Part of the challenge (and the fun) of investing is looking into the future and trying to make an educated guess on what it could look like.
"The Future" is inherently complex, making accurate predictions (especially with consistency) impossible. But fortunately you don't have to be precisely correct, you only have to be directionally correct.
Ark's Innovation ETF $ARKK
applies this idea in an interesting way. They aren't trying to predict the details
of what the future looks like,
but they do make bets on direction.
Ark focuses their time and attention on understanding technologies which can serve as a platform for additional innovations. Exhibit A: Batteries.
Battery technology has been improving; becoming smaller, holding higher capacity, lasting longer, and dropping in price relentlessly.
Aren't batteries kind of boring? Not if you think of them as a jumping off point for a lot of other cool applications. If battery prices keep falling, then we could find ourselves in a virtuous cycle described by Wright's Law (which I wrote about a couple of days ago
The precise future is hard to predict, but the general direction this would take our current world would be:
- Electric Vehicles become less expensive than gas powered vehicles.
- Stationary energy storage could reduce the need for excess energy production, decreasing the need for many coal and natural gas power plants
- Micro-mobility becomes possible on a mass scale with drones, scooters, skateboards, and bikes.
If you had made a bet solely on say Lime Bikes
going mainstream, you would have been disappointed
. But by betting on the underlying technology that enables numerous new applications, you can spread the risk out.