What do you do when your company is down to its last $5,000 and you don’t know if you’ll even be able to continue operating for another week? Well, if you’re Fred Smith you take that $5,000, hop on a plane to Vegas and hit the casino.
The 1960s was a time period full of change in America. One of these changes was the introduction of a new theory called the “Information Age”. This theory essentially said that the production of information and the provision of services was the way of the future for developed countries. Sitting here in 2020 and looking back on the past 60 years, it is safe to say that this theory was for the most part correct. Just look at how much information is gathered on us through internet use on a daily basis and how that data shapes how companies target potential customers. However, at the time this was a revolutionary idea. Up until that point, the fruits of the industrial revolution had been really all that was known. Computers were still primitive and the internet was at best the dream of a science fiction writer.
During this time, in 1962, Fred Smith was an 18 year old studying economics at Yale University. He had observed that the world around him was changing and becoming more and more automated. Computers were starting to be implemented and technology was advancing. From these observations he developed an idea about how this new automation could be harnessed and transferred over to the transportation of goods in the form of an overnight delivery system. Fred Smith admits that the idea didn’t seem to impress the professor stating, “I don’t know what grade [I got on the paper], probably made my usual C.” No matter how unimpressed it left the professor, this paper provided the idea for what eventually became the multi-billion dollar company FedEx.
In 1971, Smith founded the company that he had dreamed up in his paper at Yale. However, the first two years were rocky and the company’s funds dwindled to a mere $5,000. Knowing he didn’t have enough money to fuel the planes and having essentially no other options, Smith hopped on a plane to Vegas with FedEx’s remaining money. He hit the casino and sat down at the blackjack tables. Miraculously he emerged victorious, turning the $5,000 he started with into $27,000.
Roger Frock, a FedEx executive at the time, was in disbelief when he found out how Fred Smith managed to keep the operation afloat when the straights were dire. “I said, ‘You mean you took our last $5,000–how could you do that? [Smith] shrugged his shoulders and said, ‘What difference does it make? Without the funds for the fuel companies, we couldn’t have flown anyway.’”
Eventually the company was able to financially stabilize and produce a profit of $3.6 million in 1976. Ever since, FedEx has done extremely well–even becoming a household name. Who would have thought that gambling in Vegas with the last of your money would end up saving the day? I think that there’s some good advice to be taken from this story: even when it seems like your back is against the wall, there is always a way out if you’re willing to think outside the box.
Sources:
From the Information Age to the Communication Age by Andrew Feenberg https://www.sfu.ca/~andrewf/inforcom.htm
Fred Smith on the Birth of FedEx, Bloomberg Businessweek https://www.bloomberg.com/news/articles/2004-09-19/online-extra-fred-smith-on-the-birth-of-fedex
The Founder of FedEx Saved The Company From Bankruptcy With His Blackjack Winnings by Maggie Zhang, Business Insider https://www.businessinsider.com/fedex-saved-from-bankruptcy-with-blackjack-winnings-2014-7
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