Image: Ark Invest | Tesmanian

ARK Invest assumes that the global economy has entered a period of changes, some of which were exceptionally good and others destructive, and these will shape the market in the future. The correct orientation towards change can determine success and failure, which is why ARK suggests paying attention to next five innovation platforms in the new world.

"In our view, any company not investing aggressively in one or more of five major innovation platforms and 14 technologies evolving today will lose its way."

The five innovation platforms, according to ARK, that will transform the global economy are: DNA sequencing, robotics, energy storage, artificial intelligence, and blockchain technology. These platforms involve 14 technologies including gene therapies, 3D printing, cloud computing, big data analytics, and cryptocurrencies.

These technologies are permeating sectors of the economy, creating challenges for short term, siloed, and highly specialized research, but such convergence creates a new world order.

According to ARK's research, among the siloed sectors at risk of disintermediation are energy, industrials, consumer discretionary, communications services, health care, and financial services. "As autonomous transportation evolves, for example, autos, rails, and airlines are likely to capitulate to the convergence of robotics, energy storage, and artificial intelligence. Combined, they will collapse the cost structure of transportation." Traditional healthcare is likely to give way to the convergence of next-generation DNA sequencing, artificial intelligence, and gene therapy, the combination of which should significantly increase the return on investment, ARK belives.

However, many platforms are entering exponential growth trajectories thanks to the falling costs and increasing productivity associated with technologically enabled innovation. "For example, in response to the 28% cost decline in lithium-ion batteries for every cumulative doubling in units produced globally, prices will continue to fall, turbocharging” electric vehicle (EV) sales. According to our research, EV sales will scale 20-fold globally during the next five years, from an estimated 2 million and ~ 2.5% of the market this year to 40 million and ~ 45% in 2025. "

On the positive side, electric vehicles will generate exponential growth in the automotive market for the first time in 100 years. On the negative side, just as quickly, the more expensive gas vehicles that dominate the market today will lose almost half of their sales base.

According to ARK's research, innovation is advancing at such a rapid pace that traditional benchmarks for equities and fixed income are increasingly being filled with so-called value traps, stocks and bonds that are “cheap.” Therefore, it will be critical to investment success avoiding industries and companies in the crosshairs of “creative destruction” and accepting those who create “disruptive innovation.”

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Article edited by @SmokeyShorts, you can follow him on Twitter

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