ARK Disrupt Issue 136: Autonomous Cars, Batteries, Crypto, Blockchain, and CRISPR

Please enjoy ARK Disrupt Issue 136. 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. Tesla is Years Ahead of the Competition in the Race to Autonomous Transportation

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For the first time, Tesla’sTSLA earnings call included key members of its Autopilot team, perhaps an indication that it is prioritizing its autonomous driving efforts. Tesla also announced the development of an autonomous chip that is roughly two years ahead of the competition in performance.1 Musk explained that while “the current NVIDIA hardware can process 200 frames a second, [Tesla] soon will be able to deliver…more than 2,000 frames a second.” Currently, Tesla is using an NvidiaNVDA chip with 12 teraflops of performance, suggesting that a ten-fold improvement would deliver 120 teraflops of performance, while Nvidia’s state of the art Xavier chip delivers only 30 teraflops.

ARK believes that Tesla is not only two years ahead of the competition in autonomous hardware, but also two to three years ahead in battery technology and autonomous data collection. Thanks to its breakthroughs in chemistry, Tesla enjoys a cost advantage in battery materials and, as the only auto manufacturer able to collect data from its customer fleet, it is enhancing its autonomous neural net at a rate that others cannot.

2. Time-Based Cost Declines Are Not a Good Guide for General Purpose Technology Platforms

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Moore’s Law, which posits that transistor density per chip doubles every two years, is a well-known technology-driven cost decline framework, but it is limited to the semiconductor industry. Because Moore’s Law has been so successful at predicting computing cost trajectories, forecasters tend to rely on time-based cost declines for their technology forecasts.

When new technologies impact more than one industry, however, Moore’s Law falls short, giving way to Wright’s Law. According to Wright’s Law, for every cumulative doubling in units produced, costs decline by a fixed percent. As new technologies fall in costs, they tend to be adopted by new industries, accelerating the time for a cumulative doubling in production.

Lithium-ion batteries are a prime example of the failure of cost decline forecasts based on timelines. As shown below, when Tesla launched the Model S in 2012, lithium-ion batteries were the product of a mature consumer electronics technology, suggesting that costs would continue to flatline as they had done for the previous seven years. Consequently, a number of forecasting agencies failed to predict that electric vehicles (EVs) would be affordable during the next 10 to 20 years.

ARK Disrupt Issue 136 Graph 1

Those forecasts were incorrect, as battery costs resumed their decline (shown below). The main reason for their renewed decline was the ramp in electric vehicle demand globally. If forecasts had been based on the expected increase in unit volumes, as opposed to the passage of time, forecasters would have been focusing on the potential for a mass market EV instead of Tesla’s cash burn and viability.

ARK Disrupt Issue 136 Graph 2

3. ICE is Launching a Digital Assets Platform

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Global exchange and clearing house, Intercontinental ExchangeICE, has announced plans to launch a digital assets platform called Bakkt. Launching in November 2018, ICE’s first product will facilitate frictionless conversion from bitcoin to fiat currency. Headed by former ICE Chief Communications & Marketing Officer, Kelly Loeffler, Bakkt will offer not only a regulated market but also digital applications for merchants and consumers.

Several organizations have announced plans to join the Bakkt ecosystem, most notably StarbucksSBUX. “As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers [who want to] convert their digital assets into US dollars for use at Starbucks,” said Maria Smith, Starbucks VP of Partnerships and Payments. “As a leader in Mobile Pay[ments] for our more than 15 million Rewards members, Starbucks is committed to innovation for expanding payment options to our customers.”

ICE’s move could stimulate mainstream crypto adoption. Bakkt’s ecosystem has the potential to move bitcoin towards an institutionally acceptable, recognizable, and widespread medium of exchange, a key milestone on the path to global money.

4. Land Registry Will Become More Efficient with Blockchain Technology

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When it exists, land registry in many parts of the world still involves paper, making the process time consuming, inefficient, and error-prone. Only 30% of global land rights are registered. Even in developed countries, the digitization of land rights is low, only 40% as shown below.2

ARK Disrupt Issue 136 Graph 3

Though many countries have begun to digitize land registry, corruption tends to impede the process. Blockchain technology could provide transparency and immutability. An early adopter of blockchain technology, Ghana is working with IBMIBM to pilot a land registry project, and this week Zambia announced a pilot with OverstockOSTK called Medici Land Governance (MLG) that will collect property ownership information on a blockchain. Both are based on permissioned blockchain technology which longer run we believe will give way to permissionless blockchains, much like private clouds are shifting to public clouds.

5. Is CRISPR-Cas12a More Powerful than CRISPR-Cas9?

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CRISPR, a revolutionary genome-editing technology, has taken the scientific world by storm, with Cas9 the most researched and widely used system. Recently, however, researchers at the University of Texas, Austin, have conducted a study suggesting that the Cas12a system may be more precise and safe, mitigating “off-target effects”.

Modeling guide-binding kinetics, however, researchers found that Cas12a is 30% slower than Cas9 because it checks each guide nucleotide pairing with its target sequence before DNA cleavage. In contrast, Cas9 checks the first eight to nine base pairs out of the approximately 20 base pairs before cutting the DNA. This difference also suggests that Cas12a bondage to DNA can be 50-1000-fold weaker than Cas9 binding to DNA. While Cas12a may be safer and less-prone to off-target effects, it also may cause higher toxicity levels for in vivodelivery mechanisms because of slow editing times.

While Cas12a will be an important tool in the CRISPR toolbox, CRISPR-Cas9 has a three-year lead in developing next-generation gene-editing.

  1.  Note that Waymo is also using an in-house chip, however we do not know the performance characteristics.
  2. Doing Business 2016, Registering Property: The Paths to Digitization.

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.