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The Richest Family You've Never Heard Of · Reasonably Happy with Paul Ollinger

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SPEAKER_01: hey everybody welcome back to reasonably happy my guest today is justin bear
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SPEAKER_01: an award-winning journalist and deputy markets editor at the wall street journal in
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SPEAKER_01: a career that includes stints at the financial times
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SPEAKER_01: and bloomberg news justin has covered every significant financial event over
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SPEAKER_01: the past two decades and chronicled the ups and downs
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SPEAKER_01: of goldman sachs jp morgan citigroup and berkshire hathaway
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SPEAKER_01: his new book is called house of fidelity the rise of the johnson dynasty and
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SPEAKER_01: the company that changed american investing
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SPEAKER_01: the investment management firm administers over 18 trillion dollars
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SPEAKER_01: in assets 18 trillion that's greater than the gdps of germany japan
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SPEAKER_01: the united kingdom and france combined
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SPEAKER_01: or it's just 18 elon musks whichever way you want to look at it this is justin bayer
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SPEAKER_00: you're never going to be perfectly happy all the time the best you can hope for is
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SPEAKER_00: to be reasonably happy
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SPEAKER_01: most of the time this is your first book how did you pick
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SPEAKER_01: the topic
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SPEAKER_00: i um you know i cover finance for most of my career and um had kind of in the market
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SPEAKER_00: for a subject that i think could work as you know for writing a book
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SPEAKER_00: and um you know really i started covering fidelity i would say maybe
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SPEAKER_00: about eight years ago
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SPEAKER_00: and it was kind of an interesting time for them and for the industry a lot
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SPEAKER_00: of things have changed you know their their core business which used
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SPEAKER_00: to be selling mutual funds uh you know they're where you had
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SPEAKER_00: a portfolio managers picking stocks and all that um
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SPEAKER_00: that was slowly um not disappearing but no longer a big a big um business for
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SPEAKER_00: the whole for the whole industry so they were they had at that point been shifting
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SPEAKER_00: into um
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SPEAKER_00: um all these different investing platforms
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SPEAKER_00: where they met individual investors directly whether it's
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SPEAKER_00: through their retirement accounts or brokerage account things like that and so um
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SPEAKER_00: and yet the outside world um didn't really appreciate that um as much
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SPEAKER_00: as what was happening inside inside fidelity and the reason big reason as
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SPEAKER_00: a fidelity is is um as you may know is a private company mm-hmm
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SPEAKER_00: i read the book i know it's a private company company uh run by
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SPEAKER_01: a private very private family the johnsons of boston whose lineage goes all
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SPEAKER_01: the way back to uh 17th century the mayflower yeah yeah didn't know that yeah
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SPEAKER_00: so um they uh so they had sort of been
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SPEAKER_00: you know the place had been changing quite a bit in recent years decade or so um and
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SPEAKER_00: yet because they were so private um
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SPEAKER_00: the outside world hadn't really appreciated what what they were doing yet and
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SPEAKER_00: that was so that was one thing and also you know i you know as i start to get
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SPEAKER_00: to know the company and i would talk to a lot of people who work there over
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SPEAKER_00: the years and they once in a while they would tell me something interesting
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SPEAKER_00: and i would say huh you know that
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SPEAKER_00: i'd never heard of that i wonder if that's ever been reported
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SPEAKER_00: and it may have been something that happened like 20 30 years ago
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SPEAKER_00: and i would look it up i couldn't find anything and then i you know i love this part
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SPEAKER_00: because it's happened three or four times i would i would call someone else
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SPEAKER_00: who worked there around the same time and i'd say hey you know did this happen
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SPEAKER_00: and they would say
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SPEAKER_00: just kind of shrug their shoulders and say well
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SPEAKER_00: of course it happened you know justin everyone everyone knows that and i began
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SPEAKER_00: to think you know what i don't think everyone does know that i think maybe in that
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SPEAKER_00: in that world up in boston it may have been common knowledge but again
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SPEAKER_00: the outside world hadn't really caught on to that and was
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SPEAKER_01: the family cooperative excited uh avoidant
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SPEAKER_00: you know i at the end of the day i um i felt very very uh happy
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SPEAKER_00: and um pleasantly surprised at how many people were willing to talk um just because
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SPEAKER_00: the very reputation of of being so um so uncomfortable with media in general
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SPEAKER_00: and um i think a big reason for that was and this isn't just you know people who
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SPEAKER_00: working that fidelity in the sort of the modern era anyone who worked there over
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SPEAKER_00: the years or associated with them or or client of theirs um i think a lot
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SPEAKER_00: of people thought that their history was deserving of the sort of the full treatment
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SPEAKER_01: in in the way that a lot of their their peers
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SPEAKER_01: have had and the full treatment being a good thing or like like putting them through
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SPEAKER_00: the ringer thank you because you get the end of
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SPEAKER_00: the day um you know fidelity has been very successful they're um bigger
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SPEAKER_01: than ever let me put some numbers next to that okay i said in
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SPEAKER_01: the introduction 18 trillion dollars under advisement bigger than the combined gdps
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SPEAKER_01: of germany japan and india
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SPEAKER_01: 32.7 billion in top-line revenue that's 10 billion more than blackrock or schwab and
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SPEAKER_01: on that i pulled this from their annual report 12.7 billion
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SPEAKER_01: in operating income that's massive 40 of which goes to the family
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SPEAKER_01: because that's what they own or that the family owns like 40 of
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SPEAKER_01: the business still right 49 yeah wow that's a lot of billions
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SPEAKER_00: it is yeah um yeah so and a lot
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SPEAKER_00: and surprising that's income not net worth not income right and so and
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SPEAKER_00: that is um yeah and that doesn't even begin to describe the complexity of
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SPEAKER_00: this of this empire they built right they
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SPEAKER_00: so they have these massive well-known um financial businesses right um they also
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SPEAKER_00: have this sister company that operates in other parts of
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SPEAKER_00: the world council fidelity international they also have this sort
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SPEAKER_00: of numerous portfolios of
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SPEAKER_00: of venture capital um private equity they own this giant telecom company
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SPEAKER_00: in europe this oil and gas company in texas
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SPEAKER_00: and um yeah it's it's it's so marry one of the johnson girls yeah well yes um yeah
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SPEAKER_01: that would so um you named it the house of fidelity yes you can't not compare it to
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SPEAKER_01: the house of morgan ron cherno's magnus opus about jp morgan and friends was
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SPEAKER_01: that intentional
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SPEAKER_00: it was my uh i mean that book was was really the kind of
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SPEAKER_00: the first big um wall street biography i read one of many many over the years
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SPEAKER_00: and it did you know certainly inspire me to want to do something like
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SPEAKER_00: that someday um you know i had
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SPEAKER_00: just pick you know jp morgan and i think citigroup were
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SPEAKER_00: the two first two big financial firms i'd cover this is probably like 23 or
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SPEAKER_00: so years ago i read you know in my preparation to start covering them i read
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SPEAKER_00: that book and a handful of others and and so yeah it was i mean i would never
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SPEAKER_00: suggest that this is the in the same class as that it was really really interesting
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SPEAKER_00: and powerful story um but it is um i guess similarities with with the morgans is
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SPEAKER_00: that um there was for for the generations that they were family was
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SPEAKER_00: in charge there were not that many of them right this wasn't
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SPEAKER_00: a big sprawling um extended family um and um
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SPEAKER_00: that's certainly the case with the johnson so that's it's i think that's been
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SPEAKER_00: a reason why the business has endured and remain in family hands for as long
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SPEAKER_00: as it has you know 80 years with essentially three three people running it you know
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SPEAKER_00: for the pretty successive generations um in a lot of family businesses can be undone
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SPEAKER_00: by just a simple fact that you may have more than one
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SPEAKER_00: sibling or cousin or what have you wanting the same thing wanting the same job or no
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SPEAKER_00: or no sibling who's capable of doing right or willing to do it right and
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SPEAKER_00: so um it has been it has been instrumental that there was some there was a johnson
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SPEAKER_00: that was um at least in terms of it keeping it in family hands you know and on
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SPEAKER_00: a day-to-day basis they had someone in the right place right time
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SPEAKER_01: so when i started reading the book i i it occurred
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SPEAKER_01: to me i was like i don't even know what fidelity is is it a bank is it
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SPEAKER_01: a brokerage what is what is fidelity so fidelity is definitely is not
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SPEAKER_00: a bank they are um you probably say
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SPEAKER_00: you know you could call them
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SPEAKER_00: a financial investing conglomerate um they have you know essentially four very large
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SPEAKER_00: financial businesses uh the one that got them started
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SPEAKER_00: and they still have it's still quite big is the investing business so we think of
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SPEAKER_00: the people that are researching stocks and companies
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SPEAKER_00: and investing themselves um they have the and
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SPEAKER_00: then they have these essentially these these platforms
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SPEAKER_00: where um they service accounts for largely individuals right
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SPEAKER_00: so they would have retirement accounts most notably 401k plans where they are
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SPEAKER_00: the record keeper and the administrator they also have a big retail branch network
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SPEAKER_00: and a brokerage where um they serve you know
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SPEAKER_00: in many cases
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SPEAKER_00: advisors financial by smaller financial advisory firms and wealth managers and
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SPEAKER_00: and smaller banks that don't you know don't have that same platform themselves and
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SPEAKER_00: so through uh through fidelity's sort
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SPEAKER_00: of white label stuff they will serve those customers too so
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SPEAKER_01: if your wealth manager uses fidelity's infrastructure their back end
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SPEAKER_01: that would be considered money that they have under administration yes okay yeah so
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SPEAKER_01: that would be part of the whatever 18
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SPEAKER_01: trillion whatever it is at this point okay so how did the company get started
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SPEAKER_00: so it started out uh there was a a tiny single mutual fund called the fidelity fund
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SPEAKER_00: that emerges from the um the crash of 29 in pretty bad shape now again
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SPEAKER_00: there was you know the whole industry obviously was in shambles after that
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SPEAKER_00: and there was not a lot of interest in mutual funds um like that one
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SPEAKER_00: and others it really just gotten started you know in the decade earlier and
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SPEAKER_00: so it's still very early days um but this small little fund um never quite got over
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SPEAKER_00: the crash and um
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SPEAKER_00: they were this it was struggling in a very uncertain future but it had the fortune
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SPEAKER_00: of having been included in this group of people within the industries
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SPEAKER_00: that were actively lobbying what was this brand new agency the sec to um
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SPEAKER_00: to help shape this new legislation that was going to define and create
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SPEAKER_00: a regulatory regime for investment advisors and funds and everything right um and
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SPEAKER_00: so this the guy who ran this little fund was drafted to um
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SPEAKER_00: you know testify before congress representing the little little side of
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SPEAKER_00: the industry right so they had the big big firm it's
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SPEAKER_00: the same thing they do today right you know
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SPEAKER_00: the big firms out there saying oh well this is this is what we should do and
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SPEAKER_00: then giving the perspective of the small firm which is guy um who ran
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SPEAKER_00: the fidelity fund well in that sort of same um group that was lobbying um you know
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SPEAKER_00: on behalf of the big firms there was this law firm in boston
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SPEAKER_00: and one of the people that were working there um uh for a long time who would advise
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SPEAKER_00: who had been advising you know providing legal advice to um to one of the sort
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SPEAKER_00: of founding mutual fund firms in boston this guy named edward johnson ii
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SPEAKER_00: and uh edward was um
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SPEAKER_00: you know he he was sort of born into this world where you know the johnson's had had
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SPEAKER_00: a family business um a dry goods dry goods apartment store
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SPEAKER_00: in downtown boston um they had sold that when edward was i think a teenager
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SPEAKER_00: and made you know
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SPEAKER_00: which is real money back then yeah um and they had cashed out
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SPEAKER_00: and um were quite you know edward and his father uh were very happy about
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SPEAKER_00: that you know edward's father had um spent his whole life working at this place
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SPEAKER_00: and um came to hate it you know and and
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SPEAKER_00: because it was family business felt this sort of tug of obligation
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SPEAKER_00: to work there couldn't really quit and so his son grows up
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SPEAKER_00: sort of liberated from this um this sense of obligation and but you know he's comes
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SPEAKER_00: from a well-to-do family respectable family so his options are be a judge maybe
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SPEAKER_00: a professor maybe a minister or go to to work at a white school law firm which is
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SPEAKER_00: the plan until he um he reads this book
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SPEAKER_00: that's a serialized um originally serialized and and loosely based on the life
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SPEAKER_00: of um jesse livermore this sort of legendary trader in the early uh 20th century
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SPEAKER_00: and you know made a fortune lost it married showgirl made it all back my kind
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SPEAKER_00: of god yeah sort of the original and and interestingly enough comes grows goes up
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SPEAKER_00: and and
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SPEAKER_00: in massachusetts on a farm and and um rides in you know rides
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SPEAKER_00: into boston his career starts in the same backdrop of where edward johnson is so
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SPEAKER_00: so he reads this and has become completely um mesmerized by the market
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SPEAKER_00: and he doesn't
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SPEAKER_00: runoff to work for brokerage because that's you know it came from
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SPEAKER_00: a different different world so dirty
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SPEAKER_00: the brokerage business was considered yeah exactly or even
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SPEAKER_00: the markets themselves were not considered as is sort of as as
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SPEAKER_00: as they are now it's like crypto now or something it was sort of unestablished sort
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SPEAKER_00: of a wild wild west yeah yeah risk and and um
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SPEAKER_00: greed and and all that stuff and so um even before the crash right not suitable for
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SPEAKER_00: a boston brahman right right um and yet he was mesmerized and and and
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SPEAKER_00: because he was helping to manage
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SPEAKER_00: his family's nest egg from the sale of this business um he was active
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SPEAKER_00: in trading even as he was working in the law firm
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SPEAKER_00: but he was not surprisingly certain gravitating toward that world and he gets
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SPEAKER_00: to work with one of the big original um mutual fund companies and meets
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SPEAKER_00: the his mentor this guy brother parker who ran it and eventually he does enough work
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SPEAKER_00: with them that he joins this place full-time
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SPEAKER_00: and so he's working for them as whatever general counsel or
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SPEAKER_00: or clerk some some role like that and the crash you know the um crash comes and
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SPEAKER_00: and um this he meets this guy who runs the fidelity fund and he thinks
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SPEAKER_00: to himself well this would be interesting like i know this guy's eager
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SPEAKER_00: to probably get out of this thing it's not growing why don't i
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SPEAKER_00: take this thing over i'm gonna you know offer him uh a certain amount
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SPEAKER_00: of money um basically to get lost yeah i'll take it over and so he has to pitch it
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SPEAKER_00: to his boss brother who says okay as long as you don't
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SPEAKER_00: start selling stock to the public and and growing it and putting us
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SPEAKER_00: in direct competition no problem because
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SPEAKER_00: the way it was positioned him this will just be a way
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SPEAKER_00: to supplement it won't be competitive won't be competitive it'll just be a way
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SPEAKER_00: to supplement my management of our family estate and um so he takes it over now back
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SPEAKER_00: then um and still to a certain extent to say the the fund itself was
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SPEAKER_00: a different sort of corporate entity from
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SPEAKER_00: the management company so the people that are that are given a fee to pick stocks
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SPEAKER_00: and do that that's a separate legal entity and there's a third separate legal entity
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SPEAKER_00: that you know essentially is a sales organization that sells the funds shares in
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SPEAKER_00: the funds to brokers so brother parker was the guy who was
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SPEAKER_00: the original idea you know created came up with that setup and
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SPEAKER_00: so that's essentially what
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SPEAKER_00: edward johnson does with fidelity begins at one fund he launches
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SPEAKER_00: a management company in 1946 which is recognized as the founding of
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SPEAKER_01: the modern fidelity but he goes but he ends up being competitive
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SPEAKER_00: to his old partner he does so within like in a year he starts selling which
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SPEAKER_00: of course eventually gets back to yeah brother parker and he made the two
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SPEAKER_00: of them essentially never talk again right after that okay
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SPEAKER_01: so fidelity brought you know it was fidelity and merrill that really sort
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SPEAKER_01: of popularized the owning of equities in america they brought wall street
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SPEAKER_01: to main street
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SPEAKER_00: yeah in different ways in in other another play dreyfus was another big firm
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SPEAKER_00: that did that they they were very early like merrill
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SPEAKER_00: and advertising you know their their wares so merrill had the bull always
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SPEAKER_00: and dreyfus had the lion
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SPEAKER_00: um and um yeah that really um you know after the war um and you had the us economy
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SPEAKER_00: that was just beginning to really really rev up and this sort of industrial
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SPEAKER_00: to come become this industrial powerhouse um
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SPEAKER_01: but when they start like regular people didn't own much stuff very small percentage
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SPEAKER_01: of people owned equities and nobody had iras didn't exist 401ks didn't exist right
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SPEAKER_01: so they were part of this sort of like the the revelation
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SPEAKER_01: evolution of the stock market to become part
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SPEAKER_01: of everybody's you know personal financial plan and now one in five americans has
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SPEAKER_01: or what it's americans right one in five american adults having a some kind
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SPEAKER_00: of some kind of relationship with fidelity yeah but you know certainly merrill and
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SPEAKER_00: and new york stock exchange is very um
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SPEAKER_00: ever had a huge marketing campaign in the early in early mid fifties to get people
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SPEAKER_00: to you know own a piece of market industry ed's son
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SPEAKER_01: who is this uh i suppose you he was dyslexic was he he had adhd also
19:25
SPEAKER_00: or undiagnosed you know so this is more uh you know people he he would he would say
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SPEAKER_00: to them later in life that he believed he was you know and people just
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SPEAKER_00: by observation
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SPEAKER_01: could sort of piece it together but he's a little bit eccentric and kind of
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SPEAKER_01: a genius too and he was one of the people that sort of took advantage of the
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SPEAKER_01: that phase of american popularization of the financial markets
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SPEAKER_01: and some technological changes that led to just massive growth of the company
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SPEAKER_01: as well
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SPEAKER_00: yes and that really comes um at a point where their core business these and ed sun
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SPEAKER_00: by the way was president and ceo of the company eventually yes uh ned yes he takes
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SPEAKER_00: over in the early 70s and a lot of the ideas and the other businesses that he was
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SPEAKER_00: behind in how in in either coming up with the idea himself or
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SPEAKER_00: following others that were doing new things in the markets were really done out
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SPEAKER_00: of necessity then the 70s were was a brutal period for um for the stock market
20:28
SPEAKER_00: but especially for because why this is starting with like the oil crisis and
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SPEAKER_00: the oil crisis and uh inflation interest rates are sky high so no one wanted
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SPEAKER_00: to own stocks um the market had had
20:45
SPEAKER_00: recover or had had this nice mini rally at the start of the decade and
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SPEAKER_00: then you know crashed violently and you know a year or so after that
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SPEAKER_00: and it just changed the um the psychology of of
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SPEAKER_00: with so many people toward the market.
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SPEAKER_00: They didn't want to own them.
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SPEAKER_00: They didn't want to own stuff.
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SPEAKER_00: We don't have that now.
21:09
SPEAKER_00: No.
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SPEAKER_00: But there was another layer to it as well.
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SPEAKER_00: So the brokerage industry was also reeling and they couldn't sell.
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SPEAKER_00: They couldn't find customers to buy stocks themselves
21:22
SPEAKER_00: and they certainly weren't going to sell funds where they'd have to
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SPEAKER_00: you know share a commission with with the with the fund manager so uh that business
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SPEAKER_00: as ned johnson once said basically died for for a decade so they really had
21:36
SPEAKER_00: to find things that they could initially just carry them through that and so he
21:42
SPEAKER_00: push them into invest in startups and private companies you know venture capital
21:49
SPEAKER_00: and private equity in different ways um into sort of commercial real estate during
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SPEAKER_00: that decade in development um but some of the more sort of core things
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SPEAKER_00: that would become hugely important to the company as a whole would be
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SPEAKER_00: the brokerage business he followed chuck schwab
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SPEAKER_00: in um into that business in the 70s um he uh launched this uh money market fund
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SPEAKER_00: which was one of those products that came out of that era of of super high rates um
22:23
SPEAKER_00: with its own wrinkle that was really successful um and through that they started
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SPEAKER_00: to sell funds directly
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SPEAKER_00: to uh individual investors bypassing the brokers through through their employers
22:36
SPEAKER_00: through uh well through you know they would have a phone they would have
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SPEAKER_00: a 1-800 number and a call center where they would take orders over
22:43
SPEAKER_00: the phone oh right yeah this is
22:45
SPEAKER_00: before they had um branches anywhere right you could go to their headquarters and go
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SPEAKER_01: to a desk that they had the idea of walking into a brokerage to place an order
22:56
SPEAKER_01: for like a buy or a sell order seems just bizarre to me
23:00
SPEAKER_00: yeah although that part of it it's funny um because i've been thinking a lot
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SPEAKER_00: about it just this past week
23:07
SPEAKER_00: that was still part of the is that how you bought your spacex is
23:10
SPEAKER_00: that how you yeah um no but it was part of you know there was
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SPEAKER_00: a there was one um one really fun anecdote that i i ended up having to cut and leave
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SPEAKER_00: on the on the countering floor or the book about this scene um at a fidelity branch
23:26
SPEAKER_00: in august i think it was august of of 1996 on the morning of what was
23:32
SPEAKER_00: then considered
23:36
SPEAKER_00: the biggest ipo ever oh wait uh netscape netscape right yeah and then
23:42
SPEAKER_00: as now it was viewed more than as more than just a single hot stock it was viewed
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SPEAKER_00: as i there's this brand new technology that seems really cool
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SPEAKER_00: and everyone's interested in it and this is my chance to invest in it for
23:58
SPEAKER_00: the first time right in the internet right and so yep
24:01
SPEAKER_00: there was i remember that well yeah there was still a line of people
24:04
SPEAKER_00: that you know there's this one this one i talked to this one former branch manager
24:08
SPEAKER_00: in like austin texas and he remembers getting into the office you know and it was
24:15
SPEAKER_00: a strip mall and noticing there's like five or six people waiting outside
24:22
SPEAKER_00: the door like a half hour before they're supposed to open
24:25
SPEAKER_00: and not knowing why they were there and then finally when the door you know
24:28
SPEAKER_00: when unlock the door the first guy to come up says oh you know it's too late
24:31
SPEAKER_00: to buy netscape you know i gotta get my shares
24:34
SPEAKER_00: and i was like net what what are you talking about oh my gosh but
24:37
SPEAKER_00: that was you know much later obviously yeah
24:41
SPEAKER_01: okay years ago yeah no well i mean yeah crazy crazy i
24:46
SPEAKER_01: but i remember sitting there talking to a buddy of mine
24:48
SPEAKER_01: and just like i think i should try to get by some of this netscape you know
24:51
SPEAKER_01: because i would i was i was working on a college campus before i went
24:54
SPEAKER_01: to business school and the best part of that job was the ability to take classes in
24:59
SPEAKER_01: the computer center and
25:02
SPEAKER_01: they walked us through the this new thing called the internet yeah
25:05
SPEAKER_01: and it was fascinating and it was like you know watch the page load pixel line
25:09
SPEAKER_01: by pixel you know it was just but it was super cool anyway okay so the the big
25:15
SPEAKER_01: through line in this book is family succession
25:18
SPEAKER_01: yes and abby johnson who is the daughter of ned right right the the son so ed
25:26
SPEAKER_01: and ned had
25:27
SPEAKER_01: a really tight relationship they were like best buds net ed was ned's hero they talk
25:32
SPEAKER_01: i mean you know he learned stocks at his dead his knee and uh abby didn't have
25:37
SPEAKER_01: the same kind of relationship with ned as ned had with
25:39
SPEAKER_00: that i mean they were definitely she definitely um
25:45
SPEAKER_00: had a close relationship with him and a different one uh than her two siblings
25:52
SPEAKER_00: in large part because she had was similarly fascinated by um markets
26:01
SPEAKER_00: and she would go to um as a really young girl she would go to her father's office
26:08
SPEAKER_00: and she would remember later
26:11
SPEAKER_00: just how exciting it was and and and she would see people in offices and they'd be
26:19
SPEAKER_00: in these deep conversations or they'd be on the phone and laughing
26:23
SPEAKER_00: and it just there was so much energy um and excitement in the air
26:27
SPEAKER_00: and she had no idea what they were talking about um and then from that
26:30
SPEAKER_00: on she just paid they she was had that same had caught that same bug and so she
26:36
SPEAKER_00: and her father had
26:38
SPEAKER_00: had their own sort of language in that regard that was sort of apart from the rest
26:42
SPEAKER_00: of the family um where it gets i think complicated with um with
26:47
SPEAKER_00: the succession um part of the issue was where fidelity was headed right it was such
26:54
SPEAKER_00: a small company when
27:00
SPEAKER_00: uh edward ii was ready to step down you know maybe 30 or so people
27:04
SPEAKER_00: in what year is this this is uh edward the the second so annette's father oh right
27:11
SPEAKER_00: so this would have been in in the early early 70s right so they have one office
27:15
SPEAKER_00: or you know maybe a cluster of small office buildings downtown um and that's it
27:22
SPEAKER_00: and um to flash forward to the period where abby is moving our way through
27:28
SPEAKER_00: the organization
27:30
SPEAKER_00: it's a vastly different and bigger place and they've expanded
27:34
SPEAKER_00: into all these other businesses and um still not many women in
27:38
SPEAKER_01: the financial business no and very very few at fidelity and very few
27:42
SPEAKER_00: with fidelity i mean i wouldn't you know it's they are notable i think
27:48
SPEAKER_00: for having um
27:53
SPEAKER_00: uh women in prominent roles there particularly in in fund management
27:57
SPEAKER_00: at a relatively early period but
28:00
SPEAKER_00: um you know not a just as terrible as a record as the industry as a whole so um
28:09
SPEAKER_00: but lots of people by that point who have been successful
28:12
SPEAKER_00: in other other places other big firms big corporations a lot
28:17
SPEAKER_00: of very ambitious people and and the other thing that that made it a little bit also
28:24
SPEAKER_00: a little bit harder from for abby from the jump is ned was a phenomenal stock picker
28:33
SPEAKER_00: in his day
28:34
SPEAKER_00: uh he was so good in fact that he had outperformed the biggest star of
28:39
SPEAKER_00: that whole served go-go 60s era in jerry's side and
28:43
SPEAKER_00: so you know there were detractors of his that didn't think uh he was gonna work out
28:50
SPEAKER_01: as running the firm because he's more of a gambler than a well just
28:54
SPEAKER_00: because you know he was um you know he was someone was one of the you know kind
28:58
SPEAKER_00: of all over the map right he you know it was
29:01
SPEAKER_00: conversation with him you know he would answer questions with another question
29:05
SPEAKER_00: and he would go on these different tangents and he would get drill into something
29:09
SPEAKER_00: and talk for a very long time about this one issue and and and he would is it was he
29:17
SPEAKER_01: on the spectrum you know who knows not diagnosed
29:20
SPEAKER_01: but it sounds like he was like fascinated with mechanics
29:23
SPEAKER_00: and how fascinating mechanics with technology um and that made him a great
29:30
SPEAKER_00: uh student and analyst of of how businesses work and what the future may bring and
29:37
SPEAKER_00: and how machines work and of course technology and software and everything
29:42
SPEAKER_00: that would would come through that those decades right um
29:47
SPEAKER_00: but people still thought you know this place could go out
29:50
SPEAKER_00: of business like right guys kind of you know who is this kid right um but one thing
29:57
SPEAKER_00: that
29:59
SPEAKER_00: they all even his sort of biggest critics had to had to knowledge was
30:03
SPEAKER_00: that he was great you know he was great at the one thing fidelity was at
30:09
SPEAKER_00: the time was doing which was making investments right it's kind of like if you're
30:15
SPEAKER_00: a professional uh if you're working at a professional sports team and
30:21
SPEAKER_00: you used to be an athlete right you come into that you know and then you step
30:26
SPEAKER_00: into coaching or the front office or some other part of that world you have
30:30
SPEAKER_00: a you know there's a certain uh experience that you bring into that um
30:35
SPEAKER_00: as having succeeded on the field um that makes it harder to dismiss you right and
30:42
SPEAKER_00: and i think so ned had that going from um abby had started out like
30:46
SPEAKER_00: then had as an analyst and then a portfolio manager and she did fine
30:50
SPEAKER_00: but it wasn't this sort of off you know off the charts performance
30:55
SPEAKER_00: so she couldn't hold on to that and even even if she could it was just
30:59
SPEAKER_00: a much different organization you had these much bigger businesses
31:03
SPEAKER_00: that you know were not run by investors they were run by
31:10
SPEAKER_00: salespeople writer or marketing people or or operations people they were sort of at
31:14
SPEAKER_00: a different rhythm to that even though they were all in service
31:17
SPEAKER_00: to investing they they were um
31:20
SPEAKER_01: they had different elements sure so there comes a point where and
31:25
SPEAKER_01: and there there comes a point where she's ready personally to be recognized as
31:31
SPEAKER_01: the heir apparent and complicating this is there's a lot of very talented people
31:36
SPEAKER_01: at fidelity who aren't going to be the ceo because they're not family it's like
31:42
SPEAKER_01: the mafia in a certain way it's like you're not 100 sicilian you're not in even
31:47
SPEAKER_01: if you're you know like a great earner
31:49
SPEAKER_00: so how does this reach a boiling point yeah so it was um so abby was moving on
31:56
SPEAKER_00: the organization and she gets essentially the second most important job in fidelity
32:04
SPEAKER_00: in the late 90s which is to run this flagship funds business this is still a period
32:10
SPEAKER_00: where that is far and away the most important most profitable
32:15
SPEAKER_00: um center of the fidelity universe are the teams that are managing funds and
32:19
SPEAKER_00: the analysts research analysts that are supporting them and traders this is
32:24
SPEAKER_00: the this is the the nerve center right so she gets that job
32:29
SPEAKER_00: and she inherits it's kind of like some of the ceos who take over
32:36
SPEAKER_00: in the year like 2000 right or maybe 2008 or things are going great
32:41
SPEAKER_00: until they're not until they're not right and so she inherits this business at
32:45
SPEAKER_00: a very difficult time right you have the dot-com bubble
32:51
SPEAKER_00: just about to burst right you have a you know recession
32:55
SPEAKER_00: and 9 11 you know all these accounting scandals that really erode confidence
33:03
SPEAKER_00: in corporate america and on top of that you have fidelity that had its own sort
33:07
SPEAKER_00: of you know kind of embarrassing scandal evolving you know some
33:12
SPEAKER_00: of their traders were taking all these excessive um gifts from sales people on
33:16
SPEAKER_00: the street
33:17
SPEAKER_00: and on top of all that you have um abby and her father in disagreement
33:22
SPEAKER_00: on some key areas about not only the direction of that business
33:26
SPEAKER_00: but just fidelity overall and um yes you had people
33:32
SPEAKER_00: that um historically you know there had always been some people that that aspired
33:39
SPEAKER_00: to be the successor um
33:42
SPEAKER_00: you had probably two categories you know some one where
33:48
SPEAKER_00: they knew it was never going to happen right that you were you had signed up to work
33:54
SPEAKER_00: at a family company and you had accepted that uh and there are others that we're not
34:00
SPEAKER_00: so sure that right happened yeah and i think the the latter category grew in
34:05
SPEAKER_00: in number as abby's um struggles began yeah period how did somebody
34:12
SPEAKER_01: so peter you mentioned was it jerry si that yeah
34:15
SPEAKER_01: so he was this phenomenal trader in the 60s that was was sort of like
34:20
SPEAKER_01: a surrogate son to edward ii the first the founder this this first the founder and
34:25
SPEAKER_01: the first ceo right yes okay but it came a point where it's like you're not going
34:30
SPEAKER_01: to be you're not going to be the guy because you're not family right
34:33
SPEAKER_01: how did they pay somebody like him or peter lynch
34:37
SPEAKER_01: who is you know legendary fund manager do they just throw cash
34:41
SPEAKER_01: and equity like some sort of illiquid equity at them they did yes
34:45
SPEAKER_00: so jerry had um had a
34:48
SPEAKER_00: i think it's 20 stake oh wow um 15 or 20 percent yeah
34:52
SPEAKER_01: but what did he leaves did he have to sell that back to
34:54
SPEAKER_00: the family sell it back yeah right um
34:57
SPEAKER_00: and um peter lynch almost certainly would have some voting chairs and and had he
35:07
SPEAKER_00: fully retired he would have had us a lot of the people that have had huge roles
35:13
SPEAKER_00: at fidelity over the years don't fully retire and remain sort of
35:17
SPEAKER_00: an advisory capacity right um in different ways so peter has to this day is does
35:23
SPEAKER_01: that still okay so back to abby yes so abby and her father i mean it gets to
35:27
SPEAKER_01: the point where there's almost a coup
35:30
SPEAKER_00: yes so all that's happening and then what uh in terms of dissension um disagreements
35:37
SPEAKER_00: between ned and abby and this uprising of people within the organization
35:43
SPEAKER_00: of other senior people uh close to ned and also these independent trustees that have
35:49
SPEAKER_00: a role in in
35:52
SPEAKER_00: in governance for mutual funds they essentially go to ned and say look we've got
35:59
SPEAKER_00: to move abby out
36:00
SPEAKER_00: of this role it's been four years things aren't getting better um it's time
36:04
SPEAKER_00: for someone new and and they try to put her in the corner at
36:08
SPEAKER_00: the family foundation yeah uh which sets off and you know
36:13
SPEAKER_00: which she essentially threatens to quit if that's the case and so her father kind of
36:21
SPEAKER_00: backs down and says okay we'll figure something out
36:25
SPEAKER_00: and um they give her what ends up being um this phenomenal opportunity um and and
36:33
SPEAKER_00: the best path forward just given the way the company's evolved in running
36:36
SPEAKER_00: the retirement uh business in 401k business so she takes over that um business
36:42
SPEAKER_00: but there's this other thing that has been building sort of
36:47
SPEAKER_00: that was related to this uh showdown was um for
36:50
SPEAKER_00: the first time ned had been um taking seriously discussions to sell fidelity
36:59
SPEAKER_01: and he was being courted by the big boys yeah which is which had been the case for
37:04
SPEAKER_00: for years and years and he had been always far more dismissive um but
37:10
SPEAKER_00: then suddenly now in this backdrop
37:14
SPEAKER_00: he was telling his children and particularly abby
37:18
SPEAKER_00: that well i'm keeping my options open so that is um is highly alarming to abby
37:27
SPEAKER_00: because she sees well
37:33
SPEAKER_00: they tried to get me out of here and um
37:40
SPEAKER_00: ultimately may not you know they may decide you know if my father were to retire um
37:48
SPEAKER_00: and someone else you know someone outside the company is or outside
37:52
SPEAKER_00: the family is is running it um they may try to do this again they may try
37:57
SPEAKER_00: to push this and um so she then you know this places the emphasis
38:04
SPEAKER_00: on this succession plan that ned had
38:07
SPEAKER_00: had put off doing you know he's in his late 70s
38:09
SPEAKER_00: at this point never really pulled it together and so you know in a large part out
38:17
SPEAKER_00: of frustration that that doesn't happen and fearful that without
38:21
SPEAKER_00: that formal succession and a decision on the family's involvement in her
38:27
SPEAKER_00: in her career um
38:31
SPEAKER_00: she signals that she's going to withhold the
38:36
SPEAKER_00: as she's on the board and she's going to withhold her votes to reelect
38:42
SPEAKER_00: the you know officers you know which would include her obviously her father
38:48
SPEAKER_00: and Ned's deputy Bob Reynolds he he picks up on this he finds out about it you know
38:56
SPEAKER_00: and they have
38:59
SPEAKER_00: their interpretation of it is she's trying to throw her father out she kind of was
39:05
SPEAKER_01: though wasn't she she pulled together voting shares with her siblings
39:09
SPEAKER_01: and some allies in the bank she was trying to it was a power move yeah
39:14
SPEAKER_00: so she would have had um would have had for whatever um
39:20
SPEAKER_00: whatever she had ultimately planned to do with that um she would have had
39:24
SPEAKER_00: the support and so that's what compels um ned and reynolds to uh vote you know
39:33
SPEAKER_00: in this board meeting
39:34
SPEAKER_00: the next the following wednesday to issue more stock right um so
39:39
SPEAKER_01: through whatever board shenanigans shifts the power and she no longer has the cards
39:44
SPEAKER_00: that she thought she because i should have mentioned abby at that for the the decade
39:48
SPEAKER_00: from the mid-90s to this point is the is the biggest single shareholder
39:53
SPEAKER_00: so through this this action she her state gets knocked out right okay
39:58
SPEAKER_01: so they they form a detente or they they come to some sort
40:02
SPEAKER_01: of yes agreement abby becomes the ceo and the company's been kicking ass for yeah
40:08
SPEAKER_00: that doesn't that doesn't happen and that takes another decade right okay that
40:12
SPEAKER_00: to really play out right they're actually and there are others that come and go
40:16
SPEAKER_00: that are not still not sure that
40:19
SPEAKER_00: that ned is ultimately going to pick her right but it does and yes and
40:23
SPEAKER_01: that teen ned gets older he starts showing signs of dementia abby becomes
40:28
SPEAKER_00: the ceo yes ceo in 2014 and
40:31
SPEAKER_00: then chair chairman two years later all right you this was
40:35
SPEAKER_01: an interesting comparison you you compared this family business to
40:38
SPEAKER_01: the mondavi family business and you said the business didn't fail the family did but
40:44
SPEAKER_01: the family bent it just didn't break
40:47
SPEAKER_00: the johnson family yeah it did yeah and it is um and
40:55
SPEAKER_00: as i mentioned earlier it was it was important that they did not have you know that
41:01
SPEAKER_00: that there were not multiple uh siblings or or cousins that were
41:06
SPEAKER_00: that had would have complicated things right and you know neither one
41:11
SPEAKER_00: of abby's siblings
41:14
SPEAKER_00: you know the his uh her sister never never joined the company really and
41:20
SPEAKER_00: then her brother came to it a little bit late but always within
41:24
SPEAKER_00: the real estate uh oh yeah right development business
41:27
SPEAKER_00: and he did quite well he did quite well he's been
41:29
SPEAKER_00: he's been running that now for for some time but was never um you know part of
41:34
SPEAKER_00: the core financial business that was always abby's uh and hers alone yes
41:39
SPEAKER_00: with respect to the family so so that had been helpful and that was you know in some
41:44
SPEAKER_00: of the other cases that that the johnsons themselves studied over the years
41:49
SPEAKER_00: that wasn't always the case
41:51
SPEAKER_01: yeah it's
41:51
SPEAKER_01: an interesting story what do you think like what is what are your takeaways from a
41:55
SPEAKER_01: if you were a family business owner or you were advising family business owners
41:58
SPEAKER_01: and i know several of my fans who you know are dealing with what do we do
42:03
SPEAKER_01: with this thing no it's not it's not fidelity
42:05
SPEAKER_01: but there's some pretty substantial businesses how would you advise them to sort
42:09
SPEAKER_01: of start that process
42:10
SPEAKER_00: yeah i i i was struck by how um really how thoughtful particularly ned was
42:17
SPEAKER_00: about right and and thoughtful at a time way before there had to be a decision right
42:23
SPEAKER_00: that like that so he did all this you know he had this sort of in-house um
42:29
SPEAKER_00: sort of organizational psychologists that worked with him and they
42:33
SPEAKER_00: and they went around the country and they met all these family business people and
42:37
SPEAKER_00: then they pulled together all these sort of doctrines that you know
42:41
SPEAKER_00: that covered every scenario you could think of um
42:46
SPEAKER_00: and they did that at a point
42:47
SPEAKER_00: where abby was maybe still you know just getting there his like two-year employees
42:53
SPEAKER_00: how could you yes you could know that would be possible but it it was done so far
42:57
SPEAKER_00: in advance um i thought that was pretty um that was pretty thoughtful and um and so
43:05
SPEAKER_00: that would be something that i was struck that that helped just thinking
43:08
SPEAKER_00: of all those scenarios and okay well what what would happen if we have people in
43:13
SPEAKER_00: the family that
43:16
SPEAKER_00: want to get paid but don't want to do any work and how do we handle them
43:19
SPEAKER_00: or what do we do with in-laws or what do we do with people who don't want to run it
43:25
SPEAKER_00: but are willing to be on the board and what is that going to look like and or even
43:29
SPEAKER_00: that scenario like what if no one is left right but there's no one in the family
43:34
SPEAKER_00: that is even alive to do this you know how do we thoughtfully transfer this over
43:41
SPEAKER_00: to ideally another family right
43:45
SPEAKER_00: and uh so i just thought that was just thinking all those
43:48
SPEAKER_00: through all those those possibilities it's got to be helpful i can't remember
43:52
SPEAKER_01: if we were recording when i asked you this but we talked about it before
43:56
SPEAKER_01: so i'll ask you again was the johnson family excited or not excited
44:00
SPEAKER_01: that you were writing this book and and what kind of cooperation did you get
44:05
SPEAKER_00: from them yeah i would say i didn't um
44:10
SPEAKER_00: i wouldn't expect anyone to be excited uh at the prospects of knowing it's in depth
44:16
SPEAKER_00: but it's not a you didn't smear no
44:18
SPEAKER_00: but even just probing um intrafamily relationships and
44:26
SPEAKER_01: i mean there's no affairs in this book there's no children out of wedlock come
44:30
SPEAKER_00: on justin i know i know but even like i'm just imagining like someone wrote a book
44:35
SPEAKER_00: and was like yeah and then you know that time i yelled at my dad
44:38
SPEAKER_00: and yeah right right like so all that stuff like i knew it wasn't going
44:42
SPEAKER_00: to be pleasant and and um you know and there was this there there were moments
44:46
SPEAKER_00: where there have been screw-ups and and um and um
44:54
SPEAKER_00: discord and um and setbacks and all that um so i didn't you know and knowing their
45:01
SPEAKER_00: the family is you know being deeply private i think they're they're
45:06
SPEAKER_00: that was going to sort of guide them
45:08
SPEAKER_00: through this process too right you don't see them um out in
45:14
SPEAKER_00: the same you know public way they might see a lot of their abby doesn't have
45:19
SPEAKER_01: a big instagram following no squawking about you know what she's up to no yeah um
45:25
SPEAKER_00: and you know don't don't engage and they do engage you know in in
45:29
SPEAKER_00: donate certainly in different yeah causes and in politics
45:34
SPEAKER_00: but you don't see um them take the lead you don't see them putting their name on
45:40
SPEAKER_00: on buildings and stuff so i i i knew i wasn't they weren't going to be thrilled
45:45
SPEAKER_00: with anything that sort of focused on you know beyond like you know iras
45:52
SPEAKER_01: and did they did they engage with you at all
45:56
SPEAKER_00: i mean i i the way i left it with everyone is um you know talked to like 200 or
46:01
SPEAKER_00: so people yeah and um many of those i talked to only agreed to participate
46:08
SPEAKER_00: if i did not name them right as doing so as having done so and so as i got started
46:15
SPEAKER_00: to go through it i just extended that to everyone just out of out of fairness so
46:19
SPEAKER_00: that um
46:22
SPEAKER_00: so um but you know as a as a whole you know and i i did go through um
46:26
SPEAKER_00: as it came together when extensive fact checks with everyone who was named
46:32
SPEAKER_00: and was still alive and and all that so did abby and her dad what kind
46:37
SPEAKER_01: of relationship did they have at
46:39
SPEAKER_00: the end i mean very you know very close i think they um
46:45
SPEAKER_00: you know this this this this
46:47
SPEAKER_00: thing that played out i think it was a uh in 2005
46:52
SPEAKER_00: was certainly a rift um but i think over over time that that healed and i think at
46:59
SPEAKER_00: the time you know by the time she takes over and has served
47:04
SPEAKER_00: through her original run i think she he is he is you know extremely happy and yeah
47:09
SPEAKER_00: and and pleased with how it you know what she'd been doing he seems like
47:14
SPEAKER_01: a crazy interesting guy
47:16
SPEAKER_00: Yeah, yeah. No,
47:18
SPEAKER_00: he was – I never met him and so,
47:23
SPEAKER_00: yeah, he is a formidable person in the industry but yeah, incredible character
47:31
SPEAKER_00: and happy to have the chance
47:33
SPEAKER_00: to sort of dig into his life
47:36
SPEAKER_00: in that world for a while.
47:38
SPEAKER_01: i want to ask you about your career briefly before we finish up you started
47:41
SPEAKER_01: the journal gazette in fort wayne indiana that's right were you on
47:45
SPEAKER_00: the financial beat there uh business speed yeah yeah i mean there are maybe two
47:50
SPEAKER_01: or three business reporters what were you covering
47:53
SPEAKER_00: i mean and you know at many regional this is uh late 90s okay
48:00
SPEAKER_00: so many individual papers you're you kind of have to be prepared
48:02
SPEAKER_01: to cover whatever right national and local yeah or localizing national stories
48:09
SPEAKER_00: so they're um
48:11
SPEAKER_00: you know like much of
48:13
SPEAKER_00: the you know industrial midwest big huge manufacturing um are you from that part of
48:17
SPEAKER_00: the world i split time between new york and chicago growing up okay so i do have
48:21
SPEAKER_00: and you went to syracuse for journalism school undergrad yeah and then um i went
48:26
SPEAKER_00: to northwestern
48:26
SPEAKER_01: western for grad school
48:27
SPEAKER_01: for journalism tip-top journalism school yeah it was great yeah yeah so um
48:31
SPEAKER_00: and i have family in chicago so for fort wing was great in part because it was close
48:35
SPEAKER_00: to my mom right brother who's still there
48:38
SPEAKER_00: but yeah big manufacturer economy um they had big general motors plan ge had a lot
48:43
SPEAKER_00: of stuff there they also had a big insurance company lincoln financial um
48:49
SPEAKER_00: and um yeah interesting
48:51
SPEAKER_00: interesting time i learned
48:52
SPEAKER_01: a lot that's great how do you you you mentioned big manufacturing it's you know
48:58
SPEAKER_01: there's been a uh contraction in those industries but there's been a probably
49:02
SPEAKER_01: an equally large contraction in journalism business
49:06
SPEAKER_01: since those years are you aware uh like are you optimistic about the future
49:13
SPEAKER_00: of journalism uh yeah i have to yeah i i have to be i you know i've stuck
49:19
SPEAKER_00: with it for a long time um i think the demand
49:23
SPEAKER_00: for info you know information um is never obviously ever been greater uh the
49:30
SPEAKER_00: the number of sources of information has never been greater oh my god
49:35
SPEAKER_00: and i think it's intimidating so i think doing you know a serious job and reporting
49:41
SPEAKER_00: that that stuff is is is vital right i think there's a general acknowledgement of
49:47
SPEAKER_00: that i think it's it would just gone through this you know one massive shift
49:53
SPEAKER_00: after another in the kind of business model that succeeds right and a lot of
49:59
SPEAKER_00: that is you know obviously driven by these massive technological shifts um
50:06
SPEAKER_00: but also you know reader tastes and and um
50:11
SPEAKER_00: and the advent of not only the internet but the smartphone and now ai and
50:16
SPEAKER_00: so um i i think the big lesson is is the industry really just has to really continue
50:22
SPEAKER_00: to adapt to that right
50:24
SPEAKER_00: and i think um i think it's it's you know it there are some success certainly some
50:31
SPEAKER_00: big success stories um and
50:33
SPEAKER_00: the opposite yeah i think it's been well it's it has been you know
50:39
SPEAKER_00: disproportionately hard for you know localized regional news outlets and
50:46
SPEAKER_00: so um you know i'm hopeful that you know we do see lots
50:51
SPEAKER_00: of um digital startups um emerging in in some even
51:00
SPEAKER_00: you know relatively big cities that have lost their daily um news organization
51:06
SPEAKER_00: in recent years and so um hopeful that that gets rebuilt and you you know look
51:11
SPEAKER_00: across the country and everyone has you know what they need in terms
51:15
SPEAKER_00: of just fundamental basic information that's important to
51:20
SPEAKER_00: that right you know what's going on your local government and in your town and
51:24
SPEAKER_00: the school board and all these things that um that are
51:29
SPEAKER_01: make a difference right yeah cool well congrats on the book thank you
51:34
SPEAKER_01: if you like banking if you liked house of morgan you're gonna love house
51:37
SPEAKER_01: of fidelity it's a deeply researched and uh in-depth coverage of an industry and
51:44
SPEAKER_01: a family and uh congratulations and thanks for your time thanks
51:47
SPEAKER_01: for your time uh we'll put a link to justin's book uh in the show notes
51:52
SPEAKER_01: so uh is there a website or anything you want us to put in there as well
51:55
SPEAKER_00: uh yeah justinbarebooks.com justinbarebooks.com it's in the show notes thanks again thank you