How gambling on Blackjack saved FedEx from bankruptcy - a trip to Las Vegas that turned Frederick Smith's fortunes around

FedEx, one of the world’s biggest delivery companies, services more than 1.2 billion packages every year in over 200 countries. Despite that, in the beginning, its founder Frederick Smith was so broke, that he had to go “all-in” and gamble in Vegas to help save his company from bankruptcy.

During his studies in economics at Yale University in 1962, Smith became the author of a paper regarding the automation of society and the transport of goods. In that era, shippers transported large packets of goods by truck or airplanes, however Smith figured it would be good to cut costs and only carry small, essential items by plane.

A funny and little known fact - Smith worked on the paper on the last day, just before it was due. Late when questioned about how he did on that assignment, he admits, "I don't know what grade, probably made my usual C." Nonetheless, this very first minimal effort became the backbone of FedEx.

In 1971, Smith started his new business with $4 million cash he inherited and $80 million borrowed from loans and investors. This is how FedEx started out: eight planes, covering 35 cities, and there were even ambitious plans to add more each month.

However, in the first two years the enterprise he started found itself millions of dollars in debt and on the brink of bankruptcy – and all of this largely happened just because of rising fuel costs. Another noteworthy event from the first years of FedEx was the fact that Smith's first pitch for investments from the General Dynamics board was denied.

When FedEx's cash box decreased to the measly $5,000, Smith concluded that the company did not have enough cash to fuel the planes. More so, everyone working at FedEx had already gone to many extremes such as pilots using personal credit cards to fuel planes and even using uncashed paychecks.

Not to be judged – what’s a person to do in such circumstances? Smith impulsively booked a flight to Las Vegas and gambled on blackjack with the last of the company money.

Incredibly, after he came back just a week later, he had spun the lingering $5,000 into the big cash pile of $27,000 — just sufficient for the firm to stay in action for another week.

In the book "Changing How the World Does Business: FedEx's Incredible Journey to Success - The Inside Story," Roger Frock, a ex senior vice president of operations at FedEx, describes the moment when he found out what Smith did. "I said, 'You mean you took our last $5,000 — how could you do that? [Smith] shrugged his shoulders and said, 'What difference does it make? Without the funds for the fuel companies, we couldn't have flown anyway.'"

The $27,000 was not the answer to all of their problems, but Smith saw it as a optimistic sign that this was an uptrend. He used the cash won as drive to gain more backing, and eventually raised another $11 million. After steadying financially, Smith helped launch a direct mail advertising campaign to increase the corporation's visibility. By 1976, FedEx created its first profit earnings of $3.6 million. Some years later, it went public and has been flourishing ever since.

Strangely, FedEx is not the only company somewhat funded by blackjack winnings. Bill Gross, founder of PIMCO, also used gambling to fund his investments.