Every investor wants to know how to make massive returns, but it can be difficult to decide which of the many dizzying approaches to take. Ron Baron of Baron Capital Management advises investors to invest in companies that they can imagine what they will be.
At the 2025 Morningstar Investment Conference, Baron joined Morningstar’s Adam Sabban to talk about his investing principles, Tesla, SpaceX and Elon Musk.
Today, Baron’s investment philosophy is to focus on long-term, patient, unique assets with a competitive moat, but he didn’t always invest that way. Sabban kicked off the discussion by asking about the most impactful lesson from earlier in his career.
Also our coverage of the 2025 Ben Graham Conference, 2025 Global Alts New York and the Best Alternative Investment Fund Conferences for 2025.
At the very beginning
Baron said when he started out, he was in debt, living in his friend’s basement. He owed $15,000, and it took five years to go from -$15,000 to +$15,000. Baron bought and sold stocks in the 1970s, emphasizing that if you have no assets to compound, your rate of return doesn’t matter.
Then in the 1970s, he did research, selling it to hedge funds, mutual funds and anyone who would talk to him. In 1975 or 1976, George Soros had a bad year, and he gave Baron $5 million each.
Baron started Baron Capital with $10 million in 1982. He’s made $50 billion in profits from $100 million in 1992, advising investors to “invest in the haystack, not the needle.” Emphasizing the power of compounding, Baron said in 1992, $10,000 invested in the Baron Partners Fund is now worth $250,000 — all because of compounding.
According to him, Baron Partners Fund has been the number one mutual fund in the U.S. since 2003 and the only fund to beat the QQQ. Baron Growth Fund has been the number three small-cap growth fund in the U.S. since 1996, while the Baron Focused Growth Fund is the number two mid-cap growth fund in the U.S.
Baron Capital’s key principles
One of the key principles of Baron Capital is investing in people, not stocks. Other key principles include question everything and own it, meaning the only macro thing Baron thinks about is inflation because the stock market doubles every 10 to 11 years and the economy doubles every 10 to 11 years. He aims to invest in companies that grow faster than the market.
Baron Capital also invests in businesses rather than stocks, so the firm aims to hold it for the long term. Baron said whenever he lists to a company’s earnings call after a quarter, all they talk about is the next quarter, which he doesn’t care about.
What he actually cares about is what the company will become. Baron believes they’ve done better than the market because they can imagine what a company will become — not just what it is.
Investing in people
Zeroing in on Baron’s comments on investing in people, Sabban said he thinks that has been Baron’s superpower as an investor, his ability to identify CEOs and then go on to create an enormous amount of shareholder wealth. Sabban then asked what he looks for in CEOs.
Baron said it’s about investing in people and character, recalling Retired U.S. Army General Stanley McChrystal’s speech about the character of the people under his command. Baron has never done a single layoff at his firm, spending lots of time with people training them about what to look for. He wants to hear them talk about prospects and risks with their business and how they will deal with challenges.
Baron said people must have a drive and want to accomplish something and build something everlasting that benefits employees, people they’re doing business with, and society. He added that this what Elon Musk and all the most successful people do.
A visit with Elon Musk
Recalling a time Musk came to visit him, unshaven and wearing clothes that didn’t match, Baron said Musk told him he was going to make 20,000 cars a year. At the time, he was only making 1,000. Baron didn’t feel that was credible but kept visiting and calling him. It took four years before Baron bought a single share in Tesla. Over that period, the stock went from $25 to $75.
Over time, Baron felt the pain of not investing in Tesla was too great, so he had to invest, earning 20x his money. He expects to make 3-5x again over the next 10 years, although Musk expects much more than that.
SpaceX
Starting in 2017, Baron invested in SpaceX, and he never had seen a company that was in as much demand by as many investors as SpaceX. He explained that most people who offer a chance to invest in the company have partnerships and charge lots of fees, but he holds it in his mutual fund and charges a 1% fee.
At this point, Baron has invested $1 billion up to now in private offerings for SpaceX. In a decade, he expects to make 10x his money, although Musk predicts 30x his money.
Alpha is everywhere
Baron believes alpha is everywhere — if investors are willing to buy something they have to imagine what it will become rather than just considering how much the company pays in dividends or what its book value is right now. According to Baron, investors who can imagine what something will become and not just think about what it is can make huge returns.
Thus far, he’s made 30x his money in Tesla, just for imagining what it could be. At this point, Baron owns about 70% of the shares he held in 2014, but he still owns the stock because it’s a conscious decision.
He expects to own SpaceX at least another 10 years, with no expectations of ever selling a single share. Baron also owns xAI and Costar, a data analytics firm for real estate.
