The FedEx Story: How Blackjack Saved the Company from Bankruptcy

^{Pictured: Fred Smith, the visionary founder of FedEx}

Founder of FedEx, Fred Smith, took a gamble in a game of blackjack with the last of the company’s money in the 1970s, avoiding bankruptcy and turning FedEx into the world’s largest and globally recognized courier and logistics brand.

The Birth of a Vision: How Fred Smith Created FedEx

Fred Smith had a revolutionary idea: delivering packages by air mail. He came up with this concept as a student at Yale, but his term paper on the subject got a mediocre grade from his professor. But Smith didn’t let that stop him. He was determined to build a business around air transport, and in 1971, he founded FedEx.

To start his company, Smith raised $80 million from investors and creditors. He also invested $4 million of his personal wealth, which came from his family inheritance. Then, he rented the equipment for flights and transportation, such as planes and trucks.

Fred Smith in the early days of FedEx

The 1st flights took off in 1973, but only within the U.S. The business was barely breaking even, and had to compete with other delivery companies. Smith had a hard time selling his customers on the idea of air delivery, which seemed like a luxury compared to road delivery. And then the oil crisis hit (the Arab Oil Embargo of 1973), which made flying even more expensive. 

The Gamble of a Lifetime: How FedEx was Saved with Blackjack

FedEx was running out of money fast. The main problem was the high cost of fuel for the planes. Fred couldn’t find new investors, and FedEx was facing bankruptcy.

On a day when the company had only $5,000 left (not even enough for a week), Smith made a bold move. He took the last of the company’s money and flew to Las Vegas. 

There, he went all-in on blackjack, a game he learned during his military service in Vietnam. He was lucky and won $27,000 (more than x5 his initial amount).

Looking back on his risky Las Vegas trip, the businessman later revealed the secret of his success. He said that most players make the mistake of cashing out, taking their winnings off the table precisely when they should be doubling down.

The Payoff for a Bold Gamble

$27,000 was not a lot of money, but it was enough to keep FedEx alive for another week. More importantly, it gave Smith the confidence and the courage to try again.

He reached out to investors again and used some of the winnings for media advertising, including TV commercials. This time, he succeeded: he raised an extra $11 million.

From then on, things started to change for FedEx. By the end of 1976, FedEx made its first profit, which was $3.6 million.

Fred Smith today

Soon, the government also saw the potential of air transportation and made some changes that helped FedEx. They allowed bigger planes for civilian air transport, and let FedEx ship documents by air (before, only surface mail could do that).

A decade later, Fred Smith’s company became a global leader in logistics and air transport, with billions of dollars in profits. 

Today, Smith is one of the richest people in the world, with a net worth of at least $4.9 billion (as of December 2023). He is also ranked #184 on the Forbes 400 list of the wealthiest Americans.