How Blackjack Saved FedEx From Bankruptcy
In the fast-paced world of overnight deliveries, FedEx stands out as a global powerhouse, delivering over 3 billion packages annually to 220 countries. However, the journey to success was far from smooth for founder Frederick Smith.
In the fast-paced world of overnight deliveries, FedEx stands out as a global powerhouse, delivering over 3 billion packages annually to 220 countries. However, the journey to success was far from smooth for founder Frederick Smith. In the early days, facing financial desperation, Smith turned to an unconventional source: gambling in Las Vegas.
FedEx Founding
Back in 1962, while studying economics at Yale University, Smith penned a last-minute paper on the automation of society and goods transportation. Despite uncertain academic results, this paper became the foundation of FedEx's revolutionary concept. In 1971, armed with $4 million of inheritance and $80 million in loans, Smith founded the company with a vision to transport small, essential items by plane for efficiency.
Debt
The initial years proved challenging, with rising fuel costs pushing FedEx into millions of dollars of debt. Rejected funding pitches added to the turmoil, bringing the company to the brink of bankruptcy. When funds dwindled to a mere $5,000, Smith took a daring leap—flying to Las Vegas to play blackjack with the company's last resources.
Vegas
In a twist of fate, Smith turned the $5,000 into $27,000, providing a lifeline for FedEx to stay afloat. Former FedEx executive Roger Frock recalled the disbelief when learning about Smith's gamble but noted Smith's pragmatic response: "Without the funds for the fuel companies, we couldn't have flown anyway."
Determination
The $27,000 wasn't a complete solution, but it fueled Smith's determination. Using it as motivation, he secured an additional $11 million in funding. Stabilizing financially, Smith spearheaded a direct mail advertising campaign that elevated FedEx's visibility. By 1976, the company turned its first profit of $3.6 million. A few years later, FedEx went public, marking the beginning of its sustained success. According to the company website, FedEx reported $1 billion in revenue in 1983.
Regrets
Though gambling FedEx’s last $5,000 was a risky choice, Smith doesn't appear to regret his decision, according to a quote from an essay by Smith that Forbes published in 2017.
"No business school graduate would recommend gambling as a financial strategy, but sometimes it pays to be a little crazy early in your career,” Smith wrote.
Bonus Fun Fact
Turns out, blackjack wasn't just FedEx's lucky charm. Bill Gross, founder of PIMCO, also used gambling winnings to jumpstart his investment career.
Sources: Business Insider, Fox Business
