What I learned from Ned Johnson during my days at Fidelity - Kaizen

 

Ned Johnson, the driving force behind Fidelity, died last week. We mourn the loss of a money management visionary. 

I worked at Fidelity (FMR Co) for several years in the 90's in fixed income division. While not a regular occurrence, I had to make a few presentations to him and worked on several special projects. He was a tough boss. He did not suffer fools gladly and if you were not prepared it was going to be a difficult meeting. You had to get it right the first time. No do overs, yet he was relentless in driving home the Japanese idea of kaizen - incremental improvement. If you were not getting better on the margin something was wrong.

I was not familiar with Kaizen, the combination of kai (improvement) and zen (good), prior to Fidelity. For some, this was a Japanese business fad from the 80's. Not for Ned. He lived it and instilled it in those who worked for him. He was an inquisitive technology person who was always asking for how more can be done for less and how customer experiences could be made better. There was no company rest with Kaizen. Your best could be made better.

This idea has stuck with me, and it will well serve anyone. For the quant investor, there is no finished model. It can always be made better. You can always learn from both successes and failures. A model may start simple, but complexity and improvement can be added to make it better. It is not about overfitting but trying to see if new ideas can make the existing modeling process better. Kaizen is not for everyone, but in a changing dynamic world, it gives you a chance for a marginal edge.