Jan 4, 2019 · 31m · how-i-built-this
Remembering Herb Kelleher
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this commemorative episode of NPR's 'How I Built This,' Guy Raz pays tribute to the late Herb Kelleher, recounting how the eccentric lawyer founded Southwest Airlines and revolutionized commercial aviation through radical operational innovation, cheeky marketing, and servant leadership.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Guy holds 30.2% of the talking time here. How this is scored →
Guy as informed peer 3.1 Guest teaching 3.1 Guest disagreement 1.8 Guy pushing back 1.1
speaking balance: gold is Guy, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 26:18 Herb rejects the market share dogma
Herb forcefully condemns conventional business thinking around market share, declaring he would punch anyone in the nose who chased unprofitable market volume.
Hardest push from Guy ▶ 13:55 Guy challenges turnaround time as sole cost driverRaz directly challenges Kelleher's narrative, insisting that turning planes around in 10 minutes could not alone account for the massive fare discrepancy with competitors.
Biggest teaching moment ▶ 15:25 Herb corrects assumption on unionization and wagesWhen Raz assumes low fares were enabled by underpaying employees, Kelleher clarifies that Southwest was the most heavily unionized airline in America and pioneered generous profit-sharing.
Guy holds their own ▶ 14:15 Guy pinpoints Civil Aeronautics Board regulationRaz demonstrates industry knowledge by naming the Civil Aeronautics Board and prompting the structural reasons legacy airlines accumulated bloated cost bases.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Guy as informed peer | Guest teaching | Guest disagreement | Guy pushing back | Why |
|---|---|---|---|---|---|---|
| Getting to Know Herb: Morning Habits and Quirks | 2 | 1 | 1 | 0 | Guy Raz opens with light biographical banter about Kelleher's morning routines, cigarettes, and bourbon. Kelleher is affable and humorous, explaining how his lack of aviation background provided a blank slate to innovate. | |
| Market Opportunity and the High Cost of Air Travel | 3 | 3 | 1 | 1 | Raz asks basic business questions about market feasibility and legal challenges from entrenched competitors. Kelleher explains the economic dynamics of unregulated intrastate travel and legal battles with incumbents like Braniff. | |
| Motivations, Skepticism, and Thriving Under Pressure | 3 | 2 | 2 | 2 | Raz presses on why Kelleher would gamble four years on a long shot that seemed destined to fail. Kelleher responds with his philosophical commitment to free enterprise and his innate love of competitive stress. | |
| Operational Innovation: Fares and the 10-Minute Turn | 4 | 4 | 2 | 3 | Raz questions how Southwest achieved such low fares and pushes back that quick turns alone could not explain the price gap. Kelleher details the 10-minute gate turn and the regulatory shelter from Civil Aeronautics Board fare inflation. | |
| Union Relations, Profit Sharing, and Whiskey Retaliation | 3 | 4 | 2 | 1 | Raz inquires whether low costs came from paying workers less, but Kelleher corrects him by explaining Southwest was the most heavily unionized carrier and pioneered industry profit-sharing. | |
| 1978 Deregulation and National Route Expansion | 3 | 3 | 3 | 1 | Raz sets the scene around the 1978 Airline Deregulation Act and asks about regional skepticism. Kelleher vividly recounts confronting skeptical East Coast reporters and justifying no-meal policies through drastic fare savings. | |
| Assuming the CEO Role Amid Economic Crises | 4 | 4 | 1 | 1 | Kelleher details taking over as CEO amid economic crises and explains Southwest's unique conservative balance sheet strategy of buying aircraft with cash rather than debt. Raz prompts him on the underlying mechanics of fleet mobility. | |
| Leadership Lessons and Rejecting Market Share Traps | 3 | 4 | 3 | 1 | Raz asks why legacy carriers like Pan Am and TWA collapsed while Southwest thrived. Kelleher aggressively dismisses the pursuit of market share as an industry trap, noting he threatened to punch anyone who prioritized market share over profitability. | |
| Company Valuation and Leading by Personal Example | 3 | 3 | 1 | 0 | The conversation shifts to valuation, executive compensation restraint, and Kelleher's historical perspective on corporate mortality and personal endurance. |
Statements from this episode (26)
Kelleher: Having Zero Airline Experience Qualified Him to Build Southwest
“Well, I knew nothing about airlines, which I think made me eminently qualified to start one, because what we tried to do at Southwest was get away from the traditional way that airlines had done business. So I started with the tabula rasa blank slate, And I th…”
Kelleher: Late-1960s Airline Industry Suffered Poor Returns and Constant Difficulties
“No, it was not notably profitable.
As a matter of fact, Warren Buffett reportedly joked about it at one time and said
If a capitalist had shot down the Wright brothers at Kitty Hawk in 19 oh three, the economy would probably be better off.
And so it didn't ha…”
Kelleher: Most American Adults in the 1960s Had Never Flown Due to Costs
“Most of the adults
In the United States of America haven't been able to fly because of the cost barrier.”
Kelleher: Southwest took four and a half years to launch its first flight
“Well, between the time when I started working on forming Southwest and the time we flew our first flight, It was four and a half years.”
Kelleher: Kept Southwest alive in 1969 by litigating for free and paying court costs
“And during that time, the company ran out of money, and in 1969, the board of directors had a meeting and talked about shutting the airline down, shutting the company down. And I said, well, how about if I litigate for nothing and pay all the court costs out o…”
Kelleher: Blocking Southwest signaled a failure of the free enterprise system
“Well, first of all, I was idealistic about it, because I figured if they can prevent Southwest Airlines from introducing what Southwest Airlines proposes to provide to the consumer, Then that is a sign that the free enterprise system is failing, and one of the…”
Kelleher: 99.9% of Texans believed Southwest Airlines would fail initially
“If you had taken a poll in the state of Texas after we filed our application, I can assure you that 99.9% Of the population of the state of Texas would say, this thing will never come to anything.”
Kelleher: Texas Supreme Court cleared Southwest 19 hours before first flight
“It went through the United States Supreme Court and through the Texas Supreme Court twice before we could fly. And the Texas Supreme Court handed down an order, 19 hours prior to our first flight.”
Kelleher: Early Southwest fares were 45% lower than competitors
“Well, on some flights, we had fares as low as 10 dollars. On others, we had fares as low as 15 or 20 dollars. We were about 45% lower. Than the other carriers.”
Kelleher: Southwest flew a four-plane schedule with three planes after cash crunch
“We had to get rid of one airplane in order to meet our payroll right after Southwest started flying, and so we decided that we would fly a four airplane schedule with three airplanes.”
Kelleher: Southwest achieved 10-minute gate turns to run planes 12 hours daily
“10 minute turns at the gate. We bring that airplane in, and 10 minutes after it stopped at the gate, you know, It would be pushing back again. And we had airplanes that, ah, you know, were operating 12 hours a day sometimes, so each one of those additional fli…”
Kelleher: CAB fare increases drove up legacy airline ticket prices
“And during that time, if they had a little financial problem the CAB would just give them a fare increase, and so that's how their fares got so high as compared to what we were doing since we weren't regulated by the CAB.”
Kelleher: Southwest launched the US airline industry's first profit-sharing plan in 1973
“When we turned our first very slim profit in 1973, we set up the first profit-sharing plan in the American airline industry”
Kelleher: Southwest was the most heavily unionized carrier in the US
“We were the most heavily unionized carrier in the United States. Our low costs were not due to being a non-union carrier, since we were more unionized than our competitors were.”
Kelleher: Southwest briefly became Texas's largest liquor distributor via promo
“We maintained our full fares, and we told the public of Texas that if you paid the higher fare, We would give you a free bottle of whiskey. And so for a couple of months, we became the largest liquor distributor in the state of Texas.”
Kelleher: Southwest slashed existing airfares by 60% entering Baltimore
“And I said, yeah, it's so competitive that when we start out here, we're reducing your existing fares by 60%.”
Kelleher: Southwest cut fares by $400 on long routes instead of serving meals
“And I said, no, we're not. We're gonna charge you 400 dollars less per trip, right? And I understand you can get a pretty good sandwich at Chasin's for 400 dollars.”
Kelleher: Southwest Airlines has not had an annual loss since 1972
“We've never had a loss for a full year since 1972.”
Kelleher: Southwest Airlines has never furloughed an employee
“We've never furloughed an employee at Southwest Airlines when the rest of the industry during that period up until now has probably furloughed, I don't know, a million and a half employees throughout the world.”
Kelleher: Southwest owned a higher percentage of its fleet than any other carrier
“So we had the largest percentage in our fleet of owned airplanes of any carrier of any size.”
Kelleher: Asset mobility makes aviation more competitive than other industries
“I think that it's more competitive than other industries, and one of the reasons for that is that our principal capital assets, The airplanes move at 540 miles an hour. And, you know, if you have a shoe factory that, that fails in Seattle, as an example you ca…”
Kelleher: 4% Profitable Market Share Beats 90% Unprofitable Share
“Let's focus on profitability. And if we have four percent of a market and we're profitable, that's better than having 90% of a market and being unprofitable.”
Kelleher: Turned down pay and bonus raises to lead Southwest by example
“I always turn down pay increases, bonus increases, to set a good example, I thought, for all of our people.”
Kelleher: Passionate joy prevents burnout even during 100-hour workweeks
“It's easy when you have a passionate joy in what you're doing. You don't burn out.”
Guy Raz: Herb Kelleher resolved a trademark dispute via public arm wrestling
“Herb Kelleher once resolved a trademark dispute with a rival airline. They were both using the slogan, plain smart. He resolved this not in court, but by challenging the other CEO to a public arm wrestling match, which Herb Kelleher lost.”