WEBVTT - Cathie Wood Says Innovation Solves Problems 0:00:02.440 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:07.240 --> 0:00:10.520 You're listening to Bloomberg Business Week with Carol Messer and 0:00:10.600 --> 0:00:13.000 Tim Stenebek on Bloomberg Radio. 0:00:13.280 --> 0:00:15.920 It is International Women's Day and with us a recognized, 0:00:16.000 --> 0:00:19.320 much talked about and followed individual, well known investor who 0:00:19.400 --> 0:00:21.599 also happens to be a woman, and safe to say, 0:00:21.600 --> 0:00:24.960 the person who ignited the investment thesis around the innovative 0:00:25.000 --> 0:00:29.160 and disruptive theme and economy just about ten years ago. 0:00:29.240 --> 0:00:31.480 So let's get to our interview. Great to have back 0:00:31.520 --> 0:00:31.760 with us. 0:00:31.840 --> 0:00:32.360 Kathy Wood. 0:00:32.440 --> 0:00:35.400 She's the founder, CEO and CIO of ARC invest and 0:00:35.479 --> 0:00:39.040 she joins us once again from Petersburg, Florida. Hey Kathy, 0:00:39.159 --> 0:00:41.320 I'm so great to be talking with you again. 0:00:41.360 --> 0:00:44.360 How are you? I'm great? How are you doing? Carol? 0:00:44.479 --> 0:00:46.199 Doing well, trying to keep up as you know, of 0:00:46.200 --> 0:00:49.880 the newsflow kind of fast and furious. Let's talk about 0:00:49.880 --> 0:00:53.560 the economic backdrop, because your roots, right when you started out, 0:00:53.680 --> 0:00:56.920 you are an economist and you think about things the 0:00:56.960 --> 0:01:01.400 macro environment, the jobs report today some strength, maybe some 0:01:01.440 --> 0:01:04.040 concerns about things starting to slow down. What does the 0:01:04.200 --> 0:01:07.520 US economic environment look like to you, the business environment 0:01:07.560 --> 0:01:10.600 as well, and what it means for some of your investments. 0:01:11.319 --> 0:01:16.520 Sure, it looks like that corporations are losing pricing power, 0:01:17.080 --> 0:01:20.000 and we are now beginning to see the unemployment rate 0:01:20.280 --> 0:01:23.000 move up. It went up to three point nine percent 0:01:23.040 --> 0:01:25.920 in this latest report from a low of three point 0:01:26.040 --> 0:01:29.800 four percent, So undeniably it's on its way up now, 0:01:30.120 --> 0:01:34.000 and we do think it's because corporations are losing pricing power. 0:01:34.280 --> 0:01:37.320 Their margins are getting hit. It's going to it's going 0:01:37.400 --> 0:01:40.640 to cause a couple of things. One, the labor hoarding 0:01:40.720 --> 0:01:44.520 that we've seen since COVID is going to diminish, and 0:01:44.840 --> 0:01:48.040 that will increase the unemployment rate. But then the second 0:01:48.120 --> 0:01:54.040 thing is it will accelerate the adoption of technologies. Innovation 0:01:54.160 --> 0:01:57.120 solves problems, and one of the things that it does 0:01:57.240 --> 0:02:03.120 is increased productivity, increase efficiency, and create new products and services. 0:02:03.200 --> 0:02:07.760 So we're pretty optimistic about our strategy in this environment 0:02:07.840 --> 0:02:12.960 because interest rates should come down. I think that the FED, 0:02:13.040 --> 0:02:15.239 even the FED is going to be surprised at how 0:02:15.360 --> 0:02:19.119 low inflation goes. We think it could be negative this year. 0:02:19.240 --> 0:02:22.600 Well, so, Kathy, let me ask you. That's interesting. I mean, 0:02:22.960 --> 0:02:26.200 if the expectations, at least according to traders right now 0:02:26.240 --> 0:02:28.800 is that the first rate comes in June. Is that 0:02:29.560 --> 0:02:31.919 too late in your view for the Fed to start 0:02:31.960 --> 0:02:33.160 cutting rates? 0:02:33.840 --> 0:02:37.519 Well, I think the twenty fourfold increase in interest rates 0:02:37.520 --> 0:02:40.720 and little more than a year have shocked the system. 0:02:41.480 --> 0:02:46.280 We're beginning to see a reverberation of the regional bank issues. 0:02:47.120 --> 0:02:50.520 We don't think they are going away. Deposits are still 0:02:50.639 --> 0:02:56.120 outflowing broadly from the banking system, and there are increasing 0:02:56.200 --> 0:02:59.600 problems with commercial real estate. Most people know about the 0:02:59.680 --> 0:03:07.880 off problems, but multifamily units, multifamily apartments. We're beginning to 0:03:07.919 --> 0:03:12.440 see some distressed sales there as well. So I think 0:03:12.520 --> 0:03:18.480 that problem isn't as well understood I think, and it's 0:03:18.520 --> 0:03:21.000 going to cause the regional banks even more problems. 0:03:21.200 --> 0:03:23.560 Kathy, how quickly do you think unemployment can go up 0:03:23.560 --> 0:03:25.560 this year? What are you forecasting over at ARC? 0:03:26.600 --> 0:03:30.959 Well, I wouldn't be surprised to see the unemployed employment 0:03:31.000 --> 0:03:33.080 rate go above five percent. 0:03:33.960 --> 0:03:34.120 Now. 0:03:34.160 --> 0:03:37.160 I'm saying that knowing that this is an election year 0:03:37.480 --> 0:03:43.240 and that this administration probably will try and spend more 0:03:43.520 --> 0:03:48.120 than is currently in the budgets through executive order or 0:03:48.160 --> 0:03:54.920 what have you, But above five percent would not surprise us, 0:03:56.160 --> 0:03:57.280 all right, So, about five percent. 0:03:57.280 --> 0:03:58.800 Well that's interesting, all right, so we have a good 0:03:58.800 --> 0:04:02.800 idea of your economic and kind of macro backdrop. Having 0:04:02.840 --> 0:04:04.880 said that, so here we are sitting at a day 0:04:04.920 --> 0:04:06.920 where we're seeing a little bit of a pullback in stocks, 0:04:07.040 --> 0:04:08.560 but you're to date the S and P still up 0:04:08.560 --> 0:04:10.920 more than seven percent. We're looking at a Nasdaq one 0:04:11.000 --> 0:04:14.600 hundred that's also up more than seven percent. You look 0:04:14.640 --> 0:04:16.679 at something like the socks is up around twenty percent 0:04:16.760 --> 0:04:19.400 year today, picking an individual name like an Nvidia more 0:04:19.400 --> 0:04:21.280 than eighty percent, and I could go on and on 0:04:21.320 --> 0:04:24.479 and on. There are many who talk about a bubble, 0:04:24.880 --> 0:04:27.039 some like in it back to ninety nine, two thousand, 0:04:27.480 --> 0:04:29.960 anything in today's equity trade that says bubble to you, 0:04:31.680 --> 0:04:32.320 We do. 0:04:32.200 --> 0:04:35.320 Not believe we're in a bubble anything like we were 0:04:35.360 --> 0:04:39.080 in the late nineties. I was there, and the technologies 0:04:39.080 --> 0:04:42.040 weren't ready, the costs were too high, too much capital chase, 0:04:42.080 --> 0:04:46.400 too few opportunities, too soon. The seeds for what is 0:04:46.480 --> 0:04:50.200 happening now were planted during the twenty years that ended 0:04:50.240 --> 0:04:52.680 in the tech and telecom bubble, and they've been germinating 0:04:52.720 --> 0:04:57.440 for twenty five or thirty years. So we're we believe 0:04:57.480 --> 0:05:01.000 we're ready for primetime. The one play where we could 0:05:01.040 --> 0:05:03.919 see a correction and it's just a correction. We're not 0:05:04.200 --> 0:05:08.320 calling at the end of this at all is in 0:05:08.600 --> 0:05:12.599 the chip space. Whenever I hear the word shortage, and 0:05:12.640 --> 0:05:17.520 we started hearing about GPU shortages about this time last 0:05:17.600 --> 0:05:23.799 year as chat GPT was capturing the imagination of both 0:05:23.880 --> 0:05:27.800 businesses and consumers. So for about a year we've heard 0:05:27.839 --> 0:05:31.919 that word and now we're seeing lead times we believe 0:05:32.080 --> 0:05:37.680 come down for GPUs for nvidians in particular from the 0:05:37.920 --> 0:05:41.160 eight to eleven month range to the three to four 0:05:41.600 --> 0:05:46.200 month range. So that is suggesting that there was probably 0:05:46.240 --> 0:05:50.080 a lot of double and triple ordering as the word 0:05:50.120 --> 0:05:53.960 shortage was making the rounds, and that those inventories will 0:05:53.960 --> 0:05:54.760 have to be digestible. 0:05:54.880 --> 0:05:56.800 Is that also because of an increase in supply in 0:05:56.920 --> 0:05:59.640 terms of output or is it because you think demand 0:05:59.720 --> 0:06:01.960 is going which one is it? Oh? 0:06:02.000 --> 0:06:04.560 I don't think no, No, demand is not going down, 0:06:04.680 --> 0:06:07.920 though there is something we expect that I don't hear 0:06:07.960 --> 0:06:11.480 discussion very much. And it hearkens back to the early 0:06:11.560 --> 0:06:14.880 days of the Internet. There was a moment when the 0:06:14.880 --> 0:06:18.599 Internet was taking off, when Cisco was all the rage, 0:06:18.960 --> 0:06:25.760 and then enterprises started thinking seriously about the need to 0:06:25.839 --> 0:06:30.000 spend aggressively on this new thing called the Internet and 0:06:30.040 --> 0:06:35.280 the backbone, and they paused as a lot of competitions 0:06:35.320 --> 0:06:39.320 started to make the rounds and Cisco went down fifty 0:06:39.360 --> 0:06:44.400 percent plus as enterprises were pausing. Now, why are enterprises 0:06:45.120 --> 0:06:49.680 likely to pause or at least go through an assessment. 0:06:50.440 --> 0:06:54.279 They have to integrate all of their data first, proprietary 0:06:54.440 --> 0:06:58.200 data is the secret to AI's success. And they have 0:06:58.279 --> 0:07:02.880 to map out in excrew shading detail their workflows internally 0:07:02.960 --> 0:07:07.560 and with suppliers and customers and so forth. And this 0:07:07.600 --> 0:07:10.840 is going to take time. So we think this is 0:07:11.040 --> 0:07:15.000 this movement is real, is going to be massive, but 0:07:15.200 --> 0:07:19.360 we think there's been a little bit too much too soon. 0:07:19.640 --> 0:07:21.920 Well, it's interesting to hear you say that, Kathy, because 0:07:21.960 --> 0:07:25.640 you and at ARC were very early to acknowledge the 0:07:25.680 --> 0:07:30.000 impact of AI. Yet your flagship Our Innovation ETF has 0:07:30.080 --> 0:07:34.520 not held shares of Nvidia in about a year. You 0:07:34.560 --> 0:07:36.760 do own some of it in your other ETFs. Do 0:07:36.760 --> 0:07:39.200 you have any regrets about not having held onto the 0:07:39.280 --> 0:07:42.680 stock or actually increasing your exposure in the last couple 0:07:42.720 --> 0:07:44.800 of years After more than five hundred and thirty percent 0:07:44.880 --> 0:07:47.280 gains since twenty twenty two since the end of twenty 0:07:47.280 --> 0:07:47.720 twenty two. 0:07:48.760 --> 0:07:53.080 Yes, so you're right. We were very early into Nvidia 0:07:53.160 --> 0:07:56.080 ten years ago when it was five dollars. Now it's 0:07:56.480 --> 0:08:02.000 roughly eight hundred dollars, and I wrote it most of 0:08:02.040 --> 0:08:03.840 the way up. But I'll tell you what we did, 0:08:03.880 --> 0:08:07.120 and this is as a portfolio manager. It's not one 0:08:07.200 --> 0:08:13.040 action but what it causes in terms of another action. 0:08:13.760 --> 0:08:19.160 Last year we sold in the flagship in Vidia and 0:08:19.200 --> 0:08:24.440 put it into Coinbase. Coinbase, I believe is up as 0:08:24.800 --> 0:08:28.800 at least as much as in VideA, and it is 0:08:29.320 --> 0:08:36.559 much less well understood. The whole crypto movement, the crypto 0:08:36.600 --> 0:08:39.839 asset movement, Bitcoin as a new asset class and so forth, 0:08:40.360 --> 0:08:44.600 is not well understood or completely accepted out there. So 0:08:44.640 --> 0:08:49.720 we prefer to go where others are not traveling as much. 0:08:49.800 --> 0:08:52.560 And you know, as we were moving out of in Video, 0:08:52.600 --> 0:08:57.760 we were saying, okay, regulators are trying to crush coinbase here, 0:08:57.800 --> 0:08:59.959 and we were buying it on every dip in Video. 0:09:00.160 --> 0:09:03.559 Have to happen to be one of the sources for 0:09:04.200 --> 0:09:07.040 that purchase. So it's not just what we do on 0:09:07.080 --> 0:09:09.000 the cell side. It is what we do on the 0:09:09.040 --> 0:09:13.160 buy side that you have to look at. And yes 0:09:13.200 --> 0:09:16.440 we do hold it in the more specialized funds, but 0:09:16.480 --> 0:09:19.840 we've been taking profits there as well for reasons I 0:09:20.000 --> 0:09:20.640 just described. 0:09:21.080 --> 0:09:23.080 Yeah, and to be fair, you're right. Coinbase is up 0:09:23.080 --> 0:09:25.120 about six hundred and twenty percent since the end of 0:09:25.160 --> 0:09:27.679 twenty twenty two, so that compares with about five hundred 0:09:27.679 --> 0:09:30.600 and thirty percent gain in nvideo. Is there anything, though, 0:09:30.720 --> 0:09:34.560 Kathy in the end video story that would make you 0:09:34.640 --> 0:09:37.000 we think the name and want to become more aggressive 0:09:37.000 --> 0:09:37.319 on it. 0:09:38.559 --> 0:09:42.240 Yeah, if the price came down a lot, we would 0:09:42.720 --> 0:09:46.040 you know, the rate of return expectations or split? Would 0:09:46.040 --> 0:09:46.640 a split do it? 0:09:46.679 --> 0:09:48.400 Because I know we've been never. 0:09:48.320 --> 0:09:53.360 No, no, no, that wouldn't change. That wouldn't change anything. No, no, 0:09:53.480 --> 0:09:58.360 split adjusted than the price. So you know, if you 0:09:58.520 --> 0:10:01.840 look at our portfolio, is what we're trying to capitalize 0:10:01.880 --> 0:10:06.520 on with a Palenteer for example, are the next stages 0:10:07.160 --> 0:10:11.400 of this AI revolution? What we're seeing in the GPU 0:10:11.559 --> 0:10:15.439 side of things is Nvidia all praise to Jensen one, 0:10:15.679 --> 0:10:22.080 I mean, just unbelievable company execution, vision and so forth. 0:10:22.200 --> 0:10:25.400 And it's not over. It's going to last a long time, 0:10:25.480 --> 0:10:29.040 but there are going to be many other companies benefiting 0:10:29.520 --> 0:10:34.520 from AI. The productivity lift alone is going to be massive, 0:10:34.600 --> 0:10:38.800 the most massive productivity lift in history, we believe. And 0:10:38.880 --> 0:10:42.120 so this AI revolution is going to be broad based 0:10:42.160 --> 0:10:45.760 and is going to benefit a lot of companies. On 0:10:45.800 --> 0:10:49.200 the GPU side, of course, we have AMD as competition, 0:10:49.640 --> 0:10:52.920 but many people do not understand that there's a lot 0:10:52.960 --> 0:10:58.360 of other surreptitious competition evolving out there. Each of the 0:10:58.440 --> 0:11:03.200 hyperscalers is evolving its own chip strategy. You have a 0:11:03.280 --> 0:11:09.400 Tesla that has designed its own chip for AI, chip 0:11:09.840 --> 0:11:15.800 for the specialized, more specialized autonomous driving opportunity, and I 0:11:15.840 --> 0:11:18.960 think you're going to see a lot of companies developing 0:11:19.000 --> 0:11:23.720 more specialized chips. We know that Nvidia, of course, will 0:11:24.000 --> 0:11:27.520 segment the market as well. So we just think that 0:11:28.000 --> 0:11:31.400 a lot of the assumptions for Nvidia, you know that 0:11:31.520 --> 0:11:34.720 this is in Nvidia's market, and it's alone that those 0:11:34.760 --> 0:11:35.360 are changing. 0:11:35.520 --> 0:11:37.960 Well, we're speaking with Kathy Wood if you're just joining us. 0:11:38.000 --> 0:11:41.200 She's the founder and CEO and chief investment officer of 0:11:41.320 --> 0:11:44.160 ARC invest. She joins us from Saint Petersburg, Florida. 0:11:44.320 --> 0:11:47.280 So it's interesting Kathy two to you know, right everybody 0:11:47.360 --> 0:11:49.320 seems to be out there making chips, and it's funny. 0:11:49.360 --> 0:11:53.120 We had a conversation yesterday with Chris Miller, who wrote 0:11:53.160 --> 0:11:56.320 the book Chip Wars, and we talked about TSMC that 0:11:56.600 --> 0:11:58.960 everybody can kind of design what they want, but ultimately, 0:11:59.000 --> 0:12:00.840 right now they've got to come back to TSMC as 0:12:00.880 --> 0:12:03.160 the fabricator to make them. So as you say that, 0:12:03.200 --> 0:12:05.000 I mean you guys, and one of your funds, I 0:12:05.040 --> 0:12:09.400 think late last month was selling shares of TSMC. I 0:12:09.440 --> 0:12:12.440 am curious about then you're thinking around TSMC. There's a 0:12:12.440 --> 0:12:15.400 story today too about TSMC winning more than five billion 0:12:15.400 --> 0:12:18.360 in grants for their US chip plant, so money, you know, 0:12:18.440 --> 0:12:22.480 certainly being devoted to them. Why maybe pull back a 0:12:22.520 --> 0:12:24.760 little bit on TSMC or what is your case for 0:12:24.840 --> 0:12:26.200 TSMC in the long run. 0:12:27.120 --> 0:12:31.439 Well, the case for TSMC is, yes, it is the 0:12:31.440 --> 0:12:36.800 manufacturer of these merchant chips, so very big story there. 0:12:37.120 --> 0:12:41.800 But this is simply a cyclical call and it has 0:12:41.840 --> 0:12:45.400 to do with that word shortage and TSMC. For example, 0:12:45.440 --> 0:12:49.640 Broadcamcom reported last night I listened to that call. In 0:12:49.679 --> 0:12:53.679 the semiconductor solutions part of their business, they were up 0:12:53.679 --> 0:12:57.160 only four percent, AI up thirty five percent, but everything 0:12:57.160 --> 0:13:03.160 else down. So there are are some cyclical phenomenon out there, 0:13:03.160 --> 0:13:07.480 phenomena out there that we think are not they're not 0:13:07.520 --> 0:13:13.680 being integrated into the short term expectations for a number 0:13:13.720 --> 0:13:17.520 of stocks, hey counting including Yeah. 0:13:17.559 --> 0:13:19.440 So, Kathy, I want to move on to Tesla because 0:13:19.480 --> 0:13:22.600 you brought it up a moment ago. You've been a 0:13:22.640 --> 0:13:26.480 long time bull on Tesla. You have been buying shares 0:13:26.520 --> 0:13:30.000 recently after selling them for most of twenty twenty three. 0:13:30.480 --> 0:13:33.600 The stock down about thirty percent so far this year. 0:13:33.880 --> 0:13:35.880 We covered the news this week that ship beens from 0:13:35.920 --> 0:13:38.360 Tesla shang High Factory sank to the lowest and over 0:13:38.480 --> 0:13:41.600 a year in February. The challenges facing the EV industry 0:13:41.800 --> 0:13:43.920 have been well documented. We've talked about those a lot. 0:13:45.000 --> 0:13:48.240 Why do you still like Tesla considering all of the 0:13:48.320 --> 0:13:51.000 challenges in the EV space and also what many critics 0:13:51.000 --> 0:13:52.839 would say are disappointing fundamentals. 0:13:54.440 --> 0:13:57.199 So, yes, you're right. We were selling last year as 0:13:57.240 --> 0:14:00.720 it was in the three hundred to four hundred dollar range. 0:14:00.720 --> 0:14:04.280 It's back to one seventy five. And this is what 0:14:04.480 --> 0:14:07.400 portfolio managers do. We have a five year investment time 0:14:07.400 --> 0:14:13.600 horizon for Tesla and our price expectations from here. I 0:14:13.640 --> 0:14:20.240 mean we see roughly a seven to tenfold increase. I 0:14:20.280 --> 0:14:22.960 know we're in the process of revising our model, so 0:14:23.000 --> 0:14:26.000 I'm not at liberty to give you the new number. 0:14:26.080 --> 0:14:28.280 But would that new number be higher or lower than 0:14:28.280 --> 0:14:28.880 two thousand? 0:14:30.000 --> 0:14:33.800 Well, we're pushing it out a year, and therefore it 0:14:33.840 --> 0:14:39.360 will be higher because the autonomous taxi platform opportunity will 0:14:39.400 --> 0:14:42.280 be in full force. We think and we believe that 0:14:42.400 --> 0:14:46.400 Tesla will get the lion's share of that market here 0:14:46.480 --> 0:14:51.080 in the US, if not elsewhere. Autonomous taxi platforms are 0:14:51.280 --> 0:14:56.520 SaaS models. Tesla's current gross margin is well, it's in 0:14:56.560 --> 0:14:59.240 the teens right now because it's been cutting prices, but 0:14:59.320 --> 0:15:03.640 we think normalzed the ev margin is in the thirty 0:15:03.680 --> 0:15:07.640 percent range. SAS margins are in the eighty percent range. 0:15:08.160 --> 0:15:12.240 Most analysts focusing on the stock have nothing in their 0:15:12.280 --> 0:15:18.280 models or very little for autonomous. Our confidence that autonomous 0:15:17.880 --> 0:15:22.440 is going to happen has increased because it has happened. 0:15:23.120 --> 0:15:25.400 We see way most successful. We see a lot of 0:15:25.440 --> 0:15:29.520 success and commercial success. That is in China. It can 0:15:29.600 --> 0:15:33.800 be done. We think Tesla will launch a national service 0:15:34.000 --> 0:15:37.480 and Tesla this is where AI comes in. Tesla has 0:15:37.720 --> 0:15:41.080 orders of magnitude more data than all of the other 0:15:41.200 --> 0:15:46.239 auto and tech company companies going after this market combined. 0:15:46.920 --> 0:15:50.440 And what's important about that is that it has corner 0:15:50.520 --> 0:15:56.320 cases that nobody else has, rare, rare occurrences on the 0:15:56.440 --> 0:16:01.880 roads that it has recorded, and it is prepared for it, 0:16:01.960 --> 0:16:02.760 but others aren't. 0:16:02.800 --> 0:16:04.680 Kathy, just don't happen. I just want to jump in. 0:16:04.680 --> 0:16:06.960 It's kind of like a running joke with the Tesla 0:16:07.000 --> 0:16:10.320 community because Elon Musk says every year we're going to 0:16:10.360 --> 0:16:14.000 have this autonomous driving technology, and every year since he 0:16:14.040 --> 0:16:17.160 started saying it, what twenty seventeen, twenty eighteen, it has 0:16:17.240 --> 0:16:20.440 failed to materialize. Why are you so confident it's going 0:16:20.480 --> 0:16:21.840 to happen in the near future. 0:16:22.200 --> 0:16:25.600 Well, because it has happened, as I just said, and 0:16:25.920 --> 0:16:30.280 so it's not. It's not if it is when. That's 0:16:30.360 --> 0:16:35.600 the most important reason. Interestingly, in his last conference call, 0:16:35.680 --> 0:16:38.760 Tesla's last conference call, Elon said, yeah, I know I've 0:16:38.760 --> 0:16:40.480 been wrong about it, so I'm not even going to 0:16:40.520 --> 0:16:42.920 make a projection. I actually thought that was good and 0:16:42.960 --> 0:16:46.240 maybe he has a better shot now. And we're looking 0:16:46.280 --> 0:16:49.040 at some of their hiring and their job postings and 0:16:49.840 --> 0:16:54.040 seeing rumblings in different cities that they're starting to get ready. 0:16:54.120 --> 0:16:56.400 Hey, Kathy's something I know I've brought up this with 0:16:56.480 --> 0:16:58.680 you before, but I think back to are you and 0:16:58.920 --> 0:17:01.479 my first interview back in May of twenty fourteen, so almost. 0:17:01.200 --> 0:17:01.760 Ten years ago. 0:17:01.840 --> 0:17:04.520 But you brought up Elon Musk when he wasn't a 0:17:04.520 --> 0:17:07.600 household name or what his company was doing, and you 0:17:07.800 --> 0:17:10.080 likened him to Thomas Edison. And I guess what I 0:17:10.119 --> 0:17:12.720 want to ask you. You know this individual, you talk 0:17:12.760 --> 0:17:14.840 with him, you followed him obviously for a long time. 0:17:15.080 --> 0:17:17.800 Do you ever feel, you know, do you feel that 0:17:17.800 --> 0:17:20.600 way still about him in terms of likening to someone 0:17:20.640 --> 0:17:23.240 like Thomas Edison? And how do you find clarity and 0:17:23.280 --> 0:17:26.600 feel comfort in some of the questionable and controversial things 0:17:26.640 --> 0:17:29.639 that that Elon comments on or that he says. 0:17:30.840 --> 0:17:38.320 Yes, well, we we're focused on the technology and we're 0:17:39.480 --> 0:17:43.359 as is he. He is the inventor of our age. 0:17:43.480 --> 0:17:47.399 And this age is a very special age because the 0:17:47.720 --> 0:17:51.680 five major innovation platforms around which we have centered our 0:17:51.720 --> 0:17:57.560 research are converging, and three of them he is helping 0:17:57.600 --> 0:18:02.359 to converge. This autonomous tech see platform Opportunity is the 0:18:02.359 --> 0:18:08.000 convergence of robotics. Autonomous vehicles are robots, energy storage, they 0:18:08.040 --> 0:18:12.640 will be electric and artificial intelligence, where those are three 0:18:12.680 --> 0:18:17.800 separate s curves feeding each other and should lead to 0:18:17.880 --> 0:18:23.240 super exponential growth. He has understood this idea that technologies 0:18:23.760 --> 0:18:26.879 are going to converge with one another, and that is 0:18:26.920 --> 0:18:30.520 the way he's been thinking his first principles research. Just 0:18:30.560 --> 0:18:33.440 because something's been done one way for a very long time, 0:18:33.520 --> 0:18:37.080 think autos, doesn't mean it's going to remain that way, 0:18:37.520 --> 0:18:38.680 and that's why he's going to win. 0:18:38.760 --> 0:18:42.120 Do you ever feel though that he gets distracted or or. 0:18:42.160 --> 0:18:47.280 Candidate to it. Yeah, he is so laser focused on technology, 0:18:48.320 --> 0:18:52.920 and in the case of Tesla, the electric vehicle side 0:18:52.960 --> 0:18:56.000 that is on automatic pilot. They are just scaling and 0:18:56.359 --> 0:19:01.280 what he is doing is becoming, you know, the manufacturer 0:19:01.359 --> 0:19:05.240 of factories. He's trying to figure out how to automate 0:19:05.320 --> 0:19:09.040 and continue to drive down the costs there. His focus 0:19:09.119 --> 0:19:13.640 is on autonomous now certainly, and of course you can 0:19:13.680 --> 0:19:16.760 say on X he's distracted, but he's really more focused 0:19:16.800 --> 0:19:20.080 on the innovation. How can I go back to the 0:19:20.119 --> 0:19:23.320 future where I started, which was in the payments app 0:19:23.320 --> 0:19:28.480 Space sold to PayPal. How can I turn this into 0:19:28.920 --> 0:19:32.919 not only a payments app, but an everything app? And 0:19:32.960 --> 0:19:35.800 I think he's hard at work doing that in ways 0:19:35.840 --> 0:19:36.840 that we don't know yet. 0:19:36.960 --> 0:19:38.800 We are, of course talking with Kathy Woods. She's the 0:19:38.840 --> 0:19:41.919 ceocio and of course founder of arc invest joining us 0:19:41.920 --> 0:19:42.560 from Florida. 0:19:42.720 --> 0:19:45.520 Hey, Kathy, you're talking about the future of transportation. We 0:19:45.600 --> 0:19:47.959 got to talk about Archer Aviation. One of the most 0:19:48.000 --> 0:19:50.840 read stories today is about the company that you've been 0:19:50.840 --> 0:19:54.240 buying up. It's a developer of air taxis, Archer Aviation. 0:19:54.359 --> 0:19:57.560 Your stake around ten percent across several of your ETFs. 0:19:58.320 --> 0:20:01.480 You're the third largest investor in the name. We should 0:20:01.520 --> 0:20:04.120 note shares down roughly thirty percent so far this year. 0:20:04.119 --> 0:20:06.560 As our own Sam Potter writes today, you are once 0:20:06.560 --> 0:20:08.880 again on the other side of a short call made 0:20:08.960 --> 0:20:11.119 by Grizzly Research. Last time you were in a similar 0:20:11.160 --> 0:20:13.720 spot regarding a different name, Too Simple. You lost a 0:20:13.760 --> 0:20:16.480 lot and eventually sold most of your position. So talk 0:20:16.520 --> 0:20:19.480 to us about why you believe in Archer and does 0:20:19.520 --> 0:20:24.160 it ever worry you to go against the short sellers. 0:20:24.640 --> 0:20:32.639 So our investment process is centered around research and original research. 0:20:33.800 --> 0:20:38.160 I'll start with Too Simple. We sold too simple after 0:20:38.880 --> 0:20:46.159 the CEO who was the technology visionary left and so 0:20:46.760 --> 0:20:50.040 Grizzly got that right. I don't think for the right reasons. 0:20:50.400 --> 0:20:53.160 Although we were in the teeth of a massive bear 0:20:53.280 --> 0:20:57.000 market as well. If that CEO had not left, I 0:20:57.040 --> 0:20:59.399 don't think we would have sold that stock. In the 0:20:59.400 --> 0:21:02.920 case of Archer, we have a high degree of confidence 0:21:03.000 --> 0:21:06.240 in Archer. One thing to understand about ARC is we 0:21:06.320 --> 0:21:08.960 are the closest ARC is the closest you'll find to 0:21:09.000 --> 0:21:13.840 a venture capital company in the public equity markets, and 0:21:14.240 --> 0:21:19.119 we tread where others in the traditional asset management world 0:21:19.320 --> 0:21:22.680 will not go, at least on the public side, when 0:21:22.720 --> 0:21:25.840 we see a real opportunity. As we're doing our work 0:21:26.160 --> 0:21:31.520 on autonomous vehicles, we concluded that the cost is going 0:21:31.560 --> 0:21:34.639 to drop so much that roads are going to become 0:21:35.119 --> 0:21:38.399 very congested in the future, much more congested if you 0:21:38.400 --> 0:21:42.320 can imagine New York City. And so we then started 0:21:42.320 --> 0:21:47.840 doing work about transportation in the skies. Is it possible, Yes, 0:21:47.880 --> 0:21:51.480 it is possible. The FAA is the gating factor from 0:21:51.480 --> 0:21:54.919 a regulatory point of view. There are two companies the 0:21:55.000 --> 0:21:58.480 FAA is working very closely with, and I think because 0:21:58.520 --> 0:22:03.440 of successes elsewhere in the world. Other companies are having 0:22:03.480 --> 0:22:07.640 success where regulators have not been as strict. I think 0:22:07.640 --> 0:22:10.639 there's been a little more pressure on the FAA to 0:22:10.720 --> 0:22:15.399 pay close attention here, and the two are Archer and Jobi. 0:22:16.080 --> 0:22:20.960 Our confidence went up when Boeing, which was suing it 0:22:21.160 --> 0:22:25.399 for patent infringement, settled the case and actually took an 0:22:25.400 --> 0:22:32.840 ownership position in Archers, as has Stilantis and United Airlines. 0:22:33.400 --> 0:22:38.600 So three very deep pocketed partners who are also trying 0:22:38.600 --> 0:22:43.159 to figure out the future of transportation. And we know 0:22:44.320 --> 0:22:48.080 that they're on their way. Both Joby and Archer two 0:22:48.480 --> 0:22:53.120 FAA certification. Seems like the process is in motion and 0:22:53.520 --> 0:22:57.760 we haven't had a hiccup. And it has an MoU 0:22:58.119 --> 0:23:01.040 with Abu Dhabi to launch an air taxi service in 0:23:01.119 --> 0:23:06.199 twenty six and pending regulation, it has an MoU with 0:23:06.440 --> 0:23:10.080 inter Globe to launch an air taxi service in India. 0:23:10.119 --> 0:23:14.000 Both of those have been much better from a regulatory 0:23:14.040 --> 0:23:14.639 point of view. 0:23:14.680 --> 0:23:16.280 But how big of a concern is it to you 0:23:16.680 --> 0:23:19.200 that regulators here in the US could drag their feet. 0:23:19.240 --> 0:23:22.439 We did speak with an airline executive recently who is 0:23:22.560 --> 0:23:26.000 concerned that the FA is moving slower than other regulatory 0:23:26.000 --> 0:23:27.800 bodies when it comes to this type of technology. 0:23:28.800 --> 0:23:31.040 Yes, and that is why we pay a lot of 0:23:31.040 --> 0:23:35.840 attention to regulatory arbitrage. We've seen innovation move abroad to 0:23:35.960 --> 0:23:40.479 other countries, even Amazon. You know, the FAA wouldn't let 0:23:40.520 --> 0:23:46.159 Amazon fly its drones ninth generation nearly ten years ago 0:23:46.480 --> 0:23:50.080 on its own property outside, so it went to India 0:23:50.119 --> 0:23:52.920 and elsewhere. I think the pressures on the FAA now. 0:23:53.920 --> 0:23:57.840 And I also think that the bear market of twenty 0:23:57.880 --> 0:24:02.119 one and twenty two eliminate a lot of other competition 0:24:02.240 --> 0:24:06.719 that was brewing just the funding markets were closed, and 0:24:06.800 --> 0:24:13.280 so I think this market is much more is that 0:24:13.680 --> 0:24:15.640 both Jobie and Archer are going to have much more 0:24:15.640 --> 0:24:19.160 share than otherwise would have been the case. So we're 0:24:19.200 --> 0:24:21.920 pretty excited about the possibilities here. 0:24:22.080 --> 0:24:23.840 Hey, Kathy, as you said, you know, one of the 0:24:23.880 --> 0:24:25.840 things about ARC it certainly and it's the DNA, is 0:24:25.840 --> 0:24:28.560 that you go places and take positions that other people 0:24:28.600 --> 0:24:31.399