AI and the Future of Exponential Economic Growth: Insights from Cathie Wood

Cathie Wood, a well-known investment manager, recently shared her insights on the future of technology and its potential impact on global economic growth. In her view, the world is currently witnessing an unprecedented convergence of five innovation platforms: artificial intelligence (AI), robotics, energy storage, blockchain technology, and multiomic sequencing. This convergence, she believes, will lead to explosive growth opportunities and a significant acceleration in global GDP growth.

Wood argues that the growth dynamics are changing in a way that reminds her of the early days of the internet. Back then, investors were skeptical about the sustainability of growth, but companies like Amazon proved them wrong by maintaining compound annual growth rates of 20-25% over 20-25 years. Today, with the advent of generative AI and the convergence of these five platforms, Wood believes that we are entering a new era of explosive growth.

One prime example of this convergence is the emergence of autonomous taxi platforms. These platforms will combine three major technology platforms: robotics (autonomous vehicles), energy storage (electric power), and artificial intelligence. Wood predicts that this single opportunity could scale to a revenue opportunity of $8-10 trillion in the next 5-10 years, with platform companies potentially capturing half of that value. To put this into perspective, global GDP today is just over $100 trillion.

Wood believes that the convergence of AI and these new technologies will generate enormous productivity growth, the likes of which we have never seen before. She estimates that there are roughly 1 billion knowledge workers worldwide, with wages and compensation totaling around $32 trillion. With the help of AI, these workers could become four times more productive, leading to rapid growth gains and lower-than-expected inflation.

In fact, Wood predicts that real GDP growth around the world could accelerate from the current 2-3% range to the 6-9% range, driven primarily by productivity gains. This productivity can manifest in three ways: increased profits, higher wages, and lower prices (deflation). Despite the current focus on inflation, Wood believes that we are heading into a highly deflationary period, and that the Federal Reserve's current monetary policy, which is based on lagging indicators of inflation, is misguided.

Innovation, Wood argues, solves problems. AI and these new technologies will enhance margins and provide better, faster, cheaper, more productive, and more creative products and services. She is excited about the next few years and believes that the fight now is not against inflation, but rather for real, productivity-driven growth, which is disinflationary, if not deflationary.

Looking ahead, Wood predicts that disruptive or transformative innovation, currently valued at roughly $13 trillion (a little more than 10% of all global equity market valuation), will scale to more than $200 trillion, representing a 40% compound annual growth rate. This growth will be driven by the convergence of the five technology platforms and the explosive growth opportunities they provide.

Wood also cautions about the changes that will come with this new innovation. For instance, self-driving taxi services will change transportation. Advances in AI, genetic sequencing, and gene editing will revolutionize healthcare. Blockchain and AI will not only change the financial industry but also create new digital property rights.

Despite doubters, Wood's conviction in this forecast has only increased over the last five years, thanks to the rapid breakthroughs in AI. Her confidence stems from her team's first-principles research, which focuses on understanding how this new world will work. She advises investors to get on the right side of change, ignore the noise, and hang on for the ride, as the opportunities are enormous.