Before becoming an e-commerce giant with billions of dollars in yearly revenue, a young delivery company faced immediate bankruptcy. In a desperate bid to keep operations running, the company’s founder took the last remaining corporate funds—a mere $5,000—and boarded a flight to Las Vegas. The financial strategy involved no banks or investors, relying entirely on the tables of a casino. The outcome of that single weekend playing blackjack determined whether the massive global shipping network we know today would survive its earliest years.
From a Yale Term Paper to Corporate Launch
In 1965, Fred Smith was an undergraduate student at Yale University. He wrote a term paper outlining a new shipping strategy to deliver items faster. His professor gave the paper a C, believing the concept was impossible. Smith graduated from Yale and served two tours of duty in Vietnam with the Marine Corps. In 1971, he purchased a controlling interest in Arkansas Aviation Sales. Recognizing the difficulty of shipping items within a few days, he decided to turn his college paper into a real business. By the end of 1972, Smith had raised $80 million in loans and equity investments to build the foundation for Federal Express.
Rising Fuel Costs and Millions in Debt
Operations officially began in April 1973. The company grew quickly but soon encountered severe financial obstacles. Rising fuel costs heavily impacted the business model. Federal Express accumulated millions of dollars in debt. Investors refused to provide additional capital, making bankruptcy a distinct possibility. The company bank account eventually dwindled to exactly $5,000. In a final attempt to secure traditional funding, Smith pitched the board of General Dynamics. The board refused the request.
The High-Stakes Blackjack Gamble
Instead of returning straight home after the failed pitch, Smith took a detour to Las Vegas. He took the remaining $5,000 of company funds to the blackjack tables. Smith won $27,000 during the trip and immediately wired the funds back to the company accounts. Smith later stated the money was not decisive but served as an omen that things would improve. He emphasized his commitment to the people who had joined his venture, noting that he was determined to fight for the company survival rather than quit.
Growing into a Billion-Dollar Shipping Giant
Following the casino win, Smith successfully raised another $11 million. By 1976, the company achieved $75 million in revenue. Federal Express went public two years later. By 1983, the company reported $1 billion in revenue. Despite taking a hit during the 2008 recession, the corporation bounced back, recording $69.7 billion in revenue in a recent year. Smith maintains his role as CEO and chairman and has an estimated net worth of $3.9 billion. He later wrote in an essay that while no business school graduate would recommend gambling as a financial strategy, sometimes it pays to take unusual risks early in a career.