Ideas are a dime a dozen. Good ideas, two for a dollar. But a single world-changing idea in the hands of one determined to turn it into a new reality is priceless. This is the story of both a big idea and a rare man equipped with the courage, foresight, and intelligence to hatch that embryonic idea and nurture it through a rocky infancy into a genuinely astonishing productive adulthood. Make no mistake: this was not merely a big idea whose time had come. It took a man willing to risk his entire fortune and his reputation on an enterprise that many experts thought was at least a few decades away from practical.
All my relatives were World War II veterans,” said Fred Smith. “My father was in the navy during World War II; he died when I was very young. My stepfather was a fighter pilot in China. My uncle Arthur was in the army and fought in New Guinea. My uncle Sam was in a tank destroyer unit in Europe. My uncle Bill ran away from home and became a gunner/radio operator on a navy torpedo bomber in the battle of the Coral Sea. My father-in-law was in the Marine Corps during World War II and Korea. So there wasn’t any question in my mind, or for that matter in my mother’s mind, that I was going to serve.”
Smith was born into a well-to-do Mississippi family. His father founded Toddle House, a restaurant chain, and an interstate bus line, the Smith Motor Coach Company. The latter became the Dixie Greyhound Lines in 1931 when the Greyhound Corporation bought a controlling interest.
In his childhood, Smith was afflicted with a crippling bone disease, but he regained his health before he turned double digits. While in his teens, his family moved to Memphis, where he excelled at football. He also became a pilot at age fifteen, which launched a lifelong interest in aviation.
In 1962, Smith enrolled at Yale University, where he studied political science and economics. It’s where he discovered his first entrepreneurial interest; he wrote a paper on the merits of an overnight delivery service. His professor was not impressed because he could not envision the business would be economically feasible.
At Yale, Smith befriended John Kerry, who would later become senator from Massachusetts and secretary of state and shared Smith’s enthusiasm for aviation. They often flew together, and they became brothers in the Delta Kappa Epsilon (DKE) fraternity, where Smith was elected president. Both were also tapped for the collegiate secret society Skull and Bones. One of their fraternity brothers was George W. Bush, the forty-third president of the United States.
“Yale’s class of 1966 was completely different from the class of ’68,” Smith opined. “By the time George W. Bush’s class came along, the class of 1968 was completely antiwar. My class was much, much more traditional. I believe that a huge percentage of my class went into the military; the vast majority into the navy, including, most famously, John Kerry.”
Instead of enrolling in Yale’s excellent NROTC program, which required weekly classes and in summer sent its midshipmen to train on navy vessels, Smith chose the Marine Corps platoon leader’s course because it had no weekly academic obligation. He trained in the summer, between academic semesters, with his eye on joining the marines after graduation.
Smith went to Vietnam in 1967 as a first lieutenant and served briefly as a platoon commander. By February 1968 he commanded Kilo Company, Third Battalion, Fifth Marines, First Marine Division. Before and during the 1968 Tet Offensive, his unit operated near the marine base at Da Nang.
He recalled, “The North Vietnamese never got into Da Nang or penetrated its air base. We set up a giant blocking formation, a classic L-shaped ambush, but on a huge scale—two battalions. Just as our intelligence predicted—we actually had the enemy’s ops order—the Second NVA Division came up the railroad tracks that ran southwest to northeast into Da Nang. We had no idea this move was part of a coordinated, nationwide offensive.
“When the enemy entered the kill zone—I mean we put the hurt on those guys—we had eighteen artillery pieces zeroed in on them.”
Because of American success in this battle, Da Nang was the only major city not penetrated during Tet. Neither was its air base, which was used by the South Vietnamese Air Force, the US Air Force, and the Third Marine Air Wing. It was the only major air base not penetrated during Tet.
About three months after Tet, while conducting a search-and-destroy operation in Quang Nam Province, Company K ran into a buzz saw on Goi Noi Island, a well-entrenched NVA battalion. As Smith’s men assaulted the position, the North Vietnamese, supported by mortars, counterattacked Kilo Company’s left flank. Smith ran through intense enemy fire to the point of heaviest contact. There he ignored his own safety to carry several wounded marines to safety. After directing his company’s fire until the enemy withdrew, he ran across the fire-swept battlefield to an elevated area, where he ignored the danger while he adjusted artillery fire and air strikes as close as fifty meters from his position. Sensing the confusion this fire inflicted on the enemy, he raced back across the battlefield and led his troops to attack the NVA’s weakest point. The North Vietnamese abandoned their positions and fell back. Kilo Company took two prisoners, collected valuable intelligence, and secured some of the enemy’s most valuable equipment. For this action, Smith was awarded the Silver Star.
Smith served a second tour in Vietnam as a forward air controller (FAC). He flew more than two hundred missions in the back seat of an OV-10 Bronco (a twin-turboprop fixed-wing aircraft used for observation and light attack), directing marine, air force, and navy fighter-bombers to put their bombs, rockets, or napalm on targets he selected in response to requests from ground forces.
Capt. Fred Smith was honorably discharged in 1969. In addition to his Silver Star, he earned a Bronze Star and two Purple Hearts.
Back in civilian clothes, he returned to his love for aviation. He borrowed money to purchase a controlling interest in Ark Aviation Sales, an aircraft maintenance company. By 1971, he had refocused the business to buy and sell used jet aircraft. In June 1971, Smith raised $91 million in venture capital and also invested his inheritance to found a company he called Federal Express. It opened its doors for business in March 1973 with a fleet of fourteen Dassault Falcon 20 jets.
Initially offering small package and document delivery service to seven US cities, Federal Express expanded as Smith focused on developing an integrated air-ground system, which was an entirely new concept in the business world. He built an aircraft hub facility in Memphis, at the center of a virtual wheel that served as a clearinghouse for shipments from any city on the rim of the wheel.
This was a considerable refinement of the system he had conceived at Yale in the early 1960s. It incorporated what he had observed in action in Vietnam, specifically how USAF aircraft moved high-priority supplies, munitions, and machinery around the country. The central hub was at Saigon’s Tan Son Nhut Air Base. Flights from there to major air bases north and south moved war matériel quickly around the war zone. But deliveries ended at these airports. Smith’s genius was to integrate this air system with an elaborate ground-delivery system that in many ways mimicked the air portion of the network and expanded into hubs serviced by delivery trucks in each city. The business plan was based on, he said, “three separate and independent studies that confirmed the need for this new type of logistic system.”
One of several things Smith applied to turn FedEx, as it is now known, into a profitable business is that things happen that cannot be planned for—exactly the lesson every combat commander learns in short order.
Smith explained the first unexpected hiccup Federal Express faced: “In October 1973, the Arabs turned off the oil spigot. That created complete chaos with our plan.”
When members of the Organization of Petroleum Exporting Countries (OPEC), a cartel including Arab nations, Indonesia, and such South American countries as Venezuela, abruptly stopped selling oil, everything made from oil, including aviation fuels, became scarce. All across America, lines of cars at gasoline stations often stretched for blocks. Eventually, the federal government stepped in to regulate the available supply of all petroleum products.
“To get an allocation of the available product, you had to have had a history of using it,” Smith recalled. “But we had never been in business before. We had no baseline usage on which to compute an allocation. I had to go to Washington and learn the whole scene up there. Finally, John Sawhill was put in charge of a new Federal Energy Office. I tried to make a case that we should get x amount of jet fuel a month. I couldn’t do it; we had just launched the business. Eventually, we received an allocation; it cost us about eighteen months of profitability and created all sorts of other problems.
“In retrospect, had I known all the pitfalls, I might not have done it. Squaring the circle back to Vietnam, though, in building FedEx, I was trying to do something productive, in contrast to the completely nonproductive destruction I had been involved with—just a waste of people and resources. That was part of my motivation.”
Smith proudly says he built his company by applying principles he learned as a marine. “We put great stock in our fundamental business strategy, in the fact that we fill a large and previously unmet need, in the key marketing decisions that we’ve made, and in the innovative operational concepts that we developed.
“Yet much of our success reflects what I learned as a marine. The basic principles of leading people are the bedrock of the corps. I can still recite them from memory, and they are firmly embedded in the FedEx culture. On a personal level, there are the little things. Even in a blue pinstriped suit, I make sure that the right edge of my belt buckle lines up with my shirt front and trouser fly. I shine my own shoes, and I’m uncomfortable if they aren’t polished. I no longer sport a crewcut, but I keep my hair reasonably short. My kids would tell you I use some Marine Corps jargon, but that’s another story.
“I’ve also incorporated Marine Corps tenets into FedEx. We tell our executives that the key to their success is to rely on their first-level managers, FedEx’s counterparts to noncommissioned officers, to set the example for those under them and to publicly praise those who do a good job—all standard operating procedure in the marines, but rare in business and industry.”
It doesn’t stop there. Just as US Navy ships fly the Bravo and Zulu signal flags when their crews have done well, FedEx managers affix a sticker with BZ pennants to reports from subordinates that are particularly good. Workers who excel get to wear a lapel pin with tiny Bravo and Zulu flags. When an employee goes out of his way for a customer, he gets a “BZ check,” a cash reward of up to a few hundred dollars. Apart from the bonuses, many of these practices are straight out of the Marine Corps Leadership Manual.
Today, Smith is the chairman of an enormous corporation, but he has remained humble. He won’t cut the line in the company cafeteria. “From somewhere, a voice reminds me that a good officer lets his troops eat first,” he said.
With upwards of 400,000 employees who handle more than 14 million shipments a day, in 2017, FedEx worldwide operations covered more than 220 nations and territories and earned more than $60 billion. With 664 aircraft, the company operates the world’s largest commercial air fleet. FedEx is consistently rated near the pinnacle of the best companies to work for, is ranked among the most ethical of companies, and is unrivaled in brand recognition. It’s also universally recognized as among the world’s best corporate citizens. Smith’s company aggressively seeks to hire military veterans. “They have experience in pressure situations, and they have leadership skills,” Smith added.
As important as FedEx’s success is on its own terms, it is now virtually impossible to think of an America without reliable and affordable overnight delivery to nearly every city, town, village, and hamlet. Without FedEx or the competitors who followed in its wake, there would be no Amazon, no Walmart, no rapid, reliable, affordable delivery of life-saving medical supplies or critical machine parts. And every package FedEx delivers contributes to the national economy.
Smith has served on the boards of many large public companies, as well as those of St. Jude Children’s Research Hospital and the Mayo Foundation. A list of his professional and charitable associations would run to several pages.
Just for fun, in 2000, Smith appeared as himself in the Tom Hanks film Cast Away, filmed on location at FedEx’s home facilities in Memphis.
Despite a long life of superlative accomplishments, Smith’s days as a wartime leader are never far from his thoughts: “I think I have the same feelings as everybody who has been in something like Vietnam. You pay a big personal price. It never leaves you. I think about Vietnam probably every day . . . I think about all those guys and particularly the ones up on the Wall.1 I am seventy-three and a grandfather; all those guys missed fifty years of life. While I owe so much to the upbringing that my mother gave me, the war was probably the biggest influence in my life. It has led me to dismiss some of the things a lot of other people think are very important. I have never been particularly motivated by money. I’ve experienced the dark side of humanity; an awful lot of what I think and believe is just recognizing how short life is.
“More in retrospect than at the time, my view of the world changed significantly during the war,” Smith continued. “This might be because my perspective changed dramatically from the start of my tour in the Fifth Marines to the end of my second tour with Marine Observation Squadron 2 (VM02). The last month I was there, I controlled air strikes not far from where we operated when I joined the Fifth Marines in 1967. When I realized that we were fighting over the same ground over and over again, I began to question the strategy.
“My God, what a stupid way to prosecute the war,” he said. “I’m still stunned by it. I get madder about it the older I get. I’m now running a company with almost five hundred thousand employees. Daily operations are integrally related to our overall strategy. Making sure they are all in tune with one another is my job description.
“Looking back at the war from the perspective of a CEO of an organization with almost as many employees as the US had in Vietnam at the apex of the war—God almighty, if I had a strategy as stupid as we had in Vietnam, we would be broke.”