WEBVTT - Disruption as an Investment Thesis 0:00:06.080 --> 0:00:12.760 Her trains. I'm Joel Webber and I'm Eric. Eric. Today 0:00:12.760 --> 0:00:17.640 we have an unusual guest and active e t F manager. Yeah, 0:00:17.680 --> 0:00:19.799 I mean most of the money and the people in 0:00:19.840 --> 0:00:22.759 ETFs are passive in fact, summer you know cult like 0:00:22.920 --> 0:00:26.599 about their allegiance to passive. But here's an active manager 0:00:26.680 --> 0:00:29.360 that has has been founding success and she's something of 0:00:29.400 --> 0:00:31.560 a star. She We put her on the Bloomberg fifty 0:00:31.680 --> 0:00:36.360 last year because she was such a phenomenal uh entrance 0:00:36.760 --> 0:00:40.120 into finance and in a very unusual way. Yeah, and 0:00:40.240 --> 0:00:45.400 I'm very excited. Um. She is completely bucking like many 0:00:45.479 --> 0:00:48.000 trends at once. She is one of the hottest hands 0:00:48.040 --> 0:00:50.080 in active management, and there aren't many hot hands. As 0:00:50.159 --> 0:00:53.280 you know, active is struggling in all facets. It's under performing, 0:00:53.360 --> 0:00:58.680 largely just eating everything. Stock pickers are just they're in essence, 0:00:58.680 --> 0:01:01.000 they're facing an existential cry if you think about it. 0:01:01.320 --> 0:01:03.279 But Cathy Wood came along a couple of years ago 0:01:03.440 --> 0:01:06.920 and just really shocked the world by coming in and 0:01:07.040 --> 0:01:12.200 getting a ton of inflows for being active, discretionary, high cost, 0:01:12.600 --> 0:01:15.240 and she's an independent, no big distribution to help her. 0:01:16.520 --> 0:01:18.800 She had different about t f s like talk like 0:01:19.080 --> 0:01:21.320 it's like five hurdles stacked on on one another. And 0:01:21.440 --> 0:01:25.240 she overcame that largely on great performance. That was part 0:01:25.280 --> 0:01:27.840 of it. But what she does which is interesting, is 0:01:28.520 --> 0:01:32.399 she just focuses on disruptive innovation. That's her main thing. 0:01:32.600 --> 0:01:36.120 So she's active because, um, she don't get stuck in 0:01:36.280 --> 0:01:39.320 one sector or one theme. She wanted a room to 0:01:39.400 --> 0:01:42.680 move and she's a formerly an active manager. Um. And 0:01:42.880 --> 0:01:45.360 in retrospect, I gotta say, it makes sense if you 0:01:45.400 --> 0:01:47.400 are going after things that are moving quickly and you 0:01:47.440 --> 0:01:50.000 have a strategy, Uh, it kind of makes sense to 0:01:50.040 --> 0:01:53.080 be active in this space. She's also very thematic. What 0:01:53.320 --> 0:01:56.080 are her et f s. The Arc Innovation e t 0:01:56.240 --> 0:01:57.760 F which is a r k K that's the main 0:01:57.840 --> 0:01:59.840 one that goes across all sectors. That's sort of like 0:01:59.880 --> 0:02:01.960 the flagship product. But then she's got one called the 0:02:02.000 --> 0:02:06.560 Genomic Revolution, web X point oh um, the Industrial Innovation, 0:02:06.920 --> 0:02:10.519 Fintech Innovation, three D printing, and Israel Tech ETF. So 0:02:10.880 --> 0:02:12.760 you can say that a common thread here, which is 0:02:13.320 --> 0:02:16.079 she's in a way she is living and investing in 0:02:16.160 --> 0:02:18.760 the future that's five years out. Yeah, when every time 0:02:18.800 --> 0:02:20.679 I talked to her, I feel like I'm just a 0:02:20.760 --> 0:02:23.880 little like um slow, like I'm not I need to 0:02:24.000 --> 0:02:26.720 learn more about what's happening. She's really dynamic. She also 0:02:26.760 --> 0:02:29.440 makes some big bets, one being the one that she's 0:02:29.440 --> 0:02:32.639 probably most famous for. If you on the Twitter tes, yeah, 0:02:32.680 --> 0:02:34.600 she she said Testa is going to four thousand dollars 0:02:34.639 --> 0:02:37.320 in five years. That just riled up all of the 0:02:37.400 --> 0:02:40.239 haters on social media and sopecially the year when the 0:02:40.720 --> 0:02:44.720 stocks down or something. Yeah. I mean she's one of 0:02:44.760 --> 0:02:47.119 the rare bulls out there, but she just and she's 0:02:47.160 --> 0:02:49.840 been with it for a long thing. She owns the stock. 0:02:50.040 --> 0:02:51.720 It's the top waiting in her fun I'm not sure 0:02:51.760 --> 0:02:54.200 why people get so piste off when she's actually owning it. 0:02:54.280 --> 0:02:55.519 I mean, it's not like she's just saying something she 0:02:55.600 --> 0:02:57.679 hasn't known and she trades. It's not like it's not 0:02:57.800 --> 0:03:00.200 like a buy and hole position. Yeah. And so she's 0:03:00.200 --> 0:03:02.240 actually had Elon Musti has a podcast. She had Elon 0:03:02.320 --> 0:03:04.800 Musk on her podcast. So I think he was happy 0:03:04.880 --> 0:03:06.840 to find some people out there who were, you know, 0:03:07.200 --> 0:03:09.320 with him, because there's a lot of haters of that stock. 0:03:09.400 --> 0:03:11.560 But really with Kathy, one of the thing I want 0:03:11.600 --> 0:03:14.000 to say is as we find that active is looking to, 0:03:14.200 --> 0:03:16.400 you know, how to move forward in this passive world. 0:03:16.720 --> 0:03:20.160 I think Kathy has developed one way forward, a blueprint, 0:03:20.240 --> 0:03:22.840 which is to be high active share. Really you just 0:03:23.040 --> 0:03:26.040 very concentrated going for the gold, so to speak, with 0:03:26.120 --> 0:03:29.600 only like thirty stocks, a lot of bold bets, bold 0:03:29.680 --> 0:03:33.160 calls like Tesla, high conviction, not wavering if the stock 0:03:33.200 --> 0:03:36.080 goes down, and transparency shows her holdings every day, shows 0:03:36.080 --> 0:03:38.480 her trades every day, She crowdsources research, and she got 0:03:38.560 --> 0:03:40.960 a big social media presence pretty much all those things 0:03:41.040 --> 0:03:43.640 traditional active funds do not do. Oh and by the way, 0:03:44.000 --> 0:03:46.360 we recorded this while I was on vacation, which is 0:03:46.440 --> 0:03:48.280 why you'll have to understand that I was calling from 0:03:48.320 --> 0:03:58.080 the phone this time on Trilliance. Kathy would of our convestments. Kathy, 0:03:58.200 --> 0:04:00.960 thanks for joining us on Trilliance. Happy to be here, Joel. 0:04:01.520 --> 0:04:03.880 So when you think about what you do, how do 0:04:04.000 --> 0:04:08.520 you describe it to your friends and family. Yes, we 0:04:08.600 --> 0:04:14.440 are investors, asset managers focused exclusively on disruptive innovation, nothing else. 0:04:14.920 --> 0:04:18.720 And these disruptive innovations are technologically enabled. They're going to 0:04:18.800 --> 0:04:21.640 transform the way the world works and really make it 0:04:21.680 --> 0:04:26.120 a better place. And why do you use E t F. Well, 0:04:26.240 --> 0:04:28.800 I started with E t f s because as we 0:04:28.960 --> 0:04:33.920 were studying thematically UH, the aftermath of the O eight 0:04:34.040 --> 0:04:37.640 oh night meltdown, we were trying to discern trends, and 0:04:37.720 --> 0:04:40.720 what we were seeing was an accelerated trend towards E 0:04:40.920 --> 0:04:45.240 t f s taking market share. This usually happens, UH 0:04:45.600 --> 0:04:51.080 in any disruptive innovation. The cheaper, better, faster winds and 0:04:51.400 --> 0:04:56.120 gains increased traction throughout a very turbulent period. This was 0:04:56.240 --> 0:04:58.400 holding true with E t S and I thought, well, 0:04:58.640 --> 0:05:02.320 while the rappers terrific, it solves so many problems for 0:05:02.400 --> 0:05:07.000 the end investor, why can't we do active in in 0:05:07.320 --> 0:05:11.640 an E t F uh? And the answer was there's 0:05:12.080 --> 0:05:15.200 no reason you cannot if you're willing to disclose your 0:05:15.240 --> 0:05:18.240 holdings at the end of every day. UM, I want 0:05:18.279 --> 0:05:21.000 to go back to the innovation and these broader themes. 0:05:21.680 --> 0:05:24.800 Black Rock just had a press conference talking about mega 0:05:24.880 --> 0:05:26.960 trends and it kind of sounded like what you've been 0:05:26.960 --> 0:05:28.600 talking about for a while. And I want to bring 0:05:28.640 --> 0:05:32.400 in Rachel because Rachel has been covering thematic investing heavily 0:05:32.560 --> 0:05:34.600 and she met you a while ago and just set 0:05:34.680 --> 0:05:37.040 us up on this whole idea of thematic investing in 0:05:37.440 --> 0:05:40.279 your experience with Kathy. Yeah, so I first met Kathy 0:05:40.400 --> 0:05:43.280 back in I think it was October, so it's been 0:05:43.279 --> 0:05:46.880 a while now. She set up her funds back in fourteen, 0:05:46.920 --> 0:05:48.760 so they've been running for about a year at that stage. 0:05:49.000 --> 0:05:51.040 And my interest was piqued because I heard down the 0:05:51.080 --> 0:05:53.600 grape vine that Kathy was using these e t f 0:05:53.680 --> 0:05:57.200 s to actually invest in disruptive industries, but also bitcoin, 0:05:57.480 --> 0:05:59.360 which got my attention at the time because I was 0:05:59.400 --> 0:06:01.440 writing about orencies and I thought, hang on a second, 0:06:01.520 --> 0:06:03.840 here's a way we can write about something really interesting 0:06:03.920 --> 0:06:06.200 without staying too far from my beat. And I went 0:06:06.279 --> 0:06:08.080 in to meet Kathy and learn a bit more about it, 0:06:08.160 --> 0:06:10.440 and I was really blown away, really but how kind 0:06:10.440 --> 0:06:13.240 of sort of sophisticated that the strategy was at the time. 0:06:13.760 --> 0:06:15.440 Not only was it kind of bitcoin, it wasn't just 0:06:15.520 --> 0:06:17.800 crypto focused. It was actually kind of looking at anything 0:06:17.839 --> 0:06:20.440 that was disrupting things that were different kind of threads 0:06:20.480 --> 0:06:23.880 of investment, looking at blockchain, different threads, looking at genomics. 0:06:24.120 --> 0:06:26.960 It all seemed very kind of like futuristic and new wave, 0:06:27.240 --> 0:06:29.120 and I found it was so interesting that I kept 0:06:29.160 --> 0:06:31.200 kind of like following the progression of these funds and 0:06:31.240 --> 0:06:33.520 then actually ended up writing a story all about kind 0:06:33.520 --> 0:06:35.640 of Kathy and that the success of her her business 0:06:35.720 --> 0:06:39.040 last year until Kathy, take us back. You started the et, 0:06:39.279 --> 0:06:42.440 but you were doing themes back at your previous job. 0:06:43.279 --> 0:06:45.360 What turned you onto themes and and why do you 0:06:45.440 --> 0:06:49.840 ultimately go out in your own well A couple of reasons. 0:06:50.000 --> 0:06:54.880 I was turned onto themes, specifically technologically enabled innovation, which 0:06:54.960 --> 0:06:59.480 is which which impacts every sector of these days. When 0:06:59.560 --> 0:07:03.080 I was started in the business, I started in economics, 0:07:03.600 --> 0:07:06.000 but I knew very quickly I wanted to become an 0:07:06.040 --> 0:07:10.720 analyst and then ultimately a portfolio manager. And at Jennison Associates, 0:07:11.000 --> 0:07:15.680 great firm, wonderful mentors, six Agallis. He said, fine, you 0:07:15.760 --> 0:07:17.560 can do that here, but you're gonna have to find 0:07:17.600 --> 0:07:21.600 your own universe. And the analysts there were lifers. They 0:07:21.640 --> 0:07:25.760 weren't going anywhere, so I had to just wait around for, 0:07:26.560 --> 0:07:28.600 you know, new names to show up that kind of 0:07:28.720 --> 0:07:33.400 fell through the cracks, like database publishing, Reuter's tele rate. 0:07:33.480 --> 0:07:36.840 We called it database publishing at the time. Nobody wanted 0:07:36.880 --> 0:07:42.160 to follow that. It didn't belong in either publishing or technology. 0:07:42.320 --> 0:07:44.760 It was a fall through the crack stock, and so 0:07:45.160 --> 0:07:48.920 I said, I want to follow that. This sounds really interesting. 0:07:48.960 --> 0:07:51.400 And of course it was the precursor to the Internet. 0:07:52.040 --> 0:07:57.560 So very often when ideas are discarded or you know, 0:07:58.160 --> 0:08:03.040 dismissed uh leetly as ridiculous. Uh, there there can be 0:08:03.280 --> 0:08:07.320 often something very interesting lurking there. It may not show 0:08:07.440 --> 0:08:11.720 up right away, but sometimes the ideas that are dismissed 0:08:11.760 --> 0:08:16.040 out of hand become the most important investment opportunities. We're 0:08:16.040 --> 0:08:18.120 going to see internet being one of them. I'm thinking 0:08:18.240 --> 0:08:22.000 of Xerox and the PC. Yes, that was another one. 0:08:22.760 --> 0:08:25.400 But yeah, and so you started getting into these and 0:08:25.480 --> 0:08:28.679 then you were a portfolio manager. Yes, and our Lions 0:08:28.720 --> 0:08:31.400 Bernstein I headed up. I was c i O of 0:08:31.520 --> 0:08:36.880 the Global Thematic Strategies and I joined during the tech 0:08:36.960 --> 0:08:41.719 and telecom bust. Uh so uh it was at that 0:08:41.880 --> 0:08:45.240 time we were just focused on disruption. Uh. And in 0:08:45.320 --> 0:08:47.960 that case, it was the bust, and we were trying 0:08:48.000 --> 0:08:50.319 to figure out, okay, what are the ramifications of the 0:08:50.440 --> 0:08:54.240 bust and how is this going to change technology? And 0:08:54.360 --> 0:08:56.319 one of the one of the articles that came out 0:08:56.360 --> 0:09:00.760 at the time was I t it doesn't matter. It 0:09:00.920 --> 0:09:03.360 was a Harvard Business Review. We were trying to get 0:09:03.360 --> 0:09:05.840 our head around this. Remember we had the market had 0:09:05.880 --> 0:09:08.600 gone wild on technology, and here was here was an 0:09:08.720 --> 0:09:12.040 article in HBr saying it doesn't matter. And that was 0:09:12.679 --> 0:09:16.840 that was, uh, you know, a precursor or a foreshadowing 0:09:17.080 --> 0:09:22.080 of Amazon Web Services, the cloud. And so again, most 0:09:22.160 --> 0:09:24.839 people were buying the dip even in oh one when 0:09:24.920 --> 0:09:28.880 I was when I started, and we already were onto 0:09:28.920 --> 0:09:31.560 the next thing. Wait a minute, there's a disruption here, 0:09:32.320 --> 0:09:36.320 what could this possibly mean? So um, we did everything 0:09:36.400 --> 0:09:39.040 we did was around disruption. But because a lot of 0:09:39.160 --> 0:09:42.679 technologies were not ready, you know they were they were 0:09:42.800 --> 0:09:46.000 birthed too many of them during the Internet bubble or 0:09:46.040 --> 0:09:48.760 even way before, but they needed time to just hate. 0:09:49.240 --> 0:09:53.120 So we we were focused on other disruptions, and one 0:09:53.200 --> 0:09:57.040 of them was, Okay, investors have been disrupted. The tech 0:09:57.080 --> 0:10:01.480 and telecom bust has turned people off. Stock interest rates 0:10:01.520 --> 0:10:05.360 are only six percent long rates, so nobody's going to 0:10:05.440 --> 0:10:08.680 want bonds. That of course was wrong. Uh, where else 0:10:08.720 --> 0:10:10.880 are they going? And then we moved into housing as 0:10:10.880 --> 0:10:13.000 a new asset class. Just to give you a sense 0:10:13.080 --> 0:10:16.480 of how we were looking at disruption at the time now, 0:10:17.000 --> 0:10:20.960 the technologies are ready for prime time. They were they've 0:10:20.960 --> 0:10:23.560 been jest stating these last twenty years, and we are 0:10:23.640 --> 0:10:27.680 hitting tipping points now where demand demand for electric vehicles 0:10:27.720 --> 0:10:29.840 we think will go up twenty fold during the next 0:10:30.040 --> 0:10:33.600 UH during the next five six years, demand for DNA 0:10:33.720 --> 0:10:37.920 sequencing is going to go up fortyfold. These are unit 0:10:37.960 --> 0:10:41.360 growth numbers because costs are moving down so rapidly, and 0:10:41.480 --> 0:10:46.920 I don't think economists or analysts or portfolio managers are 0:10:47.080 --> 0:10:49.760 ready for this right now. I don't think research departments 0:10:49.800 --> 0:10:52.760 are ready for this. They have to restructure because every 0:10:52.840 --> 0:10:55.640 analyst is going to have to become very conversant and 0:10:55.760 --> 0:11:00.640 comfortable with technology. And we're focused on five technology platforms 0:11:00.720 --> 0:11:04.960 or innovation platforms. Not only is technology seeping into every sector, 0:11:05.080 --> 0:11:08.040 blurring sector lines, which I know is important in ETFs, 0:11:08.520 --> 0:11:14.080 but these three innovation platforms, they are converging. So analysts 0:11:14.240 --> 0:11:18.400 broke their responsibilities broken out by very specialized segments of 0:11:18.480 --> 0:11:22.920 sectors are not going to be able to analyze these 0:11:22.960 --> 0:11:27.760 innovations correctly without again a restructuring of their responsibilities. So 0:11:27.880 --> 0:11:32.040 what are these five platforms that you've divided and are 0:11:32.160 --> 0:11:35.160 using to sort of organize your university. Yes, and these 0:11:35.200 --> 0:11:38.360 would be in Silicon Valley. They would be considered general 0:11:38.440 --> 0:11:44.640 purpose technology platforms. Uh there there there. We didn't choose these, um, 0:11:45.120 --> 0:11:48.160 but they're at All of these are at tipping points 0:11:48.240 --> 0:11:50.800 in terms of adoption. And I can tell you how 0:11:50.880 --> 0:11:53.800 we get to tipping points, but they are DNA sequencing. 0:11:54.840 --> 0:11:58.760 The tipping points always happen because costs are collapsing, and 0:11:58.840 --> 0:12:03.319 they're collapsing there so that we believe that the number 0:12:03.360 --> 0:12:07.120 of whole human genomes sequenced, which was two point four 0:12:07.200 --> 0:12:10.719 million last year, that's half of all the genomes ever 0:12:10.880 --> 0:12:13.719 sequenced in the world ever that happened just last year. 0:12:14.000 --> 0:12:16.240 We think that's going to a hundred million in five years. 0:12:16.880 --> 0:12:19.600 Uh and we're and we think it's going ultimately into billions. 0:12:19.679 --> 0:12:22.240 And it's because costs are collapsing here. And we will 0:12:22.280 --> 0:12:26.600 get our genome sequenced every every every year, every other 0:12:26.720 --> 0:12:29.400 year to figure out what's mutating in our bodies so 0:12:29.600 --> 0:12:32.679 we can catch cancer in stage one and then we 0:12:32.800 --> 0:12:35.760 can edit it out with gene editing. So that's one 0:12:35.880 --> 0:12:39.360 huge platform that's an e t F A r KG right, 0:12:39.440 --> 0:12:44.000 the genomic revolution on that one that does and it's 0:12:44.080 --> 0:12:47.199 unusual for US to have a fund that looks like 0:12:47.320 --> 0:12:52.319 a healthcare sector fund, but it is a slice of healthcare. 0:12:52.440 --> 0:12:56.040 It is futuristic healthcare if you look at it. Uh, 0:12:56.720 --> 0:13:03.079 it includes DNA sequencing, molecular diagnostic testing companies, cart technology companies, 0:13:03.120 --> 0:13:08.240 so with immunotherapy, crisper, gene editing, other kinds of gene therapy. 0:13:09.040 --> 0:13:14.040 So again, our funds are very forward looking. You'll find 0:13:14.160 --> 0:13:16.800 many sector funds are where they are because of what 0:13:16.920 --> 0:13:20.200 has happened historically. That's true of any index. Our funds 0:13:20.280 --> 0:13:25.679 tend to be very active relative to you know, their counterparts, 0:13:25.800 --> 0:13:28.720 if there are any in the market, because most counterparts, 0:13:28.800 --> 0:13:32.280 even if they call themselves innovation, are based on some index. 0:13:32.440 --> 0:13:35.320 That's the screen. Our screen is not an index. Our 0:13:35.360 --> 0:13:40.800 screen is our research. So very different. So DNA sequencing, UH, 0:13:41.200 --> 0:13:46.840 robotics with collaborative robots, the cost or collapsing here, energy storage, 0:13:46.880 --> 0:13:51.480 so electric vehicles, UH, elon musk leading the charge, so 0:13:51.640 --> 0:13:56.440 to speak. Artificial intelligence is really part of the next 0:13:56.520 --> 0:14:01.000 generation Internet. It's it's going to turbocharge the Internet, the 0:14:01.120 --> 0:14:04.920 cloud if you'd like. UH, and it's it's ready for 0:14:05.000 --> 0:14:10.120 prime time because uh, we've pulled human programmers largely out 0:14:10.160 --> 0:14:13.280 of the equation, and then finally blockchain technology, which is 0:14:13.320 --> 0:14:16.800 also part of the next generation Internet. Yeah, and I 0:14:16.920 --> 0:14:18.959 find this really kind of fascinating because when you look 0:14:18.960 --> 0:14:21.520 at what's happened since Kathy set up her funds back 0:14:21.560 --> 0:14:25.640 in you've really seen a proliferation of these types of 0:14:25.680 --> 0:14:28.280 strategies coming through in the E T F industry, But 0:14:28.440 --> 0:14:30.760 most of these are passive. If you look at kind 0:14:30.760 --> 0:14:33.800 of the proportion of passive to active around the numbers, 0:14:33.800 --> 0:14:36.400 and I think it's only eleven percent that are actively managed, 0:14:36.440 --> 0:14:39.080 and significant number of those are run by Kathy. So 0:14:39.160 --> 0:14:40.960 it's quite interesting to me that this is a very 0:14:41.000 --> 0:14:43.840 different approach because inherently it makes quite a lot of 0:14:43.920 --> 0:14:46.600 sense when you're thinking about sort of you know, futuristic 0:14:46.680 --> 0:14:49.040 looking industries to try and think about something where you're 0:14:49.080 --> 0:14:52.560 not necessarily pinned down to indexes that that can only 0:14:52.640 --> 0:14:56.040 really rebalance on a twice annual or annual kind of basis. 0:14:56.160 --> 0:14:57.840 So I find that kind of like, sort of very 0:14:57.840 --> 0:14:59.920 interesting about this this approach that a lot of our 0:15:00.080 --> 0:15:02.080 people have kind of followed it, but they've chosen to 0:15:02.160 --> 0:15:04.720 go to the passive, whereas Kathy has has has the 0:15:04.840 --> 0:15:07.960 active kind of DNA as well. Thank you. Can I 0:15:08.080 --> 0:15:10.120 just add one thing to that, and thank you Rachel 0:15:10.160 --> 0:15:12.440 for saying that. Um. One of the other things. The 0:15:12.560 --> 0:15:16.880 other benefits of active management is we trade around our 0:15:16.960 --> 0:15:22.640 names aggressively because disruptive innovation is inherently controversial and I 0:15:23.320 --> 0:15:26.720 we just lie there and wait. We know that Tesla 0:15:27.160 --> 0:15:28.960 when it was in the three eighties, we knew it 0:15:29.040 --> 0:15:30.960 was going to come down. We sold up there. Even 0:15:31.000 --> 0:15:34.040 though our price target is as high as it is. 0:15:34.560 --> 0:15:37.040 We knew we were going to get opportunities. It never 0:15:37.280 --> 0:15:40.360 left the top position in the fund, but instead of 0:15:40.480 --> 0:15:43.720 being at twelve or thirteen percent, we took it down 0:15:43.800 --> 0:15:48.680 to eight percent. If you just isolate the trading activity 0:15:48.840 --> 0:15:50.960 in Tesla alone, and we do this with all of 0:15:51.000 --> 0:15:54.320 our names last year, and we had a number of 0:15:54.440 --> 0:15:59.080 round trips. If you just isolate that trading alone, the 0:15:59.160 --> 0:16:01.440 stock itself off was up six and a half percent 0:16:01.600 --> 0:16:05.080 last year, but the our trading activity alone added another 0:16:05.240 --> 0:16:09.080 hundred and seventy five basis points to our performance last year, 0:16:09.200 --> 0:16:11.600 just that one stock, and we do that with every 0:16:11.640 --> 0:16:14.640 stock now. It is true Tesla is probably one of 0:16:14.720 --> 0:16:18.080 the most volatile and most controversial, so we have a 0:16:18.120 --> 0:16:20.640 lot of opportunities, but that is one of the benefits 0:16:20.680 --> 0:16:23.000 of active management. And I think before you though, when 0:16:23.080 --> 0:16:24.520 when I met you, I was I met you at 0:16:24.520 --> 0:16:27.080 a conference somewhere downtown, like the Millennial Hotel or something, 0:16:27.160 --> 0:16:29.560 and when you talked about these, I said, I don't 0:16:29.560 --> 0:16:31.800 think it's going to go that well. I said, you know, 0:16:32.240 --> 0:16:34.320 I don't know why she doesn't do him passive, because 0:16:34.480 --> 0:16:36.320 that's just what everybody wants right now. The fact that 0:16:36.360 --> 0:16:37.920 you made him active at the time, I thought, man, 0:16:38.040 --> 0:16:41.760 that that could sink these just because people want stuff 0:16:41.840 --> 0:16:43.920 cheap and passive. Yours are a little on the price 0:16:44.000 --> 0:16:46.920 your side and they're active. Um, but you've defied the 0:16:46.960 --> 0:16:50.320 odds active equity mutual funds have seen. I don't know 0:16:50.320 --> 0:16:52.160 what the number is, it's probably close to a trillion 0:16:52.200 --> 0:16:55.560 dollars and outflows since you launched. You've taken in two 0:16:55.640 --> 0:16:58.400 point five billion in the past three years, so you've 0:16:58.440 --> 0:17:02.440 completely bucked the trend. Talk about that why you had 0:17:02.480 --> 0:17:04.359 to go active. Was it just because you couldn't be 0:17:04.480 --> 0:17:08.000 locked into anything, You had to have that freedom. Yes, 0:17:08.320 --> 0:17:11.840 So the number you quoted there are e t f s, 0:17:11.920 --> 0:17:15.000 they're they're close to three billion now, but we we 0:17:15.600 --> 0:17:18.399 had to do something else. And I'll explain why we 0:17:18.560 --> 0:17:21.560 had to pivot, because I funded the company for the 0:17:21.640 --> 0:17:25.399 first three years and what you said that Eric was 0:17:25.640 --> 0:17:30.080 actually happening. I the network I had in the financial community. 0:17:30.160 --> 0:17:32.920 And remember I've been around a long time in this 0:17:33.119 --> 0:17:36.920 business and I do have a very wonderful network. My 0:17:37.080 --> 0:17:40.240 network was nowhere to be found on the passive. On 0:17:40.320 --> 0:17:42.520 the passive side, on the e t F side, I 0:17:42.680 --> 0:17:46.439 was shocked that most people I was talking to did 0:17:46.560 --> 0:17:50.920 not understand what active management was. They just didn't understand it. 0:17:51.680 --> 0:17:55.199 And so we had to We had to start um 0:17:56.000 --> 0:17:59.040 using other rappers because while we were being asked, would 0:17:59.040 --> 0:18:01.200 we do it? And that's what you do as a 0:18:01.240 --> 0:18:03.399 small business. We are now up to nine and a 0:18:03.440 --> 0:18:09.120 half billion dollars all active, but any rapper. We've got 0:18:09.200 --> 0:18:13.200 two distributors. You know. We subadvised for mutual funds throughout Asia, 0:18:13.240 --> 0:18:16.720 pack UH and e t f s of course here 0:18:17.160 --> 0:18:21.159 mostly in the United States, but interestingly, sovereign wealth funds 0:18:21.480 --> 0:18:24.239 in other parts other parts of the world have been 0:18:24.320 --> 0:18:26.880 buying some of our et f s because they don't 0:18:26.920 --> 0:18:29.159 have to go through all of the due diligence that 0:18:29.840 --> 0:18:33.080 you know, a traditional separately managed account would go through. 0:18:33.119 --> 0:18:36.359 We also have separately managed accounts. I went to the 0:18:36.440 --> 0:18:40.920 Morning Star conference in October of thirteen, and this was 0:18:41.119 --> 0:18:44.119 right before we started the company, and on stage was 0:18:44.240 --> 0:18:48.560 Eugene Fama being interviewed a fireside chat, and he said 0:18:48.640 --> 0:18:53.480 at that conference, he said, active management is dead, it 0:18:53.760 --> 0:18:57.159 is disappearing. And you know this was there might have 0:18:57.200 --> 0:18:59.560 been two thousand people in the room, and everybody was cheering, 0:18:59.640 --> 0:19:03.000 and and I looked around. I really understood at that moment, 0:19:03.240 --> 0:19:06.520 Oh my goodness, I'm the only active manager here. This 0:19:06.760 --> 0:19:10.280 is crazy. I would have thought, you know, doesn't everybody 0:19:10.359 --> 0:19:12.560 want to know about this wrapper, which is so good 0:19:12.720 --> 0:19:18.600 and so interesting. Um, So we went to active when 0:19:18.640 --> 0:19:22.639 it comes to innovation, it's the only way to manage money. Um. 0:19:22.880 --> 0:19:28.080 To me, the idea of passive and innovation, well, that's 0:19:28.160 --> 0:19:33.600 an oxymoron, right. And the screen for our research is 0:19:34.000 --> 0:19:38.000 the screen for our portfolios is our research. We are 0:19:38.080 --> 0:19:42.639 constructing autonomous vehicles. What is it? What goes into it? 0:19:42.760 --> 0:19:46.240 We're doing first principles research and we're using something called 0:19:46.359 --> 0:19:50.320 rights law in order to understand the learning curves which 0:19:50.400 --> 0:19:54.080 caused cost declines in these new technologies, and then we 0:19:54.320 --> 0:19:57.320 use price elasticity of demands, so there's a lot of 0:19:57.440 --> 0:20:00.720 top down you know, how big is this market going 0:20:00.800 --> 0:20:04.160 to be? If you don't have perspective when you're investing 0:20:04.240 --> 0:20:09.040 in innovation, you don't have the courage of conviction. Um, 0:20:09.280 --> 0:20:12.080 now you came out and you just basically hit a 0:20:12.119 --> 0:20:14.040 home run right out of the gate. Your fund went 0:20:14.160 --> 0:20:17.080 up like two or three times. The SMP five undered 0:20:17.080 --> 0:20:19.720 I called the shiny object moment. I'm sure you've got 0:20:19.760 --> 0:20:21.760 a lot of people just giving you looks because of that. 0:20:22.440 --> 0:20:24.040 How much of the flows that have come in do 0:20:24.080 --> 0:20:27.119 you think are just people who just saw this and 0:20:27.520 --> 0:20:31.800 crazy performance and bought in versus you know, talk to 0:20:31.880 --> 0:20:35.479 you believe in Cathy and are there for the long haul? Uh. 0:20:35.640 --> 0:20:39.720 In the beginning, it's interesting Rachel mentioned bitcoin. Most people 0:20:39.840 --> 0:20:43.399 dismissed us because it was bitcoin. So in in in 0:20:43.560 --> 0:20:45.760 eighty seven alone we were up eighty seven and a 0:20:45.800 --> 0:20:48.159 half percent. But if you had put if you had 0:20:48.200 --> 0:20:51.200 just left our bitcoin in cash, which we wouldn't do 0:20:51.280 --> 0:20:55.120 of course, so a conservative way of calculating non bit 0:20:55.240 --> 0:20:58.520 poorn bitcoin performance, we would have been up a low 0:20:58.640 --> 0:21:01.320 sixties percent, so I was more than double the market. 0:21:02.000 --> 0:21:04.800 Uh No. In the beginning, we got oh, they're using 0:21:04.920 --> 0:21:08.120 bitcoin as a as a gimmick for from from from 0:21:08.280 --> 0:21:10.919 some journalists in the et F space that I respect 0:21:11.000 --> 0:21:14.399 and like not a lot. I thought, Wow, they didn't 0:21:14.400 --> 0:21:16.800 read our white papers. We've done so much work on this, 0:21:17.359 --> 0:21:20.680 so there was an automatic dismissal as this is a gimmick. 0:21:21.280 --> 0:21:23.720 And we also have had that. We've had that a 0:21:23.760 --> 0:21:26.159 little bit with Tesla as well. You know, you're just 0:21:26.359 --> 0:21:28.240 you just want to get out there, and and and 0:21:28.960 --> 0:21:32.240 and if they only saw the research that we put 0:21:32.280 --> 0:21:35.600 into this. So we've had a great social media and 0:21:35.840 --> 0:21:40.359 marketing presence and this has been building slowly. But I 0:21:40.480 --> 0:21:43.200 think the main thing has been slowly it's demand pull. 0:21:43.720 --> 0:21:46.280 The wirehouses were slow to put us on where we're 0:21:46.359 --> 0:21:47.960 on a few now, we have a few more to go. 0:21:49.000 --> 0:21:53.920 But it's been demand pulled because investors, whether they see 0:21:54.000 --> 0:21:57.399 us on social media or on other media, they know 0:21:57.960 --> 0:22:02.480 we are right. They know because they feel technology changing 0:22:02.560 --> 0:22:05.640 their own line lives so quickly, or their children's lives 0:22:05.720 --> 0:22:08.840 or their grandchildren's lives, and they know they're missing it 0:22:09.040 --> 0:22:12.120 in their portfolios. They they do not have a piece 0:22:12.160 --> 0:22:15.159 of the action, and they want to you know, they 0:22:15.240 --> 0:22:19.480 would like to ride, whether it's five of their portfolio. 0:22:19.960 --> 0:22:22.240 The other thing that I think we've done pretty well 0:22:22.359 --> 0:22:26.280 is helped people understand that traditional indexes are filling up 0:22:26.320 --> 0:22:29.760 with value traps because of this innovation, So why not 0:22:30.040 --> 0:22:32.880 use us as a hedge. Even if you're completely passive, 0:22:33.600 --> 0:22:36.199 you're you're you have value traps building up in your 0:22:36.280 --> 0:22:39.879 value portfolios and in your growth portfolios. That's how fast 0:22:40.040 --> 0:22:42.760 innovation is evolving. Who would you say, are are you 0:22:42.880 --> 0:22:44.760 bias for for the E T s? Is it primarily 0:22:44.800 --> 0:22:48.160