Where Were They Then?

Flight Patterns: Overnight Delivery Was Just Taking Off

“Will Federal Express go on to become a $1 billion company?” a business magazine asked in 1977. Of course, now it’s easy to answer absolutely, positively, but the company that last year had $10 billion in sales was only a tepid success in ’77-becoming profitable only one year earlier and still owing creditors some $49 million. With the largest customers that year the U.S. Army (shuttling spare plane parts from base to base) and medical groups (shipping blood, organs for transplant, and drugs), FedEx’s role in transforming how business is conducted nearly everywhere on the planet was not yet on the radar screen.

Federal Express was the brainchild of 28-year-old Frederick Smith, a Vietnam vet. He recalled his Yale term paper-which earned him only a C-detailing how a freight delivery system would succeed only if it weaned itself from commercial airlines, whose flight patterns and times differ markedly from what the package world required. With $8 million of his own family’s money (his sisters sued soon after the company’s expensive ’73 launch for misinvesting the family fortune) and $40 million in venture capital from the Rothschild-backed New Court Securities, General Dynamics, Allstate Insurance, Citicorp Venture Capital, and others (plus $90 million in bank financing), FedEx landed in the history books as the largest start-up funded by venture capital at the time. (It went public in ’78.)

CEO Fred Smith still owns 9 percent of the company, and the rest of the world is both grateful for the speed with which he can put their company jewels into others’ hands, and exhausted by the warp-speed business pace that such a system enables.


Asia: Beyond the Miraculous

Two decades ago, a worried U.S. editorial writer fretted that Japan‘s trade policies and an $8 billion trade imbalance “would eventually plunge the world into a trade war and destroy the markets they are trying to build.” Well, not quite. The Miracle of Asia was just picking up steam, and over the next decade or so, the economies of rising young Tigers such as Korea and Singapore grew by some 8 percent a year. In Asia overall, the standard of living has doubled in two decades.

But nothing lasts forever. Growth in the Tiger economies has slowed. Financial markets in Thailand and Korea are in disarray. The future of Hong Kong is cloudy. And Japan just isn’t what it used to be, with a recent flurry of business/organized crime scandals and continuing slow growth. One theory for it all: As markets and economies mature, workers want to spend as well as save and work.

This is not to say that the region is on the ropes-indeed, it’s still one of the most dynamic areas in the world. New Tigers such as Vietnam and Malaysia are coming forward. China is slowly opening markets and experimenting with capitalism. And

Japan, for all its woes, still enjoys a U.S. trade surplus of $9.8 billion. The Miracle of Asia isn’t dead-it’s just been tempered with a dose of reality.


“Uncle” Sam: Walton Proved

That Discounts-And Hands-On Management-Pay In 1962, Sam Walton opened his first Wal-Mart discount store. By ’77-having constructed a second highly mechanized distribution center that is at the core of the cost-saving operation-Walton figured he had  stretched his chain nearly as far as it could go. “There’s no need to go out of our region,” he said at the time. Wal-Mart was in eight Southern states.

Today, the company that had 200 stores that year now has more than 3,000 (including Sam’s Clubs and the discount store/supermarket hybrid Wal-Mart Supercenters). Reaching into Brazil, China, and Indonesia, the company that Sam built is the largest retailer in the world. Walton not only proved that everybody wants a discount, he also demonstrated that his warm, hands-on management style was also a winner. Walton’s role as drum major, coach, and kindly old relative had some observers worried back then whether the chain could keep making music without him (he lived until ’92), but CEO David Glass has succeeded in keeping the band playing on.


Eastern Europe: The more things change….

In 1977, Lech Walesa was just another worker in the Gdansk shipyards. Boris Yeltsin was still a communist. And the Berlin wall stood firm. A few years earlier, détente had seemed to open new possibilities for doing business in the Eastern Bloc, but those had faded quickly in the Byzantine realities of dealing with communist bureaucracies. “If there is to be a new beginning in East-West trade…it must be a sober beginning,” cautioned one international expert. “Businessmen must have a clear view of the realities and limitations of the Eastern environment.”

Then of course, it all came unraveled. But for many, the rapid introduction of capitalism was no dream come true. A civil war straight out of the Dark Ages engulfed the former Yugoslavia. Organized crime became part of daily life in Russia. And entrepreneurs still struggle to operate the unfamiliar machinery of free markets. There are, of course, bright spots-several Eastern European countries and companies are growing at a sound rate and building the kind of infrastructure needed to compete on a global stage. Opportunities do abound, but the region is still a place where businessmen-or business people, nowadays-must still have a clear view of realities and limitations.


Gene Pool: Biotech Firms Now Swim in Success-But the Water’s Just Getting Warm

Today more than two dozen companies specialize in biotechnology drugs, but 20 years ago, a handful of labs were just getting started. Tiny San Francisco-based Genentechhad the medical world bubbling over in ’77-one year after its founding-when its scientists for the first time combined gene-splicing technology with artificial gene synthesis, in effect creating little bacteria “factories” that could churn out exact copies of the desired altered hormone. The courts had only recently ruled that a man-made (or bacteria-made) organism could actually be patented, thereby making it worth the while of Genentech and the others to spend the $100 million to $200 million it has taken to develop each of biotech’s life-saving drugs. Today, Genentech, which went public in 1980, accounts for $905 million of the industry’s $14.6 billion a year in annual sales.


The Young Turks of Technology

Had he stayed at Harvard, Bill Gates would probably have graduated in 1977; instead, he was working with Paul Allen from an Albuquerque hotel room, pedaling the BASIC language they had invented two years earlier….Sun Microsystems CEO Scott McNealy had graduated from Harvard the previous year, and by ’77 was hard at work at his first job as a foreman at a Rockwell International plant in Ashtabula, OH….Algerian-born Eric Benhamou, now CEO of 3Com, was getting his own degree: a bachelor’s in engineering from Paris’ Ecole Nationale Superieure des Arts et Metiers, which he would later follow up with a master’s from Stanford…. Michael Dell, age 13, was gearing up to start his first business-a mail-order stamp-trading company that grossed more than $2,000 in a few months. His world headquarters: his parents’ Houston home…. Lawrence Ellison, a recent physics dropout from the University of Chicago, had just left his post at Amdahl to co-found Relational Software, a predecessor of Oracle, in an attempt to create a minicomputer relational database management system according to theoretical specifications put out by IBM…. Steven Jobs, another college dropout, was producing the Apple II in his garage. Jobs stayed with Apple through ’85-and returned in ’96 when his Next company was acquired. This year he again moved closer to the core, when CEO Gil Amelio’s crash landed him, at least temporarily, in the driver’s seat.

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