A Peek Inside Fred Smith’s World

In this exclusive interview, Fedex founder and CEO shares thoughts about battling Wall Street, rising global trade tensions, growing anti-business sentiment and unprecedented technological change.

You recently introduced the idea of the same-day robots, and you’re building a $1.7 billion expansion out at the campus, where there will be a lot more automation there. What’s your take on emerging technologies and their place in global commerce?

We’re heavily involved in Blockchain, which is going to revolutionize supply chains. You will have a trusted ledger of the entire life of a dozen eggs, the part that goes on a 777, the medicine that was produced in Japan, whatever it is. Blockchain is going to be a big deal.

We’re also heavily involved in A.I., which is analytics on steroids and will allow you do have much more discrete information and be able to operate things with much more precision. And what makes the FedEx same-day bots possible are sensors and digital storage that cost virtually nothing. So you have the map of the universe, if you want to, in the palm of your hand, and a sensor which can tell you, “Uh-oh, I’m about to run into something. It’s a human being.” All of these things are very important, which goes back to that strategic management process of trying to see what technology is on the horizon and how you can adapt and use them to your competitive advantage.

How has the drive toward sustainability changed FedEx’s Future?

Over the last 10 years, we’ve done a remarkable job in reducing our carbon footprint. Our miles per gallon of our vehicular fleet has gone up 40 percent. We’re introducing 1,000 electric vehicles in California, largely because of the regulatory requirement to do so. These vehicles, by the way, are built in China, which will be an electrification leader.

We’re spending billions of dollars on new, more modern airplanes. We get criticized about this by Wall Street. I dealt with it yesterday. We’re not gonna stop. And part of the motivation for that is because they’re more fuel-efficient than the older planes that they replace. Electrification is a much bigger deal in terms of sustainability for the world than people give it credit. So, between natural gas substitution for coal and power generation, and perhaps in maritime power and maybe even over-the-road power. We have natural gas over-the-road vehicles, you know, on an experimental basis.

The world is using about 96 million to 97 million barrels of oil per day. The traditional forecasts are that it will go up to 106 million barrels by 2025. But I think that because of electrification and natural gas displacement, you might see that actually gravitate back down to 70 million to 75 million. And there are a lot of efforts underway in terms of carbon sequestration and carbon capture. So I’m much more of an optimist that the sustainability of the world due to human ingenuity is much more likely than some of the people who view it in more dire straits.

The world will become more sustainable not because of fear of global warming, but because of economic advantage. We’ll get to the right place—and that’s the history of the world, quite frankly. London used to be enveloped in a coal fog every day. That stopped when they stopped burning coal. And I think the same thing will happen. Carbon emissions are down in the United States over the last 15 years. So, I think the world will get there, particularly China, which is putting a lot of time and effort into this.

How do you defend our economic system at a time when people are openly critical of business and capitalism?

Capitalism has become a pejorative in many circles. People have in their minds a Scrooge McDuck character on Wall Street that’s crushing the little people. And there’s merit to that to some degree. There are a few hundred people with these incredible incomes and, of course, that’s what everybody focuses on. It’s a tiny number of people.

Capitalism has a brand image problem, in my mind. That’s why I use the terms market-driven and government-directed. No credible economist that I know of has ever written about an economy that becomes government-driven and is successful in improving the living standards of its people. It just doesn’t exist.

At the end of the day, the market is what brought China out of poverty. It certainly wasn’t any state-directed or government-directed system. They’ve forgotten that or ignored it in order to perpetuate the power of the Communist Party, and they will suffer consequences because of that. They’d be better off just saying to the state-owned enterprises, “You will have to compete with JPMorgan or MasterCard” or whatever the case may be.

Regarding socialism, most of the youngsters talking don’t know what it means. Bernie Sanders recently said, “They’re gonna love it when they find out what I’m really talking about… free education, free medical care.” Well, that’s government-directed, and it’s not gonna be any more successful [here] than it has been anyplace else.

I think what’s happened here is we’ve gotten so sophisticated in being able to parse the electorate that…when [politicians] get into office they are incapable of doing the fundamental thing that the people who designed our system had at the heart of our government, and that is compromise. They can’t compromise because they won’t get re-elected, and every word they ever said lives forever and can be pulled out of the ether to be used against you out of context. I’ve been going up to Washington for 43 years, and the system as it was designed is overwhelmed by the technology.

So, somehow, I think there will have to be a reconciliation back to the center that forces some kind of compromise. Somehow or another, I have confidence the American system will find some kind of middle ground.

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