Cathie Wood – Investing in Innovation

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_2** (0:59)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
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**Patrick O'Shaughnessy** (1:24)
My guest this week is Cathie Wood, the founder of ARK Invest. Cathie and her team believe that disruptive innovation is the key to long-term growth and therefore alpha in public markets. Because their style of investing is entirely contingent on what will happen and change in the future, it is about as different a style as exists from the quantitative approach to investing, which relies on what is currently knowable about stocks and businesses.
The future is notoriously hard to predict, so I am always interested to hear about investing approaches which try to model and handicap the future and build portfolios against that work. In this conversation, we explore all the most interesting and exciting technology trends at play in the world today, and how those trends may play out for investors. We discuss genome sequencing, blockchain, software 2.0, mobility as a service, automation and more. We also discuss Cathie's take on building a bridge between the worlds of finance and Silicon Valley, and why starting with a benchmark is anathema to their process. It's hard to deny Cathie's passion and enthusiasm, and I credit her for building a unique firm culture that emphasizes openness and collaboration. Please enjoy our conversation on investing in innovation.
So Cathie, I was pleasantly surprised to run into Chris Bernisky on my walk in today. And when you walked away, he said, you know, you should really think about Arc and Cathie's philosophy as sort of bringing the open source mentality to Wall Street. I love that kernel of an idea, and it was a great way to frame the conversation. So maybe you could opine a bit on that philosophy as a jump off point, and then we'll get into the whole backstory of Arc and innovation investing.

**Cathie Wood** (2:52)
Sure. Well, thank you, Patrick. I'm really excited to be doing this. So open source, I have been doing nothing but really disruptive innovation in terms of investing for more than a decade. And as the world has been changing at an accelerated rate, I had this yearning to get at more information.
Then we were exposed to in a traditional asset management firm when I was in one, and yet compliance issues got in the way. And so I wanted to start this company to focus solely on disruptive innovation, as opposed to having quantitative research experts risk complete our funds and make them closer to benchmark. So I wanted to get away from that kind of thinking and focus exclusively on disruptive innovation, which I believe is the most inefficiently priced part of the public equity markets.
And then the second thing I wanted to do was add new dimensions to research.
Social media, using some of the technologies that had disrupted industries that we had been following for years. So using social media, that includes Twitter, LinkedIn, Facebook, Medium, any social media that our analysts felt comfortable on, as well as crowdsourcing and then allowing thought leaders onto our research intranet. They tend to be professors, venture capitalists, entrepreneurs, who, as we exchange knowledge, are interested in pushing the frontiers of knowledge forward. So that was impossible to do in a traditional asset management firm. Compliance was not going to turn itself upside down for one portfolio team among dozens. And so I felt, okay, this needs to be done, and I should do it.

**Patrick O'Shaughnessy** (4:47)
Can you describe in a little more detail that platform you mentioned? Collaboration, I think, is a key part of this and using some of these technologies. What are the nuts and bolts of that? How does that actually work?