ARK • Disrupt

During the current business cycle, we believe real gross domestic product (GDP)ⁱ growth could accelerate to 7% per yearⁱⁱ on average, surpassing that of any year since 1950. Seemingly outlandish, this estimate is consistent with the dramatic boost to real GDP growth during bursts of technologically enabled innovation in the past 2000+ years.

Since 1 AD, history reveals distinct time periods during which the rate of economic growth has transformed structurally—as shown below. Over each successive time span the underlying rate of economic growth has structurally changed for the better. One can measure this change either by the average yearly growth rate or, as in our case, by calculating how long it would take for the world's production to grow tenfold. In simpler terms, how many years will it take for us to be ten times wealthier?

Sources: ARK Investment Management LLC, 2024, based on data from Bolt et al. 2022; Nalley et al. 2021; DeLong 1998; The World Bank Group, as of 01/27/23.ⁱⁱⁱ Numbers are rounded. Consensus forecast is the reference economic case for the EIA’s International Energy Outlook. X-axis of log years until 2050 is tuned to the best fit against the historical data. Forecasts are inherently limited and cannot be relied upon. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency. Past performance is not indicative of future results.

During the first thousand years AD, technology breakthroughs—including the development of the waterwheel and advanced infrastructure enabled by concrete—catalyzed activity to such an extent that real GDP would have increased 10x over the course of 16,500 years. Through 1500, agricultural innovation, notably the introduction of a plow able to work heavy European soils, improved food protection, boosting growth to a rate that would have multiplied real GDP 10-fold over 1,600 years. During the Enlightenment and first industrial revolution, economic growth was driven by the introduction of the steam engine, taking the amount of time for a 10x improvement in real GDP down to 720 years. Then, the internal combustion engine, the telephone, electrification, and the railroad combined to create another structural shift during the second industrial revolution, pushing the 10x increase in GDP down to 150 years. Finally, in the second half of the 20th and early 21st centuries, the integrated circuit, personal computers, and the internet combined to compress the 10x increase in economic well-being as measured by real GDP into fewer years than the average human lifespan: 65.

In the chart above, the green dots highlight the growth trajectory that consensus forecasting agencies are predicting. Knowingly or not, they are implying that the innovation enabled by robotics, energy storage, artificial intelligence, blockchain technology, and multiomics sequencing will not impact growth meaningfully and that the global economy is entering a rendition of the dark ages.

Consistent with techno-economic history, ARK’s forecast through 2030 suggests that the time to 10x will be ~30 years, nearly three times faster than the consensus forecast, as shown in the chart above by the purple dots. Admittedly, the x-axis scaling in the chart above is doing a lot of the work: the x-axis is scaled by log years until 2050, resulting in a clean regression against available historical data. Slight tweaks to that regression could change the timeframe for the acceleration in growth.

That said, we are comfortable with our forecast based on research suggesting that a small subset of the 14 technologies that we have modeled could deliver the acceleration in real GDP growth. Indeed, adaptive robotics and robotaxis alone could realize almost all of the transformational acceleration we are anticipating, as shown below.

Source: ARK Investment Management LLC, 2024. Based on data from Crafts 2004; McKinsey Global Institute 2017; O’Mahoney and Timmer 2009.^iv Forecasts are inherently limited and cannot be relied upon. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency. Past performance is not indicative of future results.

Other advances—notably in AI software, public blockchains, and multiomics—also could prove transformational for the economy, although macroeconomic statistics could fail to capture their impacts and will have to catch up with reality. In our view, a spate of technological breakthroughs is in the process of transforming not only the global economy but also financial markets.

Last Tuesday, Walmart announced plans to acquire VIZIO, attracted by its budget-friendly TVs and the SmartCast TV operating system (OS), to “enable Walmart to connect with and serve its customers in new ways including innovative television and in-home entertainment and media experiences.” VIZIO currently has 18 million active accounts and 500 direct advertising partners.^v Walmart will integrate Walmart Connect, its US media unit, into VIZIO’s advertising business to grow its own presence in the Connected TV (CTV) advertising space.

Is the Walmart-VIZIO partnership a threat to Roku? We think not. With 80 million active accounts^vi globally and over 100 billion hours streamed during 2023, Roku's dominance is unmatched. In fact, its US active account base is larger than that of the six largest traditional pay-TV providers combined. For years, Roku has navigated through the competition from tech giants like Amazon, Google, and Apple, never losing its place as the #1 selling TV operating system in the US. It also was the #1 selling TV OS in Canada and Mexico during the fourth quarter.^vii

Scathing consumer reviews^viii of VIZIO’s operating system corroborate our research and underscore Roku’s technological advantages. Having expanded its scale and presence recently, Roku now is developing and marketing its own line of Roku-branded TVs. Initially introduced at Best Buy in 2023,^ix they are now available at Amazon and Costco. As Walmart prioritizes VIZIO and replaces Roku's OS in its Onn branded TV lineup, we believe Roku is likely to explore new opportunities with its existing retail partners and others, especially those who discontinue VIZIO after their largest competitor acquires it.

Our research suggests that the monetization of Connected TV (CTV) is just getting started. Traditional TV viewership continues to decline^x at an astonishing rate as it cedes share to streaming alternatives. During the fourth quarter, for example, it dropped 16% on a year-over-year basis while global streaming hours on the Roku platform and The Roku Channel soared 21% and 63%, respectively. Meanwhile, the disparity between viewership and advertising dollars spent is stark: although US adults spend more than 60% of their TV time streaming content, advertisers allocate only 29% of their TV budgets to streaming platforms.^xi These data demonstrate the potential for CTV’s future growth and monetization. In our view, Roku will remain the leader and premier advertising partner in the CTV space.

Last week, the European Central Bank (ECB) published^xii a lengthy blog post in which the authors declared:

Bitcoin has failed on the promise to be a global decentralized digital currency and is still hardly used for legitimate transfers. The latest approval of an ETF doesn’t change the fact that bitcoin is not suitable as means of payment or as an investment.

In the ECB’s view, bitcoin has failed for the following reasons:

1. bitcoin is not digital money because its transactions are inefficient, and the network is used mostly for illicit activity;

2. bitcoin is not a viable investment, since it is used only for speculation, offers no cash flow or dividends, and cannot be used productively like other commodities;

3. Bitcoin’s proof-of-work security mechanism pollutes the environment and will continue to increase energy consumption.

Excoriated and debunked by the X community, the ECB’s claims seem misinformed. In mid-2021, ARK responded to similar claims made by investment firms in a paper called “Debunking Common Bitcoin Myths.”^xiii

In our view, bitcoin offers the following value propositions:

a. bitcoin is censorship resistant. Important to note, illicit transactions in 2023 constituted 0.34% of total crypto volume,^xiv lower than the up to ~33%% dollars of cash estimated^xv by some experts,^xvi or the 2% - 5% in money laundering estimated^xvii by the UN.

b. bitcoin could become the first “global money.” According to monetary history, the most common and resilient monies possess qualities that sustain their demand. Often deemed “digital gold,” bitcoin shares and improves upon many of gold’s characteristics. Scarce and durable like gold, bitcoin also is divisible, verifiable, portable, and transferable in ways that offer owners more utility than gold.

c. Bitcoin is secure because of proof-of-work, a mechanism that could become net positive for the environment^xviii as renewables^xix increasingly power bitcoin mining.

As bitcoin’s adoption and valuation grow, detractors—perhaps those who would lose the most from its success—will continue to surface, despite its value propositions … or, perhaps, because of them?