How the Game of Blackjack Saved FedEx

The story of FedEx is an incredible one. The founder of the company, Frederick Smith, revolutionized package transport with a paper he had written during his undergraduate days at Yale. The idea was to carry small consumer packages by airplane across the country with a central sorting facility to make the process faster.

These dedicated airplanes would travel primarily at night to take advantage of less congestion. The professor grading his paper didn’t think it was a great idea but ultimately history has proven this professor wrong many times over.

Challenges From Day One

Smith founded the company, known back then as Federal Express, in 1971 and commenced operations in 1973. If one were to say the business had a rocky start, it would be an understatement. It’s said that FedEx had all of 186 packages on its first night in business. The company had burned through a third of its initial cash within a couple of months and was struggling. The Arab Oil Embargo of 1973 further compounded the challenges Smith faced due to massive rises in aviation fuel prices.

The company was straddled with nearly $30 million in debt and had $5,000 in cash. The end was near so in a last-ditch attempt Smith took that $5,000 to Las Vegas with the hopes to win big.

He certainly did win big; he used those $5,000 to win $27,000 at the blackjack tables. The winnings were then used to pay a fuel bill which kept the company running another week. More importantly, this gave Smith the motivation to continue aggressively seeking new capital, eventually landing over $11 million in new funding.

It wasn’t the last challenge the company faced. but since then it’s grown into the standard bearer for package delivery branching out beyond just express delivery to logistics, ground transportation, mail, and more. FedEx Express, the core business, is the world’s largest cargo airline both in terms of fleet size and freight flown.

A Fedex MD-10F in Las Vegas (Photo: AirlineGeeks | William Derrickson)

Smith’s last-ditch gamble with the final $5,000 of the company’s money has paid off immensely with FedEx now having a net worth of around $65 billion and Smith having a personal net worth in excess of $5 billion.

Unusual Luck Gambling

This story of an underdog winning it big and saving his company sounds great but it seems unusual.

Nearly every casino game is structured to give the house an advantage. If one were to play perfect basic strategy the house edge could be minimized. Beyond that, if one were to count cards, it is possible that a person playing blackjack could make the same amount of money that Smith did.

These days card counters are often noticed by pit bosses relatively quickly. It is possible that back in the 1970s Smith managed to escape detection and used card counting techniques relatively undetected to make his winnings. Card counting was a relatively new strategy back then, it only emerged in the early to mid-1970s with Ken Uston who allegedly earned millions of dollars from his methods.

The other plausible explanation could be that it was simply a mob loan. In the 1970s mob control over Las Vegas was loosening with the passing of new Nevada state laws allowing public corporations to own casinos but it was still present. It was a quick way to get money, albeit a dangerous one.

All of this is simply speculation, we will likely never know the full story behind Smith’s incredible luck at the blackjack tables when he needed it most.

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Hemal Gosai

Hemal took his first flight at four years old and has been an avgeek since then. When he isn't working as an analyst he's frequently found outside watching planes fly overhead or flying in them. His favorite plane is the 747-8i which Lufthansa thankfully flies to EWR allowing for some great spotting. He firmly believes that the best way to fly between JFK and BOS is via DFW and is always willing to go for that extra elite qualifying mile. Hemal's opinions are his own and do not reflect those of his employer.

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