You Can Do it Too: UPS Was Founded by Two Teenagers in a Basement with a $100 Loan
Why does “the magic” always happen in a basement?
If you’re the proud owner of a mailbox (cutting-edge technology), I’m sure you’re heard of UPS.
You know, the company that brings your life-saving Amazon Prime deliveries to your door? I can’t be the only one who needs a salad spinner rushed on OVERNIGHT delivery, right? I can’t be expected to hand-wash lettuce all day. What am I, The Ford Assembly Line?
But have you ever heard the origin story of how a small parcel delivery service start-up, went on to become a billion-dollar company, surviving some of the greatest economic disasters of all time?
[World War I, The Great Depression, World War II, The Crash of ’08, The Covid-19 Pandemic (I think we all remember that one), and 11 recessions later, UPS is still standing].
And not just standing. It’s raking it in. Reports say UPS has an annual revenue of over $100 Billion Dollars.
Damn, a company like that must have some titanium infrastructure.
That is if you consider two teenage boys from small-town Seattle, $100, and a desk in their mom’s basement as “titanium infrastructure.”
Whether James Casey and Claude Ryan were boy genius’ or just got lucky is up for you to decide!
How UPS Delivery Service Got Its Start
You just know it’s a good story when it starts in someone’s mom’s basement with zero capital and a big dream! In 1907 Teenagers James Casey and Claude Ryan borrow $100 bucks to start what will become the most successful shipping company in the world…UPS!
UPS Started With $100
To be the “world’s most successful” of anything is a huge feat.
To be the world’s most successful moonwalker (obviously it’s Michael Jackson vs Neil Armstrong and it’s actually not a competition) while useless, is still pretty cool.
In 1907, Claude Ryan and Jim Casey took out a $100 dollar loan. Little did they know that loan would be the seed money for a billion-dollar corporation and the most successful package delivery company in the world.
Don’t worry, I know we’re all thinking the same thing and I already ran the numbers…
$100 in today’s equivalent would be approximately $3,227.27.
If that sounds like a lot for context: Jeff Bezos started Amazon in 1994 with $300,000 (about $614,095.14 in today’s equivalent), which makes UPS’ story even more impressive!
So How Did UPS Do It?
In Seattle, starting with $100 in debt which according to Mark Cuban is “for morons,” Ryan and Casey laid the groundwork for their “American Messenger Company” which would later become UPS.
In the early years, the founders kept costs down by having most of their deliveries either carried out on foot or on bicycles.
And even though they could only afford one bicycle that year, they made it through with a rigorous schedule that could rival a chore chart divided between two roommates who secretly hate each other.
How They Advertised Their Start-Up
Let’s not forget when UPS was getting its start, telephones weren’t common.
So Casey and Ryan made message delivery their focus (genius).
The teenagers spread the word of their start-up by tacking posters up at hotels, bars, restaurants, and any other location that had public telephones to attract new customers.
They Cast A Wide Net
Casey and Ryan didn’t limit their company’s services. Instead, they cast a wide net, appealing to as many markets as possible. The company’s philosophy was that if it could be carried it could be “delivered”.
Early reports claim that the start-up would deliver anything from dinner to people’s houses or even miniature kegs of beer! (Gotta love the early 1900s)
The company set itself apart from the competition, in a surprising way…
They Were Honest
Instead of lying about the delivery logistics, Casey and Ryan implemented an “honesty is the best policy” policy.
According to a UPS historian (a profession I didn’t know existed until 12 minutes ago), “They didn’t say ‘right away. If it was going to take a couple of minutes, they would let you know.”
But There Was A Problem…
As telephones became more popular and the messenger business began to dwindle, UPS had a problem.
The “message delivery” service that was their core initiative was antiquated, and fast.
If they didn’t find a way to pivot, they were at risk to lose everything they had worked so hard for.
The Art of Pivoting: How UPS Found A New Strategy
The UPS founders give us a masterclass in working smarter, not harder! Instead of doubling down on a moot business model, the founders decided to pivot.
Even though the company was successful city-wide, the paper route wasn’t gonna pay the bills and keep the lights on.
If UPS wanted to stick around they’d need to find a big client!
So they asked themselves the most important question: who sends and receives packages and how can we integrate ourselves into an already existing model?
Can you guess the answer?
*Let’s Play A Game Called: Guess the Billion Dollar Client*
Let’s pretend you are the UPS founders!
a). You have a solid business delivering packages to individuals here and there but you don’t have a “big fish”.
b). In other words: you are operating with what entrepreneurs call a “B2C Business Model” (Business-to-Consumer Model)
c). It’s the 1919 and technology is changing..
Q: WHO DO YOU GO TO IN ORDER TO TAKE YOUR COMPANY TO THE NEXT LEVEL?
A: Department Stores.
By 1920, UPS Had A Deal With All The Major Department Stores in Seattle
UPS would run packages back and forth from these independent retail giants of their time to the U.S. Post Office.
Keep in mind: at this point in history, department stores had a monopoly on retail making them a reliable client, while its centralized location allowed for “big drops” all in one place (time/cost-effective).
According to Kevin Hussey, Entrepreneur (and my pro-bono business consultant for this article) UPS’ strategy involved them adding a new business model to their company!
In catching their “big fish”, with the department stores, UPS effectively transitioned to B2B Business Model (Business-to-Business Model).
This pivot catapulted UPS to a whole new stratosphere. Within a year they expanded from Washington State into California (and later, the rest of the world but they didn’t know it just yet).
By the time the Great Depression hit around a decade later (1929), UPS had already had a decade of cementing itself as a reliable provider of delivery services.
If you ask me, their B2B Business Model saved them. If UPS was reliant on a B2C Model, they would have had a big problem in 1929.
When The Great Depression struck, Americans stopped spending money on luxury items like miniature beer kegs, meaning UPS probably wouldn’t survive like so many other companies.
UPS: A Case Study On Staying Savvy
If I got into the details of how UPS expanded into all 50 states and then eventually North America, South American, The Middle East, China, Europe, and the world–we’d be here all day.
The cliff notes version is: They were savvy from the start.
They did things like budgeting: buying one bike when that’s all they could afford and using that one bike wisely.
They didn’t spend their modest revenue on fancy office digs and Saint Laurent suits.
^This is a biased dig at the problem I have with toxic and misappropriated “grind culture” today. It’s the core tenant of a long-winded social critique I’ll spare you from–but I have thoughts about “entrepreneurs” who post about “making their moves in silence”. I wonder if you could have spared your enemies the bad news, and just made your moves in silence, silently.
So You Have $100 and a Dream…How Do You Set Yourself Apart?
By now we all know a “good idea” isn’t enough.
Being an entrepreneur is not novel for our generation.
I know sometimes it feels that way because social media has given us a direct line to everyone’s (cringe) inner monologue.
I can’t open my phone without being assaulted by 1,000-word Instagram captions about someone’s hopes and dreams under a really questionable “photo dump.”
But I believe, we’ve always thought this way, we just weren’t as vocal about it before! Dreaming is part of our human nature and I think hope is the catalyst.
I can’t offer you a roadmap to becoming a billionaire but I can share with you an observation I’ve made:
When I observe Western Society, I hear so much talk, but I don’t see a lot of action.
We have a cultural sickness. Where it originates from, I can’t say for certain, but I observe so many people talking about all the things they’ll do, and taking no steps (big or small) to do them.
I often say it’s like we’re all trying to “simulate” the experience of growth or success, without having to actually do the painful, laborious, leg work after the party and the pats on the back are over.
It’s like getting a law degree to prove that you can, with no intention of practicing law. It’s like going to therapy to tell people you’re “working on yourself”, but you can never change your behavior, you just set more “boundaries”.
We can blame the world for our failures, in fact, it’s really easy to…
What’s hard is making new choices that pivot your life, because homeostasis wants us to keep the status quo.
Sometimes that’s the right move, but in the case study of UPS, had they stayed the course, and not dared to change their business model, they probably would have been in the start-up graveyard with hundreds of thousands of other “good ideas” that didn’t make it through economic crises.
I’m not saying events like The Great Depression and The Stockmarket Crash aren’t devastating. I am just saying the future is never certain, and ultimately we’re all trying to survive trial by fire, and maybe ‘pivoting’ has a part to play.
What’s Luck Got To Do With It?
While the UPS Founders definitely had all the ingredients for success: a compelling idea, dynamic market opportunity, competitive edge, shared vision, clear investment structure, and whatever else they tell ya in business school–in my opinion, there are always other mystical forces at play.
I do believe in luck.
Maybe not in the traditional sense…because I think the whole universe we live in has a rhyme and reason. (Like Drake, I’m a big God’s Plan guy.)
My 2 Cents On A Billion Dollar Company:
Whatever you wanna call it, “luck”, “God”, or “the universe”, the operating principles are the same.
Though we lack the ability to control the universe and the opportunities it presents to us, we still have the ability to prepare for those opportunities when they come.
Roman Philosopher Seneca, put it best when he said “luck is what happens when preparation meets opportunity”.
All you can really do is prepare. Whatever that looks like to you.
and if you need a little more guidance than that, UPS has a handy flowchart: “The Entrepreneurial Journey of a Start Up”, you can check out!