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imageOne of my favorite tales in business comes from the early days of Fedex. Here’s an account by one of the first employees:

By mid-July our funds were so meager that on Friday we were down to about $5,000 in the checking account, while we needed $24,000 for the jet fuel payment. I was still commuting to Connecticut on the weekends and really did not know what was going to transpire on my return.

However when I arrived back in Memphis on Monday morning, much to my surprise, my bank balance stood at nearly $32,000. I asked Fred where the funds had come from, and he responded, “I took a plane to Las Vegas and won $27,000.”

I said, “You mean you took our last $5,000 — how could you do that?”

He shrugged his shoulders and said, “What difference did it make? Without the funds for the fuel companies, we couldn’t have flown anyway.”

They were either going to be able to operate with the jet fuel or go out of business without the jet fuel. This is a quite literal example of gambling with the company’s future though sometimes it really makes sense to double down and take a big chance — especially when the outcome is effectively binary anyways. 

Startups often have to make crazy bets because if they don’t, they are going to be obsolete or bankrupt anyways. It doesn’t mean they do it recklessly but they need to figure out when they face the same risk between decisions but can get better outcomes with one than the other.

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