A Peek Inside Fred Smith’s World

What’s your view of U.S. trade policy with regard to China?

I don’t agree with the way the Trump administration has approached the problem, but I do agree that the problem has to be addressed. President Trump’s response was to become protectionist. He unilaterally put tariffs in place, and I think that that was a bad decision. The best way to have dealt with China was through the multilateral process; walking away from TPP was a mistake of the highest order.

We’re now in the middle of this re-adjustment. China will try to solve this on a transactional basis, and President Trump is, as we’ve all seen, very transactionally oriented. So, my guess is we’ll get a trade deal, [but] will it solve some of these fundamental problems?

We’ll see how it plays out, but there are lots of moving parts at the moment, and lots of people have been hurt by this. President Trump’s view was, “Well, they sell us $400 billion worth of stuff, we sell them $100 billion, and so if we’re tough enough, we win.” That may be true in the long run, but [not] if you’re a farmer in Midwest selling soybeans or whatever. Our exports to China were very concentrated. Their exports to us are very diversified. So, as you’ve seen, our deficit with China has actually increased, while our exports to China have actually decreased.

A better approach would have been to establish a rules-based system with all of the other trading partners in the Pacific and across the Atlantic and bring China into conformance with the liberal trading system, WTO-based trading system, that way, rather than bilaterally trying to use tariffs.

In a market constantly being reshaped by market shifts and disruptive technology, how can business leaders stay on top of change?

The fundamental thing that everybody in business has always got to realize in a market-driven economy is that you’re in the process of being commoditized. Commoditization always leads to sustenance earnings at best, so you have to innovate and find those blue ocean opportunities.

That’s hard because you’ve attracted a set of skills to pursue your core competencies, and now things have changed, so how do you manage that? That is, I think, quasi-art and quasi-science. And the really good CEOs know how to do that, and the CEOs who are not so good don’t. It’s just a messy process of trying to see where that opportunity is and how to protect yourself from commoditization in your existing business. Many companies simply cannot make that adjustment so they become obsolete, fodder for an acquisition or whatever the case may be.

FedEx was a tremendous disruptor, and now you’ve weathered recessions, fuel spikes, 9/11, the rise of China, Amazon, predictive analytics, A.I. How did you instill adaptability in the company’s culture?

Change is inevitable. If you don’t like change, don’t work here, because I can’t promise you that two, three, five years from now, what you’re doing is gonna be the same, that the market is gonna be the same. You are going to have to constantly adjust, so if you can’t do that, you should go someplace where there’s less change, teach history or something. I’m not being facetious.

There are some people who perform poorly when they’re stressed, and other people, it’s a kick to ’em. They’re adrenaline junkies. If you’re in a marketplace that’s changing or has the potential to change dramatically—and all markets are going to change, it’s just a matter of the rapidity—you’ve got to make sure you have those people in your organization.

How much of your leadership philosophy and strategy comes out of your background as a Marine?

It’s directly related. The Marine Corps is the only organization you can think of that has lasted for over 200 years and whose performance is almost always exemplary and without duplication. There is this mistaken belief that it’s all, “Yes, sir. Aye-aye, sir.” It’s not. It’s always the other way around. The first thing they teach you in the Marine Corps is that if you’re going to be an officer, when you eat, you eat last. And if there’s nothing left, you don’t eat.

It’s that culture that I tried to put into FedEx because it’s the tried-and-true method of running a high-performance organization that requires a lot of flexibility, mission change, adaptation and flexibility. I never went to business school. When people ask “What business school did you go to?” I always say, “U-S-M-C.” They think it’s University of Southern California, but the Marine Corps was my graduate school. It was during the Vietnam War, so it was a tough way to make a living at the time. But I’m very grateful to the Marine Corps.

You have said that your company philosophy is people, service, profit. How is that evident in your approach to performance?

It just tries to synthesize that we’re in the service business. People don’t see me or my son. What they see are those first-line people. Just like in the Marine Corps, we turn the whole thing upside-down. Management is at the bottom. We’re out there to support those people who you see at your doorway, the pilots you saw getting on those planes, or whatever the case may be.

The culture is very important, but FedEx’s culture is not family. It’s team, and it’s high performance at the highest level. You almost can’t conceive of the way these operations take place until you see it, the choreography of these people, machines, time and motion, automation and A.I., and all of these disciplines coming together to create this mosaic of commerce.

A lot of companies say, “We’re all family,” but I’ve never tried to portray FedEx that way. You won’t fire your son or your daughter, but the relationship on a team or a high-performance organization is different. You can’t afford to carry dead weight or have somebody who can’t play. So FedEx is much more like a team, and that’s the reason we call people team members and teammates. If you don’t do your job at FedEx, we will fire you. We’ll try to do it in a dignified way, but if you can’t play at the varsity level, you can’t play at FedEx. We don’t make any apologies about that.