The FedEx Gamble

In 1965, while attending Yale University, Fred Smith wrote an economics paper exploring how goods were transported in the United States. At the time, shippers focused on transporting large packages across the United States by truck or inside passenger airplanes. Smith thought that a company carrying small, essential items by plane could be a more efficient transporter than existing companies. Smith wrote the paper at the last minute and did not go into details about how to actually run such a company. His professor gave him a “C” for the work. Smith, however, never stopped thinking about creating an express delivery system which he created in 1971.

Unfortunately, three years after the company began, thanks largely to rapidly rising fuel costs, Federal Express was on the verge of bankruptcy, losing over $1 million a month.

At its low point, all the company had was $5000 to its name, which wasn’t enough to continue operating as their planes needed fuel and that wouldn’t cover it. Mr. Smith made a final pitch to General Dynamics for more funding but was refused.

Not to be dissuaded, instead of taking a flight home, Smith took the $5000 and flew to Las Vegas and played Black Jack that weekend with the remaining company funds. By Monday, to the shock of other higher ups in the company, FedEx had$32,000 in its bank account, which was just enough to cover the fuel for their planes and to continue operating a few days more.

The company soon after was able to raise significant money and in 1976, it made its first profit and despite challenges hasn’t looked back.

Risky Business Indeed.