California joins the union and messages need to be delivered. UPS had a solution and decided it needed to be luxury and efficient.

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Dave Young:
Welcome back to the Empire Builders podcast. Dave Young here with Stephen Semple. And we’re talking about empires and how they were built. Get it? That’s the name of the pod… that’s what we do here.

Stephen Semple:
I’ve never put that together before.

Dave Young:
Wow, I see. Aren’t you glad I’m here?

Stephen Semple:
I’m so glad.

Dave Young:
You whispered the three letters, UPS, into my ears just as the countdown started. And I’m trying to think of a UPS story, and mostly what I think of when I think of UPS, think back years ago, I sort of remember, I think their start but I remember that being a UPS driver was a way better job back then than it is today. But that’s probably not a big part of this story. So let’s talk about how they started.

Stephen Semple:
Pretty sure it was UPS recently that actually just put through a new pay package and benefits, and things along those lines. That really ramped up what people are being paid at UPS, if I remember correctly. But you’re right, it’s not a big part of the story.

Dave Young:
I think it started… how long have they been around, Stephen?

Stephen Semple:
They were founded on August 28th, 1907.

Dave Young:
I feel like probably I lived in a town so small that we didn’t have one until maybe the sixties or seventies. They just didn’t show up.

Stephen Semple:
Well, and this is an interesting part. There was a big challenge to them becoming nationwide. They were founded in August 1907 by James Casey and Claude Ryan in Seattle. I didn’t realize that they had started in Seattle.

Dave Young:
Oh, okay.

Stephen Semple:
And they actually first started as their original name was the American Message Company. And today of course is known as UPS, United Parcel Service. They do like 90 billion in sales and have over 500,000 employees. Just what a monster they have become in this space. But basically, they started around the time California joined the union. And you know what ends up happening now, I know Seattle’s not, and before people go nuts, I know Seattle’s not in California, but I was just trying to, you know, a historic landmark.

Dave Young:
It’s the West Coast, yeah.

Stephen Semple:
Exactly. But I get it before people know-

Dave Young:
Didn’t all join at once. Yeah.

Stephen Semple:
… So, California joins the union. There’s this growth happening. In the West, there’s this need to transport items and it’s hard getting things to the new territories. And lots of delivery services pop up. Wells Fargo pops up for the transportation of money. The Pony Express is created for transporting mail. Now, of course, the Pony Express only lasted 18 months because the telegraph wiped them out. Right?

Dave Young:
Right.

Stephen Semple:
But here’s the interesting thing, with the telegraph, you still need a messenger service to run the last leg. To take it from the telegraph station to the person. So Jim Casey is 19 years old, he’s in Seattle and he sets up this business for basically running the telegraphs. That’s how they start.

Dave Young:
Okay. They’re the last-mile guy.

Stephen Semple:
That’s the reason why they’re the American Message Service. They start off as being the last-mile guy. But what they also start doing, they also have this idea where they start doing errands for people. So a customer goes to the merchant, they follow the customer around, and then they basically help deliver the packages and it morphs into kind of this errand business, and it’s weird what they’re doing, all sorts of things and it’s-

Dave Young:
This is like DoorDash.

Stephen Semple:
… And it takes time and it’s hard to schedule the time because people take longer and all this other stuff.

Dave Young:
Nobody’s got iPhones.

Stephen Semple:
Yeah, exactly. But the combination of, they’re doing this messenger service and they’re doing this errand service, and it’s early 1900s and they start noticing this popularity of department stores popping up.

Dave Young:
Okay, yeah.

Stephen Semple:
And most people don’t have cars. So, Casey realizes that this is growing. And what he does is he makes a deal with some merchants to become the exclusive delivery service for them, this new idea. So, he would now go to the store and say, hey, people buy stuff in your stores, I will do the delivery to their home. This idea started to catch up because in 1913 the post office started doing parcel deliveries. But this whole idea of doing this delivery service ends up becoming a hit with the department stores. And in 1913, they acquired a Model T Ford and they form the Merchant Parcel Delivery Service. Now, here’s the interesting thing. In some places, I saw the date for this company as being 1918.

Others I saw in 1913. So, I’m not entirely sure when that happened. But this idea of delivery innovation at the time was really big. And they also started doing innovation and how things were delivered. Traditionally how things would be delivered is, you’d have your package, I pick it up and deliver it. Well, what they started to do was bundle things together that were going to the same area. Oh, Dave and Susan live close by, so we will give that to this one delivery person. And that was an innovative idea. And what they started finding is that they could replicate this idea in any city. And so they began buying small delivery companies and expanding. And they hit an obstacle when they went to San Francisco because in San Francisco there was already a company called Merchant Parcels. So, they had to change their name and that’s when they became the United Parcel Service.

Dave Young:
Okay.

Stephen Semple:
Was because of that. That’s when they became UPS.

Dave Young:
To compete in San Francisco. I thought it was going to be that the Model T couldn’t get up the hills but it was the name thing.

Stephen Semple:
It was the name thing. Now, at this same time, they decided that what they really need to do is do some branding and have standard uniforms and all this other stuff. And here’s why they decided on the color brown, and I thought this was brilliant. First of all, it doesn’t show dirt. It stays clean. And if you think about in those days, operating model T-Fords and things like that, you’re going to get dirty.

Dave Young:
It’s the color of dirt.

Stephen Semple:
Yeah. But the brown they picked was the same brown that Pullman rail cars were. Now, if we go back to the history of Pullman rail cars, Pullman rail cars were the elegant rail cars of the time. If you were going to travel posh, if you were going to travel elegantly across the United States, you traveled via a Pullman car. Everyone knew who they were. They were a well-known brand. They were aspirational. So, what these guys decided that they wanted to have was the halo effect of Pullman. So, they did it the same brown. That’s why they picked the color brown.

Dave Young:
And because the people that they’re delivering for have probably all been on a Pullman, right? So, they absolutely have a halo effect.

Stephen Semple:
Or be aware of it and would like to be in one.

Dave Young:
Yeah.

Stephen Semple:
And they did lots of logistical things. They were just not a delivery service. They actually did a lot of training for the drivers. So for example, one of the things that they recognized was that was (A) dangerous and also (B) slow, was left turns. So, they would map things out for the drivers to try to make it so that there would be no left turns in the routing.

Dave Young:
And they were doing this back then.

Stephen Semple:
They were doing this back then and also so that they would never back up. They would map things so that they would try to make it so that the driver would never have to back up. The driver would carry the keys in their right hand.

Dave Young:
Okay.

Stephen Semple:
Right. So there was a whole thing that they studied about the keys being in the right hand because I always forget that for most cars, the ignition on the right hand. This is a weird thing with a Porsche, are the ignitions on the left.

Dave Young:
Oh, you had to bring that up.

Stephen Semple:
But it was funny when it was going right hand. Why the right hand? Oh, right. That’s where the ignition is. It’s weird when I get in a rental car. At first, I can’t start the car.

Dave Young:
You’re just like, oh. Oh my God, there’s a first-world problem I’ve ever heard one.

Stephen Semple:
Even back in this time, they were doing these logistics to make the delivery more efficient, safer, more effective, all of those things. By 1930, they have 400 employees and they move the head office to New York. By the 1940s, they were in 17 cities with thousands of employees. Shopping habits are starting to change. The suburbs are popping up and people are getting bigger cars. So, this whole department store delivery starts to wane, right? Because you got a big car, you’re out in the suburbs. It’s not as big a deal. So, UPS decides at that point, they’re going to take on the post office for parcel delivery.

And it really is roll your sleeves up because at this time, each state, and sometimes even each city, has its own regulations on parcel delivery. So, they went to battle with the regulators. Literally, there were tons of licenses needed and lots of court battles. They fought this state by state, city by city. And it wasn’t until 1975 that they were able to deliver to every address in the United States.

Dave Young:
That’s probably about the time they showed up at my house when I was a kid.

Stephen Semple:
Yeah.

Dave Young:
Yeah.

Stephen Semple:
So, literally, they started basically in the 1940s this battle, and it took them 30 to 40 years to finally get to the stage where they could deliver to every address in the United States.

Dave Young:
Yeah. Our postal service, we love them and we hate them. I remember them fighting email.

Stephen Semple:
Right. I forgot about that.

Dave Young:
They wanted to charge you for every email that came through.

Stephen Semple:
I forgot about that battle. So, a couple of things I found really interesting about UPS is that they were doing this message delivery service and this parcel delivery service. And to me, it’s again, it’s of those, look, we’re in a world of change right now. They were in a world of change then and he was open to noticing things. They were both open to this whole idea where they started going, hey, wait a minute, there’s these department stores springing up and people don’t have an easy way to get this stuff home. Maybe what we should do is offer that service to the department store rather than the department store having to set it up themselves. So, that’s again, one of those observational changes in terms of what the world is going on around them, that they were able to fit a business into. The second part is they also noticed when the business started to shift against them, that they had to do something different.

Too often, I think what sinks companies is they become too dedicated, well to The Idea, and do not recognize This Idea’s time has come and gone because of this change to the suburbs and bigger cars and things along those lines. So, keeping their eye open to that and also constantly working to make delivery more efficient. But my favorite is how they ended up with brown. This whole idea of, we want to get the halo effect from the Pullman car, I thought was absolutely a stroke of brilliance. You think about that day, if the Pullman car is the thing you know about, you know it’s the most elegant thing and then you see this person pull up and they’re walking up to your home with parcels, and they’re dressed in that same brown uniform. There’s got to be this moment of excitement and positive attachment to that.

Dave Young:
Either that or the guy’s lost. He’s nowhere near the train station.

Stephen Semple:
He took a left-hand turn. Should not have taken that left-hand turn in… You know, Bugs Bunny needed to learn something from UPS. Right? Because he was always taking that wrong turn in Albuquerque. I bet it was a left.

Dave Young:
Yeah. Took a wrong turn in Albuquerque. So, I think in their DNA as a company, right, they started to remove some friction from just getting word, right? Remove some friction from you getting a telegram that your uncle sent you from New York City to Seattle, and it could sit in the telegram office till when? Till somebody decided to take it around.

Stephen Semple:
Right.

Dave Young:
Right? Or a package sits at the department store until you can arrange for somebody to go pick it up. So, they’re trying to remove the friction of just getting these things delivered, whether it’s a message or a parcel. And the fact that they’re always focused on removing friction and they’re hiring nimble drivers and training them to be quick and hold the keys in their right hand, they’re going to be always looking for innovation, right? They’re going to be always looking to make that last mile the quickest mile. I think that’s really cool.

Stephen Semple:
It is.

Dave Young:
That’s why they didn’t do left turns. I mean, they’re dangerous but you know what else it is? It takes a long time sometimes to make a left turn, right? You’re sitting in the middle of the street for a couple of minutes.

Stephen Semple:
Right. And you think about that routing. Back in that day that was pulling out a paper map and drawing it, and looking at the deliveries and drawing it out so that it would be right hand, right hand, right hand, right hand, no backing up, here’s how you do it. And boy, that was time-consuming but as you said, led to massive efficiency.

Dave Young:
I mean, time-consuming to figure it out the first few times-

Stephen Semple:
Correct, the first few times.

Dave Young:
… But once you have a route.

Stephen Semple:
Yes, you’ve got a route.

Dave Young:
You probably know. And I know because I had a couple of friends back in my hometown that were UPS drivers and the truck is sort of that way, right? It’s loaded that way. Everything in it is in the order that it’s going to be delivered. There’s a reason that UPS became a logistics company.

Stephen Semple:
Yes. And that does not surprise me because for a company to sit there and say, hey, we’ve studied that holding the key in your right hand becomes just that slightly faster, but look, you’re in and out of that vehicle 50 times. That 50 times adds up. It’s kind of like, I had a really cool opportunity back a few years ago to participate in an event with a customer where they did a team building event at a school that trains pit crew drivers. And when you look at the pit crews, they break everything down to one-eighth of a second motions. Look in a NASCAR race, one-eighth of a second is like three car lengths. From a UPS standpoint, look, each one of those small things, adds up.

Dave Young:
Yeah. When you’ve got a nationwide force of delivery guys and you can shave half a second off everybody’s day. It adds up to a lot of time.

Stephen Semple:
Or if it’s something that you’re repeating 50 times. It’s like, I was in a delegation training thing one time and the person shared a really interesting statistic, or a really interesting idea. Just because often what’ll end up happening, we go, “It takes me more time to train the driver about putting the key in the right hand than it would save us.” Well, when things are repeated, if you do something for 10 minutes every workday, by the end of the year you’ve spent 40 hours on that task. You’ve spent a week on that task. And so every daily 10-minute thing is a week. Now, if you’re UPS, every time you do something, it’s two seconds times 50 times, times your hundred thousand delivery people. Jesus, that ends up becoming real cash.

Dave Young:
Yeah, absolutely. What a cool story.

Stephen Semple:
So, that’s how they end up being brown.

Dave Young:
All right. There we go, brown. There’s probably another episode in here to talk about what I brought up at the very beginning, which is how that was a great job, and then the gig economy and probably Amazon. We should explore that sometime.

Stephen Semple:
Yeah. That would be interesting to take a look at. The changes that are happening in some of these spaces because of that. It would actually be… yeah, that would be interesting.

Dave Young:
You do the research and I’ll join right in, as usual. Our time is up and Stephen, you’ve got homework to do. So…

Stephen Semple:
Yeah. Thanks, David.

Dave Young:
Yeah, sure. Thanks for sharing the UPS brown story. Do you want a brown joke? I have one brown riddle.

Stephen Semple:
Oh, sure.

Dave Young:
I attribute it to Monty Python. We’ll end with this. What’s brown and sounds like a bell?

Stephen Semple:
I have no idea.

Dave Young:
Dung.

Stephen Semple:
Oh, God. Goodbye.

Dave Young:
I know, it’s terrible. Bye.

Stephen Semple:
Hey. I just wanted to add this note. Shortly after Dave and I recorded this episode on UPS, UPS announced that they had come to an agreement with the drivers. And as Dave said, UPS has had a history of paying drivers really well. And it looks like this is going to be carrying on because the UPS CEO says drivers will average 170,000 in pay and benefits at the end of a five-year deal. So, it looks like UPS is going to be keeping that history going. Good for them.

Dave Young:
Thanks for listening to the podcast. Please share with us. Subscribe on your favorite podcast app and leave us a big fat juicy five-star rating and review. And if you have any questions about this or any other podcast episode, email questions@theempirebuilderspodcast.com.

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