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In this video, I cover why Cathie Wood is extremely bullish on one opportunity which she believes will 130X within the next 10 years.
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Link to the interview used in this video: https://www.youtube.com/watch?v=NN5zTgUfwQs
Cathie Wood has successfully spotted many short-term trends before. She predicted that commodities would crash, and commodities did indeed crash, as lumber prices are already near pre-bubble levels. Not only that, but Ark Invest ETFs have also rebounded as she predicted following the correction that she also warned about a couple of months ago. On the other hand, Cathie is even better at predicting long-term movements. For example, she spotted the start of the internet in the 1980s before the dot-com bubble and predicted the growth of all five of Ark’s innovation platforms. Today, Cathie Wood is back with one of the boldest predictions in her lifetime. In this video, I will cover how Cathie thinks that one sector is about to 130X in size and pave the path for an explosion in several separate sectors.
Innovation is not a new occurrence and this isn’t the first time that new products replaced older ones. As someone who studies innovation, Cathie Wood recognized a pattern with all innovative products, which is the S-Curve. Essentially, S-curves describe the shape of the innovative products from when they are first introduced to when they destroy their old, inefficient counterparts. As demonstrated in this graph, slow growth occurs when the new product is worse than the old one, but as costs decline and innovation occurs, then growth accelerates before slowing down again. At the beginning of the S-curve, not many people recognize the potential of the new product. For example, Cathie spotted the earliest version of the internet when she looked at industries that no other analyst wanted to look at. By design, new products initially have a lot of doubters, just like how EVs did a decade ago. The S-curve is an event that has happened many times already with the telephone, electricity, the internet, air conditioners, dishwashers, microwaves, and many other products. S-curves clearly aren’t new to the United States or society as a whole. However, Cathie thinks that this time it is slightly different because innovation platforms are converging together to accelerate growth to a whole new level. According to Ark Invest, the five innovation platforms in our current times are blockchain technology, genome sequencing, robotics, artificial intelligence, and energy storage. What you’ll notice is that not only is each platform replacing old sectors, but the platforms are also merging with each other. For example, genome sequencing is converging with artificial intelligence and robotics to replace the way we see diseases. Cathie believes that these sectors are going to work with each other to accelerate the pace of each S-curve. It doesn’t end there though, as innovation platforms have to have doubters in the beginning as I mentioned earlier. In Cathie’s own words, stocks have to fall through the cracks due to a misunderstanding of what’s going on. An example of this is genomics because not many believe that genomics is our future, and rightfully so, as most of us are not genome experts to start with. This is all going to tie together very soon.
There are many sectors where the current innovation platforms overlap, but there’s actually one sector in particular that Cathie sees as the epitome of all innovations. That sector is autonomous driving. You might have some preconceived notions and may even think that autonomous driving is decades away. These types of biases are not a surprise at all. In fact, just like the beginning of all S-curves, autonomous driving is worse than us humans driving, which means that there’s slow growth and a lot of doubters. The autonomous driving market as of 2019 is estimated to be valued at $54 billion. By 2030 to 2031, Cathie Wood believes that this market will be worth $7 trillion in annual revenue, which is almost a 130X increase. So why is she so confident in this prediction? First of all, autonomous vehicles are just becoming better and better every month. The moment when autonomous vehicles are 2 times better than humans is where the initial fast growth of S-curves begin. At first, not everyone will believe in autonomous driving, but as autonomous vehicles become better and better, the adoption rate on the S-curve will explode. The question shouldn’t even be whether autonomous vehicles will become better than humans. Rather, the question is a matter of when autonomous vehicles will be superior to humans.
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