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It's Sunday, August 25th, 2019. Please enjoy ARK's weekly newsletter curated by our thematic analysts and designed to keep you engaged with disruptive innovation.

Wright’s Law Applies Not Only to Tesla But to the Entire Auto Industry

Follow Sam on Twitter @skorusARK


For the past two weeks, ARK has published research that applies Wright’s Law to the Model 3 and to mature technologies. This week, we wrap up the Wright’s Law mini-series by illustrating that the auto industry has been on an 85% learning curve since 1903. In other words, for every cumulative doubling of unit production, costs in the auto industry have dropped by 15%.


Other researchers have demonstrated that Ford’s Model T production followed an 85% learning curve, as shown below, but many conclude mistakenly that because they dropped after the introduction of the moving assembly line the cost declines were not sustainable.


Screen Shot 2019-08-25 at 10.17.09 AM

In reality, Wright’s Law doesn’t apply just to the Model T but also to the auto industry throughout its history. Since selling almost 2,000 Model As for ~$23,000 in today’s dollars in 1903, Ford’s costs have declined on average by 15% per doubling of production, as shown below. According to Wright’s Law, Ford should be able to make a Model A today for ~$1,500 if, like the original Model A, it were a 8 horsepower (hp) car with a top speed of 28 mph. While Ford no longer sells a car with 8 hp today, look no further than the Tata Nano or Mahindra’s rickshaw, with ~8 hp capabilities and costs at roughly $2,100, to recognize that costs have declined in line with Wright’s Law, as shown below.

Screen Shot 2019-08-25 at 10.20.11 AM


Waymo Open-Sources Some of Its Data

Follow Tasha on Twitter @TashaARK


Waymo has open sourced some of its autonomous mapping data for researchers and academics. The dataset includes 1,000 clips, each 20 seconds in length, a fraction of the roughly 15 million miles of its self-driving data. Waymo has stipulated that the data cannot be used for commercial use, that users must base their research on neural nets trained on data from Waymo cars, and that they must share the details of their research. In other words, Waymo does not want competitors to gain access to its data.


Apparently, Waymo hopes that outside researchers will experiment with its data and enhance its autonomous vehicles’ perception system. After all, its cars are far from perfect.


Startup Cerebras Has Built the World’s Largest AI Chip

Follow James on Twitter @jwangARK


Screen Shot 2019-08-25 at 9.56.24 AM

Silicon Valley startup Cerebras has built the world’s largest computer chip. About the size of an iPad, the single chip contains 1.2 trillion transistors and is 57x more complex than Nvidia’s flagship V100 GPU.


The size and complexity of today’s microprocessors are constrained by the semiconductor manufacturing process. Because large computer chips have higher defect rates, the largest chips made today are about the size of a stamp, constraining AI applications. To train large neural networks, researchers often have to build supercomputers with hundreds of chips costing tens of millions of dollars.


Cerebras—working in concert with TMSC—has created a process to build a computer chip the size of a silicon wafer. With 400,000 processor cores and 18 GB of memory, the “Wafer Scale Engine (WSE)” has enough computing horsepower to replace an entire rack of conventional GPU servers.


Cerebras’ technology is so exotic that it’s difficult to know how well it will work in practice and how it will impact Nvidia’s $3 billion data center business. The company says it has a handful of customers in trials and promises to unveil performance benchmarks in November.


For a deeper discussion, see James’ tweetstorm.



Square Crypto Hires Bitcoin Developer Matt Corallo

Follow Yassine on Twitter @yassineARK


In March, Square launched Square Crypto, the first open source initiative focused on supporting the Bitcoin network. To express gratitude and support the open source community, CEO Jack Dorsey announced that Square would hire three to four crypto engineers and one designer to work full-time on open source contributions to the Bitcoin ecosystem.


This week, Square Crypto announced its first full-time Bitcoin developer hire, Matt Corallo. A longtime Bitcoin Core contributor and co-founder of Blockstream, Corallo announced that he was leaving Bitcoin research and development firm Chaincode Labs to work full time on open source Bitcoin projects at Square.


Corallo’s past contributions to Bitcoin have been notable, including Bitcoin Improvement Proposal BetterHash, a mining pool protocol designed to increase decentralization, and a rust-Lightning implementation, a full-featured and flexible second layer Bitcoin solution that allows users to build and experiment with the Lightning Network. Access to his Github repository can be found here.


Square’s support for the open source community is aligned with CEO Jack Dorsey’s decision to prioritize open source software and forego short-term profits. Attracting Matt Corallo appears to be validation of Square’s strategy.


Square recognizes that over the long-term Bitcoin’s success should accrue to its benefit. A strong distributed well-funded developer community will be essential to Bitcoin’s long-term success.



Bank Branches Are on The Decline

Follow Max on Twitter @mfriedrichARK


Roughly 70% of bankers believe that their financial institutions could not survive without branches, according to the 2019 World Branch Report. They might be surprised, therefore, to learn that bank branches are on the decline in most western countries and are stagnant in developing countries, as shown in the chart below. In sub-Saharan Africa, mobile money accounts seem to be offsetting the slow growth of bank branches.

Screen Shot 2019-08-25 at 10.42.20 AM

In the US, bank branch closures do not seem to making headlines, especially given JP Morgan Chase’s decision to open 400 new branches and a new flagship in New York City. According to JP Morgan’s quarterly filings, however, in the last year the number of Chase branches has dropped from 5,091 to 4,970.


While some customers might enjoy a coffee now and then at a chic bank branch in New York City or elsewhere, Gen Z customers do not seem to be among them. According to a recent PWC study, only 25% of Gen Z survey participants said that nearby branches or ATMs are important in their choice of a bank compared to 70% of Baby Boomers. To attract the younger customer, financial institutions seem to be turning to digital channels.


That said, JP Morgan Chase’s decision to shut down its digital-only bank, Finn, earlier this year and its mobile payments application, Chase Pay, earlier this week seems to suggest that it is struggling to address those young customers.



Apple Card Launched This Week: While the Reviews Have Been Underwhelming, We Are More Optimistic

Follow George on Twitter @ARKInvest


One of the most successful credit card launches of all time was JP Morgan Chase’s Sapphire Reserve in 2016. Upon approval, users received points worth up to $1,000-$1,500 in travel credits and an annual $300 travel credit fee. After the successful launch, CEO Jamie Dimon announced that the card would reduce JP Morgan’s profit by $200 - $300 million in the fourth quarter of 2016, suggesting that it had acquired 166,000 new customers for $1,800 per customer.


With the launch of the Apple Card this past week, Google trends data suggests that search interest for the Apple Card has surpassed by far that for the Chase Sapphire Reserve card in 2016. At the end of 2018, Apple had roughly 100 million iPhone users in the US, each of which is eligible to apply for the Apple Card after opening the Wallet app and can be approved in fewer than three minutes. If approved, users can transact immediately. Never have customers been able to apply for a credit card AND use it in fewer than three minutes.   


Apple’s acquisition costs per customer are effectively zero because it is not offering any signup incentives or bonuses. Instead, the card incentivizes customers to use the card by offering 2% cash-back on most transactions and 3% back on purchases of Apple products and Uber services.


Apple has entered the credit card industry with a unique offering and compelling acquisition costs.


SWIFF-CAR T Cells Can Optimize Manufacturing Process 

Follow Manisha on Twitter @msamyARK


Researchers at Cellectis (CLLS) have developed a second-generation CAR-T architecture, SWIFF-CARs, for CAR-T therapy manufacturing. The new architecture controls the expression of CARs on the surface of T-cells.


CAR-T immunotherapy has emerged as a potential cure for liquid and solid tumor cancers as well as autoimmune diseases. ARK believes that CAR-T therapy is a $433 billion global opportunity. 


First-generation CAR-T therapies extract healthy T-cells from cancer patients, re-engineer them to express CAR receptors that target specific cancerous cells on the surface of the cell, and transfuse them back into patients. The CAR-T cells then detect and kill only the cancerous cells.


The manufacturing of these activated CAR-T cells has been tricky for three reasons:

  1. the T cells can differentiate,
  2. the T cells can undergo cell exhaustion or proliferate too quickly and die, and
  3. the T cells can attack each other.

SWIFF-CARs use an on and off switch controlled by the presence of a small molecule. The CAR-T cell can be manufactured in an inactivated state, avoiding many manufacturing pitfalls. Once the CAR-T cell is manufactured successfully, the removal of the small molecule will activate it.


While SWIFF-CARs are being studied for ex vivo manufacturing today, one day they could work inside patients to regulate the activation of CAR-T cells in the body, potentially avoiding the lethal side effects like cytokine release syndrome and neurotoxicity seen in first generation CAR-T therapies.

ARK's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.



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