cover illustration by john robinette
Our August 1978 issue.
Editor’s note: Frederick W. Smith, founder of FedEx, died on June 21, 2025. What follows is an excerpt of a story written by Kenneth Neill and originally published in the August 1978 issue of Memphis Magazine. The full story is available digitally at memphismagazine.com.
Six years ago, a young Memphian took an idea that the experts said would never work, added $4 million of the family fortune, somehow talked the big-money capitalists into investing an unprecedented $72 million, and started an enterprise which he hoped would revolutionize air freight. The enterprise lost $24 million in its first two years, and the experts snickered. Today, just four years later, the company is grossing more than $15 million a month and is worth more than $160 million — and the “experts” are scrambling to buy stock in it.
The young man was Frederick Wallace Smith, and his big idea became Federal Express, headquartered in that airport complex that bustles at midnight and slumbers at dawn. And at a time when most American industries are dominated by faceless conglomerates, Smith seems a throwback to the age when “oil” meant John D. Rockefeller and “automobile” meant Henry Ford.
Few modern companies have been influenced so much by the ideas and personality of one man. Yet “tycoon” is just about the last word that comes to mind when one meets young Smith. Still only 34 years old, he looks and acts more like a graduate student than a corporate executive, despite the streaks of gray which are beginning to appear in his hair.
But this youthful exuberance and informality are deceptive. Although his rise to economic stardom has had its share of miraculous elements, Smith’s origins hardly make him a Horatio Alger hero. He was born into the upper crust of Memphis society; his father, a successful bus and restaurant magnate, died a millionaire in 1948. The younger Smith attended Memphis University School and Yale University, from which he graduated in 1966 with a B.A. in economics and political science. After college he enlisted in the Marine Corps and spent two years in Vietnam, where he flew more than 200 combat missions and won both Bronze and Silver Stars.
Coming out of the service in 1970, Smith could easily have rested on his laurels and his family’s fortune. But the Vietnam veteran was not prepared for so passive a future. He needed fresh challenges as Don Quixote needed windmills. Aviation had always been Smith’s first love (he had gotten his pilot’s license when only 15), so he bought Little Rock Airmotive, an Arkansas firm that specialized in aircraft modifications and engine overhauls, and began to get his feet wet in the world of American business.
“If a hospital in Texas needs a heart valve tomorrow,” Smith observed, “it needs it tomorrow.” Fred Smith resolved to be the man who would make these special deliveries possible.
At this time the erstwhile Ivy Leaguer also began giving serious consideration to an idea which he had used as the theme for an economics research paper at Yale: the design of an efficient air cargo network which would make possible the rapid delivery of small parcels to all parts of the country.
America had never had a satisfactory air freight system. Cargo needs had always been subordinated to the needs of the passenger market. For example, there was virtually no way to move parcels quickly between secondary cities such as Birmingham, Alabama, and Salt Lake City, Utah — places that were not connected by direct passenger routes. Moreover, nearly all passenger planes flew during daylight and evening hours, suspending operations between midnight and 7 a.m. This meant that overnight movement of packages was nearly impossible, even between those places that were well served by the commercial airlines.
Young Smith put forward what he today describes as “a systems approach to a systems problem.” Instead of using existing airlines and maintaining depots in a number of cities, he proposed the establishment of a single sorting facility which would serve the entire country. Every evening, planes from a hundred cities would bring parcels to this “hub.” Within a matter of hours they could return to home base, laden with packages bound for those destinations. Smith wanted a completely self-contained system, one which maintained its own delivery trucks and depots as well as airplanes. In this way, he could ensure that any package accepted for delivery on a particular evening would be delivered to an addressee in any other city in the network on the following morning.
Ironically, Smith’s term paper had received a barely passing grade at Yale. (“I was a crummy student,” he chuckles. “Just like Winston Churchill.”) But he realized, perhaps better than his professors, that the pattern of American economic development was changing rapidly, and creating tremendous demand for just the sort of system he envisaged. Since World War II, many companies had moved out of the traditional urban centers of the Northeast, and into smaller cities that were not well served by the passenger air network. At the same time, many new industries — producers of computers and electronic equipment, for example — depended upon rapid service to all parts of the country in order to attract and to maintain customers.
Smith did not have to look far to see just how crucial the time element had become in American industry. At his own aircraft conversion plant in Little Rock, delays in parts deliveries wasted man-hours and cost the company valuable contracts. “If a hospital in Texas needs a heart valve tomorrow,” he observed, “it needs it tomorrow.” Fred Smith resolved to be the man who would make these special deliveries possible.
