Justin Baer - House of Fidelity

31:49And he just didn't want to spend, because he knew if he showed his face there, there would inevitably be someone, probably a management team that wanted to be Peter Lynch and talk to him. That's funny. Talk about stocks. So he would sneak out this back stairwell to go to the one on a different floor where he could avoid everyone. And the reason he did that is because he wanted every minute of every day to be focused on his work and analyzing these companies and these stocks. And the reality was his fund Magellan, because it was so successful going back, I think he's picked it up in maybe 78, there was just so much money flowing into this one fund.

32:37And he would hear people criticize how quickly it had grown and how many billions were in now in there and how, and the skeptics who would say, well, this is too big to manage now. There's no way you're going to be able to maintain that level of performance. And so it just sort of drove him to work even harder and to find, because he did, he had to find more stocks that were going to work if the fund was three times bigger than it was, you know, two or three years earlier. So I would say that that's kind of one of his biggest reasons for his success was just this unparalleled work ethic and his ability to do that for however long, 12 years or so as he was running what was the, you know, even with Infidelity, even the people that were running Magellan, which continued to grow after he retired from management.

33:39It was just a very, very stressful job, right? You had so much attention on you at all times. And not everyone could handle that for very long. And Peter had done it for over a decade. So I think that's another reason why he was unusually successful in that. Teach us about the Fidelity School of Stock Picking and Portfolio Management. What are the non-negotiables of that house style? Yeah, so that had to change. We mentioned the 401k business. As that becomes such a dominant force in investing, and so many Fidelity and other managers were originally interested in managing those platforms, in part because it would be a great place to sell mutual funds, right?

34:40So over, you go through the 80s and that the money that's coming in from those retirement accounts becomes a sizable chunk of the assets within these funds. So that forces them, you know, a couple things go sideways for them in the 90s, and it really forces them to really rein in some of the sort of free reign that portfolio managers had there in the past, going back to the Jerry Tsai era. And so suddenly, you had to very much stick closer to the mandate for your specific fund. You couldn't do things sort of way out there. You had to be more mindful of what the indexes were doing. Um, it really kind of, in part, because there was concern that this is retirement money.

35:31Um, there are consultants involved, um, you could get sued, right? Right. I mean, the, the, the prospects of litigation in that market, um, becomes a, becomes an issue, you know, as we get into the nineties. So for all that reason, uh, you know, for all those reasons, the, the culture of, of portfolio management changes, I would say some way areas it's remained. the same is this idea that that it it can be um you know one person job right um the structure they have is is very you know it's very similar and you have you have um individuals uh the generalists portfolio managers and then you have teams of analysts that that are that cover either industries or work directly for that fund or that let's say style fund you know so there's the there's the growth funds and the value funds, all that is still very much alive today.

36:30Sure. Ned curated an extraordinary stable of investors. How did they select for talent and keep these people productive? I mean, as I think back, you're telling the story of like Tillinghast and Danoff as young analysts, for example. Yeah. I mean, they're now retired in the last five years, but I mean, they were there for a long time. How do you how did they take these people and bring them in and then cause the longevity that we saw with their careers? Yeah. So I think what made that place very appealing, first and foremost, was that you would be managing money possibly at a very early age. and they did that through, you know, they brought back the concept of the sector fund so that if you were an analyst, let's say you were covering, let's say you were Abby Johnson, for instance, when she joins the firm and is an analyst covering telecom.

37:29So within a year or so, she's able to manage her own specialized mutual fund that owns only telecom stocks. Sure. Right. And so that gave people an opportunity that they may not have elsewhere. You know, obviously having someone like Jerry Sy and especially Peter Lynch around was a huge magnet for people who wanted to do that. Right. And you think about coming out of a period where working on Wall Street in finance general was not as attractive. Suddenly you get into the 80s, markets taking off, and this is the yuppie era, right? And you have people that are very excited about the market again, and the biggest star is Peter Lynch.

38:21So why not look for an opportunity to work alongside the guy and then maybe be the next Pete Lynch? That was very alluring and had been for a long time. And so Will and Joel kind of come in that environment, sort of early 80s, when things are really starting to boom again. Sure. When the market crashed in October 87, Lynch was famously on a golfing vacation in Ireland. He came back and aggressively bought that dip. So what does that moment tell us about Lynch's temperament versus the average fund manager? Well, and to add to that too, Justin, is there any truth that Fidelity exacerbated the morning crash of 87?

39:06So that is, I mean, that was a key takeaway of the government's report. The Brady Commission. What Rock. Brady Commission report. Very explicit. Well, they don't name Fidelity by name, but based on the size and scope that they give for this one, essentially, investment manager. it's very clear that they were talking about fidelity in fact even that day that monday fidelity um tried to get ahead of that you know and it made it clear that yes you know we were we were very active in selling but we did that and they would they argued that we did that because that was what our clients wanted them to do that they wanted out of the market um so that was true I mean, I think they, you know, in the in after that report came out, the Fidelity folks were, I think, chagrined a little bit by some of the data.

40:11And they would argue, no, it wasn't that it wasn't that much. And it was, you know, you know, but I think the substance of it was spot on. We hope you're enjoying the podcast. You know, we work hard putting together this show, but we work even harder for our investors at Smead Capital Management. At Smead, we believe in discipline investing, which is why the Smead funds have a proven track record of long-term outperformance. If you're an investor who plays the long game and want to invest in wonderful companies to build wealth, we invite you to visit SmeadCap.com. Past performance is not indicative of future results.

40:45Investing involves risks, including loss of principle. Please refer to the prospectus for important information about the investment company, including objectives, risks, charges, and expenses. Read and consider it carefully before investing. Smead Funds Distributed by Smead Funds Distributors, LLC, not affiliated. You point in the book, like what was just asking, Lynch was a buyer and started taking advantage of the following days because the aftermath, you know, was more than just that Monday. Yes, definitely, definitely. And yeah, and very, you know, true to character, right? I mean, he was looking at these companies, you know, from bottoms up basis And they were at selling at cut rate prices, right?

41:30So it's just seemed, you know, he was, that's what he did. You know, that was his job. And even before he was managing the Magellan Fund, he was head of, he was head of research at Fidelity. That's how he kind of got the spotlight in the first place. I remember at the bottom in 08, 09, someone had asked Lynch, he was quoted, you know, back then, you know, are you bullish? And he says, I'm not a good person to ask because I'm always bullish. It's like very indicative of him. You know, as someone that studied like the industry of investment management, how do you look at the star manager system of, say, Fidelity against capital groups like multi manager, multi sleeve system?

42:11You know, do you think it's just a different investor type? You know, what do you attribute the success of really both to? Yeah, it's it's. But yeah, I mean, very clearly those two firms were wildly successful, right? Going their own path, you know, and you can tell others like Wellington that, you know, different variations. PIMCO has their own, not only, but a different system, the way they manage funds. um it is uh yeah you know i i i couldn't tell you what one which one is better than the other right um i think it you know i think i think they probably that each of those styles probably um draw a different group of people right i think they might people might naturally gravitate toward one style versus the other.

43:09Sure. Whether having a team approach or individualistic, you know, there are pros and cons for sure, even with Fidelity. There have been moments in their history where that has produced a very hyper, hyper competitive and not always pleasant environment. Sure. Where portfolio managers are fighting against one another more than maybe the market or the competitors at Capital. But again, both have been wildly successful. Sure. The tech bubble broke careers at Fidelity in both directions. Jeff Vinnick on one side and George Vander Heiden on the other. How did the firm navigate 99 to 2002? And was Abbey's elevation in May of 01 connected to that wreckage?

43:59How did they navigate it? So it was not a great time, frankly, for Fidelity. I think performance-wise within their funds and internally, there were certain things that were bubbling to the surface at that moment.

44:21This was a period where there were people that were starting to leave, believing the grass was greener elsewhere. Sure. You know, not only hedge funds, which were kind of coming into their own at that point, but also even competitors of Fidelity. So that was hard for, I think, Fidelity folks and particularly the Ned and the family to come to terms with. Yeah, George was, he knew what was coming. And he was early in that. And it really – he ended up leaving before his warnings came to be. Well, and I think you pointed out outside of his office, he had a whiteboard and he wrote on there tulip bulbs for sale, which I never heard that.

45:13That was such a great little detail in your book. But we also think back like George Van der Heiden got thrown out. Julian Robertson gave up in disgust and kind of threw his hands up. And then the other guy was at Harris. Robert Sanborn got thrown out for now. Obviously, I don't know why my brain's going stupid. The lead manager at Oakmark. Bill Nygren. Bill Nygren took over. That all happened within like 90 days of each other. So George is like fighting the good fight, trying to preach a different message in fidelity. Yeah. And that just wasn't that was not accepted for that era. Yeah. Yeah. I mean, I think he could have, he could have probably stayed and could have, but it was, it was very difficult, right?

45:57Because his funds were, were, were underperforming dramatically, right? In that, in that one snapshot of time, right? And, and of course, no one knew then when things would, would reverse course, right? It happened to be, you know, kind of very soon after he decides to hang him up. Yeah, it was a very difficult, very difficult period. Abby's rise into that role really had kind of more to do with the squabbling that was going on inside of Fidelity at that moment. principally between the guy who was running asset management, Bob Posen, and Abby and folks that were very close to her. Bob was Fidelity's general manager or general manager, general counsel for a long time.

46:55And he had really saved Fidelity's bacon on a couple big things, um you know help them launch the the donor funds that were revolutionary and then help them get through that the sort of post-crash drama that had unfolded and and the blame game that was that was a flip that and a few other things and um so he was uh he was highly successful and very, you know, very closely, um, you know, close advisor to Ned. And, um, he was a bit of a flight risk because he had, um, he was very close to, um, the Clintons. He had gotten to law school with them. And so soon after, uh, Clinton is elected, um, uh, Bob seems to be in the mix for, you know, a couple of different jobs in the administration.

47:53Sure. And and then he there's one where he actually seems to be the choice. And rather than lose him, Ned promotes him to what's essentially the second most important job in Fidelity, which is run the run the funds business. So he is there and he makes a lot of changes. You know, this is in the wake of the Jeff Finnick period. And, you know, I mentioned some of them, right, really, you know, bringing more, you know, guardrails around the way portfolio managers manage their funds. So obviously not something that those people really wanted to see happen. And there was always tension also because in part, you know, Bob was not a former investor, right?

48:42He was a lawyer and, you know, how dare he tell these guys what to do, right? And so, you know, Abby gets moves into management, you know, with with post this appointment and she is managing one sleeve of of the funds as and the executive side. Right. Not as a manager. And she becomes the sort of sounding board to all these portfolio managers and analysts that are that are irritated with what Bob is telling them to do. And so they would go to her office and they would say, you know, Bob is, he wants us to do this and he wants us to do that and try to get Abby to say to them, you know, don't worry about it.

49:28You don't have to do it. Right. So you can imagine that happens enough time, you know, and you're running this business. And Bob, of course, is, you know, Abby is reporting to her and above him in the organization is Abby's father. So it's a little bit of a fraught dynamic to begin with. So, you know, after a while, you know, the sort of tensions begin to bubble up and they have to make a decision. And Ned decides, OK, well, this is Bob's, you know, we got to move him out of the role. And and that's at that point, Abby gets promoted to run the entire business. Yeah. The other thing that's going on a dynamic that you talk about is obviously Fidelity is big.

50:13Everybody knows that the asset management business when done well can be a very profitable business for the owners. Sure. So you talk about in your book when Jim Cramer in 97 wrote a worth piece called How to Fix Fidelity in a magazine that obviously Fidelity owned, which is awkward. I think of how many newsletter writers wrote about Fidelity funds. I mean, that was a whole sub-industry that like a lot of RIAs in the Northeast particularly were created off of. I know we worked with one that was created out of a newsletter writing business on Fidelity funds, as an example. And then the other thing is like, I mean, Amex is a big business in credit cards.

50:54And they're like, hey, let's get in the money management business. So what do they do? They poach Fidelity PMs. So you have this whole other dynamic where you're no longer this piddly little cute 40-act shop up in Boston in a place that no one cares. You are the 800-pound gorilla and everybody wants your lunch. Right. And with that, with all that heft, they basically push around the brokers and the banks and the exchanges. Right. They start to to bully those firms in ways that they've never been bullied before. Right. And that and that continues so long as they're managing. So as long as essentially Fidelity is the biggest and most important account on Wall Street in every at every firm.

51:43They they they flex their muscles that, you know, in that in those various constituents. Yeah. Abby clashed with her father over building a separate institutional business. With 20 years of hindsight, who do you think was right? Yeah. I mean, I think that – And by this it's called Pyramus. Pyramus Global Advisors was what they originally called it. Yes, so they launched Pyramus. Ned was one of the things Ned really wanted to do. This was the early 2000s. They had, to that point, had had some success, but not a lot, selling into institutional clients. There were some reasons for that. The main one and the reason that Ned really wanted to, Pyramus, to stand alone is he just couldn't bear the idea that, say, Peter Lynch would be flying around the country having to give sales pitches to all these pension managers.

52:45and he wanted the Peters of the world to be sitting in their office or visiting companies and picking stocks and not distracted by some of the responsibilities that might come in having those clients. So not to say they didn't, you know, Peter and others did manage money for institutional clients. Well, by the way, we call that the ivory tower theory, right? You stay in the ivory tower. Exactly. You do what you do and don't touch anything else because you might break it. Yeah. I mean, even when it comes to matters of what happens with infidelity, he did not want Peter or Bruce Johnstone, who was another very successful manager, or George monkeying around with decisions, corporate decisions.

53:33It was like, that's a distraction for them and they just need to do their thing. So that was one of the reasons why Ned really wanted to have a separate structure, have separate systems, separate business staff, separate sales staff, and separate managers. and abby um at the time thought that was unnecessary that that would add add unnecessary complexity and confusion and what cost a lot of money and you know you get you'd be in situation where people are like well what the hell is pyramids right is that fidelity or is it not fidelity right and then they'd have to explain what that meant and what the brand and the brand name was and all that.

54:22So, but he went ahead with it and it, and until eventually Abby took over and, and did away with the, with the brand name, certainly, you know, they do have a separate, they do maintain a separate institutional business, but I believe some of the investment, investing is done across both, both retail and institutional. Did Fidelity's status as a private family-owned entity give it a longer time horizon? In other words, you kind of touch on this in your book, but Charles Schwab ultimately was in the discount brokerage business. It's a volume game. It's like all economic theory. The cheaper something is, the more you use it.

55:04So trading is good for Schwab. They ultimately have to pivot to being in the bank business because they took on all these custody deposits. T. Rowe Price is a different business. It's publicly traded the whole time. Obviously, T-R-O-W, or as we call it here, Drop Trow, is a publicly traded business. Do you think that was a big advantage for Fidelity? Or compared to these other publicly traded companies, was that a disadvantage to be this private family-owned business? On the whole, I would say definitely an advantage, right? Because a lot of the experimentation they did in trying different businesses, different investing ideas.

55:43Sure. it would have been much harder for them to do that, you know, given the, you know, pressures that they might have been under to have produced short-term results. Sure. And, you know, I think in a related decision is, you know, they never, they were never public, so they never had the currency really to make these massive acquisitions, right? which would have probably changed the, if they had done that, would have changed the trajectory of the place. But we're able to grow almost completely organically. And without, you know, the culture there has been pretty stable over those 80 years. It's pretty remarkable, but there's been only three people that have run the place over that time.

56:36And they're all, you know, three successive generations in the same family. So there's a stability there and institutional memory and all that that probably doesn't exist to the same degree at other – there are similar size peers that might be public where you might have a management team that turns over every 10 years. In retrospect, we all recognize this was an earthquake with many shockwaves. But when BlackRock bought what was then called BGI or what was known at the time, Barclays Global Investors in 2009, that was game-changing for the industry. It was game-changing for BlackRock. It was thought about – Fidelity could have been one of the bidders, but they didn't have publicly traded stock as you talk about.

57:24Was that one of the bigger misses for the industry but particularly for Fidelity? Steve, I think for Fidelity, the bigger miss was not – they had index funds, right? They were not the first. They launched theirs I think a few years after Vanguard's started. But they didn't really, that wasn't something they really actively marketed. They offered them because there were enough customers that wanted it. I think the big miss for them was not recognizing the advantages of ETFs. It was something that they also had dabbled in. But really, by the time they – those two things, of course, converge with the success of iShares, right?

58:18Sure. Index funds and then ETFs. And they – by the time they recognize that index funds are here to stay, they've missed the window to catch what was then and remained sort of the big three. Sure. So Vanguard. um, iShares now owned by BlackRock, BlackRock and then State Street. And so they're way too far behind and they'll, and they, they can see that they'll never catch them. And then, um, their, uh, backup plan is to, is to reach this distribution agreement with BlackRock to get all their, the iShares funds on BlackRock. But that was definitely a miss. And that's something particularly on the ETF side is just not, not being on the ball.

59:06And I think the reasons for that, you know, mainly had to do with just their, you know, their not sure that this was going to really be a permanent fixture in the lives of investors. And, you know, and probably some institutional arrogance that will, you know, that they would occasionally voice about, you know, well, why would, do we really want investors just to be satisfied with just keeping up with the market? shouldn't they want to beat it? I'm like, that's why they, that's where we're here. That's the question of the ages, I would argue. Yeah. And so it was hard for, so they tried to do both, right?

59:47And in classic Fidelity fashion, they did offer all these products, but they just, their heart was not really into it until it's, you know, it's obvious to everyone, right? that these things are massively popular and will remain a building block of American investors. And so then, only then, really do they embrace that fully and they lower the prices on all of their index funds and they launch their own big suite of active ETFs. They've continued to do that. Hey, I want to give a big shout out to everyone who's been working so hard on this show. You know, we recently hit the top 10 in investing podcasts on Apple Podcasts and even number one in the business category in several countries.

1:00:37As you may know, this show is brought to you by Smead Capital Management. Smead Capital Management understands how frustrating and illogical the stock market can be. If you're searching for funds with a proven track record, give the Smead funds a look or better yet, reach out at SmeadCap.com. And don't forget to mention you're a fan of the podcast. Past performance is not indicative of future results. Investing involves risks, including loss of principal. Please refer to the prospectus for important information about the investment company, including objectives, risks, charges, and expenses. Read and consider it carefully before investing.

1:01:12Smead Funds Distributed by Smead Funds Distributors, LLC, not affiliated. Was Gavin Baker one of Fidelity's last true emerging star managers, and does that model still work today? Uh, he was, um, yeah, I mean, I, you know, there are lots of very promising portfolio managers that they still have. He was, um, he did, he was just remarkably successful at a period in a very important time, right? at a period where people were really paying attention to what tech stocks were doing. And there were kind of shades of some of the other portfolio managers we mentioned, just not only being very good at and really understanding how an industry might work, but certainly elements of sort of right place, right time.

1:02:08You know, companies, semiconductors that he was getting to know, you know, at a very early and critical stage of their development. You know, there are now household names, right? They're now multi-trillion dollar institutions. Sure. With Tillinghouse retired and Danoff and Weimer obviously, you know, leaving the story as we speak, who are the rising stars in Fidelity's active funds business, in your opinion? Yeah. So I think, you know, there's some that are still their big growth investor is a guy named Sunu Kora. He's been around for a while. He's had a really successful run. um the managers of joel's old fund i think were highly um highly regarded um they have um yeah i would say those are probably the top of the top of the list in terms of name recognition right now um but it's different it's a different era right you don't see them um even fidelity promoting these folks in the same way as they once did, even in the period with Will and Joel.

1:03:26Is FMR then now a brokerage and retirement business with an investment manager inside it rather than the reverse? And does Abby see it that way, do you think? Yes. I would say anyone who's probably under 40 sees it that way, which is probably the most important audience for them. Most people who are individual investors would not be familiar with the lineage of the stock pickers, even the Peter Lynch era. It was a long time ago now. And so I think that it's clearly been a shift in the center of gravity and toward the distribution platforms that they have. And that's where they, you know, that's, you know, the portfolio management business is still there.

1:04:20It's still kind of the soul of the place. But as far as the sort of framing of the story of the modern Fidelity, it's definitely shifted to the retirement and brokerage platforms, retail platforms. You touched it, you know, Fidelity obviously went to zero fee index funds back in 18. and the brokerage has gone to zero commissions. You talk about their 70 % pre-tax fund margins that they get in the active side. Most people don't realize why their index fund is so cheap. You and I both know it's because they lend the securities out and they're able to use those fees to cover fund fees. Sure. That all works in an era where beta goes up, right?

1:05:08And everyone feels happy and fat and rich and we all live happily ever after. It's kind of a grand bet, if you will, is if that goes on and on and on, they retain the customer, maybe not make as much money as they used to per dollar invested. But I think the one thing that does make me think that if the place, let's say the market burns to the ground to a certain perspective and because this era has been so market dominant where there's not really like the star manager who's taken this up, there's not like a Jerry Tsai. I mean, at least in 21, we had Kathy Woods to be like, cool, here's our star for this era.

1:05:43But we don't really have that now. I think the average active fund's getting crushed against the indices because they all sold their chips 12 months ago, 18 months ago, as an example. It is kind of like, if I'm thinking about Fidelity from a housetop perspective, if the market gets crushed, wouldn't that actually cause money to go back to the active side on the margin that would help them, but wouldn't help the Black Rocks and the State Streets comparatively? um i mean i think yeah i mean i theoretically for sure right you know that's that's we it hasn't happened you know i don't think it's happened in the in let's say years over the last 15 years since the crisis where we've had down years that i don't know that's necessarily moved in that direction sure well 22 sure didn't cause it i mean that was a bad year for stocks but it didn't really cause that pivot, if you will.

1:06:38Yeah. Or, yeah, or any of the one-off years, sort of a taper tantrum year. I forget which one that was. So, it, you know, I think people in the business are really hopeful that there will be moments in the time where there is a proving ground for them and or reminder of, of the power of, of, of active management. I was always struck by, you know, I had this conversation with, um, a guy who ran a hedge fund in, um, and his firm did very well. I think it was in the financial crisis era, but then as the, as the market began undercover, his, his fund really struggled. And, um, and he told me, you know, I did really well right in this period where, where it was really hard to do that.

1:07:33And no one remembers that, but they do remember the year that I underperformed the S and P. And it is just a, you know, it's just a bias of, you know, of human, human beings, right. Is that they're going to they're going to pay less attention to who did better in down years and more attention to who didn't do as well in in in big growth years right and so so we'll see right i mean we don't we haven't you know knock on wood lived in through this prolonged downturn period like the 70s and since then really um um so hopefully that's not around the corner but if it is yeah i think there'll be lots.

1:08:18I hope it is. Because again, who survives those equity periods? And to your point, you do this great job in your book. You talk about, I mean, we all think we're so smart and we're so logical and we're, you know, put it in Boston parlance. We're wicked smart, as they say. Right. And the reality is we're just human. And you're kind of touching that. We're just human. We're nothing greater. We have, you know, maybe more degrees than Fahrenheit compared to people of the past, but we're just human. And so can a bunch of educated, logical people do really stupid things? And the answer is, well, they did it in the seventies and they were pretty novel for their time.

1:08:52And we'd just gone to the moon. And so it's like, are we really that more thoughtful? And can we break these natural human biases down to actually change ourselves? Well, we haven't got past murder and sexual affairs yet. So I don't know if financial sins are really going to make the totem, if you will. No, yeah, yeah, I think you're right. Just on Bitcoin, Abby has a reputation as a Bitcoin maximalist. Why hasn't Fidelity built a full Coinbase-like product suite where customers hold their own wallets? Notably, Fidelity custodies their own crypto, unlike Schwab, which is using Paxos. Yeah, that's a good question.

1:09:31I don't know the answer to that. You know, they were, you know, as far as mainstream financial firms, They were very early in all sorts of experimentation around Bitcoin, both in terms of mining and you mentioned custody and the like. They were the first out of the gate for a spot Bitcoin ETF. They're doing more stuff. They're developing a stable coin now. Um, but yeah, as to, as to why they didn't, um, they didn't take, go fully into that business. Um, I'm not sure, uh, you know, it may be, they, maybe they will, right. And maybe, maybe this, this, this location that crypto has been facing, you know, for them relatively quietly, right.

1:10:22You know, since last fall, um, whether that, you know, presents an opportunity for them to expand in different ways. And of the four secular moments in this story, the go-go 60s, the lost decade, the 1982 to 2000 bull market, and the 2009 passive shift, which do you think was most consequential for the Johnson family?

1:10:50And there's no wrong answer on this, by the way, so don't feel pressured. Yeah, it's very tough because there were also different dynamics that were happening internally there that you could start and stop them in different periods in terms of the gradual role of each successive generation and all that. But, you know, I think, I mean, it's hard not to, it's hard not to pick the post-war period. Sure. You know, the 50s through the mid-60s, just because it was, there was so, you know, Fidelity came out of nowhere. I know they were this sort of very small firm and then suddenly they were this, you know, their name and brand were just everywhere in a way in a time where so many more people were paying attention to, um, to that.

1:11:55It's hard to believe that they would have, they would have had, you know, the history they, they ended up having if they, if they weren't, if they really didn't sort of come into their own in that moment. But I think you can make the argument for all the others, right? I mean, that business seemed lost and Ned – well, I'm sorry. I take that back. I would say the 70s was really the most important in formation for what Fidelity would ultimately become. Sure, because you had to survive through that to get to the bull market eventually. Right. And the businesses that they gravitate toward and the systems they put in place and some of the things like selling funds directly to consumers, all done out of necessity, but all become really the blueprint for the way the place goes right from there.

1:12:59And the success of really their greatest stretch of success and growth is probably the last five, six years. And much of that was really only made possible by some of the very early decisions they made back in the 70s. Sure. I know this didn't make the cut of the book, but you had shared beforehand that you had this retail branch story that you want to share. So I kind of want to use this as like the parting gift you give to our listeners. Yeah, sure. So the scene is, I don't know exactly what month it was, but it's 1996, right? And this is a period that really ushered, a year that really ushers in what we think of as sort of the internet age.

1:13:56Dot com boom was sort of in the early days. and um for the first time a lot of consumers are getting very excited about the potential of what the internet might bring and how it might change their lives and change business and society and suddenly what comes before them is this opportunity to buy into this sure this this phenomenon right and through this company this was still you know it was only at that point maybe two years old run by this guy who's, you know, still in his 20s called Netscape, which was for that moment, you know, as it turns out, sort of a relatively brief moment in time, but was the most popular web browser that everyone was just starting to use, right?

1:14:48So here comes this opportunity to invest not only in this company that you never heard of three months earlier, but in the internet itself. so it was a moment right and people were extremely excited about it and so the scene that i that i wanted to work in and i just ended up um you know taking maybe a little bit too long to to get to it was um you know at that point fidelity has uh branches retail branches and in most big cities around the country and there's this one in um in austin in this um austin texas in this uh um it's just this you know this strip mall not you know high traffic area at all um and this um this young associate of fidelity um shows up to unlock the door this this one day and when he gets there like eight in the morning the there's already a line you know waiting outside the office And he's like, you know, he just sort of looks at it and he's, you know, doesn't know what is going on.

1:15:55And so he unlocks the door, you know, and isn't any business. You know, they sort things out and everyone kind of gets in place. And he's sitting there, you know, at the front desk. And when the door opens at 9 or 830 and the first customer races up to the front desk and is like, okay, is it too late? I really want to buy stock in Netscape. It's, you know, it's IPOs today. And he looks at the guy and just sort of says, and net what? Like he had never heard of this company and didn't really expect this to happen. And it turns out all those people waiting outside were just eager to get their hands on this stock, right?

1:16:40And to me, it just really, it really exemplified that sort of moment in time and the enthusiasm that everyday investors had about the internet and, and, and, and what was coming. And, you know, I've been thinking a lot about that, that period and that scene, because, you know, we will probably get, you know, this shades of that at some point, maybe as early as later this year, right? When you start to see all the AI companies go public and, you know, the AI is not the internet, right? There, you know, people are maybe not as excited about what AI is going to bring to their lives personally, but they know it's a big deal, right?

1:17:29And here is this, you know, opportunity once again to, to own a piece of it right and um i know i just thought it was really fun with the story and you know like god you know now knowing obviously from my vantage point what happens after that the netscape ipo day in the years and decades to come it was just a fun fun thing to relive well and i love that story because i my dad worked with a gentleman who was in the 60s bull market and he talked about how they'd open the brokerage office store and back then people would be lined up to buy stocks because you had to go in physically to buy in those cases.

1:18:07And so the difference is we can sit in bed and do it on our phone, a la Robin Hood, like you mentioned in your book. Justin, where can people follow you going forward other than you're writing for The Wall Street Journal? Sure. You know, the socials, right? You know, I will flag our work of The Journal and LinkedIn and X. And what's your handle on X? It is Justin Baer. Okay. Okay. Pretty straightforward. I know we've had a ton of fun visiting with you today. This is a great book. Oh, thank you. Thank you for joining us. Will, thanks for hosting. Thank you, Justin. Thank you, Cole. Yeah, thanks for hosting this with me.

1:18:46I'll be with you today. Justin, your book, House of Fidelity, reminds me that the great businesses built across generations through bull markets and bear markets and that the families who steward them must constantly reinvent. You talk about this idea of like the 70s and reinventing. Without losing sight as, you know, Ted, Ned, and Abby have shown who they are, Fidelity is a story of a family willing to bet against the crowd in the dark years, as we saw with the money market fund business, and ride the wave when it finally came, as we've seen a couple times in their history. Our listeners should go out and buy a copy of your book, House of Fidelity, today.

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