In episode 570 of What Bitcoin Did, host Peter McCormack welcomes on Cathie Wood, CEO and CIO of Ark Invest to discuss her thoughts on the current macro situation, her investment process, and what Bitcoin can bring to the world.
Read our notes below to learn more.
Cathie’s Investment Process
Studied under Arthur Laffer in university, began working in asset management as a researcher.
In 80s and 90s research was prioritized in asset management, investors became more passive following dot-com bubble, GFC.
Cathie started her own firm to combat the lack of research and invest in innovation.
Indexes won’t be a good place to invest if the world experiences technological breakthroughs, which Cathie thinks will happen.
Thoughts on Innovation
Anything that takes a consumers time is competing with other services or apps who do the same.
Metaverse movement is brewing, but VR hardware is facing friction.
Will take years for Facebook to create metaverse, maybe 5 years.
AI and NFTs can be a great match to enable new possibilities for content creators.
She is interested in what Elon Musk could do with twitter.
How Ark Invests
Ark identifies tech at it’s core and tries to understand learning curve.
They look for tech that can go mass market and expand.
They use Wright’s Law: for every cumulative doubling in number of units produced, costs will decline by significant percentage for each technology.
Current market conditions have harmed Ark portfolio.
It takes a while for wallstreet to notice innovation, but truth will win out.
Innovative companies outlast rises in interest rates, and shorter investment time horizon for investors.
ARKK ETF averages down and concentrates into highest conviction stocks.
Fed’s Effect on Markets
Both BTC and Ark haven’t hit new lows recently, while S&P 500 has.
Towards end of bear markets, Cathie’s strategies have begun outperforming.
Ark wrote an open letter protesting Fed’s unanimous decision to raise rates.
Velocity of money will start falling again, M2 may come in below 3% year over year.
This means GDP growth would be flat or negative.
In this environment, Ark outperforms because its companies have higher revenue growth.
Thoughts on USD and Inflation
In 1985 foreign governments decided to sell USD together; same thing is going on now.
USD will lose its competitiveness; global trade will drop off.
USD is exacerbating high costs foreign countries are experiencing, fed has acknowledged this.
Core CPI (consumer price index) is high, but headline CPI and PPI (producer price index) is negative.
Some commodities have also fallen in price.
Gold and copper price peaked two years ago.
Thoughts on Macro Issues in the UK
Cathie is a disciple of Arthur Laffer supply side economics, supports cutting taxes as it would distinguish UK from Europe.
Peter
UK could be a center for BTC since it isn’t under EU regulation anymore.
How Cathie Discovered Bitcoin
Ark started with 4 tech platforms: genomic sequencing, robotics, energy storage and next generation internet.
Old colleague brought up BTC in 2011, Ark wrote BTC paper in 2015 in collaboration with Arthur Laffer.
Arthur Laffer approved of BTC at $250, said it had the potential to grow to the size of the monetary base.
Ark bought $100k of BTC via GBTC (Grayscale Bitcoin Trust), since ETFs can only own securities.
Eventually there will be a SEC commissioner who approves GBTC ETF.
There will be regulatory arbitrage, companies will move to other countries.
BTC is the first global, private (meaning no government oversight), digital, rules-based monetary system.
Crypto includes:
Bitcoin, the money revolution.
DeFi, the financial services revolution.
Digital property rights, the next generation internet revolution.