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Amazing Business Story: Fredrick Smith

by Valentine Ogbamebor

The concept of rag to riches is a very popular in the biographies of self made billionaires, from Steve Jobs to Andrew Carnegie to John D Rockefeller. They all had humble or very poor backgrounds; they all almost literally scratched their way to the top. But not all billionaires had such beginnings; a good example is FedEx’s founder Fredrick Smith. His affluent background nonetheless, did not exempt him from the travails and challenges of building a business.

Fred was born in Memphis, Tennessee on August 11, 1944 to a wealthy family. But in 1948, when Fred was just 4 years old, his father passed away, leaving young Fred to be raised by his mother and uncles. Fred’s father was a self made millionaire who owned, among other businesses, a chain of restaurant called Toddle House.

As a child, Fred was crippled by a congenital bone diseases called Calve-Perthes disease, which caused him to walk with crutches and braces most of the time, but by age 10, he had outgrown the disease and even participated in sporting activities including basketball and football.

In 1962, Fred entered Yale University to study Economics. While in Yale, Fred wrote a paper on the need for a reliable overnight delivery in a computerized information age. His professor didn’t see the practicality of the system and replied him, “The concept is interesting and well-formed, but in order to earn better than a ‘C’, the idea must be feasible.” This submission by Fred’s professor may have caused him to discard the idea for many years.

After graduation, Fred enlisted in the US Marines and was deployed to serve in Vietnam. He served for three years between 1966 to 1969 as a platoon leader and a forward air controller. Fred confessed to have received a different type of education during his time in Vietnam.

As a platoon leader, he was in charge of group of boys from varying backgrounds, most of them belonging to lower class families. This experience helped him to better understand them, their challenges, how they react, how they can be better motivated to work, how they can be treated fairly. This knowledge would be put to very good use in the eventual formation and management of FedEx, where every employee is made to believe he or she owns a part of the establishment.

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During his time in the military he also observed the intricate procedures of military procurement and delivery, soaking in all the necessary information and details.

After leaving the military, Fred confessed to be weary of blowing things up and instead wanted to build things up. His first adventure into business was helping his step father to run a struggling company that modified aircraft and overhauled their engines. But logistical problems caused the venture to fail and forced Fred to revisit his idea of an overnight delivery system.

On June 18, 1971, armed with his $4 million inheritance money, Fred founded Federal Express, and between 1971 and late 1972, he raised $80 million in equity and investments. With 14 Falcon 20 jets, Federal Express began offering service to 25 cities, delivering small packages and documents. Business was slow at first, (the company delivered just 186 packages on their first night), but soon things picked up and FedEx was raking in good profit.

But suddenly, tables turned and the business was bleeding money, no thanks to the rapidly increasing cost of aviation fuel. In two years, Fred had lost more than $27 million and the company was on the verge of bankruptcy. Fred tried desperately to keep FedEx afloat, including going to Las Vegas to play Blackjack with the company’s $5,000. He eventually won $27,000 which he used to pay for the company’s fuel bill.

Through doggedness and unrelenting effort Fred was able to raise another $11 million dollars which helped the company pull through the rough patch. Soon, the company began to rake in profit again. In 1976, it recorded a $3.6 million profit and in 1980, it recorded $38.7 million in profit. The company’s profit has risen steadily ever since. Presently, the company delivers over 9 million packages each working day.

The lessons Fred learnt while on military tour has played an important role in the overall success of the company. He ensures that every employee could feel like they could share in the success of the company and insist that managers treat their workers appropriately. Managers are assessed by both bosses and workers to ensure good working relations at all levels. FedEx pilots are among the best paid and best compensated in the industry.

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Fred Smith lives in Memphis and he is worth $3.8 billion.

Lessons from Fred Smith

Treat them fairly, and they will move mountains for you:

I once worked in a place where 70% of the employees would set the establishment on fire if given the chance. Why? Because, not only are they not treated fairly, they do not feel like they have a stake in the establishment; profit or loss, it makes no difference to them.

UPS was the biggest rival to FedEx, during one of its strikes, FedEx was swarmed with close to a million extra packages. Thousands of FedEx workers, who had already completed their shifts, voluntarily poured in to help sort out the packages. At the end of the strike, FedEx had increased its share of the express transportation market to more than 43%.

FedEx workers felt like they own a part of the company, so they didn’t mind that they were off duty or that it was some minutes before midnight, they came in and moved mountains for their company.

Learn to appreciate your workers, they may have flaws here and there, but appreciate their effort all the same, for one day, your own ‘UPS strike day’ would come, and those workers would either make you or break you.

Only you can see it…

Only you can see it, that’s why it is called a dream. No one else can see your dreams as clearly as you, they can only try to imagine it but it would never be so clear to them. When Fred submitted the paper on FedEx to his professor, the professor, despite how knowledgeable he was, could not see what young Fred was seeing, hence, he concluded it was impossible.

Never be discouraged when other people say your dreams are not ‘feasible’. Of course, your dream may need a little adjustment here and there but never shove it away completely for what people say. Keep at it, remembering that Fred’s professor said FedEx was not possible, but today, over 9 million packages are transported daily.

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