The man who created the modern economy has died. You've probably never heard of him
As passengers fly into Memphis each morning, they land at a beautiful, mid-century airport. When those flights end at night, the scene changes dramatically. The same runways are filled with FedEx planes, destined for a huge warehouse and sorting facility at the other end of the airport. The planes are unloaded, the packages sorted by destination, and the planes reloaded for departure by morning. A few hours later, FedEx trucks are distributing those packages to front doors around the country.
FedEx does it all so smoothly and efficiently that we hardly notice what a technological and transportation marvel it really is. That marvel is the vision and singular achievement of one man, Fred Smith, who died this week at age 80.
Smith dreamed up FedEx and described his idea in a college paper. He famously said the paper received a 'C'. It deserved far better. What the professor missed was a brilliant, counter-intuitive idea, which became the foundation of a multi-billion dollar business.
Smith's idea was that the best and cheapest way to get packages from Boston to New Haven or from New York to Baltimore was not by going directly but by travelling through Memphis. Why take this long, out-of-the-way route? Because it dramatically cut the number of planes and trucks needed to connect every starting point and destination. To send all packages directly from thousands of starting points to thousands of destinations would require countless flights, many with incomplete loads. It was far better, Smith reasoned, to send all the outgoing packages to a single location, sort them there, and then put them on planes to their final destinations.
What Smith described is a 'hub-and-spoke' system, and that is exactly what he developed for FedEx. The only difference now is that his company has added more hubs to cope with its avalanche of parcels. All FedEx competitors follow the same pattern.
FedEx did not create the hub-and-spoke system. Delta Airlines had already perfected it for passengers, sending them through its hub in Atlanta. In the 1960s, if you wanted to fly from Montgomery, Alabama, to Charlotte, North Carolina, you couldn't book a non-stop flight. Instead, you booked two connecting 'legs', the first from Montgomery to Atlanta, the second on another plane from Atlanta to Charlotte. Southerners used to joke that 'when you die and go to heaven, you still change in Atlanta'.
Fred Smith used the basic insight behind the hub-and-spoke system to build a great company, inspire a host of imitators, and change the way Americans shop and companies sell their products. Jeff Bezos owes him an enormous debt of gratitude. So does Smith's hometown of Memphis, where FedEx is a huge employer and powerful economic engine.
Most of us think, understandably, that modern economies are driven by innovations in computing: their low cost, miniaturisation, ubiquitous presence and connectivity, and now their incorporation of artificial intelligence. Tectonic changes in computing and telecommunications represent a new industrial revolution whose effects are as far-reaching as the first one (the mechanisation of cloth manufacturing in England), as well as the second, the creation of giant enterprises in chemicals, electricity, trains, petroleum, steel and automobiles in the late nineteenth and early twentieth centuries.
This focus on production is crucial, but it should be complemented by acknowledging the far-reaching changes in how this new cornucopia of products is distributed. Just as the character of production changed dramatically over the past two centuries, so has the pace of distribution. Those changes began in 1829 with Robert Stephenson's 'Rocket' train engine, followed, a year later, by the Liverpool and Manchester Railway.
By the late 1800s, a new generation of trains connected the vast wheat fields of the American Midwest with consumers in Chicago, Philadelphia, and New York. Overseas markets were connected by steam-driven cargo ships with screw propellers.
Trains and cargo ships may be old technologies, but they are still very much with us. The difference is that now they are integrated into transport systems that include cargo planes and 18-wheel trucks.
The integration of these different modes of transportation is due primarily to one man, whose name is virtually unknown. He was Malcom McLean, and he ran a trucking business in Houston in the 1950s.
McLean's achievement was to devise a cargo container that could fit on trucks, trains, and ships and could be picked up as an entire container and moved from one form of transportation to another. There was no need to keep packing and unpacking cargo.
Trucks already had containers, of course. But those trailers, as they were called, were attached permanently to the truck's structural frame, its chassis. Cargo was packed into the trailer by hand, hauled to an intermediate location, and then unloaded and packed onto a train or ship.
All this loading and unloading was costly and time-consuming. Consider cargo travelling from Hanoi to Colorado Springs, via the port of Oakland. The ship's cargo had to be unloaded in Oakland and packed into a train's box car, bound for Denver, where it was unloaded and packed onto a truck for delivery.
Wouldn't the transit be a whole lot cheaper, faster, and easier, McLean thought, if we could simply lift an entire container off the ship in Oakland, use a crane to place it on a train for Denver, where the container could be placed on a truck chassis and sent to Colorado Springs? The question answers itself.
McLean's achievement was to create this standardised 'multi-modal' shipping container, which became the basis for today's integrated, global distribution systems. His invention is why you now see pictures of cargo ships stacked sky-high with shipping containers. Customs inspection is often done at inland cities when the container arrives and is finally unsealed. The cost savings are enormous.
What McLean did in Houston and Smith in Memphis are why goods now travel so cheaply and efficiently around the world. Whether their names are known or not, their achievements touch our lives every day.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Times
2 hours ago
- Times
Fred Smith obituary: billionaire founder of FedEx
Fred Smith was near the end of his junior, or third, year at Yale in 1965 when he dashed off an essay proposing a 'hub-and-spoke' system for parcel delivery. His plan involved collecting parcels from local depots and transporting them to a central hub for overnight sorting before delivering them to their destination the following day. 'If a hospital in Texas needs a heart valve tomorrow, it needs it tomorrow,' he said, recalling a time when American parcel deliveries routinely took days or even weeks. The idea was not original. 'It had been done in transportation before: the Indian post office, the French post office. American Airlines had tried a system like that shortly after the Second World War,' he said. However, his professors were lukewarm and supposedly awarded his paper a C grade, although the essay itself was lost and its author later claimed not to remember the details. Smith turned his paper into Federal Express, making its headquarters in the centrally located city of Memphis, Tennessee. On the first night of operations, April 17, 1973, the company shipped 86 packages to 25 US cities using 14 Dassault Falcon 20 jets, one of which, called Wendy, is now at the Smithsonian National Air and Space Museum in Washington. It was far from an overnight success, quickly burning through investors' money. An oft-told tale is that Smith once flew to Las Vegas to gamble the company's last $5,000 on blackjack and won $27,000, enough to cover that week's fuel bill. Air crew were asked to delay cashing their pay cheques; one courier in Cleveland pawned his watch to pay an aircraft fuel bill; and a pilot in Indianapolis paid for his hotel room with a personal credit card. Under the mantra 'People, Service, Profit', Federal Express grew steadily, expanding more rapidly after the deregulation of US air cargo in 1977. The following year it adopted the advertising slogan 'Absolutely Positively Overnight', a phrase that has passed into popular parlance and is the title of a 1988 unofficial history of the company. In 1983 it became the first US company to achieve a $1 billion turnover within a decade without mergers or acquisitions. Three years later it landed in Britain, buying Lex Wilkinson, the domestic parcels carrier, and set up a base in Nuneaton, Warwickshire. By 1989 Federal Express was second only to Royal Mail in terms of volume of packages carried. Today FedEx, as the business was rebranded in 1994, is so synonymous with logistics that the name has become a verb, as customers 'fedex' more than 17 million parcels a day to 220 countries and territories. The company boasts of its role in delivering ancient Egyptian artefacts, parts salvaged from the Titanic and the first Covid-19 vaccines in 2021. Although Smith lobbied hard for President Trump's first-term corporate tax cuts, which reduced FedEx's tax bill from $1.5 billion to zero, he did not see eye to eye with the president on international trade. 'An increasing percentage of manufactured goods are high value-added and technology products and these tend to be easy to transport,' he once told The Daily Telegraph. 'Because of that, globalisation continues inexorable. My guess is that the vast majority of manufactured goods will cross at least one border in the future.' Frederick Wallace Smith was born in Marks, Mississippi, in 1944, the son of Sally (née West) and her husband James Smith, also known as Fred, who had made his fortune with a regional bus company that became part of the Greyhound line and the Toddle House restaurant chain, but died when Fred was four. He was raised by his mother and several uncles who 'were very good to me in terms of teaching me a few things about life'. As a child he suffered from Legg-Calvé-Perthes disease, a form of juvenile arthritis, and was forced to use crutches and watch sport from the sidelines. It cleared up by the time he was ten and, with the family having moved to Tennessee, he was educated at Memphis University School. In his teens he was a keen reader, especially of military and aviation history, and took up flying despite his mother's objections. 'You can always say if anything happens to me, I died doing what I wanted to do,' he told her. While studying economics and political science at Yale he was a member of the Skull and Bones secret society and re-established the Yale flying club, which had first been organised in the 1910s by Juan Trippe, the founder of Pan Am. He was friendly with George W Bush, a fellow student and the future president, and John Kerry, Bush's rival in the 2004 election. However, in the summer of 1963 he crashed while driving to a lake in Memphis, killing Michael Gadberry, his passenger. Charges of involuntary manslaughter were dismissed by a judge. Between 1966 and 1969 Smith served two tours of Vietnam with the US Marine Corps, on one occasion narrowly surviving a Viet Cong ambush. He received the Silver Star, Bronze Star and two Purple Hearts, but later told an interviewer: 'I got so sick of destruction and blowing things up … that I came back determined to do something more constructive.' Meanwhile, his observations of military delivery systems galvanised his belief that the world needed a reliable, overnight parcel service. 'In the military there's a tremendous amount of waste,' he explained. 'The supplies were sort of pushed forward, like you push food on to a table. And invariably all the supplies were in the wrong place for where they were needed.' In 1969, he married Linda Grisham, his high-school girlfriend. The marriage was dissolved in 1977 and in 2006 he married Diane Avis, his long-term partner, who survives him. He had two children from his first marriage and eight from his second. They include Windland, known as Wendy, a photographer who predeceased him; Molly, a film producer who worked for Alcon, a film company in which he invested; Arthur, a former head coach of the Atlanta Falcons, an American football team; and Richard, an executive at FedEx. On demobilisation Smith joined his stepfather, a retired air force colonel called Fred Hook, at Arkansas Aviation Sales, a struggling operation providing services for visiting aircraft at Adams Field airport (now known as the Clinton national airport) in Little Rock, Arkansas. He used an inheritance from his father to buy out Hook and moved into private jet maintenance and sales, but quickly grew disenchanted with the unscrupulous characters in aircraft brokerage. His thoughts turned to transporting cheques between clearing banks, a notoriously slow and inefficient process. The plan was to collect cheques every day from regional branches of the Federal Reserve Bank, fly them to a central hub for processing and dispatch the sorted bundles to the correct branch the following morning. Because his only client was the Federal Reserve he named his fledgling business Federal Express, but the bank pulled out at the last minute and he turned his attention instead to parcels. The business was just taking off when Fredette Smith Eagle and Laura Ann Patterson, half-sisters from one of his father's previous three marriages, brought legal action alleging that he had sold shares from the family's trust fund at a loss of $14 million. He was also accused of forging documents to obtain a $2 million bank loan. However, on the night that he was indicted on the federal forgery charge he was involved in a fatal hit-and-run accident involving George Sturghill, a car-park attendant. Once again, the driving charges were quietly dropped. Meanwhile, he secured an acquittal in the federal case and in 1979 reached a settlement with his half-sisters. Trouble also emerged from Smith's refusal to accept unionisation. He stood his ground when pilots threatened to strike, isolating their leadership and arousing the fears of its members, some of whom declared 'I've got purple blood', a reference to the company's corporate colours. FedEx also suffered difficulties with Zapmail, a loss-making business that involved faxes being sent to a local hub for onward delivery before the widespread use of fax machines in homes and offices, and its acquisition of the rival Flying Tiger Line. Yet its annual income continued to grow, reaching $7.7 billion in 1991 and $87.7 billion in 2024. After Bush's victory over Al Gore in the 2000 presidential election Smith was considered for the post of defence secretary, but withdrew on health grounds and the position went instead to Donald Rumsfeld. He declined the post again in 2006 to spend time with his terminally ill daughter. In 2008 he co-chaired John McCain's presidential campaign and a decade later was a pallbearer at McCain's funeral. Smith, who was sometimes described as the biggest celebrity in Memphis since Elvis Presley, played himself in the disaster-survival film Cast Away (2000), welcoming home Tom Hanks's Chuck Noland, a FedEx employee stranded on a tropical island after a cargo aircraft crashed. The scene was filmed at FedEx's home facilities in Memphis. Meanwhile, the company and its founder were the subject of countless business school case studies and several books, including Overnight Success: Federal Express and Frederick Smith, Its Renegade Creator (1993) by Vance Trimble and Changing How the World Does Business (2006) by Roger Frock. However, Smith, who according to Forbes was worth $5.3 billion, had a straightforward explanation for the success of FedEx, telling interviewers: 'It was just like Pogo the Possum [a postwar US comic-strip character] said, 'If you want to be a great leader, find a big parade and run in front of it.'' Fred Smith, founder of FedEx, was born on August 11, 1944. He died from natural causes on June 21, 2025, aged 80
BBC News
2 hours ago
- BBC News
Migrant crackdown risks choking off critical supply of US workers
At his 1,200-person cleaning business in Maryland, chief executive Victor Moran carefully screens new recruits to make sure they are authorised to work in the US. Even so, President Donald Trump's crackdown on immigrants is starting to chip away at his workforce. About 15 people have left his company, Total Quality, since Trump won a fight to strip immigrants from Venezuela and Nicaragua from temporary protections shielding them from deportation, he says. If the White House expands its efforts, it could cost him hundreds more of his workers, who rely on similar work permits and would be difficult to replace. Similar kinds of concerns are reverberating at businesses across the US, as Trump's crackdown on immigrants appears to pick up pace, threatening to choke off a supply of workers that is increasingly critical to the US one in five workers in the US was an immigrant last year, according to census data. That marked a record high in data going back decades, up from less than 10% in 1994. Trump has said he is targeting people in the US illegally, who account for an estimated 4% of the US workforce. His pledge to conduct mass deportations was a centrepiece of his campaign and an issue on which he drew widespread support, including many Hispanic administration has resumed raids at workplaces, a tactic that had been suspended under White House efforts have been much broader in scope, taking aim at people in the US on student visas; suspending admissions of refugees; and moving to revoke temporary work permits and other protections that had been granted to immigrants by previous actions threaten disruption to millions of people, many of whom have lived and worked in the US for years. 'Stress on my mind' "We are terrified," says Justino Gomez, who is originally from El Salvador and has lived in the US for three 73-year-old is authorised to work under a programme known as TPS, which grants temporary work permits and protection from deportation, based on conditions in immigrants' home countries. His employment, first as a dishwasher and line cook in a restaurant and now as a cleaner, helped him send an adopted daughter in El Salvador to school to become a teacher. But Trump has already taken steps to end the programme for people from Haiti and Venezuela. Mr Gomez, who lives in Maryland, fears El Salvador could be next. "Every time I leave home, I have this stress on my mind," he tells the BBC, through a translator provided by his labour union, 32BJ SEIU. "Even when I go to the metro, I'm afraid that ICE will be there waiting to abduct us." Economic impact Many of Trump's actions have been subject to legal challenge, including a lawsuit over TPS brought by the even if the White House does not successfully ramp up arrests and deportations, analysts say his crackdown could weigh on the economy in the near-term, as it scares people like Mr Gomez into hiding and slows in the workforce, which has been powered by immigrants, has already flattened since January, when Trump took office. As firms have a harder time finding workers, it will limit their ability to grow, slowing the economy, warns economist Giovanni Peri of University of California, Davis. A smaller workforce could also feed inflation, by forcing firms to pay more to recruit the policies are sustained, they could have far-reaching economic consequences, Prof Peri adds. He points to the example of Japan, which has seen its economy shrink as it keeps a lid on immigration and the population ages. "The undocumented raids are a piece of a policy that really wants to transform the United States from one of the places where immigrants come, are integrated and part of the success of society to a closed country," he says. "Instead of an engine of growth, it will become a more stagnant and slow growing and less dynamic economy." Many firms say it is already hard to find people to fill the jobs available. Adam Lampert, the chief executive of Texas-based Cambridge Caregivers and Manchester Care Homes, which provides assisted living and in-home care, says about 80% of his 350 staff are foreign-born. "I don't go out and place ads for non-citizens to fill our roles," he says. "It is the immigrants who are answering the call." Like Mr Moran, he said Trump's moves had already cost him some workers, who had been authorised to work on temporary permits. He said he was also worried about the ripple effects of Trump's crackdown on his business, which in some ways competes with undocumented workers employed directly by families to provide care. He said if those workers are forced out, it will drive up demand for his own staff - forcing him to pay more, and ultimately raise his rates. "We're going to have incredible inflation if you scrape all these people out of the economy," he warned. "We can't do without these people in the workforce." At Harris Health System, a major hospital network in Texas, Trump's policy changes have already led to the loss of some workers, says chief executive Esmail says training American workers to fill the jobs available in his sector would take years, given the rising needs. "As the population is getting older and we are clamping down on one viable source of current and future workforce, this issue will come to a head," he says. Trump last week acknowledged the disruption his policies were creating for sectors that rely heavily on undocumented labour, such as hospitality and agriculture, even reportedly pausing workplace raids in some industries temporarily after receiving blowback from fellow despite the concerns about the economic impact, Department of Homeland Security Assistant Secretary Tricia McLaughlin told the BBC that such raids remain a "cornerstone" of their the homebuilding industry, firms across the country are reporting seeing some work crews stop showing up for work, which will slow construction and raise costs in a sector where prices are already a concern, says Jim Tobin, president of the National Association of Homebuilders, which represents businesses in the industry has called on Congress to reform immigration laws, including creating a special visa programme for construction workers. But Mr Tobin says he was not expecting big changes to immigration policy anytime soon. "I think it's going to take a signal from the president about when it's time to engage," he says. "Right now it's all about enforcement."
The Independent
2 hours ago
- The Independent
Fewer bus services and passengers revealed in damning report
Attempts by successive governments to revitalise bus services across England have largely failed, with passenger numbers remaining below pre-pandemic levels and a significant reduction in routes, a new report by the spending watchdog has revealed. The National Audit Office (NAO) study, which focuses on areas outside London, paints a bleak picture of a sector facing a "cycle of decline", particularly in rural and suburban areas. It warns that low demand leads to service withdrawals, which in turn further reduces passenger numbers, prompting more cuts. The report highlights the weakening commercial viability of bus operators, citing falling revenues and rising costs. Public funding now accounts for half of operators' revenue, totalling £1.8 billion in 2023/24. Despite this, most local bus services are run by private companies, who primarily set routes and timetables based on profitability, with local transport authorities only supporting services deemed "socially necessary". The findings come despite a significant pledge made by then-Conservative prime minister Boris Johnson in February 2020, who promised £3 billion in funding over five years to improve bus services. The Department for Transport (DfT) published a national bus strategy for England, Bus Back Better, in March 2021, which set out that the department wanted services to be more frequent, cheaper and better integrated with other forms of transport. The NAO said the total number of bus journeys made in the year to the end of March 2024 was 1.78 billion, down 9 per cent from 1.96 billion in 2019/20. Over the same period, the mileage covered by buses fell by 15 per cent. Following Labour's success in the July 2024 general election, the Bus Back Better strategy is no longer government policy. The DfT's Bus Services Bill – which is at committee stage in the House of Commons – will lead to an overhaul of buses by giving all local transport authorities new powers to run their own services. But the NAO noted that this franchising model is 'difficult and expensive' to adopt, and recommended that the department should better target the support it gives different local transport authorities depending on their needs. Gareth Davies, head of the NAO, said: 'Bus travel should be an easy and reliable transport choice but governments' attempts to improve services have not always worked. 'DfT should work with local transport authorities and the bus sector to maximise the impact of the available resources in reversing the decline in bus usage.' A DfT spokesperson said: 'Better buses are around the corner and are central to the Government's Plan for Change— connecting communities, strengthening the local economy, and boosting access to jobs. 'After decades of decline, we're providing a record £1 billion investment to improve the reliability and frequency of bus services across the country. 'Our landmark Bus Bill, now progressing through parliament, will protect routes and prevent services from being scrapped – putting buses back into local control and bringing passengers back to the heart of buses.' Graham Vidler, chief executive of industry body the Confederation of Passenger Transport, said commercial operators 'delivered growth' in many towns and cities by investing in new routes, zero-emission buses and more frequent services. He went on: 'With a level of public investment still low by European standards, passenger numbers outside London grew by 15 per cent last year and 83 per cent of customers said they were satisfied. 'We do not recognise the description of an industry with weakening commercial viability. 'What's crucial going forward is that public funding delivers the outcomes that matter to passengers. 'More buses to more destinations with quick, reliable journey times should be front and centre of investment plans.'
