Fred Smith, FedEx founder and American business magnate, dies at 80
FedEx founder Frederick Wallace Smith, whose express shipping company revolutionized air cargo transportation and set the standard for absolutely, positively overnight delivery, died on June 21, FedEx has confirmed. He was 80.
Smith, who led FedEx as its chairman and CEO for the vast majority of his tenure, took the rough idea detailed in his rushed college term paper and molded it into a global shipping juggernaut now worth tens of billions of dollars, handling millions of packages every day and employing hundreds of thousands of people worldwide.
"Fred was more than just the pioneer of an industry and the founder of our great company. He was the heart and soul of FedEx – its PSP culture, values, integrity, and spirit," FedEx CEO and President Raj Subramaniam said in a message sent to FedEx team members. "He was a mentor to many and a source of inspiration to all. He was also a proud father, grandfather, husband, Marine, and friend; please keep the entire Smith family in your thoughts and prayers during this difficult time."
It took years for Smith's vision to get off the ground. Financing hurdles and regulatory restraints extended the time it took to prove the immense value of an express shipping network for businesses who needed vital goods like machine parts and electronics delivered fast. Before FedEx, urgent air cargo was at the whim of passenger planes.
'I just knew it was correct, but there were only a few believers at first,' Smith said, according to the Robert Sigafoos' 1983 book 'Absolutely, Positively Overnight!' chronicling FedEx's early history. 'The overwhelming body of opinion said it wouldn't work, or that we couldn't raise the money.'
After FedEx's business took off in the 1980s, Smith began to wield considerable influence in both the business and political realms. He forged close ties with presidents and presidential candidates — George W. Bush and John McCain in particular — and members of U.S. Congress while advocating for minimal trade barriers, a key FedEx policy interest.
'I thought then what I still think — he is the most impressive executive I have ever met,' former FedEx Vice President and COO Jim Barksdale, who later became CEO of Netscape, said of his first impression of Smith.
Smith was born on Aug. 11, 1944, to Frederick Smith and Sally Wallace Smith in Marks, Mississippi. He was raised by his mother in Memphis after his father, founder and chairman of one of the largest bus lines in the South, died in 1948.
As a child, Smith wore braces and used crutches due to a hip disorder. The ailment went away as he grew older, and he was an active athlete while attending the private Memphis University School, playing both basketball and football.
Smith had an interest in both aviation and business at a young age. At age 15, he both learned to fly and started Ardent Record Company with two of his classmates. The label's first release broke even.
Well-prepared for higher education following his graduation from Memphis University School, he attended Yale University beginning in 1962, majoring in economics and political science. In a moment immortalized in company lore, Smith's 1965 term paper at Yale outlined the basis for what would eventually become FedEx.
'In the paper, he laid out the logistical challenges facing pioneering firms in the information technology industry,' according to FedEx's company history. 'Most airfreight shippers relied on passenger route systems, but those didn't make economic sense for urgent shipments, Smith wrote. He proposed a system specifically designed to accommodate time-sensitive shipments such as medicine, computer parts, and electronics.'
Smith had described his term paper as a last-minute endeavor, but felt he had the right idea in pointing out that air freight would move best in a system designed specifically for it, not as a passenger add-on. The professor gave Smith an average grade for the paper, he later recalled.
It took years for Smith to revisit the idea. After graduating from Yale, he served as a U.S. Marine Corps officer from 1966 to 1970.
'A lot of Fred's ideas then, and I think now, come from his ideas in the Marines on how to manage troops and how to move things and how to get things done,' Barksdale said in 2020.
In his first tour, which lasted seven months, Smith was a platoon leader and later a company commander. He returned flying planes on reconnaissance missions and was discharged in July 1969, awarded with a litany of medals, including two Purple Hearts, the Navy Commendation Medal and the Vietnamese Cross of Gallantry.
'It's not that I'm more patriotic than anyone else, but there are 500,000 Americans over there now and there is a job that I've been asked to do,' Smith said in 1968 when asked by a Commercial Appeal reporter why he was returning for a second tour. 'I'm not being conceited, but I have had a year's experience and I know I can do it better than any new officer they might send in to replace me.'
Smith jumped into the Mid-South business world after his service, buying controlling interest in the struggling Little Rock-based Arkansas Aviation Sales run by his stepfather in 1970. The funds came from his father's estate.
Smith managed to turn the company around, solidifying its reputation as a timely, low-cost corporate jet equipment and maintenance center. However, he encountered challenges that would inform him of the need for express shipping.
Getting urgent goods delivered quickly for the business was difficult, with air cargo transportation dependent on passenger planes focused most on moving people. He knew other businesses had the same problem.
'If a hospital in Texas needs a heart valve tomorrow,' he told Memphis Magazine in 1978, 'it needs it tomorrow.'
While running Arkansas Aviation Sales, Smith's mind wandered back to his term paper. He decided an express shipping company would fulfill a need worth pursuing full-time. Federal Express was incorporated on June 24, 1971, with the 'federal' piece of the name coming partly to woo a possible customer in the Federal Reserve Bank.
The FedEx idea was initially narrow, focused on transporting bundles of checks for the Federal Reserve to expedite the process for clearing checks between banks. Although a deal with the bank fell through, Smith kept the name and decided to expand upon the idea, conceptualizing an operation catered around time-sensitive shipping.
Building a profitable business off the idea wouldn't be easy. Others had attempted airmail services before but came up short. The transportation network had to be sizable enough and serve enough locations to bring in enough customers, meaning significant financing needed to be brought in.
Federal Express was able to secure bank loans and receive enough in investments to begin making mail runs in 1972. The next year, Smith moved the company to Memphis permanently altering the economic trajectory of the Mid-South city.
'Memphis was chosen because of its central location within the U.S. and because Memphis International Airport was rarely closed due to bad weather,' per FedEx's company history. 'The airport was also willing to make the necessary improvements for the operation and additional hangar space was readily available.'
FedEx deems April 17, 1973, as Federal Express' operational birthday. Fourteen small aircraft departed Memphis and delivered 186 packages to 25 U.S. cities. A total of 389 employees had a hand in the operation.
Even after the successful run on April 17 and growing package volumes after that, Federal Express still had money troubles. Federal Express' first general manager, Roger Frock, wrote in his book 'Changing How the World Does Business' that by September, the company was essentially bankrupt and should have folded.
Employees were sometimes asked to defer cashing their checks for a couple of days. Michael Basch, a founding officer and former senior vice president for FedEx, said a pilot had to use his own credit card to pay for plane fuel because the company 'didn't have any money.'
Smith admitted in 1974 to forging documents to guarantee a $2 million loan from Little Rock Union Bank, Frock wrote, and amid the fallout investors and lenders hired Howell Estes as Federal Express' new chairman and chief executive officer.
'While it is possible to understand that, under extreme pressure, Fred was acting to save Federal Express from almost certain bankruptcy, and even to empathize with what he did, it nevertheless appeared to be a serious breach of conduct,' Frock wrote.
Smith, still president, nearly resigned from the company amid the pressure. Senior managers voiced their support for his continued involvement and threatened to resign themselves if Smith was forced to. Estes resigned instead, and Smith became chairman and leader of the company once again.
'If Fred Smith lined up all 13,000 Federal Express employees on the Hernando de Soto Bridge in Memphis and said, 'Jump!' 99.9 percent of them would leap into the swift Mississippi River below,' Heinz Adam, the company's head of customer service said, according to "Absolutely Positively Overnight!" 'That's how much faith they've got in this guy.'
Federal Express finally showed a profit in July 1975. Smith's company was primed to ascend as the standard-bearer of a unique service: rapid and reliable delivery of high-priority goods.
'We literally worked 20 hours a day, seven days a week, so it was tough,' Basch said of the early days of FedEx. 'We didn't think we were going to make it most of the time, but everybody hung in there.'
Although Federal Express and Smith had a significantly more secure future, federal regulations placed a limit on how much the company could grow its express delivery operations.
Most airlines had to land approval for new rates and routes from the Civil Aeronautics Board and expanding into new markets was an arduous process. Federal Express, using its small Falcon jets ferrying cargo, avoided these regulations in its early years, but the growing business wanted to fly larger aircraft and serve more markets.
Smith spent time in Washington, D.C., to sway lawmakers to cut back these regulations. He directly testified before congressional committees seeking change to the law so his company wouldn't have to deal with CAB regulation.
'Our efforts down here, while they were enormously important to us, they were to some degree a sideshow to the much bigger issue that had bigger players with more of a voice than we did,' Smith said in 2014. 'But we just became a part of this conversation, more than anything else, because it was so obvious it was stupid to prevent us from doing what we were doing.'
Many airlines carrying both passengers and cargo opposed Smith's proposal. Eventually, Smith won out. In 1977, President Jimmy Carter signed the Air Cargo Deregulation Act passed by Congress. Federal Express had the right to operate larger aircraft and expand its operations.
Sixty-six days after deregulation, Federal Express received its first Boeing 727 cargo plane from United Airlines, Frock wrote. Smith's company was in the clear, and revenues soared after.
Federal Express didn't look back. In 1983, the company reached revenues of $1 billion. It also expanded internationally throughout the decade, notably purchasing cargo airline Flying Tiger Line in 1989.
The influence of Federal Express' Chairman, president and CEO grew as his company did.
When Japan resisted FedEx's efforts to seek increased air rights in the country in the 1990s, Federal Express pressed the Senate to introduce a resolution — which it did — threatening sanctions against Japanese airlines. Smith also landed a 45-minute meeting with President Bill Clinton on the issue, the Wall Street Journal reported then. Japan eventually opened up for FedEx under a new treaty.
Smith also enjoyed a close relationship with President George W. Bush, a fraternity brother of his at Yale. Bush's first choice for Defense Secretary after his victory in the 2000 election was Smith, but he declined for medical reasons, Bush wrote in his book 'Decision Points."
Smith backed John McCain in his run for president in 2008, serving as national co-chair of his campaign committee and raising more than $100,000 for the Republican nominee. In 2018, Smith was one of the pallbearers at McCain's funeral, the BBC reported.
It wasn't just Republicans who admired Smith. In 2010, President Barack Obama singled out Smith when asked by Bloomberg BusinessWeek to name a chief executive he admires.
'He's an example of somebody who is thinking long-term,' Obama said.
Smith was critical of Obama's successor, Donald Trump, for his approach on global trade and use of tariffs. Still, FedEx coordinated with the Trump administration and played a key role in distributing personal protective equipment and vaccines during the COVID-19 pandemic.
Smith made an appearance in 2020 at a roundtable with then-Vice President Mike Pence in Memphis to discuss the vaccine distribution effort.
By then, public appearances were fewer and farther between for Smith, who ceded his role of FedEx president in 2018 and CEO in 2022.
Smith's legacy was cemented well before then. His ambitious idea became a giant in American business, with enough gravity to influence presidents and policies while making tens of billions of dollars each year.
'I'm very focused on the here and now,' Smith told the Wall Street Journal in 2019. 'I don't care about any legacy. The legacy will be the success of the company.'
This article originally appeared on Memphis Commercial Appeal: Fred Smith, FedEx founder and business magnate, dies at 80
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