One of the most disruptive and

innovative forces in the ETF world

today, the investor queen Kathy Wood.

The ARC Innovation ETF trading now near

a 52- week high returned an astounding

148%

>> returning more than 170% 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 Art

Invests Kathy Wood.

[Music]

Well, greetings. I'm so delighted to be

here. Uh my maiden voyage. uh and I am

here to talk about how the world's going

to transform uh during the next 5 to 10

years uh 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 uh you can see it goes into the

1700s

and our chief futurist Brett Winton in

conjunction with academics pulled 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 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 uh to

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 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 5 to 10 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 0% inflation or less as we exit

the tariffs here. and and the way

they're uh getting through the indexes

and 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

named them robotics, energy storage,

artificial intelligence, blockchain

technology and multiomic 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 uh two e examples of

convergence 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 scurve

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 and San Francisco. Whimo's been

there for a while. Just think about

that. One Scurve feeding another Scurve

feeding another Scurve. That's why we're

going to see explosive growth. Another

example is in the healthc care space.

While the autonomous mobility space

might be the biggest revenue generator

in the short term, we believe that the

most profound application of AI is in

healthcare and that's the convergence of

sequencing technologies and artificial

intelligence and technologies like

crisper 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 Six. The Mag Six. Uh, 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 2024, 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 uh they were

investing only in the largest most

cashrich 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 uh mag six 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

innovation's 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 truly

disruptive innovation started to 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 1.

These are huge, huge incentives to

invest now. And I think that's exactly

what's going to happen. And 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

deliver a compound annual rate of return

of roughly 50%. Now we've had some of

that so maybe it's 40 to 45% compound

annual rate of change. Uh and this is in

the public equity world. in the private

world. Uh just wait until you see with

that

disclosures. Of course,

>> they know the disclosure.

>> Ladies and gentlemen, Kathy Wood. Kathy,

join us.

>> Thank you.

>> Thanks for watching.

>> Thank you so much for coming. I know

you're very busy.

>> My pleasure. You're projecting in 5

years, Bitcoin hits 3.8 million per

coin. That's five times the market cap

of gold, which has hit an all-time high.

>> Walk us through the math here.

>> So, uh, I'm going to just correct that a

bit. So,

>> okay.

>> Uh, our official for bull case is 1.5

million.

>> Okay.

>> Now, what what got us to that 3.8 8 is

using modern portfolio theory. Uh if we

were to include

uh 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 size when we did that

analysis was 19% of a diversified

portfolio.

>> That's a lot.

>> That's a lot.

>> Yeah.

>> I have more in mine.

>> Well, you swing for the fences. When

your cousins, your 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 you want to protect them.

You're not like, "Hey, we're

>> we're swinging for the fences. This

needs to be our home run." But

>> I'll tell you what I've told my children

for a long time now is average in. I

mean, you know, average in, you know,

every month, every just average in and

uh and and then I would leave it to them

in terms of their comfort factor.

>> Got it. Kathy, can I ask you about Yes.

So ARC has

this ability to be a vehicle for a lot

of folks that are just living their

normal day-to-day lives and they want

the answer to what is going to do well

in the future and they can go and they

can 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

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 the

risk spectrum, what is their

responsibility so that there's no crying

in the casino?

>> There are ways to access innovation. And

one of the question many ways of course

uh we have packaged it up. We don't look

anything like a traditional benchmark.

So if they're diversifying we're a very

good uh source of diversification

especially in trying to uh 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.

And so we've gotten more vocal and this

administration is certainly uh becoming

more vocal and and and um more more

focused on this this particular idea

because it is unamerican, right? To you

have to meet this price.

>> Well, you use chat GPT every day, but

you can't buy OpenAI.

>> 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

>> How should it change? Should we just

have and I've advocated for this before

on the pod uh and I believe you've

talked about it 6% of the country 5 6%

are accredited you got small number who

are QPS should we just have a test you

know you get a license to own a gun or

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 h make enough money or you do not

have enough net worth. Take a test.

>> Take a test. And we we have this big

question in 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

private and we get to say,

>> "Yeah, you know, I drove in a FSD car

when Tesla was private or whatever it

is, and or I looked at Coinbase when it

was private or Uber. Yeah, I got the

sense I want to put one or two% into

that."

>> Yes.

>> Yeah. It does feel profoundly unfair,

doesn't it?

>> Yes. Yes.

>> Kathy, there's a lot of u market signals

right now that are flashing green.

there's a lot of market signals that are

flashing red. 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 5

years out. So how do you manage the risk

and how do you view the markets today?

>> Yes. Uh so the risk question obviously

we get a lot because our portfolios are

volatile. they don't look like the

benchmarks. And uh when markets get uh

uh into a bearish period, investors tend

to hug their benchmarks and we're moving

in the opposite direction. Uh so I just

want to say we do what we do and you

know that's what our adviserss expect.

They don't expect us to raise cash or 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 uh with

those scores we concentrate during bull

markets which I do believe we are in a

bull market that is broadening out. we

tend to diversify because the IPOs start

appearing again and um we have more

information on some of the companies

we've sold during the bare market.

>> Give us the read on Elon's trillion

dollar pay package.

>> You know what's so interesting about it?

Uh and this happened with the first

model we put out. We put out a model uh

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

and we said that looks like our model

and our model is

>> your 10 year forecast has Tesla at 8 and

a half n trillion.

>> Well, right and we we put out there five

years. Yeah. Yeah. So, uh 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 2600. I

think it's at 330 today. Something like

that.

>> Exactly.

>> Yeah. 2600. And and we have very little

for humanoid in. But what Elon is

capitalizing on is this convergence that

I mentioned. Robotics, energy storage,

and AI. That convergence in the robo

taxi 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 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 I wish more

CEOs would do this. Elon's not going to

be paid unless unless he reaches these

milestones either. So I think it's very

motivating to him. I think it also, you

know, it's uh kind of an incentive to,

you know, shoot for the stars, but do it

in a 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 way, 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 look at

Delaware now and say there's fundamental

business risk. I need to sort of and or

andor do you cajol these folks now to

maybe reinccorporate in different

places?

>> We're not an activist investor. I have

to ve be very careful and say that we

are moving out of Delaware. Uh

>> 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 suing Uber. Kathy, it's kind

of

>> Kathy Wood.

>> Kathy Wood, thank you so much for

sharing so much knowledge.

>> You're amazing. Thank you so much for

taking the time.

Great to see you all. Thank you.