we’ve had professors from, on the battery front from Carnegie Mellon. He questioned, Sam Korus’s work on batteries or autonomous trucks or electric trucks, but autonomous as well.

Cathie Wood (48:17):
And he thought we had made a mistake in our model. He DM’ed Sam and now he has become one of our theme developers and they engage regularly. So we often will see DMs as these are people who are serious about research and want to understand how we arrived at some of our conclusions. Because first we will put out blogs, there are models to go with each one of them, but we don’t publish the models. We publish more the conclusions, which is what we think most people want anyway. And so anyone coming to us asking a modeling question, we do want to hear from them because they are battle testing our assumptions. And as it turns out, we were right on that particular one and we informed the professor about something he hadn’t or an angle from which he had not thought to approach the problem. That’s all it was, was a different angle.

Cathie Wood (49:13):
And he’s helped us get through chemistry and all the other nuances with battery. So I think DMs are a big way. What I love about it is if your feed starts getting clogged with political and other, just unfollow them, they’re wasting time. That’s the beautiful thing. You don’t have to follow them. And around the time of our, I guess, early 2019, when Tesla was cascading, I got the question, how can you deal with all of these people insulting you daily? And to be honest, I didn’t even pay attention.

Cathie Wood (49:52):
And in fact, sometimes when that happens, when we know we’re onto something big in research and the barriers to entry at Tesla being battery technology, their artificial intelligence chip, the miles of data they’ve collected, their over the air software updates to change performance, and each one of these gaps is growing, those insults basically tell me that these people are not doing the research. So why would I want to have anything to do with them? It is the ones who are really trying to understand where we’re coming from, who will DM us and actually ask very intelligent questions because they too are seeking the truth.

Trey Lockerbie (50:39):
Well, Cathie, I cannot thank you enough for coming on the show and talking to us about your ETFs. Everyone should check out ark-invest.com and look at the ETFs. See for yourself, they’ve been outperforming by a wide margin over the last year. Very fascinating. I really appreciate your approach. I really gained a lot of value out of this, and I think our audience will as well. So thank you, I hope we get to do it again soon.

Cathie Wood (51:03):
Thank you Trey so much. And thank you for doing all the homework you did. I was thoroughly impressed, so thank you.

Trey Lockerbie (51:12):
My pleasure. All right, everybody that’s all we have for you this week. Be sure to check out next week, Preston will be back with Stig, and Harry and Toby for a quarterly mastermind discussion that you won’t want to miss. If you haven’t already done so, please subscribe to the feed so that you get these episodes automatically right into your app on a weekly basis. We now have the TIP Sundays and the Bitcoin Wednesday shows. So until then, we’ll see you next time.

Outro (51:40):
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