Cathie Wood Identifies 3 Sources of Impending Deflation | #𝐒𝐀𝐋𝐓𝐍𝐘 | Summary and Q&A

TL;DR

Technologically enabled innovation, creative destruction, and cyclical deflation will lead to a highly deflationary world, with AI and disruptive innovation driving significant decreases in costs.

Key Insights

• 💦 Technologically enabled innovation, particularly in healthcare, is a significant driver of deflation, as AI training costs drop and demand increases.
• 🥺 Creative destruction will result in both destructive and prosperous outcomes, leading to significant deflation in certain sectors while generating booms in others.
• 🚙 Cyclical deflation is evident in the decline of prices in sectors such as lumber, copper, and used cars, influenced by chip shortages and consumer preferences for electric vehicles.
• 🖐️ Chips are playing a crucial role in the digital transformation of industries and are becoming the new commodities, resembling the significance of copper in the industrial world.
• 😀 The auto industry is currently facing disruption due to a shift towards electric vehicles and chip shortages, which are causing deflationary pressures.
• 👍 If the expectations of deflation prove correct, the returns could be substantial for investors, as the market is largely anticipating inflation.
• 🥺 The convergence of various technologies, driven by artificial intelligence, is fueling deflationary forces and leading to significant cost reductions.

Transcript

when all is said and done and the dust clears from the supply chain problems and everything we're probably in a highly deflationary world and we see three sources of deflation one is very good it's it's called technologically enabled innovation artificial intelligence training costs are dropping 68 per year right when something when the cost drops ... Read More

Questions & Answers

Q: How is artificial intelligence contributing to deflation?

Artificial intelligence is driving deflation through technologically enabled innovation. As AI training costs decrease by 68% yearly, the demand for AI increases, leading to explosive energy and deflation across industries, especially in healthcare.

Q: What is creative destruction, and how does it contribute to deflation?

Creative destruction refers to the process where new innovations and technologies replace outdated ones, resulting in destruction in some industries and booms in others. Learning curves and cost declines, described by Wright's law, suggest that we will witness unprecedented creative destruction, leading to deflationary pressures.

Q: What is cyclical deflation, and what are some examples?

Cyclical deflation refers to a temporary decrease in prices due to economic cycles. Examples include the drop in lumber prices from $1,711 to $500, copper prices from $490 to $425, and the surprising drop in used car prices. The auto industry is also experiencing deflation due to a shift in consumer preferences towards electric vehicles and the effects of chip shortages.

Q: How are chips related to deflation?

Chips are becoming the new commodities, similar to how copper has been important in the industrial world. While chip shortages may seem inflationary, they actually contribute to deflation as they enable the digital transformation of various industries, disrupting traditional markets and causing price decreases.

Summary & Key Takeaways

• Technologically enabled innovation, particularly in healthcare, is leading to explosive energy and deflation as AI training costs drop significantly.

• Creative destruction, driven by learning curves and cost declines, will result in tremendous booms in some parts of the world and destruction in others.

• Cyclical deflation is evident in various sectors such as lumber, copper, and used car prices due to factors like chip shortages and shifting consumer preferences.