How A Lucky Run In Vegas Saved FedEx | Hacker News Reader

How A Lucky Run In Vegas Saved FedEx

priceonomics.com

71 pointslalwanivikas27 comments

A grain of salt to take with this story:

>Federal Express began to market itself as "the freight service company with 550-mile-per-hour delivery trucks". However, the company began to experience financial difficulties, losing up to a million USD a month.

So he saved the company by winning $27k, even though they were losing $30k per day? Catchy tagline though.

>Smith impulsively hopped a flight to Las Vegas, where he won $27,000 playing blackjack. The winnings enabled the cash-strapped company to meet payroll the following Monday. "The $27,000 wasn’t decisive, but it was an omen that things would get better," Smith says.

http://en.wikipedia.org/wiki/FedEx_Express

"Losing up to a million a month" doesn't necessarily mean "using a million in cash a month." The first may be based on accrual accounting, the second is based on cash accounting, and they don't need to equate in any particular time interval.

E.g., if you pre-paid $12M in rent for a warehouse for a year, you might be "losing $1M a month" in accrual accounting (as the prepaid asset gets run down) but using no cash in that same month.

In addition to what tomkarlo said, you might defer payment of bills due, but if you don't pay your workers, they won't show up the next week.

In other words, as all microeconomists know, prioritize your variable costs.

In the early 1970s if you took a secret plane trip alone and came back with 27k you probably didn't go to Vegas...

The most profitable form of logistics ;-)

Air America

"No one but Smith knows the full details of his trip... no journalists raced to confirm the details of his story."

So is this a true story? It just rings false to me. Down to their last dime. Exec swooshes off to Vegas and wins enough money to keep the company afloat for a week. Just one week, which was literally enough to make the difference between life or death for FedEx?

Why wouldn't it be true? $5000 was as useless as $0 would be, as they needed $24000 to cover fuel expenses for the next week. So if he lost the gamble, there would be no change in ultimate outcome.

It sounds like a tall tale. It's possible that it's also true but it's got all the hallmarks of a good fictional story and that makes it seem false.

Sounds like he took a loan from his family but wanted it to sound more sensational.

Or maybe he did a Walter White.

"“I knew we needed money for Monday, so I took a plane to Las Vegas and won $27,000.”"

I've been hearing this story since I was in business school (and that was a long long time ago). It's a great dog and pony show.

This could be any of the following:

a) True (but I mean who really knows?)

b) Not true (we have no record other than what Fred Smith said after all).

c) A cover for another way he got the money. Perhaps even from the mafia or another source that he didn't want to disclose. [1]

[1] No. I don't think he robbed a bank. However it's somewhat common knowledge that people use Las Vegas winnings to cover for illicit ways they get money.

This was interesting to me since I heard a version told around MLM circles (Herbal Life, Equinox, Amway) that went: "He cashed out all the liquidity of the company, hopped a plane and went to Vegas, where he put the entire company on one spin of the roulette wheel."

Of course the story has its embellishments like not telling you who the company is and then at the end they say, "Have you ever heard of a company called FedEx?"

There's a lot of red flags where I heard it like how you just cash out the entire company's "liquidity" without anybody saying anything. Or that he was flat broke, but could still afford a plane ticket.

I guess this how a good urban legend survives though - right?

And now it's being used to pimp YC startups.

My first job out of college was a software engineering gig at FedEx, and this is one of many popular stories I would hear around the office.

Another popular one was that Fred Smith had the idea of FedEx for a college paper while he was at Yale, and that the professor gave him a C on the paper and said it was a bad idea.

My first experience out of school was support at FedEx ground. Man it was terrible. Almost killed myself.

"Another popular one was that Fred Smith had the idea of FedEx for a college paper while he was at Yale, and that the professor gave him a C on the paper and said it was a bad idea."

I've heard this as well. This goes along the lines of many similar "ironies" that the business press likes to bandy about. The problem with saying how foolish the business prof was (or was not) is that we don't have any data on the other ideas that he said were foolish and never went anywhere (or the ideas he liked) nor do we know exactly what the paper said to see if there was a particular reason the prof thought it was foolish. Devil in the details. Maybe something changed between the implementation and the paper. I mean has he ever published that paper?

Also, maybe the paper itself was foolish, and then he amended the business plan? Hard to say without reading exactly what was written.

When did Priceonomics become a web crawling service? That's a neat pivot, but I think a name change to go with it might help.

Their pivot is questionable to me. I mean when you have drag-n-drop web-crawling software such as Mozenda or Connotate, it seems like it'd be hard to justify the cost, since scraping isn't particularly challenging -- even for non-techies.

The value comes in the understanding, analysis, and application of said data.

That's really what their selling. The web-crawling and scraping is just to get the data to base their analysis on. Business seems to be good for them too.

What are you basing that conclusion to demonstrate that "business seems to be good"? Numbers? Financing? Hiring? etc

Heard this story many times. Never thought it was true. I always assumed vegas was a thin excuse for something illicit.

How is this legal? Let's assume he lost the money, how would this show up in the companies books?

Let's assume he lost the money, how would this show up in the companies books?

I'd be more curious how the winnings were reported on the books. That's a lot of back tax penalties.

The company books would probably just show a loan. Then he could loan/repay the company with his winnings.

You usually can't issue a loan to an executive without some sort of director oversight. See Tyco.

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