This Simple Logistics System Made Fred Smith $3.6 Billion

And I was very, very, very sure that what we were doing was extremely important.

We don't need a lot of grandstanders and people that want the spotlight on them.

I was willing to take a chance because losing wasn't the worst thing in the world that could happen.

Nobody can do things by themselves at any scale. For the first time in history, you were able to see inventory in motion or at rest. The important thing is to think beyond your local economy to create higher margins and increase growth for your business. All of a sudden you turn the kaleidoscope and there you see something that nobody saw before. Find yourself something you're good at and do it to perfection. What's the Purple Promise? And they'll say very simply, I think one thing, I will make every FedEx experience outstanding.

He's the founder, chairman, president, and CEO of FedEx. In 2014, Fortune magazine ranked him number 26 on the world's 50 greatest leaders. He has an estimated net worth of $3.6 billion. He's Fred Smith, and here's my take on his top 10 rules for success.

The reason I never lost confidence is because I never believed that the consequences of losing were, were as bad as some other people might have thought, you know, oh my goodness, I've lost my money, or what have you. I mean, I just wasn't motivated along those lines. And I was very, very, very sure that what we were doing was extremely important and was destined to be successful. So that's the definition, I think, of an insane person or a zealot. And most entrepreneurs, I think you would find, have that sort of green wire laid in there just a little bit crosswise. And they begin to get focused on something, and they believe in the idea or themselves far beyond what they probably should.

We don't need a lot of grandstanders and people that want the spotlight on them. You know, they are all the way back to Sun Tzu, you know, who made the— the famous quote that, you know, if you're a good leader, the ultimate test of that is that the people will accomplish great things and they'll think you had nothing to do with it. So I think they have to be self-effacing. I think they have to have an understanding of the mission. I mean, they have to, whether it's football or the military or FedEx or what have you, they gotta have that DNA. They've gotta understand those little tiny details and be able to synthesize them together, particularly if they're organizations. And that, that's a very important thing. Here's an inspiring story from a recent edition of the New York Times, for example. It was about a Michigan company called Bandals that introduced a new product: women's sandals with interchangeable decorative tops. And they introduced these products right after the economic crisis hit in the fall of 2008. Pretty brave thing to start a business in that time under any circumstances. When the 5-employee company was pounded with manufacturing and raw material cost increases of up to 30%— and remember the price of fuel in the summer of 2008— went to $147 a barrel. The owner, Tom Sestee, decided that Bandle's needed to sell his way out of the problem. And he made another daring move in the midst of that economic crisis, and as it turns out, it was a very smart move indeed. Now, in the Chinese language, the symbol for crisis and opportunity are the same. And this gave Mr. Sestee the wake-up call he needed. He realized that because Bandles sell best in warm months, expanding into overseas markets with year-round nice weather, or with seasons that ran opposite to those here in the United States, would be the way to dig his business out of a hole. After he did his homework and realized it would cost much less than he expected, he began selling Bandles in 15 countries. By 2011, the company's revenue had increased a whopping 250% and its profits had tripled. I think that's a great story about a small business person having the vision to see how his product can appeal to global markets and how the technology and supply chain advancements we have today make it easier and more cost-effective to branch into those markets.

In retrospect, it was ridiculous to try to put this system together, which required so much upfront money and required changing a lot of government regulations, but I didn't know that at the time. And I think probably my experience in the service where the currency of exchange in FedEx was just money. You know, it wasn't people's arms and legs or lives, and so my perspective on it was perhaps a bit more— I don't know how you'd say it— I was willing to take a chance because losing wasn't the worst thing in the world that could happen to you. I had seen that very clearly.

Nobody can do things by themselves at any scale. And if you read about Marshall, Marshall was extraordinarily able to deal with difficult personalities and to synthesize them into a team. Admiral King, who was the Chief of Naval Operations at the time, was a very prickly fellow. He had a very tough personality. And he was— found to be intractable on many, many things. But Marshall could deal with him, and he did it in many different ways, many times being self-effacing by walking over to King's office and so forth. Now, he ended up being in charge of the whole shooting match and Roosevelt's architect of the war, but in the early stages, he had to build that team synthesis to get things done, and he was a master at it. We get— we handle millions and millions of pieces every day, and one of the things we did years ago which was very important is we figured out our customers wanted the information about where every one of them was every day, which was impossible at the time. But we had an internal entrepreneur that figured out how to do it. He revolutionized all kinds of things. There's a great story, I think it's in the National Academy of Sciences, about how the FedEx people did it. And the reason it was so important, for the first time in history you were able to see inventory in motion or at rest. A warehouse doesn't add any value. It's just a place to put something so you know you got it. Well, once we invented the tracking of things in motion, you could keep track of inventory whether it was moving in a 500-mile-an-hour or 550, uh, 777 or in a 50-mile-an-hour FedEx over-the-road truck. And it allowed people to have fantastic productivity. It's what allowed, along with government deregulation of transportation, things like Walmart, and, uh, which is really a logistics system, not just a retailer. With the help of the internet and global logistics like we provide, more small businesses have become part of the global supply chain than in any other time in history. 52% of all small businesses are home-based, and I think it's fair to say that people are selling goods to the national, international markets that they could have only sold locally 20 years ago in many, many cases. Now, whether you're expanding nationally or internationally, the important thing is to think beyond your local economy to create higher margins and increase growth for your business. I think some people just see things that others don't. There was a great professor at your alma mater, I hate to say it, Rosabeth Moss Kanter, and Professor Kanter used to describe it as kaleidoscope thinking. That you look at something and it's a pattern and then you turn the kaleidoscope and it's another pattern and it's meaningless and all of a sudden you turn the kaleidoscope and there you see something that nobody saw before. I mean, clearly lots of people fit into that category. I mean, Steve Jobs, you see it, you know, with the products that he's come out with and Bill Gates and so forth. I just think that General Marshall in his field was able to synthesize all of those things that he learned in France and the experiences that he had in the Army to understand the great crisis that was ahead and to prepare for it uniquely. And for those of you who don't know it, he ran the Army school at Fort Benning and I think at Leavenworth too, and he compiled a list of officers that he felt time of emergency would be the ones that he should promote if he were put in that position. And he was put in that position, and he did promote them with fantastic success over the heads of many, many other officers who were seniors to the ones that had impressed him. So he was able to see that, however it came about. I've thought many times about the advice I might give addressing a graduating class, and I can find no better quote than one that was given some 200 years ago by a Polish general, Thaddeus Kosciuszko, who had come to the United States to help Washington, along with Lafayette, win our independence. He was an engineer, fortified West Point, and was a major contributor to the success of American arms. He said shortly after the war to a group of students such as yourself, "Set yourself to work with reflection and intelligence, either at your prescribed duty, carried out in the most scrupulous manner, or perfect yourself in some science in which you should have true mastery." Perhaps in a shortened version, General Colin Powell summed it up: Find yourself something you're good at and do it to perfection. Something you enjoy. And if you do that, I can promise you, as I have over the past 30-some-odd years, you won't feel that you've gone to work a day in your life. FedEx, over its entire existence, David, has gotten better and better and better at what we do. And we've been able to do that for 3 reasons. One, the use of technology. 'Cause just imagine if we were handling all those millions of people today and we could— things today we couldn't keep track of. I mean, things would be going to Mars, for goodness' sake. Secondly, we have availed ourselves of the most advanced scientific quality management systems pioneered by Japanese industry and led by Professor Deming and Professor Jurand 25, 30 years ago. And third, we have a culture which is represented by a very simple phrase. We call it our Purple Promise. Purple is the common color for all of the FedEx branding. We're a little like Coke. You know, red's Coke Classic, and silver is Diet Coke, and gold is— I don't know what it is, but it doesn't have much in it. I drink it. So, purple and orange is our original express company, purple and platinum is corporate, purple and green is our ground parcel company, purple and blue FedEx Office, and purple and crimson is FedEx Freight. So, I have a very simple phrase that every member of the FedEx team knows, and I hope if you walk up to somebody you ask them, "What's the purple promise?" And they'll say very simply, I think one thing, "I will make every FedEx experience outstanding." So, you don't need 18 manuals and one thing or another. You give them the best technology and try to support them and the best management tools, and, and our, our team will deliver. So we've gotten better and better every year, so we don't lose many of anyone's packages, most including mine.

Thank you so much for watching. I made this video because Gyro Head asked me to. So if there's a famous entrepreneur that you want me to profile next, leave it in the comments below and I'll see what I I'd also love to know which of Fred Smith's top 10 rules had the deepest impact on you. Leave it in the comments and I will join the discussion. Thank you so much for watching. Continue to believe, and I'll see you soon.