ARK Invest Podcast

hey everybody I'm Zack and I'm Jesse and you're watching in-depth on now you know [Music] so Ilan was recently on Cathy woods arc invest podcast called fYI for your innovation episode 11 and we have the link down below because we really urge you to listen to it it's about 30 minutes of brilliant questions and answers Cathy wood she is the CEO founder and CEO of arc invest which is a multi-billion dollar tech investment company just for your information we do invest in our confessed Cathy wants companies to invest aggressively and she thanked Ilan for not going private because Cathy believes Tesla needs the public market to raise the funds to scale quickly to exponential growth in reach elands goals alright so we want to go through kind of a play-by-play

of what was said on this because a lot of people said about this podcast well it was fine we just heard a bunch of stuff we've already heard before no need to listen to it and I feel differently I feel like we got a lot of nuanced answers which if you look at them closely give you a lot of insight into what's going on right because I mean a lot of times when people get Ilan on their show they're just asking like oh what are what are electric cars anyone's like okay electric car is an electric car and they're like oh wow oh that's very interesting and and then it's like yes it is they're like so how do you charge it and he's like okay you plug it into this thing called a supercharger and it works like that and it's like okay great and then the interview

ends and you're like oh I I knew everything that I knew beforehand because I follow Elon Musk and I understand what electric car is and you know people don't get into like Oh tell me about autopilot you know they don't get into any of the nitty-gritty details which we're going to get into Kathy was saying that at arc invests they've done their internal projections and they see that in 2018 there was 1.

3 million evie sales what do they projected in 2023 in 2023 they project 26 million evey sales that would be about one third of the total global sales in 2023 would be EVs and they're basing this off of just battery prices just the the estimated drop in battery prices that will lead to a twenty six million car evie sale in 2023 yeah that's a 20 times increase in Elan said sounds about right might be off by a year too but not by much and so cathy has done a bear bull analysis for Tesla stock and so she prices the low end at $700 in the high end at $4,000 based on Tesla sales of 1.

6 million units in 2023 and she thinks she's being conservative being conservative $700 is already double what Tesla is worth today and $4,000 per share is well over 10 times what the stock is worth today so if she's being conservative and she's giving these numbers I my ears are have perked up right and a lot of people say well that can't be you can't be right Kathie and that's because Cathy said people don't understand exponential curves they don't they are linear thinkers and Elon agreed he said they don't understand the area under the curve so for instance if we take their 2017 car sales in terms of production it looked pretty small because no matter what you what line you draw it was very low to zero right but in 2018 Tesla doubled its fleet so in

2018 we made and delivered about as many cars as we had in our entire history zeti long and that is because they're double they're exponential so Elon said small changes in the calendar break point have enormous percentage differences the time difference is small but the percentage difference is enormous and this is really important when you're looking at s curves if you slide one way or you slide the other way if you just sort of slide it and you're and you can't see beyond you know into the into the future right that whole section all over there is unknowable and you're just seeing this little you're gonna be like okay so it's gonna go loop and then it's gonna go okay so in about 30 years Eevee's are gonna take over it's like no it's going well right

it's an exponential growth right we talked about this on the show a lot they are talking about it on their podcast as well and I mean Elon said it took six months longer than we thought it would to reach five thousand cars a week it was perceived as a massive shortfall instead it was just a calendar shift or a short delay wasn't they couldn't do it is that he was off by the timing and you could you remember these stories you know Tesla is never gonna reach that five thousand cars a week number Bloomberg tracker has them down at two thousand cars a week oh no Tesla's going to end it's the end of the way and now they're making like seven thousand cars a week so let's put two points together that didn't get connected here Elon said my guest for 2021 is 1.

5 million cars that's what Tesla will make he thinks and in 2023 just to guess we do three million now remember what Cathy just said her estimates were based on 1.

6 million in 2023 so if Ellen is saying that he thinks they're probably gonna do more like double that and she's thinking his stock is gonna be at 700 to 4,000 it could be almost doubled with the stock moving double again which would be you know so 1,400 to 8,000 for 2 to 4 to 20 times more right in terms of stock price which is crazy not that it would necessarily scale 1 to 1 but why not right um and let's talk about I mean let's talk about this question she just asked him you know what what are your goals what do you think you're going to hit in 2021 in we never got this question asked on the earnings calls no they're only interested in q1 of 2019 right that's ridiculous I mean why are the analysts and why are they on these earning calls if they're

not going to ask these sorts of questions these sort of forward-looking questions they're only talking about quarter Oh what's gonna happen next quarter we know why next quarter was gonna have it less court last quarter what happened last quarter you know why because Wall Street's not interested in anything beyond the quarter because they do everything based on the quarter that's why you see these huge fluctuations in stock prices because they're not looking any further ahead and then when some news comes out they're like whoa what wow I didn't see that that was it on my radar your radar was like 14 feet dude you're looking you know if you're looking three months into the future you're not gonna see that far look at this long distance thing that me Long's

got going here he said we think of our cars long-term as carriers of autonomy software who's talking about that now right what analysts is talking about the cars anything more than selling a car he's thinking of it as a completely different thing he's gonna flick a switch someday probably two years from now turn on the the Tesla Network and completely changed his business model right because right now yes every single analyst you know there are some analysts that will talk about way mo and then they'll talk about Tesla but they're not gonna talk about autonomy software in Tesla they just don't bring it up they do they're like oh they're way behind according to our according to our analysis there are way behind because look at the way mo cars they're driving

around cities right now Wow with no drivers in them that's crazy yeah we're gonna get to weigh him on a second salute Leland said I think we will be feature complete full self-driving this year meaning the car will be able to find you in a parking lot pick you up take you all the way to your destination without an intervention this year I would say that I'm certain of that that is not a question mark that is awesome now a lot of people said we've heard this from Elon before he said that model threes and s's Nexus would be able to drive from you know California to New York and that was two years ago hasn't done it so obviously he doesn't know what he's talking about mm-hmm Elon did answer that he said however people sometimes will extrapolate that to mean

now it works with 100% certainty requiring no observation perfectly this is not the case once it is feature complete then you're sort of the march of nines like how many nines of reliability do you want it to be and then when do regulators agree that it is reliable so you might be saying March of nines what is this is this some new show some new movie like March of nines out this March March 9th the march of the nines it's it's obviously not that but basically if you were to take an elevator right what is the safety factor of the elevator like what is the chance that you're gonna make to the floor that you asked to get to safely you know would you get on an elevator if it was 50% safe no huh no you wouldn't how about 75% safe no 90 no no 99 no 99.

9 mmm no ninety-nine point nine nine maybe ninety-nine point nine nine nine you want so many nines at the end of that number because you want it to be absolutely 100% safe and unfortunately there are no 100% anything's in this world ninety-nine point nine nine nine nine nine is as close as you're basically going to get to it you know with some more nines tacked onto the end of it and so basically what Elan is saying here is that we you're gonna have all these features you're going to be able to get into the car and it'll be able to drive you someplace but will it be able to do that with 100% safety or ninety-nine point nine nine nine nine nine nine nine nine nine nine nine percent safety right and so Ellen said so there's feature complete full self-driving

this year with certainty this is something that we control and I managed autopilot and engineering directly every week in detail so I'm certain of this right so again he's talking about the features so then the question was asked when will regulators allow with human oversight and when without human oversight Ilana said my guess as to when we would think it's safe for somebody to essentially fall asleep and wake up at their destination probably towards the end of next year that's when I would think it's most likely safe for that I don't know when regulators would agree okay so the end of next year he thinks he's going to be at where he considers to be the end of the nines acceptable that's incredible that's insane that you don't end of 2020 right go to

sleep in your car and it'll drive you to your location because I mean you can sleep in your car now true it's just you're gonna wake up where you left off right unless you park somewhere illegally in which case you're probably gonna end up at the impound lot right yeah that's insane the the end of next year now he's saying he doesn't know when regulators will agree yeah and so who's asked this do you think China would agree first and Nealon said China regulators are good so are the US federal regulators California can be overzealous and Europeans conservative so I think he was kind of hinting if you read between the lines that maybe China would be the first place to allow self-driving because probably they're gonna just look at the data right and the

data is the most important part here he's you know he's saying that like yes I can say you know oh there's all these features but the regulators are gonna be like I don't believe your features and he needs the data to back it up vielen said people think sometimes that I'm like a business person or finance person or something like that I'm an engineer I do engineering always have I think this is a really good point something that he should bring up more that he's not a business person first he is an engineer first he tackles just about every single problem you know business finance or otherwise like an engineer right in fact that's why he does so much engineering because he's an engineer a lot of people just sort of like to think of him as like a billionaire

like oh he's just some sort of billionaire like Oh some boy that billionaire guy he's so rich he is rich oh that's true but he is an engineer now a really good question from Tasha one I haven't heard before she said to what degree is consumer use of autopilot important Elon said the advantage that we have that is very difficult to overcome is that we have just a vast amount of data on interventions so effectively the customers are training the system on how to drive and there are millions of corner cases they're so obscure and weird you wouldn't believe it there's different road markings different rules in different countries different expectations you got rain snow sleet hail hurricanes floods fire smoke dust it's insane we've got cars and really all

those environments and so every time somebody intervenes takes over from AP it saves that information and uploads it to our system we don't know which car it was there's no individual attribution for the car we just know that the intervention took place and then we see what is required to fix that intervention and we're really starting to get quite good at not even requiring human labeling okay this is probably the most important point if we were to be talking about Tesla autopilot and and at full autonomy is this is what Tesla has that no other car manufacturer has okay no other car manufacturer no other basically no other self-driving car start up has way mo doesn't have this they have millions and millions of miles of real-world driving data with real

people driving real cars and real settings and they're able to basically amass billions and billions of points from billions and billions of billions of miles of data yeah they've got hundreds of thousands of employees I mean as drivers of the cars we are basically employees of Tesla getting them data right we're basically all beta testers right this is a beta software and we're accumulating all of this experience basically you're able to throw that into a neural network and treat it like experience so throughout your life when you've been driving if you're like oh you know you know you know the rules stop at a stop sign and stuff like that but it's like okay stop at the stop sign and then maybe you know try and lean my head forward down the road that

is experience hopefully somebody taught you that but if you didn't you probably instinctively learned it yourself and I mean that's what's so incredible about this podcast cuz that question got to something that's never asked which is you know way mo and crews are always put as like the number one companies when it comes to autonomous driving but they don't have hundreds of thousands of employees or people who bought their cars that can do all this work for them they've just got a small subset of cars getting them a very limited data set which in this next question is pointed out is not even a great data set so Kathy asked way Moe and Cruz are deterministic what's going wrong there versus Tesla is probabilistic in Elon said essentially a heuristics approach

to this will result in a local maximum of capabilities not a global maximum I think you really have to apply a sophisticated neural net to achieve a global maximum and it's why their reliance on lidar is unwise it gets you to a certain point but no further basically a series of if-then-else statements and lidar is not going to solve it forget it game over you have to solve vision perception essentially understanding with vision and then it's solved you don't need anything else no other senses at all I mean we drive cars with basically two cameras that aren't very good on a gimbal that doesn't move very fast and a professional driver will almost never have an accident right this is such an interesting point he's talking about two different very important

points here you don't need lidar which is huge because essentially you can drive a car now with your slightly evolved ape brain with with - you know pretty crappy cameras like they have pretty good resolution you know right in the center of your vision and then out towards the end you know there's like not a good color so I mean what's the point and then you're on this swiveling head which is like whoa and your reaction time is like well you know and you can get distracted and you during Lee and you detects there's there's all sorts of problems with people you know having a large number of people on the roads with this and and we do it we just we've accepted it we said okay yeah people are sometimes gonna crash into buildings and into other cars a million

people will die over here right except that we'll accept that here is where we can actually change that and then here's the second part this sort of idea that lidar is not going to cut it in this sort of idea that you know you can program in every edge case is not the way to do it it's as if you were trying to program a robot to respond to people talking to it and so you'd be like oh if somebody says hello it will say hello back you say you know hello and we go hello great excellent awesome all right what else good is what is your name and then it'll say my name is Robo Bob and say my name is Robo Bob but as soon as you're like ask it you know some other question or like what if what if you ask it to what is PI and it would just start at a 3.

14 what you know they that's a trope right you don't program in that concept that idea it didn't learn through experience you programmed in every action that it could take and you do that with a self-driving car and suddenly you know there are four lanes inside of a lane on the highway which has happened to me before like there's just paint everywhere and suddenly what's the car going to do it's gonna go like I must follow our lanes take all lanes that you know and you'll go all over the road would be bad so you need to have a car that can be like okay it's one of these great right that's before I've seen this before driving along I know how to drive prong I could be so angry but you know or New Jersey so New Jersey ish but you know it's gonna you know

it will have tons and tons of experience through the neural net right Natasha said talk about the uniqueness of Tesla's data Elon said that they basically have a hundred times more data than everyone else everyone else is closer to one percent of the data that Tesla have the reason Tesla is making rapid progress is because we have vastly more data and this is increasing exponentially as our fleet is increasing exponentially our data is increasing exponentially that's another huge point so I mean they're already ahead and they're just keep going right every car that they sell is more it's a function of more data that they're going to be getting it's awesome Ilan said although I brought it up before I don't think people really seem to be taking note of

the fact that the Tesla ap AI computer is about to roll into production anyone who has ordered full self-driving will get that for free I've said it's like an order of magnitude improvement over the Nvidia system that we have but it's really more like a 2,000 percent improvement and Cathy backed that up she said our analysts who spent nine years in Nvidia concluded the Tesla is three years ahead of any auto manufacturer now three years might sound like oh okay just three years but in the technological curve that we're in three years I would argue is game over yeah it's like they're from the future it's like they came out of there time-traveling machine we're like Hello we're from the future Elon talked about the fact that their cars with the new hardware

will be able to see frame rates of a hundred frames per second with full resolution on all cameras and they still haven't gotten it tapped out just put that in perspective for a second so the normal frame rate that humans see at is what around like you can detect frame rates at around you know 120 but you can't like see a very discernible difference beyond that so I mean you're basically you know you can watch if you're watching this right now at 30 frames per sec right this we're talking about three times more and then 10 more frames plus six more cameras six more cameras imagine if you had six I'm more imagine if you had seven more eyes for a moment just imagine that for six just let that sink in you can't you can't imagine yourself having seven more

eyes being able to see out of the side of your head and out of the back of your head you know people will say like oh grandma has eyes in the back of her head she doesn't I think but if she did that would be a lot of data input yeah I mean and that's the point here the point is that that's a lot of data input imagine having to deal with all of that data I mean you can you're only looking at what your two eyes you've two eyes it's really only you know you're only looking at one point at one time as soon as you cross your eyes you're like I can't do anything right because you know one can cross their eyes and be like excellent let's go your brain is only made for looking through two eyes that are looking in the same direction and they have to account for

that they have to you know account for parallax of like I need to look at this finger so I need to point in and look like an idiot like I'm crossing my eyes and as soon as I do that I realize though I'm crossing my eyes like there's so much that goes into that which is just hardwired into our brains but oh it's just so excited it is so tasha asked is hardware capacity fixed or do you need to upgrade every two years in elan pointed out something really interesting you said we could achieve full autonomy with the nvidia hardware we have now but we have to do all sorts of software tricks but with a 2,000 percent faster computer we don't have to do any kind of software tricks anymore with the current hardware with the nvidia current hardware we could get

full self-driving with fifty to a hundred percent safer percentages than a human but with their new tesla hardware hardware 3 it would be more like 1,000% safer a thousand percent safer than a human driving yeah can you imagine that for a moment you get in a car and it's a thousand times safer than if you average rain right we're behind the wheel now Cathy said do regulators understand this an Elan said I think they understand hard data billions of miles all the accidents rates that we'll be able to show them with our cars and he said no matter how you slice the data it is unequivocal at this point that it's safer to have autopilot on so just today with the car you have now it's already safer to have autopilot on right that that was but the biggest problem

there of course is that you can't have autopilot on in all cases right now it's only on you know highway ways and you know roads with clear line markings right now Cathy said after the first Tesla fatality regulators really swung in Tesla's favor and she was surprised that more people haven't taken notice of that and Elon said it's like a phenomenon people get overconfident with the system and that's kind of the problem that they have right now is that everyone gets in the car and there's either I'm not going to trust it at all not gonna turn it on right or there's like oh it's on I don't have to pay attention make a phone call right so Tasha asked about Tesla's wider rollout of AP highways versus way mo is in the cities and Elon said well we started

with the highways because that's what matters the most it gives you the most benefit there's more miles travel in the highways and you travel faster there so they thought let's go that right faster because that'll save more lives and he said that you know you can stop using Waze because basically you could stay on the highway and use autopilot even though there's tons of traffic because it'll take care of the traffic you don't have to be stressed out about driving in the traffic or taking windy back roads you can just sort of sit there and be like yeah I mean Elon said he's stopped using Waze for just that reason because he doesn't want to get off into the little back streets it's so much easier to stay on the highway like you said he said that intersections

are the next things are working on they're really difficult because there's so much ambiguity when you get to a traffic light I mean we all know this when you get to an intersection they're all different like me am I expected to go through this light right now cuz in some places like when I lived in California there's like this unwritten rule like one car goes through on a left you know and so it sounds like they're gonna try and get it to work in the US first and that after that places like Norway will be a priority because obviously Norway is like one of the biggest Tesla countries in the world this was a really interesting question that Tasha asked she said what do you think of letting other manufacturers build AP on Tesla platform yeah and in Eiland

said it's not easy to work with other traditional manufacturers they have had them asked to work with them but then they usually put all these stupid requirements in there and they're like we don't want to waste our engineers time working on that and he said basically nobody's banging down our door at the moment right but some of them have used their patents right Annie lund said if there's an automaker out there that wanted to implement the same hardware system as Tesla and use our software we'd be very open to it but we're not gonna change it and I think one point to that is that he's not saying he'll do it for free right it's not like it'll be like oh of course just pay for the cameras no no no like you're gonna have to pay to license it to put it

in the car right for sure but he's not saying no I'm going to keep it to myself and you'll never be able to get my secret formula like he's not doing that he's he's absolutely you know saying like hey yeah if you're gonna just plop it in plop it in and be well we'll see how much you know you're gonna pay well cuz it ultimately he cares about people's safety more than dollars he already admitted he's not a businessman more than he is an engineer mm-hm and he's I would argue he's a humanitarian first and I would get our engineers I think our by and large more humanitarian than some businesspeople just back away from that one slowly but I'm just saying like in general right now Kathy asked him about crypto currencies because you know she's very interested

in Bitcoin and other cryptocurrencies in the yuan said they made a joke basically that you know his account on Twitter got suspended because he jokingly offered you don't want to buy some Bitcoin and well and that's preempted because basically after every single one of his tweets you if you're a long time there yeah like the Bitcoin like scammers would would say like like they would make an Elon Musk account or Elon Musk account or II ion Musk account and and say like hey guys I'm giving away some Bitcoin get in on it just send me some Bitcoin and I'll send you back ten times that much it was just for the longest time it was going on for like a year and then finally I guess Twitter fixed it right though were they ran out of rayon accounts it was about

rageous but basically yeah he made a joke of it and his account got banned and I mean Elon said that the Bitcoin structure and aetherium is really quite a brilliant idea but he's not sure it would be a good use of Tesla's resources and he did say it's quite energy intensive to create incrementally more Bitcoin um and it bypasses currency controls which means that it's better than paper for transferring money but he really didn't seem to want to commit himself he said that a friend of him gave him like a third of a Bitcoin but he's never dealt in it it was interesting at the end of the podcasts are all kind of winding down and in Cathy's saying like you know you you're doing you're making the world a better place and he laughed at that yeah I think it's

telling I think he watched was the show of Silicon Valley right and the kind of one of the jokes in Silicon Valley is that every company says that they're trying to make the world a better place by like oh we make this social app thing that does you know it determines if the thing is a hotdog and that's supposed to like you know make the world a better place he laughed at that but Cathy was like no you're really doing it yeah we totally agree with you and you're doing the real thing right and I have to agree with Kathy on that like out of all the companies in and out of all the billionaires doing all of the work for making the world a better place Elon is by and large far and away the biggest contributor to making the world a better place especially looking

forward looking into the future as to see what the world could look like in the future what's exciting to me about this podcast is to be reaffirmed by another person that I take you know very seriously what she says Kathy wood gets it she's proven that she gets it her track record proves it we are fan boys on this channel of Elon Musk right everyone comments at all the time well you guys are fanboys so you can't possibly be unbiased I don't think that's true I think that we can look objectively at what is going on because if you look at what Ellen's done in the past he's achieved incredible incredible things in such a short amount of time if we look at his rocket company he's doing things that were completely thought to be impossible just a few years

ago and he's going on to do things which people still think are impossible today right so when he says that he'll have a full self-driving car where you can fall asleep in the back and it'll turn up at your destination at the end of next year I know that sounds crazy and I know it sounds like we must be nuts to be like well that probably is going to happen but here's coming from a guy who's been making pretty much everything he said happen happen now maybe it's not always on time but you know it could be that it's in two three years right but how many other companies are going to actually have that in two three years because way mo has said that it's going to be a long time before they actually have fully self autonomous cars that can handle all situations

right and a lot of analysts look at that and then you look over to Tesla and they go you're different what's wrong why is that the case um like it's because they're approaching it in two completely different ways right I hope we we covered pretty darn well and I mean I choose to get up in the morning and be excited about what's coming in in technology and in the future a world where cars are safe where cars get you where you want to go quickly mm-hmm where there's no pollution hmmm that's what I choose to believe in because I'm seeing that it can happen that way it's just that if we don't believe it if we don't get behind it why do you think that's gonna help a lot of what Elon has said is that he wants the world to be exciting he wants there to be a

reason for you to get up in the morning and I think that that is a really really good goal and he's been doing it because it's been exciting and not only do we get up in the morning every morning but we also get up in the morning and then we record this show which takes our entire weekend to script and to you know write and to find all the graphics and the details and then we finished recording it and then you know we have two editors and the two editors they go and they edit the entire show together and they have to fix all of our mistakes and then you know sometimes we forget to record our audio so it wasn't going into our microphones and going into a recorder where you know we had to recorded all again a lot of work goes into this show and I just want

to take a moment to thank our patreon supporters because you know there's a lot of times where it's like maybe forget it yeah such as this show when we got about three-quarters of the way through it and then we noticed we look down and though the recorder wasn't recording any audio and it was like maybe we just don't have an in-depth this week but you know what it's it's the patreon stand make that possible it wouldn't have been worth it for us to sit here for another hour and talk to you about the same things that we would just talk to you about for an hour except you wouldn't been able to hear us but instead know you said you know what we have patrons we can't you know disappoint them that we have a level of we have a level of sessional ISM that we

have to attend to and so we did we recorded the entire thing so I just want to thank our patrons for that and I want to thank you for watching all the way to the end of this video we hope you enjoyed it we do this every single week so if you're new here we have Tesla time news every Monday we do in depth this show every Tuesday we have our model 3 tip of the week every Wednesday there are there's lots of other content that we come out with from time to time be sure to hit the subscribe button hit the like button if you like this video and we'll see you next week now you know