How Fred Smith rescued FedEx from bankruptcy by playing blackjack in Las Vegas

Fred Smith founded the Federal Express in 1971 and it began operations in 1973. The company was based on an idea he wrote about in a term paper in 1965 while he was an undergraduate student at Yale. For an economics class Smith wrote a term paper that outlined his idea for a company that would guarantee overnight delivery of small, time-sensitive goods, such as replacement parts and medical supplies, to major U.S. cities. The professor was not impressed and gave Smith a grade of C for his work.

Smith wasn’t deterred. After he graduated from Yale and served in the Marine Corps for two tours of duty in Vietnam, Smith bought controlling interest in Arkansas Aviation Services in 1971. With his new company, Smith realized how difficult it was to ship items within a few days, so he decided it was time to try to put his Yale term paper to use.

In 1971, Smith became the founding president of Federal Express, an express-delivery service that he envisioned as an integrated system of airplanes and trucks. It became operational two years later, with night flights from Memphis, its base, to 25 U.S. cities. Federal Express’s first two years were grim. In fact, on its first night of business, the fledgling company shipped only 186 packages onto its 14 Falcon jets routed to 22 cities. Within the first three months of operation, the company had lost almost a third of its start-up cash. It was not uncommon for Federal Express drivers to dig into their own pockets to pay…