Ned-o-nomics

With the empire he created at a crossroads, famously tightlipped Fidelity chairman Ned Johnson is as enigmatic as ever. But though the man himself isn’t talking, what he has been spending his billions on speaks volumes — and might just reveal his plans for Boston’s last business dynasty.

ned johnson

Illustration by Mark Summers

Ned Johnson hates, hates, hates being late. But last December 13, on the evening of his company’s holiday party, the 77-year-old Fidelity chief was finding that the fickle New England weather was conspiring to make him just that. Though his firm had hired a fleet of buses from BostonCoach (which it owns) to shuttle employees to the World Trade Center (which it also owns), its preparations were rendered moot by a blizzard that had been dumping close to 2 inches of snow an hour on Boston since midday. On the twisting streets around Fidelity’s downtown headquarters, traffic was inching along at a near-standstill.

Fidelity’s annual holiday blowout traditionally has been a happy event, a night to unwind and toast the company’s latest stretch of prodigious growth. As far back as the early 1970s, Johnson’s father, who then controlled the company, used to dance with each of his secretaries before the festivities were over, twirling to tunes wheezed out on an accordion; Johnson himself is always among the last to leave. But on this night, the dismal weather seemed a fitting coda for a rough year for the mutual fund giant. A few weeks earlier, the independent credit-rating agency Moody’s had issued a scathing report on Johnson’s “lack of transparency” regarding his long-term plans for Fidelity, pointing out that the firm’s mutual funds had limped through a period of uncharacteristically poor performance. Criticism ran rampant that Johnson’s close-to-the-vest control of the company, an approach that had served him well for decades, was hurting Fidelity. And the drumbeat of serious doubts over whether Ned’s daughter, Abigail Johnson, has what it takes to one day assume leadership of the company was louder than ever.

Rather than brave the gridlock outside, a few Fidelity employees bundled into their coats and decided to forgo the company buses in favor of the Silver Line, squeezing on at South Station. Packed in tight, the group was shaking snow from their jackets when one of them noticed that Johnson had joined them. If any of the other passengers recognized the thin, white-haired man in the rumpled suit and big glasses—a prospect made unlikely by the low profile Johnson toils to keep—it must have been jarring. No bigshot businessman is supposed to take public transportation, and the thought of Johnson—a billionaire 10 times over—riding the T strains comprehension. Yet there he was. Appearances be damned, he had a party to get to, and had found the most efficient way to get there.

Johnson is notoriously short on explanations about his decisions. He reveals little to his 46,000 employees and even less to the press. (Years ago he rebuffed a reporter with a question of his own: “Are you people so fucking bored that you have nothing better to write about than us?”) Silence of this sort gives rise to a certain mystique, and with it, a powerful curiosity regarding his motives and intentions. Indeed, divining meaning from something as simple as buying a $1.70 ride on the Silver Line has become, for Johnson watchers, a kind of parlor game. Once when he transferred some Fidelity shares, a few observers took it as a sure sign of his impending retirement. That was in 1995.

Now, people are again speculating about the future of Fidelity, and there is an unprecedented urgency to their questions. More than just dominating its industry, the firm stands as one of the last homegrown titans Bostonians can still call their own. Whether it will hold on to either of those distinctions depends on a script that Johnson alone has the power to write. As usual, he isn’t talking, which, given the stakes for the city, makes his trademark opacity all the more vexing.

And yet. Maybe it is possible to divine Johnson’s grand plan. When dealing with a man who has built an empire on very calculated investments, as he has, it’s not crazy to think there might be hidden meaning in the purchases he has made with his fortune. And indeed, if you study a few of the things he’s bought for himself and his company, you find that they tell you this: Despite what the analysts may want him to do, Ned Johnson is plotting Fidelity’s future the only way he could be expected to.

 

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1. Victory Banquet at the West Garden, $7 million

At a time when the average CEO stays in power less than 10 years, Ned Johnson’s 36 years at the helm of Fidelity is an epic accomplishment, the sort of reign that seems more fitting for a monarch than a businessman. Extending that metaphor is the absolute power he wields as head of a privately held company that’s been passed to him through his family. Add to that his own fascination with royal history, and the Johnson-as-king comparisons become downright inescapable.

A voracious art collector whose tastes (and $44 million collection) stretch from Norman Rockwell to Asian ceramics, Johnson has purposefully snatched up works that once belonged to kings and emperors, including $15 million of silver dinnerware once owned by the British crown, a cache he donated—anonymously, of course—to the Museum of Fine Arts in 2005. That same year, he stealthily added another symbolically potent piece to his collection, a work with a provenance he certainly would have appreciated.

The Christie’s auction house in Paris is in the heart of the Right Bank, between the Champs Élysées and the fashion houses of the Rue du Faubourg St. Honoré. There, in November 2005, a small group of agents working for fabulously wealthy collectors from around the globe assembled to bid on an obscure 19-foot-long scroll once owned by one of China’s last emperors. Among them was James Hennessy, a London-based art expert who had been dispatched by Johnson. As the bidding began, a dozen or so of the auction-goers huddled over phones through which they received instructions from their clients. Hennessy, his mission clear, had no need to make any calls. Whenever a bid was placed, he simply topped it. Going into the auction, appraisers had estimated the piece might fetch as much as $1.4 million. When the auctioneer’s gavel finally pounded, Hennessy had won it with a record-setting bid of just over $7 million.

Called Victory Banquet at the West Garden, the richly colored scroll is made of silk and painted with gold, and depicts a feast celebrating a military triumph that expanded the kingdom of its patron. Even though the piece was more than 250 years old, it was in pristine condition, right down to the jade clasp that secured it in its red lacquer case. As amazing a treasure as the scroll was, interest in it reflected rarefied taste. “There is a group of 10 to 15 major collectors who will pursue a work like that,” Hennessy told me, suggesting Johnson’s motivation for purchasing art springs not from the pride of owning well-recognized pieces, but rather from some deeply personal desire. “Mr. Johnson is a law unto himself in what he chooses to pursue.”

It’s possible that Johnson was merely smitten with the scroll’s artistry, of course. But perhaps he also recognized something of himself in the biography of Emperor Qianlong, for whom the scroll was created around 1748. Like Johnson, for instance, Qianlong amassed a world-renowned art collection. Both men also had fathers who carefully groomed them from childhood to lead. (When Johnson was a boy, his dad took him on regular strolls along the beach. “We’re learning a lot about brokerage,” his father told a friend after one walk, “but don’t say that to Ned.”) And given the chance, both men grew their empires ambitiously. Qianlong expanded his into one of the world’s largest. When Johnson inherited Fidelity from his father in 1972, the company had a respectable $4.3 billion under management in 17 mutual funds. Today, it controls $1.6 trillion in 436 of them.

Most intriguingly, Qianlong’s life also provides insight on the bedeviling subject of succession. After 60 years on the throne, Qianlong officially stepped down in 1795, passing his scepter to his son, but he never truly let go of power. As he continued to call the shots from behind the scenes, he made clumsy personnel choices, appointing corrupt lieutenants who siphoned the empire of its riches and its influence. When Qianlong died four years later, his son was powerless to stop the empire’s long decline.

Two days after Moody’s November report rekindled jitters over the long-term direction of Fidelity, the Wall Street Journal published a story detailing some of Johnson’s thoughts on the firm’s future. In an apparent effort to reassure worried investors, anonymous sources told the paper Johnson had discussed various succession ideas—if little in terms of a definitive plan. The bottom line, they admitted, was that nothing had been decided.

Holding on too long is exactly what Johnson has long said he’s determined to avoid. Fidelity, he promised recently, will be passed on “in good working order to the next generation of executives at the appropriate time.” But whether he fears that the heirs to his empire might unwittingly do it harm—or is still just in love with his work—he’s in no rush to hand over the reins. Johnson, a spokesperson told the Journal, remains “very energetic, very involved, and very much the leader.”

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