WEBVTT - Cathie Wood's Big Ideas for 2023 0:00:00.080 --> 0:00:03.320 You're listening to Bloomberg Business Week with Carol Messer and 0:00:03.400 --> 0:00:07.280 Tim Stenebeck on Bloomberg Radio. We're gonna stay in Miami 0:00:07.360 --> 0:00:10.399 and welcome in as well our Bloomberg TV audience and 0:00:10.720 --> 0:00:13.600 YouTube and Bloomberg originals are streaming service because we've got 0:00:13.600 --> 0:00:15.880 a special guest. Kathy Wood is back with us. She's 0:00:15.880 --> 0:00:20.200 the founder, chief investment officer and CEO of our Investment Management, 0:00:20.239 --> 0:00:23.639 joining us from St. Petersburg, Florida. Kathy, great to have 0:00:23.760 --> 0:00:27.240 you back with us. Happy New Year, Happy new Year. 0:00:27.320 --> 0:00:29.400 I'm I'm really happy to be with you, and it 0:00:29.560 --> 0:00:33.120 is so far a happy new year. It's definitely a 0:00:33.159 --> 0:00:36.159 different tone. Well, you know, it's interesting we watched yesterday 0:00:36.159 --> 0:00:38.159 continuing today even though we're off our highs. When it 0:00:38.159 --> 0:00:42.120 comes to stocks, Kathy, it seemed the more j. Powell talked, 0:00:42.560 --> 0:00:45.840 the more you know excitement you saw, and it moves 0:00:45.880 --> 0:00:48.080 to the upside when it came to both stocks and bonds. 0:00:48.360 --> 0:00:51.000 Does this market reaction make sense to you or do 0:00:51.040 --> 0:00:56.280 you see some irrational exuberance if you will know, if anything, 0:00:56.360 --> 0:01:03.640 I saw an exaggerated UH reaction last year to fears 0:01:03.760 --> 0:01:08.280 that inflation and interest rates were embedded in the system, uh, 0:01:08.800 --> 0:01:11.040 like they were in the seventies, and we just didn't 0:01:11.040 --> 0:01:12.959 believe that at all. In fact, we were seeing a 0:01:13.000 --> 0:01:17.000 lot of early signs of UH inflation coming down, actual 0:01:17.240 --> 0:01:21.720 deflation surfacing. So this does not surprise us. I think 0:01:21.800 --> 0:01:25.040 what has happened here there there are three people who 0:01:25.080 --> 0:01:28.160 have weighed in in in in the last week who 0:01:28.200 --> 0:01:33.000 really have changed their points of view. One is Larry Summers. 0:01:33.360 --> 0:01:37.280 Larry Summers was almost apoplectic last year. So this is 0:01:37.319 --> 0:01:43.399 the former Treasury sector almost eplectic about inflation. And I 0:01:43.440 --> 0:01:47.559 think he truly influenced the FED because he was so 0:01:47.640 --> 0:01:51.760 sure that we were in a seventies style inflation. If 0:01:51.800 --> 0:01:55.600 you'll notice in the last week he said, okay, now, 0:01:55.840 --> 0:01:58.240 don't don't signal what you're going to do in the future. 0:01:58.280 --> 0:02:01.720 We're seeing some economic weakness here. And I think the 0:02:01.760 --> 0:02:04.920 other thing he was saying, not explicitly, was hey, some 0:02:05.000 --> 0:02:07.360 prices are coming down that I didn't expect to come down. 0:02:07.680 --> 0:02:10.680 You know, the oil prices roughly half of where it 0:02:10.800 --> 0:02:14.640 was last March. So that's uh. That's the first person. 0:02:14.960 --> 0:02:20.040 The second person was Treasury Secretary Janet Yellen. And remember, 0:02:20.080 --> 0:02:23.200 I think the market last year got really upset when 0:02:23.240 --> 0:02:27.920 she changed her mind on transitory and uh and and 0:02:27.919 --> 0:02:32.080 and I think that fed Chairman Powell as well, and 0:02:32.320 --> 0:02:36.120 uh and and turned him into an even more hawkish mode. 0:02:36.240 --> 0:02:39.120 Along with the rest of the Ford board members. She 0:02:39.440 --> 0:02:43.880 this week said that now that inflation is coming down, 0:02:43.880 --> 0:02:47.400 we're probably going to be looking at the bigger risk 0:02:47.520 --> 0:02:51.919 being kind of mired in low inflation, low growth. That 0:02:52.080 --> 0:02:56.240 was a big and it effectively says, wow, maybe it 0:02:56.360 --> 0:02:59.720 was transitory after all. It was just a little longer 0:02:59.760 --> 0:03:02.720 than we expected. Who knew supply chain problems would last 0:03:02.760 --> 0:03:07.360 two to three years? Who knew Russia would invade? And 0:03:07.360 --> 0:03:09.600 then the third the third thing that happened. This was 0:03:09.639 --> 0:03:13.000 really important. I think in the Q and a UM 0:03:13.560 --> 0:03:18.240 Chairman Powell himself said, I agree with Lyle Brainerd. We 0:03:18.360 --> 0:03:20.600 do not believe we're in the middle of a weight 0:03:20.880 --> 0:03:26.520 price spiral. And that's another code phrase for the seventies 0:03:26.520 --> 0:03:29.880 style inflation. So I think that is what the markets 0:03:29.919 --> 0:03:33.440 responding to. Cathy, you've talked about the threat of deflation, 0:03:33.720 --> 0:03:38.920 So what's your view of that versus inflation right here? Well, 0:03:39.280 --> 0:03:41.720 a couple of things. We see the deflation in the 0:03:41.760 --> 0:03:46.000 pipeline because commodity prices, which are at the top of 0:03:46.000 --> 0:03:50.920 the funnel, have been coming down on balance. Now we're 0:03:51.040 --> 0:03:55.560 we're seeing right now some interruptions in that as China 0:03:55.680 --> 0:04:00.280 moves away from its zero COVID policy. But I think 0:04:00.320 --> 0:04:04.559 the fake out here is China has been building inventories, 0:04:04.600 --> 0:04:11.000 particularly of energy. It's been getting Russia's energy for discount 0:04:11.240 --> 0:04:12.920 to what the rest of us are paying, So why 0:04:12.960 --> 0:04:17.400 wouldn't it build inventories. So I think I think UM, 0:04:17.440 --> 0:04:21.120 that fear is probably going to be or has been 0:04:22.080 --> 0:04:26.800 a little overblown in terms of ramifications for inflation. UH. 0:04:26.839 --> 0:04:30.000 And I also don't China's China's taking off. But anyway, 0:04:30.279 --> 0:04:33.120 we have the funnel. We had at a holiday time 0:04:33.640 --> 0:04:38.280 massive discounting UH. And even though we had massive discounting, 0:04:38.400 --> 0:04:44.159 in the fourth quarter, inventory accumulation accelerated. That was the 0:04:44.160 --> 0:04:47.320 biggest surprise to me. Wait a minute, final sales were 0:04:47.360 --> 0:04:53.560 that punk uh. That inventories built even though retailers and 0:04:53.600 --> 0:04:56.880 others were trying to clear the shelves with these massive discounts. 0:04:57.320 --> 0:05:00.520 That was very interesting to me. So I think unflying 0:05:00.600 --> 0:05:06.599 demand here is um basically the consumer railing against price 0:05:06.640 --> 0:05:11.440 increases because real average wages have gone down and the 0:05:11.480 --> 0:05:13.920 consumer is going to win this battle. Kathy, I want 0:05:13.920 --> 0:05:15.560 to go back to the way that you characterize what 0:05:15.600 --> 0:05:18.200 we heard from the FED and J Powell yesterday, because 0:05:18.320 --> 0:05:21.479 he also said some other things like further rate hikes 0:05:21.520 --> 0:05:24.599 will be appropriate. It's premature to declare victory. We have 0:05:24.640 --> 0:05:26.680 a lot of work left to do, and if our 0:05:26.720 --> 0:05:29.400 outlook turns true, then I don't see us cutting rates 0:05:29.440 --> 0:05:36.600 this year. What convinces you that his views have changed, Well, 0:05:36.640 --> 0:05:39.919 I think he is looking at the bond market and 0:05:40.240 --> 0:05:43.520 he's saying what he should say as as a FED 0:05:43.600 --> 0:05:48.000 chairman who has been very concerned about inflation. He can't 0:05:48.160 --> 0:05:50.800 turn on a dime. But just look at what the 0:05:50.839 --> 0:05:54.800 bond market saying. The long term bond yield peaked in 0:05:54.839 --> 0:05:58.960 October at four point three and today we got down 0:05:58.960 --> 0:06:02.240 to I believe three point three five. You know, if 0:06:02.400 --> 0:06:04.800 if you look at the tenure bond yield as a 0:06:04.839 --> 0:06:09.320 proxy for what effectively nominal g d P give or 0:06:09.360 --> 0:06:13.080 take a little uh nominal GDP growth will be over 0:06:13.120 --> 0:06:16.480 the next ten years, that doesn't need leave a lot 0:06:16.520 --> 0:06:19.919 of room for for much inflation. If we're going to 0:06:19.960 --> 0:06:23.000 have real growth over the next ten years, so I 0:06:23.040 --> 0:06:25.720 think the markets are speaking loudly. I think the inverted 0:06:25.760 --> 0:06:30.320 yield curve, we're still around seventy basis points haven't been that. 0:06:30.400 --> 0:06:32.839 We haven't seen it this low since the early eighties 0:06:32.880 --> 0:06:36.440 when Vulcar was trying to strangle inflation out of the system, 0:06:36.480 --> 0:06:39.200 and he did so. Cathy, forgive me, I want to 0:06:39.279 --> 0:06:41.039 jump in for a second, because, so are you expecting 0:06:41.080 --> 0:06:45.320 the Fed to cut rates this year? I would not 0:06:45.400 --> 0:06:48.400 be surprised to see the Fed cut rates this year. Uh. 0:06:48.480 --> 0:06:52.719 And one of the other reasons that we're very focused 0:06:52.920 --> 0:06:58.080 on this message that the bigger risk is deflation, it's 0:06:58.120 --> 0:07:02.440 also a very big opportunity. Um when when we look 0:07:02.480 --> 0:07:06.240 at deflation, there are there's good deflation and there's bad deflation. 0:07:06.640 --> 0:07:11.120 The bad deflation is caused by demand destruction. The good 0:07:11.120 --> 0:07:18.440 deflation creates demand. And that is what our research is 0:07:18.840 --> 0:07:26.720 centered on, which is illogically enabled innovation that rides down 0:07:26.920 --> 0:07:32.480 learning curves, which are expressed by cost cost declines, which 0:07:32.520 --> 0:07:36.520 turn into price declines. You'll notice that Tesla is cutting 0:07:37.360 --> 0:07:43.240 cutting prices and many many people jump to the conclusion that, oh, 0:07:43.400 --> 0:07:46.200 they're having so much trouble now, there's so much more competition. 0:07:46.800 --> 0:07:51.520 No Tesla can cut prices now that supply chain issues 0:07:52.000 --> 0:07:56.960 are passing us because it is riding down a cost curve. 0:07:57.040 --> 0:08:01.520 The battery cost curve declines, and I think it's battery 0:08:01.560 --> 0:08:05.200 costs are lower than anyone else's. It's drive train costs 0:08:05.200 --> 0:08:10.240 is more more correctly, UH said, are are lower than 0:08:10.280 --> 0:08:14.440 anyone's out there. And so he wants he wants to 0:08:14.480 --> 0:08:20.840 proliferate electric vehicles to save us from environmental disaster. That 0:08:21.000 --> 0:08:25.160 is his mission, and he is going to drive down prices. 0:08:25.160 --> 0:08:29.120 When you drive down prices, units explode. It's no surprise 0:08:29.160 --> 0:08:35.040 to us even without price cuts. Last year that electric 0:08:35.120 --> 0:08:39.120 vehicle demand was up more than sixty percent while gas 0:08:39.120 --> 0:08:43.720 powered demand was down I believe seven percent. The consumer 0:08:43.760 --> 0:08:49.080 pref shift has occurred. We are now in prime time 0:08:49.120 --> 0:08:50.960 for electric vehicles. I want to go back to test 0:08:51.000 --> 0:08:52.199 in a moment, but I want to go back to 0:08:52.200 --> 0:08:54.480 here our innovation E t F. We've done the story 0:08:54.480 --> 0:08:58.000 on Bloomberg. You guys had the best month on record 0:08:58.040 --> 0:09:01.319 for the fund, up twenty percent at all r E 0:09:01.480 --> 0:09:03.800 t F s. All the eight ones E t F 0:09:03.840 --> 0:09:05.600 s are up, seven of them in double digits. Do 0:09:05.679 --> 0:09:10.360 you see that as vindication for your investment theses UM, 0:09:10.400 --> 0:09:15.000 and do you think it can continue. Yes, we believe 0:09:15.280 --> 0:09:20.320 that innovation was one of the biggest victims of the 0:09:20.679 --> 0:09:24.720 of the massive interest rate in increase we saw last 0:09:24.800 --> 0:09:28.280 year and less than a year, I think eighteenfold increase 0:09:28.760 --> 0:09:33.880 in interest rates. It was like a massive earthquake. And 0:09:34.120 --> 0:09:37.160 the other victim, of course was the other very long 0:09:37.240 --> 0:09:41.360 duration asset out their long term bonds. Uh. They were 0:09:41.480 --> 0:09:45.360 hit at least through October, if if my numbers are correct, 0:09:45.880 --> 0:09:51.160 The long bond market had not seen that um, that 0:09:51.520 --> 0:09:56.079 bad a year since the seventeen hundreds. We're not We're 0:09:56.120 --> 0:09:59.880 not talking post worl War two. We're talking about the 0:10:00.200 --> 0:10:03.360 gives you a sense of the shock to the system, 0:10:03.400 --> 0:10:07.280 and the shock to our strategy was palpable. Boy, we 0:10:07.440 --> 0:10:12.240 felt it every time Chairman pal spoke. We're speaking with 0:10:12.320 --> 0:10:15.640 Cathy Wood, CEO of ARC Investment Management. Kathy Carroll just 0:10:15.679 --> 0:10:18.920 asked you about the performance in January and she mentioned 0:10:19.000 --> 0:10:20.920 that it's the best month ever for the our innovation 0:10:21.000 --> 0:10:23.920 e t F. The thing is is that the jumping 0:10:23.960 --> 0:10:27.720 performance hasn't been met with in the way of flows, 0:10:27.800 --> 0:10:31.599 with investors putting money back into ARC. Perhaps This is 0:10:31.640 --> 0:10:34.520 because it's been a tough couple of years for the 0:10:34.559 --> 0:10:36.040 E t F and for many of your E t 0:10:36.200 --> 0:10:40.400 F s. How do you win them back? Well, actually, 0:10:40.400 --> 0:10:43.440 I don't think we lost many investors. I think the 0:10:43.559 --> 0:10:48.360 shock to most people is how well we held our 0:10:48.440 --> 0:10:53.640 assets in Our underperformance started in February of twenty one, 0:10:54.000 --> 0:10:57.839 when people were starting to get vaccinated, going back to work, 0:10:57.880 --> 0:11:01.640 and these fears of inflation started to surface. So since 0:11:01.720 --> 0:11:06.800 February of twenty one, we have seen a massive down 0:11:06.880 --> 0:11:12.320 round in our innovation strategies. And in twenty one we 0:11:12.400 --> 0:11:17.000 had very significant inflows, most of which we kept. I 0:11:17.040 --> 0:11:21.040 think the net was seventeen billion that year. Last year 0:11:21.760 --> 0:11:26.040 again a horrific year. I think for the year our 0:11:26.080 --> 0:11:32.400 flagship was so a r k K was inflows one 0:11:32.559 --> 0:11:36.320 more than one point five billion dollars, and I think 0:11:36.360 --> 0:11:39.440 that shocked a lot of people. What we saw was 0:11:39.640 --> 0:11:44.559 averaging down. Uh. Many of our loyal shareholders did average down, 0:11:45.040 --> 0:11:47.679 and I think one of the reasons they did is 0:11:48.080 --> 0:11:51.760 we were out there every step of the way, giving 0:11:51.800 --> 0:11:58.520 away our research, reassuring our clients that actually innovation solves problems, 0:11:58.880 --> 0:12:01.840 and we have so many problems now created by supply 0:12:01.960 --> 0:12:05.760 chain problems, the war created by the FED, and the 0:12:05.840 --> 0:12:10.040 demand destruction which is hurting margins, which technology will solve 0:12:10.080 --> 0:12:14.120 in terms of increasing productivity. And I think because we 0:12:14.200 --> 0:12:18.719 are so um prolific in in our research, our analysts 0:12:18.720 --> 0:12:23.319 are amazing in terms of the kind of original research 0:12:23.360 --> 0:12:27.120 they're doing, So our clients and others are reading research 0:12:27.240 --> 0:12:29.520 from us that they're not seeing from anyone else or 0:12:29.559 --> 0:12:32.160 anyone at all. And I wouldn't get even out And 0:12:32.200 --> 0:12:33.520 I want to get into that in a moment, because 0:12:33.559 --> 0:12:35.120 I do love it, Cathy, like you've got over a 0:12:35.160 --> 0:12:38.200 hundred fifty pages and your big ideas for for this year, 0:12:38.200 --> 0:12:39.920 and it's a lot of things that we talk about. 0:12:40.200 --> 0:12:42.240 What I do want to ask you though, after a 0:12:42.320 --> 0:12:45.319 sixty scent drop in our innovation the e t F 0:12:45.440 --> 0:12:47.160 last year, and I know it was a tough year 0:12:47.240 --> 0:12:50.160 for form many assets, do you find any of your 0:12:50.160 --> 0:12:52.960 investors kind of treating ARC a little bit, you know, 0:12:53.040 --> 0:12:58.640 more cautiously. I think one thing that happened last year 0:12:58.920 --> 0:13:01.840 is we were able with a number of papers we 0:13:01.640 --> 0:13:05.200 were uh we called it our ground war. We're trying 0:13:05.240 --> 0:13:11.680 to help investors and advisors understand that if you take 0:13:11.679 --> 0:13:15.360 a look at truly disruptive innovation, which is all we 0:13:15.400 --> 0:13:20.160 do UM and you look at other growth portfolios, large 0:13:20.160 --> 0:13:24.679 cap growth, uh, you know growth generally, as well as 0:13:24.720 --> 0:13:28.680 the major benchmarks like the NASDACK, you won't find much 0:13:28.800 --> 0:13:32.960 truly disruptive innovation in them. And so as we were 0:13:33.000 --> 0:13:37.920 getting hit so badly, what we also saw is investors 0:13:38.240 --> 0:13:42.520 taking tax losses in some of NASTAC and other strategies 0:13:43.120 --> 0:13:47.480 and moving into our strategy, which was hit so hard 0:13:47.640 --> 0:13:51.400 because they did believe that we were going to rebound faster. 0:13:51.840 --> 0:13:55.160 We were the hit hit the hardest. Our research would 0:13:55.200 --> 0:14:00.360 suggest that that the two hundred trillion dollars that we 0:14:00.520 --> 0:14:06.680 expect by twenty thirty to be the market valuation pleased 0:14:06.760 --> 0:14:11.120 on disruptive innovation, that that had changed, that that hadn't changed. 0:14:11.480 --> 0:14:15.040 And so if you have a five year investment time horizon, 0:14:15.640 --> 0:14:18.360 yes you move into our strategy and oh, by the way, 0:14:18.400 --> 0:14:20.600 we are the new NASTAC, which is one of the 0:14:20.600 --> 0:14:24.080 ways we were trying to convey. Look, if you want 0:14:24.160 --> 0:14:28.480 to look at the future and truly disruptive innovation the 0:14:28.520 --> 0:14:33.600 way the Nasdaq the NASDAC performed in the eighties and nineties, 0:14:33.720 --> 0:14:38.240 that's where we went vation. Okay, look through that now 0:14:38.560 --> 0:14:41.840 you will not find the kind of disruptive innovation. It 0:14:41.920 --> 0:14:47.120 certainly doesn't dominate those indexes. Maybe them. Well that's perfect. 0:14:47.200 --> 0:14:49.320 That's the perfect segue, Kathy, to get you to weigh 0:14:49.320 --> 0:14:51.320 in on what we look for from the companies that 0:14:51.360 --> 0:14:55.200 are reporting this afternoon. Companies like Apple, Alphabet, Amazon, These 0:14:55.240 --> 0:14:58.200 are not companies that you necessarily are betting on. These 0:14:58.200 --> 0:15:01.720 are companies that you think can be disrupted. What do 0:15:01.760 --> 0:15:04.240 you watch for with them? What can they tell us 0:15:04.320 --> 0:15:07.160 about how the economy is? And you know what what 0:15:07.360 --> 0:15:11.240 arcs should be looking at. Yes, well you know when 0:15:11.280 --> 0:15:14.960 I say we don't own those in our flagship strategy, 0:15:15.000 --> 0:15:18.040 we do own them in some of our more specialized strategies. 0:15:18.840 --> 0:15:24.080 But these two are the companies that have enjoyed incredible success. 0:15:24.440 --> 0:15:29.200 They have created big, big markets, and to move up 0:15:29.280 --> 0:15:33.160 tenfold hundredfold from here is going to be difficult. We're 0:15:33.200 --> 0:15:35.680 not saying they're not going to be successful, but we 0:15:35.760 --> 0:15:39.360 are saying a few things. Take Amazon. Amazon is not 0:15:39.440 --> 0:15:42.280 a social network. We have moved into a world of 0:15:42.320 --> 0:15:48.040 social commerce, so we own Shopify. Shopify is supporting Instagram 0:15:48.080 --> 0:15:52.840 and TikTok and others that have that that are taking 0:15:53.520 --> 0:15:59.600 really social commerce and scaling it. UM and Amazon will 0:15:59.640 --> 0:16:03.760 not become a social network. It is not one. It's 0:16:03.800 --> 0:16:08.880 a good online UH retailer um and I would put 0:16:08.920 --> 0:16:12.320 it in a more mature category of online retail. That's 0:16:12.400 --> 0:16:15.280 not what we do. If you look at Google or 0:16:15.320 --> 0:16:20.720 alphabet UM, everyone is talking about chat GPT, and we 0:16:20.800 --> 0:16:24.400 do believe that it is going to put search at risk. 0:16:24.520 --> 0:16:29.960 Search is of Google's revenues. Now. We also believe, however, 0:16:30.560 --> 0:16:35.480 that the Google is going to harness AI as well. 0:16:35.520 --> 0:16:37.800 I mean, it has it owns deep mind. It is 0:16:37.880 --> 0:16:40.520 one of the best AI companies in the world. But 0:16:40.600 --> 0:16:43.240 I think it has been so caught up in fears 0:16:43.280 --> 0:16:49.800 about legal liability associated with the dangers created by about 0:16:49.840 --> 0:16:54.280 Microsoft and Microsoft's big investment chat GPT. Do they have 0:16:54.360 --> 0:16:56.880 the potential to overtake Google when it comes to search 0:16:57.200 --> 0:17:01.280 because of the way they are harnessing AIM. I I 0:17:01.320 --> 0:17:04.199 think that's the big threat. I think that's why uh 0:17:04.600 --> 0:17:08.959 Sundar went to code read at at at Google. I 0:17:08.960 --> 0:17:13.120 think they're going to become very aggressive. Uh So, yes, yes, 0:17:13.160 --> 0:17:17.320 we absolutely are are focused on what open ai and 0:17:17.400 --> 0:17:20.560 Microsoft are going to do together. Kathy, you know one 0:17:20.560 --> 0:17:22.440 thing is and you know for our TV and our 0:17:22.560 --> 0:17:24.680 streaming service and YouTube, we've got you know, the share 0:17:24.720 --> 0:17:28.440 prices of Apple, Amazon, Meta and Alphabet up there. I 0:17:28.480 --> 0:17:30.879 mean you're looking at Meta up more than and it 0:17:31.000 --> 0:17:34.679 was higher at its best levels of the session. I 0:17:34.720 --> 0:17:36.840 do like how you think about innovation and things that 0:17:36.840 --> 0:17:39.000 are going to be impacting us in years to come. 0:17:39.440 --> 0:17:43.120 Is the metaverse something that you guys think about that 0:17:43.160 --> 0:17:49.040 this is an important trend or TB d well. Yeah, 0:17:49.080 --> 0:17:53.480 In Japan we subadvise a fund for Nico Asset Management 0:17:54.160 --> 0:17:57.720 UM called the Metaverse. So yes, we are in the 0:17:57.880 --> 0:18:03.600 very early days of what will become very immersive digital experiences. 0:18:03.640 --> 0:18:08.080 In fact, we believe that more than half of our 0:18:08.200 --> 0:18:15.240 spending will end up online as opposed to UH through 0:18:15.320 --> 0:18:18.920 physical stores. UH and and that's part of our big 0:18:18.960 --> 0:18:24.359 ideas this year. Our our team UH led by Frank 0:18:24.440 --> 0:18:28.480 Downing and Nick Bruce, have done a terrific job Andrew 0:18:29.240 --> 0:18:32.960 as well, pulling together how this new world is going 0:18:33.000 --> 0:18:36.119 to work. So absolutely we do. I think what happened 0:18:36.240 --> 0:18:39.840 with Meta last night I listened to the call was fascinating. 0:18:40.240 --> 0:18:44.399 I think what's happening is UH, Meta has an answer 0:18:44.400 --> 0:18:48.320 to TikTok It's reels and Reels is taking off. They're 0:18:48.320 --> 0:18:54.120 also extremely focused on using artificial intelligence as they are 0:18:54.680 --> 0:19:01.359 activating this platform. And What's App is also uh a 0:19:01.600 --> 0:19:04.760 very important platform that they have not monetized and now 0:19:04.840 --> 0:19:10.280 they're activating it. Uh so really really fascinating. And you know, 0:19:10.400 --> 0:19:13.080 just to give you a sense, Delta is working through 0:19:13.119 --> 0:19:17.720 What'sapp right now to inform passengers when something goes wrong, 0:19:18.200 --> 0:19:23.359 uh and improving customer service dramatically. So you know this 0:19:23.359 --> 0:19:29.680 this could become a very big business use case. So yes, 0:19:30.000 --> 0:19:33.080 lots of big markets that Facebook. The other thing that 0:19:33.119 --> 0:19:37.440 Mark did was used the word efficiency. Uh. He must 0:19:37.480 --> 0:19:45.440 have used times and and and in that in that vein, 0:19:45.560 --> 0:19:51.280 he was using artificial intelligence as well. Because as we 0:19:51.640 --> 0:19:54.960 in big Ideas uh and you can find big ideas 0:19:55.040 --> 0:19:58.920 on our dash invest dot com um. In Big Ideas, 0:19:58.960 --> 0:20:02.720 we show the pro of activity increases that are possible 0:20:03.600 --> 0:20:07.439 because of artificial intelligence. It's these companies who could be 0:20:07.480 --> 0:20:11.919 some of the biggest beneficiaries if they harness AI correctly. 0:20:12.359 --> 0:20:14.000 I think a lot of people are looking for the 0:20:14.119 --> 0:20:17.919 killer app like they look like these viral apps that 0:20:18.000 --> 0:20:22.639 the Internet delivered the killer app for artificial intelligence is 0:20:22.720 --> 0:20:27.360 productivity games, and any company does not harness it is 0:20:27.560 --> 0:20:30.160 probably not going to be one of the big winners 0:20:30.160 --> 0:20:32.600 out there. And just one other thing on AI. I 0:20:32.640 --> 0:20:36.439 think a lot of a lot of the hype is 0:20:36.440 --> 0:20:40.119 in companies that have AI in in their names. But 0:20:40.160 --> 0:20:45.280 I think, you know, the real winners here are going 0:20:45.320 --> 0:20:49.280 to be those companies that have proprietary data and have 0:20:49.480 --> 0:20:54.080 lots of it, have the best domain expertise, best AI expertise, 0:20:54.400 --> 0:20:58.879 the best pools of high quality data. Two basically create 0:20:58.920 --> 0:21:01.760 new businesses in you're a big ideas paper you again 0:21:01.880 --> 0:21:04.600 speaking of of big ideas. And I love when we 0:21:04.640 --> 0:21:07.560 talk about this because everybody on Twitter has a comment. 0:21:07.920 --> 0:21:12.040 But you stick to your million dollar bitcoin forecast despite 0:21:12.080 --> 0:21:14.199 what we saw I think about a six drop in 0:21:14.200 --> 0:21:18.560 it last year. Um, people are saying to me, really 0:21:18.600 --> 0:21:21.239 did she really stick to this? Why the confidence in 0:21:21.240 --> 0:21:29.000 that despite everything? Well, the confidence actually was strengthened last year. Now, 0:21:29.320 --> 0:21:34.480 last year was was a terrible year for everything crypto, 0:21:35.160 --> 0:21:38.280 But if you think about what happened, it was the 0:21:38.520 --> 0:21:45.880 centralized opaque players who went bankrupt f tx Celsius three 0:21:45.880 --> 0:21:50.840 hours to capital Um and and what did we see 0:21:50.880 --> 0:21:57.440 from bitcoin. Bitcoin is completely decentralized and transparent. It started 0:21:57.480 --> 0:22:01.520 because of oh eight oh nine, the lack of transparency 0:22:01.720 --> 0:22:07.040 in the traditional financial services ecosystem. And I remember when 0:22:07.080 --> 0:22:11.040 we did our research and Art Laugher I mentioned him. 0:22:11.080 --> 0:22:14.200 I mentioned him the first it was on your show. Um, 0:22:14.359 --> 0:22:18.119 he took us through what bitcoin meant to him and 0:22:18.160 --> 0:22:23.160 it was wow, Art, the this is a rules based 0:22:24.280 --> 0:22:29.040 moetary It's a rules based digital monetary system, and it's 0:22:29.040 --> 0:22:36.200 global and and there's no human intervention. Uh, it's very disciplined. 0:22:36.240 --> 0:22:40.520 It's mathematically metered to top out at twenty one million units. 0:22:40.640 --> 0:22:43.880 Well in the last year, the response to the last 0:22:43.880 --> 0:22:47.679 three years, the responses to COVID, the the fiscal and 0:22:47.760 --> 0:22:52.160 monetary responses that you know in many countries are causing 0:22:52.560 --> 0:22:58.200 hyper inflation and you know fiscal crises. We're seeing protests 0:22:58.200 --> 0:23:01.600 and riots all over the place. Um, well, where do 0:23:01.720 --> 0:23:06.040 these people go for an insurance policy against an implosion 0:23:06.080 --> 0:23:09.960 in their purchasing power and wealth. It is in something 0:23:10.080 --> 0:23:13.840 like bitcoin. Bitcoin is an insurance policy, and it is 0:23:13.840 --> 0:23:17.920 an insurance policy for the for for everyone, against confiscation 0:23:17.960 --> 0:23:21.560 of wealth. Uh. So you're not tempering any of your 0:23:21.600 --> 0:23:24.160 thoughts even with what happened last year, and if anything, 0:23:24.160 --> 0:23:26.479 you're kind of doubling down in your conviction because of 0:23:26.480 --> 0:23:30.080 what happened last year. Is that fair? Yeah? We did. 0:23:30.560 --> 0:23:35.240 We tempered a few assumptions we thought, led by Tesla 0:23:35.400 --> 0:23:41.520 and block formally Square and micro Strategy, that more corporations 0:23:41.560 --> 0:23:45.160 would put coin on their balance sheets. That is that 0:23:45.200 --> 0:23:48.840 we've dialed that one down considerably. And the same thing 0:23:48.880 --> 0:23:53.040 with Nation States El Salvador, as they're sticking to their 0:23:53.080 --> 0:23:57.320 guns on this one. Uh and uh and actually are 0:23:57.359 --> 0:24:00.480 doubling down. I believe in terms of bondish ones back 0:24:00.560 --> 0:24:05.639 by a bitcoin um but other countries will probably not 0:24:06.800 --> 0:24:10.240 move as quickly as they might have if L. Salvador 0:24:10.520 --> 0:24:13.600 had had, you know, a grand swish right off the bat. 0:24:14.359 --> 0:24:16.760 We do think it will happen, it's just we've pushed 0:24:16.800 --> 0:24:19.040 it out a bit. So I think our base case 0:24:20.000 --> 0:24:25.480 going now is in five years, I think roughly six 0:24:25.920 --> 0:24:29.080 and seventy thousand, something like that, and then in by 0:24:29.680 --> 0:24:35.320 thirty as as we see more use cases and more 0:24:35.480 --> 0:24:39.920 of these insurance policies taken out against they still and 0:24:40.000 --> 0:24:43.720 policy regimes are not healthy, we think it could pass 0:24:43.960 --> 0:24:46.280 a million dollars. Kathy, we don't have a ton of time, 0:24:46.320 --> 0:24:47.359 and I want to make sure to get to a 0:24:47.440 --> 0:24:49.520 few more of your big ideas in your research. For 0:24:50.320 --> 0:24:53.200 three we've talked about AI, We've talked about cryptom we 0:24:53.320 --> 0:24:56.080 talked a little bit about batteries in Tesla. UH. In 0:24:56.160 --> 0:24:58.200 the last thirty seconds or just the last couple of 0:24:58.200 --> 0:24:59.840 minutes that we have with you, let's talk about a 0:24:59.840 --> 0:25:02.920 few you more specifically robotics. What what's appealing to and 0:25:03.000 --> 0:25:04.800 what's exciting to you. What do you see as investment 0:25:04.840 --> 0:25:09.119 opportunities for robotics. Well, I think everyone thinks robots have 0:25:09.200 --> 0:25:11.400 been around forever, and they kind of have, but they've 0:25:11.440 --> 0:25:14.680 been locked in cages inside auto companies and so forth. 0:25:15.960 --> 0:25:19.040 What we have now is really the dawn of the 0:25:19.119 --> 0:25:23.200 age of robotics. It's really going to happen because of 0:25:23.280 --> 0:25:28.680 battery technology and artificial intelligence, and we're talking about industrial robots. 0:25:29.320 --> 0:25:33.480 Amazon is adding one thousand robots per day UH and 0:25:33.880 --> 0:25:37.040 by the year we think they will have that Amazon 0:25:37.119 --> 0:25:40.600 will have more robots than people. Even though they will 0:25:40.600 --> 0:25:46.639 continue to increase their employment UH, roles, robots will increase faster. 0:25:46.840 --> 0:25:50.520 Why is this happening? Well, as always with technology. The 0:25:50.600 --> 0:25:54.960 technology is ready and even more important, the costs are 0:25:55.119 --> 0:26:00.000 low enough now and the technology really AI battery technology 0:26:00.080 --> 0:26:04.680 g critically important. Uh. And the costs if we use 0:26:04.840 --> 0:26:09.000 rights law for every cumulative doubling in the number of 0:26:09.440 --> 0:26:16.040 industrial robots produced, costs will decline by I think it's 0:26:16.040 --> 0:26:20.760 even more than that, given the massive labor shortages that 0:26:20.880 --> 0:26:23.440 have been exposed, and we still have around the world, 0:26:23.520 --> 0:26:27.040 some of its demographics, some of its COVID related um, 0:26:27.600 --> 0:26:31.920 the aftershocks. We think the time is right for robotics now. 0:26:32.080 --> 0:26:35.800 So uh. And you know, Tesla is a robotics company 0:26:35.840 --> 0:26:40.119 autonomous vehicles, which is where we're going. Uh, those are butts, 0:26:40.359 --> 0:26:42.840 those are robots. So we think we're going to see 0:26:42.840 --> 0:26:46.000 a lot of robots rolling around, flying in the air, 0:26:46.119 --> 0:26:48.960 drones and so forth, so, you know, and collapsing. The 0:26:49.080 --> 0:26:51.760