April 23, 2024
ARK
"We believe we are in one of the most profound periods in history in terms of innovation and particularly technology-enabled innovation," says Cathie Wood.

Photo: Chris Lake

ARK
Wood says it was 'mind-blowing' how open state and county leaders were to ARK becoming involved in public schools.

Photo: Innovation Foundation

ARK
Wood rings the opening bell at the NYSE in 2014. She has described founding the firm as a 'leap of faith.'

Photo: ARK Investment Management

ARK
The Tampa Bay Innovation Center is building the ARK Innovation Center in St. Petersburg. Wood donated $2 million to the center, scheduled to open this year.

Photo: Rendering

ARK
"I really like the way she sticks to what she believes in," says Tonya Elmore, who heads the Tampa Bay Innovation Center.

Photo: Mark Wemple

ARK
Steve Case is the co-founder of AOL and has since devoted his time and resources to highlighting centers of innovation across the country with his Rise of the Rest tour and venture capital firm Revolution.

Photo: Rise of the Rest

Profile

The Futurist

Cathie Wood became one of the financial world's most recognizable leaders for backing the technologies she thinks will drive global change in the coming years. She's also investing substantially in the future of her new hometown, St. Petersburg. As she ca

Mike Vogel | 3/15/2023

By now, the usual reasons Wall Street types had for decamping to Florida during the pandemic are well-known: No income tax, an entrepreneurial spirit, welcoming policies and effusive politicians, high-growth potential and minimal regulation.

All of which St. Petersburg newcomer Cathie Wood subscribes to and adds a new reason of her own: Joy.

“It’s a joyful place,” Wood says of her new hometown, a place over the last year she has discovered to be upbeat, optimistic and more youthful than she had anticipated. “I feel joy. I use that word. It just comes to me naturally.”

While most of the high-profile investor community settled in Miami and Palm Beach, Wood — never one to feel compelled to follow the crowd’s conventional thinking — looked to Florida’s west coast as a potential home for her and her firm, ARK Investment Management.

St. Pete was less crowded with marquee names, and the city had good potential in its workforce and the quality of nearby colleges and universities, as well as its proximity to Tampa, which she also considered as a potential base with Water Street and tech incubator Embarc Collective beckoning. More important, in the Tampa Bay region she found a business and civic community that enthusiastically embraced her vision of a world where disruptive technologies are deployed to solve big problems while unlocking vast wealth in the process.

ARK Investment made the move in late 2021, with Wood — one of the world’s most recognizable stock pickers because of her near daily presence on financial news channels and social media networks — and about 25 of ARK’s 45 employees settling into St. Petersburg while the rest work remotely from New York and other cities. More than a year after the surprise announcement, Wood says she rarely feels the need to return to the home she kept in Connecticut, even in the dead of summer. “I love the heat,” she adds with a slight smile.

Last year did bring the heat. While other investors were fleeing risky or overvalued tech companies and plunging cryptocurrencies in 2022, Wood held firm to her overarching belief in the unrealized value of disruptive technologies as her funds took a hit and her critics came out in force. Having built her reputation for seeing the value of emerging innovations, such as Tesla and Zoom, where other investors have blind spots, Wood is steadfast in her assertion that in the next eight to 10 years, a convergence of five technology platforms such as artificial intelligence and blockchain (“Transformers,” page 39) will unlock trillions of dollars in value.

“What we believe is happening is we are shifting from a linear growth world into an exponential growth world,” Wood says. She sees a technology-driven financial future, seeks no solace in the safety of benchmarks and is the polar opposite of Warren Buffett’s value investing strategy. “The companies at the top of many of these benchmarks are being disrupted,” she says. “They used to be the disruptors.”

It doesn’t take long in a conversation with Wood to see she’s interested in having a hand in shaping the Tampa Bay region’s innovation ecosystem for the same reason she’s uninterested in “backward looking” benchmarks. Here, she can put her ideas to work in new ways and advocate for the value of taking informed risks when it comes to pushing the boundaries of innovation. “Tried and true is OK if the world’s not changing very much,” she says.

Just blocks from where ARK Investment has its offices, a new accelerator for tech startups named the ARK Innovation Center is under construction. When it opens late this year, the 45,000-sq.-ft. building will have a 3-D printer lab, a virtual and augmented reality lab, a 200-seat event space and room for startups. The companies accepted into the accelerator will reflect the ARK ethos of embracing emerging technologies.

Less visible is the influence that Wood has even further into the future through her personal foundation, called Innovation Foundation, which is now involved in six Pinellas County public schools through a pilot program for 1,700 students in sixth-grade science classes. Wood says the curriculum is crafted from an “age-appropriate” translation of ARK research, with an emphasis on using science and technology and hands-on projects to solve problems. It is being expanded to all sixth-grade classes and more grades in the 2023-24 school year. The goal is not only to get students learning about innovation earlier — bridging some of the socioeconomic gaps that limit the opportunity of large swaths of the population from participating in the innovation economy — but also preparing students for how “the world is going to work” with the convergence of technologies explored in ARK’s research, Wood says. Late last year, some of the teachers participating in the pilot program gathered with ARK Investment’s team in a training session on the hands-on learning activities, which included teaching students how to build their own water purification systems, create longer lasting batteries and use drones to understand storms. The teachers, some of who had never handled a drone before, were taught how to fly them.

Wood said the fact that state and county officials were open to ARK Investment becoming involved in public schools so readily was “mind-blowing.” “But people said, if you want to make a difference, it’s in the public schools,” she told FLORIDA TREND.

“How do you get on the right side of change?” is the question Wood says underlies both her investment philosophy and the resources she is expending locally to promote greater engagement in technology’s future. “People have no idea how rapidly things are going to change.”

The Road to St. Petersburg

A native of Los Angeles, Wood is the oldest child in an Irish immigrant family. Her father didn’t attend college, but through military service programs both in Ireland and the United States, he took his limited formal education and became a radar systems engineer. “Education, career. Education, career. There were two things on my father’s mind,” she recalls.

After attending an all-girls Catholic high school in Los Angeles, she studied finance and economics at the University of Southern California. As an undergrad, she petitioned for admission to a graduate-level course taught by Arthur Laffer, the supply side economist who rose to prominence during President Ronald Reagan’s administration and for whom the Laffer Curve, which charts the relationship between taxes and government revenue, is named. Laffer says he typically approved undergrads such as Wood attending his class because he could recognize their ambition. “She has a drive and energy that has never abated in the time I’ve known her,” Laffer says. “Everywhere she goes she replaces laziness with hard work. She’s not an optimist. She’s not a pessimist. She’s a realist. She’s an analyst. She digs deep to find the opportunities overlooked by others.” To this day, when Wood makes casual references to “my mentor,” she is speaking of Laffer.

Wood, through Laffer, joined Capital Group in 1977 and then went on to Jennison Associates in New York for 18 years, where she honed her expertise in media, telecommunications and emerging technology investing — giving her a front-row seat to the era’s technological revolutions before the dot-com bust knocked the bottom out of new internet-based companies. In 2001, she joined AllianceBernstein as chief investment officer of global thematic strategies, managing $5 billion. When the 2008 financial crisis forced more investors and fund managers into less risky and lower cost index funds, Wood made clear her disdain for passive investing. She proposed an actively managed portfolio investing in companies built around disruptive innovation in an exchange-traded fund — an idea that didn’t go over well at AllianceBernstein. So Wood set out on her own.

She registered ARK with the Securities and Exchange Commission in 2014. ARK stands for Active Research Knowledge, the firm says on its website, although in an interview with the podcast Jesus Calling, Wood describes her decision to name the firm for the biblical Ark of the Covenant that held the 10 Commandments stone tablets. “I founded the company out of faith,” she says in the 2020 podcast. ARK’s first funds launched later in 2014 when Wood was 57 — an experience she has described as daunting and stressful as she watched her personal fortune dwindle in the early years. But then came wins in the kinds of technologies that people began to see integrated into their daily lives such as Netflix and Shopify, and the investor world began to take notice.

Wood focuses on five “very big ideas” — artificial intelligence, genomics/DNA sequencing, energy storage, robotics and blockchain — seeing trillion-dollar massmarket industries to come. She says many investors look at innovation too simplistically. Tesla isn’t just a car company, she notes, it’s also a battery company, a software- to-service company and a bundle of other new technologies with vast future applications.

ARK places huge bets on a few companies and makes its research and analysis publicly available on its website while also sharing it through the firm’s social media channels and podcasts. Wood hires people with education, training and expertise in science and technology and teaches them the finer points of investing, an approach she says is more effective in understanding the potential value of innovations than teaching finance majors to become experts in artificial intelligence, the blockchain or DNA sequencing.

In the pandemic and the economic disruption that followed a global shutdown, Wood’s star power soared as modern innovations came to the rescue and free-flowing capital accelerated investment in innovative companies. Total net assets in her flagship ARK Innovation ETF rose from $1.86 billion in 2019 to $16.19 billion in 2021. In declaring her the “Best Stock Picker of 2020,” editor-in-chief emeritus of Bloomberg News Matthew Winkler cited data showing Wood delivered a total return 11 times the gain for the S&P 500; 19 times the average of equity-exchange traded funds; 17 times the advance for the healthcare benchmark; and five times the similar measure for technology.

“She’s meant to be a small part of your portfolio that goes for the gold,” Laffer says. “When you decide on Cathie, you have to be in for the long haul.” Says Laffer, who has invested with Wood and is a minority equity owner of ARK, “I’ve made good money with her.”

Florida beckons

The explosive growth was one reason Wood in 2021 looked to relocate. She says that as her firm grew, she wanted to avoid joining Wall Street’s “fat, dumb and happy” resting on their “laurels.” Laffer was advising her and others to relocate to business-friendly states with no income tax such as Florida and introduced Wood to Gov. Ron DeSantis. Wood says St. Petersburg reminded her of tech hub Austin a decade ago. “There’s a vibe here. I felt that we could make a big difference here.”

Jamal Sowell, who served as Florida’s secretary of commerce from 2019 to 2021 and helped bring Wood and ARK Investment to the state, says Wood’s interest in having an impact beyond the investment firm was evident from the start of her conversations with officials. “That’s what made Cathie’s story so intriguing. She really tries to get to know an area, the people and the issues. That really makes her special,” says Sowell, who closed the ARK Investment relocation as one of his last big wins for Florida before resigning to take part in U.S. Navy Reserve training. Sowell is now president of business solutions for management consulting firm Indelible in Orlando.

Wood and the ARK Investment team arrived just as the pandemic “laurels” were starting to wither under the pressure of global financial shocks that followed — inflation, supply chain shortages, rising interest rates, energy costs with the war in Ukraine and the first of the inevitable growing pains for digital currencies.

In March 2021, Morningstar analyst Robby Greengold worried in a report that ARK’s “lone portfolio manager (Wood), inexperienced team and lax risk controls” left it ill-prepared for the future. Morningstar — then and now — had a particular concern that ARK has no risk management personnel and apparently doesn’t take steps to structure the stocks in its fund so that they all don’t go up and down together, he said in an interview. “ARK’s pursuit of disruptive innovators has merit, and its quest for big rewards may appeal to aggressive investors who can stomach the risk of potentially heavy losses,” he wrote. “But ARK’s team of inexperienced analysts, go-with-your-gut risk management approach and bloated asset base raise doubts about whether this fund’s outstanding historical results can continue.”

Assets under management in the innovation ETF fell $10 billion from 2021 to 2022. Wood says she will be proven right in time, though she acknowledges the pain for investors and something of a personal toll, sharing with Florida Trend a hypothetical scenario of running into acquaintances in her former home: “If I were in New York City, they would look away probably.” In January on her firm’s podcast, FYI – For Your Innovation, a reflective Wood told listeners, “This year has been the most difficult year of my career — worse than ’08-’09 — and I would venture to say it has been the most difficult year of many investors’ careers.”

The first weeks of 2023 provided a glimmer of hope for Wood. The ARK ETF returned 27.82% in January, its best monthly return since launching.

None of the last year’s challenges seem to have dampened her confidence in either ARK’s stance on the economic possibilities of disruptive technologies nor St. Petersburg’s potential. She contributed $2 million to the non-profit Tampa Bay Innovation Center, which is building the ARK Innovation Center on 2.5 acres of city-donated land just south of downtown St. Petersburg and in the center of a growing technology hub fueled by the University of South Florida St. Petersburg and public and private maritime and defense interests.

Tonya Elmore, president and CEO of the Tampa Bay Innovation Center, says the center was attracted to ARK by the alignment between its focus areas and Wood’s core interests. “I really like the way she sticks to what she believes in,” Elmore says of Wood. “Easygoing and just very intelligent.”

ARK last year launched ARK Venture Fund, which acquires stakes in early- and late-stage private companies, publicly held tech companies and venture capital funds. Investors can get in with as little as $500. To protect small investors, venture capital investing is restricted by the government to institutions and individuals with significant net worth. Wood calls that “un-American” and sees the new fund as part of the democratization of finance, opening up the opportunity to invest in transformative innovation to more people. The new fund is illiquid, closed-end, not publicly traded and restricts the exit door.

Wood says she remains focused on companies commercializing new technologies in the next five years — early-stage cancer screening tests, AI that increases knowledge worker productivity, more rockets launching to space at lower cost. She’s happy to back companies that prize exponential growth and big opportunities over short-term gains.

With her second year in St. Petersburg underway, she still seems energized by the move. “We have been through a horrendous market for our style, and I still walk out my door every day with a sense of joy,” she says.

Transformers

The five innovation platforms ARK Investment touts as transforming the future:

  1. DNA sequencing
  2. Robotics
  3. Energy storage
  4. Artificial intelligence
  5. Blockchain technology

These platforms involve 14 wide-ranging applications:

  • Smart contracts
  • Cryptocurrencies
  • Digital wallets
  • Advanced battery technology
  • Autonomous mobility
  • Reusable rockets
  • Precision therapies
  • Multiomic technologies
  • Programmable biology
  • Neural networks
  • Intelligent devices
  • Next Gen cloud computing
  • Adaptive robotics
  • 3-D printing

Rise of the Rest

Of all the innovation backers bullish on Florida, few are more influential than ARK Investment founder Cathie Wood and Steve Case, the co-founder of AOL, who has since devoted his resources to shining a light on overlooked centers of innovation around the country through his Rise of the Rest tour and venture capital firm Revolution. Wood recently hosted a conversation with Case on the ARK podcast FYI — For Your Innovation, touching on the Tampa Bay region’s potential.

WOOD: “I think you’ve been an inspiration to the Tampa Bay region. We’re seeing all kinds of innovation centers. We’re helping St. Petersburg with an innovation center that will open up an incubation center next year. There’s Embarc Collective (in Tampa) which Jeff Vinik founded. … There’s just this ethos — a DNA, an excitement and youth that is here.”

CASE: “We were there with our Rise of the Rest bus in Tampa and St. Pete just a little over three years ago, and Embarc Collective was still under construction. They did a fireside chat with Jeff Vinik, and we had hundreds of people, and you could tell something was bubbling there. ...That’s the story in all of the Rise of the Rest cities. … When I go to these cities, I see things, experience things that surprise me. Even people who are from those cities are surprised what’s happening, particularly in the startup communities. When people hit the ground and see what’s happening there, they suddenly say, ‘Huh, there’s much more happening here in the startup community than I thought. There’s really more reason to be optimistic. Maybe it is time to move back to a place that I left before because there wasn’t an opportunity before.’ ”

WOOD: “It’s real optimism about the future here that I don’t feel in the more established cities.”

Tags: Banking & Finance, Technology/Innovation, Feature, Startups

Florida Business News

Florida News Releases

Florida Trend Video Pick

Sunshine State manufacturing is a powerhouse, rivals tourism
Sunshine State manufacturing is a powerhouse, rivals tourism

Florida could be cannabis crown jewel; Florida's manufacturing industry booming; Floridians owed tax refunds; Digital privacy law on its way; From Bedside to C-Suite.

 

Video Picks | Viewpoints@FloridaTrend

Ballot Box

Do you think recreational marijuana should be legal in Florida?

  • Yes, I'm in favor of legalizing marijuana
  • Absolutely not
  • I'm on the fence
  • Other (share thoughts in the comment section below)

See Results

Florida Trend Media Company
490 1st Ave S
St Petersburg, FL 33701
727.821.5800

© Copyright 2024 Trend Magazines Inc. All rights reserved.