Investing in 2021 with Cathie Wood, Chief Executive Officer & Chief Investment Officer, ARK Invest.
Moderated by Andrew Ross Sorkin, Co-Anchor, CNBC.
MODERATOR
SPEAKER
Cathie Wood
Founder, Chief Executive Officer & Chief Investment Officer
ARK investment Management
Andrew Ross Sorkin
Co-Anchor, Squawk Box
CNBC
TIMESTAMPS
EPISODE TRANSCRIPT
Andrew Ross Sorkin: (00:07)
Thank you all, for sticking around for this final act of the afternoon. Cathie Woods is here. And we were just talking backstage. I haven't seen you since pre pandemic, at least in person.
Cathie Wood: (00:20)
That's right.
Andrew Ross Sorkin: (00:21)
And so much has happened to you and to Ark during this period. It has been a remarkable ride. And just to put it in perspective, you started Ark in 2014. Dare I say, you were 57 years old at the time. You don't look any older now. So you had no assets under management. Today, at age 60, she's at the peak, I would argue of your career, but I hope there's more to come. And you're managing something on the order of 85 billion.
Cathie Wood: (00:51)
Range, in that range.
Andrew Ross Sorkin: (00:51)
Which is a pretty remarkable thing. She has been called on social media, and I hope this isn't considered sexist or something else, Mama Cathie. They call you Aunt Cathie. And then in South Korea, they call you Money Tree, which I love.
Andrew Ross Sorkin: (01:11)
And this is what Art Laffer, who you used to work with, said about you. "The thing that's amazing about Cathie, even back then," when he was working with you, "her horizon is forever. She wasn't in it for next week or next month or next year. She was in it for the long haul."
Cathie Wood: (01:28)
Yes.
Andrew Ross Sorkin: (01:29)
And so I want to start with this, before we even get into what's going on the markets today, and it's just an investment sort of horizon thesis question. When you think about the "horizon" for your fund, and the way that investors who invest in your fund should also think about that horizon, what is it?
Cathie Wood: (01:50)
Well, in terms of our investment time horizon? Five years. So we have to believe that one of the technologies, the 14 technologies around which we have based all of our research, is going to inflect within five years. Or at least start to be discounted in the market as though it is about to inflect.
Cathie Wood: (02:16)
So five-year investment time horizon. Our minimum hurdle rate of return is 15% at a compound annual rate over five years. And so I think that combination of five years plus exponential growth trajectories, is what is finally starting to get into the market. I've been waiting for years.
Andrew Ross Sorkin: (02:39)
I know you've been waiting for years. So to put this in perspective, the fund over the last two years, is up about 164%, give or take. Year to date, it's down a little over 3% at a time. We all know the S&P 500 so far is up a little over 18% this year, thus far. So put it in perspective. Where are we in this market, given your five-year horizon?
Cathie Wood: (03:08)
It's going to be incredibly confusing I think to people. Just look at what's happened to the bond market this year. Against all expectations, yields have dropped from, I think it was 1.75 at the peak in March, down to 1.3 as inflation expectations are exploding.
Cathie Wood: (03:28)
We believe the reason for that is that probably, when all is said and done, and the dust clears from the supply chain problems and everything, we're probably in a highly deflationary world. And we see three sources of deflation. One is very good. It's called technologically-enabled innovation. Artificial intelligence training costs are dropping 68% per year.
Andrew Ross Sorkin: (03:54)
Right.
Cathie Wood: (03:56)
When a cost drops that much, the demand for it picks up. And artificial intelligence is probably the biggest reason we're seeing the convergences between and among technologies. So we've got one S-curve feeding another, feeding another. Explosive energy, incredible deflation. That's the first deflation.
Andrew Ross Sorkin: (04:15)
While the rest of the world thinks, if you were here for part of the day, everybody's talking about inflation.
Cathie Wood: (04:20)
Oh, and that's what I love. If the whole world thinks that's going to happen, and a portfolio manager and the analyst team thinks that's going to happen, well, if we're wrong, it's not going to matter that much because nobody's expecting it. It's not in the market. But if we're right, the returns are enormous. And I think that's what's going on with the technologically-enabled innovation that we see, especially in healthcare, by the way. But there are two other sources of deflation.
Cathie Wood: (04:54)
Disruptive innovation, there's another side to it. It's called creative destruction. And I think we're going to see more creative destruction than we have in all history, during the next five to 10 years. Now, you can say, "Oh, you're just talking your book." We have rights law teaching us about learning curves and cost declines that suggest we are going to see incredible boons out there in parts of the world. But it's going to mean tremendous destruction in others.
Cathie Wood: (05:27)
So when I say confusing, I mean that. And then the third source of deflation, I think will be cyclical deflation. Most people are fighting us on this one. It's hard to fight us, given our research on those other two, but this cyclical deflation, it started with lumber. $1,711 in May. Now, we're at $500. Copper, 490 I think. Now, we're at 425. Used car prices are surprisingly good. And I know we're getting pushed back on this one, too. They shot up 60% as everybody decided to avoid mass transit last year.
Andrew Ross Sorkin: (06:07)
Right.
Cathie Wood: (06:07)
Right. And now, we find ourselves supposedly in a chip shortage. I do believe in the chip shortage, because-
Andrew Ross Sorkin: (06:16)
You believe there's a chip shortage?
Cathie Wood: (06:17)
[crosstalk 00:06:17] I do believe there's a chip shortage because the world's going digital. But I believe-
Andrew Ross Sorkin: (06:22)
But wouldn't that be inflationary?
Cathie Wood: (06:24)
Well, I believe chips are the new commodities. That's the point I'm making here. So chips are going to be what Dr. Copper has been in the industrial world. This is Dr. Digital, I don't know, in the form of chips. But you hear the auto industry screaming. Auto sales have dropped from 18-and-a-half million units in April, to 13 million.
Cathie Wood: (06:52)
Now, these are annualized rates in August. That's more than a chip's shortage. What happened last year is people bought the cars, they're in their driveways, garages, didn't want to take mass transit. And now, there's a decision. What do I want to buy, a gas-powered car or an electric vehicle? Well, that's where the short supply is.
Cathie Wood: (07:16)
And I think the excess supply is going to be in the gas-powered side. So this is a really important test case of why I formed the firm when we did. I think the disruption is happening to the auto industry now.
Andrew Ross Sorkin: (07:32)
I want to get into Tesla, obviously, and a number of your picks in just a moment, but I do want to just note Morgan Stanley, City Group, Deutsche Bank, Bank of America, these are all firms that have published notes within the past month, effectively saying the opposite. Most of them believe that we are expecting to have inflation. And I think across the board, either pullbacks or much flatter returns.
Cathie Wood: (07:57)
Right.
Andrew Ross Sorkin: (07:57)
You just think they're off? You think they're wrong?
Cathie Wood: (08:00)
I think as I said, if you're looking at the traditional benchmarks, they may very well be right. All I know is when we are looking at the transformative growth that's going to take place in our space, and we're completely devoted to nothing else but disruptive innovation, we see explosive growth.
Cathie Wood: (08:22)
I think one of the reasons they will look right in terms of GDP is if the other side of create of disruptive innovation is creative destruction, well, what's happening? It's the industrial world evolving into the digital world, as more of the physical world goes digital.
Andrew Ross Sorkin: (08:40)
Right.
Cathie Wood: (08:40)
Transportation importantly. And so the traditional benchmarks, GDP, the statistics that we look like are probably going to look pretty lousy at times, I would say. Certainly, sector by sectors, these transformations take place.
Andrew Ross Sorkin: (08:57)
What do you think the role of millennials and the next generation will be? And I ask this because I've seen you make comments about demographics, both in terms of the role that millennials play in terms of the actual economy, but also the role that they may play in the markets themselves.
Cathie Wood: (09:13)
Yes.
Andrew Ross Sorkin: (09:13)
Because a lot of people look at what's happened over the last 18 months, and this new generation that's now in retail, often in your fund, on Robinhood, on Reddit, and think something has changed. Some people think it's tulips, other people think it's forever.
Cathie Wood: (09:29)
Mm-hmm (affirmative). Well, we just learned from Jolyne Caruso that millennials are 70 million strong in our economy, and now bigger than the baby boomers as a demographic. And I'm going to harken back to Stan Salvigsen, most of you won't remember who he was. He made one very important call in the early '80s.
Cathie Wood: (09:55)
He said, "Baby boomers are going to be the reason that the equity market goes up for the next 20 years." It was a brilliant call. He's no longer with us. We're in the echo now. And I do believe that both crypto and the equity markets are going to be powered by millennials. In fact, Tom Lee had fenced that.
Andrew Ross Sorkin: (10:17)
Tom Lee? Yep.
Cathie Wood: (10:18)
Yeah. He has done the arithmetic the way that Stan did. And I think he says this bull market will not end at least until 2026. And maybe not until 2038 when the number of millennials peaks out there. Well, I went through the '80s and '90s and nobody believed him, thought it was a ridiculously simple call. But when you look back in history, it was a pretty good call.
Andrew Ross Sorkin: (10:45)
Okay. I want to get into meme stocks and that whole phenomenon in just a minute, but I want to touch on a couple of your big investments. And also, touch on one other theme, which is China, because it's in the news. You have been thinking about that space or that region in a big way, or that country, I should say in a big way.
Andrew Ross Sorkin: (11:05)
And I know you've reduced some positions, but what's your overall thesis at this point on China and what we're seeing in terms of this regulatory crackdown, which seems to be worse every single day?
Cathie Wood: (11:15)
Yeah. I think there's something going on there socially that the government is very worried about. Many of the same things that the rest of the world is worried about, where there's the divide between the rich and the poor. I saw today, Evergrande, there are protests around the Evergrande offices because the wealth management products that weren't highly regulated are not paying interest, are not paying back and so forth.
Cathie Wood: (11:48)
So I think there's social unrest taking place there. And that's why common prosperity has become the rallying cry, and hostage to capital has also become a rallying cry. So I don't think it's a very friendly place for capital now. However, focused only on innovation, China has in its various five-year plans, made innovation. And it's an incredibly important plank.
Andrew Ross Sorkin: (12:15)
Right.
Cathie Wood: (12:15)
And so we don't want to avoid it, but what we do want to avoid is very high margin companies. So you look at JD Logistics or jd.com, some of the companies that are pushing innovation and access into tier two and tier three cities, we'll play with that. So what we did in the series of moves recently around China, we have taken our position down significantly, but stayed with a few of the lower margins.
Andrew Ross Sorkin: (12:50)
What would it take for you to turn?
Cathie Wood: (12:50)
They need-
Andrew Ross Sorkin: (12:50)
Invest more? What would you need to see?
Cathie Wood: (12:51)
What would I need to see? I think it would Xi Jinping saying, "Whoops, we made a mistake. We're open for business." I don't think he'll do that. So I don't think we'll be hugely involved with China. The other thing that I think is, and we've seen this in the crypto space, by shutting open source movements down, which is what they're doing, all open source movements, no, I think this is going to give the US a competitive advantage.
Cathie Wood: (13:21)
So we have allocated more of our innovation assets here in the US because of what's happening. China was going to be one of our biggest competitors. We saw them in the AI space, making the league tables in chips. I'm not so sure. I think they have to do some housecleaning right now, that we probably do not understand all the causes. But I think there's social unrest. That would be my guess.
Andrew Ross Sorkin: (13:46)
Let me ask this. Do you think that the regulatory environment there is either going to open up opportunity in the US, or will it give and embolden regulators in the US ...
Cathie Wood: (13:56)
To shut it out?
Andrew Ross Sorkin: (13:57)
To shut down what's happening here? Because it used to be that the big tech companies in the United States would say, "Well, no, no, no, you can't shut us down. Because look over there in China."
Cathie Wood: (14:06)
Right.
Andrew Ross Sorkin: (14:06)
"Those companies are so big, we need to compete with them." But if they're being shut down or cracked down upon, will it just embolden Washington here?
Cathie Wood: (14:15)
It's a good point. But I think this is much more than China as RuPaul on the last panel said. France is becoming very innovative.
Andrew Ross Sorkin: (14:29)
Right.
Cathie Wood: (14:29)
And Southeast Asia has stolen the March from China. So companies like Sea, it's a social media, social commerce, gaming company. It's exploding throughout the world. And capital is shifting towards that kind of name, because there are big populations in Southeast Asia, and Latin America as well.
Andrew Ross Sorkin: (14:51)
Okay. Can we talk about our favorite topic?
Cathie Wood: (14:53)
Tesla?
Andrew Ross Sorkin: (14:54)
Yeah.
Cathie Wood: (14:54)
Okay.
Andrew Ross Sorkin: (14:54)
Let's talk about it. And we have sparred over the years. I love Tesla. I've never loved the valuation of Tesla. And you have loved Tesla and the valuation of Tesla. And you've liked the valuation. You've been at much higher levels.
Andrew Ross Sorkin: (15:06)
And I have always thought, as you know, that that's crazy. And you have been right. So here we are. You still believe that this is a company, still believe that the valuation long term is $3,000. That's your price tag?
Cathie Wood: (15:20)
That's our base case.
Andrew Ross Sorkin: (15:20)
That's your base case?
Cathie Wood: (15:21)
Yeah, that's not even our bull case. But let's just stick with the base case from $700.
Andrew Ross Sorkin: (15:27)
3,000 by when?
Cathie Wood: (15:28)
Five years. Always five years.
Andrew Ross Sorkin: (15:30)
Always five years?
Cathie Wood: (15:31)
Mm-hmm (affirmative).
Andrew Ross Sorkin: (15:32)
You recently sold some last week, right?
Cathie Wood: (15:35)
Yes.
Andrew Ross Sorkin: (15:35)
About $180 million?
Cathie Wood: (15:38)
I read that it was 130 million. So it got so much press.
Andrew Ross Sorkin: (15:43)
Okay. Oh, I'm sorry. 180,000 shares at 130 million?
Cathie Wood: (15:46)
Yeah.
Andrew Ross Sorkin: (15:46)
Right. Why'd you do that?
Cathie Wood: (15:48)
So Tesla is still the largest position in our portfolios. On that particular day, and I can tell you this because we disclose our holdings every day and we publish our trades every day, I'm always looking for cash, in especially the flagship fund, which is very concentrated and involves all of our technologies. So a company in the automation space, UiPath was down 11% that day on its earnings release.
Cathie Wood: (16:19)
And Tesla had just gone up 30%. So it was really a tactical move. So just to give you a sense, Tesla is a 10 point, I believe it's 10.5% position in the flagship fund. The next highest position is I think 5.9%. So the conviction, this was, I will take a trade, up 30% down 10%. That's like a 40% difference. That's all that was.
Andrew Ross Sorkin: (16:47)
But this is not a stock, at least recently, that has been on the move higher. In fact, it's been flat to down.
Cathie Wood: (16:52)
No. Actually, if you look at it, it has been levitating. It has. We got into the 500s. It got well below 500, I believe in the-
Andrew Ross Sorkin: (17:04)
But it must have crossed 10% a while ago? Meaning you must have been much higher actually?
Cathie Wood: (17:09)
So when a stock moves from 10%, we can no longer buy. And thank you, I want to address this because we keep getting questions about it. We cannot buy a stock if it is 10% or higher in the portfolio. We can sell, of course. We do not have to sell. And what we usually do, this is not science, very unpredictable, you can't replicate this in terms of trying to figure out what we're going to do, but when a stock gets to 11% or 12% in the portfolio, it means that, or that means it has appreciated by 10% to 20% relative to the other positions in the portfolio.
Cathie Wood: (17:52)
And usually, what we're doing is being opportunistic and taking advantage of a drop in a stock. Again, need the cash. Largest position above 10%.
Andrew Ross Sorkin: (18:04)
Okay. Let me ask you this.
Cathie Wood: (18:05)
Does that make that a little clear?
Andrew Ross Sorkin: (18:07)
No. No, it makes sense. I know there'll be bulls and bearers on this. Let me ask you a different question, though. And it's really about how to assess and think about some of the comments, projections, and other things that Elon Musk makes about the company, and how you interpret them and how the public interprets them. And frankly, how bearers interpret them.
Andrew Ross Sorkin: (18:28)
Which is to say that there's a lot of times where Elon will come out and say something, whether it be about robotaxis, or when there'll be full autonomous driving, or all sorts of things that I imagine at some point, because we've had these conversations in the past, do get baked in, or should be getting baked into some kind of assessments of the stock.
Cathie Wood: (18:48)
Mm-hmm (affirmative).
Andrew Ross Sorkin: (18:50)
And as optimistic as you can very well be about all of those things, they haven't come true. And so, how do you grapple with that?
Cathie Wood: (19:01)
This is one of the hardest problems that we are going to solve technologically. So actually, in the last three months, we have increased our projection for autonomous taxi networks.
Cathie Wood: (19:18)
Now, in the $3,000 base case, we assign a 50% probability to autonomous. So it's a really hard problem. But if anyone is going to solve it, our confidence that Tesla is that company has gone up dramatically as we've learned more about it.
Andrew Ross Sorkin: (19:38)
But I guess when I ask you, when Elon says that robotaxis by the end of 2020, what numbers would you therefore have put in, in 2000 I think 19 when he said that or 18, when he was saying that?
Cathie Wood: (19:50)
Yeah. Again, five-year.
Andrew Ross Sorkin: (19:51)
Oh, I know. Okay.
Cathie Wood: (19:51)
As in, our probability last year, or whenever he said that, was lower. I think we had a 25% probability.
Andrew Ross Sorkin: (20:01)
Okay. So, do you discount what he says? By what number? It's a-
Cathie Wood: (20:05)
Elon, if you really look at what he's doing at SpaceX and at Tesla, he's changing our world, right?
Andrew Ross Sorkin: (20:11)
Oh, you're not going to get me to dispute that.
Cathie Wood: (20:13)
So electric vehicles-
Andrew Ross Sorkin: (20:14)
I think it's simply about the valuation and how investors should think about these numbers.
Cathie Wood: (20:18)
He was the first person. When we were talking about autonomous taxing networks, he said, "The last mile is going to be so hard. I'm not sure it can be done." This was about five years ago.
Andrew Ross Sorkin: (20:32)
Right.
Cathie Wood: (20:33)
Maybe longer. The resources that he's putting into this program, and the talent that he's attracting, and the advancements that he's making and that are possible now, that artificial intelligence training costs are dropping by 68% per year, we think the probability of autonomous is going up.
Andrew Ross Sorkin: (20:55)
I don't disagree with you. But does it frustrate you?
Cathie Wood: (20:58)
No, he's a visionary. And he sees the future so clearly.
Andrew Ross Sorkin: (21:06)
Right.
Cathie Wood: (21:06)
The fact that he changed from saying last mile, I don't think that's good. There'll have to be some combination system. He changed from that, with his partner, Andrej Karpathy, who is one of the most brilliant artificial intelligence engineers. I think this is going to happen in the next few years. He is always a year or two or three too early. We adjust for that in our forecast.
Andrew Ross Sorkin: (21:36)
What do you think about that prospect, that one of the-
Cathie Wood: (21:36)
Oh, and by the way.
Andrew Ross Sorkin: (21:36)
Yeah?
Cathie Wood: (21:36)
May I say one other thing?
Andrew Ross Sorkin: (21:36)
Please.
Cathie Wood: (21:37)
One of the reasons Elon does that, is he wants to get the supply chain in motion. And when the supply chain does not cooperate, he brings it in. He's becoming much more vertically integrated.
Cathie Wood: (21:52)
So auto suppliers and technology companies know that if they don't march to his drum and at his cadence, instead of these four to five-year design cycles, they're going to lose the business.
Andrew Ross Sorkin: (22:05)
A lot of short sellers have lost a lot of money betting against Elon, as you know.
Cathie Wood: (22:09)
Mm-hmm (affirmative).
Andrew Ross Sorkin: (22:10)
And one of the things that a lot of short sellers will tell you that they missed was not actually the technology or anything else per se, but was the scale and ability to go back to the market over and over again, to get more and more capital.
Andrew Ross Sorkin: (22:26)
That the scale of the capital unto itself, that could become almost a self-fulfilling prophecy, if there were people out there willing to impart their capital to you over and over again.
Cathie Wood: (22:38)
Mm-hmm (affirmative).
Andrew Ross Sorkin: (22:38)
How much of that is in your thesis?
Cathie Wood: (22:43)
Well, the way we would frame that is we believed that Tesla had four barriers to entry. And all but one have increased in the last few years. So they have the artificial intelligence chip. They have the best battery technology, costs lower and will be lower for the next three to five years.
Cathie Wood: (23:06)
They have the most data to do the training and find corner cases. And then the last one, which I would've thought they would've lost already, is over the air software updates. I haven't had to take my Model 3 in since 2018. They have the best cars on the road.
Andrew Ross Sorkin: (23:23)
So, your base case is 3000. What's your best case scenario?
Cathie Wood: (23:28)
The best case is about 4,000, because we won't go to a 100% in that autonomous. But let me give you the dynamics there. If you had asked me last year, I would've told you that the autonomous taxi network opportunity in the year 2030, would be a six to seven trillion-dollar revenue opportunity. We have in the last year, raised that to 10 to 12 trillion.
Cathie Wood: (23:57)
And it is because, before we had been modeling as though the cost would drop to where they should, given competition, which is 25 cents per mile, right now, it costs us 70 cents per mile to drive our own cars. We are learning, and it's through Uber and ride-sharing services, that convenience matters a lot. And not having to drive matters a lot. And so our price for the robotaxi service has gone up from 25. I think we're up to it's either 50 or a dollar per mile.
Andrew Ross Sorkin: (24:30)
Okay. New topic, our other favorite topic. You know what it's going to be? Bitcoin.
Cathie Wood: (24:33)
Bitcoin.
Andrew Ross Sorkin: (24:37)
Five years from now, what's it worth?
Cathie Wood: (24:40)
If we're right, and companies continue to diversify their cash into something like Bitcoin, and institutions, institutional investors start allocating 5% of their funds towards I'll just say Bitcoin for right now, because we did that, we framed it for Bitcoin, could be for other cryptos as well, we believe that the price will be tenfold of where it is today. So instead of 45,000, over 500,000.
Andrew Ross Sorkin: (25:20)
If you could own Bitcoin, Ethereum or some other crypto currency, and you could only own one, which would it be?
Cathie Wood: (25:32)
That is becoming a harder and harder question to answer. I think I'd default still to Bitcoin because countries are now deeming it legal tender. And we haven't even put that into our thinking. Ether, however, is seeing an explosion in developer activity, thanks to NFTs and DeFi. I'm fascinated with what's going on in DeFi, which is collapsing the cost of the infrastructure for financial services in a way that I know that the traditional financial industry does not appreciate right now.
Cathie Wood: (26:06)
So it does have to move from proof of work to proof of stake. That transition is underway and seems to be taking hold. So here's how I'll answer that question. Our confidence in Ether has gone up dramatically as we've seen the beginning of this transition from proof of work to proof of stake. We'd still probably do 60% Bitcoin and 40% Ether.
Andrew Ross Sorkin: (26:34)
For all of that to happen, do regulators, especially US, regulators need to buy into this in a major way? I would also say that we just saw it in the last week, Brian Armstrong runs Coinbase.
Andrew Ross Sorkin: (26:48)
You have steak in Coinbase, has now gotten into a somewhat bitter feud with the SEC, over how the ability to offer effectively a yield product on some of these cryptocurrencies, specifically Bitcoin will work.
Cathie Wood: (27:05)
Mm-hmm (affirmative). Yes. I think regulators, our working assumption from the beginning was that, and this was based on meeting with them, meeting regulators, both state and local and federal, was that no regulator wanted to be blamed from preventing the next big technology breakthrough to happen in the US. And that has proven true. Now, we've got Chairman Gary Gensler.
Cathie Wood: (27:34)
I'm really happy he understands crypto, and understands the merits of Bitcoin in particular. He is a regulator though, and he's a hard core regulator. What Coinbase did, I was shocked when I saw it. Wells Notice? Are you kidding? They haven't even released the product. What is this? And I think what that Wells Notice is doing, it's a call out by regulators saying, "We got to discuss this stuff, because this is happening very quickly."
Cathie Wood: (28:03)
And I think we are going to bring courts into the system. This happened in Canada. A company called 3iQ sued the regulator there, and won in court. So they were able to issue Bitcoin ETFs and closed-end funds. And Ether as well. So I am beginning to think that Coinbase doesn't mind this at all. And if you saw the stock reaction, it hardly budged.
Andrew Ross Sorkin: (28:32)
Right.
Cathie Wood: (28:32)
Right?
Andrew Ross Sorkin: (28:34)
We're going to have to wrap up in just a minute, but I do want to talk to you a little bit about the social media-enabled phenomenon that is happening. And it's impacted your fund, it's impacted the interest in all of this, diamond hands and the like. What do you make of that?
Andrew Ross Sorkin: (28:50)
And also, how do you think about your own responsibility in the context of one of the things you do? Which is so interesting, is you are transparent in terms of what you're doing every single day. People see what you're doing. There's also people that are therefore trading off of what you're doing. And how you think about that?
Cathie Wood: (29:07)
I'll start with the later one. Was the first one about meme stocks? Or was it about-
Andrew Ross Sorkin: (29:11)
Yeah. Well, it wasn't really a question, but it was in the context of just thinking about what's happening here, and the whole new generation that seems to be talking about these stocks. Some saying things that are factual, some saying things that are not factual. Some saying that they want to have less regulations, so that they can do more.
Cathie Wood: (29:32)
Okay.
Andrew Ross Sorkin: (29:32)
But it's a very different world than it was-
Cathie Wood: (29:36)
It's a different world.
Andrew Ross Sorkin: (29:36)
... post-financial crisis.
Cathie Wood: (29:38)
Yes.
Andrew Ross Sorkin: (29:38)
Where everybody said that the job of the financial industry was to protect if you will, the little guy, the little investor. And now, I think the little guy is saying, don't protect me. And in fact, by protecting me, you're not protecting me at all, because what you're really doing is protecting the suit, the big guy.
Cathie Wood: (29:55)
I think it was on your show this morning, wasn't it? That Robinhood's legal council-
Andrew Ross Sorkin: (29:59)
Yes.
Cathie Wood: (29:59)
... said something like that?
Andrew Ross Sorkin: (30:01)
Mm-hmm (affirmative).
Cathie Wood: (30:01)
That's really insulting to these people that you are going to protect them.
Andrew Ross Sorkin: (30:04)
Right.
Cathie Wood: (30:05)
Right? Okay. That was pretty interesting. So I'll first talk about the trading around what we do. I have been managing money since 1990. So, for 31 years. And I've always had other investors or speculators shooting against us, because guess what? Even when I was managing separately managed accounts for wire houses, I would be posting models. That word would get out there of what we were doing.
Cathie Wood: (30:39)
When we posted our models out there, it would get out. And lo and behold, these stocks would take off. So I've been managing with that in mind for years and years. And so we don't have to buy a stock. If someone wants to take it up 20%, the day after we buy, and we haven't finished our buy, I'll finish it another time. Because I know disruptive innovation is inherently controversial, and we'll get another shot.
Cathie Wood: (31:03)
In terms of what's going on now, I so admire the millennial generation. Yeah. As you say, I'm sure there are people trading just because their friends are trading. But the hunger for knowledge that they have, and the gratitude to us for the kind of research that we put out, the depth of our research, our tweets. Our analysts are all tweeting. We're on the right side of regulation. We know what we're doing there.
Cathie Wood: (31:32)
And we have someone from the SEC who became our CCO. So their hunger for information and their gratitude, has been extremely humbling in a way. We get a lot of people coming up to us and thanking us for that, because we've opened their eyes to a new world. Let me give you a bit of a difference. When my children were in high school and college, I was trying to teach them about the stock market.
Cathie Wood: (32:02)
I was trying to get their interest. Nada. It's almost like crypto had to happen. That got them interested. And to the extent they were looking at our research around crypto and others. They're educating themselves, and they love of education. It's one of our mission of values.
Cathie Wood: (32:21)
So we meant to do that, not because we knew this was going to happen, but because we want parents and grandparents, and the children themselves, to understand how rapidly the world is about to change. And to get your children, grandchildren, yourselves, on the right side of change, whether it's investing or your education, or your career.
Andrew Ross Sorkin: (32:44)
Okay. Couple quickies. Do you own any NFTs?
Cathie Wood: (32:48)
I do not, but I gave one as a birthday present to Sig Segalas, Chief Investment Officer at Jennison Associates. He turned to 88, and he thinks it's the best present he's ever gotten. Angie Dalton, I don't know if you know her, from Signum Capital Growth. And I did, we split it. And his grandchildren now, get to do layers of art on top of his digital art.
Andrew Ross Sorkin: (33:15)
Do you think there's a bubble in NFTs?
Cathie Wood: (33:21)
Well, when I saw this original $69 million piece, I thought, "Okay, this has gone too far, too fast." We're now talking about the creative world. And when I heard about Async Art, I don't know if you've heard of that company, Async Art has developed a digital ecosystem where artists can put out their digital art, and then anyone can buy pieces, pixels.
Andrew Ross Sorkin: (33:47)
Right.
Cathie Wood: (33:48)
And change it. And so you can do layers. And the original artist gets paid. I was walking when I heard the CEO tell his story, and my smile went ear to ear. Because I said, "Oh man, this is going to be so explosive."
Cathie Wood: (34:05)
This is how I felt when the internet first came about. Like, "Oh man, this could be really big." Remember when everybody was saying, "what's the internet?" I had the same feeling here, because creators they don't get paid for every iteration.
Andrew Ross Sorkin: (34:24)
Right. Robinhood, do you own a steak? Do you also own-
Cathie Wood: (34:27)
We do. It's a 1% position. Yes.
Andrew Ross Sorkin: (34:28)
What do you think, long term?
Cathie Wood: (34:30)
Again, we are into the millennial generation. Pay-
Andrew Ross Sorkin: (34:35)
The payment for order flow?
Cathie Wood: (34:35)
Payment for order flow. I'd be shocked if it goes away. I agree with the general counsel, because it has been so good for zero commission trading and so forth. And you can look at the spreads and you can analyze exactly who's taking what, or how big the pie is.
Andrew Ross Sorkin: (34:50)
Right.
Cathie Wood: (34:53)
I'm glad it's a discussion because it keeps coming up. Let's get some regulators making the final decision.
Andrew Ross Sorkin: (35:02)
We're out of time.
Cathie Wood: (35:03)
Oh.
Andrew Ross Sorkin: (35:04)
Cathie Wood, everybody. Thank you.
Cathie Wood: (35:06)
Andrew Ross Sorkin.
Andrew Ross Sorkin: (35:06)
Thank you.