Read on Twitter
This interview with @wintonARK is so good.
Coming from SV / Bay Area, I think ARK’s cheat code is taking the best parts of venture capital and applying them to a liquid market of mature companies. https://macro-ops.com/innovative-technology-investing-brett-winton/
Coming from SV / Bay Area, I think ARK’s cheat code is taking the best parts of venture capital and applying them to a liquid market of mature companies. https://macro-ops.com/innovative-technology-investing-brett-winton/
Everything Brett describes sounds like the best of venture, but without having to deal with:
- dealflow
- term sheets
- board seats
- managing illiquidity with LPs
- analyzing founder psychology
- confidentiality preventing sharing models publicly
- “partner” charades
- etc.
- dealflow
- term sheets
- board seats
- managing illiquidity with LPs
- analyzing founder psychology
- confidentiality preventing sharing models publicly
- “partner” charades
- etc.
People always put @ARKInvest into the active manager or thematic investing bucket.
They’re really doing something quite different that’s still misunderstood — understand the future (5+ years) and work backwards to find skew and unfair advantages in the present.
They’re really doing something quite different that’s still misunderstood — understand the future (5+ years) and work backwards to find skew and unfair advantages in the present.
I (and I think many people in SV) always assumed this was the obvious way to invest. It’s only been over the past few years, after beating the market (and ARK 
) by...a lot that I’ve dug deeper and understood that it’s still atypical.
) by...a lot that I’ve dug deeper and understood that it’s still atypical.
What’s crazy to me is that this approach is still so misunderstood. Thematic investing only gets you something like a bespoke weighted index of a present trend (ex: WFH, metaverse, clean energy). Any alpha is momentum that the trend will continue, policy will remain, etc.
Because the alpha is like a subset of trend momo, it’s easy for others to capture. Not much room for unfair advantage. VC equivalent is the investor whose friends got in on hot new thing and is now signing a term sheet for the 4th best company. Could still work but you pay $$$.
Starting with the future you get something like “X% confident Y will happen, 40-60% probability in next 5 years” and then look at who is working on Y. Research informs confidence on both future and time horizon.
Repeat this loop a few times and you can end up with conclusions that deviate wildly from consensus. That’s durable alpha, even when you shout loudly (ex: Tesla) and it’s so much more fun and less stressful than following trends or predicting which way the crowd will turn.
Most of the best VCs use some approach like this, backed by hypotheses about the future, with a feedback loop informed by meeting with founders and having inside info on portfolio companies.
(the less good ones follow them later)
(the less good ones follow them later)
But this is all so, so much easier in public liquid markets, and that’s what’s most misunderstood. Decisions can be easily reversed. You can be wrong big, but in ways that are temporary. It can be a random Tuesday and you can independently decide to double down.
Conversely, you can also afford to be more patient because the companies themselves are at less risk of running out of money. VC world is littered with examples of companies pushed to go too fast or who were just a few years early to a trend.
I’ve gone reasonably deep on Fintwit, heard a lot of the top people talk about investing, and it’s really stunned me that so few people think this way and really try to build unfair advantages. Not saying they aren’t out there, but surprised it’s not the norm.
