Let’s have a not-so-brief look at Cathie Wood, the businesswoman, who has chosen to use disruptions on the financial market as her way of succeeding in this vicious world of Wall Street. She’s really open about the investment strategies of her company – Ark Invest, and she managed to gather quite a lot of people admiring and cheering her next endeavors. So, this strategy we’re speaking about is relatively easy. The goal is to use the relentless ambitions of fast-growing innovative companies to grow exponentially. This not only fuels the development of an impressive amount of innovations, but also seems to be the against-the-current tactic.
The many already-established companies aren’t entirely happy with the context of Wood’s success. Because the approach she’s chosen is a big-rewards, high-risk, and cash-burning one. So the orthodoxies resent such a tactic, but there is no doubt that the results of it are jaw-dropping. In other words, Wood and her Ark Invest firm are polarizing the market and bystanders – a true love or hate relationship. But as we mentioned, you can not deny the figures and data. And those could be interpreted in one way only. Only in 2020, all five of Ark Invest’s ETFs (Exchange Traded Funds) managed to gain more than 100%. So if anyone denies that, they must be blinded.
Cathie Wood, her background, and current actions
Wood herself, which is not something widely known, already had a long and successful spell in New York, where she’s now been working for almost 40 years. First, she worked for 18 years for Jennison Associates, where she has become the co-founder of their hedge fund. Having left in 2001, she joined AllianceBernstein and took over as the Chief Investment Officer with five billion dollars of assets, which she was managing in the Global Thematic Strategies department.
This was when she first pitched her ETF idea, which would be based on innovation. But this went unnoticed, probably because Wood was heavily criticized back then after her worse performance during the crisis of 2008. But maybe it was rejected as the idea didn’t comply with the traditional route followed by most of the firms – to put it in simpler words, it was too innovative, and required too much of a risk. So she left her job, and founded Ark, giving life to the idea of trusting and believing in the disruptive innovators.
Okay, but what really makes this endeavor innovative?
Ren Leggi, the Ark’s Client Portfolio Manager, distinguishes three main characteristics that make a company innovative. First, these firms should be based on technology that could be used in different areas of production and innovation. This means that multi-sector innovations will provide the investors with more reliable and bigger gains (artificial intelligence is the best example, as it could potentially serve everywhere). The other thing is the necessity to be all-market friendly. There should be possibly close to zero geographical boundaries for the innovation, so that it could become useful (and thus developed and bought) everywhere.
Second, he points out the visible cost curve decline. When the innovation becomes popular and is being distributed to the masses, the costs of producing it should gradually become lower and lower. Here, Ark uses the lithium-ion batteries example. Since they have become the big hit in 2007, the costs of producing them declined massively.
And third, and final, Leggi believes that the company is supposed to become a platform for others to build on. Sustainable development does not stop on one innovator. One’s achievements should be the foundation for others to develop other ideas or maybe upgrade the existing ones. This kind of approach puts no limits on the number of potential customers and sets no artificial boundaries for innovators.
Should you want to read more about Cathie Wood, and Ren Leggis opinions, as well as find a comprehensive analysis of Ark Invest, feel free to join Disruption Banking and find Harry Clynch’s fascinating piece: https://disruptionbanking.com/2021/04/14/the-tech-investor-making-waves-on-wall-street/.