You Down With P-S-P? Yeah You Know Me! (Applying FedEx Principles in the Age of Access)
This is from a keynote address given at the Memphis PartnershipsInAction Dinner benefitting the Aga Khan Foundation, U.S.A. at the historic Peabody Hotel in downtown Memphis:
The saying “may you live in interesting times” is said to be a Chinese curse, though its actual origin is still in dispute. Regardless, we are certainly living in interesting times. We live in an age fueled by access, both virtual and physical, and it is changing our world in profound ways.
The commercialization of the Internet in the mid-90s rapidly boosted economic activity and brought about a wave of prosperity in the United States commonly referred to as the “dot-com bubble,” a boom-and-bust cycle fueled by speculative investment in information technology companies that lasted just through the turn of the century. While the bubble eventually burst, the boom had ripple like effects throughout our world. Suddenly people were connected in a way unprecedented in all of human history, which allowed buyers and sellers, manufacturers and consumers, distributors and wholesalers, to do business across borders and even oceans like never before. Supply chains became more global as a result and inventory cycles became faster and leaner, particularly for high value and high-value added goods.
FedEx saw its fleet of all-cargo aircraft truly becoming “the clipper ships of the computer age” as founder and CEO Fred Smith had predicted three decades before, and on a scale that most had never imagined. The access created by the Internet as a medium of exchange became even more enhanced in recent years with social networking and non-Internet based technologies like SMS text messaging taking off in remote parts of the globe. This has created a turbulent but exciting new world where anything is possible. Despite the tumultuous state of the economy right now, things are happening that we never thought we’d see in our lifetime.
Just look at Africa right now, a continent that is home to many of the world’s poorest economies. And yet Asian investment in Africa is booming, creating a new “Silk Road” across the Middle East to India and China. And look at what’s happening in the Middle East as well. The young people there are rising up and attempting to throw off the yoke of dictators who have been entrenched in power there for as long as they’ve been alive. What has emboldened them so? Access. Connection with their fellow human beings and seeing that they could have a better and freer life. Even the seismic economic shifts we are seeing across the globe are being driven in large part by this interconnectedness, this notion of a singular world economy or a “globality” as Daniel Yergin put it in his 1998 book, Commanding Heights, where he said:
“The borders that constrained commerce―but also protected companies from the full brunt of competition―are eroding. Governments are retreating from control of the commanding heights of their economies: they are privatizing and deregulating. Barriers to trade and investment are coming down rapidly. Ever-cheaper communications and ever-faster computers, along with the Internet, are facilitating the flow of goods and services, as well as knowledge and information. Increasingly, companies are integrating their global strategies with global capital markets.”
We already know that the economy of global trade is world’s largest economy, and air transport is transforming global trade. If we look back over the last thirty years, world GDP has grown by 150%, world trade by 350% and air freight by an incredible 1,400%! This is driven by access and the need for faster transit times, because goods with a high value per pound and/or those of a perishable nature increasingly rely on air as their primary mode of transport. The information age—or the Age of Access as I’m fond of calling it—is rife with these types of products, and nowhere is that more obvious than in the healthcare or life sciences sector.
It is fascinating to watch as major blockbuster drugs go off patent and are then manufactured in generic form in emerging economies like India and Eastern Europe. These generic drugs are then exported into developed, mature economies like the United States and Western Europe where they provide the benefit of helping to drive down the cost of medicines. On the flip side, you have more complex products like biotech therapies and medical devices which have a high degree of intellectual property associated with them and are difficult and costly to manufacture. These are primarily made in those developed countries.
As wealth flows into these emerging markets by virtue of the lower cost products and services they provide to the developed world, the companies who make the more complex products are now trying to tap into them because this is a potential consumer base with populations in the billions! I have met with numerous companies in this sector whose strategies are focused right now on doing just that, so it’s been amazing for me to witness firsthand the circular nature of international trade in an increasingly globalized world economy, and particularly in this dynamic high-growth industry.
Fred Smith has said that, “Companies like ours were started to help commerce move faster and more efficiently. As we grew, we helped more people and businesses around the world access the global marketplace, which, in turn, began to make people’s lives better.”
According to the National Bureau of Economic Research, the global poverty rate fell nearly 75 percent between 1970 and 2006. Of course, FedEx cannot claim credit for that trend, but we certainly contributed to it. Still, though, about half the world’s population—some 3 billion people—live on less than $2.50 a day. So we have to continue to do more to provide access and support to these communities so that they can climb out of abject poverty and participate in the new global economy.
At FedEx we have an internal philosophy, a guiding principle if you will, which we call P-S-P. That stands for “People-Service-Profit.” This started with our founder and he has often described the circular nature of that mantra by explaining that if you invest in your people they will provide a superior service which will generate profit, which in turn allows you to invest in your people. It is all interconnected, much like the world economy has become and is continuing to become. Thus I believe that you can apply the P-S-P principle to the world at large, and we do this every day at FedEx by working with various charitable agencies around the globe to improve lives.
This year alone we flew multiple charter missions with supplies into Japan and Somalia to assist with the tsunami and famine relief efforts there. We’ve worked with organizations like UNICEF, the American Red Cross, Heart to Heart, the United Way, March of Dimes, Teach for America and a host of others to not only respond to natural disasters but also to improve the quality of life for people in both this country and a number of others, particularly 3rd world countries and those considered to be emerging market economies. I’m here speaking to you tonight at a dinner which seeks to raise awareness for the Aga Khan Foundation and their noble mission of improving living conditions and opportunities for the poor by focusing on health, education, rural development and infrastructure to promote economic development in underprivileged regions. That sounds a lot like “investing in our people”, doesn’t it? And, if you were paying attention, investing in our people—besides being the right thing to do from a humanitarian standpoint—also has the added benefit of giving a great return on investment in an increasingly globalized society.
As these poorer regions begin to develop they start to manufacture goods and provide services that the world needs at lower costs, which benefits both parties and eventually allows them to also accumulate wealth. That wealth allows them to stabilize, end conflict and thrive; ultimately growing into a multi-tiered economy with a viable middle class which consumes hi-tech, healthcare and even luxury goods. This drives profit for the producers of such goods who are often the very people who invested in those markets in the first place. That sounds an awful lot like P-S-P to me, just applied beyond FedEx Corporation to the globality.
In these interesting times, prosperity depends upon global connectivity and access; and the ability to touch the lives of those in need is truly the proverbial rising tide that lifts all boats.