The C grade Fred Smith received from a Yale professor about his vision for an overnight delivery service is much less remarkable than is assumed. Naturally Smith got a C. Rest assured that most investors gave him an F, assuming they bothered to hear Smith’s pitch in the first place.
Evidence supporting the above claim can be found in the billions Smith left behind, along with the market cap ($54 billion) of FedEx itself. Smith’s wealth and FedEx’s valuation are all the evidence we need that the entrepreneur in Smith saw what very few did, and having seen it, had the courage to act on it in concert with the genius to execute on what conventional wisdom plainly deemed outlandish.
Stop and contemplate the miraculous nature of Smith’s innovation. No doubt many wished they could have next-day or two-day delivery, but as Smith’s billions yet again indicate, his greatest insight was in figuring out how to solve a problem that appeared insolvable. Seriously, how to profitably move documents around the U.S. and around the world overnight? Investors didn’t believe it could be done, which is why opposite-thinking, passionate people like Smith are so crucial to progress.
Which brings us to Joseph Schumpeter’s “creative destruction.” It was his way of saying that great business ideas are routinely replaced by even better ones. Stasis is death in business.
Smith knew this well. Miraculous as overnight delivery was, the proliferation of fax machines in the 1970s and 80s could have been existential for FedEx. Same with e-mail, pdf attachments, hyperlinks, and somewhere in there DocuSign in the 1990s and beyond.
The easy thing for Smith to do would have been to sell or shut down what technology was rapidly rendering dated, but that plainly wasn’t Smith. A free thinker to the core according to people like Cato Institute co-founder Ed Crane (Smith served on Cato’s board) who knew him well, Smith no doubt grasped that a world increasingly connected by split second technology would be a prosperous one. And prosperous people don’t just want market goods, they want them quickly.
Which means that when many entrepreneurs might have sold in the face of technological onslaught, Smith kept on building his creation, one that would become more valuable the more that free-market forces rendered dated FedEx’s initial purpose. Documents were to FedEx what books were to Amazon: just the test case for a business concept that would have even greater purpose the more that the world was thriving based on the connectivity that had in so many ways vitiated FedEx’s original business.
Yes, the free, rapid movement of people and communications were only existential for Smith and FedEx insofar as he was unwilling to pivot. In other words, the free trade that Smith venerated didn’t victimize him, or for that matter any entrepreneur capable of seeing that prosperity born of open trade frequently creates even better lines for businesses to expand into. That’s why FedEx didn’t die long ago, and isn’t dying with its founder in Smith. He was too smart not just for Schumpeter, but also Donald Trump.
At least rhetorically, Trump sees interconnectivity as impoverishing. That’s too bad. As Smith’s towering achievements indicate, the only true barriers to prosperity are those that separate producers.
It’s a long way of saying Trump could learn from Smith’s constant evasion of creative destruction. The latter isn’t just an understatement, it’s also urgent.
