Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg
Speaker 1: Radio this weekend. On the podcast, I have an extra
Speaker 1: extra special guest. What can I say? Ron Baron, founder
Speaker 1: of Baron Capital. He's a legend. I don't even know
Speaker 1: where to begin with this guy. He founded Baron Capital
Speaker 1: in eighty two. The performance numbers he's put up have
Speaker 1: just been obscene. Everything he does, he seems to find
Speaker 1: his way to just spectacular returns, whether it's public companies
Speaker 1: or private companies or real estate. Just Google search him
Speaker 1: on East Hampton and the property he bought for a
Speaker 1: hundred million dollars in the midst of the financial real
Speaker 1: estate collapse in oh seven. He turned that into golden.
Speaker 1: I mean, he just has an eye for intrinsic value
Speaker 1: and a process for doing things that really is is
Speaker 1: just amazing. What I ended up doing in this conversation
Speaker 1: was kind of giving him a nudge and men just
Speaker 1: getting out of his way. He just tells all sorts
Speaker 1: of stories about how different investments work out. I asked him,
Speaker 1: what are you doing in the growth space? I really
Speaker 1: know you as a small cap guy, and that's how
Speaker 1: he built his reputation. And he describes the small caps
Speaker 1: that he bought when he was first getting started in
Speaker 1: the eighties. You know, small companies like Disney and Highat
Speaker 1: and International Gaming. And it's hilarious because forty years ago
Speaker 1: those were small cap companies. He just seemed to have
Speaker 1: a knack of identifying the companies that were about to
Speaker 1: go from relatively small two giants. And it's pretty hilarious
Speaker 1: to hear him discuss that when he was a broker
Speaker 1: in the seventies, he was upset because he would buy stocks,
Speaker 1: watch them triple, and sell them and then watch them
Speaker 1: go up thirty acts over the next thirty years, which
Speaker 1: is why his turnover ratio is insane. It's like four percent.
Speaker 1: He's very Warren Buffett like. He never sells. He finds
Speaker 1: a good company and he rides them forever. So he's
Speaker 1: a legend in the industry. I found this to be
Speaker 1: just an endlessly entertaining and fascinating conversation with no further ado.
Speaker 1: My conversation with Ron Barron VI is Masters in Business
Speaker 1: with Barry Ridholts on Bloomberg Radio. My extra special guest
Speaker 1: this week is Ron Barron, founder of Baron Capital. He
Speaker 1: began the firm in n two, and it has become
Speaker 1: known for its long term, fundamental active approach to growth investing.
Speaker 1: Seventeen of their mutual funds have assets of forty nine
Speaker 1: billion dollars. One of the funds run by Ron and
Speaker 1: his son Michael, was up a hundred and forty eight
Speaker 1: sent in. Nearly all of their funds have been beating
Speaker 1: their benchmarks since their inception. Way back in Ron Baron,
Speaker 1: Welcome to Bloomberg. Thanks. So let's go way back to
Speaker 1: your childhood. You you had written you were fourteen when
Speaker 1: you talked to your father into letting you buy your
Speaker 1: first stock. You put a thousand dollars into the market,
Speaker 1: and by the time you hit college it had quadruple
Speaker 1: to four thousand dollars, and you were hooked. You just
Speaker 1: began studying the market almost obsessively. You're right. Tell us
Speaker 1: a little bit about how that led to your interest
Speaker 1: in in being a money manager. Well, my dad was
Speaker 1: an engineer for the army and my mother was a
Speaker 1: buying the agent for the army, and so professionals and
Speaker 1: the people who were most successful we're doctors and lawyers.
Speaker 1: And if you had a house on the on the lake, Uh,
Speaker 1: it was worth fifty thou dollars. Our house is where
Speaker 1: twenty thou dollars. And so I and the guy i've
Speaker 1: on the lake he owned rides on the board, book
Speaker 1: and go of a Cadillac and probably made a hundred
Speaker 1: thousand dollars a year. That's to me with success. And
Speaker 1: so I wanted to be a doctor. I didn't get
Speaker 1: into medical school when you were talking about the first investment.
Speaker 1: I've been working seven four since I've been fourteen. That's
Speaker 1: when you got working papers. So my first job was
Speaker 1: as a caddy. I had all these summer jobs caddy waiter,
Speaker 1: bart m bus boy, lifeguard, uh border ski instructor, cabanah boy.
Speaker 1: One summer I actually had a job where I was
Speaker 1: working nine to five was a lifeguard. At eleven to seven,
Speaker 1: I worked in the emergency room as in orderly and
Speaker 1: people would come in on Saturday night shot or stay
Speaker 1: up that I'd have to hold him down, A skinny
Speaker 1: little kid would hold him down on a gurney until
Speaker 1: the next a kin came and gave permission to operate.
Speaker 1: The bok died while I was holding him. So my
Speaker 1: job was I would have to clean bedpands, I'd have
Speaker 1: to hold people on the on the gurney until they
Speaker 1: until they got permission to op rate, and then UH
Speaker 1: in emergency in the internal in the I c U.
Speaker 1: When people died, I would unplug him and I'd have
Speaker 1: to put the bodies, wrap them in sheets, and I'd
Speaker 1: have to put him in the freezer. That was my
Speaker 1: job eleven to seven for for there in the nine
Speaker 1: to five. So I was always interested in being successful.
Speaker 1: I didn't know exactly what success was. And when I invested.
Speaker 1: When my convinced my dad to allow me to invest
Speaker 1: in stocks, he was never able to invest in stocks.
Speaker 1: When I when you can. When I convinced them, I
Speaker 1: was able to take my thousand dollars they had from
Speaker 1: my boar Misva and I ultimately invested it in UH
Speaker 1: Mommouth County National Bank. My dad said, you know not
Speaker 1: the stock market, but you know. Tell me about a
Speaker 1: company you want to invest in. Explain to me why
Speaker 1: you want to invest in, research it, and if it
Speaker 1: makes sense to me, you can do it. And UH
Speaker 1: the the local bank UH was owned. Mamma County National
Speaker 1: Bank was principally owned by one of the wealthiest people
Speaker 1: in probably the wealthiest person in my neighborhood. Uh and
Speaker 1: he owned that banks, three story red brick building, white
Speaker 1: pillars in front, Virgin style building. Senator of Senator Stout
Speaker 1: from New Jersey had his office in the building. And
Speaker 1: uh and allowed to me. I looked through the company,
Speaker 1: and I missed my dad to let me invest. That's
Speaker 1: where I had my savings. Uh And they were getting
Speaker 1: two and a half percent interest or two and a
Speaker 1: quarter percentials. You're bringing your past book and every quarter
Speaker 1: they print out your interest. So ultimately invested in that,
Speaker 1: and then I would go home. So I was interesting
Speaker 1: girls in sports and and but every day I look
Speaker 1: at the Asbury Park Press and they had ten or
Speaker 1: fifteen local stocks. And every day from the time I
Speaker 1: invested my hundred shares and ten dollars to share, every
Speaker 1: single day the stock you to stay the same. We
Speaker 1: went up in eighth or sixteenth or a quarter every
Speaker 1: single day. And then seven months later, eight month later,
Speaker 1: it was acquired for seventeen dollars when I paid ten
Speaker 1: for it. And so all of a sudden, my thousand
Speaker 1: dollars became worth seventeen hundred. I said, almost gotten nothing
Speaker 1: to this. I want to do this, and uh so
Speaker 1: so I wanted to UH be an investor somehow, and
Speaker 1: I would read about a well known investors, you know,
Speaker 1: UH very side with Manhattan's fund. And then I went
Speaker 1: to UH and I graduated college, didn't get into medical school.
Speaker 1: I didn't want to go to Vietnam UH and UH.
Speaker 1: I had a fellowship PhD fellowship at Georgetown, and I
Speaker 1: thought I would do that for a year and biochemistry
Speaker 1: and ride my motorcycle where my white jacket pretended I
Speaker 1: was a doctor and UH as I did that for
Speaker 1: a year, and I was making sixteen hundred dollars a year,
Speaker 1: and I was working as a bartender UH and a
Speaker 1: waiter at seventy nine UH in Georgetown and UH and
Speaker 1: then the summer on Fridays and Saturdays to make extra money.
Speaker 1: And I was living in a basement in Rock Creek Park.
Speaker 1: And that summer UH one of my friends who actually
Speaker 1: did get into medical school, my best friend. We said, Okay,
Speaker 1: why don't we see if we can sell fuller brushes.
Speaker 1: Maybe we can make money doing that. So we went
Speaker 1: into a neighborhood. We sold the record number of fuller brushes.
Speaker 1: It was a black neighborhood, and sold a record number
Speaker 1: of fuller brushes and Southeast Washington, I think it was. Uh.
Speaker 1: And then UH, when we ultimately went back to deliver
Speaker 1: those brushes, uh, there were no deposits and people wouldn't
Speaker 1: even answer the door. You'd hear a little voice inside saying,
Speaker 1: I mean, mommy, it's a fuller brushman. And they get
Speaker 1: away from the door and said, not a single person
Speaker 1: took a brush that they bought. But but this this,
Speaker 1: it changed my life because we went came to a
Speaker 1: building high rise and uh, and it said absolutely nos
Speaker 1: to listening as I said, okay, Bob, you start at
Speaker 1: the top and I'll start at the bottom. We'll meet
Speaker 1: in the middle. So where you know, we just bang
Speaker 1: on doors. And so we bang on doors, and somewhere
Speaker 1: in the middle of the building, a guy answers the door.
Speaker 1: And he's a few years older than I am. And
Speaker 1: he's well dressed. He has an apartment, and he has furniture,
Speaker 1: and he has windows to look out the sky instead
Speaker 1: of you know, standing on a chair to look out
Speaker 1: at grass, you know, because you're in the basement and uh.
Speaker 1: And he's dressed nicely and he's a wife. She's cooking
Speaker 1: dinner for him in the kitchen and said, what do
Speaker 1: you how come you're not in Vietnam? He says, while
Speaker 1: I'm working in the patent office. I'm a patent examiner. Uh.
Speaker 1: And I said, well, how do you do that? And
Speaker 1: he's making eleven thousand dollars a year. I said how
Speaker 1: do you do that? And he said, well, you take
Speaker 1: the law wars and if you get into a law school,
Speaker 1: then you can get a job in the patent office
Speaker 1: as an examiner. And I said, okay, I want to
Speaker 1: and uh and she invites me and buy some pull
Speaker 1: of brushes actually uh And but the big thing is
Speaker 1: he tells me about here's this critical skills job, about
Speaker 1: that I can it for fit into and uh uh
Speaker 1: and starting salary with seven thousand seven dollars, they go
Speaker 1: from making sixteen a year they bring in a basement
Speaker 1: to making seventy nine dollars a year for the next
Speaker 1: three years and a draft exempt job. And I said, wow,
Speaker 1: that's great. So I took the boards, did a real
Speaker 1: did real well, got into George Washington Law school, went
Speaker 1: to school at night and patent examined in the daytime.
Speaker 1: And then when I got to be twenty six, and
Speaker 1: now I was always interested in stock market. I read
Speaker 1: about it, never had any courses on it, ever had
Speaker 1: any courses economics except for Echo went on one in
Speaker 1: college and then uh, but I read all these books
Speaker 1: and uh. And then I got to be twenty six
Speaker 1: and I couldn't be drafted anymore. And the day after
Speaker 1: my birthday, I quit my job in the patent office
Speaker 1: and they had a going away munch for me at
Speaker 1: the at the holiday in which I was laid for
Speaker 1: across the street from Crystol City in Virginia. I'm late
Speaker 1: for a lunch at a date, you know, girlfriend. And
Speaker 1: as I get there, and I'm late, and everybody understood
Speaker 1: where I was and and so I come in a
Speaker 1: motorcycle and and uh and and and everyone started joking
Speaker 1: around and and my boss was Mr Lieman, and somehow
Speaker 1: he really liked me, and he sort of identified with
Speaker 1: this crazy guy who was young in the long hair
Speaker 1: and boots Stevie war and uh and and somebody liked me,
Speaker 1: and so he was always promoting me and and but
Speaker 1: it was never very good at a patent examiner. But
Speaker 1: he's dead. So his speech's going away speech, uh to
Speaker 1: me at the patent office lunch too, to honor me
Speaker 1: for the school. He says, you know, um, there was
Speaker 1: ah Iron he didn't like being a patent examiner so much,
Speaker 1: and he was okay at it, but you know, it
Speaker 1: wasn't his thing. And but you know, he's always been
Speaker 1: interested in the stock market, and that's he's going to
Speaker 1: go to New York and and find his uh calling.
Speaker 1: But there was another patent examiner he had the same
Speaker 1: idea where he also didn't like being a patent examiner
Speaker 1: so much. And that was a long time ago, in
Speaker 1: nineteen thirties, and and he lived in Switzerland or Germany
Speaker 1: and uh. And that was Albert Einstein, and he did okay,
Speaker 1: and I expect Ron to do okay. So he was
Speaker 1: comparing me to Albert Einstein. Uh. And then I go
Speaker 1: to New York and of course I'm now in debt
Speaker 1: fifteen thousand dollars. I was actually in debt fourteen thousand,
Speaker 1: four hundred fifteen thousand debt, but had six hundred hours
Speaker 1: in cash. I go to live again in a basement
Speaker 1: of one of my friends from college from high school
Speaker 1: and in Maplewood, New Jersey, and I would go every
Speaker 1: day to New York, uh to try to knock on
Speaker 1: doors to to interview for a job as an analyst.
Speaker 1: It was just impossible to get a job. In nineteen
Speaker 1: sixty nine, I was I was unemployed for three months.
Speaker 1: I was running out of money. Called my dad, you know,
Speaker 1: I'm never getting a job on Wall Street. I would
Speaker 1: I would apply for jobs as a chauffeur, thinking that
Speaker 1: for a guy who was ahead of a Wall Street firm,
Speaker 1: thinking that, see if I can talk to him, and
Speaker 1: if I can get a job for him, and maybe
Speaker 1: I can poke my way into some starter job. They're
Speaker 1: like a mail room guy or something. And but no
Speaker 1: jobs and uh and and ultimately I convinced Tony ta
Speaker 1: Bell from Delicated Harvard to Bell, which is part of
Speaker 1: Jenne Moncremer Scott uh to give me a chance, and
Speaker 1: I wrote a hired me in the fall of nineteen
Speaker 1: sixty nine, and I was the research department for Jennie
Speaker 1: Montgomery Scott broken firm in Philadelphia, and they had two
Speaker 1: fifty offices, two fifty brokers in five offices. And Tony
Speaker 1: every week was in a Princeton which is where I
Speaker 1: lived with him at his firm Delicate Harvard to Bell
Speaker 1: and uh and and what I would do is I
Speaker 1: would go. He would every week stocks for me to
Speaker 1: go visit the companies that go visit them, and I
Speaker 1: write a letter and then the letter went to all
Speaker 1: the salesmen. And then so I left Washington making eleven
Speaker 1: thousand dollars a year and here I am making fifteen
Speaker 1: thousand dollars a year and promised me eighteen thousand by
Speaker 1: the end of the year. I didn't get the raise.
Speaker 1: UH and UH and then UH. And then I got
Speaker 1: fired because I wrote a negative report about a company
Speaker 1: that UH that ultimate bankrupt. But I screwed up Jane
Speaker 1: mcgommery Scott forward in the underwriting UH and then UH.
Speaker 1: And it was very easy for me to get my
Speaker 1: next job. And Alan n Abelson from Barrens UH, he
Speaker 1: was he was on my list for this letter that
Speaker 1: I wrote every week. And I wrote a letter every
Speaker 1: week for Jennue mcgommery Scott gave it to their salesman
Speaker 1: that the companies have been to visit go to the
Speaker 1: two fifty brokers in these five different offices or six offices,
Speaker 1: and that was what they sold to their clients every week.
Speaker 1: The companies that have been to visit UH. So ultimately.
Speaker 1: That was for for three years and then UH, now
Speaker 1: I go to UH New York and get another analyst job.
Speaker 1: And then I went became partners with a friend of
Speaker 1: mine from law school and we sold research to two
Speaker 1: hedge funds. I had a hundred clients ultimately and hedge funds,
Speaker 1: mutual funds, anyone who is well known, I would do
Speaker 1: research and sell us them for their commissions. And U
Speaker 1: and I went from from having a negative net worth
Speaker 1: of fifteen thousand dollars in nineteen seventy to getting UH
Speaker 1: to making a million dollars in a year in nineteen
Speaker 1: eighty being worth a million dollars and then nineteen eighty
Speaker 1: two started Barren Capital. At that time we had ten
Speaker 1: million dollars under management and million that's with an emma
Speaker 1: and involved from from one person UH he had who
Speaker 1: saw us and and he had given six people, six
Speaker 1: people who were his favorite stockbrokers in the nineteen seventies,
Speaker 1: seventies six or seventy seven. He gave each of us
Speaker 1: five million dollars after he had had a tough year.
Speaker 1: So they said Quantum said, why don't you have some
Speaker 1: other people manage money for you? And that have just you,
Speaker 1: and he picked his six favorite uh brokers. I was
Speaker 1: one of them, and my five million became worth ten millions,
Speaker 1: and everyone else to buy and sell and trade and
Speaker 1: uh and my my little segments of that quantum fund
Speaker 1: was called Man Drake and Raked the magician Man Drake.
Speaker 1: And what I would do is I would just buy stuff.
Speaker 1: Then I'd hold it and uh and and that's why
Speaker 1: the five million became ten And in nineteen ninety two
Speaker 1: we were up to a hundred and we started our
Speaker 1: first mutual fund. Nineteen eighty seven, Baroness had fund and
Speaker 1: initially eighty two there were three people Susan Robbins, Lynda
Speaker 1: Martinson and me. Uh. Then nine two had a hundred million,
Speaker 1: and maybe we were ten people. Then now we have
Speaker 1: a hundred. Now we have forty nine point one billion,
Speaker 1: and that we've made our clients forty seven billion in
Speaker 1: profits that I've gone from having h you know, negative
Speaker 1: net worth to a million dollar net worth. And now
Speaker 1: Forbes says I'm one of the wealthiest people in the
Speaker 1: country and I have five and five and a half
Speaker 1: percent of the two billion seven of the money that's
Speaker 1: invested in the mutual funds is me, my two sons
Speaker 1: and me. That's an amazing story. I have to ask
Speaker 1: this so I know you primarily as a small cap manager.
Speaker 1: In fact, the Barren Small Cap Funds is up an
Speaker 1: average of eleven point four percent a year since its inception.
Speaker 1: It's benchmark is the Russell two thousand, which is only
Speaker 1: up seven point four percent. Let's discuss a little bit
Speaker 1: how you built your reputation originally around small caps. Tell
Speaker 1: us a little bit about that. Well, Barren Small Cap
Speaker 1: Fund happens to be managed by Cliff Greenberg, not by me,
Speaker 1: and he's done terrific. And Aaron Growth Fund is managed
Speaker 1: by me. Uh and with with Neil Rosenberg and the
Speaker 1: Cager on that one since that inception in its fourteen
Speaker 1: point one six compared to nine point four for the
Speaker 1: for the rest of two thousands, ten and a half
Speaker 1: for the SMP and then uh so all these funds.
Speaker 1: So starting off the idea that we had originally when
Speaker 1: when I was still doing research in the seventies and
Speaker 1: selling it for commissions. My ideas were smaller companies like McDonald's, Disney,
Speaker 1: Federal Expressed, a Nike, Mattel Highest. They were small companies
Speaker 1: billions two or three billion dollars, Mark kept him. And
Speaker 1: my idea was that I was getting about one and
Speaker 1: in commissions for every idea that I had. And so
Speaker 1: I would go around and if I get home to
Speaker 1: spend six or seven or eight hundred thousand dollars on
Speaker 1: the stock, I would make six or seven or eight
Speaker 1: thousand dollars in commissions. And and then uh, it didn't
Speaker 1: take me long to figure out, Okay, well, if I
Speaker 1: got him to buy a stock for six or seven
Speaker 1: or eight thousand dollar commission, then if I'd gone up
Speaker 1: to sell a stock and I would make another six
Speaker 1: or seven or eight thousand dollars in commissions. That's that
Speaker 1: was my my, you know. So that was how I
Speaker 1: paid the rent. And then after about IBus six or
Speaker 1: seven or eight years, uh I was. I looked back
Speaker 1: and I said, man, I am a disaster. I looked
Speaker 1: at all these companies, saying and they had gone up
Speaker 1: so much, and and uh, I said, I could have
Speaker 1: been rich, you know, said, there's all these things. I was,
Speaker 1: what am I crazy? Looking at these things and selling
Speaker 1: them them so quick? And I have destined day land
Speaker 1: with uh with ken Lan gone. And he calls me
Speaker 1: up one day and he says him, ken Lan going
Speaker 1: we went to college together. Uh, he's got ten years
Speaker 1: older than I am, or eight years older than I am.
Speaker 1: Went to buck now and he said, you know, people
Speaker 1: like us, we gotta stay together. Said people like, what
Speaker 1: are you talking about? And say he says, why don't
Speaker 1: we go to lunch? And uh, so we go to
Speaker 1: lunch at h I guess it was lunch at the
Speaker 1: Waldorf and it was the Bull and Bear restaurant. But
Speaker 1: he was in and as I knew him, he didn't
Speaker 1: you know, And he said, look, you're buying this company, Dalen. Uh,
Speaker 1: and I'm buying it just could come out of bankruptcy.
Speaker 1: And it was run by a guy named san Fredcigaloff.
Speaker 1: And there were two guys who had a business inside
Speaker 1: of that that I felt it was really cool. Uh
Speaker 1: Marcus and what was the other guy's name? They both
Speaker 1: were in Handy Dan ultimately became home Depot and uh
Speaker 1: and and so so I invest in this company for
Speaker 1: my clients. And Kenada's INVESTINGLFS run just killing me every
Speaker 1: time I see something. You fight before the stock. Why
Speaker 1: don't we just do something where we split things. You
Speaker 1: take half and I'll take half. I said, fine, that
Speaker 1: sounds good to me. And if I see something, I'll
Speaker 1: show it to you. You see something, you show it
Speaker 1: to me. And was split at fifty fifty. I said great.
Speaker 1: He was buying it for himself. I was buying it
Speaker 1: for my clients. And stop goes from two dollars to
Speaker 1: four or five dollars to share. I sell my stock
Speaker 1: because I made commissions selling and uh. And he hangs
Speaker 1: on and then ultimately, uh, he write refinances the whole thing,
Speaker 1: and those guys who were running handy Dan get fired.
Speaker 1: And then you go to Ken. He raises the money
Speaker 1: for him and builds home. DEEPO, that's home depot. That's
Speaker 1: where it comes from. And if I had been an
Speaker 1: investor and I stayed with it, you know, it would
Speaker 1: have been so much earlier for me to be successful. Uh.
Speaker 1: But but small companies, companies and other people weren't following
Speaker 1: so much that they're growing real, asked uh and uh,
Speaker 1: and that's that's where we focused. The best week for
Speaker 1: the week before I'm writing about this in my current
Speaker 1: quarterly letter. Um, I was. I got a phone call
Speaker 1: from Chuck matheson the same thing happened with me with
Speaker 1: him where I guess in the eighties. Uh, and he
Speaker 1: and I were both buying international game and market Capp
Speaker 1: was a hundred million dollars. He was buying it to
Speaker 1: take it over. I was buying it to make brokerage commissions.
Speaker 1: And uh and and and uh hell he calls up
Speaker 1: and he said, why don't we And it was the
Speaker 1: same kind of split thing. I said, fine, And so
Speaker 1: I make my doubles or triples or quadruples or something
Speaker 1: and uh and he stays with it, and it goes
Speaker 1: from a hundred million dollars of market Capp to ten
Speaker 1: billions ten billion, A hundred millions of ten billion. He
Speaker 1: told me, I was the only guy ever really understood
Speaker 1: what this megabucks was and and how important it was,
Speaker 1: and how it was just leaking up all these slot
Speaker 1: machines and all these different casinos, and uh, says H.
Speaker 1: And ultimately, like in an guess it was around two thousand's.
Speaker 1: Then the government he sent us in New York wanted
Speaker 1: to have independent directors for independent chairman for mutual funds.
Speaker 1: And Chuck came the chairman of our mutual fund company
Speaker 1: of Barren Funds for five years, and we wanted to
Speaker 1: have an independent director, independent executive chairman, and so he
Speaker 1: calls me up about and now he's in his probably
Speaker 1: eighty five, ninety years old, and he's retired and he's
Speaker 1: living in Reno, and last time his home was about
Speaker 1: a year ago, two years ago, and it's visiting a plant,
Speaker 1: Tesla plant in Reno, and he bites me over and
Speaker 1: spent an afternoon with him. It was so much fun.
Speaker 1: But he calls me up and he's now chairman emeritus
Speaker 1: for Barren Funds and chairman emeritiths also from an international game,
Speaker 1: and it calls me up. He said, Ron, congratulations on
Speaker 1: on on Tesla. He says, you know, I never thought
Speaker 1: this would work, and you know you were right, and
Speaker 1: you hung in there and everyone was criticizing you and
Speaker 1: you believed and you were right. I was wrong and
Speaker 1: everybody else was wrong, and you made congratulations on that.
Speaker 1: And uh. And then I'm talking to my trader who's
Speaker 1: been working at Baron Capital since nineteen uh seven. I
Speaker 1: think he told me, uh, And I'm talking to him
Speaker 1: about the conversation uh uh uh Chuck had with me.
Speaker 1: Oh yeah, Chuck. The way he starts the conversation is
Speaker 1: he says, you know when I first met you in
Speaker 1: the nineteen eighties, Uh all you were you were talking
Speaker 1: about with investing in wireless telephones. And he says, and
Speaker 1: this is this is how I started off my next
Speaker 1: shareholder letter, the letter from Ron. It's a Ron. Here's
Speaker 1: the quote. Ron, when I first met you thirty five
Speaker 1: years ago, you were investing in wireless telephones. Wow, that's
Speaker 1: a pretty fear idea. I thought, that's Chucks. He's thinking,
Speaker 1: I'm in the nineties eighties and I'm investing in US
Speaker 1: Cellular and mccau u Cellular, in lynd Broadcasting and uh
Speaker 1: uh George Lindeman's metromobile and uh and he says, Man,
Speaker 1: that's crazy, the wireless telephones. I was thinking about Maxwell
Speaker 1: smart gets smart on television. You know, you take off
Speaker 1: your shoe and you're talking to your shoe and uh
Speaker 1: and and and of course wireless phones. That's that's come
Speaker 1: you know everything. And and then I was talking to uh,
Speaker 1: to David our Trader about conversation. So he says, you know,
Speaker 1: and I was talking about Tesla, and Chuck just called
Speaker 1: to congratulate me about Tesla. And he says, Ron, you
Speaker 1: always invested in things like this you know, when I
Speaker 1: first joined you in the nineteen eighties, you were talking
Speaker 1: about cellular telephones. You were just getting back with Judy
Speaker 1: from a vacation in Italy, a week vacation in Italy,
Speaker 1: and you just, uh said, and everywhere I go, people
Speaker 1: are talking on these little cell phones. This is gonna
Speaker 1: be unbelievable. I have, whether you're rich or whether you're poor.
Speaker 1: At that time, you know, uh, we had bought a
Speaker 1: when we started married Capital, I bought a telephone. I
Speaker 1: bought one. It was five thousand dollars. It was a briefcase,
Speaker 1: the size of a briefcase. And now it's late eighties
Speaker 1: and they're and they're down to smaller phones. They're still
Speaker 1: they look like a um, you know, a brick or
Speaker 1: something the size of a brick. And but you know,
Speaker 1: and he said, and you were talking about it then,
Speaker 1: and that's all you want to invest in then, and
Speaker 1: all these companies, so you always invested in those kind
Speaker 1: of things, and so so the idea was initially, uh
Speaker 1: to investing companies that were worth more than they were
Speaker 1: selling more in the stock market. And if you could
Speaker 1: buy a hotel room, for example, or uh, you know,
Speaker 1: if it cost you a hundred thousand dollars to build,
Speaker 1: and you made ten thousand dollars a year after you
Speaker 1: built it, and you could buy it in the stock
Speaker 1: more could for seven seventy dollars. Uh and and then
Speaker 1: it would go to the value that That's how it started.
Speaker 1: And then, uh, you know when when I when I
Speaker 1: went out of my own, I figured that was a
Speaker 1: safe thing to do. I didn't, you know, I Warren
Speaker 1: Buffetts thing where you buy the cigarette butts on the street,
Speaker 1: and and Mario Gabelly, you know, it's about you know,
Speaker 1: buying things, you know, discounted cash flow. And but that
Speaker 1: wasn't really what I love doing. I loved finding these
Speaker 1: businesses that were that could grow tremendously from from what
Speaker 1: they were now. And and that's where so it started off,
Speaker 1: finding smaller companies that people ignored. But then what would
Speaker 1: happen is that, you know, out of the ten things
Speaker 1: that you bought, uh, two or three would be amazing successes,
Speaker 1: and then uh, you know a few of them would
Speaker 1: be sort of ordinary. The more you brought up and
Speaker 1: the harder it was to sell them to get out
Speaker 1: at the other side, and then they're always you left
Speaker 1: over with things that you know, how do you get
Speaker 1: out of them? And you and the answer was you don't.
Speaker 1: So so I was that interested in that and uh
Speaker 1: and I wanted to have a business that was going
Speaker 1: to last for a long time. And so again going
Speaker 1: back to my parents, I wanted to have a business
Speaker 1: that people uh like my parents, I would be able
Speaker 1: to invest in the stock market. Uh. You know, and
Speaker 1: because I always believed and and uh so so I
Speaker 1: always believe in this sort of thing, and and and
Speaker 1: the idea behind the mutual funds was that here's a
Speaker 1: way that I would be able to give a service
Speaker 1: to people like my parents so they could save for
Speaker 1: their retirements in their life events. I got a phone
Speaker 1: call about so so uh you know. So we have
Speaker 1: a house in Long Island and uh I went in Florida,
Speaker 1: where I am now, and then of course we live
Speaker 1: in New York and uh in our house in Long Island. Uh,
Speaker 1: one of my sons and his wife were staying there
Speaker 1: are about a month or two ago, and we get
Speaker 1: a and he calls me up and he said, Dad,
Speaker 1: I just got four bottles of dom peren young from
Speaker 1: from Uh. He tells me who's from? And I said, oh, wow, Bob.
Speaker 1: He he worked with me when I was at her
Speaker 1: Spells and Stern from deventy three to eighty two. It
Speaker 1: was a retail stockbroker. And he sends me four bottles
Speaker 1: of John Premier. Unit said, man, that's a lot of money.
Speaker 1: I gotta call him to thank them. I can't understand
Speaker 1: why he would send me campaigne. I pulled him up
Speaker 1: and he says, roun Uh. You know when seventy three
Speaker 1: to eight two, when you were working at her Spelled
Speaker 1: and Stern, and then ultimately you and Susan who was
Speaker 1: my assistant left. Susan is now vice president Baron Capital
Speaker 1: and she's our health care analyst. Uh, and left. And
Speaker 1: I said, I have that. And you were selling your
Speaker 1: research to hedge institutions and I saw you were doing
Speaker 1: and and I have and I have retail broker, retail broker,
Speaker 1: and they were my my clients. I pay you back
Speaker 1: then some of your ideas that I said, but if
Speaker 1: I have a chance to invest with you, I am
Speaker 1: going to invest with you. And so when you started
Speaker 1: your first fund in eighty seven, I invested in it.
Speaker 1: And then when you started Barren Parker's funds, and like
Speaker 1: the very cool idea. So I did something that I
Speaker 1: never do, and I advised my clients they should never do.
Speaker 1: I borrowed two hundred thousand dollars to invest in Barrenpartments
Speaker 1: funds I had to invest with you, and and so
Speaker 1: you put in the two And then he said, and
Speaker 1: then after it doubled or tripled, I sold half of it,
Speaker 1: and and I left the other hundred thousand dollars in.
Speaker 1: And the other hundred thousand dollars that I took out,
Speaker 1: I put that into, uh, this little fund of funds
Speaker 1: called Castle, which I wanted to which which which we
Speaker 1: had at Barrens on a parent capital for some of
Speaker 1: the employees to invest in, some of the people who
Speaker 1: I was friends with, and and then some of it
Speaker 1: I was doing myself. And so he says, and then, uh,
Speaker 1: that that hundred thousand dollars left in Barren Partner's fun
Speaker 1: that is now over forty thousand shares a Barren Partner's
Speaker 1: fun It's worth over seven million dollars. So the hundred
Speaker 1: thousand became worth over seven millions. And then the hundred
Speaker 1: thousand I took out that became worth a million seven
Speaker 1: And and he says, and basically I want you to
Speaker 1: know that you've paid for my son to go to
Speaker 1: medical school and just graduated from medical school. You've paid
Speaker 1: for him to go to medical school. In addition to that,
Speaker 1: I have another child's disabled and I never really understood
Speaker 1: how it's going to take care of him for the
Speaker 1: rest of my life. And uh, you've taken care of
Speaker 1: him for the rest of my life. Um, so so
Speaker 1: so here so there isn't anything that you could do
Speaker 1: that I wouldn't that I wouldn't believe in. And I
Speaker 1: walked on the street. My my youngest son got married,
Speaker 1: uh last September, uh a year and a half ago,
Speaker 1: and uh and hiss from from Virginia Beach and his
Speaker 1: parents came up, of course to the wedding and everything.
Speaker 1: We have wedding in our house and uh and when
Speaker 1: uh they came to our office and when uh, we're
Speaker 1: walking home from our office in the General Motors Building
Speaker 1: to our apartment. As we're walking out Madison Avenue, two
Speaker 1: people jumped out of doorways to say thank you, Ron,
Speaker 1: thank you Ron, and uh and Jane's mother who I'm
Speaker 1: walking with, Judy's walking with her dad. Uh, she said,
Speaker 1: does this always happen to you. It's unbelievable. All over
Speaker 1: the place, people are always saying thank you when I
Speaker 1: when we have our annual meeting, they come out of
Speaker 1: our conference afterwards, it's the same thing where they say, gee,
Speaker 1: you know, thank you for my life, thank you for
Speaker 1: doing this, thank you for it's it's amazing. One of
Speaker 1: my this guy who is telling me about Ray Novak actually,
Speaker 1: who was my high school friend who was living in Maplewood, Uh,
Speaker 1: when I was living in his basement trying to get
Speaker 1: a job on Wall Street. He's now a director of
Speaker 1: Barren's funds and he has been for five thirty years.
Speaker 1: And and uh, you know, he calls me up and
Speaker 1: he says, you know, I'm I'm seventy seven now and uh,
Speaker 1: and I've been investing with you, um the very beginning,
Speaker 1: and thank you for all this. You know you I
Speaker 1: don't have to think about stuff anymore. And I was
Speaker 1: for a while, I was trying to pick stocks, and
Speaker 1: you know, I try to read a lot, and he said,
Speaker 1: I can't pick stocks. You know. I come to your meetings,
Speaker 1: you know, to the board meetings every three months, and
Speaker 1: I see what you're doing. And I listened to the
Speaker 1: ANALYSTSIA working for you. There's a hundred and seventy two
Speaker 1: people in now a parent capital and forty one or
Speaker 1: forty two our analysts and portfolio managers has been there
Speaker 1: a really long time. And UH, and I see and
Speaker 1: and well every at all of them a long time.
Speaker 1: And we hire one or two people a year, three
Speaker 1: sometimes and we hired ten or fifteen people a year
Speaker 1: in total. And you know, they could be in risk managements,
Speaker 1: or they can be legal accounting, applying, compliance, sales, hum.
Speaker 1: All these two I t h. Of course, I wouldn't
Speaker 1: have any clues far as what we need to hire,
Speaker 1: because I know what I need to hire for research,
Speaker 1: but all these other people, So I'm in charge of
Speaker 1: forty people, and uh, and Lynda Mornson who is the
Speaker 1: third employee, Susan Robbins and I and Linda Uh. She's
Speaker 1: the president of the firm and chairman of the mutual
Speaker 1: funds or she has all these different titles and chief
Speaker 1: operating after and she's the one who hires all these
Speaker 1: other people that we need. And initially other guys there
Speaker 1: would say, why are we hiring? What is that all about?
Speaker 1: What is this attribute? What do those people do and
Speaker 1: always you know, saying and thinking, See if if we're
Speaker 1: hiring all these other people, then that means that I'm
Speaker 1: going to make less money. And so because some of
Speaker 1: that money is going to them instead it to me.
Speaker 1: That's the mind mindset the people have when um business
Speaker 1: growth and everyone thinks that it's growing because they're great.
Speaker 1: Of course they are great, but everyone thinks everything is
Speaker 1: because of them until they go home at night and
Speaker 1: think about it and to say, oh, maybe it's not
Speaker 1: all because of me. But but then all of a sudden,
Speaker 1: small smaller piece of a bigger pie. Yeah, And but
Speaker 1: then all of a sudden everyone's g I can't write
Speaker 1: my shareholder letters without talking to Claudia. And so Claudia
Speaker 1: is this a young woman who into M I T
Speaker 1: and mask and says all this risk metrics and everything
Speaker 1: that she looks at and explains things to me. But
Speaker 1: she can explain where we're making money, where we're not
Speaker 1: and ron taking this much risk. And and for me,
Speaker 1: I don't really care that much about I have to
Speaker 1: see where I'm making where I'm losing and and uh,
Speaker 1: and to make sure that things don't get too out
Speaker 1: of whack. But for the most part. Uh you know
Speaker 1: Henry Fernandez from from from ms C. I. Uh. So
Speaker 1: he invites me to speak to his board of directors
Speaker 1: and and he says, uh, you know, he wants to
Speaker 1: talk about capital allocations and about investments that he should
Speaker 1: be making and shouldn't be buying back stock or she's
Speaker 1: paying out dividends or she's making acquisitions, or what should
Speaker 1: he be doing? And do I like it? Do I
Speaker 1: like this? And I talked to the board and but
Speaker 1: he says, you know, uh, most of the things that
Speaker 1: we do, I mean that's not what you do. You're
Speaker 1: an investor. I mean you find companies, uh you think
Speaker 1: are going to become dramatically an MSCI said. Henry says,
Speaker 1: you know, run, I would not have a public company
Speaker 1: were not for you, nine in two thousand nine when
Speaker 1: I'm going public, or two thousand and eight when I'm
Speaker 1: going to public, I couldn't go public without you doing it.
Speaker 1: He has an immigrant his parents. Uh they had Uh
Speaker 1: dad was a general in Venezuela and there was a change,
Speaker 1: a coup and they had to flee from the country.
Speaker 1: And he goes to Morgan Stanley. That's what Morgan Stanley
Speaker 1: MSc I uh, and he starts the business and then ultimately, uh,
Speaker 1: he let the Morgan Stanley doesn't bring in public. But
Speaker 1: when he goes public and the market isn't receptives, but
Speaker 1: we even invest in the company, and and then uh,
Speaker 1: and it stopped doubles, and then it goes back down.
Speaker 1: And now we've made about twenty times our money. And said,
Speaker 1: you know, I often I often asked myself that how
Speaker 1: is it. You know, some other guys at Barren Capital sold,
Speaker 1: but you didn't. You always brought more and and you
Speaker 1: hung in there the whole time. And other people were
Speaker 1: criticizing for for this acquisition, but you understand the strategy
Speaker 1: of what we were trying to accomplish. And while that's
Speaker 1: not you know, you're not competing against an index. You
Speaker 1: beat the indexes all the time, but you know, not
Speaker 1: every single year, but over the long term you kill them.
Speaker 1: And but but uh, you know and and and all
Speaker 1: the things I described everyone else about uh, you know,
Speaker 1: volatility and standard deviation, just everything I described everyone else.
Speaker 1: And that's important that they need to have. You're an investor.
Speaker 1: You find these businesses and whether it goes upward down,
Speaker 1: you don't think about it. J. Pritsker, who was one
Speaker 1: of the people who who who was the first really
Speaker 1: mentor when I when I was starting, and and he
Speaker 1: told me I was investment highest and then and and
Speaker 1: he told me once he said, Ron, you know more
Speaker 1: about HIGAHT than I know about Highest. He says, you
Speaker 1: know and and and But the idea was about trying
Speaker 1: to understand the businesses in which we're investing so well
Speaker 1: that you can just ride to it. And he would
Speaker 1: tell me, he says, I don't ever think about the
Speaker 1: price of a stock. But during the day, you know,
Speaker 1: during the year, the only time I ever think about
Speaker 1: stock prices is when I'm either going to buy or
Speaker 1: whether I'm going to sell. Let's talk a little bit
Speaker 1: about how you put the long in long term investing.
Speaker 1: A couple of names you've owned Charles Schwab since Choice
Speaker 1: Hotels since ninety six, Veiled Resources. It's where do you
Speaker 1: get the conviction to be so long term in your
Speaker 1: core holdings. There's something about every business. The most important
Speaker 1: element of a bit. Of course, they got to grow
Speaker 1: and you really got to like and trust the people.
Speaker 1: Uh and uh. But what is important. It's about competitive advantage.
Speaker 1: What is it about these businesses in which you've invested,
Speaker 1: which we've invested, to give them a chance to last
Speaker 1: for a long time and give the pricing power. In
Speaker 1: the case that Chall Schuab, that was the we had
Speaker 1: a mutual fund business and had a hundred million dollars
Speaker 1: in management. Fifty was the mutual fund, fifty was separate accounts.
Speaker 1: We could not make that business grow eight seven it's
Speaker 1: fifty million mutual fund. We had fifty million mutual funds.
Speaker 1: It couldn't make a grow And all of a sudden
Speaker 1: we get into Chall Schwab on the plat forms. We've
Speaker 1: learned about financial advisors. We learned about I had no
Speaker 1: idea who they were, like you r a S and UH.
Speaker 1: We learned about them and we learned that they're clearing
Speaker 1: through Schwab and UH and and they have SWAB has
Speaker 1: a platform, the mutual fund marketplace. And then they had
Speaker 1: once source and we got on UH. We got people
Speaker 1: who were advisors to recommend to charl Schwab, which was
Speaker 1: for twenty th hours we would they would have to
Speaker 1: do the work and they weren't sure they were going
Speaker 1: to have a worthwhile spend on us. Where with the
Speaker 1: demands so we got a whole bunch of people to call.
Speaker 1: They said, okay, we'll put you on, and they put
Speaker 1: us on and we started. UH. They said a lot
Speaker 1: of people know who you are, but UH and I
Speaker 1: how to buy what was telling And we got on
Speaker 1: the platform, are funded well, we got recommended, we got
Speaker 1: uh one of the top fund choices, and all of
Speaker 1: a sudden where we couldn't get any money coming in
Speaker 1: starting in ten thousand a day, fifty thousand a day,
Speaker 1: a hundred thousand dollars a day, and then UH we
Speaker 1: started growing. And so when I saw that happening and
Speaker 1: it all came from Schwab, I said, wow, I better
Speaker 1: really studied charl Schwab, and I started Charles Schwab. And
Speaker 1: I saw that people were leaving big brokerage firms to
Speaker 1: go on their own and then use Charl Schwab to clear.
Speaker 1: And they didn't want to sell the product that the
Speaker 1: brokerage firms that they were working for, we're asking them
Speaker 1: to sell. And they didn't want to just raise money.
Speaker 1: They wanted to uh, to have their own business. And
Speaker 1: and so it made sense to me, And and I
Speaker 1: really like Chuck. In fact, he was just being honored fairly. Uh,
Speaker 1: I guess the last few years, uh at some restaurants
Speaker 1: downtown and uh and and he invited me to be
Speaker 1: one of the people at you know, you know, at
Speaker 1: this lunch, at this dinner, and and then I don't know,
Speaker 1: maybe a hundred people were there, a hundred fifty people
Speaker 1: and see I was up there, and and he said,
Speaker 1: and he called me out from from from the podium
Speaker 1: about how you know, people like Ron Barron were able
Speaker 1: to be offered to his clients, which was a really
Speaker 1: good deal to Joshuab they're responsible. It would be crazy
Speaker 1: for me to have a business like ours that couldn't grow.
Speaker 1: And all of a sudden we get his platform and grow,
Speaker 1: and for me not to realize that was a really
Speaker 1: big opportunity, had an invest in it. So we invest
Speaker 1: in it. We made fifty times their money. Fifty times
Speaker 1: their money so far so far? Are you are you
Speaker 1: still long, Charles Schwab all this time? Yes, that's thirty
Speaker 1: years ago. That's amazing. I know your turnover rate is
Speaker 1: about five to seven percent, and the Baron Growth Fund
Speaker 1: the average turnover is under three. That very much stands
Speaker 1: out compared to your peers who often have turnover rates
Speaker 1: of fifty or a hun or even more than will
Speaker 1: turn over a whole portfolio, you know, twice a year.
Speaker 1: What are the advantages of the buy and sell approach
Speaker 1: that that you've embraced. When I was describing to you
Speaker 1: before about Disney and McDonald's and cetera, Express and Nike
Speaker 1: in the nineteen seventies, uh I had been remained an
Speaker 1: investor in all those companies. They were up fifty sixty,
Speaker 1: and we're investing in Disney in the nineteen seventies, when
Speaker 1: they were building disney World in Florida, they had disney
Speaker 1: Land in California, which was five thousand acres h and
Speaker 1: everyone around them built other properties and made all that
Speaker 1: extra money, and you know, in the Orange Groves in
Speaker 1: California and in Florida, they said, Okay, we're doing this
Speaker 1: differently this time. Instead of having five thousand acres where
Speaker 1: we just have a park, we're gonna buy a hundred
Speaker 1: thousand acres and and we're gonna have the hotels, we're
Speaker 1: gonna have all the other services. We're going to get
Speaker 1: the money from that. So I was investing in Disney
Speaker 1: in the nineteen seventies when they were building Disneyland. I
Speaker 1: was in Disney World. I was investing in McDonald's at
Speaker 1: a time. When I would I would go my girlfriend
Speaker 1: at the time was in Washington, and when I would
Speaker 1: go down to Washington, I would go. Every weekend she
Speaker 1: would come to New York. I would go to Washington
Speaker 1: and and uh, it was big Max. Would I couldn't
Speaker 1: wait to go at a big Max. And they were
Speaker 1: like less than a dollar seventy five eight cents, I
Speaker 1: don't know, And I felt it With the McDonald's, the
Speaker 1: big opportunity was that they were they owned the land
Speaker 1: that was underneath of the franchise's properties, and the Coca
Speaker 1: Cola's were then uh and cents where coke maybe fries
Speaker 1: were ten cents, maybe the Hamburgers were twenty or twenty
Speaker 1: five cents. And said, oh my god, the profit margin
Speaker 1: that they're on the verge of making. They could raise
Speaker 1: the price from ten to fifteen cents and then all
Speaker 1: of a sudden, the extra five cents is all profits.
Speaker 1: Or they could raise the fry from ten cents to
Speaker 1: twelve cents, or apple pie that they had from from
Speaker 1: fifteen cents to twenty cents. So they thought there was
Speaker 1: a tremendous amount of leverage in the pricing that they had.
Speaker 1: And plus they had UH this land and underneath the
Speaker 1: ball of the hotel. So there's something about the business
Speaker 1: that felt Vail was the best mountain I had ever
Speaker 1: seen ski I love skiing. It was the best mountain.
Speaker 1: Other people would have six hundred acres, asked them with
Speaker 1: six hundred acres. They always fourteen thousand acres, And you know,
Speaker 1: and there was and the big opportunity in Bail was
Speaker 1: that when we invested in it in nineteen seventy six,
Speaker 1: it was sixteen or seventeen dollars to share. And then
Speaker 1: Leon So what happened in Vail is that it was
Speaker 1: controlled by a man named George Gillette bar against the
Speaker 1: property and then built the radio station in uh Tallahassee
Speaker 1: I guess it was or somewhere in Florida, and borrowed
Speaker 1: two fifty million dollars in bankrupt Leon black bot the
Speaker 1: dead and turned into the equity UH and then brought
Speaker 1: the company public so you could pay back some of
Speaker 1: the money that he borrowed to buy the to buy
Speaker 1: this and the stock of sixteen or seventeen dollars and
Speaker 1: then Uh, my idea since well ever since yes and bo.
Speaker 1: And what I did was that when he distributed his
Speaker 1: stock at thirty dollars to share in in two thousand
Speaker 1: six to all of his partners, I knew a lot
Speaker 1: of his partners. In fact, one of his partners is
Speaker 1: one of my friends. His name is Billy Mack Matt
Speaker 1: Callie real Estate. In fact, I was just talking to
Speaker 1: him the other day. Uh. We were playing golf in Florida,
Speaker 1: and he said, you know, I only know a few stocks.
Speaker 1: I know you're Tesla told me about I know a ridium.
Speaker 1: I bought a ridium when you told me to buy
Speaker 1: a ridium of seven dollars to share it now forty seven?
Speaker 1: Uh and uh and then veil Uh. I was an
Speaker 1: investor with Leon and then when he sold his distribute
Speaker 1: all the stock at thirty dollars our twenty eight dollars,
Speaker 1: I came to you because you were buying the stock,
Speaker 1: and I said, what should I do? And you told
Speaker 1: me I told him, as a billy, what you should
Speaker 1: do is you should buy all the stock you can
Speaker 1: buy at this price. But if you want to sell
Speaker 1: your stock, I want to buy your stock. And so
Speaker 1: all those guys who I knew from from from from
Speaker 1: Leon Blacks, from Apollo. We're selling the stock. I bought
Speaker 1: it all, and so we bought ten or twelve percent
Speaker 1: of the company around thirty dollars a share is now
Speaker 1: to seven or two eighty something like that. But the
Speaker 1: big idea was that it was the best place you
Speaker 1: could see, and there had been nothing done in the
Speaker 1: town to re gentrify it. And that was a town
Speaker 1: built in the nine eighties, about nineteen eighty, and it
Speaker 1: would really decrepit, and the places would be junkie, and
Speaker 1: you would stay there and you pay five hundred or
Speaker 1: thousand dollars a night, and then you go skiing on
Speaker 1: a mount for forty five dollars. And I said, if
Speaker 1: you made this town better, buy, sell, build, and then sell,
Speaker 1: build and sell, build and sell. Uh, then what would
Speaker 1: happen is that the town would be so great and
Speaker 1: everyone would come there and we would be happy to
Speaker 1: spend anything he charged to stay in the town, even
Speaker 1: if he didn't own it. But we make all the
Speaker 1: money on this on the mountain. Instead of forty five
Speaker 1: dollars a day, he could a hundred dollars a day,
Speaker 1: and so he Uh. He thought that was too risky,
Speaker 1: but he guesked me make a presentation to the board.
Speaker 1: I said, I'm not an active investor. I'm not trying
Speaker 1: to make me do things that this is the way
Speaker 1: that Ron too in risk I'm just want to fix
Speaker 1: it up and sell it. And and and he did
Speaker 1: and uh and then uh and all the people got
Speaker 1: through stock. And then what happened is that the new
Speaker 1: person comes in, Rob Cats Rob. I got so lucky
Speaker 1: with him, and Rob all the ideas that I had
Speaker 1: about building and selling building he took off and he did.
Speaker 1: And in addition to that, he took a ski task.
Speaker 1: And now he sells more than half of the tickets
Speaker 1: in advance before the season even starts, before we know
Speaker 1: it's in the snow. And as a results of that,
Speaker 1: we have half the ski pass and sold an import
Speaker 1: of a networking mountains that he can sell, for example
Speaker 1: in the north East. Now we can sell people go
Speaker 1: skiing in Bail from the Northeast. They couldn't get there
Speaker 1: before and now they can buy the tickets. Uh there,
Speaker 1: and so we have all this money in until and
Speaker 1: and then what what happens is that instead of charging
Speaker 1: my hundred dollars that wanted to charge. He now charges
Speaker 1: two hundreds to ski in the mountain. And uh, and
Speaker 1: then he has his whole network that he's a speeder
Speaker 1: for the skip geest a ticket but the best mountain,
Speaker 1: and he's got the best distribution system and uh and
Speaker 1: and uh and it's a great brand and these a
Speaker 1: spectacular So Ron, I get the sense that your experience
Speaker 1: as a stockbroker buying and selling those companies that kept
Speaker 1: going up even after you sold it very much impacted
Speaker 1: how you behave as a mutual fund manager. You learned
Speaker 1: you had such a terrible experience selling winners in the
Speaker 1: seventies that in the eighties and nineties you decided, I
Speaker 1: just can't get rid of these really good companies with
Speaker 1: great growth prospects. Yes, that's it, that's the whole idea.
Speaker 1: And if they have competitive advantage. So so the big picture,
Speaker 1: the big picture I have is that my parents, so
Speaker 1: when we bought when I was five years old, and
Speaker 1: so I'm born in and we live in a we
Speaker 1: live for that was during the war and we're living
Speaker 1: in my my parents and I of course I didn't
Speaker 1: know what I was doing. I'm a year old living
Speaker 1: in Red Bank, New Jersey, in three rooms owned by
Speaker 1: a racist, uh who is a Helen racist or husband's
Speaker 1: fighting in the war and my dad's working for the
Speaker 1: army and we're living in these three rooms. In we
Speaker 1: go live in Bradley Beach, which is just out of
Speaker 1: Astbury Park, and we live in a garage apartment. Detached
Speaker 1: garage apartment. Where are they It's so small that they
Speaker 1: have to have the refrigerator as the fit. They kitchen's
Speaker 1: outside on the porch. Uh. And so we lived there
Speaker 1: until forty eight. My parents by their first house for
Speaker 1: five thousand dollars in Wana Massa, also outside of Astbury Park,
Speaker 1: five thousand dollars. Then in nineteen they sell it for
Speaker 1: ten thousand dollars to build a twenty thousand dollar house
Speaker 1: in west down Hurst, also outside of Astbury Park. So
Speaker 1: to those houses, for example, I went back three or
Speaker 1: four or five years ago to see to see those
Speaker 1: houses eleven twenty two Grassmarer Avenue, five forty two Deal Parkway,
Speaker 1: UH and I go look at those houses and the
Speaker 1: house on on in Wana Massa that's the one they
Speaker 1: sold for ten thousand. It was every single house on
Speaker 1: the street was the same they're coming back after World
Speaker 1: War Two. They're all the same. They were like one
Speaker 1: was yellow and one was brown, and one had a
Speaker 1: little brick front and one had a car port. They're
Speaker 1: all the same. In my house with a second from
Speaker 1: the corner. It was the nicest house in the block.
Speaker 1: I was still proud. They had a little a little
Speaker 1: fence around the front yard maybe the quarter acre house.
Speaker 1: And they had put a dormer on the route. Uh
Speaker 1: so therefore then extra rooms. I'm standing there looking at
Speaker 1: this house taking pictures of it, and a big giant
Speaker 1: guy comes to the door. Don't wanted to shoot me
Speaker 1: or something, thinking that, you know, who is this guy?
Speaker 1: I go up to him and I said, you know,
Speaker 1: I I'm Ron Barron and this was I was the
Speaker 1: one who lived in this house for the just when
Speaker 1: it was built, a brand new house. And he said
Speaker 1: I know your name actually, and I said wow, and
Speaker 1: and it turned me turned out that this guy is
Speaker 1: the construction guy and his wife is a is a nurse. Uh.
Speaker 1: And he said it works at night and uh. He says,
Speaker 1: come on. And I couldn't come in because they had
Speaker 1: dogs and I were afraid of dogs. But I said,
Speaker 1: what's this house worth he says, three thou dollars. I said, wow,
Speaker 1: my parents wore made a bad sale. And then I
Speaker 1: go to the other house that the gil Parkway in
Speaker 1: West down Earth, the same thing that was the one
Speaker 1: they built for twenty and they sold ultimately for a
Speaker 1: hundred when my dad retired. That's also worth three hundred,
Speaker 1: three hundred, fifty four thous and and so so I
Speaker 1: think about it in terms of inflation. And when when
Speaker 1: I was young, and I thought, a hundred thousand dollars
Speaker 1: for the guy who lived on the corner and drove
Speaker 1: a Cadillac and we had an old Ford. Uh. And
Speaker 1: he had a house on the on the lake, and
Speaker 1: we had a house in the middle of the block.
Speaker 1: In a quarter of April or something like that, I said,
Speaker 1: and and and uh. And he owned rides on the
Speaker 1: boardwalk and a real estate guy. And I said, boy,
Speaker 1: I want to be successful like that. But but again,
Speaker 1: a hundred thousand dollars that was a hold the money
Speaker 1: in the world. And and they had a fifty thou
Speaker 1: dollar house, And so I said, how do you have that?
Speaker 1: And and so the concept of inflation, concept of what
Speaker 1: things cost. When I was in when I graduated college
Speaker 1: in nineteen sixty five. My last year in college was
Speaker 1: you know, my everything was thirty five dollars. When my
Speaker 1: first year was twos, my kids was fifty or sixty
Speaker 1: seventy thousand dollars. When my grandchildren are going to the
Speaker 1: school right now, Uh, there are six and eight years old,
Speaker 1: and I think their school must be fifty thousand dollars
Speaker 1: a year, sixty thousand dollars year, and they've got the
Speaker 1: school anymore, that's a virtual. So whether it's a car
Speaker 1: when I when when I bought a two forty z
Speaker 1: uh for when I came to New York, uh for
Speaker 1: two thousand dollars or twenty dollars, And now they're I
Speaker 1: don't know it, twenty or thirty thousand dollars for these cars.
Speaker 1: So so yeah, and and my salary of seventy nine
Speaker 1: when it's a patent examiner, those are now sixty thousand dollars,
Speaker 1: seventy thousand dollars. So my big picture is that the
Speaker 1: value of your money bowls and every seventeen years. So
Speaker 1: if you have a hundred thousand dollars today, in seventeen years,
Speaker 1: you have fifty thousand dollars of buying power in seventeen
Speaker 1: more years, seventeen more years of the twelve. So basically
Speaker 1: I think that the stock market, uh is the hedge
Speaker 1: against against the devaluation of your currency. So the stock
Speaker 1: market basically doubles every ten or twelve years. So historically
Speaker 1: it's about ten percent a year including dividends, so it's
Speaker 1: two or three and that's because it keeps up with
Speaker 1: the economy. Two or three percent reel or three or
Speaker 1: four percent inflation. People say it's now inflation. You go
Speaker 1: try to hire someone for the same price that they
Speaker 1: paid last year and you'll find out how much inflation is. Ron.
Speaker 1: Let me, let me tell you a little bit about
Speaker 1: a bad sale you made. Those two forty z s
Speaker 1: that car you had, they become very collectible and nice
Speaker 1: versions of them today from the seventies. Nice versions go
Speaker 1: for thousand dollars. Wow, we know when when when I
Speaker 1: bought it? And when I bought it, this must be
Speaker 1: in nineteen nineteen seventy, nineteen seventy. Uh. Then what happened
Speaker 1: is that the list price was dollars and in order,
Speaker 1: but there was a waiting list had mispriced it. There's
Speaker 1: a waiting list on those cars, and you had to
Speaker 1: paid the deal or cash, you know, a bribe. You
Speaker 1: had to give him three or four or five hundred dollars.
Speaker 1: So basically it cost me three thousand dollars for this
Speaker 1: price car, so I can get it immediately. It put
Speaker 1: an orange car, and then uh and then two or
Speaker 1: three or four years later the price had gone up
Speaker 1: and I sold the car. I bought it for three
Speaker 1: thousands when it was listed for hundred, and after I
Speaker 1: owned it for three or four years, I sold her
Speaker 1: for thirty hundreds or thirty sold it for more than
Speaker 1: I paid for it, and I paid over list when
Speaker 1: I bought it originally, So it doesn't surprise me. I
Speaker 1: guess that. Yes, So what they do with those cars
Speaker 1: is they do a full frame off restoration. They take
Speaker 1: them apart down to the last nut and bolt, and
Speaker 1: then rebuild them the practically brand new forty year old cars.
Speaker 1: Ron you've mentioned Matt Calli earlier. I want to share
Speaker 1: a quote of yours about real estate that I found intriguing. Quote.
Speaker 1: We believe there is a strong case to allocate capital
Speaker 1: to real estate in the public markets in an actively
Speaker 1: managed strategy. So so let's discuss how you do that,
Speaker 1: how do you actively manage real estate investments in the
Speaker 1: public markets. So we have a utual fund. It is
Speaker 1: probably ten years old. I think it must be certainly
Speaker 1: in the top one percent of real estate utual funds.
Speaker 1: Instead of just investing in reads, uh, we invest income
Speaker 1: the needs that are sea corps. And it can be
Speaker 1: a hotel business like a high for example. Or it
Speaker 1: can be a a service business like co Star, which
Speaker 1: enables people to walk around and buy apartments. Our rent
Speaker 1: apartments when you walk by the building, and will show
Speaker 1: you instead of looking at the newspaper for the department,
Speaker 1: Um that might be for sale, you can actually walk
Speaker 1: by one and you can look at it on your
Speaker 1: iPad and you can see what that apartment, whether it's available,
Speaker 1: and how much the rent is and go in and
Speaker 1: u and rented and uh so. Or it could be
Speaker 1: a tracks where it's going out there and building uh
Speaker 1: you know decks over again with wood that's uh you know,
Speaker 1: composite and it's better than the traditional would last longer
Speaker 1: and uh and it looks more attractive. So it's not
Speaker 1: just investing in wreaths. Or it can be investing in
Speaker 1: a gaming company, uh, like a like a a Penn Gaming,
Speaker 1: which which has sold the real estate that it owns
Speaker 1: but operates the properties. Now you have a play in
Speaker 1: pen and I've investing with Peter Carlino in Penn Gaming
Speaker 1: since Three Mile Island right after you know, there was
Speaker 1: a I don't remember what year it was, but it
Speaker 1: was in nineteen seventies, I think somewhere where uh you know,
Speaker 1: there was a nuclear explosion at three Mile Island in
Speaker 1: Pennsylvania and in Harrisburg and went to visit him something.
Speaker 1: Sometime after that he was going public for the first time,
Speaker 1: and I think the market cap and his company was
Speaker 1: twenty five or thirty million dollars. He ultimately sold a
Speaker 1: company for seven billions. So so you find these people
Speaker 1: and uh that that you can trust and you think
Speaker 1: are really capable. You know, do I do I really what?
Speaker 1: I trust this person to manage money for my family.
Speaker 1: That is that's something I would feel comfortable choosing them
Speaker 1: to be someone who would be uh in charge of
Speaker 1: the assets that my family has. I wor wasn't here
Speaker 1: and so it's the same kind of idea. So what
Speaker 1: we're doing is like with Peter Carlino, there isn't anything
Speaker 1: this guy told me that he's ever not performed. And
Speaker 1: Stewart Fatum from Choice Hotels. Uh, there isn't anything I know.
Speaker 1: Stewart ptom a thousand times. When I was in the
Speaker 1: patent office in Washington, I borrowed, UH. Somehow I had
Speaker 1: to get two thousand dollars because a Manner of Care
Speaker 1: was going public in sixty nine. That was a company
Speaker 1: his father had started. And man of Care was a
Speaker 1: nursing home company, and I had read about NINETI they
Speaker 1: had the nursing homes and medicare that I kind of
Speaker 1: figured out somewhere, and and Washington Post wrote these stories
Speaker 1: best that I got invest in that company, and so
Speaker 1: I invested. I borrowed two thousand dollars to get a
Speaker 1: margin account and UH a thousand dollars in patting office
Speaker 1: credit union, three hundred hours from household finance, three hundreds
Speaker 1: from beneficial finance. Somehow I came up with another four
Speaker 1: hundred dollars. They have no idea how, but I had.
Speaker 1: I got the two thousand dollars to open up an
Speaker 1: account it I think the firm was called Reynolds UH company,
Speaker 1: and and invested in Manner Care and manner of Care
Speaker 1: uh was ultimately went up a thousand times from thousands
Speaker 1: of times, since the company had a book value of
Speaker 1: twelve million dollars when it went public, and it came
Speaker 1: public at twenty million dollars when first trade. You know,
Speaker 1: I p O twenty million dollars. That's the value of
Speaker 1: the whole company. It was. We became in the seventies,
Speaker 1: I was recommending the stock to my institutional clients. In
Speaker 1: the eighties, We'll be came the largest institutional shareholder of
Speaker 1: manner Care and it was sold ultimately for Carlisle roof
Speaker 1: for four and a half billion work point three four
Speaker 1: point four four from five something like that. And but
Speaker 1: before it was sold Choice Hotel. Now we got Choice
Speaker 1: Hotels is now a d stock and our cost is
Speaker 1: maybe originally three dollars. So and Stewart being him one
Speaker 1: of those people anything he said, there's good to be
Speaker 1: at J Prince who was one of those people. Anything
Speaker 1: they said. Prince who used to say to me run
Speaker 1: Now I would talk to about contracts and and he
Speaker 1: would say, ron a contract doesn't mean anything. If you
Speaker 1: have to have a contract to enforce an agreement, you're
Speaker 1: doing business with the wrong person, because that just because
Speaker 1: any good lawyer can break any single contract you have,
Speaker 1: So you have to look, you only have the contracts.
Speaker 1: You can keep track of what the deal was not
Speaker 1: so you can expect to enforce it. So, Ron, let's
Speaker 1: talk a little bit about one of your are bigger holdings.
Speaker 1: You've been a buyer of Tesla since the stock has
Speaker 1: just exploded last year it was up over six Is
Speaker 1: there any upside left here? Where do you think the
Speaker 1: stock goes from here? Well, we bought stock in Tesla.
Speaker 1: We spent three eighty five million dollars between two thousand
Speaker 1: and fourteen and two thousand and sixteen by eight million
Speaker 1: shares a million one shares, and uh, the average prices
Speaker 1: forty to share forty two dollars to share is now
Speaker 1: eight hund sixty and eight hund fifty, and so it's
Speaker 1: now a hearing fifty billion dollar market cap. Who is
Speaker 1: forty to forty five billion when we started. Uh, I
Speaker 1: think that in and I've been saying this for a while.
Speaker 1: When we bought it, I thought that we would make
Speaker 1: twenty times our money. We've been twenty times our money
Speaker 1: and so far, and I think that it's going to
Speaker 1: be a two trillion dollar company over the next ten years,
Speaker 1: eight or ten years. That's two thousand dollars a share.
Speaker 1: And uh, and can we get lucky? Yeah, I can
Speaker 1: get lucky. And and UH to phil Us, autonomous driving
Speaker 1: takes off the way I think it could be, that
Speaker 1: could be worth another five billion or trillion dollars. Uh.
Speaker 1: Ride sharing could be a really big deal. Uh. The
Speaker 1: solar roofs, that could be a nice business form the
Speaker 1: battery business. Now, when they build factories, the factories they
Speaker 1: build or for tund fifty thousand cars a year of
Speaker 1: production and a factory when they built them in California,
Speaker 1: when they built it in the first one in Fremont,
Speaker 1: that was about seventeen thousand dollars of capital spending a car.
Speaker 1: Now in China about four thousand dollars a car, and
Speaker 1: the factory in China is probably a two hundred fifty thousand.
Speaker 1: People thought it was gonna be a hundred fifty thousand
Speaker 1: car factory, and that was the opportunity people perceived. And
Speaker 1: but we thought that they do millions of pars a
Speaker 1: year in China and that one factory they built so
Speaker 1: far is a two hundred fifty thousand par factory a year,
Speaker 1: and which is now at the rate it's producing, and
Speaker 1: that's making somewhere around two and a half billion dollars
Speaker 1: a year. So they invested a billion as making two
Speaker 1: and a half day. And when you invested in McDonald's
Speaker 1: a long time ago, you can invest a million dollars
Speaker 1: as a franchise a and if you work, you know,
Speaker 1: crazy hours and you put on your apron and got
Speaker 1: old dirty, maybe you can make a quarter of million
Speaker 1: dollars a year from million dollar investment. These guys have
Speaker 1: a billion dollar investment to making two an a half
Speaker 1: day in a year. Uh. Pretty wild, Like when when
Speaker 1: he goes into China and uh, they spend two million
Speaker 1: dollars two billion dollars in the first hotel in Macau
Speaker 1: and uh, and they gave him they were so happy
Speaker 1: that he came. He gave him land that he sold
Speaker 1: for a billion dollars. He has a billion dollars net
Speaker 1: and he started making a hundred million dollars a month.
Speaker 1: But this is a testla they make a billion a
Speaker 1: billion dollar investments and they make two and a half
Speaker 1: billion a year. They're gonna do the same thing in Germany,
Speaker 1: the same thing in Texas. What about SpaceX which Elon
Speaker 1: Musk also wait one more thing, and and it tests
Speaker 1: the battery business, which I think the car business could
Speaker 1: be a six or seven hundred billion dollar business and
Speaker 1: revenues a year and making two hundred million dollars a
Speaker 1: year two hundred billion a year in ten years. So
Speaker 1: that's how you get to this two train dollar value.
Speaker 1: But that's not including the batteries. He thinks that the
Speaker 1: battery can be also a business as big as the
Speaker 1: car business. So think about that. So here he thinks
Speaker 1: he's gonna go from five thousand cars a year to
Speaker 1: twenty million cars a year, and he thinks his battery business,
Speaker 1: who is gonna be the biggest car business. So I'm
Speaker 1: talking about the two trillion dollars because of the cars.
Speaker 1: I'm not talking about it for the batteries as far
Speaker 1: as space X. But that is is that that's the
Speaker 1: business that But we're an investor. We own a little
Speaker 1: bit less than one percent. It's a private company, and
Speaker 1: the value on its forty billion maybe and that was
Speaker 1: where we started with Tesla. I think that SpaceX is
Speaker 1: on the way to two trillion dollars also, so I
Speaker 1: think that in TESTA, we're gonna make a triple in
Speaker 1: ten years. I think that in space X we're gonna
Speaker 1: make thirty to fifty times in ten years. Uh. And
Speaker 1: one of the big reasons for that is that in
Speaker 1: the nineteen sixties when we started, you know, when President
Speaker 1: Kennedy's they were going through the moon. Uh and uh
Speaker 1: the rockets that he used there were disposable hundred million
Speaker 1: dollars rockets to the million dollar rockets they used one
Speaker 1: time and then it burns up. I was when I
Speaker 1: was working in the patent office, by the way, just
Speaker 1: as a little side here, when one of the things
Speaker 1: I did was I gave the patents on the nose
Speaker 1: on the coatings that were used on the capsules that
Speaker 1: returned to Earth, so all those capsules to make them
Speaker 1: not burn up. I was the one who gave the
Speaker 1: patents on that stuff. It's amazing. Uh. So yeah, full sir,
Speaker 1: and and so with h with with SpaceX, the competitive
Speaker 1: advantage that they have, the competitive advantage that test has
Speaker 1: this battery stuff. A competitive advantage of space X had
Speaker 1: is that they use the rockets over and over again.
Speaker 1: So the fuel to get into outer space is maybe
Speaker 1: an orbit maybe five thousand dollars a million dollars. Uh,
Speaker 1: And the rockets are a hundred two or a million dollars.
Speaker 1: They're throwing away a hundred two or million dollars instead
Speaker 1: of just spending the rock in the fuel over and
Speaker 1: over again. So now Tesla, the invention that they have
Speaker 1: is that they use the rockets over and over and
Speaker 1: over again. And so everyone said, man, you can't do that,
Speaker 1: you know, you know, landing a rocket on a platform
Speaker 1: in the ocean that's moving, they could use it again
Speaker 1: and again. That's insane. Nobody could do. That's like dropping
Speaker 1: a pencil from your from your hand, landing on the
Speaker 1: racer and standing up doesn't work. He did it. And
Speaker 1: so it's so if someone else is going to do
Speaker 1: with China. When they were successful at this landing these rockets,
Speaker 1: China had an a toorial in the Wall Street Journal
Speaker 1: and they said, congratulations Elon Musk, But boy, are are
Speaker 1: brilliant Chinese engineers. You're really missing out. You're getting beaten
Speaker 1: not by a country, you're getting beaten by a guy.
Speaker 1: But no matter with you, you've got to catch up.
Speaker 1: And they and they think and the China, uh, you know,
Speaker 1: editorial and the Wall Street Journal was we think we
Speaker 1: are I don't remember if it's five years behind or
Speaker 1: ten years behind, but way behind Elon Musk behind the
Speaker 1: unit based behind Elon Musk. Um. So. So the idea
Speaker 1: here is that there's three there's seven billion people on
Speaker 1: Earth or seven half billion, and uh, and half of
Speaker 1: them don't have internet. If you happen to live in
Speaker 1: East Hampton or Vale or or even Palm Beach. Uh,
Speaker 1: there's uh, there's not good reception for internet. And so
Speaker 1: the big opportunity and the relatively short term is that
Speaker 1: they can get they can have very low cost of launch.
Speaker 1: So Elon Musk, company, Google and seven we are a
Speaker 1: little bit less than one. And I think that this
Speaker 1: uh internet to the broadband, from satellite to your home,
Speaker 1: you're going to be an unbelievable business. Unbelievable and uh
Speaker 1: because there's so many people that needed. So so this
Speaker 1: is like the utility, this is like water, and this
Speaker 1: is like electricity. You've got to have broadband and if
Speaker 1: you want to if you want to cut that down
Speaker 1: on the inequality, this president of the world, you've got
Speaker 1: to have people educated the way you're getting educated as
Speaker 1: a broadband do you own any other non public companies
Speaker 1: or is this is SpaceX the only private firm your
Speaker 1: Barren Funds investment. We own Rivan, which is another UH
Speaker 1: electric car company, a small position than that, and that's
Speaker 1: on twenty present by Amazon and UH we have a
Speaker 1: small position in that. We're just investing right now in
Speaker 1: Cruise that's another private company that's going to do a
Speaker 1: car service UH or the autonomous driving in UH in
Speaker 1: San Francisco and UH very shortly that's about to start.
Speaker 1: We're investors in that. And then we're investors in a
Speaker 1: couple of small investments that were investor in a battery company.
Speaker 1: The Goldman Sacks also a very small investment. Baron Growth
Speaker 1: Fund has this investment. UH and UH. The big problem
Speaker 1: with the electric vehicles is where the batteries coming from.
Speaker 1: And and and this company Goldman Sacks sponsored in Volkswagen
Speaker 1: is the the big customer for making these batteries in
Speaker 1: in Europe and using hydropower Norway hydropower and then a
Speaker 1: farmer's network to allow farmers to get better seed and
Speaker 1: lower prices. We're investor in that. So we have a
Speaker 1: bunch of small investments, but we have in Bearing Growth
Speaker 1: fund for example, about a bunch of investments that we
Speaker 1: invested ten twenty million dollars that are worth two million,
Speaker 1: three hundred million dollars. It was I had sold a
Speaker 1: little bit of Tesla, and I wanted people to see
Speaker 1: what I'm doing you so they don't think that I've
Speaker 1: died and the only reason we still own test this
Speaker 1: because I'm dead. So so so, so I put a
Speaker 1: note up on our website. I said that what happened
Speaker 1: is that, uh, it became a very large percentage of
Speaker 1: a few funds that we managed, bearing Partner's Fund, bar
Speaker 1: and Focus Growth Fund, one off shore fund that we have,
Speaker 1: and so its results of that, I decided it would
Speaker 1: be a prudent for me as as a business owner,
Speaker 1: not just as an investorment a company to show people
Speaker 1: that actually we do take profits on occasion and uh
Speaker 1: you know when when when it's something not because there's
Speaker 1: something wrong with the business troup because I'm afraid about
Speaker 1: the volume of alatility in the stock, but rather because
Speaker 1: I want to show people that we're responsible. So out
Speaker 1: of the eight million shares, uh that that we have
Speaker 1: eight million one shares, we sold five thousand shares for
Speaker 1: our clients at at at four hundred and fifty and
Speaker 1: five thousand shairs remember of course, uh, five thousand shares
Speaker 1: at six fifty and two hift thousand shares at at
Speaker 1: eight d fifty, and so basically us it's painful every
Speaker 1: time I've sold it. But people just say, gee, how
Speaker 1: can you? Don't you ever sell? That's a matter with you.
Speaker 1: And and but for so, what I did in in
Speaker 1: Tesla is that I said that that now I will
Speaker 1: be I'm not buying stocks. I only invest in our
Speaker 1: mutual funds. And that was the commitment I made. And
Speaker 1: since with a couple of little, tiny exceptions, and the
Speaker 1: exceptions where when we wanted to have a large cap
Speaker 1: growth fund, I said, okay, this ten million dollars just
Speaker 1: without knowing anything about Berkshire Hathaway and Goldman Stacks and Cloudcom.
Speaker 1: You're not really doing research. I'll best tenny stocks and
Speaker 1: and see how they do, and I'll compare that that's
Speaker 1: my benchmark against our large cap growth. So we did that,
Speaker 1: and I did a couple of little things like that
Speaker 1: is what I did. And then uh, then when Testa
Speaker 1: comes along, I said, geez, this is gonna be this
Speaker 1: monster company, and uh. And what I want to do
Speaker 1: is I went to the board and I said, in
Speaker 1: two thousand and fourteen and two thousand and sixteen, I
Speaker 1: wrote all the stock I could buy for a couple
Speaker 1: of funds that I managed, and most of the mutual
Speaker 1: funds at Bearing Capital, which all are uh real estate
Speaker 1: or healthcare or fintech or emerging markets or small camp
Speaker 1: they can't own Tesla, and so I and a couple
Speaker 1: of guys that could own it. I tried to persuade him,
Speaker 1: and I wasn't successful. I said, I'm not used taking
Speaker 1: anyone's opportunity. If I invest in this, I'm not gonna
Speaker 1: do it personally, but I'd like to take fifty million
Speaker 1: dollars on behalf the Barren Capital and invest it in Tesla. Uh.
Speaker 1: And I think I can make a billion dollars on it,
Speaker 1: and I can afford to lose fifty million. It wouldn't
Speaker 1: be pleasant, but I can afford to lose it, but
Speaker 1: I can't afford not to make a billion. And if
Speaker 1: I do make it, I'll give some of the profits
Speaker 1: to people who work at Barren Capital. In addition, at
Speaker 1: Barren Capital would just be stronger. And my goal is
Speaker 1: to make it. They asked for a hundred years. So
Speaker 1: I wanted to be have a stronger balance sheet, even
Speaker 1: stronger than it does now, and they gave me permission.
Speaker 1: I said, I'm committing that I will be the last
Speaker 1: person to sell. So I'm the last person to buy
Speaker 1: because no one else is going to buy a parent capital,
Speaker 1: and I'll be the last one to sell. I'm not
Speaker 1: gonna sell anything until all of the shares are sold
Speaker 1: by all of my clients. And the directors of Barns
Speaker 1: Fun said, that makes it sounds reasonable. Uh, and it's
Speaker 1: fine to go do it, And so I did that,
Speaker 1: and uh it turned into way after a five or
Speaker 1: one split a million one shares. So uh, I told, uh,
Speaker 1: you know, so when the five hundred million two shares
Speaker 1: that we sold so far for clients I haven't sold
Speaker 1: a single share, fifty million became eight hundred fifty eight
Speaker 1: hundred sixty million or eight nine hundred millions something like that. Okay,
Speaker 1: that's not too bad a return. Oh, pretty cool. And
Speaker 1: I think that there's three more times to come from that,
Speaker 1: and uh and then over ten years and so so
Speaker 1: very easy. The advantage that we have is that just
Speaker 1: hardly I don't know any people. I'm sure they must
Speaker 1: be out there, but I don't know people who are
Speaker 1: investing for other. People said, I'm gonna make a ten
Speaker 1: ten year investment for a twenty year investment in a company,
Speaker 1: and as long as the fundamentals are as I expect
Speaker 1: him to be, stay with it, and I'm not going
Speaker 1: to worry about the price in the meantime. And you
Speaker 1: know so, so that's what I do. And as long
Speaker 1: as the fundamentals for here the business fundamentals PROTESTA. From
Speaker 1: the time we invested in it in two thousand fourteen
Speaker 1: UH to last year, the business grew from two lays
Speaker 1: and eight h to twenty five billion dollars in sales.
Speaker 1: The stock price didn't change, went up and down, up
Speaker 1: and down, up and down, and then went up ten
Speaker 1: times to the stock price caught up to U to
Speaker 1: the business, and now the business is going to grow
Speaker 1: faster than the stock price over the next ten years.
Speaker 1: I think, Wow, that's amazing. Let me let me throw
Speaker 1: you a curveball for our last question. You're ready for this? Ye?
Speaker 1: You You grew up in Asbury Park and years after
Speaker 1: you left, you were sort of unhappy because the Asbury
Speaker 1: Park football team ended up winning the state championship, but
Speaker 1: they were disqualified, and you were so unhappy about it.
Speaker 1: You bought trophies for the teams and got rings for
Speaker 1: all the players that were inscribed with undefeated on the field.
Speaker 1: Tell us about that. I read the article in the
Speaker 1: New York Times that described that, and uh, I felt badly.
Speaker 1: I mean, when I went to high school, it was
Speaker 1: a minority high school. I mean it was black and white. Uh.
Speaker 1: And maybe it was about that. Maybe it was two
Speaker 1: thirds white and one third black, or maybe it was.
Speaker 1: And there were two thousand kids there, and now there's
Speaker 1: a thousand kids when this happened, and it was virtually
Speaker 1: all minority, and uh, and the shining and it was
Speaker 1: eighteen or employment in Asbury Park, and the board walk
Speaker 1: was a mess, and I felt badly and and and
Speaker 1: so here are these kids. And there were two kids
Speaker 1: who were ineligible and they played on the team. And uh,
Speaker 1: because that day they first, I think it was, they
Speaker 1: were they went eight and oh or nine and oh,
Speaker 1: and all of a sudden went we took away all
Speaker 1: the victories and went oh and nine. And so I said,
Speaker 1: oh my god, this is this is everything for this town.
Speaker 1: And so I said that maybe it's something I can do.
Speaker 1: And it was this trophy case in the front of
Speaker 1: the school, uh, where he said, bought the trophies for
Speaker 1: and with the scores for every game that they had,
Speaker 1: and it's had undefeated on the field, and then every
Speaker 1: football player's name I had inscribed on there. And then
Speaker 1: I bought them rings that said undefeated on the field.
Speaker 1: And Springsteen UH read about it. And then he gave everyone,
Speaker 1: including me, baseball jackets, football jackets. It's said the same thing,
Speaker 1: undefeated on the fields I got. I got Springsteen jacket
Speaker 1: from that would be Bruce Springsteen of Asbury Park. I
Speaker 1: also have another story about Springsteen when when we when
Speaker 1: when I have my nineteen eighty we have our first child,
Speaker 1: Judy and I and we didn't have a weekend house,
Speaker 1: and we bought uh this this old house built in
Speaker 1: eighteen sixty on two and a half acres on Navasink
Speaker 1: River Road, nine Navastink River Road, uh and overlooking Rumson,
Speaker 1: overlooking the Navasink River and to the leftist so the
Speaker 1: ocean maybe sixty ft high and so and and it's
Speaker 1: now eighty and we paid two fifty dollars board in
Speaker 1: the middle of these fifteen acre states. Bon Jovi was
Speaker 1: on the street and Uh Roger Pensky was on the streets.
Speaker 1: They had big houses. We had this tiny little house
Speaker 1: and uh with a with a with a dirt basement,
Speaker 1: and so we have it were two and a half years,
Speaker 1: three years, and now we have two children. We have
Speaker 1: Duty's dad living with us, and we have a nanny
Speaker 1: and we're bursting at the Season's house. The guy knocks
Speaker 1: on our door and says, uh, I'd like to buy
Speaker 1: your house. And I said, well, it's not for sale,
Speaker 1: and uh, he says, well, how about for fos I
Speaker 1: said just a second. But it was the door to
Speaker 1: see Duty somebody wants to buy a house for four
Speaker 1: hunderzo dollars because she says sell it. So I opened
Speaker 1: the door and said, you just bought a house. And
Speaker 1: it turns out that this was a lawyer representing Springsteen.
Speaker 1: So he bought that house and he lived in it
Speaker 1: for he had a habit by he just gotten married
Speaker 1: and he needed to have it by Um I think
Speaker 1: of it like December fifteenth or as well. He wanted
Speaker 1: to have it for a celebration in December uh, and
Speaker 1: so we sold it to him at the end of
Speaker 1: the summer and you know, no problem. And then uh.
Speaker 1: And then what he did afterwards is that uh. For
Speaker 1: I was an the borter harvest man and he which
Speaker 1: is a day school and my kids went to and
Speaker 1: he would give us regularly when when they would have
Speaker 1: these auctions, I would call him his agents, who turns
Speaker 1: out now with the agents my friend. But I would
Speaker 1: call the agent and he would give us, uh, you know,
Speaker 1: record albums that would say he would autograph I would
Speaker 1: say R C. K. Rocket and then exclamation points Bruce
Speaker 1: Springsteen and I WoT auction for you know, hundred dollars
Speaker 1: to or whatever it was I would get, you know,
Speaker 1: get these these gifts, uh, that he would put out
Speaker 1: to raise money for Horseman. That's Ron, Thank you so
Speaker 1: much for being so generous with your time. We've been
Speaker 1: speaking with Ron Barron, founder of Barren Capital. If you
Speaker 1: enjoy this conversation, well, be sure and check out any
Speaker 1: of the other four d previous interviews we've had over
Speaker 1: the past six years. You can find those at Apple, iTunes, Spotify,
Speaker 1: wherever you feed your podcast fix. We love your comments,
Speaker 1: feedback and suggestions. Right to us at m ib podcast
Speaker 1: at Bloomberg dot net. Gives a review on Apple iTunes.
Speaker 1: If you would like to get my free daily reads,
Speaker 1: you can sign up for that at rid Halts dot com.
Speaker 1: Be sure and check out my weekly column at Bloomberg
Speaker 1: dot com slash Opinion. Follow me on Twitter at rit Halts.
Speaker 1: I would be remiss if I did not thank the
Speaker 1: crack team that helps put these conversations together each week.
Speaker 1: Reggie Bazil is my audio engineer, Michael Boyle is my producer.
Speaker 1: Atika val Bron is our product manager. Michael Batnick is
Speaker 1: up my head of research. I'm Barry RIH Halts, and
Speaker 1: you've been listening to Master's in Business on Bloomberg Radio.