Contents
- “A productivity-driven boom is the kind of boom that doesn’t burn.”
- “Productivity is one of the most powerful forces against inflation.”
- “The convergence of healthcare and technology is inevitable—two worlds finally learning the same rhythm.”
- “Volatility isn’t the enemy. It’s the sound of discovery.”
- “Taking profits is never a bad thing. Neither is buying low.”
- “We’re investing in the way the world is going to work, not the way it has worked.”
- “Volatility is the price of discovery.”
Editor's Note
Somerset recently joined a private discussion with ARK Invest’s Cathie Wood to explore how new U.S. policy measures, paired with breakthroughs in technology and life sciences, may shape the next decade of innovation. What follows isn’t a transcript. It’s a narrative summary—part macro, part human story—of how policy, capital, and conviction are converging to build what she called “a productivity-driven boom.”
Our role at Somerset is to translate conversations like this into context for our clients: how shifts in policy and technology ultimately flow through the CLARITIES framework (Cash Flow, Listening, Allotment, Retirement/Real Estate, Insurance, Taxes, Investments, and Stewardship) and what they mean for long-term planning.
I. The Quiet Revolution in Policy
Cathie began not with technology, but with policy—what she described as “the scaffolding of the next expansion.”
Most headlines miss it, she said, but OB3 (often summarized as “Opportunity and Build Back Better 3”) has quietly reshaped the effective corporate tax structure in the United States. The statutory rate remains at 21%, yet the effective rate has dropped dramatically thanks to unprecedented depreciation allowances.
She laid it out simply: if a company starts building a manufacturing facility now and puts it in service by the end of 2028, it can depreciate the entire cost in year one.
What used to take thirty to forty years now happens instantly. “That,” she said, “means a boom in American manufacturing and construction.”
The change doesn’t stop there. Equipment, domestic R&D, and software now enjoy 100% expensing—made permanent. Temporary incentives like these have appeared in other administrations to spark growth, but permanence is the real innovation.
“These tax changes,” she smiled, “are music to innovation’s ears.”
The broader implication: an incentive cascade that pulls capital back onshore, rewards experimentation, and compresses payback periods for builders and creators alike.
Cathie-ism:
“A productivity-driven boom is the kind of boom that doesn’t burn.”
II. From Rolling Recession to Rolling Recovery
For several years, Cathie said, we’ve lived through a rolling recession—not in headline GDP, but sector by sector.
Manufacturing has contracted for nearly three years. Housing has been in retreat. Capital spending outside of AI has slowed.
Lower-income households, she added, “have been miserable. Affordability for everything is down.”
GDP growth looked fine because government-related sectors—healthcare, education—and high-end consumers carried the data.
Now, she believes, that phase is ending. As tariffs fade (with businesses absorbing more than half of the hit1), and as interest rates ease alongside a softening labor market, the economy begins to pivot.
Her phrase for what comes next: “a rolling recovery.”
It won’t feel smooth. Employment lags, and markets rarely move in straight lines. But beneath the noise, Cathie sees a productivity-led expansion—the most sustainable kind.
She quoted Art Laffer, who once called the early Trump years “the best modern stretch of the U.S. economy.”
Then she added, matter-of-factly: “He thinks these next three years will be better. And we agree.”
Cathie-ism:
“Productivity is one of the most powerful forces against inflation.”
III. The Five-Year Lens
ARK’s portfolios operate on a five-year investment horizon.
That patience, Cathie reminded the group, is what allows her team to lean into volatility instead of away from it.
On the transportation side, autonomous vehicles remain a cornerstone.
“Humans cause 85% of accidents,” she said plainly. “Regulators are finally catching up to that math.”
But the deepest conviction—where ARK has “fought to hold the line”—is in healthcare innovation, or what they call multi-omics: the integration of genomics, proteomics, and other layers of biological data.
Even as that sector underperformed, they kept exposure around 20%, recently rising toward 24%.
“The convergence of technology and healthcare is inevitable,” she said, describing two disciplines that have long resisted each other:
“Healthcare analysts hate things that move fast and break. Tech analysts hate things that move slow and regulate. But they’re learning to dance.”
Cathie-ism:
“The convergence of healthcare and technology is inevitable—two worlds finally learning the same rhythm.”
IV. One-and-Done: The CRISPR Shift
Cathie’s tone brightened as she turned to gene editing—the kind of topic that still makes her sound like a founder rather than a fund manager.
“CRISPR is miraculous,” she said simply.
Yet most traditional analysts dismissed it. “They told us, ‘There’s no annuity here. One-and-done cures will destroy the business model.’”
She paused, smiling at the irony. “Nothing could be further from the truth.”
Curing a disease once, she argued, allows companies to charge far more upfront while avoiding the patent-cliff erosion that plagues traditional pharma.
The market is already proving it: sickle-cell and beta-thalassemia cures sell for about $2.2 million per treatment.
A recent ARK paper, she noted, models the economics of eliminating bad cholesterol entirely—an edit done in one’s twenties to remove a hereditary killer that might have struck in midlife.
“Curing disease once and for all pulls revenue forward and eliminates the patent cliff,” she summarized.
The idea, she said, requires a new psychology of value in healthcare—and investors are just beginning to catch up.
V. The Behavior of Volatility
An advisor in the audience asked about volatility, the perennial challenge of client experience. Cathie’s answer felt almost pastoral.
First, she framed volatility correctly: “Volatility is a measure of uncertainty. Risk is something else entirely.”
Then she gave a process.
If a position doubles without a change in its five-year outlook, they trim; expected return has fallen by definition.
If it halves but conviction holds, they buy.
The same rule applies for clients: set exposure bands and rebalance mechanically.
Her example: hold 5% in innovation.
If it grows to 7.5%, trim back to 5%.
If it drops to 2.5%, add back to 5%.
It’s not timing, she insisted—it’s discipline.
“It is generally advantageous to buy assets at lower prices.”
In ARK’s own portfolios, they believe that their discipline of cutting winners and adding laggards may contribute positively to long-term returns, though this is subject to market conditions and inherent risks.
She compared it to breathing.
“You inhale conviction, exhale emotion.”
Cathie-ism:
“Volatility isn’t the enemy. It’s the sound of discovery.”
VI. The “Diet” ETF and the Art of Sleeping at Night
For investors who believe in innovation but prefer steadier nights, ARK now offers what she playfully calls “diet ETFs.”
Each quarter introduces a new series with a defined-outcome structure—a one-year window, 50% downside buffer, 5% initial hurdle, and participation in roughly two-thirds of the upside beyond that.
Unlike many buffered products, this one is designed to have no hard upside cap (but it’s important to consider the associated risks).
She laughed as she explained it: “It’s the low-calorie version of innovation.”
The purpose is psychological as much as mathematical.
Volatility, she reminded everyone, is not a moral failing—it’s a feature of discovery.
But for investors who want exposure without exhaustion, these “diet” structures create an emotional bridge back to participation.
Cathie-ism:
“Taking profits is never a bad thing. Neither is buying low.”
VII. The Socialization of the Public Markets
Then came my question—the one that shifted the tone of the entire call.
I asked about what you called “the socialization of the public markets”—the way passive flows and machine learning have created a hall of mirrors in large-cap growth, while private markets, paradoxically, feel more human and idiosyncratic.
Cathie lit up.
“I’m going to start using that,” she said. “The socialization of the public markets.”
She agreed the pendulum has swung too far toward indexing as ideology.
What began as diversification has become homogenization.
Everyone owns everything.
Everyone moves together.
“Indexing has become the socialization of the public markets,” she repeated, adding: “Benchmark managers are going to be blown away by AI.”
She described attending ETF conferences where no one even looked at what was inside the funds. “They didn’t know the companies. They didn’t know the management teams. They didn’t know what was making these businesses tick.”
That, she said, is what ARK has been fighting for the past decade: the restoration of research as differentiation.
Cathie-ism:
“We’re investing in the way the world is going to work, not the way it has worked.”
VIII. The Private Counterpart
In contrast, Cathie sees promise in the private markets, where ARK runs a smaller venture fund launched in 2022.
It’s performed roughly in line with the S&P, but with less perceived volatility.2
That perception, she cautioned, can be misleading: “Volatility and risk are not the same thing.”
The true risk, in her view, lies in missing the next S-curve because you’re tethered to yesterday’s benchmarks.
Still, she’s enjoyed the different culture of venture investing—one where founders often reach out to invite ARK onto their cap tables, even for small allocations.
“Sometimes we only put in $25,000, and they still want us,” she said, “because we’re doing real research.”
Roughly 95% of their venture positions are direct-to-cap-table, not via pooled SPVs.
It’s a dynamic she describes as “venture as verification”—companies using ARK’s name as a quiet seal of credibility.
She also noted how the M&A drought of the last administration crippled “strategic price discovery” in healthcare and tech, but that the deal flow is back.
“The market is working again,” she said. “Real price discovery is back.”
Cathie-ism:
“Volatility is the price of discovery.”
IX. GLP-1s and the LASIK Lesson
Before closing, Cathie addressed the GLP-1 boom—the class of obesity and metabolic drugs that reshaped healthcare headlines.
She admitted ARK largely sat it out.
“It was discovered the old-fashioned way,” she said. “No technological enabler. Just serendipity and scale.”
The results have been remarkable, but she drew an analogy: “It reminds me of LASIK—miraculous at first, then commoditized.
Patent workarounds and production issues followed.
“Look at Novo Nordisk,” she said. “They’re laying people off now. That economy is suffering.”
Could they have participated more? Maybe.
But her point was subtler: not every big medical story is an innovation story.
True innovation, she argues, scales differently—it builds new platforms, not just new products.
X. A Market That Moves Like Life
Cathie ended where she began—with the idea that markets are living systems.
They breathe, adapt, and sometimes overreact.
But progress, she said, is compounding quietly underneath.
The S&P 500, she noted, has changed more than 50% of its constituents since 2010.
Over 100 new names have entered; ARK owned roughly a quarter of them four years before inclusion.
That’s where the real alpha lives: before consensus arrives.
To her, that’s the purpose of research—to see early, to hold through noise, and to provide a compass when benchmarks lose their bearings.
“We’re the ones investing in the way the world is going to work,” she said again, “not the way it has worked.”
Somerset Reflection
At Somerset, we don’t invest in headlines—we invest in structure.
Cathie’s observations align with what we see emerging from both policy and practice: the scaffolding of a new productivity era, where innovation is rewarded not just for speed, but for its ability to compound value across generations.
For our clients, the takeaway is balance:
- Policy and productivity will likely drive opportunity in manufacturing, healthcare, and technology alike.
- Volatility, handled through disciplined rebalancing, becomes a tool rather than a threat.
- And innovation—whether through CRISPR, AI, or on-shored production—demands the same trait our clients embody: patience with purpose.
In the CLARITIES process, this moment touches nearly every letter:
- Cash Flow and Taxes through policy incentives,
- Investments through shifting market leadership,
- Estate and Stewardship through legacy-scale innovation that extends human health and capability.
As Cathie reminded us, “Productivity is one of the most powerful forces against inflation.”
The next few years may prove that it’s also one of the most powerful forces for renewal—of economies, portfolios, and perspective.
The opinions and market views expressed herein reflect the personal views of Cathie Wood, CEO of Ark Investment Management. They should not be construed as investment advice, a solicitation, or an offer to buy or sell any security. The information is based on sources believed to be reliable, but Somerset Advisory and Indivisible Partners, do not guarantee its accuracy or completeness. Market conditions, economic data, and other factors may change at any time, and Somerset Advisory and Indivisible Partners have no obligation to update these materials. Past performance does not guarantee future results, and all investing involves risk.
- Jaison R. Abel, Richard Deitz, Sebastian Heise, Ben Hyman, and Nick Montalbano, “Are Businesses Absorbing the Tariffs or Passing Them On to Their Customers?,” Federal Reserve Bank of New York Liberty Street Economics, June 4, 2025, https://libertystreeteconomics.newyorkfed.org/2025/06/are-businesses-absorbing-the-tariffs-or-passing-them-on-to-their-customers/
- ARK VENTURE FUND ANNUAL REPORT INVESTING AT THE PACE OF INNOVATION ARK Venture Fund (ARKVX). (2025). https://assets.ark-funds.com/media-12243148-2a3e-4996-9763-260f93905eb9/71800be5-0d7a-49d0-ae7c-b9c9b9c3dfe5/ARK%20Venture%20Fund%20Annual%20Report%202025%20%281%29.pdf.
The most important thing in my life is my family. My husband, Andrew, and our three smart and brave daughters.