I can think of worse places to hang out for an hour waiting for Iona, my daughter, than a Boston Tea Party in Bristol. (There are a few of them).
I wasn’t surprised to be waiting.
When I rang her with 20 minutes to go on my journey, she was just leaving Swansea and still needed petrol.
I realise now, that the loose arrangement around 11:30 was merely a suggestion of when we might catch-up for brunch. I was early, arriving at elevenses and she was expecting to push brunch firmly into lunch. I guess I should be grateful that it didn’t turn into afternoon tea. It couldn’t anyhow, she needed to be somewhere else by then.
Having settled down with my own pot of tea, I noticed the number of empty tables. That’s unusual for a Friday lunchtime, especially pre-pandemic, Johnson and Truss. I estimated that they were probably running half full, on what would normally be one of their busiest times of the week.
My phone pinged, interrupting my thoughts about recession. It was a friend recommending Merryn Talks Money and a particular podcast featuring Cathie Wood, the CEO of Ark Invest. Given it was an hour long show and a window had just opened up, I settled down to listen.
If you’ve been reading my newsletter for a while, you’ll know that I’m fond of a bit of future gazing and have an optimistic bias towards new technology, ideally the sort that saves the planet and us selfish humans on a collision course to destroy it.
Ark Invest was started in 2014 by Cathie Wood. It’s flagship Exchange Traded Fund (ETF), ARK Innovation, looks for long-term growth by investing in companies which promise disruptive innovation. A phrase which must have come straight out of their marketing bumph.
I don’t think for one minute that Wood’s focus is climate change. She’s actively managing a big pot having attracted plenty of retail investors and billions of dollars, buying companies and their technologies which she believes will reshape the world. If there’s any crossover, and there is, it’s a bonus.
Her performance is a bit of a mixed bag.
2020 was an extraordinary year, surging a frothy 152%, because of the market’s love affair with tech and innovation related stocks during the pandemic. Who can forget the rise and fall of Peloton, another favourite of Wood’s, at least it was.
Like Peloton, what goes up, usually comes down and ARK Innovation was no exception. A 24% loss in 2021, was followed by a 67% fall in 2022 as interest rates rose and investors shifted towards more stodgy traditional sectors with traditional earnings. There must be a lot of ARK investors sitting on a big fat loss right now.
She argues that algorithms are largely to blame. Her fund isn’t helped by most of her stock picks not being included in any benchmarks. The one exception now being Tesla.
The fund has bounced back a third in 2023, regaining some losses, as interest returns to innovation stocks.
Wood is also at pains to point out that the world is now economically mirroring what was happening in the 1920s. I’ve heard this story before.
I think it’s mostly sales spin, using WW1 and the Spanish Flu pandemic to reflect on market sentiment today. Back then, inflation reached 24% causing, what she describes as a supply side shock. Our own pandemic has also caused supply chain problems with accompanying inflation and painful interest hikes for all borrowers.
She believes this is now unravelling, leading to a period of deflation and recession before the good times finally role, claiming back the roaring twenties towards the end of this decade. She conveniently forgets to mention the stock market crash in 1929.
One fact no one can disagree with, new technologies can indeed lead to exponential growth. Back in the 1920s, three new technologies had already started to transform the world - telephone, electricity and the internal combustion engine.
The question is, are we entering a new period of explosive growth with a whole host of new technologies now?
She argues that we’ve had a taste of this with the internet and companies like Amazon. Here was a company which continued to grow exponentially and didn’t decay quickly to GDP type growth, the small percentage rises which don’t tend to excite most investors.
What’s exciting her now are a number of new technologies and how they are rapidly converging. It’s this convergence which will lead to those explosive growth opportunities, which she believes will far exceed what has happened so far on the internet.
The biggest life changer she believes is multi-omics. It’s the science of biological analysis of different data sets coming from the multiple omes of our body. A lot of work has already been done on our genome, our genetic make-up and sequencing our DNA.
Another could be the microbiome, the army of microbes which protect us against germs, breaking food down to release energy and the production of our vitamins.
This combination of sequencing technology and artificial intelligence (AI) is already transforming our world.
DNA sequencing is helping doctors diagnose cancers much earlier and more accurately.
Personalised medicine is in its infancy but could become the way in which treatments are tailored based on our own genetic make-up. Imagine having your genome sequenced every couple of years, in order to look for new mutations, programming errors if you prefer, as we continue to age.
If you’re interested in the biggest breakthrough earner she’s betting the bank on, it’s autonomous taxi platforms which she expects to be an $8-10 trillion business in the next 5-10 years.
She expects the platforms will take half of that revenue and Tesla will be in pole position to capitalise. Other platforms include Waymo (Google), Mobileye, Cruise (General Motors), Motional (Hyundai and Aptiv). There are other unfamiliar names in this list with their more famous owners.
The reason for Wood’s optimism is because Tesla has collected more driving data than the rest of the automotive industry put together. Tesla has 5 million cars running around the world already, collecting data. It adds up to a wealth of information on what the US refer to as corner cases, the places where accidents often occur.
Autonomous vehicles are robots and this technology is not restricted to them. Industrial robots are coming down in price into $10-12,000 range, a fraction of what you have to pay a person and they don’t need a holiday. Given the growing labour shortages around the world, the use of robots especially to do mundane tasks is set to grow.
Energy storage is another new technology, although she doesn’t expand beyond the use of batteries in electric vehicles (EVs). A surprising stat is the 5.9 million EVs sold in China in 2022, represents 29% of total vehicles sales in that region, doubling from 2021. Canalys research.
She expects most new car sales by the end of this decade to be electric, which I guess is a balance between government policy and the manufactures’ production lines. EVs will soon become unpopular if and when they flood the market, but charging options involve a very long queue.
The takeaway from this hour long podcast was the expectation around AI and how it is fast becoming the glue around all of these breakthrough technologies. Wherever huge amounts of data exist, be it from driving a car, or dissecting our genome, the role of AI and the creation of expert generative models to accelerate understanding will lead to new and fascinating breakthroughs.
Although Tesla has loads of data, it lags far behind Waymo and Cruise in terms of capability. The issue is that Tesla relies solely on cameras whereas every other company uses multiple sensors. Richard Windsor monitors this sector and is highly critical of Tesla.
https://www.radiofreemobile.com/category/automotive/
Compare the Tesla self parking feature with that of a humble Volkswagen just using ultrasonic sensors. R Symons has some great videos showing this.