May 12, 2003
Herb Kelleher, the Complete Interview
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Editor's note: A shorter version of this interview with Herb Kelleher -- chairman, co-founder, and former CEO of Southwest Airlines -- appears in the Spring / Summer 2003 edition of Texas, the McCombs School magazine. Because Kelleher is such a fascinating personality, and because he shared so much of his experience, wisdom and humor with us, we offer the complete interview here. All 6,700 words follow, with bookmark links to key topics.
Key topics:
Interview transcript from J.B. Bird's interview with Herb Keller on July 9, 2002 at Southwest Airlines headquarters in Dallas.
J.B. Bird: One thing I wanted to ask you about is humility. You hold that up as a corporate value.
Herb Kelleher: Yes, very strongly.
JB: It's not typically advertised as a corporate value.
HK: Yes, I know that. (Laughs.)
JB: Anybody who looks into the values of Southwest Airlines will notice humility, customer service - you've said profits are a by-product of customer service. You also have some other interesting ideas: that people shouldn't wear masks when they come to work and that business should be fun. You said that your employees should be able to realize their values at work. It seems like you've realized some of your values here in this job.
HK: Well I think that to a great extent I have and it's been very fulfilling in that respect because I think that we've created an environment where our people could be themselves, where they could act naturally, where they felt comfortable, where they experience less stress and more dedication to the organization as a consequence. And so I think that we've pretty much lived the values that we have espoused at Southwest Airlines and I hope that we always will.
JB: Are there other organizations that you know of that are a model for this kind of organization?
HK: No, I really don't know of any to tell you the truth, at least of any size, no. No other organization comes immediately to mind in that respect. Southwest Airlines has been kind of an outlier, you might say, kind of a maverick and in a sense kind of a leader. You know there are a lot of people today that are extolling the principles upon which we've operated Southwest Airlines - not from a business standpoint but from a personal standpoint and I'm very gratified that that's the case but we've never been messianic about. We've never tried to lecture other companies as to how they should behave, what kind of environment they should try to create, because there are a hundred roads to Rome and you can get to Rome by any one of those roads. But our focus has always been on the well-being and the joy that we want our people to experience.
JB: What are some of the sources of that for you personally?
HK: Well, being with them, really, that's the foremost motivation apart from my personal family because I feel like the people of Southwest Airlines are my extended family and I always tremendously enjoy being with them, talking to them, seeing them, trying to help them to the extent that I possibly can on an individual basis. I have described them as my Fountain of Youth. I've said that Ponce de Leon was looking in the wrong place in Florida - he should have come to Southwest Airlines and met our people because they will keep you perpetually young.
JB: And what about not wearing a mask at work? That seems revolutionary in so many ways and counterintuitive certainly to the stereotypical impression of Big Business -
HK: Yes, it is -
JB: Where does that come from in your life?
HK: Well, I just always have felt that people should be natural in their behavior, that they should be able to derive enjoyment from whatever they do. When they derive enjoyment they tend to work together better, they tend to be more productive. One time a ramp agent wrote me, he said, Herb, I've caught on to what you're doing, you're making work fun - and home is work. Now, I've never repeated that to anybody because I thought that wouldn't make me very popular in certain quarters but he did get it. And you know I don't think that in order for people to be effective they have to act like automatons.
JB: Would you say that things in your early business career or things from your childhood shaped your outlook here - did you have a desire from an early age to have an organization that allowed people to be themselves, and to be natural?
HK: No, I've just always felt that every individual should be himself or herself in any context or any environment whatsoever, and that was simply just an extension of how I've always felt life should be lived.
JB: It requires a certain amount of faith, as an outside observer -
HK: It does, it does - there's no question about it. It does require faith, and usually that faith is requited, because the only way that you ever get people, I think, to respond with trust and fidelity is to treat them as if you trust them and believe they will be faithful, otherwise that won't be the case. You have to give everyone the opportunity to show their best qualities. And some people don't, but many people are unleashed by it. It's kind of interesting to see.
We don't hire a great many people in management positions from other airlines, but we have hired some over the years where we felt that the expertise was required as we grew. And it's interesting to see their response because they get into the Southwest environment and for awhile they are like a new dog in town, just kind of sniffing around, because they want to see if this is legitimate, whether it's genuine, whether it's heartfelt. And after about six months, I would say, you get either one of two reactions: they feel liberated for the first time in their business lives and they say, "Hey, this is for real. I can say what I want to. I can joke. I can be friendly with people." Or in some cases they say, "This makes me feel very insecure, the fluidity of it is daunting to me. I need a more structured environment than Southwest Airlines has in order for me to be comfortable."
And that's what I call incompatibility. There's nothing right, nothing wrong about either position in a moral sense, so I just say we're incompatible, just like two people who got married and find out they shouldn't have.
JB: You mentioned that other companies are emulating the approach of Southwest -
HK: Well, you hear more talk about it.
JB: Do you have any specific examples where people have actually approached you and said, We're dying to learn how you do this?
HK: Oh, there are just a ton of them. We just - this I think is an illustration of Southwest Airlines walking its talk - we used to hold corporate days several times a year and companies from all over the world, not just the United States, would come in to talk to our people department about how they hire, how they train, and how they maintain employee relations. And so yes, there were as many as 150, 160 that would come in at one time.
We finally stopped that program and you know the reason we stopped it? Because we concluded that we were spending an awful lot of time preparing for the corporate days, we were spending an awful lot of time participating in the corporate days, and perhaps we were neglecting the welfare of our own people to some extent as a consequence. So we discontinued it. We said, Hey, wait a second, we would rather spend this time trying to benefit our own people and deal with their issues and their problems than trying to tell the outside world how to do it. Now that is the humility that you were talking about, that's an illustration of it, because we didn't say, Oh, my lord this is just wonderful, it creates a lot of coverage, it creates a lot of stature, it creates the kind of image that we're looking for, we ought to continue this for these reasons. We just said, Hey, wait a second, it's causing us to neglect what's more fundamental, the internal well-being of our people, and so we're going to stop it.
JB: So the mission of the company shaped that decision? Southwest has a very well defined mission statement that is visible throughout the building, on your Web site. What are your thoughts on the importance of a mission statement?
HK: I have two comments on the mission statement.
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"The mission of Southwest Airlines is dedication to the highest quality Customer Service
delivered with a sense of warmth, friendliness, individual pride, and Company Spirit." |
First of all, one of the things that I want to tell you with respect to a mission statement is that a lot of people hire outside people to prepare their mission statements. My suggestion is that if you need someone outside your company to prepare a mission statement for you, then you really don't know what your mission is and you probably don't have one.
The second thing is that people always are writing and calling and saying we want to help you revise your mission statement, you know, they say, "Things have changed greatly in the American economy." And I've said, ours is eternal. It has nothing to do with the American economy. It simply has to do with the way you treat people - the respect that you give them and the opportunity that you give them whether they are employees or customers. So it's basically focused on people and how they should relate to one another and that's eternal. So we don't need to revise it to take into account new developments in corporate America.
JB: Well, so many people confuse mission and vision too -
HK: Well, you don't want to be too definitional about those things, because they are fundamentally spiritual in nature. And to give you an idea of the kind of risks that we were willing to take with respect to the quality of our people and how they relate to one another and customers, after deregulation of the industry, GSD&M, our very excellent advertising agency, was talking to us and they said, Well, now, the industry's being deregulated so anybody can fly wherever they want to domestically and they can charge whatever fares they want to, and that's new. For 40 years the industry had been strictly regulated by the federal government in that respect. So what do we have that's special under those circumstances? I said what we have are people. And that was the birth of the Spirit of Southwest Airlines (advertising campaign). And that's a big risk. If you're talking about the spirit of your people on television, in the newspapers, on the radio, in ads, it's got to be there. And I never had any kickback from it whatsoever because we were 100% right in that respect.
But, you know, the thing about it is that a group got together and said, We want to define spirit. And I said, I don't think you want to do that. Because Wordsworth said, "It's murder to dissect." And I think it's murder to dissect to take a concept like that and make it too narrow and make it confining and a strait jacket instead of as expansive as anybody wants it to be. So we're not going to define it. As long as it's a positive attitude, that's the Southwest Airlines spirit. Don't chain it. Don't put it in jail.
That's why we have never subscribed to acronymic programs -
JB: Six Sigma?
HK: Yes, TQM etc, because I think what happens is that again you define too much what you're trying to do and you curtail the imagination, the creativity, and the joy that should go into creating a company that is very people oriented and where people care about and respond to each other in a way that manifests the Golden Rule. And sometimes in my opinion at least people want to define and quantify too much, and they take the juice out of the whole thing in the process. Because fundamentally it's not cerebral, it's visceral. (He laughs heartily.)
JB: You've said you're not in the airlines business, but you're in the customer service business.
HK: Yes, basically we've said we're in the customer service business and we happen to operate an airline. But then any business is about providing great customer service to the people you serve. We just happen to be in one branch of the customer service business. And if you have a great customer service organization it doesn't matter whether you're flying people or selling steel or cleaning houses or whatever it might be.
JB: Is it true that because of that idea, you kind of expanded the market, created markets where they didn't exist for the airlines industry?
HK: Yes, yes. We sure have. As a matter of fact that's one of the most satisfying things and that is the essential meaning of the symbol of freedom (Southwest's tagline). If you go into a new city pair market and let's say there are about 125 thousand people a year flying between the two cities when you enter it, and at the end of one year with Southwest Airlines' great customer service, low fares, and high frequency which equals convenience there are a million people flying, what does that tell you? What that tells you is that you have just liberated a tremendous number of people who for business and personal reasons are now able to fly much more than they ever were before. And that's very important to them. And that's why we're a symbol of freedom.
But the interesting thing about that signature line was that it really wasn't directed so much at the outside world as it was at the inside world, at our own people, because we wanted to signify to them that they're doing something that's very important and that's good for society.
JB: Speaking on that topic, you've set your corporate hierarchy as employees first, customers second, shareholders last.
HK: Yes.
JB: Could you start and take me through the employee part a little bit.
HK: It used to be regarded as sort of I guess you might say an analyst's or a business school conundrum. People would ask me when I was talking at a business school or to an analyst group, "Which comes first, your employees, your customers or your shareholders?" And you know for a long, long time, many decades, I've been telling them that it isn't a conundrum. That if you treat your employees right, they're happy and proud and participative with respect to what they're doing. They manifest that attitude to your customers and your customers come back. And what's business all about but having your customers come back, which makes the shareholders happy?
JB: With regard to the shareholders being last, would it be fair to say that as you look at some of the crises going on over the last year, the shareholders are now paying for the cost of corporate hierarchies that used to place them first?
HK: Well, they're paying for it, but you see, it's holistic. It's holistic. You look at taking that approach that Southwest Airlines has, and then you look at the fact that since the end of 1972 our stock has gone up 138,000%. So, obviously, there are not any tensions involved among the various constituencies. Southwest Airlines is a manifestation of that in another way, in that a great many of our shareholders are also our employees, and a great many of our customers are also shareholders. So it's kind of a unified constituency, and the financial results have been superb for our shareholders. It's just when you say the shareholders come first to the detriment of your customers and your employees - that is when you might get into trouble and it might lead the chief executive officer to really be saying, I come first. (Chuckles sardonically.)
JB: In your evaluation of some of the giants falling over the last six months is that part of what happened?
HK: I think that is a part of what happened. I think that you had a culture developing that in many cases was focused on personal finance, corporate job hopping, that sort of thing, which I don't think has been very healthy for companies in the longer run. I think part of it is the difference between the short-term and the long-term perspective. If you have respect for the institution and you want it to be successful long beyond your own lifetime, then you behave one way. If you are looking for a short-term gain, then you behave another way.
And it's interesting to me that by comparison Southwest Airlines has been a pretty prominent company for quite some time and no one has ever made any allegations against Southwest Airlines in any way, shape or form that the officers, who are generally paid about 30% less in hard pay than officers of companies of comparable size and less success, are ripping off the company. No one has ever contended that the shareholders were lied to, that they somehow were the victims of misrepresentation, because we tell it like it is when we're addressing the financial and shareholder communities.
And you feel very comfortable with yourself, and you're saying to yourself you want this to be a company for all seasons, not just this season. We've had a board of directors by the way, that has been very willing to take a longer-term perspective. In other words they haven't been looking to do things in the short-term that might perhaps artificially inflate the price of the stock and that are detrimental to the company in the longer term. Many times I've made proposals to the board and said, "I think we ought to do this because this is what I foresee is coming and in order for us to be competitive five years from now, we need to make these expenditures. Now, they are going to reduce our earnings in the short-term, of course." They've always said, "Fine. Have at it."
JB: You haven't had ethical problems at Southwest. One would think that your culture of openness and the un-hierarchical nature of the company would make it very hard to hide things.
HK: Yes, I think that's a contributory factor, I really do. Years ago I was negotiating with our pilot group, you know, a collective bargaining agreement. They said, "We want to look at the company's books," and I said, "Fine - look at 'em. I don't care." And you know what the upshot of that was? It was kind of funny - they never did. They said, "We just wanted to see whether you'd let us." (He cracks up.)
JB: I'd like to switch now and talk a little about the Kelleher Center for Entrepreneurship and MBAs. First, you're not a company that is known for hiring a lot of MBAs.
HK: We hire MBAs, and we have a good many here, but we don't necessarily assume that having an MBA makes you an enormously competent and contributory person within the confines of a business organization. Fundamentally, what we're looking for is someone who understands how to work as part of a team, understands that they have an awful lot to learn about customers and the interrelationship of people within an organization, and that you know is not going to try to plan and administer what the company does when they're fresh out of school. I think that almost any lawyer would tell you that when you graduate from law school you probably have at least five years of practice in front of you before you become a competent lawyer. Competent in the sense that you know how to handle clients, your pragmatic in the advice that you give them instead of pedantic, you know, that sort of thing. And I think people who graduate from business school should have the same realization, that they still have a tremendous amount to learn in the field.
Another thing that I might add, and it's part of the entrepreneurial approach, is that - well, some years ago, as an illustration, Wall Street and the airline analysts became very fascinated with plans - you know, what kinds of plans did you have - and would corner me about that, and I said, We have a very special plan, it's called doing things - (Laughs) having a quick response capability. And that has served Southwest Airlines very well. And another comment that I made, as far as planning was concerned: that if you looked at some of the huge losses that were sustained, I guess you have to assume that they were planned. (Laughs even harder.)
I think spontaneity - the ability to respond with alacrity, to change, is enormously important, especially in a business where your principal capital assets are traveling over 500 miles an hour, meaning that you can redeploy them instantaneously. One of the things that struck me was that when Braniff, the original Braniff, ceased operations on May 12, 1982, during the afternoon, at 8 o'clock the next morning, three different airlines were at DFW serving Braniff's routes. From one afternoon to the next morning three airlines had moved in. Why? Because, of course, airplanes move so fast. They're not shoe factories.
JB: You have not had long-term plans in general. You have eschewed that.
HK: Not long-term plans in the meticulous, detailed sense. What we've had is a strategic plan, which is really a definition of us, what do we think we ought to be, how do we think we ought to function, what kind of debt-equity ratio do we think we ought to have, that sort of thing - defining what we are, number one, strategically. Okay, this is our strategy, now that's behind us. Our strategy is simple but ironclad. I mean, you know, you have to have discipline too to adhere to a strategy. Like, we're not going to do some things that could generate more revenue because we simply don't do those things. We're not going to run our costs up 80% to get the last 20% of revenue that's available, as an example.
Then, what values do we have? They're very simple as well. And having simple, clearly expressed values enables you to move much faster because instead of studying things extensively, in many cases you're prepared to say, just instantaneously, No, we don't do that, or, Yes, that is something that we do, and we're interested in it. But if it's clear-cut, then you can act much more quickly. So speed, quickness is very important. And I think people have to learn that -
JB: Yes, working at the university I would say so. (HK laughs.)
HK: - and the fact that you never can obtain perfect knowledge. You have to include that realistically and up front. I'm never going to have perfect knowledge. Okay, that means when I make a judgment I'm taking a risk by definition. If you can't have perfect knowledge, you're taking a risk, but you have to be prepared to take those risks. You have to be prepared to make those judgments. And you have to be prepared to move ahead. And you have to be prepared to correct quickly any mistakes that you might make - quickly - not have mistakes that you're so egotistical about, getting back to humility, that you say, "Oh my Lord, I can't do anything about this because it'll admit I was wrong." You know what I mean: Say, "Well, I was wrong. I've got to correct it, instantaneously."
JB: I assume this is just the sort of advice you would give an entrepreneur starting out as well. Have you worked much with start-ups directly, or serving just as an adviser?
HK: Well, I've had a good bit of experience in that sort of respect because I've been involved in several other start-up operations personally to some degree and also the law firm that I was with in San Antonio - that was its specialty. We were constantly helping people to start new businesses. It was fascinating to see what made them work and sometimes why they didn't work. Someone would come in with an idea. They didn't have an idea in the world how to get financing - we'd get the financing for them. If they were going to build a factory, and they had never purchased a piece of land, didn't know how to negotiate the price, we'd negotiate the acquisition of the land - actually negotiate it, not just draw the papers, but negotiate it on their behalf. Act as kind of a, I guess you might say, "foster father." So yes, I have a lot of experience in that respect.
JB: Why would you fund a center for entrepreneurship? It's obviously a topic that means a lot to you, but what do you see in it in terms of value?
HK: As far as value is concerned, the principal reason that I moved to Texas from New Jersey many, many years ago was because I recognized that Texas was a much more entrepreneurial state than New Jersey, that the opportunities to start things were greater in Texas. And my vision was fortunately fulfilled. But that really was my primary motivation for moving to Texas. I kind of liked its swashbuckling ways - the fact that you could call one of the biggest and wealthiest industrialists in the state about an idea you had and he would say, "Well, okay, be here in about an hour." You know, that sort of thing. And I think that's served Texas very well, and I want to see it continue in Texas. I want to see Texas remain an entrepreneurial powerhouse in the United States. And I think that's where a lot of the vitality is, that's where the growth is, and I would like to see Texas retain its preeminent position in that respect, and The University of Texas as well.
That's the primary reason why I was interested in helping to establish the center, because I would like to see that grow. I would like to see the university's reputation grow in that area where it's already very good, and I would like to see the State of Texas as a whole benefit from it enormously. And you know it has been fundamentally, and it has been for some years, the newer companies that have been producing jobs in the United States as opposed to the old-line companies, so to speak -
JB: Statistics show that even the smaller start-ups are where most of the job growth is -
HK: And we want job growth. We're obviously going to have young people coming along and they want jobs. So I think that preserving, maintaining, and perhaps nurturing the entrepreneurial spirit is very important to the future of Texas and its younger people. And another thing about it, it's not just starting something, although that in and of itself has a form of creativity to it that's very appealing to people who have somewhat of a sense of adventure, but it's constantly renewing it, it's constantly working to keep it fresh, to keep it creative, to keep it imaginative, to keep it dedicated, not to allow it to desiccate and, you know ossify, into an organization that suddenly is focused more internally than it is externally - that's focused more on the preservation of the institution than on what the institution produces for society and for the work-force.
JB: Is that why you don't have a window? (Kelleher is well known among associates for having an office at corporate headquarters that purposely does not have a window.)
HK: Yes, exactly, I'm trying to set a good example that it doesn't matter where your office is, it's where your mind is that should be important. And actually, you did hit on that, you're right, when we built this building I said give me an interior office because fundamentally bureaucrats scrap over space, which in and of itself I think should be somewhat meaningless, physical space. It's the space between your ears that should be the important thing. So I did say, I want an office without a window, away from a corner.
JB: I noticed that, because I have an office with a window, which is rare in my building, and every time people come into my office, without fail they say, "How did you get a window?"
HK: I know. You get that kind of competition going. I had an office at the law firm in San Antonio that had a window, but I always kept the blinds drawn, so nobody could ever look out the window, including me.
JB: Back to entrepreneurship, so it's a value -
HK: You have to - you know, bureaucracy in its worst form brings stagnation, so you have to constantly fight against becoming absorbed in the process of doing things rather than the results of doing them. You know, you can do all the wrong things right. (Laughs.) You know, we've created the documents, we've done the studies, and now we're going to happily go ahead and do the wrong thing insofar as the future success of the enterprise is concerned.
I might tell you this story just by way of illustration. When the Justice Department was investigating - not investigating, it wasn't, but questioning us about a proposed acquisition on the carrier - the Justice Department lawyer said, "Well, we asked for all of your documents with respect to this acquisition and we got a pile that was just about an inch high." And I said, "Well, we're not big on documents. We're big on action, but we're not big on documents. That's all the documents we have." And he said, "Well, what about your business plan for the carrier." I said, "Did you bring a neurosurgeon with you?" - tongue-in-cheek, you know - "We have a business plan: it's up here (he points to his head)." You can have a plan without having a pile of documents.
But I think that as far as the center is concerned, the fundamental point that I want to make is that it's not just to encourage people to start things, but it's also to encourage them to keep renewing them - keep the flame burning.
JB: Does entrepreneurship ever stop?
HK: It's used to be kind of a shibboleth I guess you might say that there were two stages of a company: there was the entrepreneurial stage when someone started it, and if it were successful, within a very short time it passed into the managerial stage and there was a huge chasm between the two, and then you know entrepreneurs could never manage and managers could never be entrepreneurs. Well, I think that's a false dichotomy. I think you have entrepreneurs who can manage well if they're interested in doing it. And you have managers who can turn into entrepreneurs if you give them the opportunity to do so, the latitude, the inspiration to do so.
JB: And that will be a part of the center as I understand it, working on renewal -
HK: Yes, it's intended that way.
JB: How do you foresee your involvement with the center?
HK: Well, I don't want to trespass in any way, shape, or form. I have great respect for the university and its leadership and what it has been accomplishing for Texas and the people of Texas for a long, long time. But to the extent that I can provide any insights, I would be very happy to do so, and I would enjoy working, to the extent that it's appropriate, with the people at the center.
In the situation I am (in) right now, you know, we have a new CEO, Jim Parker, and a new chief operating officer, Colleen Barrett, but since September 11th, I've been kind of preoccupied myself, because it was sort of all hands on deck, and so I haven't had much time since then because, you realize, of the gravity of the threat that that posed to the airline industry as a whole. So I haven't been able to devote much time to it. But I would hope to the extent that it would be helpful to spend more time working with the university in that regard because I think the university has the greatest potential - I mean it's just almost unimaginable to me - the potential that the University of Texas in the state of Texas has in entrepreneurship.
JB: Your friendship with Red McCombs, did that encourage you to fund the Kelleher Center, in a sense knowing that he put his name on the line?
HK: It did. Red tells the story and I think it's true. Red tells the story that after he made that $50 million donation to the university and to the business school, I wrote him and said, Hell, Red, I'll change my name for $25 million. But I've always been very fond of Red personally. I've always admired his guts and decisiveness, and I've always admired him as the ultimate risk taker. And so Red's doing what he did was an inspiration to me to do what I did in a much smaller way than Red. And he is the consummate entrepreneur, Red McCombs is. And then of course I had a great deal of respect for Bill Cunningham and other people at the university that talked to me about it.
JB: You were the chair of the business school advisory council for a while (in the early 1980s)?
HK: I was the chair of the business advisory council for two years. That was the period during which the Legislature was matching donations for professorships. It was very nice to be the chairman during that time, because you could offer everybody a two-fer. (Laughs.) "Guess what, you get one, you get two?"
JB: I want to switch back just in closing a little bit to you. One thing I wanted to ask was about your battle with cancer.
HK: It wasn't really much of a battle. I just kind of kicked its ass - with the help of The University of Texas of course. (Kelleher pursued treatment at The University of Texas MD Anderson Cancer Center.) I just kept working - I just kept working the whole time. I went down to Houston every day, got radiation treatment, came back to the office and kept working.
JB: Did it change your outlook on life?
HK: No. As a matter of fact, I've got to tell you this, J.B., I was over there waiting for one of those treatments. And I ask them finally, "I'd like to ask you why, if this is so good for me, all of you run out of the room before you turn the machine on. Don't you want to share the benefits?" (He laughs.) But this lady, she stroked my hand, she was very nice, and she said, "I bet you're scared." And I said, "Yeah, I'm scared. You know what I'm afraid of? I'm afraid I'm going to die of boredom," you know, waiting to get in there. (He laughs harder) I just loved to see everybody scurry before they turn on the x-ray machine. "You know this is terrific! Why are you all wearing those lead jackets?" (He laughs even harder, then pauses.) So, you either get it, or it gets you.
JB: I somehow thought you were going to say, "No, it didn't change me," because you've always been the same anyway.
HK: Yeah, well actually, I had some fun down there. Enjoyed meeting the people, and really enjoyed I guess in a small way sort of becoming part of the institution. I did ask someone, I asked, "Have you ever thought about hiring an architect who knows how to build a corridor that goes from end to the other?" Because it's been built (in such a way that) there's constant detours. I found myself in the experimental section one day. The lady said, "I don't think you want to be here." And I let them do an experimental procedure on me while I was down there. Because I figured there were probably relatively few people and probably I should do it on behalf of other people that might be afflicted. And I was absolutely astounded because all of a sudden about 35 people showed up because they all wanted to see it. I suddenly felt, hey, it's like being in the circus, here's this strange animal lying on the table. (Laughs.)
JB: Coming back to the company just a little bit too. You said you've been working more since September 11th.
HK: Well, actually, I was going to throttle down on October 1st of last year. Because Jim and Colleen had asked me to, well, I've retained four areas, direct responsibility for four areas, and am available for whatever advice, counsel, wisdom I might summon up, which is very difficult for me, to summon up any. But then after September 11th of course it was an emergency situation where everybody was supposed to pitch in, so I never got to October 1st and reducing my hours, because everybody just had to do what had to be done. It was an unprecedented crisis in the airline industry, and survival literally was at stake. And also the government was going to have to take quick and very intrusive action with respect to security issues involving airlines. You know you try to do everything you can under those circumstances to make sure you don't get squashed inadvertently in the process.
JB: Certainly a lot of paeans have been written to Southwest Airlines since then. Would you say the last year has been kind of a vindication? I mean, your business model has been vindicated over and over, but since September 11 your industry has been put to the test.
HK: Yes. When September 11th occurred Southwest Airlines had the strongest balance sheet in the American airline industry. We had the unprecedented record of profitability. We proportionally had the greatest liquidity and access to liquidity proportional to our size. And we had the people who were ready to respond lickety-split in a situation that was highly emergent, and where many times you were getting - and this is not criticism by the way, because the government had to react in an emergency way as well - but you'd be getting conflicting directives two or three times a day as to how you were going to conduct your business with respect to the processing of passengers. Our people just said, "Oh, here's another one, okay, we'll do it differently this afternoon than we did this morning." So in that sense I think it was somewhat of an affirmation that we had been on the right track. And we had the lowest costs in the industry. That's also very helpful in times of stress. And that goes back to what we talked about earlier, and that is foresight. Because anybody that has any sense of historicity whatsoever, realizes, especially in the airline industry where it's magnified, that the bad times are going to come, so you better be prepared for them. And if you don't think the bad times are going to come, then you're engaging in self-deception.
As our interview closed, Kelleher talked about the famous court battle behind the founding of Southwest Airlines, which culminated in Kelleher successfully arguing before the U.S. Supreme Court in 1971 for the carrier's right to operate. He closed with these thoughts for would-be entrepreneurs.
HK: I realized it was going to be a long, hard and bitter battle to get (Southwest) into operation because the other carriers would exert every effort they possibly could to prevent that from coming to pass. Indeed, it took three-and-a-half years of litigation and running out of money in order to get it done. But that's another thing with respect to entrepreneurs that they need to understand, that you can't just have a fabulous idea. You've got to have a lot of tenacity, stick-to-it-iveness, to buck the tide of the general wisdom, because if it's general it's probably not wisdom and if it's wisdom it's probably not general. (In 1971,) there probably weren't ten people in the state of Texas who would have given you a plug nickel for the chances of success of Southwest Airlines.
Maybe they wouldn't have given Kelleher a plug nickel, but if they had bought $1,000 worth of Southwest stock at the IPO in 1972, today their investment would be worth $1.4 million.
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