For millions of Americans, Fidelity is the name they see on a retirement account, investment fund or workplace benefits platform. Justin Baer, deputy markets editor at The Wall Street Journal and author of House of Fidelity: The Rise of the Johnson Dynasty and the Company That Changed American Investing, joins Solomon Wilcots on the Russo Edge for an inside look at Fidelity and the Johnson family.
Baer explains how private ownership gave the company the freedom to make long-term investments without the pressure of outside shareholders, Wall Street analysts or activist investors. That structure produced remarkable continuity, with only three CEOs from three generations of the Johnson family in approximately 80 years.
Solomon Wilcots: Justin, welcome to the Russo Edge. It’s great to have you with us today. How are you doing?
Justin Baer: Great, thanks for having me.
From Communications to Covering Wall Street
Solomon Wilcots: Before we get started on Fidelity, I want to ask: what drew you to business journalism and why did finance become the world that you wanted to cover?
Justin Baer: Yeah, it wasn’t really a direct path for me in either case. My first job out of college was at a communications firm that really focused on corporate clients, deals, and crises within companies. I had been an English major in college and as I stepped into this world, it just seemed really fascinating. I sort of decided along the way that I was more interested in being on the other side of the fence as a reporter.
I kind of just gravitated toward covering business from day one. It’s also a beat that not as many reporters are really into. There are some people that don’t like it because of the numbers, and it’s maybe not as exciting as to say covering the White House or something like that.
But I always found it really interesting and challenging in the sense that you were covering a lot of companies and other institutions that were often closed off; you made your job harder, but I think in many respects, also more rewarding when you could break news or uncover stuff.
As for finance, I lived in New York for a long time, and I’ve always found the idea of covering a sector that is essentially the hometown industry really appealing. I kind of likened it to, if I was working in Detroit, I’d want to cover the automakers, right? Or if I were in LA, covering Hollywood and media.
It also, in part, just resonates more with the people around you. I’ve had friends and neighbors and people on the bus that work at these companies; occasionally they’ll say—Hey, I read your story. You wrote about my boss—and all that good stuff. You don’t always get that when you’re covering stuff that’s far-flung and around the world, so I’ve always really enjoyed covering that and getting that hometown connection.
Inside an Unusual Financial Institution
Solomon Wilcots: Well, I love that path: the road less traveled. I think it makes for a more interesting one. And so, you know, you’ve reported on many of the biggest players on Wall Street. Why did Fidelity stand out as the company you wanted to write a book about?
Justin Baer: Yeah, I mean, you hit on it a little bit earlier. They’re pretty unusual, right? You know, there are lots of, I don’t want to say lots, but I’ve covered many really big companies, banks, brokers, and investment firms.
None of them are really built or have developed the way Fidelity has. It is an 80-year-old business that’s remained privately held, that’s remained under control by one family, and not only under control, but also had a family member run the thing from a day-to-day basis for now 80 years across three generations.
That doesn’t happen, especially as we go through the ‘80s and ‘90s when you had these big financial partnerships all go public and get a lot bigger and merge to become these giant behemoths. Fidelity got that way itself, but by taking a much, much different road.
Solomon Wilcots: Well, this was your first book, right? Did you talk to many other authors about the process? And how was writing a book different than your daily reporting?
Justin Baer: Yeah, I did talk to a lot of people. I’m grateful to have a lot of colleagues at the Journal who not only have gone through this process, but also were willing to kind of share their experiences and their tips and all that.
I would say it is different in some ways. You’re really kind of digging into one subject, right? You know, being a reporter, particularly at a place where things are moving quickly, you’ve got a lot of stuff that you may be pursuing at once, so you have to make a lot of decisions about, Okay, well, am I going to devote two or three days to this one story to try and track it down? Or do I need to bail on that for now and cover something else that may be happening sooner, right?
With a book, you’re really digging into one subject, and you really have such freedom in terms of what you look at. There’s really no way to waste time in that process. When you’re a daily reporter, you have got to be really careful in terms of time management that you don’t spend too much time on something that’s not going to end up working as a story. For this, there were no days where I was like, I just wasted today, because it was all in service to this one project that was covering so much material and so much time.
What else is different about it? When I was calling lots of folks, I didn’t have to worry about other reporters who might be covering that person. I was doing this book project that wasn’t going to see the light of day in another year or two. So that was a little bit different than my day job.
Then, of course, there was the whole process of writing it. I wrote it over a year. I really couldn’t use the workday to put this together. So, it meant being extremely disciplined about how I spent my weekends, nights, holidays, and vacations, because I knew I had a certain number of words that I had to write, I had a deadline, and I had to be really careful to make sure that I was keeping up with that, looking at the calendar, and saying, Okay, I’ve got six months to go… I’ve three months to go. I’ve got to hit all these targets.
I would say that it was definitely not terrible and there are definitely lots of parts that I really enjoyed about it. It was a lot different than my day job in that respect too.
Solomon Wilcot: Kind of nice to not have a daily deadline, but the deadline is still kind of pushed out. Nevertheless, deadlines are almost always ever-present, aren’t they?
Justin Baer: Yes. I mean, this one had a really big one and I had to think about it a lot, right? I had to constantly think about it because if you’re writing a hundred thousand words it just is not going to happen. So, I had to really space it out and say, OK, well I’ve got, let’s say, 12 writing days this month. That means I got to hit on average, this number of words, if I’m going to reach a point where I feel good about wrapping this up by whenever. It was like January 6th that I had to finish it.
Fidelity’s Role in Democratizing Investing
Solomon Wilcots: That’s right. Well, hey, look, many people know Fidelity primarily through their retirement accounts, right? So, what is the larger story of how the company changed the way Americans have invested?
Justin Baer: Yeah, I think it all starts back in the early days, right? So, Fidelity was founded in 1946. At that point, there were some mutual fund companies that existed. A lot of them had been really hammered by the crash in 1929. But by the mid-40s, they were kind of coming back, but it was still very early days. And I would say most people that were investing in these funds were well-to-do; it hadn’t yet really reached broader audiences.
Then we get into those subsequent decades; in the seventies, they’re one of the first firms to really sell funds directly to consumers. That was a new thing.
Then we get to discount brokerage, like Charles Schwab; they were early in offering low-cost stock trading to individuals. And then probably the big one that comes along for Fidelity, where you can see the modern-day company take shape was when they changed the tax laws to allow this particular style of retirement account that would be overseen by employers, right? So, they were early in becoming a business that offered to do all the administrative tasks associated with managing those accounts for big companies.
They very quickly signed up lots of big companies, which, in turn, had thousands of employees that were, for the first time, getting these new accounts that were different than the classic pensions that companies had offered.
I would say those are some of the big ones that continue through the years in different ways. When you think of Fidelity and what it is today, those are some of the big areas that they were early and sort of helped democratize investing and bring it to a lot of folks.
How Private Ownership Shaped Fidelity
Solomon Wilcots: Today that form of investing has become all too familiar. Fidelity has remained private and a family-controlled business for roughly 80 years. How has that structure shaped the way it operates and makes decisions today?
Justin Baer: Yeah, that’s a good question. I would say probably the biggest way is that they don’t really have to tell the outside world a lot about what goes on internally. They can invest in different businesses at their own pace and if things don’t work or if it costs more in order for those businesses to launch, there’s no one really outside the place that is going to call them out on that, right?
They don’t have Wall Street analysts that follow them. They don’t have outside shareholders that might get mad at what they do and sell the stock. There’s no chance that there’d be an activist that would show up and yell at them about stuff. So, it has sort of given them a lot of freedom that public companies often don’t have, which is to make these big long-term bets on things, knowing that maybe a good share of them are not going to pan out.
Beyond that, I think another big way they’ve been different is that there has just been tremendous stability in the way the place has been run. They’ve had three CEOs in 80 years from three successive generations of the same family. It has helped, in some ways, in terms of keeping the place stable and taking a long-term approach to investing.
Sometimes it hasn’t worked as well. I think sometimes they have been slower to adapt to certain things than you might find in a big public company, in large part because again, no one is pressing them to take action and accelerate their plans.
Solomon Wilcots: So they can afford to be very conservative. One of the most dramatic parts of the book is the succession struggle between Abby Johnson and her father, Ned. What was really at stake here when it came to that conflict and what did it reveal about Fidelity?
Justin Baer: Depending on who you talk to, everything was at stake, right? There was a moment, however brief, when Abby considered leaving the company. Had that happened, it would have likely ended the Johnson family’s long period of control. There was, at the time, no one else in the family that would have been able to step in and succeed Ned. And so, it seemed likely that he would have to go to a non-family member to run the place, right?
On top of that, Ned was not certain whether Abby was going to be ready to succeed him. He had also briefly considered selling the company. That definitely would have changed things a lot had they gone down that path, either then and there, a lot of this all took place in early 2005, or at some point further down the road when, let’s say, the scenario of Abby deciding to leave and then retiring three years later, handing it over to her successor. And they decide, well, we’ve got this great offer from Bank of America, we’re going to take it, right? All that seemed to be, at that moment, a possibility.
Fidelity’s Early Bet on Life Sciences
Solomon Wilcots: Well, I want to now turn to a less familiar part of the story. Why did Fidelity and the Johnson family start investing so heavily in early-stage biotechnology?
Justin Baer: This is another Ned story. As a young guy, he was a very good investor himself and had a great track record picking stocks. Even as CEO, he was very active and aggressive in looking for all sorts of investments that could be made with company money.
They were never a classic venture capital or private equity firm where they would get pensions and other big institutions to write them checks and invest their money. They would always be investing their own money.
Coming out of the financial crisis and Ned was very interested in certain areas of the life sciences. The amount of funding that life sciences and biotech were getting from venture capital and other sources had dried up. There wasn’t a lot of money that was flowing there. And so, he thought, Well, we can do this. I’m really interested in this. His interests started really with his experience of caring for his father, who was the founder of Fidelity. He had suffered from Alzheimer’s and died in the mid-‘80s. Ned’s older sister had also had Alzheimer’s. And at some point along the way, Ned himself was diagnosed with it, so he was very aware of the tragedy that can come to families of people who suffer from that disease.
He was trying at the same time to tackle it in a lot of different ways. He would give a lot of money to fund certain research and scientists, some of whom he knew very personally, including his own father’s physician, Dr. Selkoe in Boston. He would do that by directly investing in some of the businesses that initially were around brain diseases but very quickly broadened out to include all sorts of different biotech companies.
Solomon Wilcots: You also said that he had struggled with Alzheimer’s. Is that kind of what motivated it, because he brought a lot of scientists, physicians, and patients together when it came to Alzheimer’s research, putting his primary focus on this disease as well?
Justin Baer: Yeah, I mean, the people that I talked to that knew him well, particularly around this area, would say that he wouldn’t really talk about his father and his sister all the time. He also was just a deeply, extremely curious guy. This was a problem that needed to be solved for him. He was trying to set out different ways to solve it, to fix it, and to identify how to not only diagnose but then treat the symptoms that come with it.
One of the things he did was bring all these world-famous researchers and scientists together once a year and hold this symposium; they would talk about all these different issues. He and others would ask all these questions and compare notes on what they had learned, among other things that they did. But yes, it was clear that his firsthand experience in being a part of the family and then his own experience with this diagnosis led to a lot of that.
Fidelity’s Broader Health Care Footprint
Solomon Wilcots: Justin, Fidelity’s connection to health care extends way beyond venture investing. It also includes health savings accounts, employee benefits, health care funds, public market investments, and participation in biotechnology IPOs, as you’ve already explained. How does health care fit into the broader Fidelity story?
Justin Baer: Yeah, I would say in a couple of important ways. Some of the things you mentioned, like health savings accounts and benefits, all that was an outgrowth of the 401(k) plan.
At some point, I think maybe in the early ‘90s, they were the 401(k) manager for a majority of the Fortune 500 companies in the United States. Their platform was now reaching now many thousands and thousands of employees. They decided, Well, there got to be other things. We were already there. We already have the real estate. All these people already know who we are. We should just try to sell them all these other services and take a bigger chunk of the whole array of benefits that companies would offer.
So that’s one, I would say. Health care is obviously a huge part of the economy and a big part of the stock market. Their interests as stock and bond investors would be with any of the big companies. Fidelity, for a long time before we really get to the point where you have all these big index fund managers coming along like BlackRock and Vanguard, was the big kahuna. You look at every big company’s list of shareholders and Fidelity almost certainly would be in the top three.
They would certainly own all of the big companies, not only biotech companies but also pharma and health insurance companies. All down the line, they would almost certainly be big shareholders in all of them today just because they have so much money under management and so many different investment funds that would target that. And then the last piece is all their venture capital investments, which go beyond biotech and cover all different lines of sciences, health, and health technology companies that they’ve either founded or invested in in the early days.
Lessons From Writing House of Fidelity
Solomon Wilcots: So once you begin to speak to people who have spent their careers working at Fidelity, what surprised you most about this company?
Justin Baer: One is Abby Johnson: her rise to becoming CEO was a lot more fraught and challenging for her than I realized when I started this project. I think that was true for a lot of reasons, but what was surprising in her early days was the amount of negativity and dismissiveness within the company about her abilities to run the place or even manage big businesses.
Normally, when they’re about to talk about one of the kids of the chairman, all these alarm bells go off in people’s heads and they’re like, This is a bad warning sign; I need to be very careful. It was just surprising to hear all these anecdotes about how people were openly dismissive of her in a way that was shocking.
And maybe I shouldn’t have been so shocked because this was the 1990s and there were not a lot of women that worked on Wall Street to begin with and even fewer that were in senior management. That was always going to be part of the story. But that was a little surprising to me. Normally, people are very careful about what they say about the kids of the boss, no matter where you work. So that was another surprise.
Solomon Wilcots: Wow, that’s really good stuff. Great storytelling on your part. So, after spending so much time studying one company, are you ready to write another corporate history? Tell us what’s coming next.
Justin Baer: Yeah, I think so. I think I’d like to do this again. Going back to what I said earlier, there are some points in the journey that are lonely when you aren’t sure if you’re going to be able to do that, you think the whole idea is dumb, and you should probably give up.
For me, for this first process, I was always very confident that the idea and the story were solid. The second thoughts I had were always about like, Well, am I going to be able to pull this off? Am I going to be the right person to bring this all together and land the plane? And so, I think for the next one, I need to find an idea that I have the same level of conviction for because even going through the publishing process, you get maybe a few yeses, and you’re fortunate to get a few, but you also get a lot of noes from people who say like, why would anyone want to read this? This is a dumb idea or whatever, right?
You must be prepared for all these rejections along the way. My thought was that if I don’t feel confident that this is a good story, it just makes it so much harder to push through. I’ve got a few things that I’m thinking about, but I have got to feel like it’s solid enough that I can push through to the other side.
Solomon Wilcots: We want to thank you for joining us and for taking us inside a company that millions of Americans know, but whose history is far less familiar.
Fidelity’s story is about more than mutual funds and retirement accounts. It’s also about family, succession, and how the long-term mindset extended into areas like biotechnology and Alzheimer’s research. A big thank you to Justin Baer, author of House of Fidelity, for joining us right here on the Russo Edge. Thank you.
The Russo Edge Podcast is hosted by Solomon Wilcots and features candid conversations at the intersection of biotech, healthcare, and innovation, spotlighting leaders, scientists, and investors moving medicine forward. The following transcript has been edited for clarity.
