Opportunity Knocks

When a new technology appears

Fred W. Smith, 80, died last week. Much was made of the paper that he wrote as a Yale College undergraduate, asserting America’s need for an overnight package delivery system. Six years later Smith founded Federal Express, based in Little Rock, Arkansas. A couple years later he moved its headquarters to Memphis, Tennessee.

Why Little Rock? I remembered the stories I heard from the venture capitalists who had put him in business. Smith had learned how to make FedEx work riding as a forward air controller in the back seat of a close-quarters reconnaissance airplane in Vietnam.

Hub-and-spoke logistics – airports from which planes are permitted to fly in any direction, to other hubs, with many stops in between – weren’t entirely new in those day, but they weren’t yet well understood either. Delta Airlines had gradually implemented the scheme with a series of mergers, starting in 1955. Delta thereby broke Eastern Airlines’ hold on north-south passenger routes, the regulatory pattern adopted thirty years earlier modeled on north-south and east-west railroad lines. Delta’s success inspired airline deregulation twenty years later. Smith employed the same methods to start his overnight delivery business, operating from hubs in America’s rice-belt South.

I thought of Smith while re-reading a Stephen Bush column clipper from the Financial Times. “Without TV in common, can we live together?” he asked.