Investing in the Future | Cathie Wood, Yassine Elmandjra, and Chris Burniske on Bankless with Ryan Sean Adams and David Hoffman

Check out the Bankless episode page

Key Takeaways

  • Price in the future today – the future is closer than you think.
  • Institutions keep looking backwards to support their investments rather than towards the future. Retail investors could be rewarded for their forward-thinking approach
    • Many industries are approaching a sweet spot in their innovation S-curve
    • ARK predicts $100 trillion dollars will be globally committed to innovation in the next 5-10 years
    • Most investors have never seen exponential growth – creates an “allergic reaction” to innovation
    • ARK invests in 5 main tech categories: Genomics, Artificial Intelligence, Robotics, Energy Storage, and Blockchain
  • Crypto is symptomatic of an imminent explosion in innovation
    • Due to the open-source nature of crypto, the wealth of data accumulated can be incredibly valuable to growth assessment and adoption
    • It’s politically neutral, transcends borders, and is a new mechanism for global economic activity
    • Crypto’s openness and competitiveness drives down costs which entices private sectors to adapt for increased profitability with the removal of banks from business processes
      • With open networks, you can not hide inefficiencies
  • “Follow the developers” – Cathie Wood
    • While Cathie references the rapid utilization of Ethereum in the NFT marketplace in this quote, this is a great thing to observe in all innovation spaces
  • “Ethereum is a new capitol coordination system, which is a powerful lens” – Chris Burniske
    • Ether can guarantee a yield and risk-free rate through proof of stake
    • Cathie will be studying earnings season closely to understand if banks are searching elsewhere for untraditional yields like crypto
  • Cathie, Yassine, and Chris also give their thoughts on what’s next in the world of Crypto

Intro

  • Cathie Wood, ARK Invest CEO (@CathieDWood), Yassine Elmandjra, Crypto Analyst (@yassineARK), Chris Burniske, Former Crypto Lead (@cburniske) join Bankless to discuss ARK’s analysis on the future of innovation as well as key fundamentals in the crypto space that can inevitably change the world.
  • Hosts: Ryan Sean Adams (@Ryan_Sadams) & David Hoffman (@TrustlessState)

ARK’s Investing Strategy

  • Price in the future today – the future is closer than you think…
    • Early 2000’s bubbles (tech, telecom, housing) created risk aversion in markets and tendencies toward investing in lower value indices
      • “Fate loves irony” – Elon Musk
      • There’s more innovation than ever but institutions maintain their backwards-looking investment strategy – this could give a leg up to retail investors for being forward-thinking (ARK provides tons of free open-source educational resources!)
      • Large blue-chip companies maintain their market cap based on past success, not what is to come
      • Most investors have never seen exponential growth – creates an “allergic reaction” to innovation
  • Many industries are approaching a sweet spot in their innovation S-curve
    • In 2019, around $7 trillion in global equity is committed to transformative technology
      • 2020: $14 trillion
        • Next 5-10 years: Upside of $100 trillion
  • ARK centers their research around Wright’s law which is a relative of Moore’s law
    • Moore’s law: function of time
    • Wright’s law: function of units
      • Worked better in the semiconductor and eclectic vehicle space
      • Factors in the correlation of units of production and cost decline
  • ARK invest in 5 main tech categories: Genomics, Artificial Intelligence, Robotics, Energy Storage, and Blockchain

Bitcoin

  • Bitcoin: A Disruptive Currency by Chris Burniske
    • Explains Bitcoin’s potential as a global rules-based monetary policy
    • Bitcoin, as it functions in decentralized finance, explores new possibilities in efficiency and inclusion
  • ARK started researching in 2015 on if Bitcoin can be a new asset class
    • Crypto is symptomatic of an imminent explosion in innovation
  • The first attempt at non-state money can be a tool for freedom in undeveloped nations
    • It’s politically neutral, transcends borders and is a new mechanism for economic activity
    • El Salvador has recently rolled out Bitcoin as a legal tender
  • Due to the open-source nature of crypto, the wealth of data accumulated can be incredibly valuable to growth assessment and adoption
    • This doesn’t exist in traditional assets 
  • The market narrative has accepted Bitcoin as digital gold since roughly 2017

Ethereum

  • The Fat Protocol Thesis – Google, Facebook, Amazon value is created in the application layer rather than the protocol layer. Blockchain creates value in the protocol layer through token economics.
  • “Follow the developers” – Cathie Wood
    • When it comes to researching crypto, follow how the developers create utilization
    • On Cryptoslam, you can see almost every NFT operates on Ethereum
    • Cathie is thoroughly impressed with NFTs ability to reward creators
    • Higher programmability in Ethereum than Bitcoin
  • “Ethereum is a new capitol coordination system, which is a powerful lens” – Chris Burniske
    • Ether as an asset has been interpreted as a digital commodity that can demand a sizeable premium compared to physical commodities
    • Ethereum can be a productive financial asset; it acts as an internet bond
      • Ether can guarantee a yield and risk-free (minimized, pending the US remains solvent) rate through proof of stake
      • Cathie will be studying earnings season closely to understand if banks are searching elsewhere for untraditional yields like Crypto
      • “There is going to be a lot of creative destruction, these banks are going to be losing share to the crypto world” – Cathie Wood
    • Ethereum passed Bitcoin in fee revenue which can be interpreted as a proxy for demand, interest, and usage is undeniable
  • Ethereum has the power to influence financial globalization on an equal scale

Fintech & De-Fi

  • The Fintech Mullet – Fintech in the front, De-Fi in the back
    • Mastercard, Visa, PayPal, Square have all been getting involved in crypto
      • Cathie believes Mastercard and Visa see the writing on the wall as they are ‘hostage to the banks’
      • PayPal and Square have made strides with their digital wallet features – the consumer and merchant have the opportunity to benefit from each other
  • Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Perez
    • Early innovators -> Private sector adoption -> Public sector adoption
    • We are currently in the private sector phase
      • The banks hold everyone hostage through ‘costs of doing business’ meaning we don’t really live in a financially free market, crypto’s openness and competitiveness drives user costs to almost zero
      • Private sector adoption is not just trendy, it improves profitability with the lower costs
  • De-Fi succeeds on the convergence of artificial intelligence and blockchain technology
    • With open networks, you can not hide inefficiencies
      • Our current financial inefficiencies and unfairness exist because they are hidden

What is Next for Crypto?

  • Yassine is optimistic about the progress crypto has made so far!
    • More need for education and regulatory clarity for value proposition
    • Don’t remain complacent at the protocol level
  • Chris believes crypto is inevitable
    • Spends a lot of time thinking where the power and capital will concentrate
    • Power and capital have always had a tendency to corrupt… must ensure broad enrichment, the amplitude of societal impact will be dictated by our own self-control
    • “Capitol is created from the capitol, just as life created with life” Chris Burniske
  • Cathie believes the more times we go through volatility, the stronger the network gets
    • This instills more confidence in investors
    • Continue to support developers to continue to strengthen the network
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Notes By Drew Waterstreet

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