The Motley Fool Interviews Tom Slater, Head of U.S. Equities at Baillie Gifford

Tom Slater is a partner and investment manager at Edinburgh-based investment firm Baillie Gifford. In this podcast, Motley Fool Chief Investment Officer Andy Cross talks with Slater about the keys to successful long-term investing.

Topics discussed include:

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• Finding long-term winners.
• Managing your mindset.
• Culture and leadership.
• Allocation.
• E-commerce winners.

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A full transcript is below.

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This podcast was recorded on Sept. 07, 2025.

Tom Slater: Inevitably, your most successful holding will become a big part of the portfolio, and you would be tempted to chip it away in the name of risk control, but that goes against the structure of returns. It is those small number of big winners that matter.

Mac Greer: That was Tom Slater, head of US equities at Baillie Gifford. I'm Motley Fool producer Mac Greer. Now, the Motley Fool, we love learning from successful investors. This week, Motley Fool Chief Investment Officer Andy Cross talks with Tom Slater about finding long term winners and navigating short term volatility.

Andy Cross: Hi, Fools. Welcome to another Motley Fool conversation. I'm Andy Cross. Joining me today is Tom Slater, Tom is head of US Equities at Baillie Gifford, where he is a partner, a co manager of the US Equity Growth Fund, and Scottish Mortgage Investment Trust, a footsie 100 listed company that really, frankly, has nothing to do with Scotland or mortgages, Tom. Welcome, and thank you for joining us here at The Motley Fool.

Tom Slater: Thank you so much for having me.

Andy Cross: We have so much alignment around our investing approach, so I'm really looking forward to digging in to here. We'll get to the markets and stocks in a second, Tom, but I do want to start with that philosophy a bit because the approaches between your investment approach and the Motley Fools investment approach around long term investing really resonate. I really want you to share your investment approach, your time horizon, when you look at investing over five and ten years and the focus on innovation and transformation technologies.

Tom Slater: Yeah, well, to make it really simple in the first instance, our aim is to find the world's most exceptional growth companies and own them for long periods of time. It's simple, but it's not easy. Peeling back the layers on that a little bit we spend our time looking at companies and thinking what might go right, not what might go wrong. In an industry that is full of skeptics and people picking holes in arguments, we think it's important to think critically, but in the context of the upside, how much can we make if we're right about this? We're looking for businesses which can grow to many multiples of their current size. We think the world's greatest businesses are just about always underestimated and we think returns and markets are really concentrated, that it's not about what happens to the average company, but it's about the contribution of a small number of really exceptional companies. Therefore, we should invest our time and effort in trying to identify those companies, trying to understand the leadership, what makes them tick, and trying to learn from those people about what's going on in the world because they are building the future of the economy.

Andy Cross: Tom, when I think about Scottish mortgages, 100 year history, and you mentioned the few really driving the bulk of the returns, reminds me of the Henrik Bessenbinder study from Arizona State that showed that basically over very long periods of time, like 100 years, a few of the companies around 4% drive the bulk or if not all of the returns in the market. Now that's very long time horizons. But even if you shorten those over, like ten year rolling periods, you do see that concentration and trying to find those exceptional winners. And I think that resonates with what you're trying to do at Baillie Gifford.

Tom Slater: Yeah, you get this, we're all taught that there is this normal distribution of returns that there's the spread around an average and we don't really have much hope as individual investors. But actually, if you extend the time frame, that isn't true. Our average holding period in public markets is around ten years. When you get to that time horizon, you get a very different distribution of returns. As you say, there's a small number that really matter over that time period. Once you take the veil away, once you see that, then I think it changes the nature of what you're trying to do because it becomes much more important to try to find the companies capable of being those big winners. Then where you do find them, the second really difficult task is that you just don't interrupt the compounding. You're not tempted to chip away at them if they become a big part of the portfolio, because inevitably, your most successful holding will become a big part of the portfolio, and you will be tempted to chip it away in the name of risk control. But that goes against the structure of returns. It is the small number of big winners that matter.

Andy Cross: Tom, finding those companies is one thing. You mentioned the real holding on is the real, I think, a lot of challenge with so many investors, especially in a hyper focused investing climate that is so short term. How do you build that discipline to be able to continue to hold those winners within a reasonable allocation strategy for those companies that have done so well, especially for investors who might have been building out positions over time, doing all the right things?

Tom Slater: Yeah, I think it is difficult. It is, as you say, it's a discipline. What I find quite helpful is you're tempted to look at reducing stocks that have gone up. But what I like to frame it through two questions. The first question is, has the opportunity for that company got bigger or smaller? And the second question is, has the likelihood of capitalizing on that opportunity got greater or less? And it's only once you've answered those questions you can come to the issue of valuation risk. Has the stock got riskier? Is it more highly valued? Because it may well have got cheaper, even though it's gone up. If I take Amazon, we're just about coming up on our 20th anniversary of owning Amazon stock in Scottish mortgage. If you think about that original opportunity, it was in the book market in e-commerce and selling books and then media. Every time it's gone up, we've been able to come back and answer the question. Has the opportunity got bigger? Yes. Has the likelihood of success increased, and it's enabled us to hold that stock for 20 years.

Andy Cross: Tom, just building on that about Amazon, when you think about the legendary investment letter that Jeff Bezos wrote about it always being day one. When you look at technologies like this, do you always feel like it's day one at Scottish Mortgage when you're when you're analyzing companies?

Tom Slater: No, I don't think we're always looking for day one. Amazon is an exceptional company in so many ways, and we've learned so much from it from Jeff Bezos and his approach to think about investment and about the world more broadly. But I don't think it needs to be day one. Specifically, we're investors in businesses, not investors in technologies. So we're thinking about the business model. We think about the ability to grow revenues. We're thinking about how profitable an opportunity might be. We're not trying to predict whether a technology will or won't work. But I think what he's trying to capture with day one is around this idea of mindset about fighting against all of those things that slow companies down as they get bigger. How do you keep the pace of innovation? How do you stop creeping bureaucracy? How do you stop creeping inefficiency? Not day one in terms of, is it early, is it early technology, but, yes, you want special companies that can fight against those almost those facts of life, those tough realities that are faced with companies as they get larger.

Andy Cross: Tom, speaking of tough realities, the reality of investing, especially in long term and especially in innovative technology in companies that are literally changing the world like you all do. We do also at the Motley Fool in so many ways, is you do have the outside risk of the ups and downs and of that volatility. How do you manage your personal and your team, how do you coach your team on managing some of the emotions that come with the high flyers in those emotional times, and not just during COVID when there's loads of money going into the markets ups and downs. But even just when you go through earnings reports, I know you have looked at and own Ferrari, for example, and they had a recent report that sent the stock down maybe 10%. How do you help guide and manage around that volatility around growth companies?

Tom Slater: I think what this speaks to is that in investing one of your own whist one of your worst enemies is yourself. Managing your own emotions, managing your own process to deal with that is really important. The starting point for me is just being upfront with people about what you're trying to do. Scottish Mortgage Investment Trust is focused on trying to deliver its shareholders, long run capital appreciation. We're very upfront with people that this will be volatile. Don't judge us over short time frames. I pretty much own all the stocks today that I will own in a year's time. There's not a lot I can do if those stocks are out of favor over the next year there's a lot of randomness in that. Don't own these shares if you can't stomach volatility, if you have a time horizon that's shorter than that, if capital preservation is your key objective. You get the clients you deserve, you get the investors you deserve, be upfront with people and be transparent and very clear about what you're doing. The consequence of that is that when you encounter the inevitable volatility, people don't get immediately on your back saying, this isn't what I signed up for. This isn't what I expected. I think that's really important as a starting point.

Andy Cross: Talk a little bit about the discipline you have on trying to identify those that really, when you look at those five or ten year periods, what are the characteristics of those companies and of their teams that you're looking for that help you narrow into the list to hopefully find some of those companies that can benefit from the power laws?

Tom Slater: Well, maybe I'll start by telling you what it isn't isn't the technology. We don't think we have a deeper insight into the technology that these companies have than anybody else. When we bought Tesla in 2013, it was not because we knew something about batteries or self driving software that nobody else did. Instead where our focus is is, first of all, on the culture of the organization. Why did the people turn up to work? What is it that they're trying to achieve? Why should they have a sustainable edge in what they're trying to do versus other people? Go back to the Amazon example it was that relentless drive on the long term. It was the 2016 shareholder letter that you talked about about how they, I was 1996 shareholder letter you talked about about how they were going to make trade offs, how are they going to make decisions? I think that was so much more important in the outcome over the subsequent 20 years than any of the products and services that were available when you analyzed the company back in 2004. There are quantifiable aspects of that. How much skin in the game do they have? How much of their own wealth is tied up in the stock? How are they compensated? How are they incentivized? And then there's a lot of other factors that are much more intangible. But they are worth looking for because the time horizon of most participants in markets is so short that they don't care about these things. You might pick up insights that other people are not even bothering to look for.

Andy Cross: Tom Tesla is a well known and widely owned and recommended from The Motley Fool, any reflections on the balance that Elon Musk has navigated around the management of different entities that he has invested into and helping to lead. As an investor in one of those private companies, is there any just thinking you can help us understand your approach to understanding and getting comfortable with Elon's management style of his various entities?

Tom Slater: Yeah, so we bought Tesla shares in 2013. We're still shareholders today, so very long term owners of Tesla. I think what I would emphasize is the management team beyond Delon. He brings some extraordinary talents to bear at his companies and there are other areas where you need other people to input. And my observation with Tesla is when that company has been working and delivering at its most successful, it's because there's a broader team around Delon that have been helping with that delivery. Now that is in no way to diminish his role, I think, is crucially important. But it's these endeavors require a lot of people working together to be successful. I think that's the really important part to think about.

Andy Cross: Is that a thread across the other investments you look at, whether it's Meta when you think about they are founder led? Because we spend a lot of time thinking about founders and investing behind founders. The likes of Mark Zuckerberg at Meta or Jensen Wong at NVIDIA, the importance from the culture side, what you led at when you were looking at companies, the impact they have can be outsized. Do you spend time understanding the underlying structure between how they go about managing those companies and inspiring their teams?

Tom Slater: Absolutely. If I look at the portfolio, I think about 80% of it is founder led or family controlled. Really agree with you on that point, and I don't think you have to have a founder led company to have a special culture, but I do think it's often a really important indicator because I think founders often have the ability to just extend the time frame. They're not beholden to whatever the street is demanding for the next quarter, and they can take decisions without without worrying too much about that. I think also they have the moral authority to drive change in their organization. I think Tobi Lukte Shopify is an exceptional founder. You look at some of the decisions they've made in recent years, for example so this is a business which is an operating system for retail. They moved into providing delivery infrastructure. There came a point where as interest rates rose, and as the tech landscape started to change, that was no longer appropriate for their business. You've got a founder there who can just take the difficult decision and say, Right, we're stopping doing that and emphasizing this. I think it's very hard for professional teams rangment teams who don't have that moral authority often to drive that adaptability within organizations. I absolutely agree with you. I think it's a really important indicator.

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Andy Cross: As we look to wrap up here, Tom, yeah, thank you for that answer. I just want to talk a little bit about allocation before we get to some specific stocks. When you think about Scottish mortgage and the allocation strategy, you don't invest in thousands of businesses. You do have to make allocation decisions. Is there any process or steps that you take to starting positions, maximum minimums, anything along those lines and the logic behind that that could maybe shed some light on your approach, but also help us to be better investors ourselves.

Tom Slater: Well, we're really wary of thinking about dividing the world up into sectors or dividing the world up into regions. The reason for that is I think you've got to go where the opportunities are greatest. I'll give you two examples. A really successful area of investment for us over the past 20 years is being in China. If you'd started with the World index and said, China's 2% of the index, I'm going to have a big bet and own five, then you wouldn't have had ten cent as one of your largest holdings. You wouldn't have had Baidu as one of your largest holdings. You wouldn't have had Alibaba as one of your largest holdings. Actually freeing yourself from that index maker's lens of viewing the world allowed you to have a proper allocation. People would say Oh, it's really risky. You own Google and you own Amazon in large size. Well Google's an advertising business, actually, and Amazon's a retailer. Their revenues come from different places. I don't bucket them in the tech sector and think about a big allocation to tech. Staying away from that and actually focusing on where the opportunities are, I think is really valuable. We don't start with what's our allocation to anything, really is. Is where do we see the biggest opportunities? Where do we see the biggest probability adjusted upside, and those will be our biggest holdings, the end.

Andy Cross: Tom, do you think about active share or any of those Beta, any of those more traditional academic Wall Street kind of measurement sticks?

Tom Slater: Yeah, we think about active share. We think, if we're going to charge active management fees, we ought to have a high active share. We want to give an exposure that's very different from the index. We don't don't think tinkering around the edges of indices adds much value for investors at all. But equally, it's not something we target. It's just an output of having a process which doesn't start with the index, which is concentrated. We think very few stocks matter. It's not a target. Then Beta we don't look at at all. Again, it's in that category of things that if you looked at it, it would put you off investing in the way that we do and we don't think it has anything sensible to say about the likely return over the next ten years.

Andy Cross: Great. Tom, let's talk about putting your long term, which I know you always wear your long term investing cap on, but talk about a few businesses that when you look out the next 20 years, you're very excited to continue to be an owner of that business in Baillie Gifford and in Scottish Mortgage.

Tom Slater: Well, I think one area I pull out is e-commerce. And we've been talking about e-commerce for 20 years, and you might think it's one of those trends that's run its course. But if I look at globally where some of the big opportunities are we have a big holding in MercadoLibre, the Latin American e-commerce platform. We own C in Southeast Asia, Kupang in South Korea. We own PDD, the owners of Timu, and I think that this trend is long established, but particularly away from developed markets where there's efficient, modern formal retail these companies are able to bring a completely different experience to a rapidly growing middle class. I think that opportunity is going to continue to run, but at the same time, a number of these companies are moving into financial services. Consumers first experience in financial services isn't coming from the traditional banking sector. It's coming from these companies who are able to deliver that service much more efficiently than the traditional incumbents. I think that has so far to run, and these opportunities are completely undervalued relative to the next 20, 30 years of growth that's available.

Andy Cross: Tom Slater from Baillie Gifford and Scottish Mortgage Investment Trust, thank you so much for joining us today here at The Motley Fool. It's been a real pleasure to hear your long term investing approach, the way you think about investing in businesses and people, technologies, but focus on that long term patient investing and letting those winners continue to run in your investing approach. Really enjoyed having you here with us.

Tom Slater: Thank you so much for giving me the opportunity.

Mac Greer: As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for guest. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool Editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For the Motley Fool Money team, I'm Mac Greer. Thanks for listening, and we will see you tomorrow.

Andy Cross has positions in Alphabet, Amazon, MercadoLibre, Meta Platforms, Nvidia, Shopify, and Tesla. Mac Greer has positions in Alphabet, Amazon, MercadoLibre, Meta Platforms, Nvidia, and Shopify. The Motley Fool has positions in and recommends Alphabet, Amazon, MercadoLibre, Meta Platforms, Nvidia, Shopify, and Tesla. The Motley Fool recommends Alibaba Group and Ferrari. The Motley Fool has a disclosure policy.