Ron Baron: Why the SpaceX Billionaire Investor Never Sells a Great Business

Ron Baron, the founder of Baron Capital, tells Columbia Business School how he turned $5 million from George Soros into $71 billion of client profits by owning great businesses and refusing to sell them. In A Conversation with Ron Baron, part of the school’s Distinguished Speaker Series and moderated by Jennifer Prosek of Prosek Partners, the 83-year-old investor covers his years as a patent examiner and fired analyst, the four years it took Elon Musk to win him over on Tesla, his $25 billion SpaceX stake and where he thinks it goes next, the rules he runs his firm by, and why he has never laid anyone off.

TLDW

Baron got fired from almost every job he had before starting Baron Capital in 1982 with $5 million that Soros had given him to manage. The firm now runs about $69 billion and, by his count, has compounded at 21 to 22 percent a year since 1992. His method is to own businesses rather than trade stocks, back founders he trusts, and wait 5 to 10 years, which is how he ended up with roughly $7.7 billion of Tesla profits and a 1.25 percent stake in SpaceX that he thinks can rise 20 to 30 times. He closes on inflation as the only certainty in investing and on a family business that caps its own profit margins so it never has to lay anyone off.

Thoughts

Baron’s real edge is not stock picking. It is that he almost never sells, and the tax code quietly rewards him for it. Near the end he mentions, almost in passing, that Baron Capital has about $4.5 billion of book value plus another $1.5 billion of deferred taxes, and compares it to Warren Buffett, because “I don’t sell stocks, so I don’t have to pay tax on the gains that I produce.” That deferred tax is effectively an interest-free loan from the government that stays invested and keeps compounding. A trader who realizes gains every year hands a slice of the pile to the IRS every year; Baron’s pile keeps the whole slice working. Over 30 years at 21 percent, that difference is a big part of how $100 million in 1992 becomes the 700 times he describes. Most investors hear “buy and hold” as a temperament. In his hands it is also the cheapest form of leverage available.

The best moment of the talk is his comparison with Izzy Englander of Millennium, a friend whose $95 billion multi-manager fund turns over about 15 percent a day, against Baron’s 10 percent a year. Asked what happens when one of his portfolio managers falls in love with a stock, Englander reportedly said he sells it while they are at lunch and fires them when they come back. Both men are enormously successful, which is the point. Neither style is “right.” Each works because the whole structure around it, from client terms to compensation to risk controls, is built for that holding period. Baron can wait a decade because his clients and his own balance sheet let him; a pod manager at Millennium cannot wait a quarter. The lesson for an ordinary investor is to pick the holding period your own structure can actually survive, and stop borrowing the habits of people whose structure is different.

There is a tension in the talk that Baron never resolves. Asked about downturns, he tells the room that most people should buy index funds, that it is hard to beat the market, and that the only certainty is 4 to 5 percent inflation that keeps eroding cash. That is sound, modest advice. Twenty minutes earlier he told the same room that SpaceX, already valued at $2 trillion, could be worth $20 trillion to $50 trillion in 10 years, and that his friends and doctors should buy it every month and buy more on the night they panic about how much they own. Both cannot be general advice at once. The honest reading is that the index fund line is for everyone, and the SpaceX line is an 83-year-old billionaire’s conviction about one company he has studied for nine years and owns 1.25 percent of. A reader who copies the second without his balance sheet is taking a very different risk than he is.

The most unusual management choice is the profit margin cap. Most asset managers aim for 30 to 50 percent margins; Baron says he targets 20 to 25 percent at peak and accepts single digits in bad years, and the firm has never had a layoff. He treats employees like a factory owner treats plant: you do not burn the plant down when business is slow. He backs it with real money, putting $12,000 per person into SpaceX partnerships for everyone earning under $600,000, stakes now worth $700,000 to $800,000 each. That is a retention plan, and it also explains why the firm can hold a decade-long position without staff turnover forcing a change in strategy. Patient capital needs patient people, and he pays for both.

The Tesla story is a useful corrective to the myth of the instant conviction bet. Baron met Musk at the 2010 IPO, thought he had no chance against unions, carmakers and oil companies after watching 50 or 60 car companies fail in his lifetime, and kept talking to him for four years before investing. Musk later teased him on stage about how long it took. The $400 million he put in between 2014 and 2016 is now worth about $7.7 billion in profits, and the relationship is what got him to the front of the line on SpaceX tender offers from 2017. The long hold made the money, but the long wait before buying is what made the hold possible.

Key Takeaways

Baron Capital started in 1982 with $5 million that George Soros’s Quantum fund gave Baron to manage under the code name “Mandrake.” It reached $100 million by 1992 and runs about $69 billion today.
Baron says the firm has made $71 billion of profits for clients, roughly 700 times since 1992, which he puts at 21 to 22 percent a year compounded.
Before investing, he was a biochemistry instructor at Georgetown, a US Patent Office examiner (a draft-exempt job), and a night law student who quit one semester short of his degree.
He was fired as an analyst at Janney Montgomery Scott for a sell recommendation on General Development, and Barron’s editor Alan Abelson helped him land his next job.
His core idea came from his childhood: the families with money owned things. He thinks about investing in businesses, not stocks, and hates trading.
He met Elon Musk at the 2010 Tesla IPO, waited four years, then invested $400 million from 2014 to 2016 for about $7.7 billion in profits so far.
From 2017 he invested about $2.5 billion in SpaceX, mostly through employee tender offers, which became $25 billion by June. He then bought another billion dollars at the offering to avoid dilution.
Baron Capital owns about 1.25 percent of SpaceX, which he says is $3 to $4 billion more than NVIDIA holds. He expects 20 to 30 times from here in 10 years, with Starlink alone worth $14 to $15 trillion.
His firm’s rules: invest in people, question everything, own businesses, accept that exceptional takes time, and protect reputation.
Analysts are told to ask questions as if their family’s welfare depended on being right, and to mentally take a business apart and reassemble it.
He will not invest in a great business if he does not trust or like the person running it, and he values people who keep a handshake deal even when it costs them.
For most people he recommends index funds. He treats 4 to 5 percent annual inflation as the only certainty and does not invest in crypto or gold.
Baron caps the firm’s profit margin at about 20 to 25 percent and says it has never had a layoff.
Employees earning under $600,000 got $12,000 each in SpaceX partnerships that are now worth $700,000 to $800,000 per person.

Chapters

0:09 Introduction and the Worst Job Ever

Jennifer Prosek, a Columbia alum who runs Prosek Partners, describes meeting Baron after his firm hired hers. At their first breakfast he spent 25 minutes typing notes about her life instead of talking about his. She sets out the headline numbers: $71 billion returned to retail investors, about $25 billion in SpaceX and another $5 billion in Tesla. Baron then tells a dinner story about the worst job he ever had, working nights in a New Jersey emergency room holding down gunshot and stabbing victims and wrapping bodies in intensive care.

5:37 Bucknell, the Patent Office and a Cot by the Water Heater

Baron says he was better at fraternity than classes at Bucknell and did not get into medical school. To avoid Vietnam he taught biochemistry at Georgetown, then took a draft-exempt job as a patent examiner, issuing patents on nose cone coatings, while going to law school at night at George Washington. At 26, no longer draftable, he quit, dropped law school one semester short, and moved into a friend’s basement in Maplewood, New Jersey, doing chores for room and board while he looked for work on Wall Street. When he nearly gave up, his father told him he had to keep trying.

9:46 Fired Over a Sell Call

Janney Montgomery Scott hired him as the only researcher for 250 brokers. Around 1970 he issued a sell recommendation on General Development, arguing that inflation had made its obligations to develop the land lots it had sold far larger than they looked. The company’s chairman exploded and Baron was told to clear his desk by noon. Alan Abelson of Barron’s, who had been reading his letters, offered him a reporting job and, when Baron declined, helped him find work as an analyst instead.

13:07 Soros, Mandrake and the Founding of Baron Capital

Through the 1970s Baron sold research to institutions and wealthy clients, recommending familiar companies such as McDonald’s, Disney and Federal Express. His net worth went from minus $15,000 in 1970 to $1 million in 1980. In 1977 George Soros’s Quantum fund gave him $5 million to manage under the name “Mandrake,” and he stood out by buying and holding while everyone else traded. That $5 million seeded Baron Capital in 1982, which grew to $100 million by 1992 and roughly $69 billion now.

16:35 Owning, Not Trading

Baron’s father was a government engineer who earned $2,500 a year in 1942 and was proud to reach $10,000 by 1957. Baron noticed that his friends’ wealthier families all owned something, from boardwalk rides to hotels to law practices. A friend’s father taught him that a stock pays you to own it while it grows. With $1,000 saved, he bought 100 shares of Monmouth County National Bank, watched it never fall for months, and saw it acquired at $17. The lesson he took was ownership, not trading.

21:07 Four Years to Invest in Tesla, Then SpaceX

Musk visited at the 2010 Tesla IPO in plaid, cargo pants and clogs, promising 20 million cars a year while making a few thousand. Baron thought he could not succeed and kept talking to him for four years before investing $400 million between 2014 and 2016. From 2017 he joined SpaceX’s twice-yearly employee tender offers, often as the first or second largest buyer alongside Abu Dhabi, Fidelity and Blackstone, and asked to be called whenever long-time holders wanted to sell. About $2.5 billion invested became $25 billion, and he added another billion at the offering so he would not be diluted.

27:12 The SpaceX Forecast and a Car That Stops for Ducks

Baron expects SpaceX, now valued at about $2 trillion, to reach $20 trillion to $50 trillion within 10 years, with Starlink worth $14 to $15 trillion and orbital data centers potentially larger. He tells friends to buy every month and to buy more on the night they panic. He then describes a self-driving Tesla taking him from his garage to a Hamptons pancake breakfast with no input, stopping for a duck and six ducklings on the way, and says the car now drives better than he does.

32:40 A Mission-Driven Family Business

Baron says most people in his business want to make as much money as fast as possible, while his mission is to change the financial lives of clients and employees. His principles are to invest in people, question everything, own businesses rather than trade stocks, accept that exceptional takes time, and guard reputation. He contrasts his 10 percent annual turnover with Izzy Englander’s 15 percent a day at Millennium, and quotes Roy Furman on treating every day as a job interview and Robert Kraft’s father on leaving his son only a good name.

40:15 Investing in People Who Keep Their Word

Asked what makes him back a founder, Baron says it is someone who does what they say. A neighbor in East Hampton sold him seven acres for the $30 million they had shaken on years earlier, even though the land was then worth $50 million. Tom Pritzker persuaded him to buy non-voting Hyatt shares at the IPO by promising to treat him like family. Hyatt has since bought back a large share of its stock and the price has risen from the mid-twenties to around $150.

45:14 Downturns, Inflation and a Safe Full of Gold Coins

Baron says 97 percent of his funds beat the market and Baron Partners Fund has been the top US fund since 2003, yet he tells most people to buy index funds. The one certainty, he argues, is 4 to 5 percent inflation over his 83 years, visible in house prices and college tuition, so savings must be invested in growth companies. He avoids crypto and gold, though he admits to buying rolls of gold coins after 9/11 until his wife asked whether he expected change when paying for a bottle of water with one.

51:56 Building a Firm That Lasts

Baron Capital has 240 people, 45 of them analysts and portfolio managers, organized in industry verticals with mentoring toward portfolio manager roles. Book value has grown from $100,000 in 1982 to about $4.5 billion, plus $1.5 billion of deferred taxes because he does not sell. Employees under $600,000 a year received $12,000 SpaceX partnership stakes now worth $700,000 to $800,000. He targets 20 to 25 percent margins rather than 30 to 50, has never had a layoff, and closes with the story of the one firing he tried, which ended with a $150,000 bonus.

Notable Quotes

“I got fired from almost every job I ever had. Almost every one.”
Ron Baron, on his early career before Baron Capital

“When you wake up that morning, go to your broker and buy more.”
Ron Baron, on the advice he gives friends about SpaceX

“It’s not possible to own enough of a great business, period.”
Ron Baron, passing on a lesson from George Soros

“Well, when they go to lunch, I sell it, and when they come back, I fire them.”
Izzy Englander, as retold by Ron Baron, on portfolio managers who fall in love with a stock

“If I don’t trust them, if I don’t like them, if the chemistry isn’t good for me, I don’t care how good the business is, I’m not going to invest in it.”
Ron Baron, on backing founders

“And so I say that the only thing you’re certain about is inflation.”
Ron Baron, on investing through downturns

“We have never had a layoff in the history of our business, not one.”
Ron Baron, on running Baron Capital as a family business

Watch the full conversation here.