Why Peter Lynch Left the Best Job on Wall Street
Book: Beating the Street by Peter Lynch with John Rothchild | ISBN: 978-0-671-75915-5
Peter Lynch turned off his Quotron machine at Fidelity Magellan Fund on May 31, 1990. He’d been running the fund for exactly 13 years. In that time he’d purchased more than 15,000 different stocks. He could remember 2,000 stock symbols.
But he was forgetting his kids’ birthdays.
The Moment That Changed Everything
Lynch was celebrating his 46th birthday with his wife Carolyn and daughters Mary, Annie, and Beth. In the middle of the party, something hit him. His father had died at age 46. When you outlive the parent you lost, you start thinking about mortality in a different way.
He started noticing what he’d been missing. Mary’s soccer season had seven games. He made it to one. The family Christmas cards went out three months late. The scrapbooks sat unfinished. His daughters were 15, 11, and 7. They were growing up, and he was spending more time with Fannie Mae, Freddie Mac, and Sallie Mae than with his own family.
“Nobody on his deathbed ever said: ‘I wish I’d spent more time at the office,’” Lynch writes.
His only exercise was flossing his teeth. He’d seen three operas but not a single football game. He hadn’t read a book in 18 months. Saturdays were spent facing what he called a “Himalaya of paperwork.”
Peter’s Principle #1: When the operas outnumber the football games three to zero, you know there is something wrong with your life.
The Offers He Turned Down
Leaving Magellan didn’t mean Lynch had no options. His boss at Fidelity, Ned Johnson, offered him a smaller fund to run. Maybe $100 million instead of $12 billion. Lynch said no. Even a smaller fund would mean the same workload. Same Saturdays at the office.
He’d also been secretly running a $1 billion pension fund for Kodak, Ford, and Eaton. It actually had a better record than Magellan because pension funds had fewer restrictions. Those companies wanted him to keep managing their money. He said no to that too.
Then came the big money offer. Promoters wanted him to start a closed-end Lynch Fund listed on the New York Stock Exchange. They said they could sell billions of dollars’ worth of shares on a quick road show. A $2 billion closed-end fund would have paid Lynch $15 million a year in fees. Every year. Whether the fund beat the market or not.
He could have hired assistants, played golf, spent time with his family, and still collected that check. But Lynch knew himself. He believed fund managers should pick their own stocks. If he started a fund, he’d end up right back at that desk on Saturdays, buried in annual reports. Richer, sure. But just as time-poor as before.
The Tolstoy Warning
Lynch tells a Tolstoy story that stuck with me. A farmer gets offered all the land he can encircle on foot in a single day. He starts running. After several hours, he’s got more land than he could ever farm. More than enough to make his family rich for generations. He thinks about stopping. But he can’t help himself. He keeps running to grab more. And he drops dead from exhaustion.
Lynch saw himself in that story. And he chose to stop running.
Three Things People Got Wrong About the Book
When the hardcover came out, Lynch noticed that reviewers and radio callers kept getting three things wrong. He used the paperback preface to set the record straight.
Misconception #1: Lynch says amateurs should imitate the pros. That’s backwards. His whole point is that amateur investors have advantages professionals don’t. You don’t have to own hundreds of stocks. You don’t have to publish quarterly results. You can sit in cash when nothing looks good. You can take your time. Investment clubs made up of ordinary people were beating the S&P 500 at a rate of 69.4 percent. The little guys weren’t supposed to copy the big guys. They were supposed to use the freedoms the big guys didn’t have.
Misconception #2: Lynch thinks everyone should buy stocks. Absolutely not. Millions of people should stay away from individual stocks. If you have no interest in researching companies, if balance sheets make your eyes glaze over, if you flip through annual reports only for the pictures, then buying stocks is a bad idea for you. Lynch compares it to sports. When people find out they’re bad at baseball, they put away the bat and try something else. But when people find out they’re bad at picking stocks, they keep doing it anyway. They call it “playing the market.” They spend weeks planning a vacation but throw $10,000 at a company they know nothing about.
Misconception #3: Lynch is against mutual funds. Why would he trash the industry that made him? Equity mutual funds are a great option for people who don’t want to pick individual stocks. There’s no rule saying you can’t own both. Even a fund that doesn’t beat the market average will produce decent long-term results. The key is to leave your money in for several years and not sell during downturns.
The Real Message
Lynch’s departure from Magellan wasn’t about money or markets. It was about what kind of life he wanted to live. He’d been blessed with massive financial success, and he decided to let that success serve him instead of the other way around.
That honesty is what makes this book different from most investing books. Lynch isn’t pretending to be a superhero. He’s a guy who got so good at his job that it almost ate his life. And he had the courage to walk away before it did.
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