Dialogue Cathie Wood: Investors Changing Wall Street Are Betting on Bitcoin and Artificial Intelligence

Original Title: Cathie Wood: The Investor Who Changed Wall Street Is Betting Big On Bitcoin And AI

Author: Nicole Casperson

Translation: Luffy, Foresight News

The iconic investor behind ARK Invest, Cathie Wood, was asked a question that had never been posed to her before. It was a Monday afternoon in July, and the 67-year-old woman was energetic, despite having just flown from Los Angeles to St. Petersburg, Florida, the night before. She was rushing from one meeting to another, a testament to her powerful drive.

During a recent Zoom call, I asked her who taught her the most about money. It was a rather ordinary question, but in the high-stakes world of media scrutiny and market expectations, it was a refreshing inquiry that revealed a deeper truth about this high-profile fund manager—she remains a very human person.

"This is the first time I've publicly answered this question, my mother," Wood declared. "While my father was proud that she never had to work, she worked tirelessly to take care of the family. He called her the best economist in the world."

Wood's parents came from humble beginnings, immigrating from Ireland to the United States and settling in Los Angeles. Her father, a military man, had no formal college education, but he instilled in her a spirit of innovation; her mother was frugal, ensuring they never went without.

Today, Wood is making waves in the investment world as the founder, CEO, CIO, and star stock picker of ARK Invest, an investment management firm with nearly $24 billion in assets under management. Her flagship ARK Innovation Fund has achieved an average annual return of nearly 45% over the past five years, proving her prowess in fund management.

Cathie Wood speaking at the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2022

The Market Atmosphere of 2023

Wood took a moment to find some numbers on her desk before continuing to share. Because this is Cathie Wood, we couldn't complete the interview without her first addressing the numbers.

"The interesting thing about the current market performance is that if I had told you at the beginning of this year, or you had told me," she began, "that large tech stocks would take off and outperform the S&P 500, while healthcare stocks would be negatively impacted and small-cap stocks would underperform most indices, I would have thought we would do poorly."

Her words carried the weight of experience; she knows that market conditions can be volatile and unpredictable. But her voice was filled with pride as she revealed, "On the contrary, we have even outperformed the Nasdaq 100 index. This is an early sign of a resurgence for actively managed funds."

To substantiate her claims, Wood delved into the data, illustrating the returns of her investment strategy. "As of last Friday (July 21), our flagship product was up 53.4%, and our genomic strategy was up 31.5%," she recounted precisely.

"The S&P 500 was up 19.2%, the Nasdaq was up 34.7%, and the Nasdaq 100 was up 41.5%. Despite the healthcare sector's overall increase of only 1.1% this year, our fund still rose robustly by 31.5%."

As she further explored their performance, her excitement grew. Emphasizing the success of their small-cap strategy, which soared by 12% despite challenges in that area, her pride was evident as she recognized that their unique active management approach was paying off.

"We are very pleased with this," she asserted, "but we also want to convey this message: this is the best active management."

As the conversation shifted to market conditions and interest rate fluctuations, Wood's analytical thinking began to operate at high speed. She weighed the impact of rate hikes on their long-term strategy, acknowledging the challenges brought about by increased uncertainty over the past two years.

"The market seems to have priced in the rate hikes," she continued, "and we believe that the rate hikes are nearing an end, and the market seems to agree."

In July, ARK Invest began to see new inflows, indicating that their unique strategy was attracting investor attention and trust. She likened the market's volatility to waves of truth, rising and falling with investor sentiment and interest rate fluctuations.

Having weathered booms and busts, ARK Invest has stood firm through the storm, and as she reflected on this journey, she reaffirmed her commitment to the vision that has led them to where they are today. "We know who we are," Wood declared, her voice calm. "So, I won't let either side influence me. We focus closely on what matters, and we keep moving forward."

Research-Supported Optimism

Since founding ARK Invest in 2014 and offering stock portfolios in the form of ETFs, the business Wood has built has reflected her core philosophy.

Wood is not satisfied with being surrounded by "yes-men." Instead, she enjoys the intellectual challenge of curiosity, which guides her to seek different perspectives and think beyond traditional norms. She knows their success hinges on one core principle—research.

"Our research is based on first principles," she explained. "At the beginning, we knew nothing. Then we picked up a blank sheet of paper and explored various possibilities. We questioned the prospects of self-driving cars in 2014. Really? Is it even possible? Existing benchmarks do not constrain us."

She emphasized that ARK analysts are not divided by industry but by technology, spanning 14 different technologies, all of which are industry generalists. People believe these technologies will cross industry boundaries and expand into the mass market.

"With this belief stemming from research, I have deep confidence in what we are doing," Wood admitted. "I sincerely believe we are doing the right thing, and our approach is unique. What surprises me is that more companies haven't followed our lead."

When she talks about their research principles, it is clear she sees the power in sharing their findings. But even Wood remains surprised by the significant attention her company receives on social media.

Their social strategy, which includes collaborating with fintech platform Titan for social media and social distribution, allows them to engage with a broader audience and gain valuable feedback. ARK Invest's YouTube channel has 545,000 subscribers, where viewers can regularly listen to the company's insights.

"Many people say it's crazy that we publicly share our research findings," Wood said with a smile, "but they don't see the incredible value we gain in return. Founders, venture capitalists, and professors reach out to us, and we benefit immensely from their perspectives and critiques. It's like having an ongoing dialogue with innovators and critics."

Placing ARK Invest's research at the forefront has also opened doors for collaboration. In September 2022, Titan announced a partnership with ARK Invest to introduce ARK risk funds to retail investors on Titan.

She noted that, as a result, even during the regional banking crisis in March, ARK Invest's inflows remained steady. "Our first significant victory came from MosaicML, one of the companies we included in our venture portfolio early on, which was acquired by Data Bricks for five times the price we paid last September."

Wood is not only interested in profits but also aims to help the companies in the ARK Invest portfolio attract talent and prepare for the next round of funding or IPO, which she describes as a "true win-win situation."

In a world where short-term thinking often dominates the financial landscape, ARK Invest's long-term vision sets them apart. For Wood and her team, it's not just about chasing fleeting gains but pursuing a purpose.

"We look at companies differently," she asserted. "We want to see them actively investing in their future, even if it means sacrificing short-term profitability. Opportunities in emerging technologies like AI and autonomous taxi platforms require a different approach, and we are ready to embrace it."

Her words were filled with confidence and introspection, leaving a strong impression. "The hope for a beautiful new world has become very short-term," she shared, acknowledging that her groundbreaking investment approach will inevitably face ups and downs.

Lule Demmissie, CEO of eToro US (another heavyweight woman in finance), is drawn to the long-term commitment of blockchain technology to provide a fair competitive environment for global investors, similar to Wood.

"This doesn't mean the road is without twists; the industry will continue to mature," she stated in an email. "Market cycles are inevitable, and any investment viewpoint should be well-considered rather than blindly optimistic. But the differences in viewpoints and outlooks create the market, and Cathie brings a different perspective."

Bitcoin Icon

Cathie Wood gesturing while speaking at the Bitcoin 2022 conference held at the Miami Beach Convention Center on April 7, 2022

Despite having worked on Wall Street for 45 years and in portfolio management for over 30 years, Wood only rose to iconic status in 2020. She made bold investments in innovative companies, believing they would shape the future and create a fair competitive environment. These bets ultimately paid off. As COVID-19 spread and the economy spiraled, her ARK Innovation Fund saw returns as high as 150%, a remarkable achievement that put Wood in the spotlight on Wall Street.

Most importantly, Wood's optimistic outlook on Bitcoin has frequently placed her name in the headlines. She recognized and communicated the potential of public blockchains early on. She previously predicted that Bitcoin would rise in 2020, and now she forecasts that Bitcoin will reach $500,000 by 2026 and $1 million by 2030.

Matt Hougan, Chief Investment Officer of Bitwise, stated in an email: "She supported this view with high-quality research and broadened the Overton window for professional investors to understand the future of Bitcoin." "The best part is that now other mainstream voices, including Fidelity and BlackRock, have joined her ranks. This is how progress is made in disruptive fields: first by a few, then by the many."

Notably, despite the controversies, her views have proven correct. She confidently predicted Tesla's surge, which became one of the best-performing stocks over the past five years. Bitcoin is also one of the best-performing assets of the decade.

Wood stated that all this acclaim came crashing down in 2022 when ARK Invest's long-term strategy was "devastatingly impacted" by rising interest rates. Critics claimed Wood's funds were too risky and that she was just a pony doing tricks. Jim Cramer referred to her as the "death kiss," and there were even funds established specifically to bet against her.

Despite the ridicule her beliefs faced, Wood remained unfazed. She recognized the negative impacts of her contrarian decisions, which were documented in tweets and news reports. Amid the whirlwind of market ups and downs, Wood reflected on what seemed to be an unshakeable period for her company.

"I can tell you that by the end of 2020 and early 2021, ARK couldn't do anything wrong—Cathie Wood couldn't do anything wrong," she recalled, reflecting on the endless negative publicity directed at her and her company. With the conviction of an experienced visionary, she recounted her words during those exciting days: "Today we are the greatest GOAT of all time, and tomorrow we will still be the GOAT."

Her trust in her team and their unique approach was evident as she emphasized the distinction between the uppercase and lowercase "GOAT," illustrating the difference between public perception and their enduring confidence.

Meanwhile, she is also recognized as a trailblazer. As a female representative standing out in an industry dominated by Warren Buffett, her achievements, relentless pursuit of excellence, and steadfast dedication to her work have solidified her status as one of the most influential women in finance, paving the way for the next wave of female leaders to reach the pinnacle.

Vik Sasi, Chief Strategy Officer at Manhattan West, stated that while Wood's investment style is polarizing, no one can deny her significant contributions to cryptocurrency.

Sasi noted in an email: "She brought the steadfast belief of a forward-thinking venture capitalist into the public markets and did not back down at the first signs of volatility." "She is a conviction-driven person—considering the portfolio predictions she makes in public, this may be a mistake—but ultimately has had a positive impact on the asset class and will continue to be a staunch advocate for broader acceptance and adoption of cryptocurrency."

In April, Wood, along with Ophelia Schneider, refiled the application for the ARK 21Shares Bitcoin ETF with the U.S. Securities and Exchange Commission. Schneider co-founded 21Shares in 2018 with others, aiming to develop sophisticated crypto investment technologies accessible to ordinary people like her mother. The company is currently valued at $700 million.

Both Wood and Schneider believe that innovation will become a safe category for investment. "Contrary to what people think now," Wood said, "one example is that when regional banks collapsed in March, stocks were also facing collapse, but Bitcoin rose from $19,000 to $30,000—this is a safe haven when fleeing risk."

Michelle O'Connor, Vice President of Brand and Communications at TaxBit, who has worked in the crypto industry for nearly a decade, stated that she has witnessed the rise and fall of many innovators and provocative pioneers.

"I highly value Cathie's unwavering commitment to this market as she and her team continue to focus on the potential future of cryptocurrency," she said in an email.

O'Connor noted that Wood's critics seem to forget her position in the industry. "Having a public figure promoting cryptocurrency is one thing," she said, "but having an experienced thought leader who is not only very familiar with the short- and long-term potential of cryptocurrency but also deeply understands the underlying technology is another."

A New Home for Innovation

In October 2021, Wood moved the investment company's base from Midtown Manhattan, where most traditional financial institutions are located, to St. Petersburg, Florida, making headlines once again.

Now, she rotates her team in the St. Petersburg office, embracing this sun-soaked location that resonates with her optimistic outlook, ushering in a new era centered on education and community building in her new territory.

St. Petersburg is ready for growth, and Wood is prepared to be the first to bet on the future. To help stimulate economic development within the city, ARK invested $2 million to build the ARK Innovation Center, a 45,000-square-foot space that will incubate over 50 companies and encourage entrepreneurship.

The ARK Innovation Center will also be the home of the Wood Innovation Foundation, which she launched over three years ago to create a new educational blueprint through an innovative lens.

A notable research initiative by Ark (for which Wood specifically hired educators) will become the sixth-grade science curriculum for all public schools in Pinellas County, a first in the Northeast.

"There is no better long-term way to bring about change than to inspire young children," Wood said. "New technologies excite them, give them hope and dreams, and allow them to live better lives than their parents."

About 60% of students in the Pinellas County school system come from lower socioeconomic backgrounds. Wood firmly believes that innovation and technology can create a fair competitive environment. "Dreams have come true; I didn't even know they would come true," she said.

The Next Five Years

Wood always looks ahead, and in the next five years, she is considering how to make more people clearly recognize that we are entering a deflationary world, and that "deflation is not necessarily a bad thing," she said.

"The decline in the prices of new technologies means that more people around the world can access them; they can afford them," she said. "Therefore, we believe we are at the sweet spot of five innovative platforms in the ARK portfolio: multi-omics sequencing, robotics, energy storage, artificial intelligence, and blockchain technology."

Wood firmly believes that the convergence of these industries is experiencing exponential growth, and they are now beginning to promote each other. She stated, "We believe this will lead to the market value of truly disruptive innovative technologies increasing from $15 trillion to over $200 trillion in the next 5 to 10 years."

She further explained that it is too early to compare this to the internet bubble of the 1990s, as the technologies at that time were too expensive. She noted that ChatGPT has significantly reduced the cost of developing AI models, from $800 million in 2015 to just $4.5 million in 2020, and it continues to decline rapidly.

If today's technology represents a vibrant and innovative environment in our history, then to fully leverage it, we need to reach a consensus among everyone. As Wood enters her new era, she is prepared to dedicate herself to education in schools nationwide and encourage people to invest in innovative fields to prepare for the "disruption of the traditional world order."

"Getting more people on the right side of change is our best opportunity to improve their lives."