ark disrupt issue 86

ARK Disrupt Issue 86: Genome-Editing, Bitcoin, Fintech, and Autos

Please enjoy ARK Disrupt Issue 86. 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. 

1. Early Results Of Editing Out Inherited Disorders From Human Embryos Are Spectacular

Last week, news broke that a group of scientists had edited out inherited disorders from lab-fertilized human embryos. Initially met with skepticism, as no one could verify the study methodology nor its “success” rates, the results were published in Nature and are nothing short of spectacular.

Scientists focused on correcting a gene mutation that leads to hypertrophic cardiomyopathy (HCM), characterized by the thickening of heart muscles. Caused by a mutation in the MYBPC3 gene, HCM is the most common cause of death in young, healthy athletes.

Co-fertilizing 58 healthy oocytes and sperm carriers, the researchers used CRISPR gene editing to correct the disease. Prior to fertilizing the human embryos, they tested CRISPR efficiency in induced human pluripotent stem cells (iPSCs), cells that were coaxed back to their pre-specialized cell state.

This research has advanced the case for CRISPR-Cas9 as a genome-editing tool in basic biology. Among the most important findings, the editing-efficiency in human embryos, at 72.4%, was far superior to that in induced pluripotent stem cells, at 27.9%.

Consequently, embryonic genome-editing could protect babies from a variety of hereditary conditions once it is perfected. While this research might flame fears of “designer babies,” the fact that inherited disease impacts one out of every 100 births should channel the discussion toward preventing and curing inherited diseases.

2. Bitcoin’s Blockchain Forked…And Both Chains Survived!

At last, Bitcoin has split into two chains. This week, a group of miners took Bitcoin’s source code, modified it, and started mining a new coin, Bitcoin Cash.  For some time, this ‘hard fork’ has been a threat to Bitcoin’s viability and bitcoin’s price, and it happened as somewhat of a surprise last week. The fear has been that a Bitcoin split into multiple versions would create confusion, splintering developers and eroding network effects, causing a dramatic loss in the value of bitcoin.

Interestingly, Bitcoin Cash launched on August 1 without a hitch: as of Friday it was trading at $270 per coin, or $4.4 billion in total network value, making it the fourth most valuable cryptoasset in the world. Meanwhile, the original bitcoin continued to trade in the $2,700–$2,900 range, which is where it traded before the fork…as if nothing had changed.

Another interpretation is that bitcoin did lose some of its value.  Without the fork, bitcoin could have been trading at $3,100, the combined value of the two coins.

While Bitcoin bears could view this week’s fork as evidence that cryptocurrencies are not ready for prime time, software experts will highlight that forks are features, not bugs. The virtue of software is that many versions can be created and tested in the market place, and that the fittest will survive.

In other words, the fork seems to have strengthened bitcoin. The vocal minority advocating for a different kind of bitcoin has been placated, leaving the original bitcoin to move forward and prosper.

3. Softbank Is Eating Its Greens

Japanese technology conglomerate Softbank is investing $250 million in Kabbage, Inc, an Atlanta-based fintech company loaning money to small businesses and consumers.  Founded in 2009, Kabbage was an early mover in applying big data analytics to underwrite and monitor loans.

According to its website, Kabbage analyzes real time business metrics – in addition to credit scores – to gauge credit-worthiness. Kabbage sources these metrics not only from checking accounts, AmazonAMZN , IntuitINTU  QuickBooks, PayPalPYPL, EtsyETSY, Xero, EbayEBAY, Stripe, and Sage but also social media profiles In order to qualify for a Kabbage loan, a business must have a year-long track record and annual revenue of $50,000 or monthly revenue of $4,200 per month over a three year time horizon.  Kabbage grants loans up to a maximum of $150,000 within 5 to 6 minutes on average, according to CEO, Rob Frohwein.

Apparently, Kabbage hopes to leverage its lending business into payments and back-office services both in the US and Asia.  Frohwein notes that Kabbage should be able to capitalize upon utilizing its $1.5 million data connection points.

4. The Auto Industry Is In The Throes Of Upheaval

The ground is shifting under the auto industry.  Here are some recent illustrations from last week:

  • DNA Matters: This week, the WSJ published an article highlighting the difficulty that Volkswagen’s CEO is facing as he repositions the company for an electric future. Some executives fear that he is “driving the nails into our own coffin.”  In ARK’s view, traditional original equipment manufacturers  (OEMs) will have great difficulty repositioning their companies as electric and autonomous vehicles evolve and, ultimately, dominate.
  • Ridesharing Disrupts: ARK’s research suggests that both ridesharing and autonomous taxis could cause major problems for auto loans. At the end of last week, Capital One restructured its commercial taxi medallion loans, citing the role that Uber and other ridesharing services are playing in the industry.
  • Auto Industry Consolidation Begins: This week, ToyotaTM announced that it will acquire roughly 5% of Mazda. Together, they will build a $1.6 billion factory in the U.S. as they research and develop electric vehicle (EV) technology.  ARK’s research suggests that the transition to EVs will consolidate the industry to a small extent, but that the transition to autonomous vehicles will consolidate the auto industry dramatically.
  • Used Cars Suffer: Surprisingly, in a weak market AutoNation opened its first used car center, purportedly to evade the restraints that OEMs have placed on auto retailers. In ARK’s view, the used car market could deteriorate dramatically during the next few years with the introduction of autonomous taxis. As individuals increasingly forgo personal vehicles in favor of autonomous taxis, the supply of used cars could surge as the demand for them collapses.

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