Wright's Law Explained (Ark Invest's Formula for Success)

Ark Invest uses Wright's Law to analyze technology and identify high-growth investments. I wanted to dig deeper to understand how Wright's Law works, how Ark Invest uses it and how I can use it myself!

00:00 - Intro
0:49 - What is Wright's Law?
2:42 - Why Wright's Law Works
4:37 - Wright's Law & Ark Invest
6:15 - Lessons from Wright's Law


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Wright's Law is a mathematical expression of an experience curve, also called a learning curve. Essentially, Wright's Law suggests that we learn by doing - the more experience we have doing something, the better and more efficient we become at performing that task.

In the context of technology, Wright's Law says that manufacturers will be able to produce their products at a lower cost with more production experience. This will dramatically cut production costs over time according to the formula behind Wright's Law.

And when you consider what happens when businesses gain experience with manufacturing, it makes plenty of sense.
• Humans become more efficient at labor with more experience, leading to lower costs
• Over time, production becomes standardized - including parts and processes.
• Specialization becomes necessary and practical, and those with production experience know how to take advantage of it best.
• Manufacturers gain more feedback from consumers as more of their product enters the market.

Plus, economies of scale accelerate this process even more. A business with a large market share will have more capital, more resources and more production capabilities. This leads to more production experience, lower production costs and further increased market share.

Ultimately, production experience is a substantial advantage for anyone involved in making a new technology.

Ark Invest used this theory to predict the profitability of Tesla, when many analysts were betting against the stock. When they applied Wright's Law, they expected substantial growth in Tesla's profit margins. This production came true - while Wright's Law didn't pinpoint the exact number, it put Ark Invest very close.

So, Ark Invest was able to find a winner in Tesla thanks to Wright's Law and their other research strategies. Furthermore, if Wright's Law worked to that point, we might want to consider the fact that Wright's Law will continue to apply to Tesla and their electric vehicle manufacturing.

This is also a good indication that Wright's Law can be used for other emerging technology, such as VR, drones, 3D printing, artificial intelligence and more. Of course, Wright's Law is a huge component of Ark Invest's research, which is why these technologies are so popular within the Ark funds.

As someone who didn't want to hold Tesla for a while, this was the first thing that made me take a second look. Additionally, it gets me excited for new technologies and investing in Ark funds. What do you think about Wright's Law? Let me know in the comments!

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DISCLAIMER: NOT FINANCIAL ADVICE.
The content in this video should not be used as the basis for any investment decision, as it is for entertainment purposes only. Additionally, some of the links contained in this description are affiliate links. I may earn a commission via Amazon, WeBull, M1 Finance or Robinhood should you choose to purchase or sign up at the links provided.