Cathie Wood's Latest Interview: Investors Changing Wall Street are Betting on Bitcoin and Artificial Intelligence
Original Author: Nicole Casperson
Original Compilation: Luffy, Foresight News
Cathie Wood, the iconic investor behind ARK Invest, was asked a question she had never been asked before. It was a Monday afternoon in July, and this energetic 67-year-old lady, despite having just flown from Los Angeles to St. Petersburg, Florida the previous night, was full of energy. She went from one meeting to another, showcasing her strong drive.
During our recent Zoom conference call, I asked her who taught her the most about money. It was a seemingly ordinary question, but in the media scrutiny and high-risk investment world of urgent market expectations, it was a refreshing inquiry that revealed a deeper truth about this highly acclaimed fund manager - she remains a very down-to-earth person.
"This is the first time I publicly answer this question, my mother," Wood declared. "While my father was proud that she never needed to work, she worked wholeheartedly to take care of the family. He called her the best economist in the world."
Wood's parents had humble origins, immigrating from Ireland to the United States and settling in Los Angeles. Her father, who came from a military background, did not receive a formal college education, but he instilled in her a spirit of innovation; her mother, on the other hand, was thrifty and ensured that they never lacked basic necessities.
Today, as the founder, CEO, CIO, and star stock picker of ARK Invest, Wood has made waves in the investment world. ARK Invest is an investment management company with nearly $24 billion in total assets under management. Her flagship Ark Innovation Fund has achieved an average annual return of nearly 45% over the past five years, demonstrating her formidable expertise in fund management.
Cathie Wood speaking at the Milken Institute Global Conference held on May 2, 2022, in Beverly Hills, California
Market Outlook for 2023
Wood took a moment to find some numbers on her desk and then continued to share. Because it's Cathie Wood, we can't proceed with the interview without first dealing with numbers.
"What's interesting about the current market performance is that if I had told you at the beginning of this year, or if you had told me,..." she began, "that large-cap tech stocks would take off and outperform the S&P 500, while healthcare stocks would face negative impact, and performance of mid-cap stocks would lag behind most indices, I would have thought we would perform poorly."
Her words were full of the weight of experience. She knew that the market conditions could be unpredictable and ever-changing. But there was pride in her voice as she revealed, "On the contrary, our performance has even exceeded the Nasdaq 100 index. These are early signs of the comeback for actively managed funds."
To validate her claims, Wood delved deep into the data and used it to illustrate the returns of her investment strategies. "As of last Friday (July 21st), our flagship product has grown by 53.4%, and our genomics strategy has grown by 31.5%," she stated with precision.
"The S&P 500 index has risen by 19.2%, the Nasdaq index has risen by 34.7%, and the Nasdaq 100 index has risen by 41.5%. Despite the healthcare industry as a whole only seeing a 1.1% increase this year, our funds have remained resilient with a growth of 31.5%."
As she further delved into their performance, her excitement grew. She emphasized the success of their small-cap strategy, which has soared by 12% despite the challenges faced by the sector. Her pride was evident in her voice as she knew their unique active management approach was paying off.
"We are very pleased with this," she asserted, "but we also want to convey this message: this is the best active management."
As the conversation shifted towards market conditions and interest rate fluctuations, Wood's analytical thinking kicked into high gear. She weighed the impact of interest rate hikes on their long-term strategy and acknowledged the challenges brought about by increased uncertainty in the past two years.
"The market seems to have factored in the interest rate hikes," she continued, "and we believe that the hikes are nearing their end, and the market seems to agree."
In July, ARK Invest started seeing new capital inflows, indicating that their unique strategy was attracting the attention and trust of investors. She likened the market's volatility to the waves of truth, rising and falling with the tides of investor sentiment and interest rates.
Having experienced prosperity and downturns, ARK Invest has weathered the storm. As she reflected on this journey, she reiterated her commitment to the vision that led them to where they are today. "We know who we are," Wood proclaimed, her voice steady. "So, I won't let any party influence me. We focus on what matters and keep moving forward."
Optimism Backed by Research
Since its establishment in 2014, ARK Invest, under Wood's leadership, has built a business that reflects her core beliefs in the form of ETFs providing stock investment portfolios.
Wood doesn't settle for being surrounded by "yes-men." Instead, she relishes the challenge of intellectual games and curiosity, which guide her to seek different perspectives and think beyond traditional norms. She knows that their success relies on a core principle - research.
"Our research is based on first principles," she explained. "We started with a clean slate, knowing nothing. Then we picked up a blank piece of paper and delved into various possibilities. We questioned the prospects of self-driving cars in 2014. Is it true? Is it even possible? The existing benchmarks were not binding for us."
She emphasized that the responsibility of ARK analysts is not to divide by industry, but to divide by technology, and they span 14 different technologies, all of which are industry generalists. People believe that these technologies will cross industry boundaries and expand to the mass market.
"With this belief from research, I am convinced of what we are doing," Wood admitted. "I sincerely believe that we are doing the right thing, and our approach is unique. What surprises me is that there are not more companies emulating our approach."
When she talked about their research principles, it was clear that she saw the power of sharing their research findings. But even Wood was still surprised by the company's extensive attention on social media.
Their social strategy, including social media and social distribution through collaboration with financial technology platform Titan, enables them to interact with a broader audience and gain valuable feedback. ARK Invest's YouTube channel has 545,000 subscribers, where viewers can regularly listen to the company's insights.
"Many people say it's crazy for us to openly share our research findings," Wood said with a smile, "but they haven't seen the incredible value we have gained in return. Founders, venture capitalists, and professors have reached out to us, and we have benefited greatly from their perspectives and criticisms. It's like having an ongoing conversation with innovators and critics."
Putting ARK Invest's research on the center stage has also opened doors for collaborations for the company. In September 2022, Titan announced a partnership with ARK Invest to launch ARK risk funds to retail investors on Titan.
She stated that even during the regional bank crisis in March, ARK Invest's fund flows remained stable. "Our first significant success came from MosaicML, one of the earliest companies we included in our venture portfolio, being acquired by Data Bricks at five times the price we paid in September of last year."
Wood is not only interested in profits but also wants to help the companies in ARK Invest's portfolio attract talent and prepare for the next round of funding or IPO, describing it as a "genuine win-win situation."
In a world where short-term thinking often dominates the financial landscape, ARK Invest's long-term vision sets them apart. For Wood and her team, it's not just about chasing short-term gains, but about striving for goals.
"We look at companies in a different way," she asserts. "We want to see them actively investing in their own future, even if it means sacrificing short-term profitability. The opportunities of emerging technologies like artificial intelligence and autonomous taxi platforms require a different approach, and we are ready to embrace it."
Her words are confident and introspective, leaving a deep impression. "Hope for a beautiful new world has become very short-term," she shares, and admits that her pioneering investment approach will inevitably experience ups and downs.
Lule Demmissie, CEO of eToro US (also another prominent woman in the finance industry), is attracted by the long-term commitment of blockchain technology to provide a fair competitive environment for global investors, which is similar to Wood.
"This does not mean that the road will not be bumpy and that the industry will not mature," she said in an email. "Market cycles are inevitable, and any investment perspective should be carefully considered rather than blindly optimistic. But the differences in perspectives and prospects create the market, and Cathie brings a different perspective."
Bitcoin Idol
Cathie Wood gestures during her speech at the Bitcoin 2022 conference held at the Miami Beach Convention Center in Florida on April 7, 2022.
Despite working on Wall Street for 45 years and in portfolio management for over 30 years, Wood only achieved idol status in 2020. She made bold investments in innovative companies, believing that these companies would shape the future and create a fair competitive environment. These bets ultimately paid off. With the spread of COVID-19 and the spiraling economic collapse, her ARK Innovation Fund achieved a remarkable return rate of 150%, making Wood the focus of Wall Street.
Most importantly, Wood's optimism towards Bitcoin has frequently put her name in the headlines. She saw and shared with the world the potential of public blockchain early on. She previously predicted the rise of Bitcoin in 2020, and now she predicts that Bitcoin will reach $500,000 by 2026 and $1 million by 2030.
Bitwise Chief Investment Officer Matt Hougan stated in an email, "She supported this viewpoint through high-quality research, expanding the Overton window for professional investors to understand the future of Bitcoin. And the best part is, other mainstream voices including Fidelity and BlackRock have now joined her team. This is how progress is made in disruptive fields: first by a few, then by the majority."
It is worth noting that despite the controversies, her viewpoints have been proven right. She confidently predicted the surge of Tesla, which became one of the best-performing stocks in the past five years. And Bitcoin is one of the best-performing assets of the past decade.
Wood mentioned that all these accolades came crashing down in 2022 when ARK Invest's long-term strategy was "decimated" by rising interest rates. Critics claimed that Wood took on too much risk with her funds and that she was a trickster. Jim Cramer called her the "kiss of death," and there was even a dedicated fund set up to oppose her.
Despite being mocked for her beliefs, Wood remained undeterred. She recognized the negative impact of her contrarian decisions, all documented in tweets and news reports. In the whirlwind of market ups and downs, Wood reflected on a time when her company seemed untouchable.
"I can tell you, by the end of 2020 and the beginning of 2021, ARK was not doing anything wrong - and Cathie Wood was not doing anything wrong," she said, recalling the endless negative publicity against her and her company. With the conviction of an experienced visionary, she spoke her words on those exhilarating days: "Today we are the greatest GOAT of all time, and tomorrow we will also be a goat."
Her trust in her team and their unique approach was evident as she emphasized the difference between capital letters and lowercase letters in "GOAT," illustrating the distinction between public perception and their enduring confidence.
At the same time, she is also hailed as a trailblazer. A female representative who stood out in an industry dominated by Warren Buffett - her achievements, unwavering pursuit of excellence, and dedication to her work have solidified her position as one of the most influential women in the financial world, opening doors for the next wave of female leaders to reach the pinnacle.
Vik Sasi, Chief Strategy Officer at Manhattan West, stated that while Wood's investment style is polarizing, no one can deny her significant contributions to cryptocurrency.
Sasi expressed in an email, "She brings the unwavering conviction of a forward-thinking venture capitalist to the public markets and does not shy away at the first sign of volatility. She is a conviction-driven person - perhaps at the expense of some of her portfolio predictions made publicly - but ultimately has had a positive effect on asset classes and will continue to be a loyal champion for wider acceptance and adoption of cryptocurrencies."
In April, Wood and Ophelia Schneider, co-founders of 21 Shares (with Wood as a board member), jointly resubmitted an application for the ARK 21 Shares Bitcoin ETF to the U.S. Securities and Exchange Commission. Schneider co-founded 21 Shares in 2018 with others, aiming to develop complex cryptocurrency investment technology that ordinary people, like her mother, can use. The company is currently valued at $700 million.
Wood and Schneider both believe that innovation will be a safe category for investment. "Contrary to people's current notions," Wood said, "an example is when regional banks were collapsing in March, stocks were also facing a crash, but Bitcoin rose from $19,000 to $30,000 - that's a safe haven when fleeing from risk."
Michelle O'Connor, Brand and Communications Vice President at TaxBit, has worked in the cryptocurrency industry for nearly a decade and has witnessed the rise and fall of numerous innovators and challengers.
She said in an email, "I highly appreciate Cathie's unwavering commitment to this market as she and her team continue to focus on the potential future of cryptocurrency."
O'Connor said critics of Wood seem to have forgotten her position in the industry. "Having a public figure promoting cryptocurrency is one thing," she said. "Having an experienced thought leader who is not only very familiar with the recent and long-term potential of cryptocurrency, but also very knowledgeable about the underlying technology, is another."
A New Home for Innovation
In October 2021, Wood moved her investment firm's headquarters from midtown Manhattan, where most traditional financial institutions are located, to St. Petersburg, a coastal city on the Gulf of Mexico, making headlines once again.
Now, she is rotating her team at the St. Petersburg office, embracing the sunny location, resonating with her optimistic outlook, and embarking on a new era centered around education and community building on her new turf.
St. Petersburg is primed for growth, and Wood is prepared to be the first to bet on the future. To help stimulate economic development within the city, ARK invested $2 million to build the ARK Innovation Center, a 45,000-square-foot space that will serve as an incubator for over 50 companies and encourage an entrepreneurial spirit.
The ARK Innovation Center will also be the home of the Wood Innovation Foundation, which she launched over three years ago with a mission to create a new blueprint for education through an innovative lens.
A renowned study by ARK (for which Wood specifically hired educators) will become the sixth-grade science curriculum for all public schools in Pinellas County, a first in the Northeast.
"There's no better long-term way to bring about change than to inspire young children," Wood said. "New technology excites them, gives them hope and dreams, and allows them to live better lives than their parents."
About 60% of students in the Pinellas County school system come from economically disadvantaged families. Wood believes that innovation and technology can create a level playing field. "The dream is coming true, and I didn't even know it would," she said.
The Next Five Years
Wood always looks ahead, and in the next five years, she is considering how to make more people aware that we are entering a world of deflation, and "deflation is not necessarily a bad thing," she said.
"The decline in the price of new technologies means that more people around the world can afford to use them," she said. "So, we believe we are at the sweet spot in the ARK investment portfolio with our five innovative platforms: genomics, robotics, energy storage, artificial intelligence, and blockchain technology."
Wood believes that the convergence of these industries is experiencing exponential growth, and now they are starting to reinforce each other. "We believe this will lead to the market value of truly disruptive innovative technologies increasing from $15 trillion to over $200 trillion in the next 5 to 10 years," she said.
She went on to explain that it is too early to compare this to the dot-com bubble of the 1990s because the technology at that time was too expensive. She said that ChatGBT has greatly reduced the cost of developing artificial intelligence models, which cost $800 million in 2015 but only $4.5 million in 2020, and is rapidly decreasing.
If today's technology represents the dynamic and innovative environment of our history, then in order to fully utilize it, we need to reach a consensus among everyone. She said that as Wood enters her new era, she is ready to dedicate herself to the education cause in national schools and encourage people to invest in innovative fields, preparing for the "disruption of the traditional world order."
"Giving more people the opportunity to stand on the right side of change is the best chance we have to improve their lives."
