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Online Extra: Fred Smith on the Birth of FedEx

The delivery giant's founder recalls how he started it, what made it take off, and why it helped spark a revolution in business

Without a question, FedEx Corp. has been one of the great entrepreneurial success stories of the past quarter-century. From the legendary college term paper in which Frederick W. Smith first advanced his idea of an overnight-delivery service to the infamous trip to the Las Vegas casinos -- where he won enough hands of blackjack to help meet a payroll -- the story of how Smith built FedEx (FDX ) into a $27 billion delivery juggernaut has become a part of Corporate Americana. Smith recently sat down with BusinessWeek Atlanta Bureau Chief Dean Foust to discuss the history of FedEx. Edited excerpts follow:

Q: Part of the lore of FedEx is that you wrote a term paper while a grad student at Yale that first explored the idea of an overnight-delivery service -- and that you received a C from a skeptical professor. Was that term paper truly the genesis of FedEx?

A:

The question is prescient because there wasn't a single "eureka" moment. The original idea for FedEx came when I wrote a term paper as an undergraduate -- not as a graduate student, because I never went to graduate school -- about a very simple observation: As society automated, as people began to put computers in banks to cancel checks -- rather than clerks -- or people began to put sophisticated electronics in airplanes -- society and the manufacturers of that automated society were going to need a completely different logistics system.