The Cost Structure of Unprofitable Tech

4min Snip

00:00

Play full episode

Summary

Transcript

Episode notes

Innovation names tend to outperform before the broader market kind of goes through a recession. Much of the cost structure of these tech businesses is in the human capital and the talent. And so, you know, when companies are capital market sensitive, separate from being macroeconomically sensitive, people look at them as unprofitable. But they're actually better positioned during actual macro downturns.

ARK Client Portfolio Manager Ren Leggi and Chief Futurist Brett Winton discuss why ARK believes investors should consider an allocation to disruptive innovation in 2023 in today’s episode of FYI. Ren and Brett discuss the potential size of the disruptive innovation opportunity, why ARK focuses exclusively on investing in innovation and what some of the major breakthroughs were in 2022 that the market might have missed while focusing closely on macroeconomic headwinds like interest rates and inflation. Ren explains why investors shouldn’t think of volatility negatively, and Brett answers the question: “Why should investors hold innovation strategies through downturns in the market?”

“Volatility is a sign of how early we are. Volatility feels bad on the downside, but it feels great on the upside.” – wintonARK Key Points From This Episode:

Everything Brett’s role entails as Chief Futurist as ARK
What the size and scale might be for the disruptive innovation opportunity
Why ARK focuses exclusively on investing in disruptive innovation
Why Brett believes ChatGPT was a major breakthrough
Some of the major breakthroughs the market might have missed in 2022
Our belief that the market might be too focused on macroeconomic headwinds
What Brett would tell investors concerned about the inherent volatility in innovation
Making the case for an allocation to disruptive innovation in an investor’s portfolio
Why the broad-based benchmarks might be short innovation
The importance of maintain a long-term investment time horizon when investing in innovation
What innovation is happening in the private equity markets
Why ARK never changes its investment philosophy even in market turmoil
Answering the question: “Why should investors hold innovation strategies through downturns in the equity markets?”
Why investors should not try to “time” the market
Ren explains why volatility should not be considered a bad word
Companies seem to be holding elevated levels of cash on their balance sheets