While attending Yale University in the mid-1960s, Fred Smith wrote an economics term paper on the need for reliable overnight delivery in a computerized information age. His professor was less than impressed and responded: "The concept is interesting and well-formed, but in order to earn better than a 'C', the idea must be feasible." Several years later, through a combination of innovative thinking, unbridled charisma and sheer determination, Smith would use this "interesting but unfeasible" concept to found the world's first overnight delivery company and change the transportation industry forever.
Early Life
Smith
was born to a well-to-do family in 1944 in a small suburb outside Memphis,
Tennessee. His father, who died when Smith was only 4, became a self-made
millionaire after founding the Dixie Greyhound Bus Lines and a chain of
restaurants called the Toddle House.
Smith was born with a congenital birth defect-a bone socket hip disorder called Calve-Perthes disease-which caused him to wear braces and walk with the aid of crutches for most of his youth. His mother worked diligently to build his self-esteem, and encouraged his participation in all sorts of physical activities. He eventually grew out of the disease, and in prep school, Smith played both basketball and football.
Smith was born with a congenital birth defect-a bone socket hip disorder called Calve-Perthes disease-which caused him to wear braces and walk with the aid of crutches for most of his youth. His mother worked diligently to build his self-esteem, and encouraged his participation in all sorts of physical activities. He eventually grew out of the disease, and in prep school, Smith played both basketball and football.
Bachelor & Professional life
After
earning a bachelor's degree in economics from Yale, Smith enlisted in the
Marines and was sent to Vietnam where he received an education of a very
different kind. "As a platoon leader in Vietnam, I was in charge of a
group of youngsters who had come from very different backgrounds than I had.
You know, blue-collar backgrounds: steelworkers, truck drivers, gas station
folks," Smith reveals in a 1998 Fortune magazine interview. "The
experience gave me a very different perspective than most people who end up in
senior management positions on what people who wear blue collars think about
and the way they react to things, and what you should do to try to be fair to
those folks. A great deal of what FedEx has been able to accomplish was built
on those lessons I learned in the Marine Corps."
After two tours of duty, Smith left
Vietnam weary of destruction and eager to focus his energy on building rather
than tearing down. "I wanted to do something productive after blowing so
many things up," he remembers. His stepfather, retired Air Force general
Fred Hook, had bought a struggling company in Little Rock that modified
aircraft and overhauled their engines, and Smith went to Arkansas to help him
run it. Difficulty in getting parts brought Smith back to the overnight
delivery concept he'd hit upon in college.
Determined to make it work, he came
up with a plan for creating an integrated air and ground delivery system in
which packages from all over the country would be flown to a central point, or
"hub," sorted, and then flown out again along specific routes, or
"spokes" to their destinations. Under this "hub and spokes"
system, the flying would be done at night, when airlanes were comparatively
empty. The airports used would be in sizable cities, and trucks would carry the
packages to their final destinations, whether in those cities or smaller
communities.
Convinced his idea was feasible,
Smith decided to take the plunge with $4 million he'd inherited from his
father. At that point, Smith's life became a marathon nonstop journey into the
canyons of Wall Street to raise the capital he would need to purchase the fleet
of airplanes vital to his plan. "I was a kind of naive about the whole
thing," he confesses in a Nation's Business magazine interview. "I
thought there would be basketfuls of checks right away." There weren't.
But Smith kept at it. His charisma and the knowledge he gleaned from several
years of studying the air-freight industry (both in the military in Vietnam and
later in the United States) impressed investors, and by the end of 1972, he had
managed to raise $80 million in loans and equity investments.
FedEx Establishment
Federal
Express (FedEx) began operation in April 1971, with 14 Falcon jets servicing 25
cities. Initially business was slow. During its first night, FedEx shipped a
mere 186 packages. But volume picked up rapidly and service was expanded. FedEx
was an overnight success. Then the roof caved in. Because of rapidly inflating
fuel prices, costs surpassed revenue, and by mid-1974, FedEx was losing more
than $1 million a month.
Smith asked his disappointed
investors for more money to keep the company afloat, but they refused.
Bankruptcy was a distinct possibility. Then fate stepped in. While waiting for
a flight home to Memphis from Chicago after being turned down for capital by
General Dynamics, Smith impulsively hopped a flight to Las Vegas, where he won
$27,000 playing blackjack. "The $27,000 wasn't decisive, but it was an
omen that things would get better," Smith says. And indeed they did.
Returning to his quest for funds, he raised another $11 million.
Although FedEx had lost nearly $13.4 million in its first two years, Smith never considered giving up. "I was very committed to the people that had signed on with me, and if we were going to go down, we were going to go down with a fight. It wasn't going to be because I checked out and didn't finish," he says.
Although FedEx had lost nearly $13.4 million in its first two years, Smith never considered giving up. "I was very committed to the people that had signed on with me, and if we were going to go down, we were going to go down with a fight. It wasn't going to be because I checked out and didn't finish," he says.
But FedEx didn't go down. Thanks to
an aggressive ad campaign which featured the now famous line, "FedEx-when
it absolutely, positively has to be there overnight," the company scored a
profit of $3.6 million in 1976. Two years later, FedEx went public, and by
1980, revenue had zoomed to $415.4 million and profits soared to $38.7 million.
From then on, it was smooth sailing for FedEx. By 1999, the company has become
the No. 1 overnight shipper in the world, delivering more than 3 million
packages to nearly 210 countries each working day.
Present Position
Fred
Smith, now chairman, president and CEO of FDX Corp., FedEx's parent company,
compiled a fortune estimated at $700 million by enabling businesses to deliver
their goods quickly, anywhere in the world. He was told it couldn't be done.
But in the time-honored style of the true innovative visionary, Smith listened
to his own counsel, and single-handedly changed the way the world does
business.
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