Please enjoy ARK Disrupt Issue 126. This blog series is based on ARK Brainstorming, a weekly discussion between our CEO, Director of Research, thematic analysts, ARK’s theme developers, thought leaders, and investors. It is designed to present you with the most recent innovation takeaways and to keep you engaged in an ongoing discussion on investing in disruptive innovation. To read the previous issue, click here.
1. California Seems to be Ceding the Market for Autonomous Taxis to Other States
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The California Public Utility Commission (CPUC), which regulates limos and taxis, is proposing some extremely restrictive rules for autonomous taxis. Notably, they would force companies like GoogleGOOG, TeslaTSLA, and GMGM to provide autonomous rides for free. In addition, companies would have to test all of their cars on the road for 90 days before deploying them, and then report regularly on disengagements and miles traveled.
Because California has required them to report disengagements for some time, autonomous vehicle companies like Google are shifting their testing to less burdensome states like Arizona. As a result, the proposed CPUC rules are likely to backfire if enacted, pushing innovation and autonomous taxi services into other states.
In our view, regulators should be open-minded and work with companies providing autonomous vehicles, for a number of reasons:
- Autonomous cars should cut the cost of transportation dramatically, to the electorate’s great satisfaction. If Waymo launches its autonomous service this year, as planned, California and other states will learn quickly that Arizona residents are enjoying taxi rides for 50 cents per mile, roughly an 80% discount to traditional taxi rides, putting pressure on local governments to adopt more friendly legislation. ARK estimates that consumers will pay 35 cents per mile for an autonomous taxi, roughly half the cost of personal cars and a tenth the cost of traditional taxis.
- Autonomous driving should save tens of thousands of lives in the US, and nearly 1.5 million globally. Currently more than 40,000 people in the US die from auto accidents each year. ARK estimates that autonomous vehicles will lead to an 80% reduction in accident rates and fatalities.
- Autonomous cars could boost US GDP by $2 trillion dollars by 2035, thanks not only to service revenues but also to a boost in productivity, as former drivers work from the back seat and consume other content. Other likely contributors will include a reduction in traffic congestion which costs roughly $28 billion per year and incremental capital returns as parking spaces give way to more profitable projects.
To dimension the last benefit, while each human driven car requires roughly 5 parking spots today in the US, autonomous taxis will need only one.1 As a result, state- or city- owned land will be freed either for more profitable uses or for wider roads to reduce congestion. ARK estimates that repurposing the land now occupied by parking could add more than $300 billion in annual returns, roughly 20% of which should accrue to municipalities.
ARK expects that the revenue associated with autonomous taxi services will surpass $700 billion in North America by the 2030s. Autonomous vehicles should be a win-win-win for public, private, and consumer interests, suggesting that every state should try not only to encourage them but also to support them.
2. Thanks to CRISPR, Global Rice Yields Will Increase Significantly
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In a remarkable study, scientists from Purdue University and the Chinese Academy of Sciences increased rice yields by as much as 31% with CRISPR-genome editing. They edited 13 genes linked to stress tolerance and growth, optimizing rice crop yields in days instead of the decades it would have taken with traditional breeding techniques.
Rice feeds more people in the world than any other crop. As the global population increases while arable land decreases, new seed traits and increased agricultural productivity will be critically important for global sustainability. By 2025, ARK estimates that CRISPR-based agriculture will increase the global agriculture industry by $170 billion.
3. Banks in Emerging Markets are Beginning to Say No to SWIFT
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Two announcements in emerging markets this week suggest that banks are beginning to move away from SWIFT, a global financial messaging network, to blockchain based payments.
Banco Masventas (BMV), an Argentine bank, has partnered with Bitex to facilitate cross border transactions over the Bitcoin blockchain. Bitex, a crypto exchange in Latin America, will be responsible for converting bitcoin to fiat and vice versa, cutting the processing time from roughly three days to fewer than 24 hours and reducing the transaction costs associated with international transfers considerably. Essentially, customers would cover the bitcoin transaction fee paid to miners verifying the transactions. That BMV chose bitcoin points to the enhanced security and robust nature of the Bitcoin blockchain, and bitcoin’s potential to serve as a means of exchange.
Philippines also is embracing the blockchain for payments. Union Bank of the Philippines, one of the country’s largest banking institutions, will use the Kaleido blockchain platform to facilitate transfers among its 7000 islands.
Other banks in Asia are piloting blockchain protocols like Ripple for cross border payments to save both costs and time. According to Ripple, its pilot test cut the time to consummate cross border transactions from days to two minutes and cut costs by 40-70%.
Thanks to the simple, secure, and real-time global payment networks enabled by blockchain technology, old school payment models are at serious risk.
- This was calculated by ARK Investment Management LLC using data from The Earth Institute at Columbia University, Transforming Personal Mobility Report. ↩
The information provided is for informational purposes only. It does not constitute any form of advice or recommendation to buy or sell any securities mentioned. It is intended only to provide observations and views of the author(s) at the time of writing, both of which are subject to change at any time without prior notice. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on ARK's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance is no guarantee of future results. Equities may decline in value due to both real and perceived general market, economic, and industry conditions. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.