189: From Vision to Valuation: Disrupting the Future - With Cathie Wood, Founder & CEO of ARK Invest

30:59Cathie Wood:It is so much more than that. But those are the risks we have to consider as well. That unit growth dynamic is critically important. So from the bottom up, we have six metrics that we think are very important to innovation companies. The first one is company people, so management and culture. And we need visionary leaders with a strong point of view about the way the world is going to work, probably because they have introduced the new technology and able to stand up to short term oriented shareholders, whether in the public market or the private market, and spend aggressively in the short term to capitalize on these longer term opportunities.

31:51Cathie Wood:So that's the first. The second is moat. What is the barrier to entry here? And usually it's some technology, sometimes it's patents, less so over time. More and more, it's becoming speed, speed at which the technology is taking off. And then there's execution. For us, execution does not mean did this company hit its operating margin to the decimal point? For us, it's more important is, is this company spending enough on R &D as a percent of revenues? And perhaps more important than that even is, are they spending these dollars in the right places? So to give you a good answer or example of what pulled us out of a stock, Toyota, you know, the EV market was Toyota's to lose.

32:47Cathie Wood:It had the Prius, right? But the government pivoted after Fukushima and basically said, we cannot support transportation on our grid. We're going to go to hydrogen fuel cells. We sold Toyota. We had already done the analysis saying that infrastructure is not going to scale like EV infrastructure. So that's execution. Products and service leadership, that's market share. That's sentiment. We get a lot of sentiment from our social media contacts. We give our research away, not when it's finished, but as it's evolving. And we get a lot of feedback, obviously. And we want all of that feedback, as long as it's constructive one way or the other, challenging us in particular.

33:34Cathie Wood:And then the last two are valuation. And we get a lot of questions there because people, many people who do not understand ARK think we'll pay anything for a stock. We will pay any price if it's in the right space. That's just not true. We, from a valuation point of view, make the assumption that whatever the premium multiple a stock has at the moment, that that is going to decay over the next five years toward a market multiple. So a huge headwind in terms of performance as valuation compresses. Our analysts and our portfolio managers have to believe that the revenue growth and margin expansion is going to overwhelm that margin compression.

34:22Cathie Wood:And then the last stage of analysis is thesis risk. What could get in the way? What could interrupt the unit growth of this company? Remember, unit growth is the most important variable. I mentioned politics can, regulation can, COVID did. COVID got in the way of all kinds of unit growth. And another technology disrupting our disruptors is another risk. So we're looking at thesis risk to help us size our position. So when we bring this up to the market, and you don't look at benchmarks, but most of us do, but it's about the constitution of that market. I think over the last hundred years, 70 companies have provided half of the return over bonds, but that's come down from 90.

35:11Now, do you think that it is shrinking partly because of passive, which may or may not be challenged when we get a recession and unemployment reverses a lot of those inflows? Because I think it was the Santa Fe Institute that said when Microsoft went public in whenever it was, 86, you become more dependent on intellectual capital, which increases your returns to scale.

35:33Cathie Wood:I do think indexation is one of the reasons for concentration in the markets. and, you know, the MAG-6 or the MAG-7 certainly prove that out. The indexation movement started, as I mentioned, in earnest during the tech and telecom bust, and even more so in 08-09. If we are right on the amount of disruption, you know, we have never seen this amount of technologically enabled disruption in history. You have to go back to the late 1800s, early 1900s, internal combustion engine, telephone, electricity to see a true technology revolution. If we're right, then there are going to be huge winners, but there are also going to be big losers.

36:25Cathie Wood:And they are in those are in the traditional world order. The world really hasn't changed very much in the last 125 years. and now we're going to see change and people are getting this idea because AI is moving so quickly that it is going to be very disruptive perhaps even to the Mag 6. I think Tesla's in the right position but the others have challenges and some are going to handle them well and some are not going to handle them well. So again, you're right there on my next question but I'm going to just pause because I had written that if obsolescence is the result of innovation, aren't those new winners that we all know that have become the household names actually more vulnerable and their ratings perhaps too optimistic?

37:17Cathie Wood:It depends. Now, one of the transformations we expect, you know, a lot of these companies are really capitalizing on data about us. We as individuals, we don't control that data, but it's valuable. And in the world of blockchain technology, we may be able to take that back, you know, and enable people to see our data, but we give the permission. If that happens, all of these data aggregators, primarily the MAG-6, will have their economic models will be challenged. Now, Google is responding to the threat beautifully. We see with Gemini, it has some of the best AI researchers in the world, thanks to DeepMind in the UK.

38:10Cathie Wood:Thank you. Thank you very much. So it is, I think, ChatGPT put Google on red alert because it's going to lose its search business. And that's about 60, about two thirds of its business. It's going to lose but it can recreate. Gemini is an attempt and with Gemini, they are trying to transform into more of a chat GPT-like experience, but they're going to have to share the market. That said, their cloud business, they're doing really well and they came from behind on that and are doing very well. Their TPU business, that's chips, they could compete more and more with NVIDIA. We're seeing that Anthropic is already taking the TPU or using Google's TPU.

39:02Cathie Wood:Google does own part of Anthropic. So there are going to be puts and takes here, but it's not going to be as easy for these companies as it has in the old world. Right. And I think what you're saying deliberately, but also quite interestingly, is on one level, that data shift creates an economic threat. On the other, there's a certain amount of capitalization. And these businesses are surely going from being pretty asset light to having huge capex to build out these data competencies. So you could have a scenario where you're actually getting headwind from both sides. Absolutely right. Most of the people who own these stocks have felt, oh, these are cash fortresses, especially because in the last administration, M &A was shut down.

39:54Cathie Wood:So they didn't have to compete with each other in terms of spending this cash. They just let it build, build, build. And so the shareholder base now that they have did not expect this high fixed cost business to start dominating the headlines. Margins are going down. Maybe that gross profits and operating profits are going up, but margins are going down. So we're going to have a turnover in the shareholder base. Yes. Yep. And we all know about NVIDIA's margins. Now, you put out this, you, your company, Art, puts out a really interesting, thorough, detailed report called The Big Ideas for each year.

40:39I was going through your big ideas 2025. I'm looking forward to the next one. And, of course, I come from a more value bias in value. So a lot of this stuff, I'm scratching my head. And I learned an enormous amount as I went through it. And a bit like your website, well done. Now, you have, you describe these five technologically enabled innovation platforms. They are AI, robotics, energy storage, public blockchains, and multi-omics sequences. And you've made a statement or the statement is made, these platforms should drive exponential advances across industries and catalyze a step-changing global economic growth.

41:17So here's my question for you, Cathy. I hear that, I see it, and then I pick up the paper. Vista Equity for Partners, the largest software company in the world, former guest here, is laying off thousands of people. Amazon is about to lay off another 14 ,000 people. There's the US economy, which is 68 % to 70 % consumption as a percentage of GDP, and at the same time, people are losing their jobs. How can it represent a step-changing global economic growth?

41:44Cathie Wood:Sure, and I'm going to give all credit to our analysts for big ideas. analysts and our directors and Brett Winton, our chief futurist, I am standing on their shoulders. And yes, that piece represents months of work each year. So how the history of technology is that it is a net job creator. Now, we will have displacement in the short term. And I think we're at a point in the economic cycle, certainly here in the United States, where, you know, a lot of the economy, manufacturing is still contracting. Small businesses are having trouble getting credit. I know the headline numbers read fine, but I think it's because government was a big part of the push in the last four years.

42:39Cathie Wood:High-end consumers are benefiting from stock market and housing prices. But the undercurrents are quite weak. And so that's I think there's a cyclical dynamic at work. There is also a technology, a technology dynamic. The fastest increase in the unemployment rate in terms of cohorts, the fastest increase is in college graduates. And the duration of unemployment has extended to 30 weeks. Now, one of the things that I try and encourage, especially new graduates to do is, OK, you know, go interview for those jobs. The jobs in this new world are going to be very renumerative, shall I say. The success rate, if a person moves to the right side of change, they're going to be enormously successful because we think that the opportunities are going to explode in these five areas that you mentioned.

43:51Cathie Wood:If you're a new graduate, go for it. Go start learning as much as you can about AI. If you have an idea for a company in your mind, go to ChatGPT and say, I want to start this company. Here's what I want it to look like. And you will begin building that company and it will prompt you. You will prompt it. You will engage. Just start doing it. I think the personal agency that these technologies will enable is going to create a tremendous number of entrepreneurial opportunities for people who don't even understand they are entrepreneurs. All of us have ideas about the way something could work better.

44:48Cathie Wood:We all have new business ideas. I wish this worked better than that. OK, try and make that happen while you are also looking for jobs. My guess is, if our view is correct, that in the U.S., and I think this will happen around the world as the adoption of technology accelerates, that real GDP growth globally is going to accelerate from 3%, where it's been for the last 125 years, to 7 % to 8%, powered by productivity. Now, nobody believes that. But in terms of providing some perspective here, if you look at the 400 years from 1500 to 1900, Brett Winton has done a study in collaboration with academia and has hypothesized, it's hard to get the numbers, that real GDP growth averaged 0.6%.

45:51Cathie Wood:6%. That's pretty precise, by the way, roughly half of a percent, roughly half of a percent in those 400 years. We had a step function increase to 3%. That was a five to six fold increase in the growth rate. What I'm telling you now is that 3 % is only going to seven to 8%, even though we have five technologies evolving, not three, five major innovation platforms. And with that growth rate is going to come jobs that you cannot even imagine now. And I'll just say one more thing. Anyone who's discouraged by the job market or is fearful, go to ChatGBT and or my chosen one is Grok. And put in there the question, what kinds of jobs will AI create in the next five years?

46:51Cathie Wood:But prompt it this way. Use futurists, use science fiction, use strategists, economists, use visionaries, and you will come out with a list of jobs that actually are surfacing new spaces. We think of our as these jobs as being just here on Earth. Well, space is opening up and AI is a part of that. And robotics is a part of that. The digital world is opening up. Many people say, what do you mean? It's been around since the Internet. Property rights have not been around in the digital world since the beginning of the Internet. We need a blockchain technology for that. For the first time now, we have immutable property rights in the digital world.

47:52Cathie Wood:And so that's another new economy that is going to evolve here. And the fastest way to pull people and countries out of poverty, this is proven, is immutable property rights. Well, I've been advising my three children along those lines, but with less articulacy. So I'll have them listen to you when we release this. But two of those big ideas I wanted to put the micro soap on above. One is multiomics, which I had never looked at or understood. So I had to look it up. I'd love you first of all, just to explain what's the story. So multiomics sequencing is the platform. So multiomics used to be called genomics.

48:37Cathie Wood:More people know that. But it's not just DNA sequencing anymore. It's RNA sequencing, protein, methylation, metabolics. We can sequence so we can understand so much more about the human body. So that's the platform. And we believe the most profound application of AI is going to be in health care as these sequencing technologies and AI converge. We think it's going to take the cost to develop one drug, think about this, from discovery to go to market. It costs a company$2.4 billion if you include the failures along the way. And it has taken traditionally about 13 years to do so. We think that those numbers are going to go down from$2.4 billion to$600 million in the next 5 to 10 years, and from 13 years to 5 to 8 years.

49:48Cathie Wood:And when you have patent lives in the 20 to 22-year range, that increase in the number of years a company can sell a stock under patent is really important. So that's the first thing. Because of the convergence of sequencing technologies and AI, we are now able to diagnose cancer in stage one with blood tests. They're called liquid biopsies. And we're going to be able to diagnose many more diseases that way. And in fact, when it comes to colorectal cancer, we're probably going to be able to diagnose colorectal cancer before stage one, because polyps also shed into the blood infinitesimally. But you've got AI helping us out here.

50:41Cathie Wood:We're able to get better and better. And then the third, and maybe the holy grail here in terms of convergence is sequencing technologies, artificial intelligence, and CRISPR gene editing. Now that we can isolate mutations in the genome thanks to sequencing, we are going to be able to edit any mutations, which are programming errors. The older we get, the more programming errors we face. And wouldn't it be nice to have our geneticists say, well, from this year to this year, as I've sequenced your multi-ome, I see this mutation and there's this therapy to address it. So you'll catch it early, maybe even prevent it.

51:29Cathie Wood:So brave new world. And this is not five years from now. We're already seeing cures for sickle cell disease and beta thalassemia. and CRISPR Therapeutics, the company with those cures, is also working on heart disease and trying to lower bad cholesterol for good with one treatment. Well, we had Mike Milken on and he obviously talked about that. And then at the recent Money Mays Allocated Summit, we had a healthcare panel, which Kasim Kittaya, the Novo Foundation ran, and there was a absolutely palpable sense of it's here now happening, much as you said, from biotech and the other practitioners.

52:10So maybe when we do our allocated summit next year, we'll have you there to be able to talk about your perspectives. The other of those five themes was the energy and battery storage or energy storage, I guess. And we all know the issues with intermittent power, et cetera. But there was a very confident sense of, I would call it a great leap forward in that domain. Please explain why such confidence.

52:39Cathie Wood:Well, I think you've got Elon Musk leading the charge. That's one reason, you know, the company, people and management. And Elon believes that ultimately, everything will be powered by the sun, and that storage is going to become increasingly important because the sun is intermittent in many parts of the world. And the other thing he's said recently to help give people perspective on the shortages we're facing out there, we are about 50 percent efficient around the world in our use of electricity. And that's because we could be with energy storage, you know, storing up energy while the sun is powering business.

53:38Cathie Wood:And then overnight using that battery storage to heat or cool homes. So I think we're going to see a lot more increase in efficiency. That's part of innovation. but also because we agree with him that long term the sun is going to power everything then that energy storage is going to be a critical part of that puzzle solving that puzzle let's talk about risk we had a we get a lot of folks who come in with different questions one was an ex-colleague of yours william johnston from alliance bernstein who said i used to work with Cathy's around the thematic growth. We need more Cathy Woods, he said.

54:24But then his question was, how do you define risk?

54:31Cathie Wood:So the six metrics that I gave earlier, the bottom up steps of our process, are not only helping us understand the opportunities, I gave you the opportunity side of it, but also the risk. And so we have a scoring system, one to 10 for each of those, well, for the first four metrics, which we can quantify. And some of them are more qualitative, like company management and culture, we know what we're looking for. Others like R &D spending as a percent of total, less quantitative, product and share leadership, we've got market share studies. So we are looking at each of those variables and moving the scores around as news comes out telling us, in the case of management and culture, are they losing a lot of management team members who are critical to driving this vision?

55:31Cathie Wood:If we are, that goes down. Are they not spending enough R &D dollars in this space that we think is important? our sizing of the position will go down. Is their moat being challenged by this new technology? The score will go down and the position size will go down. So we are moving those scores around all the time. And of course, the mega score is thesis risk, overarching risk. Is there something out there from a macro point of view that, you know, most people looking at companies from the bottom up are not seeing and is that important. So our scoring system is designed both to measure the opportunity and to discern the risks as well.

56:26Got it. Well, clearly your style isn't going to be for everybody. We might talk about a minute about when people think about portfolio allocation at a higher level, what might be the sort of the the allocation when you get a big drawdown such as the one you have from 21 23 i think it was 70 you know and uh and the winds in your face what do you say to your investors

56:48Cathie Wood:so um i'm going to answer that in two ways one what do we do during periods like that we concentrate our portfolios towards our highest conviction names based on the scoring system i just described. So that's the first. So you'll never see style drift from us. That is the biggest risk when a market goes against a style. Often managers will try and add a little of this and a little of that. And before you know it, they've drifted away from what their clients thought they had bought, right? Okay, that's the first thing. Now, in this COVID period, the boom, we went up 150%. And as you mentioned, the bust, we were down 70%.

57:34Cathie Wood:Now, had we known that supply chain issues would last three years and disturb our unit growth dynamics, we would have done what we normally do towards the end of bull markets. We diversify into cash-rich innovators. That would have been the MAG-6. We mistakenly made the assumption, well, technology is going to take over and cure these supply chain risks pretty quickly because that's what we do. We see all the companies that are evolving to solve problems like that. And we thought they were ready for prime time. Well, they weren't. What happened was we moved the global economic system so close to just in time that there was no room for error.

58:31Cathie Wood:We did not understand that. We did not understand that. So I think we'll never see a period like that again. And here's why. Governments now know that by throwing money at a problem, they create a lot of other problems. And we see China operating in this way. I just saw a news article recently that say that China is starting to pull away from government subsidies because they're creating misincentives, right? And I think that's very important and good for China. We might have a pandemic again, but I don't think governments will act in the same way. And we certainly are going to be much more focused on how much room for error there is in the system.

59:19Cathie Wood:If there's no room for error, we will be moving more towards cash-rich innovation names. We won't go away from our style. They must be innovators. That was our mistake. We started concentrating too early. However, I'll tell you, based on the last three years, I don't think the result would be much different. It would have made our clients feel better. We still would have had a significant drawdown. But if we had bulked up with more cash-rich names, I think clients would have felt a bit better given how little room for error there was.

1:00:01So we have a few questions. We have this thing called the Outsiders Inquiry where smart people that we know, you know, come in with these questions. And there's a very interesting investment organization called Curation Corp run by Nick Feingold, which is a private investment club. And one of the questions from Philip Donald, who's a highly regarded stock operator said, to what extent will AI make much of the investment industry we've grown up with redundant?

1:00:25Cathie Wood:Well, and let me give a shout up to William Johnston. I haven't seen him in years, and I thank him for that question because it's a really important one. So now for Philip. What's ironic about our industry, I described this move towards benchmark sensitivity in the last 25 years. And it's become pretty extreme, right? Well, it's rules-based, right? That a benchmark strategy is a rules-based strategy. AI is going to be very good at that. So benchmark-sensitive asset managers probably should think about pivoting into something less them benchmark sensitive, adding value in a different way. Because I do think AI is going to take that over.

1:01:20Cathie Wood:I think passive started the trend. And I think AI can finish it. I think our strategy, there's pattern recognition certainly involved in it. But there's a little more art than just science. So I described Wright's law, AI can figure that In fact, we're using it, cutting our research times in half. It used to be painstaking, and now AI is enabling our analysts tremendously. So Wright's law is an equation, and AI can do that. But you've got, and I described this with COVID, it's critical to understand unit dynamics. That's impacted by lots of other things, economics, geopolitics, you know, all the risks that we do measure out there.

1:02:22Cathie Wood:So that becomes the art side of it. And I think taking new technologies out 5, 10, 20 years, which is what we do, AI is much more focused on what has happened historically. It kind of has to get used to a new paradigm. And so that's why we think we can remain ahead of the game, especially as technologies converge, right? Because they're evolving at different rates and they're converging at different times. So these are the sorts of things that just rules based, you know, pure pattern recognition based on a certain set of rules is going to need some augmentation by human beings. I'm not going to tell you that we won't be written out of action at some point, but, you know, we are moving forward and that's the right thing to do.

1:03:26Cathie Wood:We are not looking backwards, which are what benchmarks are all about. We've got to know Cathy Zhu, who runs Capital Today, one of the great VC businesses in China. She spoke at our conference a few weeks ago and she said you recently increased your positions in Baidu and Alibaba. Please share your insights about China versus the USA in terms of AI competition in the long run. Yes, this is very interesting. So we pulled out of China. We had roughly 20 % of our portfolio in China. But when Jack Ma was banished and then the online education was nationalized and gaming was restricted, all of these were government measures, of course, we pulled out.

1:04:10and we've been focused on the mantras coming out of China.

1:04:17Cathie Wood:The first was common prosperity. To us, what that meant was, okay, the government wants these new technologies to reach into rural areas. And what it's saying is cut your prices and margins to do so. So that was not inviting. But about, I'm going to say two years ago, President Xi Jinping rolled out a new mantra called New Productive Forces. And as we were burrowing into that, we learned, OK, this is all about technology. And as we saw Deep Seek and learn more about that, we said, whoa, China, Chinese open source, large language models, or they're called more open weights, large language models.

1:05:08Cathie Wood:They are very creative with their algorithms. This is open source. And they and our technology experts, Jensen Wang and Sam Altman, just complimented DeepSeek and said, that was very clever. And they're now using that algorithm. So building on Chinese, I said, wow. And then something else happened, which was this is this happened very recently. So the concept of involution or anti involution, as as we understand it, what the government is trying to say there to BYD, for example, is, OK, great. You're more the most competitive electric vehicle manufacturer in the world. Congratulations. We're competing aggressively in the rest of the world, but we're also killing our own industry.

1:06:02Cathie Wood:Stop. Stop commoditizing. And so BYD and others, you hear a lot more about robo-taxis from XPeng and other manufacturers. They are going into the higher value add, just like Tesla, part of the market, the higher margin. And it seems like the government really is blessing it. So in our more narrowly focused portfolios, we do own Pony AI as well, and we ride. And part of this is, you know, recognizing that the government in China has decided that technology is where it wants to lead and how it wants to lead its economy out of this deflationary bust. And we think China is in worse shape than many economists think.

1:07:01And that this is a very important move to, you know, harness new technologies and bail the

1:07:09Cathie Wood:economy out. Now, it's going to take a long time because that property speculation occurred over 20 years. And every downturn was a buy signal, a buy signal. And so many, many investors and consumers, 75 % of their savings was in real estate, empty apartment buildings. So think about that. You're getting hit two places. The consumer savings are getting hit hard and anyone invested in property. So we think it's and there's one last thing. We know that President Trump and President Xi Jinping are are probably trying to create a win win situation with their own economies in mind, you know, fighting for their own economies, but understanding that these really are the two most powerful countries in the world.

1:08:09Cathie Wood:And, you know, if you, the old expression is, you know, keep your friends close, keep your enemies closer. If you believe China is an enemy, as a great negotiator, you probably are going to want, if you want to become the most important president ever, as President Trump says he does, you probably want to create a win-win virtuous cycle. Get the bad news out this year. Let the economy boom next year and before the midterm elections with bringing China along as opposed to alienating. That's a little bit of what I think is going on. Could be wrong. But if that is what's going on, then we should have a higher weighting in China.

1:09:06Well, former guest, Treasury Secretary Scott Besant, might well be coming on. We think he is. And we might be asking him that question very delicately as well. And Sir Nick Clegg, who's left Meta, former British Prime Minister, Deputy Prime Minister, had a question, which was, what regulation would you like to see around AI, if any?

1:09:30Cathie Wood:um so we think ai is inning number one it's a baseball term it's like uh maybe the first quarter of a soccer game or a football game um and and so to regulate ai right now would have been like regulating the internet in the late 80s and early 90s before we really understood its ramifications. Now, I agree with people who say that AI could be used for nefarious purposes, and all technology can be used for nefarious purposes. The most important conversation out there right now is that it can be used for nefarious purposes. How do we guard against that? And a lot of that is happening in the private sector, which is important.

1:10:25Cathie Wood:And companies are evolving to prevent nefarious behavior. So I think that AI regulation has to be very carefully managed because AI is the biggest catalyst for all innovation today. It is the reason innovation is moving as quickly forward as it is, and it's going to impact every other technology and every sector and industry and company. So we have to think carefully. Of course, safety, security is paramount, but we've seen other industries regulated out of business, and a really good one is nuclear power. If we had not regulated nuclear power in the United States in the 70s, in the 70s, electricity prices in the U.S., according to our estimates, would be 90 percent lower than they are now.

1:11:28Cathie Wood:Regulation really can hold innovation back. Have you thought about giving an address to the European Parliament where that message seems to be least absorbed? Well, you know, as I go around Europe, I think one of the most hopeful things that is happening is policymakers are asking us and others, you know, how can we jump into this game? How can we deepen our venture capital markets, our private enterprise here? And, you know, half of the solution is understanding the problem. And I do believe there is an understanding that restrictions associated with AI, certainly Palantir has been very vocal.

1:12:10Cathie Wood:Alex Karp has been pulling his people out of Europe saying, you know, we can't operate here if the threat is four to seven percent of our global revenues when we don't even know. there's not even clarity country to country, you know, on some of these rules and regulations. So I think that Europe is beginning to feel left behind. And even in the last year, what I am sensing, a year ago, no one, first of all, no one had any clue that full self-driving worked. because regulators would not allow FSD, Tesla's FSD in Europe. Now we're seeing regulators more friendly. Why? Because autonomous taxis will save lives.

1:13:08Cathie Wood:The human error is responsible for 80 to 90 % of all accidents and fatalities. So we're going to save 40 ,000 lives in the United States by going to autonomous platforms. And I think around the world, the number is 1.25 million lives lost per year. Right. So so it's I think regulators are beginning to jump on board. So, Gaby, there are so many questions I haven't answered that I haven't got time to answer. So you're definitely going to be asking you back on the show. but I'm going to close with three, which is recruitment in the world we now inhabit. What do you really want to see when you've got a young person sitting in front of you?

1:13:55Cathie Wood:Yes, I want to see, given the way we're set up from a research point of view, I want to see passion, like obsession with the technology. You know, we just hired someone into our blockchain group, and his hunger and passion for the space was very evident. But it came from a place where he just didn't trust the financial services sector anymore. And so he thinks blockchain technology solves that. He saw people losing their homes in 08, 09, and all of that. So some deep passion for some reason and critical thinkers willing. I mean, part of the interview process, I want to see if this person will disagree with me or if I am disagree with disagreeing with this young analyst.

1:14:55Cathie Wood:How does he or she take it? And so I think that's really important. And the other thing is an ability to collaborate. So chemistry is important. So I am not the first interview. I'm the last. The first and the first screen is, can you get along with this person? Is this person coming from a good place intellectually and and has the right kind of ego? You know, we all have egos and some are a little out there and others are just right. Healthy enough to stand ground and not acquiesce if, you know, someone who seems to be in a more senior position says something. We don't want that. We want real intellectual debate.

1:15:49Got it. Now, you are a great advocate for female success in the world of investment management. We support the charity Gain here in the UK, Girls Are Investors, and Will Campion, my co-partner, myself, each have two daughters. How do you encourage more females into the world of investment management?

1:16:06Cathie Wood:Well, I would encourage them not to go into the benchmark sensitive part of our world, because I do think that's going to acquiesce to, you know, AI driven solutions. I would encourage them if they love learning remember how I was when I talked about capital I was so taken with the business where wait a minute I get to learn I get to learn the way the world's going to work economically technologically if that interests people this is the best business in the world now it's transforming and it must transform we went way the pendulum moved way too far to benchmark sensitivity. And that is why individuals coming into the business now are more attracted to the private sector.

1:16:58Cathie Wood:There's more opportunity there. We want the public sector and the private sector lines to blur. We have a venture fund. We have the same analysts on both public and private. And I would look for that kind of a situation. If you love learning and you love to work hard and you want to be challenged. You want to be challenged and you want to be in a place where you are free to challenge as well. Those are the kinds of people who do very well in our business. And I highly encourage it. Go for it. And when we speak about resilience, when you are in, as we all are in the investment business, a period where we are struggling for all sorts of factors?

1:17:39How do you keep yourself grounded and head above the water?

1:17:46Cathie Wood:So most important is our research. If the market's going against us and certain stocks are acting very badly, we will obviously reassess the way we've modeled. But it's very therapeutic to then say as we're doing that, OK, then we misunderstood the risk here. All of these other stocks are down as much. So let's consolidate from that stock into these other stocks. So research, keeping our eye on the prize, five year investment time horizon. And we have so much faith in Wright's law and the explosion in innovation that's taking place that I always say when we're down and out, I always say truth will win out.

1:18:30And emotionally?

1:18:32Cathie Wood:You've got to have an even keel. You have to. And emotions, emotional investors are the worst investors. They are the worst investors. They will sell at the low and buy at the high. And they'll always be a few steps behind, if not a few miles behind or whatever, however to say that, arrows behind, whatever. So, yes. So, Kathy, finally, your favorite book your favorite film and your favorite place to go on holiday oh my gosh i am so bad at these fun questions we had to find one weak spot didn't we yeah yeah yeah yeah so favorite book uh many people know it's the bible mostly because of how it's guided me uh along my life uh but i will say in the secular world the emperor of all maladies the history of cancer just really learning that and saying, wow, we could turn cancer into life rejuvenation.

1:19:33Cathie Wood:We can actually do that. So read that book. Film, we're just talking about films. I'm a documentary person. I love watching how musical groups, especially from, you know, the 60s, 70s, 80s, 90s, how they evolved. And there are always challenges, teamwork, all of that. But I love the music. So love those. You can pick any one of those. And the last question was? Destination, your last holiday or the one holiday, I'll rephrase that, the one place that you really want to go to if it was your last holiday. That, you know, I've been around the world a lot. And I think what I'd like to do is I have the privilege of seeing the business culture in each of these places.

1:20:23Cathie Wood:I think I need to take some time, you know, and our partner, Amova, formerly Niko Asset Management, is in Japan. I would like to know more about that culture, just maybe living in it. Same with almost all of the cultures. I love Europe as well, the lifestyle. And I'll give you One, when people ask me, well, what's going to be scarce in this age of abundance? And this is for UK, Europe. One of the good answers that has come back is the lifestyle that people in Europe enjoy. That is becoming more and more scarce. And I'm, you know, a poster child for this. and I would like to just go and enjoy and learn how you know how to enjoy those learn about those cultures but watch how how they do life because it's just very different and I so it's a very general answer but that's what I would like to do fantastic well I always conclude in these conversations and I have written down on two pieces of paper so many things that I'm only going to take three of them and one is that you quite rightly at the start and I think quite rightly because it's been clear that you do not describe yourself as a tech bigot.

1:21:40You will move your portfolio around. You'll move to very specifically when certain situations have either forced concentration or recognizing that something isn't right and working. Number two, that we perhaps don't appreciate why the world of medicine is absolutely sitting at a frontier of immense and immediate change. If we look at immediacy in, you know, in one, two years rather than, you know, in decades. And for young people worried about AI, very understandably, is that you've got to move to the right side of change. That may sound easier than, you know, than necessary. But if they sit in front of you or your equivalent in an interview, they better be passionate, they better have known their stuff, and they better be prepared to argue.

1:22:22So, Cathy, it's been terrific. Thank you for so much time you've given us today. And I wish you all the best in the future.

1:22:30Cathie Wood:Oh, thank you, Simon. This has been delightful. Thank you for all the homework you did to really understand ARC.