The way I heard the story, and I was at FedEx in Memphisat the time, Fred went to Vegas to see Howard Hughes and pitch for an investment and won the $27 K while waitingto see Hughes.Take advantage of self-service copying and full-service printing services at FedEx Office in Blackjack. Learn about our latest offers and special deals at FedEx Office. Or start your order online for pickup. How The Founder Of FedEx Saved The Company From Bankruptcy With His Blackjack Winnings The Story SUBSCRIBE to ALUX: https://www.youtube.com/channel/UCNjPtO.
That week the company asked employees to delay cashing theirpaychecks if they could.
About Fedex Corp In 1974, FedEx faced bankruptcy after only three years in business. In a last-ditch effort to save the company, founder Frederick Smith flew to Las Vegas and played blackjack with.
At the time, I was doing operations research working on fleet scheduling, etc. Likely there was a lot of money to be saved with better scheduling of the fleet.
I'd writtenthe first software for scheduling the fleet, and one evening Roger Frock (mentioned in the article) and I used my software to do a schedule for all planned 33 airplanes and all planned 90 cities. Our two representatives from Board Member General Dynamics checked the 'feasibility' of the schedule and announced 'It's a little tight in a few places but it's flyable'. Some members of the board had been concerned or even convinced that a schedule would not be possible. So, the schedule Roger and I did alleviated the concerns and, as I was told, enabled $55 million in funding, i.e., loans, on the airplanes.
At a senior staff meeting, Fred's remark on the schedule was'An amazing document. Solved the most important problemfacing the start of Federal Express.'. Yup, it had beensix weeks in my living room in Maryland connected to a time sharing computer for 80 hours a week writing PL/I code while finishing teaching two computer science courses at Georgetown U.
That FedEx was close to going under didn't bother me much, but the stock I'd been promised 'within two weeks' with my offer to join still was not there 18 months later and bothered me a lot.
Fred Smith Las Vegas
If I couldn't get the promised stock when the company was close to folding, then staying around and helping to save the company would get me what? With no stock, I was going to graduate school to have a better career in operations research.
Fedex Founder Blackjack
Then Fred called me to his office and said: 'You know, if you stay, then you are in line for $500,000 in Federal Express stock.' But he wasn't giving me that statement on paper with a signature. My manager, Mike Basch, SVP Planning, was there with me with Fred. My office was next to Fred's with Mike's across the hall. No, given that the promised stock was already 18 months late, the company was close to going under, and Fred was not putting his statement in writing, I didn't know I was in line for any stock at all.
Apparently none of Fred's talk about stock meant anything: With the original copy of the offer letter, all the promises, all my records from then, when I contacted Fred with all the information, he and his FedEx lawyer refused to pay me anything, and a lawyer told me that legally FedEx owed me nothing.
The work I was doing would likely have saved FedEx a LOT of money soon. E.g., a good first shot would have been to modify the scheduling software to include some accurate costing and then just use it to develop schedules with the least cost by just intuitive methods. For a second cut, generate and cost out many possible individual airplane trips from Memphis to the cities and back. Then use that data for integer linear programming (ILP) set covering with one column for each possible trip and one row for each city to be served, say, a few dozen cities growing to the planned 90. Then use some column generation (Gilmore and Gomory) and some branch and bound. Easily should have saved millions a year in fuel and other operational costs quickly. I had world expert in integer linear programming George Nemhauser lined up as a consultant, and I was writingsoftware in PL/I on an IBM CP67/CMS system.
Actually, well into the start of FedEx, Fred had planned to do the first schedules himself. When he tried, for just a few cities, just by hand, from his office, when FedEx was still in Little Rock, at the end of the afternoon he came out of his office saying 'We need a computer'. A guy I had known in college heard that and gave me a call.
Yes, ILP set covering is in NP-complete. So, no one hasa guaranteed polynomial algorithm for worst caseexamples. But that doesn't mean that can't save a lotof money fairly easily in cases of interest. Sure, mighthave trouble guaranteeing to save the last 10 cents, but if save $5 million a month over the best solution otherwise,then just saved, let me see here, right, $5 million amonth.
I didn't get the stock, and Fred didn't get the savings.
Fred has been very successful, but he didn't do it alone, and some promises about stock were not kept.
One lesson is, from what my wife told me as I joined FedEx, 'Get it in writing'. Well, my offer letter said I'd be in the stock plan, but apparently that was meaningless legally. Better still, get a lawyer. Better still, start and own your own company. Back to it.
Shortly after founding shipping group FedEx, the company was facing dire financial straights. The company was eating through cash while trying to establish their footprint, and was on the verge of bankruptcy. This week CEO Fred Smith revealed how he won big at the blackjack table and used those funds to help save the company from bankruptcy early on.
Smith recalled how he went to General Dynamics to beg for additional funding, only to be rejected. On the way home, Smith took a detour to Las Vegas and sat down at a blackjack table. He went on a run and walked away after winning $27,000. With funds in hand, Smith then wired the funds back to FedEx, which helped get the company by until they were able to raise $11 million in funding. A few years later, FedEx reached over $1 billion in revenues.
Fedex Blackjack
Speaking about the big win and the impact it had on his company Smith said, “The $27,000 wasn’t decisive, but it was an omen that things would get better. I was very committed to the people that had signed on with me, and if we were going to go down, we were going to go down with a fight. It wasn’t going to be because I checked out and didn’t finish.”
Since that time FedEx has become one of the largest shipping companies in the world. The group employs more than 400,000 people globally and had nearly $70 billion in revenues last year.
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