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Ark Invest, Katie Wood, wrote a letter to investors earlier this week with many interesting ideas. So let's welcome Katie Wood. I won't read anyone's summary. I want to go to you right away. Katie Wood joins us now for an exclusive interview. Katie, I'll tell you how I summarized your words. The US economy has weathered rising interest rates, an inverted yield curve, tariffs, government shutdowns, and war.
It continues to show high growth rates, and you see it in the coming years with an additional factor that could rival the Industrial Revolution—which is artificial intelligence. Certainly. In fact, we are building on the experience of the Industrial Revolution. If we look back 400 years to the Industrial Revolution, Bret Winton, our chief futurist, did this work.
Real global GDP growth was about 0.6%, and then, with the Industrial Revolution, which was actually the last technological revolution, we got to 3% global GDP growth. So, that was a fivefold increase. We believe that over the next 3-5 years we will see regular, and perhaps average, growth of over 7%.
And this is only two and a half times more, despite the fact that much more technology is being developed today than then. Back then, it was electricity, the telephone, and the industrial internal combustion engine. We now have, among others, artificial intelligence, robotics, energy storage, blockchain technology, and multi-omic sequencing in the life sciences .
So a lot more technologies are developing a lot faster. So I actually think 7% will look conservative in retrospect . There are many other interesting points. So we have closed borders and, you know, inflation fears that are on everyone's lips. You think it's about to collapse in the long term. Why?
Yes. I believe that productivity growth, which is important, is one of the reasons. We also believe that oil prices will fall quite significantly as transportation shifts to electric grids. And power grids don't use oil . 57% of oil consumption is accounted for by transportation. Therefore, we believe that as transportation transitions to electricity, the role of oil will decrease.
And there we say, and there is a graph showing how during each crisis the price of oil usually drops to $30-35. Well, we don't think it will lead to a crisis, except for oil companies and energy-dependent countries , but we think it could happen again , but this time it would be stable. During the Industrial Revolution, we had an inverted yield curve that didn't cause a recession, and you expect something like that again.
Can you explain why short-term rates are rising while long-term rates are expected to remain stable? Why is this happening in the economy that you predict is doing this? So, again, taking lessons from the Industrial Revolution, short rates—that was for the 50 years ending in 1929 , before the Depression.
Short-term rates averaged nominal GDP growth, which was then 4.8%. Long-term rates averaged 3.8%. So, short-term rates were oriented towards nominal growth . Long-term rates then were more oriented towards deflation or the absence of inflation . So, the yield curve was inverted over 60% of the time by an average of about 100 basis points.
Therefore, we believe that we can see nominal GDP growth in the range of 6 to 8%. This is the level at which we expect short-term rates, and long-term rates—from 5 to 7%. So, in terms of government bond yields, we are already at the lower end of that range. I don't know if you saw Joe Lonsdale the other day saying that we're talking about $40 trillion in debt, and that's such a staggering number that we don't seem to have a way out.
He said, "Don't worry. You know, everyone wants to raise taxes. Don't raise taxes. We're going to enter a disinflationary decade starting in 2030 thanks to AI. The growth will be so high that you won't even have to raise taxes, and it'll all take care of itself." Did you see how he said that, Katie?
Do you agree? I didn't see him say it, but I generally agree that we will get out of this situation through growth. I was at the beginning of my career during the Reaganomics era, and the same controversies were going on then. And, of course, growth solved the problem then, and I believe it will solve it again .
You know, it's interesting, I think many people will start competing for this growth rate. We are in the 7-8% range, and I saw Elon Musk, I think he predicts over 20% real GDP growth. So, I agree that the surprise here will be how fast this growth will be. And we're already seeing this from AI companies. They have simply amazing, incredible growth rates.
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