All-In with Chamath, Jason, Sacks & Friedberg - Cathie Wood on How AI Can Double GDP, Bull Case for Bitcoin $1M, Elon’s Trillion-Dollar Pay Package

Starting point is 00:00:00 One of the most disruptive and innovative forces in the ETF world today. The Investorqueen, Kathy Wood. The ARC Innovation ETF trading now near a 52-week high, returned an astounding 148 percent. Returning more than 170 percent last year now has $17 billion under management. My conviction is so high because of what I do on a day-to-day basis. We are doing original research, trying to figure out these companies that are going to transform the world. Ladies and gentlemen, please welcome, Arct Invest's Caffee Wood. Well, greetings. I'm so delighted to be here, my maiden voyage, and I am here to talk about how the world's going to transform during the next five.

Starting point is 00:01:00 to 10 years, and how much more rapidly we will see real GDP grow, and how low inflation is going to be, and why? So here we go. Here is a timeline of innovation. And you can see it goes into the 1700s. And our chief futurist, Brett Winton, in conjunction with academics, pull this together. And what you're seeing here is the impact of innovation on productivity. And you can see in this time we've had two great eras. The first one was in the late 1800s, early 1900s, telephone, electricity, internal combustion engine. Huge boost in GDP growth. And in fact, prior to that, for the fourth,

Starting point is 00:01:57 400 years prior to that, real GDP growth had been averaging about 0.6% per year, very slow. After that, we went into a 125-year period of 3% real GDP growth. So a five-fold increase from 0.6 to 3%. You have to move forward to today to see. multiple innovation platforms evolving at the same time. So for the first time in 125 years. This time, there are five platforms, not three major platforms, and they involve 15 different technologies. This is very important in terms of how to research and analyze the world. It's not going to be by sector or industry anymore. It is going to be by technology, because

Starting point is 00:02:57 technology is permeating every sector, every industry, and blurring the lines between them. So you can see five here. We believe that the productivity uplift here is going to be so strong during the next five to ten years. And I think President Trump's tax package is going to turbocharge this, that real GDP growth will accelerate from that 3% where it has been for the last 125 years, towards 7% plus. And we think that could be conservative. That's a little more than two times, as opposed to the five-fold uplift before. So get ready. But the other thing that we think is going to happen is that inflation is going to surprise significantly on the low side of expectations. we would not be surprised to see zero percent inflation or less as we exit the tariffs here

Starting point is 00:03:59 and the way they're getting through the indexes and move forward into this new age of technological explosion. One of the reasons for this explosion is not just the five platforms. So I should have name them, robotics, energy storage, artificial intelligence, blockchain technology, and multi-oemic sequencing. Five major platforms involving 15 different technologies. And here you can see why we think we're going to see explosive growth. It is the convergence between and among these technologies. So just to give you two examples of convergence.

Starting point is 00:04:46 in the autonomous mobility space, that is the convergence of robotics, energy storage, and artificial intelligence. Now, each one of those technologies or platforms is following its own S-curve. And we are moving into the sweet spot of the S-curve now that autonomous taxis are debuting in the case of Tesla in Austin. San Francisco, Waymo's been there for a while. Just think about that. One S curve, feeding another S curve, feeding another S curve. That's why we're going to see explosive growth. Another example is in the healthcare space. While the autonomous mobility space might be the biggest revenue

Starting point is 00:05:36 generator in the short term, we believe that the most profound application of AI is in health care. That's the convergence of sequencing technologies and artificial intelligence and technologies like CRISPR gene editing. And I think this is the sleeper. It's the most inefficiently priced part of the market. So you can see why it's going to be so important to set up research departments by technology, not by sector or industry. And on this last page here, here is what we think is going to happen to the equity market in terms of valuations. So you can see in the turquoise there, that's the Mag 6. The Mag 6, it used to be called the Mag 7, but they threw Tesla out when it wasn't behaving like the rest of the Mag 6. So you can see from 2019 to 2000,

Starting point is 00:06:39 the MAG-6 tripled, they tripled in valuation in the market, market cap. Whereas truly disruptive innovation in the purple at the bottom there went up only 30%. And that's because investors were playing it safe. And they were investing only in the largest, most cash-rich stocks in the market. That was a very difficult time for innovation, for venture capital generally. And you can see what we expect to happen between, well, really the next five years. The Mag 6, some of them will do well. Some are facing headwinds. Apples in the AI space are well documented. And now we think it is truly disruptive innovations time to shine in the market. I feel as though a rubber band has been stretching for the last four years. And it let go with the election of Donald Trump. That's when

Starting point is 00:07:46 truly disruptive innovation started to shine. And the stock market started to broaden out from the very concentrated max six strategies into much more widespread disruptive innovation. In other words, risk, appetite, and time horizon is starting to extend here. And I think the tax package, especially the corporate tax cuts, which most people haven't focused on, full depreciation of structures, first year they're put in service, full expensing of equipment, R&D domestic, and software. In year one, these are huge, huge incentives to invest now. And I think that's a great, exactly what's going to happen. When you can see the difference here, the truly disruptive innovation we would expect, now we did this chart at the end of last year, during the next five years to

Starting point is 00:08:46 deliver a compound annual rate of return of roughly 50%. Now we've had some of that, so maybe it's 40 to 45 percent, compound annual rate of change. And this is in the public equity world. in the private world just wait until you see with that disclosures of course they know the disclosures ladies and gentlemen

Starting point is 00:09:13 Kathy Wood Kathy join us thank you thank you thank you thank you thank you so much for coming I know you're very busy

Starting point is 00:09:25 my pleasure you're projecting in five years Bitcoin hits 3.8 million per coin. That's five times the market cap of gold, which is hit an all-time high. Walk us through the math here. So I'm going to just correct that a bit. Okay. Our official for a bull case is 1.5 million. Now what got us to that 3.8 is using modern portfolio theory. If we were to include Bitcoin in portfolios at its optimal weight. So maximizing the sharp ratio, that would have provided that increment to $3.8 million. Now, believe it or not, that position

Starting point is 00:10:19 size, when we did that analysis, was 19% of a diversified portfolio. That's a lot. That's a lot. I have more in mine. Well, you swing for the fences. When your cousins, when civilians ask you, hey, how much Bitcoin should I own? What's the number you would say in private to a family member? To a family member? Yeah, you want to protect them. You're not like, hey, we're swinging for the fences.

Starting point is 00:10:50 This needs to be our home run. I'll tell you what I've told my children for a long time now is average, I mean, you know, average in, you know, every month, just average in, and then I would leave it to them in terms of their comfort factor. Got it. Kathy, can I ask you both? Yes. So ARC has this ability to be a vehicle for a lot of folks that are just living their normal

Starting point is 00:11:18 day-to-day lives, and they want the answer to what is going to do all in the future. And they can go, and they can buy your ETFs, and then they can participate in that future. There's a lot of people that are frustrated, palpably frustrated with an inability to sort of get ahead and break through, build wealth. First, what is economically happening in America that prevents so many people? What do you see, number one? And then number two, what characteristics and responsibility do retail investors have? If they're going to yolo this and if they're going to buy this other thing and they're going to try to go further out on their spectrum, what is their responsibility so that there's no crying in the casino?

Starting point is 00:12:03 There are ways to access innovation. And one of the question, many ways, of course, we have packaged it up. We don't look anything like a traditional benchmark. So if they're diversifying, we're a very good source of diversification, especially in trying to get exposure to innovation. We also have a venture fund. One of the questions I get regularly from retail investors used to be, why can't we access the private markets? We know more about those technologies than most of the institutions who are buying them. They have no idea. We're passionate about it.

Starting point is 00:12:45 And so we've gotten more vocal, and this administration is certainly becoming more vocal and more focused on this particular idea, because it is on. American, right? You have to meet this threshold. Well, you use chat GPT every day, but you can't buy open AI. Exactly. But you can buy a lottery ticket or you can bet on sports. And it makes no sense. And I do think it's going to change. And I think this administration will change. How should it change? Should we just have, and I've advocated for this before on the pod, and I believe you've talked about it, 6% of the country, 5, 6% are accredited. You've got a small number who are QPs. Should we just have a test? You know, you get a license to own a gun or

Starting point is 00:13:27 drive a car, cut hair in this country. Why not just have a simple accreditation test? You understand diversification. You understand private versus public assets, how to read a balance sheet. Wouldn't that just solve the problem right quick? I mean, I used to say, you know, it would be, what we're doing in the investment world right now would be the equivalent of saying you can't drive because you don't make enough money or you do not have enough net worth. Take a test. Take a test. And we have this big question the country about polarization of wealth. 50, 60% of the country has some exposure equities, but the people who don't, they tend to trend towards socialism or handouts. Maybe they don't feel they're part of what we experience, which is we meet great founders and you get to do public and

Starting point is 00:14:15 private and we get to say, yeah, you know, I drove in a FSD car when Tesla was private or whatever it is and where I looked at Coinbase when it was private or Uber. Yeah, I got the sense. I want to put one or two percent into that. Yes. Yeah, it does feel profoundly unfair, doesn't it? Yes, yes. Cassie, there's a lot of market signals right now that are flashing green. There's a lot of market signals that are flashing red.

Starting point is 00:14:40 Do you feel that you have to position actively to all of those things? Or do you say, you know what, I can't control this. I need to look five years out. So how do you manage the risk and how do you view the markets today? Yes. So the risk question, obviously we get a lot because our portfolios are volatile. They don't look like the benchmarks, and when markets get into a bearish period, investors tend to hug their benchmarks, and we're moving in the opposite direction. So I just want to say, we do what we do, and, you know, that's what our advisors expect.

Starting point is 00:15:17 They don't expect us to raise cash or do anything. They might, that's their decision, right? In terms of what we do to control risk, during bare markets, we will concentrate towards our highest conviction names. We have a scoring system based on management, execution, moat or barriers to entry, product service leadership, valuation importantly, and thesis risk. So with those scores, we concentrate. During bull markets, which I do believe we are in a bull market that is broadening out,

Starting point is 00:15:51 we tend to diversify because the IPOs start appearing again and we have more information on some of the companies we've sold during the bear market. Give us the read on Elon's trillion dollar pay package. You know what's so interesting about it? And this happened with the first model we put out. We put out a model once a year of Tesla and with our price target five years out. we looked at his first package and we said that looks like our model and we looked at this one we said that looks like our model and our model is public your 10 year forecast has Tesla eight and a half

Starting point is 00:16:32 nine trillion well right and we we put out there five years five years yeah yeah so and I think if he delivers on humanoid robots the way he thinks he is we don't have enough in there so our price target is 2,600. I think it's at 330 today, something like that. Yeah, 2600. And we have very little for humanoid end. But what Elon is capitalizing on is this convergence that I mentioned, robotics, energy storage, and AI, that convergence in the robotaxy space is pretty much the same convergence in the humanoid robot space. Do you underwrite compensation as part of your model, meaning like when you look at a package like that, if you compare it to other CEOs, Zuck or whomever, different styles of compensation, Bezos famously took no compensation post the

Starting point is 00:17:28 IPO. How do you think about that as a motivating factor or a necessary condition in 2025 to get results? I think it's huge. I mean, I wish more CEOs would do this. Elon's not going to be paid unless he reaches these milestones either. So I think it's very motivating to him. I think it also, you know, it's kind of an incentive to, you know, shoot for the stars, but do it in a very first principles way. You know, everything's physics-based and everything's milestone-based, and he's very disciplined. If people do not know that, they should. And when a milestone misses, he's in there on the floor. Final quick question. As a stock picker, do you care where the companies are incorporated? Like, do you

Starting point is 00:18:15 look at Delaware now and say there's fundamental business risk. I need to sort of and or do you cajole these folks now to maybe reincorporate in different places? We're not an activist investor. I have to be very careful and say that. We are moving out of Delaware. You as your own business. Why? You don't trust them to be predictable. Is that the issue? They're not predictable now and they're activist? Activist. Activist. It's in a bizarre way. What business do they have overriding the shareholders of Tesla when it comes to a pay package and all those shareholders who did that drive-by lawsuit twice they did it twice yes I mean it's unbelievable that guy owned 10 shares he he did a 20 act 20 bagger and then he's got the right to take away it's like j-cal suing Uber Kathy it's kind of

Starting point is 00:18:59 Kathy Wood Kathy Wood thank you so much for sharing so much knowledge you're amazing thank you thank you so much taking the time thank you great to see much thank you

All-In with Chamath, Jason, Sacks & Friedberg - Cathie Wood on How AI Can Double GDP, Bull Case for Bitcoin $1M, Elon’s Trillion-Dollar Pay Package

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