WEBVTT 00:00:00.000 --> 00:00:02.359 You know, usually when we sit down to do one 00:00:02.359 --> 00:00:05.299 of these deep dives into a famous investor, the 00:00:05.299 --> 00:00:08.160 narrative is it's pretty straightforward. It 00:00:08.160 --> 00:00:10.179 is. It's usually a victory lap. A total victory 00:00:10.179 --> 00:00:12.419 lap. We talk about the Warren Buffetts, the Charlie 00:00:12.419 --> 00:00:15.279 Mungers, the, you know, the sages of the industry 00:00:15.279 --> 00:00:19.300 who seem to have this mystical, unbreakable crystal 00:00:19.300 --> 00:00:21.940 ball. Right. They're universally revered. Everyone 00:00:21.940 --> 00:00:24.480 agrees they're geniuses. Exactly. The steady 00:00:24.480 --> 00:00:27.379 hands, the ones who preach value and patience 00:00:27.379 --> 00:00:29.640 and compounding. It's a comfortable story. It's 00:00:29.640 --> 00:00:32.439 very comfortable. But today, today we are looking 00:00:32.439 --> 00:00:34.939 at a figure who makes people feel anything but 00:00:34.939 --> 00:00:37.500 comfortable. I mean, she is perhaps the most 00:00:37.500 --> 00:00:39.859 polarizing figure in a modern finance. That's 00:00:39.859 --> 00:00:42.960 not an exaggeration. Not at all. On one side 00:00:42.960 --> 00:00:45.439 of the room, you have people who have called 00:00:45.439 --> 00:00:48.200 her the absolute best stock picker of her generation. 00:00:48.729 --> 00:00:50.890 A true visionary. And on the other side of the 00:00:50.890 --> 00:00:52.890 room, sometimes in the very same room, just a 00:00:52.890 --> 00:00:55.590 year later, you have people labeling her a massive 00:00:55.590 --> 00:00:57.890 wealth destroyer. We are talking, of course, 00:00:57.969 --> 00:01:01.609 about Cathie Wood, the CEO and CIO of ARK Invest. 00:01:02.090 --> 00:01:04.590 And I have to be honest with you, as I was going 00:01:04.590 --> 00:01:08.090 through this stack of research, the biographies, 00:01:08.090 --> 00:01:11.250 the fund reports leading up to late 2025, the 00:01:11.250 --> 00:01:14.230 trade logs, my head was spinning a little bit. 00:01:14.269 --> 00:01:16.549 I can imagine. Because the data is so contradictory. 00:01:17.189 --> 00:01:20.950 I mean. How is it possible for one person to 00:01:20.950 --> 00:01:23.989 be hailed as a genius in 2020 and then, just 00:01:23.989 --> 00:01:27.189 a few years later, be accused of incinerating... 00:01:27.480 --> 00:01:29.739 billions of dollars in shareholder value. That 00:01:29.739 --> 00:01:31.760 is the central contradiction we have to wrestle 00:01:31.760 --> 00:01:33.859 with today. And I think if you look closely at 00:01:33.859 --> 00:01:35.819 the sources, you realize that the story of Cathie 00:01:35.819 --> 00:01:37.879 Wood isn't really about stock picking in the 00:01:37.879 --> 00:01:39.480 traditional sense. What do you mean? It's not 00:01:39.480 --> 00:01:42.140 about PE ratios or balance sheets? Not really. 00:01:42.239 --> 00:01:44.780 I mean, not primarily. It is a story about extreme 00:01:44.780 --> 00:01:49.149 conviction. It is about what happens when. profound 00:01:49.149 --> 00:01:51.230 faith, and I mean that literally, we'll get into 00:01:51.230 --> 00:01:53.709 that, collides with high -risk technology and 00:01:53.709 --> 00:01:56.109 the brutal, unforgiving volatility of the financial 00:01:56.109 --> 00:01:58.609 markets. It really is a roller coaster. That's 00:01:58.609 --> 00:02:00.129 actually a term that pops up constantly in the 00:02:00.129 --> 00:02:02.049 commentary about our friends. A roller coaster 00:02:02.049 --> 00:02:04.109 ride. It's the only metaphor that fits. So here 00:02:04.109 --> 00:02:07.829 is our mission for this deep dive. We're going 00:02:07.829 --> 00:02:10.370 to try to move past the headlines and the memes. 00:02:10.889 --> 00:02:14.370 And we have to say this up front. We aren't here 00:02:14.370 --> 00:02:17.270 to give investment advice. Please do not take 00:02:17.270 --> 00:02:19.710 this as financial advice. But we want to understand 00:02:19.710 --> 00:02:21.969 the mindset. We want to try and get inside the 00:02:21.969 --> 00:02:25.110 head of a woman who bets billions on a version 00:02:25.110 --> 00:02:27.930 of the future when almost everyone else is obsessing 00:02:27.930 --> 00:02:30.090 over the present. And to do that, we have to 00:02:30.090 --> 00:02:32.050 look at her through a specific lens. I don't 00:02:32.050 --> 00:02:33.810 think you can judge her as a traditional fund 00:02:33.810 --> 00:02:36.270 manager. It just doesn't work. You have to view 00:02:36.270 --> 00:02:38.969 her as a thematic thinker. Someone who sees patterns 00:02:38.969 --> 00:02:40.930 where others see chaos. Exactly. Someone who 00:02:40.930 --> 00:02:43.569 claims to see the new world emerging while the 00:02:43.569 --> 00:02:45.740 rest of us are just... you know, staring at the 00:02:45.740 --> 00:02:48.419 noise of the daily stock ticker. OK, let's unpack 00:02:48.419 --> 00:02:50.419 this. Yeah. If we want to understand where she 00:02:50.419 --> 00:02:52.259 thinks the world is going, we have to understand 00:02:52.259 --> 00:02:54.560 where she came from. And this was the first surprise 00:02:54.560 --> 00:02:57.360 for me in the research. Oh, yeah. I kind of assumed, 00:02:57.400 --> 00:03:00.159 given her status, that she was born on Wall Street, 00:03:00.280 --> 00:03:03.159 you know, Upper East Side, banking family, the 00:03:03.159 --> 00:03:05.919 whole nine yards. Far from it. She starts out 00:03:05.919 --> 00:03:09.539 in Los Angeles, born in 1955. Right. The eldest 00:03:09.539 --> 00:03:12.740 child of Irish immigrants, Gerald and Mary Deddy. 00:03:13.599 --> 00:03:15.900 And there's a specific detail about her father 00:03:15.900 --> 00:03:18.180 that just jumped out at me. I feel like this 00:03:18.180 --> 00:03:20.479 is the rosebud of the Cathie Wood story. I know 00:03:20.479 --> 00:03:22.139 exactly what you're going to say. The radar systems 00:03:22.139 --> 00:03:24.840 engineer. Yes. Her father served in the Irish 00:03:24.840 --> 00:03:27.439 Army and then the U .S. Air Force as a radar 00:03:27.439 --> 00:03:30.080 systems engineer. It's a detail that seems small, 00:03:30.199 --> 00:03:32.939 but if you zoom out, it is incredibly significant. 00:03:33.120 --> 00:03:35.560 I mean, think about what a radar system actually 00:03:35.560 --> 00:03:37.979 does. What is its fundamental function? Well, 00:03:38.060 --> 00:03:40.319 it detects things you can't see. Planes, missiles. 00:03:40.990 --> 00:03:43.870 storms on the horizon. Exactly. But specifically, 00:03:44.169 --> 00:03:46.870 it detects things that are invisible to the naked 00:03:46.870 --> 00:03:50.210 eye. It scans the horizon for these little blips 00:03:50.210 --> 00:03:52.650 that represent something coming, something that 00:03:52.650 --> 00:03:55.590 is going to arrive but hasn't arrived yet. And 00:03:55.590 --> 00:03:57.729 the radar operator has to trust the instrument 00:03:57.729 --> 00:04:00.389 more than they trust their own eyes. That's the 00:04:00.389 --> 00:04:02.810 key. You have to have faith in the system, in 00:04:02.810 --> 00:04:05.509 the technology, over your immediate sensory input. 00:04:06.030 --> 00:04:08.289 That is a fascinating connection. So you're saying 00:04:08.289 --> 00:04:10.650 she grew up in a household where the primary 00:04:10.650 --> 00:04:13.550 mode of thinking was about seeing the invisible. 00:04:14.240 --> 00:04:16.339 about detecting the future before it becomes 00:04:16.339 --> 00:04:18.879 obvious. I think it shaped her entire cognitive 00:04:18.879 --> 00:04:21.699 framework. I really do. She isn't looking at 00:04:21.699 --> 00:04:23.839 what a company is earning today that's visible. 00:04:23.980 --> 00:04:26.300 That's what everyone else sees. She is trying 00:04:26.300 --> 00:04:29.660 to use her own internal radar to detect where 00:04:29.660 --> 00:04:32.220 that company and the entire world will be in 00:04:32.220 --> 00:04:35.420 5, 10, or 20 years. She is looking for the blips 00:04:35.420 --> 00:04:37.860 on the screen. That makes a lot of sense. It 00:04:37.860 --> 00:04:40.519 explains why she seems so detached from current... 00:04:40.800 --> 00:04:43.399 market conditions sometimes. You know, when her 00:04:43.399 --> 00:04:46.040 fund is down 50 percent and she's on TV saying 00:04:46.040 --> 00:04:47.920 she's more confident than ever. Right. Because 00:04:47.920 --> 00:04:50.399 in her mind, the daily price is just static. 00:04:50.500 --> 00:04:53.100 It's noise. The blip on the long range radar 00:04:53.100 --> 00:04:56.120 is the signal she cares about. So she's in L 00:04:56.120 --> 00:04:58.100 .A. She goes to Notre Dame Academy, which is 00:04:58.100 --> 00:05:00.180 an all girls Catholic high school. We should 00:05:00.180 --> 00:05:02.079 probably bookmark that detail about her faith. 00:05:02.120 --> 00:05:04.019 It comes up again later. In a big way. And then 00:05:04.019 --> 00:05:05.959 she heads to the University of Southern California, 00:05:06.139 --> 00:05:09.439 USC. And she doesn't just scrape by. She graduates 00:05:09.439 --> 00:05:13.079 summa cum laude in finance and economics in 1981. 00:05:13.860 --> 00:05:17.500 Top of her class. Clearly brilliant. But here's 00:05:17.500 --> 00:05:19.540 where it gets really interesting. Because in 00:05:19.540 --> 00:05:21.920 academia, you often have that one professor. 00:05:22.839 --> 00:05:25.379 who just changes your entire trajectory. We have 00:05:25.379 --> 00:05:28.620 to talk about her mentor. The Laffer curve guy. 00:05:28.740 --> 00:05:31.560 I mean, for anyone who took Econ 101, that's 00:05:31.560 --> 00:05:33.379 a name that rings a bell. The very same. And 00:05:33.379 --> 00:05:35.160 for listeners who might not be deep into economic 00:05:35.160 --> 00:05:37.579 theory, we should probably clarify why Arthur 00:05:37.579 --> 00:05:39.720 Laffer is such a big deal. He is essentially 00:05:39.720 --> 00:05:42.100 the godfather of supply -side economics. Right. 00:05:42.160 --> 00:05:44.139 This is the stuff that underpinned Reaganomics 00:05:44.139 --> 00:05:47.439 in the 80s. Exactly. In the 1970s, the dominant 00:05:47.439 --> 00:05:51.470 economic theory was Keynesianism. Which, to oversimplify, 00:05:51.689 --> 00:05:53.709 is the idea that government should manage the 00:05:53.709 --> 00:05:55.910 economy through spending and managing demand. 00:05:56.170 --> 00:05:58.610 The government is the driver. Right. Laffer flipped 00:05:58.610 --> 00:06:01.389 that completely on its head. He argued that you 00:06:01.389 --> 00:06:04.750 should focus on supply, you cut taxes, you deregulate, 00:06:04.750 --> 00:06:07.129 and you unleash production and innovation from 00:06:07.129 --> 00:06:10.750 the private sector. The famous Laffer curve argues 00:06:10.750 --> 00:06:13.629 that if you cut tax rates from a very high level, 00:06:13.769 --> 00:06:16.490 you can actually increase total tax revenue by 00:06:16.490 --> 00:06:18.829 supercharging the economy. Right. Because more 00:06:18.829 --> 00:06:20.790 people are working, more companies are investing, 00:06:20.949 --> 00:06:23.350 the pie gets bigger for everyone. So he's all 00:06:23.350 --> 00:06:26.050 about small government, low taxes and letting 00:06:26.050 --> 00:06:29.310 the free market run wild. So Cathie Wood is learning 00:06:29.310 --> 00:06:32.480 at the feet of this. This economic rebel, really. 00:06:32.660 --> 00:06:34.759 Absolutely. And he wasn't just her professor. 00:06:34.980 --> 00:06:37.759 He was her mentor. The sources say he took her 00:06:37.759 --> 00:06:39.899 under his wing. He actually helped her get her 00:06:39.899 --> 00:06:43.079 first job at Capital Group in 1977, even before 00:06:43.079 --> 00:06:46.439 she graduated. Wow. So this establishes her intellectual 00:06:46.439 --> 00:06:48.920 lineage. She isn't coming from a background of 00:06:48.920 --> 00:06:51.339 cautious government managed Keynesian economics. 00:06:51.639 --> 00:06:54.240 She's coming from the school of aggressive free 00:06:54.240 --> 00:06:57.060 market supply side thinking from day one. That 00:06:57.060 --> 00:06:59.980 contrarian streak we see later starts right here. 00:07:00.430 --> 00:07:02.350 She believes that innovation solves problems, 00:07:02.470 --> 00:07:04.949 not regulation. And she believes that the market 00:07:04.949 --> 00:07:07.470 left to its own devices will always find the 00:07:07.470 --> 00:07:10.209 most efficient path. That is a core tenet of 00:07:10.209 --> 00:07:12.529 her philosophy that has never, ever changed. 00:07:12.870 --> 00:07:14.970 So Lafferty gets her in the door at Capital Group. 00:07:15.129 --> 00:07:17.430 She cuts her teeth there as an assistant economist. 00:07:17.970 --> 00:07:21.670 Then in 1980, she makes the big move. She goes 00:07:21.670 --> 00:07:23.839 to New York City. The center of the universe. 00:07:24.100 --> 00:07:27.060 For finance, anyway. She joins Jenison Associates. 00:07:27.339 --> 00:07:30.000 And she stays there for 18 years. I mean, that 00:07:30.000 --> 00:07:32.420 is a lifetime in Wall Street years. It is. She 00:07:32.420 --> 00:07:34.939 wasn't job hopping. She settled in and wore a 00:07:34.939 --> 00:07:37.300 lot of hats there. Chief economist, analyst, 00:07:37.560 --> 00:07:39.779 portfolio manager. She really learned the business 00:07:39.779 --> 00:07:42.339 inside out. But there is one specific moment 00:07:42.339 --> 00:07:44.579 from her time at Jenison that I think defines 00:07:44.579 --> 00:07:47.680 her entire career. It's the moment she proved 00:07:47.680 --> 00:07:50.240 her radar actually worked. The debate with Henry 00:07:50.240 --> 00:07:53.350 Kaufman? Yes. This is a legendary story in financial 00:07:53.350 --> 00:07:55.529 circles, to give you the context. It's the early 00:07:55.529 --> 00:07:58.970 1980s. Inflation is rampant. Interest rates are 00:07:58.970 --> 00:08:01.290 through the roof. It's the era of stagflation. 00:08:01.430 --> 00:08:04.050 A terrible time for the economy. And Henry Kaufman, 00:08:04.149 --> 00:08:05.990 who's the chief economist at Salomon Brothers, 00:08:06.209 --> 00:08:09.310 was known as Dr. Doom. Great nickname. And he 00:08:09.310 --> 00:08:11.949 had earned it. He was a heavyweight. A giant. 00:08:12.689 --> 00:08:15.670 And his view, which was the consensus view of 00:08:15.670 --> 00:08:17.829 almost everyone on Wall Street, was that interest 00:08:17.829 --> 00:08:20.230 rates and inflation were going to keep skyrocketing. 00:08:20.459 --> 00:08:22.699 the sky was falling essentially it was the only 00:08:22.699 --> 00:08:26.259 story in town buy gold hide under your desk and 00:08:26.259 --> 00:08:29.139 here comes kathy wood who is what in her late 00:08:29.139 --> 00:08:31.540 20s at this point very young relatively unknown 00:08:31.540 --> 00:08:35.200 she looks at the data specifically the money 00:08:35.200 --> 00:08:37.279 supply data she learned to analyze under laffer 00:08:37.279 --> 00:08:40.679 and she sees something different she sees a blip 00:08:40.679 --> 00:08:43.980 on the radar that dr doom is missing What did 00:08:43.980 --> 00:08:46.159 she see? She argued that interest rates had actually 00:08:46.159 --> 00:08:48.899 peaked and were about to collapse, that the back 00:08:48.899 --> 00:08:51.399 of inflation had been broken. Which was a completely 00:08:51.399 --> 00:08:54.299 insane thing to say at the time. It takes some 00:08:54.299 --> 00:08:56.399 serious nerve. She's young. She's a woman in 00:08:56.399 --> 00:08:59.000 a very, very male -dominated industry. And she's 00:08:59.000 --> 00:09:00.600 standing up in meetings and telling the most 00:09:00.600 --> 00:09:03.559 respected economist in the world that he's wrong. 00:09:04.039 --> 00:09:06.799 Publicly. She was writing reports on this. And 00:09:06.799 --> 00:09:08.980 she was right. She nailed it completely. Paul 00:09:08.980 --> 00:09:11.500 Volcker's Fed had done its job. Interest rates 00:09:11.500 --> 00:09:13.850 came crashing down. The market centered one of 00:09:13.850 --> 00:09:15.970 the biggest bull runs in history. Imagine what 00:09:15.970 --> 00:09:17.769 that does to your psychology. I mean, really 00:09:17.769 --> 00:09:19.830 think about that formative experience. You go 00:09:19.830 --> 00:09:21.789 against the titan, you go against the entire 00:09:21.789 --> 00:09:25.169 crowd, you trust your own niche data, and you 00:09:25.169 --> 00:09:28.269 win decisively. It cements a belief that the 00:09:28.269 --> 00:09:31.190 consensus is often wrong. It validates the idea 00:09:31.190 --> 00:09:32.950 that if you do the work and trust your data, 00:09:33.029 --> 00:09:36.289 you can beat the market. But, and this raises 00:09:36.289 --> 00:09:39.909 an important question, does being right once... 00:09:40.169 --> 00:09:43.169 even in a huge way, mean you're always right. 00:09:43.289 --> 00:09:45.750 That's the danger. Because that confidence, that 00:09:45.750 --> 00:09:47.909 willingness to stand alone against the crowd 00:09:47.909 --> 00:09:50.129 is a double -edged sword. It's your greatest 00:09:50.129 --> 00:09:52.409 strength and potentially your greatest weakness. 00:09:52.809 --> 00:09:55.049 We definitely see that edge getting sharper later 00:09:55.049 --> 00:09:57.389 on. It's almost like that victory set the template 00:09:57.389 --> 00:09:59.909 for her entire career. I see what you don't. 00:09:59.970 --> 00:10:01.850 You're all looking at the wrong thing. Exactly. 00:10:02.169 --> 00:10:05.830 So fast forward a bit. It's 2001. After 18 years 00:10:05.830 --> 00:10:08.169 of jenison, she moves to Alliance Bernstein. 00:10:08.720 --> 00:10:11.100 This is the big leagues. A huge, established, 00:10:11.240 --> 00:10:13.960 traditional asset manager. And she's the chief 00:10:13.960 --> 00:10:16.360 investment officer of Global Thematic Strategies, 00:10:16.360 --> 00:10:21.679 managing $5 billion. But then 2008 happens. The 00:10:21.679 --> 00:10:23.919 great financial crisis. And this is where we 00:10:23.919 --> 00:10:25.679 have to talk about the downsides of her strategy. 00:10:25.919 --> 00:10:28.259 This is where the cracks in the thematic approach 00:10:28.259 --> 00:10:30.740 start to show. The sources say she was heavily 00:10:30.740 --> 00:10:33.240 criticized for underperforming the market during 00:10:33.240 --> 00:10:36.259 the crisis. And we have to explain why she underperformed, 00:10:36.279 --> 00:10:38.740 because it's not random. It comes down to a concept 00:10:38.740 --> 00:10:41.700 called beta. OK, let's define that for the listener, 00:10:41.779 --> 00:10:43.259 because it's key to understanding her entire 00:10:43.259 --> 00:10:47.220 story. What is high beta? Beta is essentially 00:10:47.220 --> 00:10:50.320 a measure of a stock's volatility relative to 00:10:50.320 --> 00:10:52.840 the overall market. The market, like the S &P 00:10:52.840 --> 00:10:55.799 500, has a beta of 1. So it's the baseline. It's 00:10:55.799 --> 00:10:58.200 the baseline. If your stock has a beta of 2, 00:10:58.460 --> 00:11:00.679 it means that in theory, if the market goes up 00:11:00.679 --> 00:11:04.559 1%, your stock goes up 2%. But, and this is the 00:11:04.559 --> 00:11:06.559 important part, it works both ways. So if the 00:11:06.559 --> 00:11:08.980 market drops 1%, your high beta stock might drop 00:11:08.980 --> 00:11:11.600 2 % or more. Exactly. Cathie Wood's strategies 00:11:11.600 --> 00:11:14.259 are historically very high beta. She invests 00:11:14.259 --> 00:11:17.299 in growth in the future in unproven tech companies 00:11:17.299 --> 00:11:19.679 that are often not profitable yet. They are more 00:11:19.679 --> 00:11:22.100 sensitive to market mood swings. Extremely sensitive. 00:11:22.480 --> 00:11:25.259 So when the market is happy and confident, what 00:11:25.259 --> 00:11:28.299 they call a risk -on environment, she's ecstatic. 00:11:28.320 --> 00:11:32.440 Her portfolio soars. But when the market is sad... 00:11:32.440 --> 00:11:35.279 Or terrified, like in 2008... She is devastated. 00:11:35.960 --> 00:11:38.840 In a liquidity crisis like 2008, investors are 00:11:38.840 --> 00:11:41.460 scrambling for safety. They don't want future 00:11:41.460 --> 00:11:44.019 promises. They want cash. They want companies 00:11:44.019 --> 00:11:46.279 that make toothpaste and toilet paper things 00:11:46.279 --> 00:11:48.399 people buy no matter what. The boring stuff. 00:11:48.700 --> 00:11:51.820 The boring, profitable, low beta stuff. They 00:11:51.820 --> 00:11:54.679 dump the innovation stocks first and fastest. 00:11:55.210 --> 00:11:57.549 So her portfolio didn't just fall with the market. 00:11:57.690 --> 00:12:00.710 It crashed much harder. Exactly. And because 00:12:00.710 --> 00:12:03.149 her strategy is fully invested in these themes, 00:12:03.289 --> 00:12:05.809 she doesn't have a safety switch. She doesn't 00:12:05.809 --> 00:12:08.350 pivot to safe stocks. She believes in her theme, 00:12:08.409 --> 00:12:10.769 so she rides the volatility all the way down. 00:12:10.929 --> 00:12:12.470 It seems like that experience didn't scare her 00:12:12.470 --> 00:12:14.129 off, though. If anything, it seems to have made 00:12:14.129 --> 00:12:15.909 her double down on her conviction. It's like 00:12:15.909 --> 00:12:18.029 the Henry Kaufman experience taught her to trust 00:12:18.029 --> 00:12:20.350 her debt, and the 2008 experience taught her 00:12:20.350 --> 00:12:22.370 to endure the pain when her gut feeling is out 00:12:22.370 --> 00:12:25.549 of favor. Which brings us to 2014. She's been 00:12:25.549 --> 00:12:28.070 at Alliance Bernstein for over a decade, and 00:12:28.070 --> 00:12:31.029 she has this new idea, a big idea. She wants 00:12:31.029 --> 00:12:33.669 to create actively managed ETFs based entirely 00:12:33.669 --> 00:12:37.409 on disruptive innovation. Let's break that down. 00:12:37.610 --> 00:12:40.330 Yeah. ETFs, exchange -traded funds, were mostly 00:12:40.330 --> 00:12:43.070 passive at the time. They just tracked an index 00:12:43.070 --> 00:12:45.909 like the S &P 500. Right. Cheap, boring, and 00:12:45.909 --> 00:12:48.789 automatic. She wanted to combine the accessibility 00:12:48.789 --> 00:12:51.690 of an ETF, something anyone can buy and sell 00:12:51.690 --> 00:12:54.309 like a stock, with her high conviction active 00:12:54.309 --> 00:12:57.649 stock picking. She says, I want to package these 00:12:57.649 --> 00:13:00.230 high risk, high reward ideas into an ETF that 00:13:00.230 --> 00:13:02.889 anyone can buy. And she pitches this to the higher 00:13:02.889 --> 00:13:05.340 ups at Alliance Bernstein. And they said, no, 00:13:05.419 --> 00:13:07.840 thanks. They deemed it too risky. And honestly, 00:13:08.039 --> 00:13:10.000 looking at it from the perspective of a traditional 00:13:10.000 --> 00:13:12.340 conservative firm managing pension money, you 00:13:12.340 --> 00:13:15.019 can see why. I guess so. Active ETFs were a relatively 00:13:15.019 --> 00:13:17.919 new concept. And betting purely on the most volatile 00:13:17.919 --> 00:13:19.899 sectors of the market is inherently unpredictable. 00:13:20.679 --> 00:13:22.799 They didn't want the headache or the potential 00:13:22.799 --> 00:13:25.500 liability if it blew up. But Cathie Wood doesn't 00:13:25.500 --> 00:13:28.340 take no for an answer. And I love this part of 00:13:28.340 --> 00:13:30.620 the story because she's 57 years old at this 00:13:30.620 --> 00:13:33.169 point. An age when most people are planning their 00:13:33.169 --> 00:13:36.370 exit strategy. Right. Most people at 57 are thinking 00:13:36.370 --> 00:13:39.139 about their 401K vesting and where they're going 00:13:39.139 --> 00:13:42.000 to retire. She decides to quit her stable, high 00:13:42.000 --> 00:13:45.240 -paying job as a CIO and start her own firm from 00:13:45.240 --> 00:13:47.879 scratch. That takes guts. You can't deny that. 00:13:47.940 --> 00:13:50.919 It requires a massive, almost staggering amount 00:13:50.919 --> 00:13:54.559 of self -belief. And she calls it ARK Invest. 00:13:55.019 --> 00:13:57.559 Now, for the longest time, I assumed ARK was 00:13:57.559 --> 00:13:59.759 an acronym, like Advanced Research Knowledge 00:13:59.759 --> 00:14:01.759 or something. A lot of people think that. Automated 00:14:01.759 --> 00:14:04.480 Risk Keeper, I've heard that one, but it's not. 00:14:04.659 --> 00:14:06.570 It's named after the Ark of the Covenant. The 00:14:06.570 --> 00:14:08.830 biblical Ark, the one from Indiana Jones. Exactly. 00:14:09.149 --> 00:14:11.029 The sources know she was reading the one -year 00:14:11.029 --> 00:14:13.350 Bible at the time of founding, and as she was 00:14:13.350 --> 00:14:15.730 praying and thinking about a name, the Ark of 00:14:15.730 --> 00:14:18.899 the Covenant just stood out to her. And this 00:14:18.899 --> 00:14:21.039 reveals something absolutely essential about 00:14:21.039 --> 00:14:24.460 her character, the deep integration of her personal, 00:14:24.559 --> 00:14:26.799 devout Christian faith with her professional 00:14:26.799 --> 00:14:30.179 ambition. She isn't just managing money. She 00:14:30.179 --> 00:14:33.460 views her work through a spiritual lens. It's 00:14:33.460 --> 00:14:35.679 so interesting because usually Wall Street is 00:14:35.679 --> 00:14:39.659 all about cold, hard rationality, you know, atheistic 00:14:39.659 --> 00:14:42.299 numbers. But for her, there's this element of, 00:14:42.340 --> 00:14:47.059 is it destiny? Is it a calling? I think conviction 00:14:47.059 --> 00:14:49.539 is the word we keep coming back to. If you believe 00:14:49.539 --> 00:14:51.360 you're doing something that aligns with a higher 00:14:51.360 --> 00:14:54.159 truth. or in her case, allocating capital to 00:14:54.159 --> 00:14:56.259 disruptive innovation, which she believes makes 00:14:56.259 --> 00:14:58.820 the world a better place, as God intended, you 00:14:58.820 --> 00:15:00.700 are going to hold on to your positions even when 00:15:00.700 --> 00:15:03.259 the market is screaming at you to sell. It provides 00:15:03.259 --> 00:15:05.740 a kind of psychological armor against the critics 00:15:05.740 --> 00:15:07.840 and the downturn. Exactly. If you think your 00:15:07.840 --> 00:15:10.059 mission is righteous, a 20 % drop in a stock 00:15:10.059 --> 00:15:12.200 price isn't a signal that you're wrong. It's 00:15:12.200 --> 00:15:14.419 just a test of faith. It's the market offering 00:15:14.419 --> 00:15:16.179 you a chance to buy more of what you believe 00:15:16.179 --> 00:15:19.799 in at a discount. Speaking of armor, and maybe 00:15:19.799 --> 00:15:22.789 a few chinks in it, We have to talk about who 00:15:22.789 --> 00:15:25.610 helped fund this launch because launching a fund, 00:15:25.649 --> 00:15:28.129 let alone a whole family of them, is incredibly 00:15:28.129 --> 00:15:31.710 expensive. You need seed money. Ah, yes, the 00:15:31.710 --> 00:15:33.950 seed money. This is a complicated part of the 00:15:33.950 --> 00:15:36.730 story. The name that comes up is Bill Wang. A 00:15:36.730 --> 00:15:38.889 name that sends shivers down the spine of risk 00:15:38.889 --> 00:15:42.049 managers everywhere now. He was the man behind 00:15:42.049 --> 00:15:44.350 Archegos Capital. Which, for listeners who don't 00:15:44.350 --> 00:15:46.649 remember, famously imploded in March of 2021. 00:15:46.889 --> 00:15:49.289 It didn't just implode, it vanished. It lost 00:15:49.289 --> 00:15:52.970 an estimated $20 billion in two days in one of 00:15:52.970 --> 00:15:55.490 the biggest, fastest -treating disasters in modern 00:15:55.490 --> 00:15:58.090 history. But this was back in 2014, before all 00:15:58.090 --> 00:16:00.250 that. Right. Back then, he was known as a tiger 00:16:00.250 --> 00:16:03.370 cub, a protege of the legendary hedge fund manager 00:16:03.370 --> 00:16:06.529 Julian Robertson. He was known as an aggressive, 00:16:06.730 --> 00:16:09.309 high -risk investor who was also, like Cathie 00:16:09.309 --> 00:16:11.990 Wood, deeply religious so they connected on that 00:16:11.990 --> 00:16:14.750 level they did he understood her vision he shared 00:16:14.750 --> 00:16:17.690 her faith and he had the capital he provided 00:16:17.690 --> 00:16:21.450 the seed money for ark's first four etfs it feels 00:16:21.450 --> 00:16:24.909 like risk attracts risk you have this high conviction 00:16:24.909 --> 00:16:28.379 high volatility strategy And it attracts high 00:16:28.379 --> 00:16:30.700 risk capital. It does. It shows the circle she 00:16:30.700 --> 00:16:33.139 was operating in. Bill Hong was known for using 00:16:33.139 --> 00:16:35.620 extreme leverage and making incredibly concentrated, 00:16:35.899 --> 00:16:38.539 aggressive bets. It's not a coincidence that 00:16:38.539 --> 00:16:40.299 this was the type of capital attracted to her 00:16:40.299 --> 00:16:42.820 vision. It kind of set the DNA for the firm right 00:16:42.820 --> 00:16:45.100 from the start. Aggressive, high conviction, 00:16:45.259 --> 00:16:50.120 high stakes. So ARK launches in 2014. And for 00:16:50.120 --> 00:16:53.769 a while, it's a grind. They aren't an overnight 00:16:53.769 --> 00:16:55.929 success. They're out there publishing research, 00:16:56.110 --> 00:16:58.389 trying to get noticed. For the first few years, 00:16:58.450 --> 00:17:00.809 they were a niche player. Interesting, but not 00:17:00.809 --> 00:17:03.330 exactly setting the world on fire. But then the 00:17:03.330 --> 00:17:05.769 rocket ship takes off. The years 2017 to 2020. 00:17:05.950 --> 00:17:08.170 This is the golden era for Cathie Wood. The narrative 00:17:08.170 --> 00:17:10.250 starts to build. Especially 2020. I mean, we 00:17:10.250 --> 00:17:11.750 all live through it. But looking back at the 00:17:11.750 --> 00:17:13.869 financial charts from that year, it is just mind 00:17:13.869 --> 00:17:16.990 boggling. Her flagship fund, ARKK, the Error 00:17:16.990 --> 00:17:19.289 Innovation ETF, was the top performing global 00:17:19.289 --> 00:17:22.250 equity fund with over a billion dollars in assets. 00:17:22.779 --> 00:17:25.500 Bloomberg named her the best stock picker of 00:17:25.500 --> 00:17:30.500 2020. And CNBC noted ARKK had a 170 percent return 00:17:30.500 --> 00:17:33.339 in just that one year. Let that sink in. One 00:17:33.339 --> 00:17:35.200 hundred and seventy percent. That's just it's 00:17:35.200 --> 00:17:38.380 absurd. If you put ten thousand dollars in ARKK 00:17:38.380 --> 00:17:40.960 at the start of 2020, you had twenty seven thousand 00:17:40.960 --> 00:17:43.400 dollars by Christmas. That is lottery ticket 00:17:43.400 --> 00:17:46.420 money. It is. And we have to ask why. Why did 00:17:46.420 --> 00:17:48.980 2020 happen the way it did for her? It wasn't 00:17:48.980 --> 00:17:50.700 just luck. It was the pandemic, right? It was 00:17:50.700 --> 00:17:52.880 the ultimate catalyst for her themes. It was 00:17:52.880 --> 00:17:55.490 the perfect storm. Think about what she was invalid 00:17:55.490 --> 00:17:58.230 in. Digital payments with Square, streaming with 00:17:58.230 --> 00:18:01.650 Roku, telemedicine with Teladoc, video conferencing 00:18:01.650 --> 00:18:05.089 with Zoom, genetic sequencing, electric vehicles 00:18:05.089 --> 00:18:07.109 with Tesla. All the things that became essential 00:18:07.109 --> 00:18:09.329 when the world shut down. Exactly. The entire 00:18:09.329 --> 00:18:11.809 global economy was forced to accelerate into 00:18:11.809 --> 00:18:13.829 the very future she had been predicting for years. 00:18:13.990 --> 00:18:16.509 The five -year horizon she always talks about 00:18:16.509 --> 00:18:19.269 arrived in five weeks. Her radar was perfectly 00:18:19.269 --> 00:18:21.730 tuned to that specific disaster. She was the 00:18:21.730 --> 00:18:23.980 queen of Wall Street. An absolute rock star. 00:18:24.079 --> 00:18:25.640 Everyone wanted to know what Kathy was buying. 00:18:25.779 --> 00:18:28.480 She had her own merchandise. People were unironically 00:18:28.480 --> 00:18:31.220 wearing In Kathy We Trust t -shirts. And she 00:18:31.220 --> 00:18:33.579 was so open, right? She was democratizing the 00:18:33.579 --> 00:18:36.259 information, sharing her research freely online. 00:18:36.660 --> 00:18:39.880 It created this huge cult -like following, especially 00:18:39.880 --> 00:18:42.859 among younger retail investors. She was appearing 00:18:42.859 --> 00:18:45.079 on every podcast, every news show. She became 00:18:45.079 --> 00:18:48.720 this icon of futuristic, optimistic investing 00:18:48.720 --> 00:18:51.960 in a very dark time. But... And there is always 00:18:51.960 --> 00:18:55.220 a but in these stories. Trees do not grow to 00:18:55.220 --> 00:18:58.779 the sky. Right. And 170 % return is not sustainable. 00:18:59.140 --> 00:19:01.680 No, it is not. And when the environment changed, 00:19:01.839 --> 00:19:04.980 it changed violently. The brutal comedown. 2021 00:19:04.980 --> 00:19:07.839 hits, vaccines roll out, the world starts to 00:19:07.839 --> 00:19:10.500 reopen and the music stops. Well, a different 00:19:10.500 --> 00:19:12.519 kind of music starts playing. Inflation starts 00:19:12.519 --> 00:19:14.940 creeping up as supply chains are broken. And 00:19:14.940 --> 00:19:17.559 what does the Federal Reserve do to fight inflation? 00:19:17.799 --> 00:19:19.339 They raise interest rates. They raise interest 00:19:19.339 --> 00:19:22.779 rates aggressively. The very thing she had famously 00:19:22.779 --> 00:19:25.339 predicted would stay low back in the 80s started 00:19:25.339 --> 00:19:27.880 to rise. And remind us again, why do high rates 00:19:27.880 --> 00:19:30.759 hurt her specific type of stock so badly? It 00:19:30.759 --> 00:19:32.759 all comes down to a concept called discounted 00:19:32.759 --> 00:19:35.599 cash flow. It's how you value a company. If you 00:19:35.599 --> 00:19:38.240 are a company like Coca -Cola, you make a predictable 00:19:38.240 --> 00:19:40.559 amount of money today. Higher interest rates 00:19:40.559 --> 00:19:43.279 matter, but your value is anchored in the present. 00:19:43.720 --> 00:19:45.960 But if you are a tech company promising to make 00:19:45.960 --> 00:19:48.339 billions of dollars 10 years from now, those 00:19:48.339 --> 00:19:50.779 future dollars are worth a lot less today when 00:19:50.779 --> 00:19:53.279 interest rates are 5 % than when they are 0%. 00:19:53.279 --> 00:19:56.440 It's a pure math problem. So as rates go up, 00:19:56.500 --> 00:19:59.000 the present value of her portfolio's future promises 00:19:59.000 --> 00:20:02.819 goes down. The whole foundation of their valuations 00:20:02.819 --> 00:20:04.599 gets kicked out from under them and her stocks 00:20:04.599 --> 00:20:08.359 get repriced downwards viciously. ARKK falls 00:20:08.359 --> 00:20:11.960 24 percent in 2021, which is not great. But after 00:20:11.960 --> 00:20:14.539 170 percent gain, maybe it's just a correction. 00:20:14.599 --> 00:20:17.519 But then 2022, the bottom falls out completely. 00:20:17.779 --> 00:20:20.720 In the first quarter of 2022, ARKK was the worst 00:20:20.720 --> 00:20:22.519 performer among all the equity funds covered 00:20:22.519 --> 00:20:24.980 by the research firm Morningstar. She went from 00:20:24.980 --> 00:20:27.599 best to worst in a little over a year. And then 00:20:27.599 --> 00:20:29.980 comes the label that sticks. Morningstar, who 00:20:29.980 --> 00:20:32.079 are usually pretty polite, you know, very bureaucratic 00:20:32.079 --> 00:20:33.940 with their analysis. They came out with a report 00:20:33.940 --> 00:20:36.819 in February 2024 and they didn't mince words. 00:20:37.160 --> 00:20:40.140 They called ARK Invest the wealth destroyer. 00:20:40.559 --> 00:20:44.240 Specifically, they ranked ARK Invest funds as 00:20:44.240 --> 00:20:47.140 the worst wealth destroyer family of funds for 00:20:47.140 --> 00:20:50.640 the entire decade ending in 2023. That is a brutal 00:20:50.640 --> 00:20:52.440 headline. Let's look at the specific stat here 00:20:52.440 --> 00:20:54.559 because it's staggering. Morningstar estimated 00:20:54.559 --> 00:20:58.440 a loss of $7 .1 billion in shareholder value. 00:20:58.640 --> 00:21:02.579 Seven point. one billion dollars gone but wait 00:21:02.579 --> 00:21:04.380 i need you to explain this to me because this 00:21:04.380 --> 00:21:06.440 is the part that confused me at first looking 00:21:06.440 --> 00:21:09.019 at the data the notes also say that for the 10 00:21:09.019 --> 00:21:13.000 years ending in 2023 the ark fund itself generated 00:21:13.000 --> 00:21:16.160 a total return of 122 percent that's also true 00:21:16.160 --> 00:21:18.980 so if the fund is up 122 percent over its life 00:21:18.980 --> 00:21:22.539 how on earth can it have lost 7 .1 billion dollars 00:21:22.539 --> 00:21:24.819 for its investors The math doesn't seem to man 00:21:24.819 --> 00:21:27.400 thought. It's a classic tragic case of the difference 00:21:27.400 --> 00:21:30.359 between time -weighted returns and dollar -weighted 00:21:30.359 --> 00:21:32.539 returns. And this is maybe the most important 00:21:32.539 --> 00:21:34.700 lesson from the entire Cathie Wood saga. Okay, 00:21:34.759 --> 00:21:36.079 let's break that down for everyone listening. 00:21:36.220 --> 00:21:38.099 Okay, time -weighted return is what you see on 00:21:38.099 --> 00:21:39.940 the fund chart. It shows the fund's performance 00:21:39.940 --> 00:21:42.039 over time. If you put money in on day one and 00:21:42.039 --> 00:21:45.480 never touched it, you are up 122%. Simple. That's 00:21:45.480 --> 00:21:47.519 the theoretical return. It's the theoretical 00:21:47.519 --> 00:21:49.880 return. But dollar -weighted return is different. 00:21:49.960 --> 00:21:53.150 It looks at when the actual... Dollars, the real 00:21:53.150 --> 00:21:55.609 money from real people, entered and left the 00:21:55.609 --> 00:21:58.049 fund. It weighs the returns by the amount of 00:21:58.049 --> 00:22:00.609 money invested at the time. Ah, I see where this 00:22:00.609 --> 00:22:02.589 is going. The timing is everything. Everything. 00:22:03.130 --> 00:22:06.269 In the early years, from 2014 to 2019, when the 00:22:06.269 --> 00:22:08.009 fund was doing well, it was relatively small. 00:22:08.349 --> 00:22:10.690 Maybe a few hundred million, then a billion dollars. 00:22:11.009 --> 00:22:14.289 So a 50 % gain is great, but it's not a huge 00:22:14.289 --> 00:22:16.910 dollar amount. But then 2020 happens. The fund 00:22:16.910 --> 00:22:21.220 goes vertical. 170 % returns. It's all over CNBC. 00:22:21.380 --> 00:22:24.180 It's all over social media. Cathie Wood, the 00:22:24.180 --> 00:22:26.619 investing genius. The FOMO kicks in. The fear 00:22:26.619 --> 00:22:29.200 of missing out. Massively. The average retail 00:22:29.200 --> 00:22:31.720 investor sees the headline, sees the rocket ship 00:22:31.720 --> 00:22:34.380 chart, and they chase the performance. Billions 00:22:34.380 --> 00:22:36.259 and billions of dollars poured into the fund 00:22:36.259 --> 00:22:38.519 at the absolute peak. People were buying in at 00:22:38.519 --> 00:22:43.099 $150 a share in late 2020 and early 2021. And 00:22:43.099 --> 00:22:45.759 then the elevator cable snapped. The fund crashed 00:22:45.759 --> 00:22:48.880 all the way down to $30 or $40 a share. So most 00:22:48.880 --> 00:22:50.640 of the actual money, the bulk of the capital 00:22:50.640 --> 00:22:52.480 from the public, arrived just in time to lose 00:22:52.480 --> 00:22:55.670 70 % of its value. So the fund itself, on paper, 00:22:55.869 --> 00:22:58.470 made money over its lifetime. But the average 00:22:58.470 --> 00:23:01.049 investor in the fund got crushed. It destroyed 00:23:01.049 --> 00:23:03.089 wealth because it attracted the most capital 00:23:03.089 --> 00:23:05.509 right before it drove off a cliff. That is a 00:23:05.509 --> 00:23:08.410 painful reality check. It's like throwing a great 00:23:08.410 --> 00:23:10.829 party, but everyone shows up five minutes before 00:23:10.829 --> 00:23:12.890 the cops raid the place and gets arrested. That's 00:23:12.890 --> 00:23:15.109 a perfect analogy. The early guests had a great 00:23:15.109 --> 00:23:17.069 time, but most people just got the consequences. 00:23:17.509 --> 00:23:20.519 And to add insult to injury. Let's compare ARK's 00:23:20.519 --> 00:23:24.779 122 % 10 -year return to just buying a simple 00:23:24.779 --> 00:23:27.500 tech index fund. The NASDAQ 100 index, which 00:23:27.500 --> 00:23:29.779 holds all the big tech stocks, over that same 00:23:29.779 --> 00:23:33.099 10 -year period where ARKK returned 122 % with 00:23:33.099 --> 00:23:34.859 heart -stopping, stomach -churning volatility, 00:23:35.299 --> 00:23:39.079 the NASDAQ returned 330%. Ouch. So you took on 00:23:39.079 --> 00:23:41.140 massive stress, you bit your nails for a decade, 00:23:41.279 --> 00:23:43.660 and you ended up with significantly less than 00:23:43.660 --> 00:23:45.880 if you just bought a boring tech index fund and 00:23:45.880 --> 00:23:48.160 gone fishing. That is the harsh truth of high 00:23:48.160 --> 00:23:50.680 -risk active management. It is very, very hard 00:23:50.680 --> 00:23:52.880 to beat the index over a long period, especially 00:23:52.880 --> 00:23:55.730 after fees. So that puts the best... stock picker 00:23:55.730 --> 00:23:58.289 of 2020 title in a pretty harsh light. It shows 00:23:58.289 --> 00:24:00.829 that one year of performance means almost nothing 00:24:00.829 --> 00:24:02.890 in the long run. But Cathie Wood is resilient. 00:24:03.210 --> 00:24:05.950 I think that's undeniable. She didn't close up 00:24:05.950 --> 00:24:07.950 shop. She didn't apologize. She kept showing 00:24:07.950 --> 00:24:10.670 up, doing interviews and buying more of the stocks 00:24:10.670 --> 00:24:12.869 that were falling. Doubling down on her conviction. 00:24:13.009 --> 00:24:15.150 Let's bring this timeline up to the present day 00:24:15.150 --> 00:24:17.569 or, well, the reason past since we are recording 00:24:17.569 --> 00:24:20.910 this in early 2026. Right. We have data through 00:24:20.910 --> 00:24:24.930 late 2025. And guess what? The roller coaster 00:24:24.930 --> 00:24:27.410 went back up again. It did. After the brutal 00:24:27.410 --> 00:24:31.230 crash, ARKK rebounded significantly in 2025. 00:24:32.029 --> 00:24:34.710 Through the third quarter of 2025, the fund was 00:24:34.710 --> 00:24:38.079 up 23 .4%. Which is impressive on its own, but 00:24:38.079 --> 00:24:39.940 especially impressive when you compare it to 00:24:39.940 --> 00:24:42.480 the broader market. The S &P 500 was only up 00:24:42.480 --> 00:24:45.259 about 6 .8 % in that same period. So she more 00:24:45.259 --> 00:24:46.980 than tripled the market's return. She beat the 00:24:46.980 --> 00:24:49.740 market again. She did. And this is the maddening 00:24:49.740 --> 00:24:51.880 thing about her strategy for her critics. When 00:24:51.880 --> 00:24:54.339 it works, it works beautifully. When the conditions 00:24:54.339 --> 00:24:56.990 are right. Maybe interest rates stabilized, maybe 00:24:56.990 --> 00:24:59.309 excitement around AI or crypto surged again. 00:24:59.450 --> 00:25:02.329 Her high beta portfolio flies. It acts like a 00:25:02.329 --> 00:25:04.970 coiled spring. When it's released, it just explodes 00:25:04.970 --> 00:25:08.049 upwards. Speaking of flying, there was a specific 00:25:08.049 --> 00:25:11.329 tactical move she made in mid 2025 that caught 00:25:11.329 --> 00:25:13.730 a lot of attention in the financial press. The 00:25:13.730 --> 00:25:17.349 Coinbase play. Yes. This was in late June, early 00:25:17.349 --> 00:25:21.289 July of 2025. So to set the stage, Coinbase stock 00:25:21.289 --> 00:25:24.309 has surged. It was up 37 percent in just one 00:25:24.309 --> 00:25:26.569 month because there's a lot of optimism about 00:25:26.569 --> 00:25:30.009 new, clear crypto regulation coming. Right. And 00:25:30.009 --> 00:25:32.130 usually the criticism of Kathy is that she falls 00:25:32.130 --> 00:25:34.309 in love with her stocks and never sells. She 00:25:34.309 --> 00:25:37.250 has diamond hands, as the internet says. She 00:25:37.250 --> 00:25:39.910 just holds on for dear life. But here she actually 00:25:39.910 --> 00:25:43.450 took profits. She sold about $47 .9 million worth 00:25:43.450 --> 00:25:46.950 of Coinbase shares, roughly 137 ,000 shares. 00:25:47.170 --> 00:25:49.890 That surprises a lot of people, it seems. Disciplined. 00:25:49.990 --> 00:25:51.730 It's very disciplined. And what's fascinating 00:25:51.730 --> 00:25:54.190 is the context. She sells into the strength, 00:25:54.349 --> 00:25:56.190 taking some money off the table after a huge 00:25:56.190 --> 00:25:59.390 run -up. But, and this is key, she didn't exit 00:25:59.390 --> 00:26:01.710 the position. She didn't lose faith. Not at all. 00:26:01.789 --> 00:26:04.309 Even after selling nearly $48 million worth, 00:26:04.569 --> 00:26:06.109 Coinbase remained her second largest holding, 00:26:06.230 --> 00:26:08.730 making up about 8 .4 % of the entire portfolio. 00:26:09.049 --> 00:26:10.750 So she's just trimming the hedges, not cutting 00:26:10.750 --> 00:26:13.359 down the tree. Exactly. It shows active management 00:26:13.359 --> 00:26:15.339 and practice. She's rebalancing. She's saying, 00:26:15.420 --> 00:26:17.779 OK, this position grew too large relative to 00:26:17.779 --> 00:26:19.859 everything else. Let's take some chips off the 00:26:19.859 --> 00:26:21.920 table to deploy into other ideas that haven't 00:26:21.920 --> 00:26:24.039 popped yet. It contradicts the narrative that 00:26:24.039 --> 00:26:26.759 she's just a blind gambler who holds until zero. 00:26:26.880 --> 00:26:30.539 And that sector crypto is a huge part of her 00:26:30.539 --> 00:26:33.380 identity now. I mean, we can't talk about Cathie 00:26:33.380 --> 00:26:34.859 Wood for more than five minutes without talking 00:26:34.859 --> 00:26:37.619 about Bitcoin. It's arguably her highest conviction 00:26:37.619 --> 00:26:40.819 bet of all, even more than Tesla. The sources 00:26:40.819 --> 00:26:44.000 say she is a major, major proponent of Bitcoin. 00:26:44.220 --> 00:26:46.579 But it's not just client money she's investing, 00:26:46.680 --> 00:26:48.559 right? This isn't just her playing with other 00:26:48.559 --> 00:26:50.880 people's chips. No, this is the ultimate skin 00:26:50.880 --> 00:26:53.880 in the game. As of 2024, the records show she 00:26:53.880 --> 00:26:56.440 had allocated 25 % of her personal net worth 00:26:56.440 --> 00:26:58.940 into Bitcoin. A quarter of her personal fortune. 00:26:59.099 --> 00:27:01.839 That's a stunning number. I mean, most financial 00:27:01.839 --> 00:27:04.480 advisors would tell you to put, what, maybe 1 00:27:04.480 --> 00:27:07.319 % to 5 % in a highly speculative asset like that? 00:27:07.420 --> 00:27:09.799 If that, most would say zero. If we connect this 00:27:09.799 --> 00:27:12.279 to the bigger picture, it explains why she is 00:27:12.279 --> 00:27:15.539 so immune to criticism. If you believe in something 00:27:15.539 --> 00:27:17.579 strongly enough to bet a quarter of your own 00:27:17.579 --> 00:27:20.099 life savings on it, a bad Morningstar report 00:27:20.099 --> 00:27:22.839 or some mean tweets are not going to change your 00:27:22.839 --> 00:27:25.259 mind. She doesn't just see it as a stock. She 00:27:25.259 --> 00:27:28.539 sees Bitcoin as a monetary revolution, an insurance 00:27:28.539 --> 00:27:31.880 policy against irresponsible central banks. It's 00:27:31.880 --> 00:27:34.619 a fundamental part of her worldview. And that 00:27:34.619 --> 00:27:37.289 ties into her politics, too. We promised we wouldn't 00:27:37.289 --> 00:27:39.769 take sides and we won't. But we have to look 00:27:39.769 --> 00:27:41.910 at how her political views shape her investing 00:27:41.910 --> 00:27:44.809 strategy. It's impossible to separate them. She 00:27:44.809 --> 00:27:47.390 views everything through that single lens of 00:27:47.390 --> 00:27:50.490 disruptive innovation. So naturally, she tends 00:27:50.490 --> 00:27:52.609 to view government regulation as the primary 00:27:52.609 --> 00:27:56.250 enemy of progress. Right. Back in 2020, she publicly 00:27:56.250 --> 00:27:58.609 warned that Joe Biden's tax and regulation plans 00:27:58.609 --> 00:28:01.250 would stifle innovation. She's been very consistent 00:28:01.250 --> 00:28:03.430 on that point. Whether it's the SEC regulating 00:28:03.430 --> 00:28:06.490 crypto or proposals for tax hikes on capital 00:28:06.490 --> 00:28:09.269 gains, she sees it as a roadblock to the future 00:28:09.269 --> 00:28:11.470 she's betting on. And she's putting her money 00:28:11.470 --> 00:28:13.450 where her mouth is in terms of education, too. 00:28:13.569 --> 00:28:17.029 It's not just about her fund. She donated a significant 00:28:17.029 --> 00:28:19.789 amount of money to her old high school, Notre 00:28:19.789 --> 00:28:23.150 Dame Academy, to start the Duddy Innovation Institute. 00:28:23.450 --> 00:28:26.769 Named after her family. Yes. And the stated goal. 00:28:27.369 --> 00:28:30.009 is to encourage high school girls to study disruptive 00:28:30.009 --> 00:28:33.009 innovation. She wants to create the next generation 00:28:33.009 --> 00:28:35.329 of radar engineers, essentially. I love that. 00:28:35.390 --> 00:28:37.869 The next generation of radar engineers. It really 00:28:37.869 --> 00:28:40.509 does come full circle back to her dad. You know, 00:28:40.549 --> 00:28:42.529 we've talked a lot about the money and the funds 00:28:42.529 --> 00:28:44.490 and the theories, but I want to take a second 00:28:44.490 --> 00:28:46.970 to look at the human side of this. She lives 00:28:46.970 --> 00:28:49.269 in St. Petersburg, Florida now, right? She moved 00:28:49.269 --> 00:28:51.269 the whole company. She did. She moved the entire 00:28:51.269 --> 00:28:54.299 headquarters there from New York in 2021. Which, 00:28:54.380 --> 00:28:56.920 again, is a classic Cathie Wood contrarian move, 00:28:57.119 --> 00:28:59.259 leaving the center of the financial universe 00:28:59.259 --> 00:29:02.140 to go to Florida. And she's a widow. Her husband, 00:29:02.259 --> 00:29:05.059 Robert Wood, died in 2018. And she's a mother 00:29:05.059 --> 00:29:07.059 of three children. It's worth pausing on that 00:29:07.059 --> 00:29:10.119 for a moment. The year 2018, that was just before 00:29:10.119 --> 00:29:12.819 her massive rise to fame in 2020 and then the 00:29:12.819 --> 00:29:15.759 subsequent crash. She was navigating the loss 00:29:15.759 --> 00:29:18.859 of her spouse while building this empire and 00:29:18.859 --> 00:29:21.019 dealing with all that public pressure. It speaks 00:29:21.019 --> 00:29:23.900 to a profound resilience. I mean, leading a high 00:29:23.900 --> 00:29:25.980 -risk, high -volatility fund is one of the most 00:29:25.980 --> 00:29:28.579 stressful jobs in the world. Doing it while grieving, 00:29:28.640 --> 00:29:31.720 while being a single parent, it requires a specific 00:29:31.720 --> 00:29:34.559 type of psychological fortitude. It reinforces 00:29:34.559 --> 00:29:36.839 that idea that her faith and her deep -seated 00:29:36.839 --> 00:29:39.359 conviction are the bedrock of her ability to 00:29:39.359 --> 00:29:41.140 function under that kind of immense pressure. 00:29:41.440 --> 00:29:43.799 It has to be. So let's try to pull this all together. 00:29:44.000 --> 00:29:45.960 We've got the radar engineer's daughter, the 00:29:45.960 --> 00:29:48.799 mentee of the supply -side guru Arthur Laffer. 00:29:49.079 --> 00:29:51.900 The young analyst who publicly beat Henry Kaufman, 00:29:52.000 --> 00:29:54.539 the founder who named her company after the Ark 00:29:54.539 --> 00:29:56.880 of the Covenant, the best stock picker of 2020 00:29:56.880 --> 00:29:59.500 and the worst wealth destroyer of the decade. 00:29:59.700 --> 00:30:02.380 It is a dichotomy. It is a bundle of contradictions 00:30:02.380 --> 00:30:04.640 held within one person. So I have to ask the 00:30:04.640 --> 00:30:08.160 big question. Is she a genius or is she a gambler? 00:30:08.259 --> 00:30:11.259 I think I think that's the wrong question. Oh, 00:30:11.339 --> 00:30:14.609 OK. Then what's the right question? I think the 00:30:14.609 --> 00:30:17.329 right question is, what is the role of active 00:30:17.329 --> 00:30:20.130 conviction in a market that is increasingly dominated 00:30:20.130 --> 00:30:22.910 by passive flows? Break that down for me. What 00:30:22.910 --> 00:30:25.230 do you mean? Look, the way most people invest 00:30:25.230 --> 00:30:27.930 today, the way institutions recommend you invest, 00:30:28.130 --> 00:30:32.589 is to just buy the S &P 500. Buy the index. Accept 00:30:32.589 --> 00:30:34.730 the market average. It's safe. It's efficient. 00:30:34.990 --> 00:30:37.130 It works over time. Exactly. It's the sensible 00:30:37.130 --> 00:30:40.509 path. Kathy Wood represents the old school idea, 00:30:40.710 --> 00:30:43.430 the belief that a human being, through research 00:30:43.430 --> 00:30:46.190 and insight and conviction, can identify the 00:30:46.190 --> 00:30:48.269 future and dramatically outperform the average. 00:30:48.490 --> 00:30:50.750 She's a throwback to the era of the star stock 00:30:50.750 --> 00:30:53.240 picker. But the data we just went through shows 00:30:53.240 --> 00:30:55.700 she has struggled to do that consistently over 00:30:55.700 --> 00:30:57.480 the long haul, at least compared to something 00:30:57.480 --> 00:31:00.039 like the NASDAQ index. True. But when she wins, 00:31:00.140 --> 00:31:02.680 she wins big. She offers a product that is fundamentally 00:31:02.680 --> 00:31:06.039 distinct. If you buy ARKK, you are not buying 00:31:06.039 --> 00:31:08.640 the S &T 500. You are buying a ticket to a very 00:31:08.640 --> 00:31:10.839 specific, concentrated vision of the future. 00:31:10.980 --> 00:31:13.859 A future of robo -taxes, genomic editing, and 00:31:13.859 --> 00:31:16.599 cryptocurrency taking over the world. Exactly. 00:31:16.839 --> 00:31:19.460 And sometimes that vision is blurry and seems 00:31:19.460 --> 00:31:22.680 impossible. And sometimes, like in 2020, it comes 00:31:22.680 --> 00:31:25.640 into crystal clear focus. The radar picks up 00:31:25.640 --> 00:31:28.680 blips. Sometimes those blips are incoming revolutions 00:31:28.680 --> 00:31:30.920 that will change the world. Sometimes they are 00:31:30.920 --> 00:31:33.539 just noise or glitches or false signals. And 00:31:33.539 --> 00:31:35.839 the tragedy for investors is that they often 00:31:35.839 --> 00:31:37.759 can't tell the difference until their money is 00:31:37.759 --> 00:31:39.200 already committed and the missile is already 00:31:39.200 --> 00:31:41.660 hit. That's the risk you take. So what does this 00:31:41.660 --> 00:31:44.069 all mean for you, the listener? trying to make 00:31:44.069 --> 00:31:46.130 sense of all this. I think it means that conviction 00:31:46.130 --> 00:31:49.509 is a powerful drug. It can lead to massive success 00:31:49.509 --> 00:31:52.890 like her 2020 run, but it can also blind you 00:31:52.890 --> 00:31:56.559 to risks leading to the 2022 crash. Kathy Wood 00:31:56.559 --> 00:31:59.079 is a living reminder that the market is a humbling 00:31:59.079 --> 00:32:01.920 machine. Even the best can become the worst in 00:32:01.920 --> 00:32:04.160 the blink of an eye. And perhaps it's a reminder 00:32:04.160 --> 00:32:05.900 that if you're going to follow a visionary, if 00:32:05.900 --> 00:32:07.500 you're going to bet on someone else's radar, 00:32:07.920 --> 00:32:10.039 you better make sure you have the stomach for 00:32:10.039 --> 00:32:12.339 the ride. And you absolutely need to know when 00:32:12.339 --> 00:32:14.680 to get off the elevator. And maybe... Just maybe 00:32:14.680 --> 00:32:16.839 learn to check your own radar every once in a 00:32:16.839 --> 00:32:18.640 while. Don't just rely on someone else's screen. 00:32:18.859 --> 00:32:21.220 I love that. Here is a final thought for you 00:32:21.220 --> 00:32:24.039 to mull over as you go about your day. In a world 00:32:24.039 --> 00:32:27.220 that is increasingly moving toward passive investing, 00:32:27.380 --> 00:32:29.640 where we all just buy the whole haystack instead 00:32:29.640 --> 00:32:32.460 of looking for the needle, is there still a place 00:32:32.460 --> 00:32:37.250 for the star stock picker? Is Cathie Wood a relic 00:32:37.250 --> 00:32:40.549 of a past era trying to use human intuition in 00:32:40.549 --> 00:32:43.170 a market that is now ruled by cold, unfeeling 00:32:43.170 --> 00:32:45.869 algorithms? Or here's the other side of it. Is 00:32:45.869 --> 00:32:47.829 she the only one actually looking at the long 00:32:47.829 --> 00:32:49.950 range horizon while the algorithms are just fighting 00:32:49.950 --> 00:32:51.710 each other over the next few microseconds of 00:32:51.710 --> 00:32:53.950 trading data? That is the multibillion dollar 00:32:53.950 --> 00:32:56.009 question. Thanks for diving deep with us. See 00:32:56.009 --> 00:32:56.349 you next time.