Latest / Masters in Business / Ron Baron on Investing in Tesla and SpaceX (Podcast)

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Ron Baron on Investing in Tesla and SpaceX (Podcast) · Masters in Business

• 0:02
  Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg
• 0:06
  Speaker 1: Radio this weekend. On the podcast, I have an extra
• 0:10
  Speaker 1: extra special guest. What can I say? Ron Baron, founder
• 0:14
  Speaker 1: of Baron Capital. He's a legend. I don't even know
• 0:17
  Speaker 1: where to begin with this guy. He founded Baron Capital
• 0:20
  Speaker 1: in eighty two. The performance numbers he's put up have
• 0:24
  Speaker 1: just been obscene. Everything he does, he seems to find
• 0:29
  Speaker 1: his way to just spectacular returns, whether it's public companies
• 0:35
  Speaker 1: or private companies or real estate. Just Google search him
• 0:38
  Speaker 1: on East Hampton and the property he bought for a
• 0:42
  Speaker 1: hundred million dollars in the midst of the financial real
• 0:45
  Speaker 1: estate collapse in oh seven. He turned that into golden.
• 0:49
  Speaker 1: I mean, he just has an eye for intrinsic value
• 0:54
  Speaker 1: and a process for doing things that really is is
• 1:00
  Speaker 1: just amazing. What I ended up doing in this conversation
• 1:04
  Speaker 1: was kind of giving him a nudge and men just
• 1:07
  Speaker 1: getting out of his way. He just tells all sorts
• 1:10
  Speaker 1: of stories about how different investments work out. I asked him,
• 1:17
  Speaker 1: what are you doing in the growth space? I really
• 1:19
  Speaker 1: know you as a small cap guy, and that's how
• 1:21
  Speaker 1: he built his reputation. And he describes the small caps
• 1:26
  Speaker 1: that he bought when he was first getting started in
• 1:28
  Speaker 1: the eighties. You know, small companies like Disney and Highat
• 1:33
  Speaker 1: and International Gaming. And it's hilarious because forty years ago
• 1:37
  Speaker 1: those were small cap companies. He just seemed to have
• 1:41
  Speaker 1: a knack of identifying the companies that were about to
• 1:45
  Speaker 1: go from relatively small two giants. And it's pretty hilarious
• 1:50
  Speaker 1: to hear him discuss that when he was a broker
• 1:53
  Speaker 1: in the seventies, he was upset because he would buy stocks,
• 1:56
  Speaker 1: watch them triple, and sell them and then watch them
• 1:59
  Speaker 1: go up thirty acts over the next thirty years, which
• 2:02
  Speaker 1: is why his turnover ratio is insane. It's like four percent.
• 2:07
  Speaker 1: He's very Warren Buffett like. He never sells. He finds
• 2:10
  Speaker 1: a good company and he rides them forever. So he's
• 2:14
  Speaker 1: a legend in the industry. I found this to be
• 2:17
  Speaker 1: just an endlessly entertaining and fascinating conversation with no further ado.
• 2:23
  Speaker 1: My conversation with Ron Barron VI is Masters in Business
• 2:29
  Speaker 1: with Barry Ridholts on Bloomberg Radio. My extra special guest
• 2:33
  Speaker 1: this week is Ron Barron, founder of Baron Capital. He
• 2:38
  Speaker 1: began the firm in n two, and it has become
• 2:42
  Speaker 1: known for its long term, fundamental active approach to growth investing.
• 2:48
  Speaker 1: Seventeen of their mutual funds have assets of forty nine
• 2:53
  Speaker 1: billion dollars. One of the funds run by Ron and
• 2:56
  Speaker 1: his son Michael, was up a hundred and forty eight
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  Speaker 1: sent in. Nearly all of their funds have been beating
• 3:04
  Speaker 1: their benchmarks since their inception. Way back in Ron Baron,
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  Speaker 1: Welcome to Bloomberg. Thanks. So let's go way back to
• 3:14
  Speaker 1: your childhood. You you had written you were fourteen when
• 3:18
  Speaker 1: you talked to your father into letting you buy your
• 3:21
  Speaker 1: first stock. You put a thousand dollars into the market,
• 3:24
  Speaker 1: and by the time you hit college it had quadruple
• 3:28
  Speaker 1: to four thousand dollars, and you were hooked. You just
• 3:31
  Speaker 1: began studying the market almost obsessively. You're right. Tell us
• 3:35
  Speaker 1: a little bit about how that led to your interest
• 3:39
  Speaker 1: in in being a money manager. Well, my dad was
• 3:44
  Speaker 1: an engineer for the army and my mother was a
• 3:47
  Speaker 1: buying the agent for the army, and so professionals and
• 3:52
  Speaker 1: the people who were most successful we're doctors and lawyers.
• 3:57
  Speaker 1: And if you had a house on the on the lake, Uh,
• 4:01
  Speaker 1: it was worth fifty thou dollars. Our house is where
• 4:04
  Speaker 1: twenty thou dollars. And so I and the guy i've
• 4:07
  Speaker 1: on the lake he owned rides on the board, book
• 4:09
  Speaker 1: and go of a Cadillac and probably made a hundred
• 4:11
  Speaker 1: thousand dollars a year. That's to me with success. And
• 4:14
  Speaker 1: so I wanted to be a doctor. I didn't get
• 4:16
  Speaker 1: into medical school when you were talking about the first investment.
• 4:19
  Speaker 1: I've been working seven four since I've been fourteen. That's
• 4:23
  Speaker 1: when you got working papers. So my first job was
• 4:26
  Speaker 1: as a caddy. I had all these summer jobs caddy waiter,
• 4:30
  Speaker 1: bart m bus boy, lifeguard, uh border ski instructor, cabanah boy.
• 4:38
  Speaker 1: One summer I actually had a job where I was
• 4:41
  Speaker 1: working nine to five was a lifeguard. At eleven to seven,
• 4:45
  Speaker 1: I worked in the emergency room as in orderly and
• 4:49
  Speaker 1: people would come in on Saturday night shot or stay
• 4:51
  Speaker 1: up that I'd have to hold him down, A skinny
• 4:53
  Speaker 1: little kid would hold him down on a gurney until
• 4:56
  Speaker 1: the next a kin came and gave permission to operate.
• 4:59
  Speaker 1: The bok died while I was holding him. So my
• 5:01
  Speaker 1: job was I would have to clean bedpands, I'd have
• 5:05
  Speaker 1: to hold people on the on the gurney until they
• 5:10
  Speaker 1: until they got permission to op rate, and then UH
• 5:13
  Speaker 1: in emergency in the internal in the I c U.
• 5:16
  Speaker 1: When people died, I would unplug him and I'd have
• 5:19
  Speaker 1: to put the bodies, wrap them in sheets, and I'd
• 5:21
  Speaker 1: have to put him in the freezer. That was my
• 5:23
  Speaker 1: job eleven to seven for for there in the nine
• 5:27
  Speaker 1: to five. So I was always interested in being successful.
• 5:30
  Speaker 1: I didn't know exactly what success was. And when I invested.
• 5:34
  Speaker 1: When my convinced my dad to allow me to invest
• 5:36
  Speaker 1: in stocks, he was never able to invest in stocks.
• 5:39
  Speaker 1: When I when you can. When I convinced them, I
• 5:42
  Speaker 1: was able to take my thousand dollars they had from
• 5:44
  Speaker 1: my boar Misva and I ultimately invested it in UH
• 5:48
  Speaker 1: Mommouth County National Bank. My dad said, you know not
• 5:51
  Speaker 1: the stock market, but you know. Tell me about a
• 5:53
  Speaker 1: company you want to invest in. Explain to me why
• 5:55
  Speaker 1: you want to invest in, research it, and if it
• 5:58
  Speaker 1: makes sense to me, you can do it. And UH
• 6:01
  Speaker 1: the the local bank UH was owned. Mamma County National
• 6:05
  Speaker 1: Bank was principally owned by one of the wealthiest people
• 6:09
  Speaker 1: in probably the wealthiest person in my neighborhood. Uh and
• 6:13
  Speaker 1: he owned that banks, three story red brick building, white
• 6:16
  Speaker 1: pillars in front, Virgin style building. Senator of Senator Stout
• 6:21
  Speaker 1: from New Jersey had his office in the building. And
• 6:24
  Speaker 1: uh and allowed to me. I looked through the company,
• 6:26
  Speaker 1: and I missed my dad to let me invest. That's
• 6:28
  Speaker 1: where I had my savings. Uh And they were getting
• 6:31
  Speaker 1: two and a half percent interest or two and a
• 6:32
  Speaker 1: quarter percentials. You're bringing your past book and every quarter
• 6:35
  Speaker 1: they print out your interest. So ultimately invested in that,
• 6:40
  Speaker 1: and then I would go home. So I was interesting
• 6:42
  Speaker 1: girls in sports and and but every day I look
• 6:44
  Speaker 1: at the Asbury Park Press and they had ten or
• 6:46
  Speaker 1: fifteen local stocks. And every day from the time I
• 6:49
  Speaker 1: invested my hundred shares and ten dollars to share, every
• 6:53
  Speaker 1: single day the stock you to stay the same. We
• 6:55
  Speaker 1: went up in eighth or sixteenth or a quarter every
• 6:57
  Speaker 1: single day. And then seven months later, eight month later,
• 7:00
  Speaker 1: it was acquired for seventeen dollars when I paid ten
• 7:03
  Speaker 1: for it. And so all of a sudden, my thousand
• 7:05
  Speaker 1: dollars became worth seventeen hundred. I said, almost gotten nothing
• 7:08
  Speaker 1: to this. I want to do this, and uh so
• 7:11
  Speaker 1: so I wanted to UH be an investor somehow, and
• 7:15
  Speaker 1: I would read about a well known investors, you know,
• 7:18
  Speaker 1: UH very side with Manhattan's fund. And then I went
• 7:22
  Speaker 1: to UH and I graduated college, didn't get into medical school.
• 7:26
  Speaker 1: I didn't want to go to Vietnam UH and UH.
• 7:30
  Speaker 1: I had a fellowship PhD fellowship at Georgetown, and I
• 7:34
  Speaker 1: thought I would do that for a year and biochemistry
• 7:38
  Speaker 1: and ride my motorcycle where my white jacket pretended I
• 7:41
  Speaker 1: was a doctor and UH as I did that for
• 7:45
  Speaker 1: a year, and I was making sixteen hundred dollars a year,
• 7:50
  Speaker 1: and I was working as a bartender UH and a
• 7:53
  Speaker 1: waiter at seventy nine UH in Georgetown and UH and
• 7:59
  Speaker 1: then the summer on Fridays and Saturdays to make extra money.
• 8:03
  Speaker 1: And I was living in a basement in Rock Creek Park.
• 8:06
  Speaker 1: And that summer UH one of my friends who actually
• 8:10
  Speaker 1: did get into medical school, my best friend. We said, Okay,
• 8:13
  Speaker 1: why don't we see if we can sell fuller brushes.
• 8:15
  Speaker 1: Maybe we can make money doing that. So we went
• 8:18
  Speaker 1: into a neighborhood. We sold the record number of fuller brushes.
• 8:22
  Speaker 1: It was a black neighborhood, and sold a record number
• 8:24
  Speaker 1: of fuller brushes and Southeast Washington, I think it was. Uh.
• 8:28
  Speaker 1: And then UH, when we ultimately went back to deliver
• 8:32
  Speaker 1: those brushes, uh, there were no deposits and people wouldn't
• 8:36
  Speaker 1: even answer the door. You'd hear a little voice inside saying,
• 8:39
  Speaker 1: I mean, mommy, it's a fuller brushman. And they get
• 8:42
  Speaker 1: away from the door and said, not a single person
• 8:44
  Speaker 1: took a brush that they bought. But but this this,
• 8:47
  Speaker 1: it changed my life because we went came to a
• 8:50
  Speaker 1: building high rise and uh, and it said absolutely nos
• 8:55
  Speaker 1: to listening as I said, okay, Bob, you start at
• 8:57
  Speaker 1: the top and I'll start at the bottom. We'll meet
• 8:59
  Speaker 1: in the middle. So where you know, we just bang
• 9:01
  Speaker 1: on doors. And so we bang on doors, and somewhere
• 9:03
  Speaker 1: in the middle of the building, a guy answers the door.
• 9:06
  Speaker 1: And he's a few years older than I am. And
• 9:09
  Speaker 1: he's well dressed. He has an apartment, and he has furniture,
• 9:12
  Speaker 1: and he has windows to look out the sky instead
• 9:15
  Speaker 1: of you know, standing on a chair to look out
• 9:17
  Speaker 1: at grass, you know, because you're in the basement and uh.
• 9:21
  Speaker 1: And he's dressed nicely and he's a wife. She's cooking
• 9:24
  Speaker 1: dinner for him in the kitchen and said, what do
• 9:26
  Speaker 1: you how come you're not in Vietnam? He says, while
• 9:28
  Speaker 1: I'm working in the patent office. I'm a patent examiner. Uh.
• 9:32
  Speaker 1: And I said, well, how do you do that? And
• 9:33
  Speaker 1: he's making eleven thousand dollars a year. I said how
• 9:36
  Speaker 1: do you do that? And he said, well, you take
• 9:39
  Speaker 1: the law wars and if you get into a law school,
• 9:42
  Speaker 1: then you can get a job in the patent office
• 9:44
  Speaker 1: as an examiner. And I said, okay, I want to
• 9:47
  Speaker 1: and uh and she invites me and buy some pull
• 9:50
  Speaker 1: of brushes actually uh And but the big thing is
• 9:54
  Speaker 1: he tells me about here's this critical skills job, about
• 9:59
  Speaker 1: that I can it for fit into and uh uh
• 10:03
  Speaker 1: and starting salary with seven thousand seven dollars, they go
• 10:07
  Speaker 1: from making sixteen a year they bring in a basement
• 10:11
  Speaker 1: to making seventy nine dollars a year for the next
• 10:15
  Speaker 1: three years and a draft exempt job. And I said, wow,
• 10:18
  Speaker 1: that's great. So I took the boards, did a real
• 10:21
  Speaker 1: did real well, got into George Washington Law school, went
• 10:24
  Speaker 1: to school at night and patent examined in the daytime.
• 10:27
  Speaker 1: And then when I got to be twenty six, and
• 10:29
  Speaker 1: now I was always interested in stock market. I read
• 10:32
  Speaker 1: about it, never had any courses on it, ever had
• 10:35
  Speaker 1: any courses economics except for Echo went on one in
• 10:38
  Speaker 1: college and then uh, but I read all these books
• 10:42
  Speaker 1: and uh. And then I got to be twenty six
• 10:45
  Speaker 1: and I couldn't be drafted anymore. And the day after
• 10:49
  Speaker 1: my birthday, I quit my job in the patent office
• 10:53
  Speaker 1: and they had a going away munch for me at
• 10:56
  Speaker 1: the at the holiday in which I was laid for
• 10:59
  Speaker 1: across the street from Crystol City in Virginia. I'm late
• 11:02
  Speaker 1: for a lunch at a date, you know, girlfriend. And
• 11:06
  Speaker 1: as I get there, and I'm late, and everybody understood
• 11:08
  Speaker 1: where I was and and so I come in a
• 11:12
  Speaker 1: motorcycle and and uh and and and everyone started joking
• 11:15
  Speaker 1: around and and my boss was Mr Lieman, and somehow
• 11:19
  Speaker 1: he really liked me, and he sort of identified with
• 11:22
  Speaker 1: this crazy guy who was young in the long hair
• 11:25
  Speaker 1: and boots Stevie war and uh and and somebody liked me,
• 11:28
  Speaker 1: and so he was always promoting me and and but
• 11:33
  Speaker 1: it was never very good at a patent examiner. But
• 11:36
  Speaker 1: he's dead. So his speech's going away speech, uh to
• 11:40
  Speaker 1: me at the patent office lunch too, to honor me
• 11:45
  Speaker 1: for the school. He says, you know, um, there was
• 11:49
  Speaker 1: ah Iron he didn't like being a patent examiner so much,
• 11:54
  Speaker 1: and he was okay at it, but you know, it
• 11:57
  Speaker 1: wasn't his thing. And but you know, he's always been
• 12:01
  Speaker 1: interested in the stock market, and that's he's going to
• 12:04
  Speaker 1: go to New York and and find his uh calling.
• 12:07
  Speaker 1: But there was another patent examiner he had the same
• 12:10
  Speaker 1: idea where he also didn't like being a patent examiner
• 12:14
  Speaker 1: so much. And that was a long time ago, in
• 12:16
  Speaker 1: nineteen thirties, and and he lived in Switzerland or Germany
• 12:20
  Speaker 1: and uh. And that was Albert Einstein, and he did okay,
• 12:23
  Speaker 1: and I expect Ron to do okay. So he was
• 12:24
  Speaker 1: comparing me to Albert Einstein. Uh. And then I go
• 12:27
  Speaker 1: to New York and of course I'm now in debt
• 12:29
  Speaker 1: fifteen thousand dollars. I was actually in debt fourteen thousand,
• 12:33
  Speaker 1: four hundred fifteen thousand debt, but had six hundred hours
• 12:36
  Speaker 1: in cash. I go to live again in a basement
• 12:39
  Speaker 1: of one of my friends from college from high school
• 12:42
  Speaker 1: and in Maplewood, New Jersey, and I would go every
• 12:45
  Speaker 1: day to New York, uh to try to knock on
• 12:49
  Speaker 1: doors to to interview for a job as an analyst.
• 12:53
  Speaker 1: It was just impossible to get a job. In nineteen
• 12:55
  Speaker 1: sixty nine, I was I was unemployed for three months.
• 12:59
  Speaker 1: I was running out of money. Called my dad, you know,
• 13:02
  Speaker 1: I'm never getting a job on Wall Street. I would
• 13:05
  Speaker 1: I would apply for jobs as a chauffeur, thinking that
• 13:08
  Speaker 1: for a guy who was ahead of a Wall Street firm,
• 13:10
  Speaker 1: thinking that, see if I can talk to him, and
• 13:13
  Speaker 1: if I can get a job for him, and maybe
• 13:15
  Speaker 1: I can poke my way into some starter job. They're
• 13:18
  Speaker 1: like a mail room guy or something. And but no
• 13:22
  Speaker 1: jobs and uh and and ultimately I convinced Tony ta
• 13:26
  Speaker 1: Bell from Delicated Harvard to Bell, which is part of
• 13:29
  Speaker 1: Jenne Moncremer Scott uh to give me a chance, and
• 13:33
  Speaker 1: I wrote a hired me in the fall of nineteen
• 13:37
  Speaker 1: sixty nine, and I was the research department for Jennie
• 13:41
  Speaker 1: Montgomery Scott broken firm in Philadelphia, and they had two
• 13:45
  Speaker 1: fifty offices, two fifty brokers in five offices. And Tony
• 13:49
  Speaker 1: every week was in a Princeton which is where I
• 13:52
  Speaker 1: lived with him at his firm Delicate Harvard to Bell
• 13:55
  Speaker 1: and uh and and what I would do is I
• 13:58
  Speaker 1: would go. He would every week stocks for me to
• 14:01
  Speaker 1: go visit the companies that go visit them, and I
• 14:03
  Speaker 1: write a letter and then the letter went to all
• 14:06
  Speaker 1: the salesmen. And then so I left Washington making eleven
• 14:09
  Speaker 1: thousand dollars a year and here I am making fifteen
• 14:11
  Speaker 1: thousand dollars a year and promised me eighteen thousand by
• 14:15
  Speaker 1: the end of the year. I didn't get the raise.
• 14:17
  Speaker 1: UH and UH and then UH. And then I got
• 14:20
  Speaker 1: fired because I wrote a negative report about a company
• 14:23
  Speaker 1: that UH that ultimate bankrupt. But I screwed up Jane
• 14:27
  Speaker 1: mcgommery Scott forward in the underwriting UH and then UH.
• 14:32
  Speaker 1: And it was very easy for me to get my
• 14:33
  Speaker 1: next job. And Alan n Abelson from Barrens UH, he
• 14:37
  Speaker 1: was he was on my list for this letter that
• 14:39
  Speaker 1: I wrote every week. And I wrote a letter every
• 14:41
  Speaker 1: week for Jennue mcgommery Scott gave it to their salesman
• 14:44
  Speaker 1: that the companies have been to visit go to the
• 14:47
  Speaker 1: two fifty brokers in these five different offices or six offices,
• 14:52
  Speaker 1: and that was what they sold to their clients every week.
• 14:54
  Speaker 1: The companies that have been to visit UH. So ultimately.
• 14:58
  Speaker 1: That was for for three years and then UH, now
• 15:02
  Speaker 1: I go to UH New York and get another analyst job.
• 15:07
  Speaker 1: And then I went became partners with a friend of
• 15:10
  Speaker 1: mine from law school and we sold research to two
• 15:15
  Speaker 1: hedge funds. I had a hundred clients ultimately and hedge funds,
• 15:20
  Speaker 1: mutual funds, anyone who is well known, I would do
• 15:24
  Speaker 1: research and sell us them for their commissions. And U
• 15:29
  Speaker 1: and I went from from having a negative net worth
• 15:33
  Speaker 1: of fifteen thousand dollars in nineteen seventy to getting UH
• 15:39
  Speaker 1: to making a million dollars in a year in nineteen
• 15:42
  Speaker 1: eighty being worth a million dollars and then nineteen eighty
• 15:45
  Speaker 1: two started Barren Capital. At that time we had ten
• 15:49
  Speaker 1: million dollars under management and million that's with an emma
• 15:53
  Speaker 1: and involved from from one person UH he had who
• 15:58
  Speaker 1: saw us and and he had given six people, six
• 16:02
  Speaker 1: people who were his favorite stockbrokers in the nineteen seventies,
• 16:07
  Speaker 1: seventies six or seventy seven. He gave each of us
• 16:10
  Speaker 1: five million dollars after he had had a tough year.
• 16:13
  Speaker 1: So they said Quantum said, why don't you have some
• 16:15
  Speaker 1: other people manage money for you? And that have just you,
• 16:18
  Speaker 1: and he picked his six favorite uh brokers. I was
• 16:22
  Speaker 1: one of them, and my five million became worth ten millions,
• 16:26
  Speaker 1: and everyone else to buy and sell and trade and
• 16:30
  Speaker 1: uh and my my little segments of that quantum fund
• 16:34
  Speaker 1: was called Man Drake and Raked the magician Man Drake.
• 16:37
  Speaker 1: And what I would do is I would just buy stuff.
• 16:38
  Speaker 1: Then I'd hold it and uh and and that's why
• 16:42
  Speaker 1: the five million became ten And in nineteen ninety two
• 16:46
  Speaker 1: we were up to a hundred and we started our
• 16:48
  Speaker 1: first mutual fund. Nineteen eighty seven, Baroness had fund and
• 16:53
  Speaker 1: initially eighty two there were three people Susan Robbins, Lynda
• 16:57
  Speaker 1: Martinson and me. Uh. Then nine two had a hundred million,
• 17:01
  Speaker 1: and maybe we were ten people. Then now we have
• 17:04
  Speaker 1: a hundred. Now we have forty nine point one billion,
• 17:08
  Speaker 1: and that we've made our clients forty seven billion in
• 17:11
  Speaker 1: profits that I've gone from having h you know, negative
• 17:18
  Speaker 1: net worth to a million dollar net worth. And now
• 17:21
  Speaker 1: Forbes says I'm one of the wealthiest people in the
• 17:23
  Speaker 1: country and I have five and five and a half
• 17:28
  Speaker 1: percent of the two billion seven of the money that's
• 17:32
  Speaker 1: invested in the mutual funds is me, my two sons
• 17:37
  Speaker 1: and me. That's an amazing story. I have to ask
• 17:40
  Speaker 1: this so I know you primarily as a small cap manager.
• 17:46
  Speaker 1: In fact, the Barren Small Cap Funds is up an
• 17:50
  Speaker 1: average of eleven point four percent a year since its inception.
• 17:54
  Speaker 1: It's benchmark is the Russell two thousand, which is only
• 17:57
  Speaker 1: up seven point four percent. Let's discuss a little bit
• 18:01
  Speaker 1: how you built your reputation originally around small caps. Tell
• 18:06
  Speaker 1: us a little bit about that. Well, Barren Small Cap
• 18:09
  Speaker 1: Fund happens to be managed by Cliff Greenberg, not by me,
• 18:13
  Speaker 1: and he's done terrific. And Aaron Growth Fund is managed
• 18:18
  Speaker 1: by me. Uh and with with Neil Rosenberg and the
• 18:23
  Speaker 1: Cager on that one since that inception in its fourteen
• 18:28
  Speaker 1: point one six compared to nine point four for the
• 18:33
  Speaker 1: for the rest of two thousands, ten and a half
• 18:36
  Speaker 1: for the SMP and then uh so all these funds.
• 18:41
  Speaker 1: So starting off the idea that we had originally when
• 18:45
  Speaker 1: when I was still doing research in the seventies and
• 18:49
  Speaker 1: selling it for commissions. My ideas were smaller companies like McDonald's, Disney,
• 18:57
  Speaker 1: Federal Expressed, a Nike, Mattel Highest. They were small companies
• 19:02
  Speaker 1: billions two or three billion dollars, Mark kept him. And
• 19:05
  Speaker 1: my idea was that I was getting about one and
• 19:09
  Speaker 1: in commissions for every idea that I had. And so
• 19:12
  Speaker 1: I would go around and if I get home to
• 19:14
  Speaker 1: spend six or seven or eight hundred thousand dollars on
• 19:17
  Speaker 1: the stock, I would make six or seven or eight
• 19:20
  Speaker 1: thousand dollars in commissions. And and then uh, it didn't
• 19:24
  Speaker 1: take me long to figure out, Okay, well, if I
• 19:26
  Speaker 1: got him to buy a stock for six or seven
• 19:28
  Speaker 1: or eight thousand dollar commission, then if I'd gone up
• 19:30
  Speaker 1: to sell a stock and I would make another six
• 19:33
  Speaker 1: or seven or eight thousand dollars in commissions. That's that
• 19:35
  Speaker 1: was my my, you know. So that was how I
• 19:36
  Speaker 1: paid the rent. And then after about IBus six or
• 19:40
  Speaker 1: seven or eight years, uh I was. I looked back
• 19:43
  Speaker 1: and I said, man, I am a disaster. I looked
• 19:46
  Speaker 1: at all these companies, saying and they had gone up
• 19:49
  Speaker 1: so much, and and uh, I said, I could have
• 19:52
  Speaker 1: been rich, you know, said, there's all these things. I was,
• 19:55
  Speaker 1: what am I crazy? Looking at these things and selling
• 19:57
  Speaker 1: them them so quick? And I have destined day land
• 20:01
  Speaker 1: with uh with ken Lan gone. And he calls me
• 20:04
  Speaker 1: up one day and he says him, ken Lan going
• 20:08
  Speaker 1: we went to college together. Uh, he's got ten years
• 20:11
  Speaker 1: older than I am, or eight years older than I am.
• 20:12
  Speaker 1: Went to buck now and he said, you know, people
• 20:15
  Speaker 1: like us, we gotta stay together. Said people like, what
• 20:18
  Speaker 1: are you talking about? And say he says, why don't
• 20:20
  Speaker 1: we go to lunch? And uh, so we go to
• 20:23
  Speaker 1: lunch at h I guess it was lunch at the
• 20:26
  Speaker 1: Waldorf and it was the Bull and Bear restaurant. But
• 20:30
  Speaker 1: he was in and as I knew him, he didn't
• 20:34
  Speaker 1: you know, And he said, look, you're buying this company, Dalen. Uh,
• 20:38
  Speaker 1: and I'm buying it just could come out of bankruptcy.
• 20:41
  Speaker 1: And it was run by a guy named san Fredcigaloff.
• 20:44
  Speaker 1: And there were two guys who had a business inside
• 20:48
  Speaker 1: of that that I felt it was really cool. Uh
• 20:52
  Speaker 1: Marcus and what was the other guy's name? They both
• 20:55
  Speaker 1: were in Handy Dan ultimately became home Depot and uh
• 20:59
  Speaker 1: and and so so I invest in this company for
• 21:03
  Speaker 1: my clients. And Kenada's INVESTINGLFS run just killing me every
• 21:07
  Speaker 1: time I see something. You fight before the stock. Why
• 21:10
  Speaker 1: don't we just do something where we split things. You
• 21:12
  Speaker 1: take half and I'll take half. I said, fine, that
• 21:15
  Speaker 1: sounds good to me. And if I see something, I'll
• 21:16
  Speaker 1: show it to you. You see something, you show it
• 21:18
  Speaker 1: to me. And was split at fifty fifty. I said great.
• 21:20
  Speaker 1: He was buying it for himself. I was buying it
• 21:22
  Speaker 1: for my clients. And stop goes from two dollars to
• 21:27
  Speaker 1: four or five dollars to share. I sell my stock
• 21:31
  Speaker 1: because I made commissions selling and uh. And he hangs
• 21:35
  Speaker 1: on and then ultimately, uh, he write refinances the whole thing,
• 21:39
  Speaker 1: and those guys who were running handy Dan get fired.
• 21:42
  Speaker 1: And then you go to Ken. He raises the money
• 21:44
  Speaker 1: for him and builds home. DEEPO, that's home depot. That's
• 21:47
  Speaker 1: where it comes from. And if I had been an
• 21:49
  Speaker 1: investor and I stayed with it, you know, it would
• 21:51
  Speaker 1: have been so much earlier for me to be successful. Uh.
• 21:55
  Speaker 1: But but small companies, companies and other people weren't following
• 21:58
  Speaker 1: so much that they're growing real, asked uh and uh,
• 22:01
  Speaker 1: and that's that's where we focused. The best week for
• 22:05
  Speaker 1: the week before I'm writing about this in my current
• 22:07
  Speaker 1: quarterly letter. Um, I was. I got a phone call
• 22:12
  Speaker 1: from Chuck matheson the same thing happened with me with
• 22:15
  Speaker 1: him where I guess in the eighties. Uh, and he
• 22:19
  Speaker 1: and I were both buying international game and market Capp
• 22:23
  Speaker 1: was a hundred million dollars. He was buying it to
• 22:25
  Speaker 1: take it over. I was buying it to make brokerage commissions.
• 22:28
  Speaker 1: And uh and and and uh hell he calls up
• 22:32
  Speaker 1: and he said, why don't we And it was the
• 22:33
  Speaker 1: same kind of split thing. I said, fine, And so
• 22:35
  Speaker 1: I make my doubles or triples or quadruples or something
• 22:38
  Speaker 1: and uh and he stays with it, and it goes
• 22:41
  Speaker 1: from a hundred million dollars of market Capp to ten
• 22:44
  Speaker 1: billions ten billion, A hundred millions of ten billion. He
• 22:47
  Speaker 1: told me, I was the only guy ever really understood
• 22:50
  Speaker 1: what this megabucks was and and how important it was,
• 22:53
  Speaker 1: and how it was just leaking up all these slot
• 22:57
  Speaker 1: machines and all these different casinos, and uh, says H.
• 23:01
  Speaker 1: And ultimately, like in an guess it was around two thousand's.
• 23:06
  Speaker 1: Then the government he sent us in New York wanted
• 23:13
  Speaker 1: to have independent directors for independent chairman for mutual funds.
• 23:19
  Speaker 1: And Chuck came the chairman of our mutual fund company
• 23:22
  Speaker 1: of Barren Funds for five years, and we wanted to
• 23:24
  Speaker 1: have an independent director, independent executive chairman, and so he
• 23:29
  Speaker 1: calls me up about and now he's in his probably
• 23:33
  Speaker 1: eighty five, ninety years old, and he's retired and he's
• 23:36
  Speaker 1: living in Reno, and last time his home was about
• 23:39
  Speaker 1: a year ago, two years ago, and it's visiting a plant,
• 23:41
  Speaker 1: Tesla plant in Reno, and he bites me over and
• 23:45
  Speaker 1: spent an afternoon with him. It was so much fun.
• 23:47
  Speaker 1: But he calls me up and he's now chairman emeritus
• 23:50
  Speaker 1: for Barren Funds and chairman emeritiths also from an international game,
• 23:54
  Speaker 1: and it calls me up. He said, Ron, congratulations on
• 23:58
  Speaker 1: on on Tesla. He says, you know, I never thought
• 24:02
  Speaker 1: this would work, and you know you were right, and
• 24:04
  Speaker 1: you hung in there and everyone was criticizing you and
• 24:07
  Speaker 1: you believed and you were right. I was wrong and
• 24:10
  Speaker 1: everybody else was wrong, and you made congratulations on that.
• 24:13
  Speaker 1: And uh. And then I'm talking to my trader who's
• 24:19
  Speaker 1: been working at Baron Capital since nineteen uh seven. I
• 24:24
  Speaker 1: think he told me, uh, And I'm talking to him
• 24:26
  Speaker 1: about the conversation uh uh uh Chuck had with me.
• 24:33
  Speaker 1: Oh yeah, Chuck. The way he starts the conversation is
• 24:36
  Speaker 1: he says, you know when I first met you in
• 24:39
  Speaker 1: the nineteen eighties, Uh all you were you were talking
• 24:43
  Speaker 1: about with investing in wireless telephones. And he says, and
• 24:48
  Speaker 1: this is this is how I started off my next
• 24:50
  Speaker 1: shareholder letter, the letter from Ron. It's a Ron. Here's
• 24:54
  Speaker 1: the quote. Ron, when I first met you thirty five
• 24:58
  Speaker 1: years ago, you were investing in wireless telephones. Wow, that's
• 25:02
  Speaker 1: a pretty fear idea. I thought, that's Chucks. He's thinking,
• 25:05
  Speaker 1: I'm in the nineties eighties and I'm investing in US
• 25:09
  Speaker 1: Cellular and mccau u Cellular, in lynd Broadcasting and uh
• 25:14
  Speaker 1: uh George Lindeman's metromobile and uh and he says, Man,
• 25:19
  Speaker 1: that's crazy, the wireless telephones. I was thinking about Maxwell
• 25:21
  Speaker 1: smart gets smart on television. You know, you take off
• 25:24
  Speaker 1: your shoe and you're talking to your shoe and uh
• 25:27
  Speaker 1: and and and of course wireless phones. That's that's come
• 25:31
  Speaker 1: you know everything. And and then I was talking to uh,
• 25:36
  Speaker 1: to David our Trader about conversation. So he says, you know,
• 25:42
  Speaker 1: and I was talking about Tesla, and Chuck just called
• 25:44
  Speaker 1: to congratulate me about Tesla. And he says, Ron, you
• 25:48
  Speaker 1: always invested in things like this you know, when I
• 25:51
  Speaker 1: first joined you in the nineteen eighties, you were talking
• 25:54
  Speaker 1: about cellular telephones. You were just getting back with Judy
• 25:57
  Speaker 1: from a vacation in Italy, a week vacation in Italy,
• 26:01
  Speaker 1: and you just, uh said, and everywhere I go, people
• 26:05
  Speaker 1: are talking on these little cell phones. This is gonna
• 26:08
  Speaker 1: be unbelievable. I have, whether you're rich or whether you're poor.
• 26:11
  Speaker 1: At that time, you know, uh, we had bought a
• 26:14
  Speaker 1: when we started married Capital, I bought a telephone. I
• 26:18
  Speaker 1: bought one. It was five thousand dollars. It was a briefcase,
• 26:21
  Speaker 1: the size of a briefcase. And now it's late eighties
• 26:24
  Speaker 1: and they're and they're down to smaller phones. They're still
• 26:27
  Speaker 1: they look like a um, you know, a brick or
• 26:29
  Speaker 1: something the size of a brick. And but you know,
• 26:32
  Speaker 1: and he said, and you were talking about it then,
• 26:35
  Speaker 1: and that's all you want to invest in then, and
• 26:37
  Speaker 1: all these companies, so you always invested in those kind
• 26:40
  Speaker 1: of things, and so so the idea was initially, uh
• 26:43
  Speaker 1: to investing companies that were worth more than they were
• 26:47
  Speaker 1: selling more in the stock market. And if you could
• 26:50
  Speaker 1: buy a hotel room, for example, or uh, you know,
• 26:53
  Speaker 1: if it cost you a hundred thousand dollars to build,
• 26:55
  Speaker 1: and you made ten thousand dollars a year after you
• 26:57
  Speaker 1: built it, and you could buy it in the stock
• 26:59
  Speaker 1: more could for seven seventy dollars. Uh and and then
• 27:03
  Speaker 1: it would go to the value that That's how it started.
• 27:07
  Speaker 1: And then, uh, you know when when I when I
• 27:09
  Speaker 1: went out of my own, I figured that was a
• 27:10
  Speaker 1: safe thing to do. I didn't, you know, I Warren
• 27:13
  Speaker 1: Buffetts thing where you buy the cigarette butts on the street,
• 27:17
  Speaker 1: and and Mario Gabelly, you know, it's about you know,
• 27:20
  Speaker 1: buying things, you know, discounted cash flow. And but that
• 27:23
  Speaker 1: wasn't really what I love doing. I loved finding these
• 27:26
  Speaker 1: businesses that were that could grow tremendously from from what
• 27:30
  Speaker 1: they were now. And and that's where so it started off,
• 27:34
  Speaker 1: finding smaller companies that people ignored. But then what would
• 27:38
  Speaker 1: happen is that, you know, out of the ten things
• 27:40
  Speaker 1: that you bought, uh, two or three would be amazing successes,
• 27:44
  Speaker 1: and then uh, you know a few of them would
• 27:46
  Speaker 1: be sort of ordinary. The more you brought up and
• 27:48
  Speaker 1: the harder it was to sell them to get out
• 27:50
  Speaker 1: at the other side, and then they're always you left
• 27:53
  Speaker 1: over with things that you know, how do you get
• 27:55
  Speaker 1: out of them? And you and the answer was you don't.
• 27:58
  Speaker 1: So so I was that interested in that and uh
• 28:02
  Speaker 1: and I wanted to have a business that was going
• 28:06
  Speaker 1: to last for a long time. And so again going
• 28:10
  Speaker 1: back to my parents, I wanted to have a business
• 28:13
  Speaker 1: that people uh like my parents, I would be able
• 28:16
  Speaker 1: to invest in the stock market. Uh. You know, and
• 28:20
  Speaker 1: because I always believed and and uh so so I
• 28:24
  Speaker 1: always believe in this sort of thing, and and and
• 28:27
  Speaker 1: the idea behind the mutual funds was that here's a
• 28:30
  Speaker 1: way that I would be able to give a service
• 28:33
  Speaker 1: to people like my parents so they could save for
• 28:37
  Speaker 1: their retirements in their life events. I got a phone
• 28:42
  Speaker 1: call about so so uh you know. So we have
• 28:46
  Speaker 1: a house in Long Island and uh I went in Florida,
• 28:49
  Speaker 1: where I am now, and then of course we live
• 28:51
  Speaker 1: in New York and uh in our house in Long Island. Uh,
• 28:55
  Speaker 1: one of my sons and his wife were staying there
• 29:00
  Speaker 1: are about a month or two ago, and we get
• 29:05
  Speaker 1: a and he calls me up and he said, Dad,
• 29:07
  Speaker 1: I just got four bottles of dom peren young from
• 29:13
  Speaker 1: from Uh. He tells me who's from? And I said, oh, wow, Bob.
• 29:19
  Speaker 1: He he worked with me when I was at her
• 29:23
  Speaker 1: Spells and Stern from deventy three to eighty two. It
• 29:27
  Speaker 1: was a retail stockbroker. And he sends me four bottles
• 29:31
  Speaker 1: of John Premier. Unit said, man, that's a lot of money.
• 29:33
  Speaker 1: I gotta call him to thank them. I can't understand
• 29:35
  Speaker 1: why he would send me campaigne. I pulled him up
• 29:40
  Speaker 1: and he says, roun Uh. You know when seventy three
• 29:43
  Speaker 1: to eight two, when you were working at her Spelled
• 29:45
  Speaker 1: and Stern, and then ultimately you and Susan who was
• 29:48
  Speaker 1: my assistant left. Susan is now vice president Baron Capital
• 29:51
  Speaker 1: and she's our health care analyst. Uh, and left. And
• 29:55
  Speaker 1: I said, I have that. And you were selling your
• 29:58
  Speaker 1: research to hedge institutions and I saw you were doing
• 30:02
  Speaker 1: and and I have and I have retail broker, retail broker,
• 30:06
  Speaker 1: and they were my my clients. I pay you back
• 30:10
  Speaker 1: then some of your ideas that I said, but if
• 30:13
  Speaker 1: I have a chance to invest with you, I am
• 30:15
  Speaker 1: going to invest with you. And so when you started
• 30:17
  Speaker 1: your first fund in eighty seven, I invested in it.
• 30:20
  Speaker 1: And then when you started Barren Parker's funds, and like
• 30:24
  Speaker 1: the very cool idea. So I did something that I
• 30:27
  Speaker 1: never do, and I advised my clients they should never do.
• 30:31
  Speaker 1: I borrowed two hundred thousand dollars to invest in Barrenpartments
• 30:35
  Speaker 1: funds I had to invest with you, and and so
• 30:38
  Speaker 1: you put in the two And then he said, and
• 30:40
  Speaker 1: then after it doubled or tripled, I sold half of it,
• 30:44
  Speaker 1: and and I left the other hundred thousand dollars in.
• 30:47
  Speaker 1: And the other hundred thousand dollars that I took out,
• 30:50
  Speaker 1: I put that into, uh, this little fund of funds
• 30:54
  Speaker 1: called Castle, which I wanted to which which which we
• 30:59
  Speaker 1: had at Barrens on a parent capital for some of
• 31:02
  Speaker 1: the employees to invest in, some of the people who
• 31:04
  Speaker 1: I was friends with, and and then some of it
• 31:07
  Speaker 1: I was doing myself. And so he says, and then, uh,
• 31:10
  Speaker 1: that that hundred thousand dollars left in Barren Partner's fun
• 31:15
  Speaker 1: that is now over forty thousand shares a Barren Partner's
• 31:19
  Speaker 1: fun It's worth over seven million dollars. So the hundred
• 31:22
  Speaker 1: thousand became worth over seven millions. And then the hundred
• 31:25
  Speaker 1: thousand I took out that became worth a million seven
• 31:31
  Speaker 1: And and he says, and basically I want you to
• 31:33
  Speaker 1: know that you've paid for my son to go to
• 31:36
  Speaker 1: medical school and just graduated from medical school. You've paid
• 31:38
  Speaker 1: for him to go to medical school. In addition to that,
• 31:41
  Speaker 1: I have another child's disabled and I never really understood
• 31:44
  Speaker 1: how it's going to take care of him for the
• 31:47
  Speaker 1: rest of my life. And uh, you've taken care of
• 31:49
  Speaker 1: him for the rest of my life. Um, so so
• 31:53
  Speaker 1: so here so there isn't anything that you could do
• 31:56
  Speaker 1: that I wouldn't that I wouldn't believe in. And I
• 31:59
  Speaker 1: walked on the street. My my youngest son got married,
• 32:04
  Speaker 1: uh last September, uh a year and a half ago,
• 32:09
  Speaker 1: and uh and hiss from from Virginia Beach and his
• 32:14
  Speaker 1: parents came up, of course to the wedding and everything.
• 32:17
  Speaker 1: We have wedding in our house and uh and when
• 32:23
  Speaker 1: uh they came to our office and when uh, we're
• 32:26
  Speaker 1: walking home from our office in the General Motors Building
• 32:30
  Speaker 1: to our apartment. As we're walking out Madison Avenue, two
• 32:35
  Speaker 1: people jumped out of doorways to say thank you, Ron,
• 32:39
  Speaker 1: thank you Ron, and uh and Jane's mother who I'm
• 32:44
  Speaker 1: walking with, Judy's walking with her dad. Uh, she said,
• 32:49
  Speaker 1: does this always happen to you. It's unbelievable. All over
• 32:52
  Speaker 1: the place, people are always saying thank you when I
• 32:55
  Speaker 1: when we have our annual meeting, they come out of
• 32:58
  Speaker 1: our conference afterwards, it's the same thing where they say, gee,
• 33:03
  Speaker 1: you know, thank you for my life, thank you for
• 33:05
  Speaker 1: doing this, thank you for it's it's amazing. One of
• 33:09
  Speaker 1: my this guy who is telling me about Ray Novak actually,
• 33:12
  Speaker 1: who was my high school friend who was living in Maplewood, Uh,
• 33:18
  Speaker 1: when I was living in his basement trying to get
• 33:20
  Speaker 1: a job on Wall Street. He's now a director of
• 33:22
  Speaker 1: Barren's funds and he has been for five thirty years.
• 33:26
  Speaker 1: And and uh, you know, he calls me up and
• 33:30
  Speaker 1: he says, you know, I'm I'm seventy seven now and uh,
• 33:35
  Speaker 1: and I've been investing with you, um the very beginning,
• 33:40
  Speaker 1: and thank you for all this. You know you I
• 33:44
  Speaker 1: don't have to think about stuff anymore. And I was
• 33:46
  Speaker 1: for a while, I was trying to pick stocks, and
• 33:49
  Speaker 1: you know, I try to read a lot, and he said,
• 33:51
  Speaker 1: I can't pick stocks. You know. I come to your meetings,
• 33:55
  Speaker 1: you know, to the board meetings every three months, and
• 33:58
  Speaker 1: I see what you're doing. And I listened to the
• 34:00
  Speaker 1: ANALYSTSIA working for you. There's a hundred and seventy two
• 34:03
  Speaker 1: people in now a parent capital and forty one or
• 34:06
  Speaker 1: forty two our analysts and portfolio managers has been there
• 34:10
  Speaker 1: a really long time. And UH, and I see and
• 34:14
  Speaker 1: and well every at all of them a long time.
• 34:17
  Speaker 1: And we hire one or two people a year, three
• 34:20
  Speaker 1: sometimes and we hired ten or fifteen people a year
• 34:24
  Speaker 1: in total. And you know, they could be in risk managements,
• 34:29
  Speaker 1: or they can be legal accounting, applying, compliance, sales, hum.
• 34:38
  Speaker 1: All these two I t h. Of course, I wouldn't
• 34:43
  Speaker 1: have any clues far as what we need to hire,
• 34:46
  Speaker 1: because I know what I need to hire for research,
• 34:49
  Speaker 1: but all these other people, So I'm in charge of
• 34:51
  Speaker 1: forty people, and uh, and Lynda Mornson who is the
• 34:56
  Speaker 1: third employee, Susan Robbins and I and Linda Uh. She's
• 35:01
  Speaker 1: the president of the firm and chairman of the mutual
• 35:05
  Speaker 1: funds or she has all these different titles and chief
• 35:08
  Speaker 1: operating after and she's the one who hires all these
• 35:10
  Speaker 1: other people that we need. And initially other guys there
• 35:14
  Speaker 1: would say, why are we hiring? What is that all about?
• 35:18
  Speaker 1: What is this attribute? What do those people do and
• 35:21
  Speaker 1: always you know, saying and thinking, See if if we're
• 35:24
  Speaker 1: hiring all these other people, then that means that I'm
• 35:27
  Speaker 1: going to make less money. And so because some of
• 35:30
  Speaker 1: that money is going to them instead it to me.
• 35:33
  Speaker 1: That's the mind mindset the people have when um business
• 35:38
  Speaker 1: growth and everyone thinks that it's growing because they're great.
• 35:42
  Speaker 1: Of course they are great, but everyone thinks everything is
• 35:46
  Speaker 1: because of them until they go home at night and
• 35:48
  Speaker 1: think about it and to say, oh, maybe it's not
• 35:51
  Speaker 1: all because of me. But but then all of a sudden,
• 35:55
  Speaker 1: small smaller piece of a bigger pie. Yeah, And but
• 35:58
  Speaker 1: then all of a sudden everyone's g I can't write
• 36:01
  Speaker 1: my shareholder letters without talking to Claudia. And so Claudia
• 36:05
  Speaker 1: is this a young woman who into M I T
• 36:08
  Speaker 1: and mask and says all this risk metrics and everything
• 36:11
  Speaker 1: that she looks at and explains things to me. But
• 36:14
  Speaker 1: she can explain where we're making money, where we're not
• 36:17
  Speaker 1: and ron taking this much risk. And and for me,
• 36:21
  Speaker 1: I don't really care that much about I have to
• 36:25
  Speaker 1: see where I'm making where I'm losing and and uh,
• 36:28
  Speaker 1: and to make sure that things don't get too out
• 36:31
  Speaker 1: of whack. But for the most part. Uh you know
• 36:34
  Speaker 1: Henry Fernandez from from from ms C. I. Uh. So
• 36:38
  Speaker 1: he invites me to speak to his board of directors
• 36:42
  Speaker 1: and and he says, uh, you know, he wants to
• 36:46
  Speaker 1: talk about capital allocations and about investments that he should
• 36:50
  Speaker 1: be making and shouldn't be buying back stock or she's
• 36:52
  Speaker 1: paying out dividends or she's making acquisitions, or what should
• 36:56
  Speaker 1: he be doing? And do I like it? Do I
• 36:59
  Speaker 1: like this? And I talked to the board and but
• 37:02
  Speaker 1: he says, you know, uh, most of the things that
• 37:05
  Speaker 1: we do, I mean that's not what you do. You're
• 37:07
  Speaker 1: an investor. I mean you find companies, uh you think
• 37:11
  Speaker 1: are going to become dramatically an MSCI said. Henry says,
• 37:15
  Speaker 1: you know, run, I would not have a public company
• 37:18
  Speaker 1: were not for you, nine in two thousand nine when
• 37:21
  Speaker 1: I'm going public, or two thousand and eight when I'm
• 37:23
  Speaker 1: going to public, I couldn't go public without you doing it.
• 37:27
  Speaker 1: He has an immigrant his parents. Uh they had Uh
• 37:30
  Speaker 1: dad was a general in Venezuela and there was a change,
• 37:35
  Speaker 1: a coup and they had to flee from the country.
• 37:38
  Speaker 1: And he goes to Morgan Stanley. That's what Morgan Stanley
• 37:40
  Speaker 1: MSc I uh, and he starts the business and then ultimately, uh,
• 37:45
  Speaker 1: he let the Morgan Stanley doesn't bring in public. But
• 37:48
  Speaker 1: when he goes public and the market isn't receptives, but
• 37:51
  Speaker 1: we even invest in the company, and and then uh,
• 37:55
  Speaker 1: and it stopped doubles, and then it goes back down.
• 37:57
  Speaker 1: And now we've made about twenty times our money. And said,
• 38:00
  Speaker 1: you know, I often I often asked myself that how
• 38:04
  Speaker 1: is it. You know, some other guys at Barren Capital sold,
• 38:09
  Speaker 1: but you didn't. You always brought more and and you
• 38:12
  Speaker 1: hung in there the whole time. And other people were
• 38:15
  Speaker 1: criticizing for for this acquisition, but you understand the strategy
• 38:21
  Speaker 1: of what we were trying to accomplish. And while that's
• 38:24
  Speaker 1: not you know, you're not competing against an index. You
• 38:28
  Speaker 1: beat the indexes all the time, but you know, not
• 38:31
  Speaker 1: every single year, but over the long term you kill them.
• 38:35
  Speaker 1: And but but uh, you know and and and all
• 38:40
  Speaker 1: the things I described everyone else about uh, you know,
• 38:43
  Speaker 1: volatility and standard deviation, just everything I described everyone else.
• 38:48
  Speaker 1: And that's important that they need to have. You're an investor.
• 38:53
  Speaker 1: You find these businesses and whether it goes upward down,
• 38:56
  Speaker 1: you don't think about it. J. Pritsker, who was one
• 38:59
  Speaker 1: of the people who who who was the first really
• 39:04
  Speaker 1: mentor when I when I was starting, and and he
• 39:08
  Speaker 1: told me I was investment highest and then and and
• 39:12
  Speaker 1: he told me once he said, Ron, you know more
• 39:15
  Speaker 1: about HIGAHT than I know about Highest. He says, you
• 39:18
  Speaker 1: know and and and But the idea was about trying
• 39:24
  Speaker 1: to understand the businesses in which we're investing so well
• 39:29
  Speaker 1: that you can just ride to it. And he would
• 39:31
  Speaker 1: tell me, he says, I don't ever think about the
• 39:34
  Speaker 1: price of a stock. But during the day, you know,
• 39:38
  Speaker 1: during the year, the only time I ever think about
• 39:41
  Speaker 1: stock prices is when I'm either going to buy or
• 39:43
  Speaker 1: whether I'm going to sell. Let's talk a little bit
• 39:47
  Speaker 1: about how you put the long in long term investing.
• 39:52
  Speaker 1: A couple of names you've owned Charles Schwab since Choice
• 39:57
  Speaker 1: Hotels since ninety six, Veiled Resources. It's where do you
• 40:02
  Speaker 1: get the conviction to be so long term in your
• 40:07
  Speaker 1: core holdings. There's something about every business. The most important
• 40:12
  Speaker 1: element of a bit. Of course, they got to grow
• 40:15
  Speaker 1: and you really got to like and trust the people.
• 40:19
  Speaker 1: Uh and uh. But what is important. It's about competitive advantage.
• 40:25
  Speaker 1: What is it about these businesses in which you've invested,
• 40:29
  Speaker 1: which we've invested, to give them a chance to last
• 40:32
  Speaker 1: for a long time and give the pricing power. In
• 40:35
  Speaker 1: the case that Chall Schuab, that was the we had
• 40:38
  Speaker 1: a mutual fund business and had a hundred million dollars
• 40:43
  Speaker 1: in management. Fifty was the mutual fund, fifty was separate accounts.
• 40:48
  Speaker 1: We could not make that business grow eight seven it's
• 40:51
  Speaker 1: fifty million mutual fund. We had fifty million mutual funds.
• 40:55
  Speaker 1: It couldn't make a grow And all of a sudden
• 40:57
  Speaker 1: we get into Chall Schwab on the plat forms. We've
• 41:00
  Speaker 1: learned about financial advisors. We learned about I had no
• 41:04
  Speaker 1: idea who they were, like you r a S and UH.
• 41:08
  Speaker 1: We learned about them and we learned that they're clearing
• 41:10
  Speaker 1: through Schwab and UH and and they have SWAB has
• 41:14
  Speaker 1: a platform, the mutual fund marketplace. And then they had
• 41:17
  Speaker 1: once source and we got on UH. We got people
• 41:22
  Speaker 1: who were advisors to recommend to charl Schwab, which was
• 41:26
  Speaker 1: for twenty th hours we would they would have to
• 41:30
  Speaker 1: do the work and they weren't sure they were going
• 41:32
  Speaker 1: to have a worthwhile spend on us. Where with the
• 41:36
  Speaker 1: demands so we got a whole bunch of people to call.
• 41:38
  Speaker 1: They said, okay, we'll put you on, and they put
• 41:42
  Speaker 1: us on and we started. UH. They said a lot
• 41:44
  Speaker 1: of people know who you are, but UH and I
• 41:46
  Speaker 1: how to buy what was telling And we got on
• 41:50
  Speaker 1: the platform, are funded well, we got recommended, we got
• 41:54
  Speaker 1: uh one of the top fund choices, and all of
• 41:57
  Speaker 1: a sudden where we couldn't get any money coming in
• 42:00
  Speaker 1: starting in ten thousand a day, fifty thousand a day,
• 42:02
  Speaker 1: a hundred thousand dollars a day, and then UH we
• 42:06
  Speaker 1: started growing. And so when I saw that happening and
• 42:10
  Speaker 1: it all came from Schwab, I said, wow, I better
• 42:12
  Speaker 1: really studied charl Schwab, and I started Charles Schwab. And
• 42:15
  Speaker 1: I saw that people were leaving big brokerage firms to
• 42:18
  Speaker 1: go on their own and then use Charl Schwab to clear.
• 42:23
  Speaker 1: And they didn't want to sell the product that the
• 42:25
  Speaker 1: brokerage firms that they were working for, we're asking them
• 42:29
  Speaker 1: to sell. And they didn't want to just raise money.
• 42:32
  Speaker 1: They wanted to uh, to have their own business. And
• 42:36
  Speaker 1: and so it made sense to me, And and I
• 42:38
  Speaker 1: really like Chuck. In fact, he was just being honored fairly. Uh,
• 42:43
  Speaker 1: I guess the last few years, uh at some restaurants
• 42:47
  Speaker 1: downtown and uh and and he invited me to be
• 42:52
  Speaker 1: one of the people at you know, you know, at
• 42:55
  Speaker 1: this lunch, at this dinner, and and then I don't know,
• 43:00
  Speaker 1: maybe a hundred people were there, a hundred fifty people
• 43:02
  Speaker 1: and see I was up there, and and he said,
• 43:05
  Speaker 1: and he called me out from from from the podium
• 43:09
  Speaker 1: about how you know, people like Ron Barron were able
• 43:13
  Speaker 1: to be offered to his clients, which was a really
• 43:16
  Speaker 1: good deal to Joshuab they're responsible. It would be crazy
• 43:22
  Speaker 1: for me to have a business like ours that couldn't grow.
• 43:25
  Speaker 1: And all of a sudden we get his platform and grow,
• 43:28
  Speaker 1: and for me not to realize that was a really
• 43:30
  Speaker 1: big opportunity, had an invest in it. So we invest
• 43:32
  Speaker 1: in it. We made fifty times their money. Fifty times
• 43:34
  Speaker 1: their money so far so far? Are you are you
• 43:36
  Speaker 1: still long, Charles Schwab all this time? Yes, that's thirty
• 43:40
  Speaker 1: years ago. That's amazing. I know your turnover rate is
• 43:45
  Speaker 1: about five to seven percent, and the Baron Growth Fund
• 43:49
  Speaker 1: the average turnover is under three. That very much stands
• 43:55
  Speaker 1: out compared to your peers who often have turnover rates
• 43:59
  Speaker 1: of fifty or a hun or even more than will
• 44:02
  Speaker 1: turn over a whole portfolio, you know, twice a year.
• 44:07
  Speaker 1: What are the advantages of the buy and sell approach
• 44:10
  Speaker 1: that that you've embraced. When I was describing to you
• 44:13
  Speaker 1: before about Disney and McDonald's and cetera, Express and Nike
• 44:18
  Speaker 1: in the nineteen seventies, uh I had been remained an
• 44:22
  Speaker 1: investor in all those companies. They were up fifty sixty,
• 44:25
  Speaker 1: and we're investing in Disney in the nineteen seventies, when
• 44:28
  Speaker 1: they were building disney World in Florida, they had disney
• 44:32
  Speaker 1: Land in California, which was five thousand acres h and
• 44:36
  Speaker 1: everyone around them built other properties and made all that
• 44:40
  Speaker 1: extra money, and you know, in the Orange Groves in
• 44:42
  Speaker 1: California and in Florida, they said, Okay, we're doing this
• 44:45
  Speaker 1: differently this time. Instead of having five thousand acres where
• 44:48
  Speaker 1: we just have a park, we're gonna buy a hundred
• 44:50
  Speaker 1: thousand acres and and we're gonna have the hotels, we're
• 44:54
  Speaker 1: gonna have all the other services. We're going to get
• 44:55
  Speaker 1: the money from that. So I was investing in Disney
• 44:58
  Speaker 1: in the nineteen seventies when they were building Disneyland. I
• 45:03
  Speaker 1: was in Disney World. I was investing in McDonald's at
• 45:07
  Speaker 1: a time. When I would I would go my girlfriend
• 45:11
  Speaker 1: at the time was in Washington, and when I would
• 45:14
  Speaker 1: go down to Washington, I would go. Every weekend she
• 45:16
  Speaker 1: would come to New York. I would go to Washington
• 45:18
  Speaker 1: and and uh, it was big Max. Would I couldn't
• 45:21
  Speaker 1: wait to go at a big Max. And they were
• 45:23
  Speaker 1: like less than a dollar seventy five eight cents, I
• 45:26
  Speaker 1: don't know, And I felt it With the McDonald's, the
• 45:29
  Speaker 1: big opportunity was that they were they owned the land
• 45:33
  Speaker 1: that was underneath of the franchise's properties, and the Coca
• 45:38
  Speaker 1: Cola's were then uh and cents where coke maybe fries
• 45:42
  Speaker 1: were ten cents, maybe the Hamburgers were twenty or twenty
• 45:46
  Speaker 1: five cents. And said, oh my god, the profit margin
• 45:49
  Speaker 1: that they're on the verge of making. They could raise
• 45:52
  Speaker 1: the price from ten to fifteen cents and then all
• 45:55
  Speaker 1: of a sudden, the extra five cents is all profits.
• 45:57
  Speaker 1: Or they could raise the fry from ten cents to
• 46:01
  Speaker 1: twelve cents, or apple pie that they had from from
• 46:04
  Speaker 1: fifteen cents to twenty cents. So they thought there was
• 46:06
  Speaker 1: a tremendous amount of leverage in the pricing that they had.
• 46:09
  Speaker 1: And plus they had UH this land and underneath the
• 46:13
  Speaker 1: ball of the hotel. So there's something about the business
• 46:17
  Speaker 1: that felt Vail was the best mountain I had ever
• 46:20
  Speaker 1: seen ski I love skiing. It was the best mountain.
• 46:24
  Speaker 1: Other people would have six hundred acres, asked them with
• 46:27
  Speaker 1: six hundred acres. They always fourteen thousand acres, And you know,
• 46:31
  Speaker 1: and there was and the big opportunity in Bail was
• 46:34
  Speaker 1: that when we invested in it in nineteen seventy six,
• 46:38
  Speaker 1: it was sixteen or seventeen dollars to share. And then
• 46:41
  Speaker 1: Leon So what happened in Vail is that it was
• 46:45
  Speaker 1: controlled by a man named George Gillette bar against the
• 46:49
  Speaker 1: property and then built the radio station in uh Tallahassee
• 46:53
  Speaker 1: I guess it was or somewhere in Florida, and borrowed
• 46:56
  Speaker 1: two fifty million dollars in bankrupt Leon black bot the
• 46:59
  Speaker 1: dead and turned into the equity UH and then brought
• 47:03
  Speaker 1: the company public so you could pay back some of
• 47:05
  Speaker 1: the money that he borrowed to buy the to buy
• 47:07
  Speaker 1: this and the stock of sixteen or seventeen dollars and
• 47:11
  Speaker 1: then Uh, my idea since well ever since yes and bo.
• 47:17
  Speaker 1: And what I did was that when he distributed his
• 47:19
  Speaker 1: stock at thirty dollars to share in in two thousand
• 47:23
  Speaker 1: six to all of his partners, I knew a lot
• 47:27
  Speaker 1: of his partners. In fact, one of his partners is
• 47:29
  Speaker 1: one of my friends. His name is Billy Mack Matt
• 47:32
  Speaker 1: Callie real Estate. In fact, I was just talking to
• 47:34
  Speaker 1: him the other day. Uh. We were playing golf in Florida,
• 47:38
  Speaker 1: and he said, you know, I only know a few stocks.
• 47:41
  Speaker 1: I know you're Tesla told me about I know a ridium.
• 47:46
  Speaker 1: I bought a ridium when you told me to buy
• 47:48
  Speaker 1: a ridium of seven dollars to share it now forty seven?
• 47:51
  Speaker 1: Uh and uh and then veil Uh. I was an
• 47:54
  Speaker 1: investor with Leon and then when he sold his distribute
• 47:58
  Speaker 1: all the stock at thirty dollars our twenty eight dollars,
• 48:02
  Speaker 1: I came to you because you were buying the stock,
• 48:04
  Speaker 1: and I said, what should I do? And you told
• 48:07
  Speaker 1: me I told him, as a billy, what you should
• 48:09
  Speaker 1: do is you should buy all the stock you can
• 48:11
  Speaker 1: buy at this price. But if you want to sell
• 48:14
  Speaker 1: your stock, I want to buy your stock. And so
• 48:16
  Speaker 1: all those guys who I knew from from from from
• 48:20
  Speaker 1: Leon Blacks, from Apollo. We're selling the stock. I bought
• 48:23
  Speaker 1: it all, and so we bought ten or twelve percent
• 48:25
  Speaker 1: of the company around thirty dollars a share is now
• 48:27
  Speaker 1: to seven or two eighty something like that. But the
• 48:30
  Speaker 1: big idea was that it was the best place you
• 48:33
  Speaker 1: could see, and there had been nothing done in the
• 48:35
  Speaker 1: town to re gentrify it. And that was a town
• 48:37
  Speaker 1: built in the nine eighties, about nineteen eighty, and it
• 48:40
  Speaker 1: would really decrepit, and the places would be junkie, and
• 48:43
  Speaker 1: you would stay there and you pay five hundred or
• 48:46
  Speaker 1: thousand dollars a night, and then you go skiing on
• 48:48
  Speaker 1: a mount for forty five dollars. And I said, if
• 48:50
  Speaker 1: you made this town better, buy, sell, build, and then sell,
• 48:54
  Speaker 1: build and sell, build and sell. Uh, then what would
• 48:57
  Speaker 1: happen is that the town would be so great and
• 49:00
  Speaker 1: everyone would come there and we would be happy to
• 49:02
  Speaker 1: spend anything he charged to stay in the town, even
• 49:05
  Speaker 1: if he didn't own it. But we make all the
• 49:07
  Speaker 1: money on this on the mountain. Instead of forty five
• 49:09
  Speaker 1: dollars a day, he could a hundred dollars a day,
• 49:12
  Speaker 1: and so he Uh. He thought that was too risky,
• 49:14
  Speaker 1: but he guesked me make a presentation to the board.
• 49:17
  Speaker 1: I said, I'm not an active investor. I'm not trying
• 49:19
  Speaker 1: to make me do things that this is the way
• 49:21
  Speaker 1: that Ron too in risk I'm just want to fix
• 49:23
  Speaker 1: it up and sell it. And and and he did
• 49:26
  Speaker 1: and uh and then uh and all the people got
• 49:30
  Speaker 1: through stock. And then what happened is that the new
• 49:32
  Speaker 1: person comes in, Rob Cats Rob. I got so lucky
• 49:36
  Speaker 1: with him, and Rob all the ideas that I had
• 49:39
  Speaker 1: about building and selling building he took off and he did.
• 49:43
  Speaker 1: And in addition to that, he took a ski task.
• 49:45
  Speaker 1: And now he sells more than half of the tickets
• 49:48
  Speaker 1: in advance before the season even starts, before we know
• 49:50
  Speaker 1: it's in the snow. And as a results of that,
• 49:53
  Speaker 1: we have half the ski pass and sold an import
• 49:57
  Speaker 1: of a networking mountains that he can sell, for example
• 49:59
  Speaker 1: in the north East. Now we can sell people go
• 50:02
  Speaker 1: skiing in Bail from the Northeast. They couldn't get there
• 50:05
  Speaker 1: before and now they can buy the tickets. Uh there,
• 50:08
  Speaker 1: and so we have all this money in until and
• 50:11
  Speaker 1: and then what what happens is that instead of charging
• 50:14
  Speaker 1: my hundred dollars that wanted to charge. He now charges
• 50:16
  Speaker 1: two hundreds to ski in the mountain. And uh, and
• 50:20
  Speaker 1: then he has his whole network that he's a speeder
• 50:23
  Speaker 1: for the skip geest a ticket but the best mountain,
• 50:26
  Speaker 1: and he's got the best distribution system and uh and
• 50:30
  Speaker 1: and uh and it's a great brand and these a
• 50:33
  Speaker 1: spectacular So Ron, I get the sense that your experience
• 50:38
  Speaker 1: as a stockbroker buying and selling those companies that kept
• 50:43
  Speaker 1: going up even after you sold it very much impacted
• 50:46
  Speaker 1: how you behave as a mutual fund manager. You learned
• 50:52
  Speaker 1: you had such a terrible experience selling winners in the
• 50:55
  Speaker 1: seventies that in the eighties and nineties you decided, I
• 50:59
  Speaker 1: just can't get rid of these really good companies with
• 51:02
  Speaker 1: great growth prospects. Yes, that's it, that's the whole idea.
• 51:07
  Speaker 1: And if they have competitive advantage. So so the big picture,
• 51:12
  Speaker 1: the big picture I have is that my parents, so
• 51:16
  Speaker 1: when we bought when I was five years old, and
• 51:20
  Speaker 1: so I'm born in and we live in a we
• 51:25
  Speaker 1: live for that was during the war and we're living
• 51:29
  Speaker 1: in my my parents and I of course I didn't
• 51:32
  Speaker 1: know what I was doing. I'm a year old living
• 51:34
  Speaker 1: in Red Bank, New Jersey, in three rooms owned by
• 51:39
  Speaker 1: a racist, uh who is a Helen racist or husband's
• 51:43
  Speaker 1: fighting in the war and my dad's working for the
• 51:45
  Speaker 1: army and we're living in these three rooms. In we
• 51:50
  Speaker 1: go live in Bradley Beach, which is just out of
• 51:52
  Speaker 1: Astbury Park, and we live in a garage apartment. Detached
• 51:57
  Speaker 1: garage apartment. Where are they It's so small that they
• 52:03
  Speaker 1: have to have the refrigerator as the fit. They kitchen's
• 52:05
  Speaker 1: outside on the porch. Uh. And so we lived there
• 52:08
  Speaker 1: until forty eight. My parents by their first house for
• 52:12
  Speaker 1: five thousand dollars in Wana Massa, also outside of Astbury Park,
• 52:16
  Speaker 1: five thousand dollars. Then in nineteen they sell it for
• 52:21
  Speaker 1: ten thousand dollars to build a twenty thousand dollar house
• 52:24
  Speaker 1: in west down Hurst, also outside of Astbury Park. So
• 52:27
  Speaker 1: to those houses, for example, I went back three or
• 52:30
  Speaker 1: four or five years ago to see to see those
• 52:34
  Speaker 1: houses eleven twenty two Grassmarer Avenue, five forty two Deal Parkway,
• 52:38
  Speaker 1: UH and I go look at those houses and the
• 52:42
  Speaker 1: house on on in Wana Massa that's the one they
• 52:45
  Speaker 1: sold for ten thousand. It was every single house on
• 52:48
  Speaker 1: the street was the same they're coming back after World
• 52:51
  Speaker 1: War Two. They're all the same. They were like one
• 52:53
  Speaker 1: was yellow and one was brown, and one had a
• 52:55
  Speaker 1: little brick front and one had a car port. They're
• 52:58
  Speaker 1: all the same. In my house with a second from
• 53:00
  Speaker 1: the corner. It was the nicest house in the block.
• 53:02
  Speaker 1: I was still proud. They had a little a little
• 53:05
  Speaker 1: fence around the front yard maybe the quarter acre house.
• 53:08
  Speaker 1: And they had put a dormer on the route. Uh
• 53:11
  Speaker 1: so therefore then extra rooms. I'm standing there looking at
• 53:14
  Speaker 1: this house taking pictures of it, and a big giant
• 53:17
  Speaker 1: guy comes to the door. Don't wanted to shoot me
• 53:20
  Speaker 1: or something, thinking that, you know, who is this guy?
• 53:23
  Speaker 1: I go up to him and I said, you know,
• 53:25
  Speaker 1: I I'm Ron Barron and this was I was the
• 53:28
  Speaker 1: one who lived in this house for the just when
• 53:30
  Speaker 1: it was built, a brand new house. And he said
• 53:32
  Speaker 1: I know your name actually, and I said wow, and
• 53:35
  Speaker 1: and it turned me turned out that this guy is
• 53:37
  Speaker 1: the construction guy and his wife is a is a nurse. Uh.
• 53:42
  Speaker 1: And he said it works at night and uh. He says,
• 53:46
  Speaker 1: come on. And I couldn't come in because they had
• 53:47
  Speaker 1: dogs and I were afraid of dogs. But I said,
• 53:50
  Speaker 1: what's this house worth he says, three thou dollars. I said, wow,
• 53:54
  Speaker 1: my parents wore made a bad sale. And then I
• 53:56
  Speaker 1: go to the other house that the gil Parkway in
• 54:00
  Speaker 1: West down Earth, the same thing that was the one
• 54:02
  Speaker 1: they built for twenty and they sold ultimately for a
• 54:05
  Speaker 1: hundred when my dad retired. That's also worth three hundred,
• 54:08
  Speaker 1: three hundred, fifty four thous and and so so I
• 54:13
  Speaker 1: think about it in terms of inflation. And when when
• 54:17
  Speaker 1: I was young, and I thought, a hundred thousand dollars
• 54:20
  Speaker 1: for the guy who lived on the corner and drove
• 54:23
  Speaker 1: a Cadillac and we had an old Ford. Uh. And
• 54:26
  Speaker 1: he had a house on the on the lake, and
• 54:29
  Speaker 1: we had a house in the middle of the block.
• 54:30
  Speaker 1: In a quarter of April or something like that, I said,
• 54:33
  Speaker 1: and and and uh. And he owned rides on the
• 54:36
  Speaker 1: boardwalk and a real estate guy. And I said, boy,
• 54:40
  Speaker 1: I want to be successful like that. But but again,
• 54:43
  Speaker 1: a hundred thousand dollars that was a hold the money
• 54:45
  Speaker 1: in the world. And and they had a fifty thou
• 54:48
  Speaker 1: dollar house, And so I said, how do you have that?
• 54:52
  Speaker 1: And and so the concept of inflation, concept of what
• 55:00
  Speaker 1: things cost. When I was in when I graduated college
• 55:03
  Speaker 1: in nineteen sixty five. My last year in college was
• 55:09
  Speaker 1: you know, my everything was thirty five dollars. When my
• 55:12
  Speaker 1: first year was twos, my kids was fifty or sixty
• 55:15
  Speaker 1: seventy thousand dollars. When my grandchildren are going to the
• 55:19
  Speaker 1: school right now, Uh, there are six and eight years old,
• 55:22
  Speaker 1: and I think their school must be fifty thousand dollars
• 55:25
  Speaker 1: a year, sixty thousand dollars year, and they've got the
• 55:26
  Speaker 1: school anymore, that's a virtual. So whether it's a car
• 55:30
  Speaker 1: when I when when I bought a two forty z
• 55:34
  Speaker 1: uh for when I came to New York, uh for
• 55:37
  Speaker 1: two thousand dollars or twenty dollars, And now they're I
• 55:41
  Speaker 1: don't know it, twenty or thirty thousand dollars for these cars.
• 55:44
  Speaker 1: So so yeah, and and my salary of seventy nine
• 55:50
  Speaker 1: when it's a patent examiner, those are now sixty thousand dollars,
• 55:54
  Speaker 1: seventy thousand dollars. So my big picture is that the
• 55:57
  Speaker 1: value of your money bowls and every seventeen years. So
• 56:02
  Speaker 1: if you have a hundred thousand dollars today, in seventeen years,
• 56:05
  Speaker 1: you have fifty thousand dollars of buying power in seventeen
• 56:08
  Speaker 1: more years, seventeen more years of the twelve. So basically
• 56:12
  Speaker 1: I think that the stock market, uh is the hedge
• 56:16
  Speaker 1: against against the devaluation of your currency. So the stock
• 56:21
  Speaker 1: market basically doubles every ten or twelve years. So historically
• 56:25
  Speaker 1: it's about ten percent a year including dividends, so it's
• 56:28
  Speaker 1: two or three and that's because it keeps up with
• 56:30
  Speaker 1: the economy. Two or three percent reel or three or
• 56:33
  Speaker 1: four percent inflation. People say it's now inflation. You go
• 56:36
  Speaker 1: try to hire someone for the same price that they
• 56:38
  Speaker 1: paid last year and you'll find out how much inflation is. Ron.
• 56:41
  Speaker 1: Let me, let me tell you a little bit about
• 56:43
  Speaker 1: a bad sale you made. Those two forty z s
• 56:46
  Speaker 1: that car you had, they become very collectible and nice
• 56:50
  Speaker 1: versions of them today from the seventies. Nice versions go
• 56:55
  Speaker 1: for thousand dollars. Wow, we know when when when I
• 57:00
  Speaker 1: bought it? And when I bought it, this must be
• 57:04
  Speaker 1: in nineteen nineteen seventy, nineteen seventy. Uh. Then what happened
• 57:14
  Speaker 1: is that the list price was dollars and in order,
• 57:21
  Speaker 1: but there was a waiting list had mispriced it. There's
• 57:24
  Speaker 1: a waiting list on those cars, and you had to
• 57:26
  Speaker 1: paid the deal or cash, you know, a bribe. You
• 57:29
  Speaker 1: had to give him three or four or five hundred dollars.
• 57:31
  Speaker 1: So basically it cost me three thousand dollars for this
• 57:36
  Speaker 1: price car, so I can get it immediately. It put
• 57:38
  Speaker 1: an orange car, and then uh and then two or
• 57:42
  Speaker 1: three or four years later the price had gone up
• 57:45
  Speaker 1: and I sold the car. I bought it for three
• 57:48
  Speaker 1: thousands when it was listed for hundred, and after I
• 57:51
  Speaker 1: owned it for three or four years, I sold her
• 57:53
  Speaker 1: for thirty hundreds or thirty sold it for more than
• 57:56
  Speaker 1: I paid for it, and I paid over list when
• 57:58
  Speaker 1: I bought it originally, So it doesn't surprise me. I
• 58:02
  Speaker 1: guess that. Yes, So what they do with those cars
• 58:07
  Speaker 1: is they do a full frame off restoration. They take
• 58:10
  Speaker 1: them apart down to the last nut and bolt, and
• 58:13
  Speaker 1: then rebuild them the practically brand new forty year old cars.
• 58:18
  Speaker 1: Ron you've mentioned Matt Calli earlier. I want to share
• 58:21
  Speaker 1: a quote of yours about real estate that I found intriguing. Quote.
• 58:27
  Speaker 1: We believe there is a strong case to allocate capital
• 58:31
  Speaker 1: to real estate in the public markets in an actively
• 58:35
  Speaker 1: managed strategy. So so let's discuss how you do that,
• 58:39
  Speaker 1: how do you actively manage real estate investments in the
• 58:44
  Speaker 1: public markets. So we have a utual fund. It is
• 58:48
  Speaker 1: probably ten years old. I think it must be certainly
• 58:51
  Speaker 1: in the top one percent of real estate utual funds.
• 58:56
  Speaker 1: Instead of just investing in reads, uh, we invest income
• 59:00
  Speaker 1: the needs that are sea corps. And it can be
• 59:02
  Speaker 1: a hotel business like a high for example. Or it
• 59:06
  Speaker 1: can be a a service business like co Star, which
• 59:11
  Speaker 1: enables people to walk around and buy apartments. Our rent
• 59:15
  Speaker 1: apartments when you walk by the building, and will show
• 59:19
  Speaker 1: you instead of looking at the newspaper for the department,
• 59:22
  Speaker 1: Um that might be for sale, you can actually walk
• 59:25
  Speaker 1: by one and you can look at it on your
• 59:27
  Speaker 1: iPad and you can see what that apartment, whether it's available,
• 59:31
  Speaker 1: and how much the rent is and go in and
• 59:34
  Speaker 1: u and rented and uh so. Or it could be
• 59:37
  Speaker 1: a tracks where it's going out there and building uh
• 59:41
  Speaker 1: you know decks over again with wood that's uh you know,
• 59:48
  Speaker 1: composite and it's better than the traditional would last longer
• 59:53
  Speaker 1: and uh and it looks more attractive. So it's not
• 59:58
  Speaker 1: just investing in wreaths. Or it can be investing in
• 1:00:02
  Speaker 1: a gaming company, uh, like a like a a Penn Gaming,
• 1:00:08
  Speaker 1: which which has sold the real estate that it owns
• 1:00:13
  Speaker 1: but operates the properties. Now you have a play in
• 1:00:16
  Speaker 1: pen and I've investing with Peter Carlino in Penn Gaming
• 1:00:20
  Speaker 1: since Three Mile Island right after you know, there was
• 1:00:24
  Speaker 1: a I don't remember what year it was, but it
• 1:00:27
  Speaker 1: was in nineteen seventies, I think somewhere where uh you know,
• 1:00:32
  Speaker 1: there was a nuclear explosion at three Mile Island in
• 1:00:36
  Speaker 1: Pennsylvania and in Harrisburg and went to visit him something.
• 1:00:41
  Speaker 1: Sometime after that he was going public for the first time,
• 1:00:44
  Speaker 1: and I think the market cap and his company was
• 1:00:47
  Speaker 1: twenty five or thirty million dollars. He ultimately sold a
• 1:00:49
  Speaker 1: company for seven billions. So so you find these people
• 1:00:54
  Speaker 1: and uh that that you can trust and you think
• 1:00:59
  Speaker 1: are really capable. You know, do I do I really what?
• 1:01:02
  Speaker 1: I trust this person to manage money for my family.
• 1:01:07
  Speaker 1: That is that's something I would feel comfortable choosing them
• 1:01:10
  Speaker 1: to be someone who would be uh in charge of
• 1:01:14
  Speaker 1: the assets that my family has. I wor wasn't here
• 1:01:18
  Speaker 1: and so it's the same kind of idea. So what
• 1:01:20
  Speaker 1: we're doing is like with Peter Carlino, there isn't anything
• 1:01:25
  Speaker 1: this guy told me that he's ever not performed. And
• 1:01:30
  Speaker 1: Stewart Fatum from Choice Hotels. Uh, there isn't anything I know.
• 1:01:34
  Speaker 1: Stewart ptom a thousand times. When I was in the
• 1:01:37
  Speaker 1: patent office in Washington, I borrowed, UH. Somehow I had
• 1:01:43
  Speaker 1: to get two thousand dollars because a Manner of Care
• 1:01:45
  Speaker 1: was going public in sixty nine. That was a company
• 1:01:49
  Speaker 1: his father had started. And man of Care was a
• 1:01:52
  Speaker 1: nursing home company, and I had read about NINETI they
• 1:01:55
  Speaker 1: had the nursing homes and medicare that I kind of
• 1:01:59
  Speaker 1: figured out somewhere, and and Washington Post wrote these stories
• 1:02:03
  Speaker 1: best that I got invest in that company, and so
• 1:02:05
  Speaker 1: I invested. I borrowed two thousand dollars to get a
• 1:02:08
  Speaker 1: margin account and UH a thousand dollars in patting office
• 1:02:12
  Speaker 1: credit union, three hundred hours from household finance, three hundreds
• 1:02:16
  Speaker 1: from beneficial finance. Somehow I came up with another four
• 1:02:19
  Speaker 1: hundred dollars. They have no idea how, but I had.
• 1:02:22
  Speaker 1: I got the two thousand dollars to open up an
• 1:02:25
  Speaker 1: account it I think the firm was called Reynolds UH company,
• 1:02:29
  Speaker 1: and and invested in Manner Care and manner of Care
• 1:02:34
  Speaker 1: uh was ultimately went up a thousand times from thousands
• 1:02:39
  Speaker 1: of times, since the company had a book value of
• 1:02:43
  Speaker 1: twelve million dollars when it went public, and it came
• 1:02:45
  Speaker 1: public at twenty million dollars when first trade. You know,
• 1:02:48
  Speaker 1: I p O twenty million dollars. That's the value of
• 1:02:51
  Speaker 1: the whole company. It was. We became in the seventies,
• 1:02:55
  Speaker 1: I was recommending the stock to my institutional clients. In
• 1:02:58
  Speaker 1: the eighties, We'll be came the largest institutional shareholder of
• 1:03:02
  Speaker 1: manner Care and it was sold ultimately for Carlisle roof
• 1:03:06
  Speaker 1: for four and a half billion work point three four
• 1:03:09
  Speaker 1: point four four from five something like that. And but
• 1:03:12
  Speaker 1: before it was sold Choice Hotel. Now we got Choice
• 1:03:16
  Speaker 1: Hotels is now a d stock and our cost is
• 1:03:19
  Speaker 1: maybe originally three dollars. So and Stewart being him one
• 1:03:24
  Speaker 1: of those people anything he said, there's good to be
• 1:03:28
  Speaker 1: at J Prince who was one of those people. Anything
• 1:03:30
  Speaker 1: they said. Prince who used to say to me run
• 1:03:33
  Speaker 1: Now I would talk to about contracts and and he
• 1:03:36
  Speaker 1: would say, ron a contract doesn't mean anything. If you
• 1:03:40
  Speaker 1: have to have a contract to enforce an agreement, you're
• 1:03:43
  Speaker 1: doing business with the wrong person, because that just because
• 1:03:46
  Speaker 1: any good lawyer can break any single contract you have,
• 1:03:50
  Speaker 1: So you have to look, you only have the contracts.
• 1:03:53
  Speaker 1: You can keep track of what the deal was not
• 1:03:55
  Speaker 1: so you can expect to enforce it. So, Ron, let's
• 1:03:58
  Speaker 1: talk a little bit about one of your are bigger holdings.
• 1:04:01
  Speaker 1: You've been a buyer of Tesla since the stock has
• 1:04:06
  Speaker 1: just exploded last year it was up over six Is
• 1:04:11
  Speaker 1: there any upside left here? Where do you think the
• 1:04:14
  Speaker 1: stock goes from here? Well, we bought stock in Tesla.
• 1:04:18
  Speaker 1: We spent three eighty five million dollars between two thousand
• 1:04:22
  Speaker 1: and fourteen and two thousand and sixteen by eight million
• 1:04:26
  Speaker 1: shares a million one shares, and uh, the average prices
• 1:04:33
  Speaker 1: forty to share forty two dollars to share is now
• 1:04:36
  Speaker 1: eight hund sixty and eight hund fifty, and so it's
• 1:04:40
  Speaker 1: now a hearing fifty billion dollar market cap. Who is
• 1:04:43
  Speaker 1: forty to forty five billion when we started. Uh, I
• 1:04:47
  Speaker 1: think that in and I've been saying this for a while.
• 1:04:50
  Speaker 1: When we bought it, I thought that we would make
• 1:04:53
  Speaker 1: twenty times our money. We've been twenty times our money
• 1:04:57
  Speaker 1: and so far, and I think that it's going to
• 1:05:01
  Speaker 1: be a two trillion dollar company over the next ten years,
• 1:05:05
  Speaker 1: eight or ten years. That's two thousand dollars a share.
• 1:05:08
  Speaker 1: And uh, and can we get lucky? Yeah, I can
• 1:05:12
  Speaker 1: get lucky. And and UH to phil Us, autonomous driving
• 1:05:16
  Speaker 1: takes off the way I think it could be, that
• 1:05:18
  Speaker 1: could be worth another five billion or trillion dollars. Uh.
• 1:05:22
  Speaker 1: Ride sharing could be a really big deal. Uh. The
• 1:05:27
  Speaker 1: solar roofs, that could be a nice business form the
• 1:05:29
  Speaker 1: battery business. Now, when they build factories, the factories they
• 1:05:34
  Speaker 1: build or for tund fifty thousand cars a year of
• 1:05:38
  Speaker 1: production and a factory when they built them in California,
• 1:05:43
  Speaker 1: when they built it in the first one in Fremont,
• 1:05:45
  Speaker 1: that was about seventeen thousand dollars of capital spending a car.
• 1:05:49
  Speaker 1: Now in China about four thousand dollars a car, and
• 1:05:53
  Speaker 1: the factory in China is probably a two hundred fifty thousand.
• 1:05:56
  Speaker 1: People thought it was gonna be a hundred fifty thousand
• 1:05:58
  Speaker 1: car factory, and that was the opportunity people perceived. And
• 1:06:03
  Speaker 1: but we thought that they do millions of pars a
• 1:06:05
  Speaker 1: year in China and that one factory they built so
• 1:06:08
  Speaker 1: far is a two hundred fifty thousand par factory a year,
• 1:06:11
  Speaker 1: and which is now at the rate it's producing, and
• 1:06:15
  Speaker 1: that's making somewhere around two and a half billion dollars
• 1:06:17
  Speaker 1: a year. So they invested a billion as making two
• 1:06:20
  Speaker 1: and a half day. And when you invested in McDonald's
• 1:06:22
  Speaker 1: a long time ago, you can invest a million dollars
• 1:06:24
  Speaker 1: as a franchise a and if you work, you know,
• 1:06:27
  Speaker 1: crazy hours and you put on your apron and got
• 1:06:30
  Speaker 1: old dirty, maybe you can make a quarter of million
• 1:06:33
  Speaker 1: dollars a year from million dollar investment. These guys have
• 1:06:35
  Speaker 1: a billion dollar investment to making two an a half
• 1:06:37
  Speaker 1: day in a year. Uh. Pretty wild, Like when when
• 1:06:41
  Speaker 1: he goes into China and uh, they spend two million
• 1:06:44
  Speaker 1: dollars two billion dollars in the first hotel in Macau
• 1:06:48
  Speaker 1: and uh, and they gave him they were so happy
• 1:06:50
  Speaker 1: that he came. He gave him land that he sold
• 1:06:53
  Speaker 1: for a billion dollars. He has a billion dollars net
• 1:06:55
  Speaker 1: and he started making a hundred million dollars a month.
• 1:06:58
  Speaker 1: But this is a testla they make a billion a
• 1:07:02
  Speaker 1: billion dollar investments and they make two and a half
• 1:07:04
  Speaker 1: billion a year. They're gonna do the same thing in Germany,
• 1:07:05
  Speaker 1: the same thing in Texas. What about SpaceX which Elon
• 1:07:09
  Speaker 1: Musk also wait one more thing, and and it tests
• 1:07:13
  Speaker 1: the battery business, which I think the car business could
• 1:07:16
  Speaker 1: be a six or seven hundred billion dollar business and
• 1:07:18
  Speaker 1: revenues a year and making two hundred million dollars a
• 1:07:21
  Speaker 1: year two hundred billion a year in ten years. So
• 1:07:24
  Speaker 1: that's how you get to this two train dollar value.
• 1:07:26
  Speaker 1: But that's not including the batteries. He thinks that the
• 1:07:29
  Speaker 1: battery can be also a business as big as the
• 1:07:31
  Speaker 1: car business. So think about that. So here he thinks
• 1:07:34
  Speaker 1: he's gonna go from five thousand cars a year to
• 1:07:37
  Speaker 1: twenty million cars a year, and he thinks his battery business,
• 1:07:40
  Speaker 1: who is gonna be the biggest car business. So I'm
• 1:07:42
  Speaker 1: talking about the two trillion dollars because of the cars.
• 1:07:45
  Speaker 1: I'm not talking about it for the batteries as far
• 1:07:48
  Speaker 1: as space X. But that is is that that's the
• 1:07:51
  Speaker 1: business that But we're an investor. We own a little
• 1:07:55
  Speaker 1: bit less than one percent. It's a private company, and
• 1:07:58
  Speaker 1: the value on its forty billion maybe and that was
• 1:08:02
  Speaker 1: where we started with Tesla. I think that SpaceX is
• 1:08:05
  Speaker 1: on the way to two trillion dollars also, so I
• 1:08:07
  Speaker 1: think that in TESTA, we're gonna make a triple in
• 1:08:09
  Speaker 1: ten years. I think that in space X we're gonna
• 1:08:12
  Speaker 1: make thirty to fifty times in ten years. Uh. And
• 1:08:15
  Speaker 1: one of the big reasons for that is that in
• 1:08:19
  Speaker 1: the nineteen sixties when we started, you know, when President
• 1:08:22
  Speaker 1: Kennedy's they were going through the moon. Uh and uh
• 1:08:25
  Speaker 1: the rockets that he used there were disposable hundred million
• 1:08:28
  Speaker 1: dollars rockets to the million dollar rockets they used one
• 1:08:31
  Speaker 1: time and then it burns up. I was when I
• 1:08:33
  Speaker 1: was working in the patent office, by the way, just
• 1:08:34
  Speaker 1: as a little side here, when one of the things
• 1:08:37
  Speaker 1: I did was I gave the patents on the nose
• 1:08:40
  Speaker 1: on the coatings that were used on the capsules that
• 1:08:43
  Speaker 1: returned to Earth, so all those capsules to make them
• 1:08:46
  Speaker 1: not burn up. I was the one who gave the
• 1:08:48
  Speaker 1: patents on that stuff. It's amazing. Uh. So yeah, full sir,
• 1:08:53
  Speaker 1: and and so with h with with SpaceX, the competitive
• 1:08:57
  Speaker 1: advantage that they have, the competitive advantage that test has
• 1:09:00
  Speaker 1: this battery stuff. A competitive advantage of space X had
• 1:09:04
  Speaker 1: is that they use the rockets over and over again.
• 1:09:07
  Speaker 1: So the fuel to get into outer space is maybe
• 1:09:11
  Speaker 1: an orbit maybe five thousand dollars a million dollars. Uh,
• 1:09:16
  Speaker 1: And the rockets are a hundred two or a million dollars.
• 1:09:18
  Speaker 1: They're throwing away a hundred two or million dollars instead
• 1:09:21
  Speaker 1: of just spending the rock in the fuel over and
• 1:09:24
  Speaker 1: over again. So now Tesla, the invention that they have
• 1:09:27
  Speaker 1: is that they use the rockets over and over and
• 1:09:30
  Speaker 1: over again. And so everyone said, man, you can't do that,
• 1:09:34
  Speaker 1: you know, you know, landing a rocket on a platform
• 1:09:38
  Speaker 1: in the ocean that's moving, they could use it again
• 1:09:41
  Speaker 1: and again. That's insane. Nobody could do. That's like dropping
• 1:09:44
  Speaker 1: a pencil from your from your hand, landing on the
• 1:09:46
  Speaker 1: racer and standing up doesn't work. He did it. And
• 1:09:50
  Speaker 1: so it's so if someone else is going to do
• 1:09:53
  Speaker 1: with China. When they were successful at this landing these rockets,
• 1:09:59
  Speaker 1: China had an a toorial in the Wall Street Journal
• 1:10:01
  Speaker 1: and they said, congratulations Elon Musk, But boy, are are
• 1:10:08
  Speaker 1: brilliant Chinese engineers. You're really missing out. You're getting beaten
• 1:10:13
  Speaker 1: not by a country, you're getting beaten by a guy.
• 1:10:16
  Speaker 1: But no matter with you, you've got to catch up.
• 1:10:18
  Speaker 1: And they and they think and the China, uh, you know,
• 1:10:22
  Speaker 1: editorial and the Wall Street Journal was we think we
• 1:10:25
  Speaker 1: are I don't remember if it's five years behind or
• 1:10:27
  Speaker 1: ten years behind, but way behind Elon Musk behind the
• 1:10:31
  Speaker 1: unit based behind Elon Musk. Um. So. So the idea
• 1:10:35
  Speaker 1: here is that there's three there's seven billion people on
• 1:10:38
  Speaker 1: Earth or seven half billion, and uh, and half of
• 1:10:42
  Speaker 1: them don't have internet. If you happen to live in
• 1:10:44
  Speaker 1: East Hampton or Vale or or even Palm Beach. Uh,
• 1:10:48
  Speaker 1: there's uh, there's not good reception for internet. And so
• 1:10:53
  Speaker 1: the big opportunity and the relatively short term is that
• 1:10:57
  Speaker 1: they can get they can have very low cost of launch.
• 1:11:03
  Speaker 1: So Elon Musk, company, Google and seven we are a
• 1:11:07
  Speaker 1: little bit less than one. And I think that this
• 1:11:11
  Speaker 1: uh internet to the broadband, from satellite to your home,
• 1:11:17
  Speaker 1: you're going to be an unbelievable business. Unbelievable and uh
• 1:11:22
  Speaker 1: because there's so many people that needed. So so this
• 1:11:26
  Speaker 1: is like the utility, this is like water, and this
• 1:11:28
  Speaker 1: is like electricity. You've got to have broadband and if
• 1:11:32
  Speaker 1: you want to if you want to cut that down
• 1:11:35
  Speaker 1: on the inequality, this president of the world, you've got
• 1:11:38
  Speaker 1: to have people educated the way you're getting educated as
• 1:11:40
  Speaker 1: a broadband do you own any other non public companies
• 1:11:45
  Speaker 1: or is this is SpaceX the only private firm your
• 1:11:49
  Speaker 1: Barren Funds investment. We own Rivan, which is another UH
• 1:11:55
  Speaker 1: electric car company, a small position than that, and that's
• 1:11:59
  Speaker 1: on twenty present by Amazon and UH we have a
• 1:12:03
  Speaker 1: small position in that. We're just investing right now in
• 1:12:07
  Speaker 1: Cruise that's another private company that's going to do a
• 1:12:11
  Speaker 1: car service UH or the autonomous driving in UH in
• 1:12:16
  Speaker 1: San Francisco and UH very shortly that's about to start.
• 1:12:20
  Speaker 1: We're investors in that. And then we're investors in a
• 1:12:23
  Speaker 1: couple of small investments that were investor in a battery company.
• 1:12:28
  Speaker 1: The Goldman Sacks also a very small investment. Baron Growth
• 1:12:31
  Speaker 1: Fund has this investment. UH and UH. The big problem
• 1:12:36
  Speaker 1: with the electric vehicles is where the batteries coming from.
• 1:12:40
  Speaker 1: And and and this company Goldman Sacks sponsored in Volkswagen
• 1:12:45
  Speaker 1: is the the big customer for making these batteries in
• 1:12:50
  Speaker 1: in Europe and using hydropower Norway hydropower and then a
• 1:12:55
  Speaker 1: farmer's network to allow farmers to get better seed and
• 1:12:58
  Speaker 1: lower prices. We're investor in that. So we have a
• 1:13:01
  Speaker 1: bunch of small investments, but we have in Bearing Growth
• 1:13:04
  Speaker 1: fund for example, about a bunch of investments that we
• 1:13:08
  Speaker 1: invested ten twenty million dollars that are worth two million,
• 1:13:12
  Speaker 1: three hundred million dollars. It was I had sold a
• 1:13:16
  Speaker 1: little bit of Tesla, and I wanted people to see
• 1:13:20
  Speaker 1: what I'm doing you so they don't think that I've
• 1:13:23
  Speaker 1: died and the only reason we still own test this
• 1:13:25
  Speaker 1: because I'm dead. So so so, so I put a
• 1:13:29
  Speaker 1: note up on our website. I said that what happened
• 1:13:33
  Speaker 1: is that, uh, it became a very large percentage of
• 1:13:37
  Speaker 1: a few funds that we managed, bearing Partner's Fund, bar
• 1:13:40
  Speaker 1: and Focus Growth Fund, one off shore fund that we have,
• 1:13:44
  Speaker 1: and so its results of that, I decided it would
• 1:13:47
  Speaker 1: be a prudent for me as as a business owner,
• 1:13:52
  Speaker 1: not just as an investorment a company to show people
• 1:13:55
  Speaker 1: that actually we do take profits on occasion and uh
• 1:13:59
  Speaker 1: you know when when when it's something not because there's
• 1:14:02
  Speaker 1: something wrong with the business troup because I'm afraid about
• 1:14:04
  Speaker 1: the volume of alatility in the stock, but rather because
• 1:14:08
  Speaker 1: I want to show people that we're responsible. So out
• 1:14:11
  Speaker 1: of the eight million shares, uh that that we have
• 1:14:15
  Speaker 1: eight million one shares, we sold five thousand shares for
• 1:14:20
  Speaker 1: our clients at at at four hundred and fifty and
• 1:14:25
  Speaker 1: five thousand shairs remember of course, uh, five thousand shares
• 1:14:31
  Speaker 1: at six fifty and two hift thousand shares at at
• 1:14:37
  Speaker 1: eight d fifty, and so basically us it's painful every
• 1:14:43
  Speaker 1: time I've sold it. But people just say, gee, how
• 1:14:48
  Speaker 1: can you? Don't you ever sell? That's a matter with you.
• 1:14:51
  Speaker 1: And and but for so, what I did in in
• 1:14:55
  Speaker 1: Tesla is that I said that that now I will
• 1:15:00
  Speaker 1: be I'm not buying stocks. I only invest in our
• 1:15:03
  Speaker 1: mutual funds. And that was the commitment I made. And
• 1:15:07
  Speaker 1: since with a couple of little, tiny exceptions, and the
• 1:15:11
  Speaker 1: exceptions where when we wanted to have a large cap
• 1:15:15
  Speaker 1: growth fund, I said, okay, this ten million dollars just
• 1:15:19
  Speaker 1: without knowing anything about Berkshire Hathaway and Goldman Stacks and Cloudcom.
• 1:15:25
  Speaker 1: You're not really doing research. I'll best tenny stocks and
• 1:15:30
  Speaker 1: and see how they do, and I'll compare that that's
• 1:15:32
  Speaker 1: my benchmark against our large cap growth. So we did that,
• 1:15:36
  Speaker 1: and I did a couple of little things like that
• 1:15:38
  Speaker 1: is what I did. And then uh, then when Testa
• 1:15:41
  Speaker 1: comes along, I said, geez, this is gonna be this
• 1:15:44
  Speaker 1: monster company, and uh. And what I want to do
• 1:15:48
  Speaker 1: is I went to the board and I said, in
• 1:15:50
  Speaker 1: two thousand and fourteen and two thousand and sixteen, I
• 1:15:52
  Speaker 1: wrote all the stock I could buy for a couple
• 1:15:55
  Speaker 1: of funds that I managed, and most of the mutual
• 1:15:57
  Speaker 1: funds at Bearing Capital, which all are uh real estate
• 1:16:02
  Speaker 1: or healthcare or fintech or emerging markets or small camp
• 1:16:08
  Speaker 1: they can't own Tesla, and so I and a couple
• 1:16:11
  Speaker 1: of guys that could own it. I tried to persuade him,
• 1:16:14
  Speaker 1: and I wasn't successful. I said, I'm not used taking
• 1:16:17
  Speaker 1: anyone's opportunity. If I invest in this, I'm not gonna
• 1:16:20
  Speaker 1: do it personally, but I'd like to take fifty million
• 1:16:23
  Speaker 1: dollars on behalf the Barren Capital and invest it in Tesla. Uh.
• 1:16:28
  Speaker 1: And I think I can make a billion dollars on it,
• 1:16:31
  Speaker 1: and I can afford to lose fifty million. It wouldn't
• 1:16:34
  Speaker 1: be pleasant, but I can afford to lose it, but
• 1:16:36
  Speaker 1: I can't afford not to make a billion. And if
• 1:16:39
  Speaker 1: I do make it, I'll give some of the profits
• 1:16:41
  Speaker 1: to people who work at Barren Capital. In addition, at
• 1:16:43
  Speaker 1: Barren Capital would just be stronger. And my goal is
• 1:16:46
  Speaker 1: to make it. They asked for a hundred years. So
• 1:16:48
  Speaker 1: I wanted to be have a stronger balance sheet, even
• 1:16:50
  Speaker 1: stronger than it does now, and they gave me permission.
• 1:16:52
  Speaker 1: I said, I'm committing that I will be the last
• 1:16:55
  Speaker 1: person to sell. So I'm the last person to buy
• 1:17:00
  Speaker 1: because no one else is going to buy a parent capital,
• 1:17:01
  Speaker 1: and I'll be the last one to sell. I'm not
• 1:17:03
  Speaker 1: gonna sell anything until all of the shares are sold
• 1:17:05
  Speaker 1: by all of my clients. And the directors of Barns
• 1:17:08
  Speaker 1: Fun said, that makes it sounds reasonable. Uh, and it's
• 1:17:12
  Speaker 1: fine to go do it, And so I did that,
• 1:17:15
  Speaker 1: and uh it turned into way after a five or
• 1:17:18
  Speaker 1: one split a million one shares. So uh, I told, uh,
• 1:17:23
  Speaker 1: you know, so when the five hundred million two shares
• 1:17:27
  Speaker 1: that we sold so far for clients I haven't sold
• 1:17:30
  Speaker 1: a single share, fifty million became eight hundred fifty eight
• 1:17:33
  Speaker 1: hundred sixty million or eight nine hundred millions something like that. Okay,
• 1:17:37
  Speaker 1: that's not too bad a return. Oh, pretty cool. And
• 1:17:41
  Speaker 1: I think that there's three more times to come from that,
• 1:17:44
  Speaker 1: and uh and then over ten years and so so
• 1:17:49
  Speaker 1: very easy. The advantage that we have is that just
• 1:17:53
  Speaker 1: hardly I don't know any people. I'm sure they must
• 1:17:56
  Speaker 1: be out there, but I don't know people who are
• 1:17:58
  Speaker 1: investing for other. People said, I'm gonna make a ten
• 1:18:02
  Speaker 1: ten year investment for a twenty year investment in a company,
• 1:18:06
  Speaker 1: and as long as the fundamentals are as I expect
• 1:18:09
  Speaker 1: him to be, stay with it, and I'm not going
• 1:18:12
  Speaker 1: to worry about the price in the meantime. And you
• 1:18:15
  Speaker 1: know so, so that's what I do. And as long
• 1:18:19
  Speaker 1: as the fundamentals for here the business fundamentals PROTESTA. From
• 1:18:24
  Speaker 1: the time we invested in it in two thousand fourteen
• 1:18:28
  Speaker 1: UH to last year, the business grew from two lays
• 1:18:31
  Speaker 1: and eight h to twenty five billion dollars in sales.
• 1:18:34
  Speaker 1: The stock price didn't change, went up and down, up
• 1:18:37
  Speaker 1: and down, up and down, and then went up ten
• 1:18:38
  Speaker 1: times to the stock price caught up to U to
• 1:18:42
  Speaker 1: the business, and now the business is going to grow
• 1:18:45
  Speaker 1: faster than the stock price over the next ten years.
• 1:18:49
  Speaker 1: I think, Wow, that's amazing. Let me let me throw
• 1:18:51
  Speaker 1: you a curveball for our last question. You're ready for this? Ye?
• 1:18:56
  Speaker 1: You You grew up in Asbury Park and years after
• 1:19:01
  Speaker 1: you left, you were sort of unhappy because the Asbury
• 1:19:05
  Speaker 1: Park football team ended up winning the state championship, but
• 1:19:09
  Speaker 1: they were disqualified, and you were so unhappy about it.
• 1:19:13
  Speaker 1: You bought trophies for the teams and got rings for
• 1:19:16
  Speaker 1: all the players that were inscribed with undefeated on the field.
• 1:19:23
  Speaker 1: Tell us about that. I read the article in the
• 1:19:26
  Speaker 1: New York Times that described that, and uh, I felt badly.
• 1:19:32
  Speaker 1: I mean, when I went to high school, it was
• 1:19:35
  Speaker 1: a minority high school. I mean it was black and white. Uh.
• 1:19:41
  Speaker 1: And maybe it was about that. Maybe it was two
• 1:19:45
  Speaker 1: thirds white and one third black, or maybe it was.
• 1:19:48
  Speaker 1: And there were two thousand kids there, and now there's
• 1:19:51
  Speaker 1: a thousand kids when this happened, and it was virtually
• 1:19:54
  Speaker 1: all minority, and uh, and the shining and it was
• 1:19:58
  Speaker 1: eighteen or employment in Asbury Park, and the board walk
• 1:20:03
  Speaker 1: was a mess, and I felt badly and and and
• 1:20:07
  Speaker 1: so here are these kids. And there were two kids
• 1:20:09
  Speaker 1: who were ineligible and they played on the team. And uh,
• 1:20:13
  Speaker 1: because that day they first, I think it was, they
• 1:20:16
  Speaker 1: were they went eight and oh or nine and oh,
• 1:20:20
  Speaker 1: and all of a sudden went we took away all
• 1:20:22
  Speaker 1: the victories and went oh and nine. And so I said,
• 1:20:25
  Speaker 1: oh my god, this is this is everything for this town.
• 1:20:28
  Speaker 1: And so I said that maybe it's something I can do.
• 1:20:31
  Speaker 1: And it was this trophy case in the front of
• 1:20:33
  Speaker 1: the school, uh, where he said, bought the trophies for
• 1:20:38
  Speaker 1: and with the scores for every game that they had,
• 1:20:41
  Speaker 1: and it's had undefeated on the field, and then every
• 1:20:44
  Speaker 1: football player's name I had inscribed on there. And then
• 1:20:47
  Speaker 1: I bought them rings that said undefeated on the field.
• 1:20:50
  Speaker 1: And Springsteen UH read about it. And then he gave everyone,
• 1:20:54
  Speaker 1: including me, baseball jackets, football jackets. It's said the same thing,
• 1:20:58
  Speaker 1: undefeated on the fields I got. I got Springsteen jacket
• 1:21:03
  Speaker 1: from that would be Bruce Springsteen of Asbury Park. I
• 1:21:06
  Speaker 1: also have another story about Springsteen when when we when
• 1:21:12
  Speaker 1: when I have my nineteen eighty we have our first child,
• 1:21:17
  Speaker 1: Judy and I and we didn't have a weekend house,
• 1:21:20
  Speaker 1: and we bought uh this this old house built in
• 1:21:24
  Speaker 1: eighteen sixty on two and a half acres on Navasink
• 1:21:28
  Speaker 1: River Road, nine Navastink River Road, uh and overlooking Rumson,
• 1:21:34
  Speaker 1: overlooking the Navasink River and to the leftist so the
• 1:21:36
  Speaker 1: ocean maybe sixty ft high and so and and it's
• 1:21:40
  Speaker 1: now eighty and we paid two fifty dollars board in
• 1:21:43
  Speaker 1: the middle of these fifteen acre states. Bon Jovi was
• 1:21:48
  Speaker 1: on the street and Uh Roger Pensky was on the streets.
• 1:21:51
  Speaker 1: They had big houses. We had this tiny little house
• 1:21:55
  Speaker 1: and uh with a with a with a dirt basement,
• 1:21:58
  Speaker 1: and so we have it were two and a half years,
• 1:22:01
  Speaker 1: three years, and now we have two children. We have
• 1:22:05
  Speaker 1: Duty's dad living with us, and we have a nanny
• 1:22:08
  Speaker 1: and we're bursting at the Season's house. The guy knocks
• 1:22:10
  Speaker 1: on our door and says, uh, I'd like to buy
• 1:22:14
  Speaker 1: your house. And I said, well, it's not for sale,
• 1:22:17
  Speaker 1: and uh, he says, well, how about for fos I
• 1:22:21
  Speaker 1: said just a second. But it was the door to
• 1:22:24
  Speaker 1: see Duty somebody wants to buy a house for four
• 1:22:27
  Speaker 1: hunderzo dollars because she says sell it. So I opened
• 1:22:30
  Speaker 1: the door and said, you just bought a house. And
• 1:22:32
  Speaker 1: it turns out that this was a lawyer representing Springsteen.
• 1:22:36
  Speaker 1: So he bought that house and he lived in it
• 1:22:39
  Speaker 1: for he had a habit by he just gotten married
• 1:22:43
  Speaker 1: and he needed to have it by Um I think
• 1:22:46
  Speaker 1: of it like December fifteenth or as well. He wanted
• 1:22:50
  Speaker 1: to have it for a celebration in December uh, and
• 1:22:55
  Speaker 1: so we sold it to him at the end of
• 1:22:56
  Speaker 1: the summer and you know, no problem. And then uh.
• 1:23:01
  Speaker 1: And then what he did afterwards is that uh. For
• 1:23:06
  Speaker 1: I was an the borter harvest man and he which
• 1:23:09
  Speaker 1: is a day school and my kids went to and
• 1:23:11
  Speaker 1: he would give us regularly when when they would have
• 1:23:16
  Speaker 1: these auctions, I would call him his agents, who turns
• 1:23:19
  Speaker 1: out now with the agents my friend. But I would
• 1:23:23
  Speaker 1: call the agent and he would give us, uh, you know,
• 1:23:28
  Speaker 1: record albums that would say he would autograph I would
• 1:23:31
  Speaker 1: say R C. K. Rocket and then exclamation points Bruce
• 1:23:36
  Speaker 1: Springsteen and I WoT auction for you know, hundred dollars
• 1:23:40
  Speaker 1: to or whatever it was I would get, you know,
• 1:23:42
  Speaker 1: get these these gifts, uh, that he would put out
• 1:23:46
  Speaker 1: to raise money for Horseman. That's Ron, Thank you so
• 1:23:51
  Speaker 1: much for being so generous with your time. We've been
• 1:23:53
  Speaker 1: speaking with Ron Barron, founder of Barren Capital. If you
• 1:23:57
  Speaker 1: enjoy this conversation, well, be sure and check out any
• 1:24:01
  Speaker 1: of the other four d previous interviews we've had over
• 1:24:05
  Speaker 1: the past six years. You can find those at Apple, iTunes, Spotify,
• 1:24:10
  Speaker 1: wherever you feed your podcast fix. We love your comments,
• 1:24:14
  Speaker 1: feedback and suggestions. Right to us at m ib podcast
• 1:24:19
  Speaker 1: at Bloomberg dot net. Gives a review on Apple iTunes.
• 1:24:23
  Speaker 1: If you would like to get my free daily reads,
• 1:24:26
  Speaker 1: you can sign up for that at rid Halts dot com.
• 1:24:29
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• 1:24:33
  Speaker 1: dot com slash Opinion. Follow me on Twitter at rit Halts.
• 1:24:38
  Speaker 1: I would be remiss if I did not thank the
• 1:24:40
  Speaker 1: crack team that helps put these conversations together each week.
• 1:24:45
  Speaker 1: Reggie Bazil is my audio engineer, Michael Boyle is my producer.
• 1:24:51
  Speaker 1: Atika val Bron is our product manager. Michael Batnick is
• 1:24:55
  Speaker 1: up my head of research. I'm Barry RIH Halts, and
• 1:24:58
  Speaker 1: you've been listening to Master's in Business on Bloomberg Radio.