Transcription
He said, "If you have identified, do not listen to other people. If you have identified and you have done the work on a business that you think can grow tremendously, you can't own enough of it. You can't own enough of the greatest idea you've ever had."
That's the way I feel about SpaceX, which is why I urge my friends and executives of companies to invest in SpaceX. And I wouldn't be telling them to do that at these prices if I didn't think that making these kind of investments is going to change their lives, which is what I believe.
Many people believe SpaceX's upcoming IPO is a culmination of a historic investment opportunity. And in SpaceX, where so far we made about $12 billion, I think we're going to make somewhere uh I I think we're going to make from the time it goes public and the IPO is priced for one and a half trillion or one and 3/4 trillion or two trillion, that kind of a range. Um I think that over the following 10 or 15 years, we're going to make that company which is going to be valued initially for less than $2 trillion dollars. I think uh we think uh uh is going to be worth 10 trillion, 20 trillion or $30 trillion. Uh people in the company believe that I'm lowballing it, but that's what I think. And we think that this is going to become SpaceX will become the largest most profitable company on the planet.
I was recently been on CNBC and I was talking to uh the head of Goldman. I said, "Ron, you should look back in 1604. And in 1604, uh there was a West Indies trading company, and they had the exclusive rights for 22 years to get to uh trade spices and fabrics between Europe and uh and and and the Middle East, the Far East rather. And uh so so uh and then they needed to raise money. So they went to the people who lived in Holland and they said, "Uh, we will invent the limited liability corporation. If you give us money to buy these boats, uh, then the most you could lose is how much you put up. You can't lose your house, you can't lose your family, you can't lose any. All you can lose is what you put up." So that was one big innovation. Innovation number two was that uh they had made a trading market for those securities that people had been enticed to purchase. And because of that and they raised the money and they built the boats and they traded for 22 years and because of that exclusivity exclusive right that they had to trade with a valuable commodity uh they became the most powerful wealthiest company on the planet the number one company on the planet and uh and Dan said that's sort of like in his career and he's a lot younger than I am. So uh so he has never seen anything like this before uh where SpaceX has the ability to get to space and uh and and and and lead uh the space economy uh and and have very difficult for anyone to ever compete against him. Uh or if they can there will be niches. I mean you would never bet against Jeff Bezos. There will be an opportunity for Bezos, I'm certain. Uh but uh the main person the main beneficiary of the space economy is going to be SpaceX.
So how do we come up with evaluations? Uh and so there are several pockets, several opportunities uh that SpaceX has. They all come about because this company has been able to launch a rocket uh and bring it back to Earth again and reuse it over and over and over again. And so they've done this about 600 times since uh 2000 when we started to invest in 2017. They hadn't done this yet. Uh but uh uh in this past since then they've done it 600 times. Last year they did it 165 times and we think they're going to do it thousands of times a year. Thousands. And they right now uh in and have four launchpads. The culture that he has is everything has to be done faster, better, cheaper. That's him. Faster, better, cheaper.
We talked to people uh Isa and I were speaking to one of the executives for X in Memphis uh a few weeks ago and this uh person was the CFO of that business and uh I said so what are you doing? He says well what we're doing here is that we're all getting ready because Elon's coming tonight coming tonight. Uh he said yeah he's going to come here at midnight and he's going to meet with hundreds of engineers. Hundreds of what does he do at night time with hundreds of engineers? Well, um we buy a lot of things at this uh at this facility and uh and what he wants to and make sure of is that we spend money uh appropriately. We don't overspend. In fact, when he gave a recent presentation, he spoke about how uh what he wants to do is give engineers a little bit less than they need to accomplish their goals. So, they're very conscious about how much to spend. So, he says, "What does he do?" First thing he comes, he says, "Show me the purchase orders of everyone. Show me purchase orders." I said, "Purchase orders?" He said, "Yeah, uh because someone had just fallen off a platform and hurt themselves in this plant a week or two ago, and so we were installing railings." She said, "Show me the pictures." So they showed him pictures and there's two railings going around. And uh and he says, "Why do you need a second level of railing?" I said, "Well, I guess we don't, Elon, you're right." And and and then they say, "Well, why does Elon says, "Well, why do you need this on all of the different platforms, all the different heights? someone falls off a low platform, they're not going to hurt themselves. And he says, "Yeah, you're right. I guess we don't have to do it." But but the whole idea of his is that he wants the culture. Everything sooner or later gets to be a commodity. So he wants to be the low-cost provider of every service that he's in invested in and continue to innovate and make things better and better, faster, and faster. That's his whole idea.
No one else does this. And so you're dealing with a government. What the government does is they put out contracts which are cost plus and and and there and therefore the providers are incented to take longer and cost more. Uh and what Elon does, Hill is the only one who bids for contracts fixed price. He says my risk uh and and I'll take it and he does it for half price of what others are doing it and gets it better and other guys stuff doesn't work and when he does it it does work. Anyways, the bottom line is he has this culture that's installed that enables him to compete better than other people.
So, what enables him right now, these businesses that he has presently are that he can reuse rockets over and over again. So, for other people to get to space cost him $150 million. Right now, it's costing us tens of millions of dollars. It's about to cost us $5 million or $3 million. So, number one, we get this space cheaper. So because of that we can have constellations of satellites uh that other people can't afford because it cost them too much to get there. So we can do that. And then uh when we started uh I guess we were doing I guess earlier uh this year uh we were uh doing 20,000 uh units a week and now we're doing 500,000 a week. Just everything is multiplying uh uh tremendously so we can provide these services.
So story link. So story link is the internet for the whole planet. The internet for the entire planet. That means if you're in the ocean, you're in the mountains, you're in the desert, uh you're in the air, you can use your telephone. And I have people tell me over and over again, amazing to use uh to use Starlink. So Starlink is a business right now that has last year it had 9 million customers. This year it'll have 15 million customers. We think that in uh in 10 years it's going to have 300 million customers plus the enterprises plus the government. What's that going to do? We think it'll do about a trillion dollars of annual revenues and seven or 800 billion of IBIDA and be worth about $14 trillion. So basically the whole company is coming out for less than two trillion. Starlink alone we think in 10 or 12 or 15 years will be worth $14 trillion. That's number one. And that's only beginning to penetration. There's eight billion people on the planet. Five billion have internet is spotty and three billion have internet don't have internet at all. So it's a huge market. And to get to the numbers that we're describing is 300 million customers. That's business number one.
Business number two is the fact that uh data centers uh are quite controversial now. And the issue that people have is that when they come up in their community, their electricity bills go up. So the governor uh candidate uh in New Jersey uh she won because she said we have to stop these data centers from going up and your electricity bills are going up. We have to stop them. And her roommate when she was in Congress uh ran for Virginia governor and she had the same campaign. They both got elected. And so everywhere you go in this country now is costing more to build data centers. Uh cost 40 or 50 billion dollars to build a data centers. takes three or four or five years, you can't get a fixed price contract. Uh and uh and when you get it built, if you get the permits, if you get the people, if you get the powered land, uh uh then you get campaigning against you. So what uh what what we have here is a ability and and it's also very expensive to cool it with water and also very expensive to run it with electricity. So what we're going to do and what Bezos says he's going to do ultimately and what uh Gemini uh which is uh uh uh Google wants to do and what Anthropic wants to do. They all want to use our power. Our power is going to be satellites in space which are going to be data centers. So we have 10,000 satellites on the way to 20,000 for Starlink. 10,000 on the way to 20,000. In the next four or five years, we're going to have 1 million satellites which are going to be data centers, uh, you know, tied together in a mesh, not physical mesh, uh, but with lasers in space. Uh, and that's going to be for inference. And so, so all of a sudden, you're going to have all these companies that don't have compute. So, Anthropic, they've just gone from having a business that in December, I'll try to shorten it up a little bit here, but uh they have they were doing $9 billion of annual revenue, annualized revenues in December. They're now doing 45 or 50 billion. It's a 5-year-old company. They're about to go public with a valuation of eight or 900 billion dollars. We have the same thing as them called Gro at the inside of of of X, which has been acquired by Tesla. So basically, we have the same thing, but they've been better at us for coding. Uh, and uh, uh, we have a pipe going in that's similar and a faucet coming out that's similar. And the magic box, they've done better than we have in coding. We got to catch them. And Elon doesn't regard anything short of being as good or better than anyone else as as a vic. He regards every if I'm not number one, I lost. And so he So, so where we are right now is that we started three years later. uh but we think that and he thinks that the barrier to these businesses these large language models is the fact that you don't have uh the barrier compute and so just to show how important that is anthropic has come to us anthropic with these tremendous growth uh opportunities and saying look I can't meet my customers demands because I don't have enough compute can I rent some of your compute so they go to us and they say we'd like to rent your compute in Memphis and Elon says but I can give it to you short term I can't do it long term right now and they've agreed according to perspectus to rent it for 1.25 billion per month 1.25 25 billion a month which is $15 billion annualized and that and what they're renting uh we guess uh Isa and I yes and our analysts we we think that might have cost them 15 or 20 billion and they're renting it for $15 billion a year and and because the other people are so desperate for commute compute Google wants to rent it anthropic wants to rent everyone wants to rent our compute they've focused on coding we will be equal to them in coding or hopefully better before the next four or five months.
The second business now is is data centers in space. No cooling needed because we got space, no electricity needed because we got the sun and and so it's a lower cost to operate and and and we have tremendous demand from all of the people you read about with large language models. They want to use our compute in space.
Next is that retail and that's going to be trillions of dollars of revenues making 70% margin. Several times as valuable as Starlink.
Next one is that we go to TSMC and we go I I say we a lot in companies that we invest in because I think of them as we we're partners. We are investors in their business and they allow us to invest and take part. They work they do all the hard work. All we do is put money in and they spend it and they make these incredible returns. So, so what we're thinking about is that uh we go to TSMC, a Taiwan semiconductor, and we say we need uh for our robo cars for Tesla and for our data centers in space and for our Optimus robots and Tesla, we need 50 times as many chips as the whole world makes presently. 50 times. So, Taiwan says, "Well, that's really nice, Elon, but we can't take that kind of risk. We got a really cool business now. uh we can't satisfy your demand. And they go to Samsung, same thing. So he says, "Okay, we're going to do it ourselves and we're great at manufacturing things and uh we can do this." And so we're going to spend and we partner up with Intel for some technology expertise, but we have our own ideas about how to make stuff and and so we think we're going to be able when when we buy things from Nvidia, what Nvidia is making is an 80% profit margin on products that they're selling. And we only use maybe 6% of the content of a chip because Nvidia makes these chips for everyone and for every all different purposes. We only need a fraction of what that chip is uh being made for. And so what we're going to do is we're going to make chips instead of making them do everything. We're going to make them just do a couple things. And we just do a couple things we think we can reduce the cost of the chips that we're buying by 70 80 90%. But it's not just the fact that we're making them cheaper. It's the fact that if we don't get enough chips, we can't grow as fast as we want. So chip manufacturing for ourselves. That's the next thing we're doing.
Then the next thing we're doing is Grock. Uh you've just been reading about Anthropic, as I just mentioned before about how big the opportunity is and how much they're doing. Uh what we uh I'm sorry about Anthropic. Grock is the same thing. Uh and and but we're just behind. And so what we think we're going to do is in the very short term, months, not years, months, uh that we're going to be the equivalent or as good as uh the leading uh large language models. And in the perspectives, it's disclosed that we think the opportunity is somewhere around $2 trillion a year. $25 trillion a year. Think about that. The entire United States economy is 30 trillion. the world economy is a h 100red trillion. The economy United States doubles roughly every 10 years and we're telling you that we are going to make the uh something we have an opportunity as big as the whole economy. And so obviously that doesn't pencil out. And what pencils out or what you think about is well obviously something has to change. And what Elon thinks is going to change is that with his robots in autonomy and every uh and and and and chips that we're going to make the economies grow instead of doubling every 10 years going up 10 times every 10 years. So everyone's lives are about to change. So the the uh the purpose of Baron Capital and the purpose of of Elon is that to change lives. That's what we're doing. We are investing not just so we can get super rich or not just so we can go somewhere and do whatever. We're investing to have an impact on people's lives. The the the whole theorem of our business is changing lives. So we question everything. We invest in people. We own things for long term. We think anything's possible. But it's everything takes time and and so what we're thinking about is that uh over the long term these businesses that he's starting are going to be what what what Grock is is that we're going an enterprise what they do is they're saying okay we're going to take the job of a million knowledge workers and those million knowledge workers we are going to study them and understand how they move and how they use compute and we're going to duplicate those jobs and instead of someone making 20 or $25 an hour, we're going to be able to do it for 25 cents an hour for chips. That's what's happening. And so what are those other people going to do? I promise you, there will be lots and lots of jobs and and and they're not going to be doing the same exact thing as they're doing now, but they're going to be there's never been a technological innovation in the world where you haven't seen a huge increase in jobs. There was an interview with Jeff Bezos on uh I think it was 60 minutes or somewhere for the last few days really I guess it was maybe a CNBC uh where it was a great interview and he's talking about the jobs that are going to be created uh by this technology. So, so those are some of the businesses that uh that this fertile mind has considered uh and thought about and going to bring to us and change our lives uh and uh and change your lives. Uh and so uh uh that's who we're investing in and I'm so excited about SpaceX.
So, in uh in in the investments that we have right now, of the 63 billion, roughly $15 billion in that is invested in SpaceX. And of that $15 billion uh um uh that's valued at at SpaceX for a $1.25 trillion uh you know enterprise value and and before long that enterprise value is going to change to one and a half or one and three/4ers or $2 trillion. But that's just the beginning. So people can be buying it because they think oh well I'm great I'm going to make a good return in a short period of time by investing in it now. But the real return you're going to make is a return you're going to be making over the next 10 years where we think it's going to go 10 20 30 40 times your money. Uh and and your children and grandchildren are going to say, "Man, thank you so much for what you've done for my family, for our family by investing in SpaceX. I pro there's one picture that sticks in my head about uh the first launches in 1969 and it's about a shoreline with a bunch of families standing on the shore and from shot from the back picture from the back and there's a a dad holding his his child's hand and just see it's just so emotional and so touching that's what is going to happen by your investments in SpaceX. Now, we believe you are going to make a huge amount of money because the earnings of this company are going to be explosive in the next five or 10 years, but because you're going to be doing something really good for the planet and for society and for your families and for everyone else.
So, with that, uh, Katcha, you want to leave the questioning? I'm sorry I went too long.
Um, I think you just answered our first question, which is, given SpaceX's valuation has gone up a lot, is it too late to invest? And the answer from you is a resounding no. Um, which Baron funds currently own SpaceX?
Um, if you look at the current letter from Ron, which you can get on our website, uh, there's disclosure about every one of our mutual funds uh, that has ownership interest in Tesla and SpaceX and what percentage of the funds uh, that it represents. And we've had significant inflows into our funds since then. And so it's a little bit less than what's disclosed there, but we it's still very large positions, larger than any other uh firm that I've seen holding investments. And the reason they get so large is not because we buy large positions, but because we've invested in companies that have been incredibly successful and just because they become successful, we don't say, "Oh, I got it. We better sell quick before it goes back to where it started." We have done the research on these businesses. So as a result of that, we are able to continue to hold those investments where other people who have to listen to others for advice can't possibly do that. If you made two or three or four times your money, you can say, "Man, I am so lucky. I better sell it fast before something bad happens." But if you're like us and you study these businesses over and over and speak with the executives over and over, speak to your competitors and customers over and over all the time. That's what we do. And then you understand a business and you understand opportunities otherwise you can't possibly do this.
Will Baron buy additional SpaceX shares at the IPO price?
Yes. Uh I've given an order for a billion dollars. Um and uh they said how do you how do you come up with a billion dollars? I said well um the company uh we now have $15 billion and the company's valued for uh 1.25 trillion. So we own about one and a quarter% of SpaceX. And if you're going to raise $70 billion uh and uh and I don't want to be diluted uh then we need to have a billion dollars. That's why that's why I come up with a number. And and there's so many people who are huge money managers, people with two trillion, three trillion, one trillion, they don't own a share. And the people who own uh who have seven or eight trillion dollars, they own way less than they can. So So you have huge demand coming from people who don't own enough and have to own more. Uh and then you also have these indexes where where passive investors uh have to invest in those indexes. Uh whether they like it or not, if they're going to duplicate an index and you have a new company coming into the index, they got to invest in it. So you have demand coming from investors who don't own any and want it and are large cap growth investors. They have to own it. And then in addition to that, you have people who are going to be trying to duplicate an index and they have to own it too. And then you have people like us who say, "Boy, I have never in my life seen a business like this." And I haven't. Uh then they they have to own it, too. And you have to own it for us. Um I I've told my son, you say, "Say, Dad, don't say never, but I can't imagine that I'm ever going to sell my stock in Tesla in SpaceX >> or Tesla >> or Tesla."
Great. Thanks, Ron. We're getting a lot of questions on the potential merger of SpaceX and Tesla. Do you think that's realistic or pure speculation?
Um well I don't know more uh than anyone else. Uh no one there's been no public announcements and I have uh you know made assumptions that a lot of uh Elon's businesses uh the interests converge uh and if one person one business makes a profit the other one uh has an expenditure. uh so you're able to do uh things without having to uh uh you know merge but whatever so I believe that uh this individual is the most consequential industrialist engineer physicist on the planet and uh and he jokes whether he's from this planet or not but I'll take his word that he's from here and and I think that uh that I am we are not activist investors And if he thinks it's better to be merged, then we'll support him. And we'll explain why and we'll support him. And if he explains that it's better not to be merged, uh, then we'll support him. Whatever he wants to do, it's his, you know, he he's got more at risk than anyone else. And he's the, you know, giving his health and putting himself at risk, physical risk, uh, for for making all of our lives better. I It's amazing person he is. I I often, you know, question I don't understand exactly how uh I became friendly with him and uh and um just changed my life, changed our lives and uh and and I don't think I can't think, you know, of someone who I admire more. One of my friends was telling me when I said that on CNBC that he's the most p person I admire the most. My friend said, "You know, you should say that the person you admire most is your wife." I said, "Okay." And so Judy says, Judy says, "Well, if you say that, then I'll know it didn't come from you."
Well, Ron, speaking of Elon, how do you think about keyman risk at SpaceX? And how dependent is SpaceX on Musk versus the broader management team, including Gwen Shotwell?
Gwen Shotwell is incredible. And so she's actually gonna speak at our annual meeting this year for the third time. Elon has been there uh once physically and twice uh virtually. Um the uh uh when when I started to invest in SpaceX uh I was very concerned about uh security. uh and uh in fact one of the questions that I asked him at the Met one year was uh was a question this was when he was buying uh Twitter and uh and he answered it you know Ron I can't answer that question I have enough people trying to kill me and so the fear I have look someone tried to take out the president a couple times so far took off his ear uh and uh and so initially I was concerned that security wasn't strong enough. Uh but I do think that uh his security is probably as good as the president's security right now. And so so he's aware of risk. And then as far as I'm concerned, uh then he has I don't know 130 140,000 employees, hires 30,000 people a year. Out of the 30,000 people a year he hires uh there are something like three million applicants. You know, it's hard. It's impossible to get a job there. You got to be brilliant and you got to work like crazy. Uh, you know, we were out there, Isa and I were out there a few weeks ago and we were meeting with a young woman who I recommended uh to SpaceX to hire. The only person I've ever recommended uh to to SpaceX after I met her and had lunch with her. She's uh her grandmother is friends with my wife. And so she asked me if I would have lunch with uh with her granddaughter and I did. And I had a two-hour lunch. She was 22 at the time and she's now 26. and and I spoke with her and I said this this woman I called Gwen I said Gwen you got to hire this person she's brilliant and she's like a young you a young Elon and so ultimately went through eight or nine months of interviews before she got the job and she got the job and when I talked to her uh so Isa and I were having lunch with her uh breakfast I guess it was breakfast a few weeks ago in Los Angeles and uh and I was saying well how's your boyfriend doing well is on this project. Uh and uh I don't see him that much because he works uh till midnight every day. Seven days a week. I said, "Seven days a week? Every day till midnight?" She says, "Yeah." Um and I said, "People get paid extra for that." She says, "No, people do this because they love it. So they hire brilliant people who want to work with Elon, who are missiondriven, who are creating stuff. So he has unbelievable people working for him and and they want to work there and and learn from him and and Gwen was telling me once she said they come and they she he has these meetings uh where they might take 30 young people in and he goes around the room and asks him questions and they ask him questions that not so much asking him although they should and then they walk out of the room shaking their heads saying did you believe what we just learned there? Can you believe that? And then uh and then uh they say to each other uh you know that's not possible to do what he's asking. And uh they say well yeah but somehow said Gwen says yeah but if he says you can do it you can do it as an example. They said we can reuse rockets. Okay reuse rockets. and uh and he says and what we're going to do is we're going to initially uh we we're going to ultimately land them in a site where all we got to do is uh you know hold it up there and then refurbish it a little bit and then fill it up with fuel and use it again. And in addition though he says what we're going to do is we're going to land it on a barge in the ocean a barge in ocean and I say seriously that's what we're gonna do land on a barge in the middle of the ocean. Yeah that's what we're gonna and that's he did it. So ultimately he comes up with ideas that everyone who works with him say, "Wow, you know, I didn't ever think you could do that." So the idea about him being super important, no question. And would it be uh, you know, a loss to everyone who lives on Earth, a lo if something happened to him? Yes. And uh but the people who had you know he's built his culture and he's hired these incredible people and so this company you haven't built much of a company if it only build if it only relies on one person and uh and he's built a great staff a great bunch of people uh that only I'm watching a film of Mark Josa and he's the person who's in charge of uh of of Starship which is which is this this change a stair ship stair fair step change in the capacity they have for bringing things to space and returning them by 10 times, 15 times, 20 time and and so so I'm watching him give a presentation and he looks like he's I don't know 35, 40 years old. He skis by helicopter. Um he uh he rides a motorcycle. And so he's speaking to this room of button-down people who wear ties and jackets and and and he's wearing jeans and engineer boots and a plaid shirt and he's unshaven and his real long hair and uh and a beard and and he starts talking and he says, "And we got to get a crapload of this and a crapload of that and a f this and f." And I'm saying, "Oh my god, that's me when I'm 35." So he has great people.
What is SpaceX's closest competitor? How should we think about Blue Origin for example?
Um well Blue Origin uh I think will be successful ultimately Amazon will be successful. Uh and uh you would never say as I mentioned before that uh that uh Jeff Bezos wouldn't be successful at anything he tried. And uh so I'm sure about that and and so he's an entrepreneur uh very wealthy entrepreneur and so everything he does uh has to be perfect I think uh the mindset uh so he doesn't uh shoot rockets up and let them blow up and and learn from that. He wants it to be right the first time where Elon uh idea is to keep trying things over and over and over again until he just learns what doesn't work and then makes things that that do work. So I think Blue Origin is going to be a competitor, but I'm hoping that uh they find uh niches uh to to work uh together. Uh and I think that's happening uh to some extent. uh they're not enemies, that's for sure. And and so so I'm encouraged about uh you know, a relationship with uh with Musk and uh and Bezos. Uh as far as there will be lots of opportunities for lots of companies in space, a lot. So when you build uh you know, they're going to build plants on on the moon. Uh and Jeff Bezen says that when he graduated uh high school that he was a valatoran and his speech in high school was about about space. He's been interested in space. He says he probably knows more about space than he does about retail. And u so so I'm sure he'll be successful whatever he does, but he's not going to compete headon against Elon. That's not going to happen. And uh but he but he is going to use uh the the resources that he has and they're they're plentiful uh to become a great manufacturer using AI and using uh another using the moon uh and and hopefully they can sort of divvy up uh uh services that they need. So he's one that most the other companies though they get sort of um oified. uh then there's a great incentive in in uh in American businesses uh for people not to take risk. And the reason for it is when uh you you're 60 years old or 65 and you hope you're going to become uh the chairman of a company that you work for, uh then you're incented not to try something new. It's and risky. And the reason for it is if you do uh and it's uh is not successful, that's a black mark against you for becoming the leader of that business. And if it happens to be successful, that just means you're going to have to work harder. So if it's successful, you work harder. And if it's not successful, uh uh you lose your opportunity to move ahead. So there's incentive for inertia. and and and so the reason companies like like Tesla who's not in the SpaceX I mean gee what they do is they innovate faster so other people are innovating also but even though we have this 10-year lead on everyone we're innovating faster than the people who are uh who are coming up behind us and so the we the lead the spread is widening uh uh so I don't Chinese are going to be competitors They're great engineers and some really smart, hardworking, diligent people and the government supports them. So, they're going to be successful at whatever they do. And uh someone to be admired and and uh remember that in China when you want to open up a business in China, what you have to do is you need the government's permission. And the permission is granted if you own 49% and a Chinese company owns 51%. That's for everyone except for Tesla. And so basically they let Tesla own 100% the only one like that. And the reason they did is because uh they were convinced that Elon was more knowledgeable about technology and in the past the Chinese automobile manufacturers had not been very successful and he persuaded them that all those people who he hires in China are not going to just be working for him but ultimately they'll leave and some of them and they'll go start other businesses and he will help them build robust supply chains and and train people uh to uh to be successful uh engineers and entrepreneurs. So people the Chinese admire he's when people came to visit us they said the only one we we try to copy is him. Uh so there are people that will come up and there were companies all the time and say I'm going to do this and I'm going to do that and you know I'm sure there will be but there's no one going to be like him.
Ron we're getting a lot of questions on justifying SpaceX's valuation. So here's uh a question. Is the valuation based more on Starlink, launch dominance, Starship, data centers, AI infrastructure, defense, Mars, or all of the above?
All of the above.
Thought you might
Everything.
Is there anything you think the market is underestimating about SpaceX over the next 10 or 15 years?
Well, when we uh when we began to invest in uh in Tesla, um they the battery business was immature and not scaling yet. They didn't have Optimus robots at that time. Uh they were just starting to make a lot of money in cars, but it was really early. And uh and then when we invested in SpaceX uh that was before uh they launched rockets that were and were reused before they did that uh uh and before they uh talked about uh whether they could have data centers in space before people recognized that the uh the value that's created from the understanding of uh behaviors in driving cars or in conversation that takes place real time on X uh was going to be incredibly valuable uh before anyone saw that. He saw it and and so so you can't really say so what the way we think about uh SpaceX is that over from the time we invested in SpaceX in 2017 we've made 54% per year kagger 54% per year kagger in the last nine years and when I was thinking well maybe what we should do is now the company's at a scale maybe we should uh think about growing at 30 or 35 5% a year and instead of 54% which is pretty remarkable 30 or 35 and I was disabused of that notion to reduce uh the growth rates that we're thinking about uh because they're just on on such a track uh so I didn't go down to uh Bokhica uh to the facility I haven't been there for maybe two or three years and was just there and said you wouldn't believe what's happened there since you've been there last time, you wouldn't believe it. And so when we were there last time, uh they had these canopies up and they were building rockets under tarps and they had a dune that was erected on the water to prevent the land from flooding. He says they built a city there. They built a city. You wouldn't believe it. I got to go back. I'm trying to go back. Uh, I probably won't get there for a little bit, but uh, they are just going so fast. And so what people are underestimating is how fast they're going and how much profits they're going to generate. Just think if they go out there and they spend 12 or 15 billion dollars on on a portion. They can build data centers for uh the actual the chips they're paying the same as everyone else right now. Although ultimately it'll be less, dramatically less. But everything else they're buying uh they're doing it all themselves. whether people have three levels of subcontractors and it cost them three times as much. So, we're buy building things super fast. Everyone has three or four years. We do it in 122 days was the first 100,000 GPUs and then 92 days the next 100,000 GPUs and and uh uh Jensen Juan said that the only person on this planet and before I was commenting about how Elon says that in joking around that he's not from this planet but you never really know. But he said the only person who could do this is him only one. And so when he builds these things that he makes when when he's going to rent out uh compute for uh $15 billion annualized a year and it cost him $15 billion. I my goodness. Uh and and everything he does he how does anyone ever catch him? And uh so what I think about is you know here he is not I'm hoping he takes better care of himself. Uh but I worry about that a little bit. or worry about someone you know trying to hurt him. Um and uh but so he has protection brings in great people. He's built an amazing company and and I think the opportunities that that are there for this business are so enormous. I don't think people recognize it. I don't think they recognize how big they're going to be with with this data centers and space. Trillions a year of revenues five, six, seven years away. Trillions. And then with with uh with Starlink, you're talking about a trillion in 10 or 12 years. And with seven or eight hundred billion dollars of IBIDA, that's in in within 10 years. But people aren't going to look out 10 years. They don't want to buy invest in a company until they can see it now. But the people who've been most successful are the people who invested in Apple 20 years ago and forgot they owned it and then look what it became. where they invested in Google or Meta when they came public for the first time. This is what this is. SpaceX, this is going to be in our opinion the largest company on this planet. And right now you're buying it for $2 trillion. That's what people are are not getting. This is going to be the largest company, most profitable company on this planet.
Ron, going back to the IPO for a minute. Um, people are asking, can the broader stock market absorb an IPO of this size, especially if the large AI companies also come public?
Um, so, so we're not macro investors. So, that's the kind of picture that, you know, that a hedge fund would say, well, it can't do it. We better sell it short. Sell short the market. So, who knows? Uh, and I don't know what's going to happen short term. And all I know is I'm paying a really attractive price to buy it now. All you can do is figure out what something's We think. All that you can do is figure out what something is going to become and then you have to buy it for much less than it's worth in some future date and time. Pick a pick a point 10 years, five years, and this is what it's going to be earning. And if that's the case, and this is how much it can grow in the future after that, then how much is that worth? And if you buy it at a big enough discount from that price today, that's a good deal. And to me, if you're buying something in SpaceX today at let's take $2 trillion at $2 trillion and one of the businesses you think in 10 or 12 years can be worth $14 trillion, you're making seven times your money in 10 years and that still has a lot of growth in the future. And you're not including all these other businesses they have. How could you not want to own that? And the only reason you wouldn't want to own that is because you haven't done the work to be able to make the judgment that that that is going to be uh that that's going to happen. when uh when when I was managing uh money for uh for uh for George Soros, one thing uh that uh that stuck in my head was that he said that if you uh have identified if you have identified do not listen to other people. If you have identified and you have done the work on a business that you think can grow tremendously, you can't own enough of it. You can't own enough of the greatest idea you've ever had. That's the way I feel about SpaceX, which is why I urge my friends and executives of companies in which we've invested uh to do a good thing for them like they've done for us uh to invest in SpaceX. And a lot of the people who invested in SpaceX with us so far uh uh are those my friends and executives of companies and uh and family and and I wouldn't be telling them to do that at these prices if I didn't think that making these kind of investments is going to change their lives, which is what I believe.
Thank you, Ron. Um I think we only have a few more minutes. So just a few final questions to wrap up. Uh, a few people wondering about Mars. How long will it take to get humans to Mars? And how relevant is Mars even to the investment case here. Is
The ambition financially relevant? >> Um, when I first started investing in personal investing, I didn't really understand it as much. I'm sure I still don't understand uh what the opportunities are. Uh, but it's going to be years away before that happens. And there's so many other things that will happen in the meantime. And uh and who knows how how governments will encourage people to go there and what he you know when you go to the museum of natural history in New York and there's a room with dinosaurs flying around in the sky and to get into that room there's six boxes on the floor glass boxes that describe the eras uh where all life on earth was extinguished six times and uh all everything wiped out six times and So what Elon says is who knows you know you have people who are in control of uh of of countries and have nuclear weapons and who knows what they're going to do. Uh and you don't know if uh you know earth is what 4 billion years old big bang was 14 billion years ago 13 billion years ago was first light but four billion years that's it for earth and that means that this has happened every billion years earth has been wiped out every 600 800 million years so he wants to make sure that that uh he calls it uh the light of consciousness is not extinguished u and so he wants to be able to have Now, Gwen thinks that Mars is a is a fixed up planet. She's not into camping, so she's not going there. On the other hand, uh you know, it's a good backup, but ultimately they're going to be technologies that are going to enable us to uh to travel all the galaxies, I would imagine, uh through wormholes or however. I mean, I I I read comic books when I was a kid, just like everyone else has. And uh science fiction, science fiction is pretty close to what's happening now. And uh I can't imagine what the lives of my family, my grandchildren and their grandchildren are going to be like at some 100 years, 200 years from now. I don't know. Um it's not going to be the same as it is now. That's for sure.
>> Great. Ron, just two more very quick questions. What's the next SpaceX?
>> Baron Capital.
>> I love that. No, I I can't imagine there being another SpaceX. But but that's people can't imagine what is going to come next. I you know people say, "So tell me about the next Elon. Tell me about the next Elon. Why do I have to say about the next Elon? This is this Elon. You don't need another Elon."
>> Um I think you said it um very well earlier when you said you can't own enough of the best investment idea you've ever had. I assume you'll also tell us you can't own it for long enough. Uh but positioning it this way, recognizing that every personal situation is different, how are you thinking about monetizing this investment now or soon versus holding it for the very long term?
>> Um I don't have any thoughts about shares that I control ever selling, but of course that's not that big of a promise because I am 83. Uh but I'm not selling my shares uh in in in my lifetime. Uh I don't think and uh you never say never. Michael Baron says never say never. Uh but so many things in front I can't imagine leaving. Uh so I'm I'm not selling. In fact, as I mentioned before, we're trying to buy another billion dollars worth of uh of SpaceX stock and this offering. And I'm not a trader. I'm just an investor. Just an investor. Investing in businesses that are run by people uh who I admire, who I trust, uh who are really smart, great leaders. And it's about owning something. Uh because one, the only thing I think about for certain in my economic life is that the value of your money falls in half every 14 or 15 years. Every 14 or 15 years. So inflation is four or five% a year for my lifetime. And when I think about my parents, uh my dad was an engineer for the army and his first home was $5,000 in Wanamassa, New Jersey outside of Asbury Park. And that home is now worth $500,000 or $600,000. The next home they bought in 1955 for $20,000 is now worth a million half dollars. And I've told the story a few different times about uh I guess a couple or three years ago then uh it was a it was snowing in New York when it snowed in New York and it's really snowing and it was a Saturday and Judy says uh you got to go out and get some food. And I said, "Well, it's a it's a blizzard out there. If I go out, I might never be able to come home." She says, "We'll starve if you don't go out. You got to go out and get food." So, I go out to Madison Avenue, start walking up Madison Avenue, and on the left hand side is a butcher shop uh on Madison Avenue and uh and I go in and they have these big uh cases and they're white and glass. You look through and and they have these huge steaks in there and the guy behind the counter and I say, "Wow, what great looking sirloin steaks. How much are they?" And he says, "$67 a pound." I said, "$67 a pound?" I said to the guy behind the counter, I said, "Wow, when I was young, I couldn't afford to shop here. I still can't afford to shop here." Um, $67 a pound, maybe 71. And so everything is about inflation. And the way whenever there's a COVID or there's a war or there's a financial crisis uh governments what they do uh to come out of it and maintain power is they print money and uh they give the populace uh you know they make sure the populace is supportive and so when that thing happens it doesn't make it more productive it just makes more money going around to make the same to buy the same stuff inflation so over and over again. So inflation every now and then might touch 2% and then it goes to eight or 9% but average is four or five and so you have to go four or five. So investing in stocks uh and investing in a business that grows much faster than that four or five% uh that you lose every year buying power for your money uh is uh is what we do. We just invest in growth companies. That's it. Nothing but growth companies uh and invest in them for the long term. Invest in just like some people would own a hotel or a restaurant or a law practice or rides on the boardwalk or boats. Uh we just own investments. That's what we do. We own investments.
>> Thank you, Ron. You mentioned your childhood in New Jersey and someone who clearly knows you well said, "When you were driving an ice cream truck, how did you run Mr. Softy out of Asbury Park?"
>> Um so so uh so when I was driving carnival bar and so for summer and a half I did that and what you would have to do is you have to be uh in the uh carnival plant and eat in town. You have to be there at uh you have to be leave the plant um to be on the route by 10 o'clock in the morning and you have to stay out till 10 o'clock at night and you had to work at least six days a week uh and sometimes seven and and what you would do is that you try to figure out when you get to the beach in these little pocket beaches and when you get there and and you see the people eating ice cream cones you know that's not the way you're supposed to be. You have to psych out the person who's driving the competitive ice cream truck. And so I was beating him. I was going, well, if he was there, then the next place he's going to go is here. And I wanted to be there before he was. So, and and and the big measure of uh whether you're successful or not, is that at that time uh if you did a $100 a day of revenues, that's a bill. We called it a bill. If you did a bill a day, you made $25. The 25% revenues became yours and and I was able to do uh record numbers because I went places to sell ice cream. I went there and I was breaking $100 regularly a day for doing that. But because of that experience I had with uh with driving an ice cream truck myself about I don't know three years ago. One of my friends came to me and said that he has a friend, he's a young guy, has a friend who used to be a disc jockey and he wanted to be an ice cream man. And so he described to me a business uh with these trucks which were I don't know $300,000 a truck maybe. And and what he was doing is that he would sell ice cream on the internet. So he would have a route and he would call all the people in a community before he goes there, email them. So he would go instead of getting this $100 a day when he showed up in a in a neighborhood, he would do 1700 $1,700 a day. And instead of paying someone a quarter of his revenues, he would pay him $20 an hour and and then we get some tips. And so I said, "Wow, that's a cool business. I like to do that." So I actually invested in this guy's business. I think I own three or four ice cream trucks. And every year at our annual meeting, we have these ice cream trucks at the end. And I tell people, just tell them Ron sent you. We have them parked up outside of the Metropolitan Opera. Just tell Ron sent you and we give you free ice cream. And and the last story I'll tell is that my wife goes out and uh at the end of a conference and the line there's 5,000 people standing in line with five trucks. And so she says, "I can't stand here." So she goes to front of the line and says, "I'm Ron's wife. Uh can I can I cut in line here? I got to get home." And and the guy says to her, "Prove it." So she takes out her badge and she shows it says, "Okay, grudgingly, okay, you can do it." And uh so so I I'm part owner of an ice cream truck still.
>> That's a great note to end on. We hope to see many of you on November 6th at our conference. Um thank you, Ron. Thank you our other speakers. Uh a replay of this call will be available on our website in the coming days. Uh and thank you to everyone very much for joining us. Thank you for the fantastic questions. Uh and most of all for your support of Baron Capital.