Fred Smith founded FedEx on an idea everyone told him would fail and built it into an $88 billion empire that changed how the world moves.
In this episode, we dive into how he built FedEx and the lessons he learned along the way.
Available Now: Apple Podcasts | Spotify | X | Transcript
This story proves that impossible is just another word for opportunity.
Lessons From Fred Smith
- Not trying guarantees failure. Fred Smith spent his childhood in leg braces. Doctors said he’d never walk normally. Through thousands of hours of excruciating therapy, he didn’t just walk; he became a varsity athlete. “Fear of failure must never be a reason not to try something,” he’d later say. When everyone said overnight delivery was impossible, he remembered the doctors who said he’d never play sports.
- Incentives matter. The Memphis hub was a nightly disaster. Planes had to land, unload, sort, and reload in hours. Nothing worked until someone noticed the obvious: they paid workers by the hour. The longer it took, the more they earned. FedEx switched to paying by the shift. Same pay, go home when you’re done. The sort suddenly ran like clockwork. Charlie Munger loved this story: “Never, ever, think about something else when you should be thinking about the power of incentives.”
- Loyalty is earned in the trenches. In Vietnam, Fred learned soldiers don’t fight for politicians; they fight for the person next to them. Years later, when FedEx ran out of money, employees worked without pay. Pilots used personal credit cards for fuel. Not because they had to. Because of the loyalty that was earned in the trenches.
- Become a learning machine. Fred Smith read four hours a day. Every day. “People who supposedly have vision spend a lot of time reading and gathering information, then synthesize it until they come up with an idea,” he explained. All that reading showed him something nobody else saw: people would soon care more about tracking their package than getting it fast.
- Take care of your people and they will take care of you. In 1974, investors moved to fire Fred Smith. Every senior officer signed the same letter: fire him, and we all walk. One was even offered the presidency as a bribe. (He refused.) This was People-Service-Profit in action. The order of those words is important. People first, then service, then profit. Not the other way around. Most companies put this stuff on motivational posters. At FedEx, people bet their careers on it.
- Reliability is rare. Speed without predictability is useless. FedEx guaranteed overnight delivery or your money back, a feat that seemed impossible at the time. The guarantee created trust with customers and accountability internally. There were no excuses.
- All in or all out. FedEx had $5,000 left. The planes needed $24,000 to fly on Monday. So Fred Smith took the five grand to Vegas and turned it into $27,000 at blackjack. When investors heard this story, they didn’t see a gambling problem. They saw a founder who’d already bet his inheritance, his house, everything, and was still fighting. Two weeks later, they gave him $11 million.
- Trust is built in drips and emptied in buckets. When Fred Smith bought Flying Tigers, he faced a choice: protect the seniority of Tigers pilots or his own FedEx pilots. He chose Tigers. The FedEx pilots—the ones who’d saved his company with their credit cards—called it “treachery.” FedEx recovered financially, but the family was dead.
- Outcome over Ego: FedEx lost $629 million in Europe because Smith assumed Europeans wanted overnight delivery. They didn’t. Their countries were small enough that regular trucks worked fine. Rather than double down to save face, Smith killed the entire operation. Most CEOs would have thrown another billion at the problem rather than admit they were wrong. They confuse stubbornness with strength. But Smith had learned from military history: sometimes the smartest generals are the ones who know when to retreat.
- Bounce, Don’t Break: Fred Smith survived childhood disease, his friend’s death, Vietnam combat, near bankruptcy, a coup attempt, and a $629 million failure in Europe. Despite disasters that would have broken most people, he kept going and built an $88 billion empire.
References:
Trimble, Vance H. 1993. Overnight Success: Federal Express and Frederick Smith, Its Renegade Creator. New York: Crown Publishers.
