‘It was like meeting Elvis’: Fidelity’s Peter Lynch reflects on Ned Johnson
Peter Lynch, the star Boston money manager who from 1977 to 1990 grew the Fidelity Magellan fund into a $14 billion behemoth, considers Ned Johnson a mentor. Lynch, 72, now advises young Fidelity analysts and helps run his family’s charitable foundation. In an interview with Boston Globe reporter Sacha Pfeiffer, Lynch reflected on Johnson’s announcement this week that he will retire in December and give control of the company to his daughter, Abigail.
On Lynch’s first meeting with Ned Johnson:
“It was 1966 and I was a summer intern at Fidelity — the company had less than 200 employees at the time — and he met with each one of us. It was like meeting Elvis. I was anxious and excited because he was it. This is who you wanted to be — a fund manager — and you wanted to do what he had done. He had a million questions for us. He was interested in you and the ideas you had, and he loved talking about stocks and companies, why he liked them and didn’t like them. He’d say, ‘What industry are you covering?’ I said publishing, and I was also doing some apparel and textiles and energy services companies and metal companies. He asked where they got the steel and how they priced the rigs. He’s a very friendly, outgoing person.”
On Johnson’s 1974 decision to let Fidelity customers write checks from their money market mutual funds, a convenience that eventually became an industry standard; previously, customers had to go through a more complicated “redemption” process to access that money. It also paved the way for Fidelity to expand beyond asset management and into other financial services.
“I remember so vividly that we all thought it was scary. I remember saying to Ned, ‘People told me we can lose tens of millions of dollars on this [due to the cost of setting up the untested business],’ and Ned said, ‘You’re right. We could lose lots of money on this, and everyone else has the same opinion, so they’re not going to get into it. But if it works we could make lots of money. We have a huge potential winner here and it’s worth it.’ Everyone, including people in the company, were second-guessing him, and everybody else was afraid to do it and said it was a big mistake. And he said, ‘That’s true,’ but still did it.”
On Lynch’s one-on-one encounters with Johnson:
“I was on the investment committee and we met every week, so I’d see him in action there. Then the big day came in 1977 when I took over Magellan and got to see a lot of Ned. He’d drop in at the end of the day, and that was fun. I used to take the 6:15 p.m. bus home [to Marblehead] and he’d wander into the office at 10 till 6 or 5 till 6. When that happened I remember calling [Lynch’s late wife] Carolyn and saying, ‘What’s for dinner?’ which was code for: ‘Ned just walked in; this could be a long night.’
But it was a treat. It was like Santa Claus showing up, and I didn’t mind if I’d get home at 9:15 p.m. He was a night person and he loved to chat about stocks — what you owned and why you owned it. He’d ask why you’re buying this or that, or what you’re looking at now. He’d stay for 20 minutes or over an hour, and it was terrific to have a mentor. Those were always fun meetings, and those are the meetings I remember the most.”
On Johnson’s office at Fidelity, which Lynch once jokingly called “the smallest CEO office in the world.”
“When you do what I’ve been doing for 50 years, you see a lot of CEO offices, and Ned’s would be in the bottom 1 percent in quality and size. He didn’t have a big desk where he sat up and looked down on you. His was a cute little office. He never bragged about anything, and he’d talk about stocks or companies he’d bought in the past that didn’t work. He was very open to self-criticism. Unlike our president-elect [Donald Trump], he defined modesty.”
A professional lesson Lynch learned from Johnson:
“The real test he would ask of fund managers was: Do you understand why you own your stocks? You had to have a good reason for owning them, and he really wanted to find out if you had done your homework. But he knew you had no control over other factors.
[As an example of factors beyond a fund manager’s control:] I remember when the damn movie “Bonnie and Clyde” came out [in 1967] it changed women’s fashion [based on the type of skirts actress Faye Dunaway wore on screen]. Hemlines went from an inch-and-a-half above the knee to the ankles and destroyed the ladies apparel companies in two years.
It took two years because fashion-forward ladies might have bought that style, but most women thought it looked silly for a few years, and 5 percent of them weren’t going to buy new stuff, and some of them wouldn’t buy the old style or the new style; they were just waiting [to see which style would take hold]. After a few years hemlines finally settled in around the knee, but by then all the companies were gonzo.
I had just recommended a well-established dress company that had a great balance sheet, great products, and great sales, but it went bankrupt after “Bonnie and Clyde.” I remember thinking: what can I do about this movie with Faye Dunaway? But Ned had seen stocks that had gone from 10 to 100, and from 10 to zero. He understood that some things came out of left field, and this one came from outside the ballpark. But you had to have done your homework.”
On Abby Johnson formally taking the reins of Fidelity next month:
“Abby’s been really running it for a long time. She’s run every part of the company. She was an analyst, she was a fund manager, she ran the research group, she ran the equity group, she ran bonds, she ran distribution. Fidelity is probably 20 times as complex a company as Ned took over in 1972, and she’s run all the different parts, and now she runs them all. She’s been, in effect, running the company for a long time, and now she’s chairman. She’s really been Ned for a long time, so I don’t really think it’s anything different than five years ago.”
This interview has been edited for length and clarity.