These days, most investment strategies focus on the wrong things. Asset managers will group companies to invest in by a particular geography ("Let's invest in Asia!"), a particular sector ("The energy sector is undervalued, let's invest there!"), or market capitalizations ("Small companies can grow the most!").

But just because a company is in Asia, is in a particular sector, or happens to be small, doesn't really say anything about that company's operations. The way the company operates is what is valuable.

Ark starts with researching new technologies that have the potential to become as ubiquitous as electricity. Then with that understanding they analyze companies that have figured out how to leverage the technology.

The key difference is that other asset managers aren't organized in a way to understand the key drivers of growth. So they settle for the next best thing: trend spotting. Trend spotting is when you notice a correlation without understanding the causation. For example, noticing that small companies on average grow more than larger companies, and making that itself your investment thesis.

But correlation does not imply causation. Business performance improves because of a material improvement in how a company operates. It is always better to understand the thing that is making the business operate more efficiently than to notice the effects of this after the fact.

Trend Spotting is backward looking. Technology understanding is forward looking.

Ark has structured their research around technology "themes", while everyone else specializes in arbitrary groupings, enabling Ark to understand why and how particular companies will benefit the most from the new technology.