Thursday, February 9, 2012

Connecting the World

FedEx founder Fred Smith on Facebook and Mark Zuckerberg.

Posted By on Thu, Feb 9, 2012 at 4:00 AM

Live and let live. Mind your own business. Your work speaks for itself. There's a lot to be said for printed books and newspapers, a reliable old car, a black blazer, and cutting-edge retro. And that Madonna gal is something, isn't she?

Needless to say, I don't know much about Facebook. I tried it half-heartedly out of professional curiosity and a desire to "friend" my children in Montana, who, having better things to do, soon stopped posting things. To me, a friend is someone who will take you to the airport at 5 o'clock in the morning or let your dog out.

Facebook is a big deal though. It is getting ready to go public, which means selling stock, monetizing its 845 million members, and raising as much as $100 billion. Snoops must be ecstatic.

That's a lot of money any way you look at it, so I called someone who knows a lot about entrepreneurs, stock offerings, connecting the world, turning a brand into a household word, and the future: FedEx founder Fred Smith.

Smith, 67, conceived his big idea when he was a student at Yale. Mark Zuckerberg, 27, founded Facebook with three classmates at Harvard in 2004. Federal Express, as it was called then, began operations in 1974. Smith and believers had raised $72 million in venture capital. "Never in American business history had a newly-formed corporation raised such an enormous amount of venture capital," wrote Kenneth Neill, publisher of the Flyer, in Memphis magazine in 1978. These days, $72 million gets you Rudy Gay.

Federal Express went public in 1978 at $24 a share, which rose to $42 within two months. Morgan Keegan made the first trade and rode the wave. The stock has split several times since then and is now around $94. FedEx, with all its airplanes, trucks, hubs, and 290,000 employees, has $41 billion in revenue and a market capitalization (shares times stock price) of $30 billion.

Facebook, whose offering price has not been set, has no fleet of airplanes or hubs and its 2011 revenue was $3.7 billion.

On why he's watching: "One, social media is a huge phenomenon that is important to FedEx in many ways. Two, as best I can tell, my kids are around half of Facebook's traffic — just kidding. And, three, I have met [Facebook COO] Sheryl Sandberg and Mark Zuckerberg at their headquarters, and it is a fascinating thing that is going to have a huge impact, on marketing in particular."

On the Federal Express IPO price: "I don't remember it."

On going public: "We were run with the discipline of a public company. My guess is that it will be more of a culture shock for Facebook just because of the nature of the entity. Their headquarters is more of a campus. It is a publicly held company in name only. The majority of voting shares are held by Mark Zuckerberg. He can run it pretty much the way he wants to run it."

On Zuckerberg: "My impression is that he is a very bright guy, obviously a technical genius. Sheryl Sandberg is a very experienced executive. She is terrific. I think they will hit the ground running, because they have been preparing for some time."

On capital expenses: "What Facebook is doing would be impossible without the enormous networks and capital expenditures in servers of companies like Verizon, Cisco, Hewlett-Packard, and Sprint. Like most things in the history of the industrialized world, several parts and pieces come together, and somebody realizes what they mean in the aggregate if you put them together to do something nobody has ever done before."

On communities: "The Internet gives you the ability to aggregate a community of interest, for good or bad. Long before 9/11, it was a command-and-control system for people who wished the world ill. In the case of FedEx, it allows us to see the wares of the world. If you are interested in buying sprockets for a racing bike, you can look at every one in the world and say 'this one.'"

On new entrepreneurs: "There are people sitting around campus rooms right now, and the Internet allows them to come up with great ideas that don't need a lot of capital. The capital was put up by all those other people. And they're not going to get a $100 billion market cap."

On using Facebook: "FedEx is a very big user, and I am sure we will be a bigger user in marketing and advertising. If you live on Facebook, we want to be a part of that too."

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