We are currently in one of if not the largest technological transformation in history, kathy wood. The ceo and cio of arkhanvest believes that we are on the verge of an unprecedented technological revolution. In the early 20th century, we experienced massive changes to our economy that transformed the world and are still relevant today. This included three innovation platforms, the telephone electricity and the internal combustion engine.

Now, kathy wood and arkhan vest believe that we are undergoing a similar or even bigger transformation here in the 21st century. This transformation will change the world as we know it, and not surprisingly, significantly alter the investing landscape for years to come in this video i'll be talking about why kathy wood believes that traditional valley, investors and valley stocks will be disrupted heading into the new year and Beyond welcome to cas games academy, if you're new to the channel, please consider subscribing for more content like this and let's get right into it. Wood and arc invest commonly referred to a graph that is demonstrated and will continue to demonstrate the course of innovation. For the history of mankind, this is the s-curve graph, with revenue on the y-axis and time on the x-axis.

This involves multiple segments that eventually reach a maturity point where they have no choice but to plateau and decline. During this time, there is a new innovation window for a new product that is more efficient than the old technology and arc invest, thinks that we are in the midst of another innovation window. Kathy would believe that the previous s-curve of innovation was experienced over a century ago. These technologies have changed the way we live and are still used today.

Now it is time for the adoption of new technologies that are simply better and easy to use in comparison to their current counterparts. The sweet spot of the s curve starts somewhere in that 10 to 15 high teens range of share. Then we go into overdrive. Then we go into overdrive in terms of tech, new technology, adoption think about it.

Retail seems to have been destroyed already we're only 16 into that move. Think about it. Kathy would think that at this moment we are at the tipping point of the s curve, which would be around the 10 to 20 range. More specifically, the launch point that is displayed on this s curve.

We can see how much growth there is to come, and this will come as kathy mentions in our five investing platforms of innovation, artificial intelligence, energy storage, robotics, genome sequencing and blockchain technology in a recent arc report. Kathy would detail that upcoming innovation will also create black holes in the current financial markets. If there are going to be new markets created by the five platforms of innovation, they need to take out market share of more or less five already existing sectors. These black holes will drive out old businesses that take 35 to 40 of the s p 500 and will be replaced by new businesses.

The businesses include linear tv, physical bank branches, brick and mortar retail freight rail and traditional transportation. This all might sound a little extreme at first, as many of these are relied on heavily in our everyday lives. However, there are many reasons that point to the notion that these businesses will no longer be relevant in just a short period of time. Linear tv uh.

We believe uh that uh linear tv is about to experience a wily coyote moment off. The cliff advertising spending on television in the united states has been fairly flat for the last few years, while the number of households watching tv has dropped from 100 million to fewer than 50 million. Think about that and advertising bit has been flat. Well, streaming is about to solve that uh.

There is a massive shift to streaming tv now and uh. We believe that the there that uh triggered trip the switch for that uh television advertising to fall, and we think that analysts, who have been fairly comfortable with the cash flows in that uh in that world are are also going to experience. The wiley coyote moment. Kathy means in this clip with mentioning the wild e coyote moment is the looney tunes cartoon character.

She believes that these sectors have been chased off the cliff by disruptive technology. Linear tv is currently unknowingly suspended in the air with no support below it. It's only a matter of time before reality, catches up and the industry comes crashing to the ground as kathy would mentioned. Advertising revenue is flat, while the number of people watching traditional tv is falling dramatically.

This is especially evident with the younger generations. Furthermore, the way linear tv is set up is extremely inefficient when you purchase a subscription to linear tv you're forced to get a ton of useless channels that you know you're, not gon na watch. Most of the time, a few channels in the package carry the rest of the channels, and sooner or later those channels and advertisers are going to do something about it. Arkan vest forecasts that over the next five years, the number of u.s linear tv households will drop 48 from 86 million today to 44 million in 2025.

The way streaming services are set up are a lot more efficient for both sides of the party there's better and cheaper content and targeted advertising. Both of these branches are now in more danger than ever. For example, physical bank branches will be replaced by digital wallets in the us very soon. Kathy wood often refers to the financial networks in china.

As an example, china has seen a dramatic growth into the adoption of digital wallets, like wechat pay and alipay. In q4 of 2019 tencent reported that one billion wechat paid transactions occur daily, with the continued growth in the us through paypal's venmo, square's cash, app bitcoin and more. We see traditional financial institutions fighting an uphill battle. The cost of acquiring a loyal customer for a bank is exponentially greater than that of a platform like cash.

App arcane west forecast that the number of digital wallets will reach 75 or 200 million of the adult u.s population by 2023. With such wide availability, you have to pose the question of whether or not it's even worth it to make frequent trips to the bank anymore. Just like linear tv, i see a growing number of the younger generation using more of digital wallets and less of traditional banks with the completion of autonomous driving technology and evs. Traditional transport will have a tough time competing internal combustion engines have dominated the past few decades.

However, it's extremely clear that over the next decade, electric vehicles will continue improving and eventually take over internal combustion engines. When it comes to freight, rail autonomous driving technology will ultimately take over through the use of autonomous driving semi-trucks. It is true that today such technology is not available, however, over the long term in the next 5 to 10 years, freight rail will be disrupted. In particular, this is talking about the businesses and sectors that are relying too heavily right now on passive, investing passive, investing or more specifically, index fund.

Investing has been very popular over the past few years. This is because people are afraid of another bubble occurring like the tech and telecom bubble or the 2008 crash in order to decrease their susceptible risk index. Investors put their money into the broad market like the s p 500 to them. This gives them the ability to diversify their capital, so they don't get too heavily affected by sector crashing while receiving that historic, seven to eight percent annual return.

I do think this kind of investing is fine and is great for retirement funds and such, however kathy would believe that this type of investing will slowly disappear in the future and will cause many businesses inside these broad market indexes to fail. As we all know, tesla was only just added to the s p. 500. So by investing in general index funds, your allocated capital is less efficient than it could potentially be.

Investors are eventually going to realize this and in reaction just put more money into the s p leaders rather than the entire index. In fact, if we take a look at the s p's top companies, we can see that most are in the tech industry. These top 10 companies make up over 27 percent of the s p, meaning that the other 490 companies make up the 70 to the 73 percent. The five bad ideas stated by kathy wood earlier are due to get disrupted very soon and they take up 35 to 40 percent book value of the current s.

P 500, that is kathy, was contrarian outlook on the investing world today. Her views are definitely unique and not accepted by the traditional investing world at the current moment, but we will have to see what happens in the future. With this graph on arkhan vest's website, we can see a lot of their investing philosophy. I know i showed this graph in a previous video, but i cannot overstate this enough arc.

Invest's goal is to be ahead of the competition and the overall market. They jump in far before the rest of the crowd, which has definitely served them well so far, the early adopters in this graph represent the dot-com bubble in the year 2000, where too much capital funded too little innovation. Since then, for the past 20 years. Behind the scenes, long-term innovation has been occurring.

This is going to continue to happen with wright's law due to falling costs and increased productivity when the five investing platforms become strong enough to the point where we see them to start to converge. This would be absolutely revolutionary for society. If you enjoyed this video, please hit the like button and subscribe and i'll see you in the next one.