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We're just honored to have Herb here, and it's a wonderful pleasure for me to introduce him, however briefly.
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And the reason I say briefly because he is a world famous fellow, as many of you know, also a very likable guy, and I think we're all going to experience that today at this meeting.
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I do want to give you just a little bit of background that I've learned about Herb.
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Some things I already knew and some things I learned in preparing for this one is that he was born in Haddon Heights, New Jersey.
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He went to Connecticut Wesleyan University.
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From New Jersey, he subsequently then went to the NYU Law School, joined the New Jersey Supreme Court as an employee.
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After law school, and practiced law from that venue for a couple of years until he and his wife decided, they wanted to move of all places to Texas.
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>> [LAUGH] >> They moved to Texas, and- >> [LAUGH] >> I didn't know.
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>> Speaker 1: [LAUGH] >> He joined a law firm in San Antonio, Texas, that specialized in nurturing, among other things, in nurturing entrepreneurs.
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And at that law firm, he met a guy named Roland King, who came in and who had a revolutionary idea, that they might start an airline, that would charge, guess what?
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Low fares, now, I might say at Continental we consider that a little subversive.
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>> [LAUGH] >> They did that and sort of wrecked it for everyone, I might add.
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>> [LAUGH] >> At that time, it's hard for us to remember that fares in the United States were not a matter of the free market.
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They were controlled by something called the CAB, the Civil Aeronautics Board.
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And airlines filed for fares on a regular basis and generally got the fares they asked for, and fares got right up there.
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But there was a little bit of room, there was a little bit of an escape clause, which had to do with the fact that the Civil Aeronautics Board only regulated fares on interstate Airlines on interstate transport.
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So Herb and Rollin King had the notion that if they didn't fly interstate, maybe they could come in with low fares.
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And they filed to start Southwest Airlines, which was going to fly within the state of Texas between San Antonio and- >> Dallas and Houston.
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>> Speaker 1: Dallas and Houston >> Initially.
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>> Speaker 1: And of course, the other airlines in Texas, in that great American tradition, said this must be against the law and challenged it and tried to get Southwest put out of business.
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Herb, as a lawyer, was the key player in fighting that lawsuit, and eventually won and put them out of business, at least temporarily.
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>> [LAUGH] >> Not intentionally.
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>> Speaker 1: [LAUGH] >> His list of innovations is just tremendous, he is the man, subsequently, Rollin King gave up the CEO job.
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Herb left the law firm, became CEO of Southwest Airlines in 1978 until 2001, when he passed the baton to another CEO, and is currently the chairman of Southwest Airlines with another CEO who he has nurtured over the years, and now in charge.
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His innovations are legendary, and I'm only going to cite just a few of them.
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The first was the 15 minute turnaround on an airplane, nobody thought that could be done.
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They did it, one class of service instead of two or three classes of service.
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No reserved seats, serving satellite airports instead of the major airports in a number of the cities that they serve.
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No meals, peanuts instead with peanut fares. A single aircraft type.
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Airlines at that time were famous for having a different aircraft almost for every pilot.
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Employee spontaneity, the notion that somehow work should be fun.
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And most of all, low fares.
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He pioneered that segment of the industry and gave rise to a whole new industry within an industry which is something that we now call LCCs, which is low-cost carriers.
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And the list goes on and on.
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The company's now $8 billion in sales.
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Who would have believed it in those early days?
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A half a billion dollars in profits last year, which is about a half a billion more than all the other airlines.
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>> [LAUGH] >> Speaker 1: Professor, we have two sets of books.
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>> Speaker 1: Yeah, yeah.
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>> [LAUGH] >> We actually teach that, Herbert.
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>> [LAUGH] >> Speaker 1: They have 31,000 employees.
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And I might say that while he's come a long way and is one of the few executives in America that has made the transition from being really a founder and an entrepreneur.
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To a person who managed a company with north of 30,000 employees and sales encroaching on $10 billion, I mean, that is a tremendous career.
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And I hope we can get a little bit of a flavor for that today.
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He still has a wonderful interest in entrepreneurship, having endured.
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Excuse me, endowed the entrepreneur center at the University of Texas in Houston.
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Herb, thank you very much for coming today, we're delightful.
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>> Speaker 1: Thank you for having me.
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>> Speaker 1: Well, we are.
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>> Wonderful to be with you.
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>> [APPLAUSE] >> Speaker 1: Now, the format that he chose today, was rather than giving a talk, to invite me to ask him some questions, which I will do.
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But most of all, I want to ask just one or two questions and then I want to invite questions from the audience today, and Herb welcomes that.
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One of the things, Herb, this may be kind of an unusual question, but one of the things that you've said, and I as a finance professor tried to get my arms around this.
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You've said employees come first, customers come second, and stockholders come last.
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That's not exactly the way I teach it.
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>> [LAUGH] >> Speaker 1: Well, I guess I'm going to have to take over that class. >> Yeah.
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>> [LAUGH] >> [APPLAUSE] >> I wondered, given that, whether you think it would be a step forward in America if we had that more reflected in boards of directors.
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For example, I notice your board of directors, is not populated very much by customers, although they may fly, but they're elected by the stockholders.
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The customers don't elect the board.
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The employees don't elect the board.
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The stockholders elect the board.
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Do you think that's a mistake?
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Do you think we should have more of the.
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European system where employees elect board members and maybe even customers elect board members.
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>> Speaker 2: I don't, we've experimented with that some in the United States, professors, you well know.
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United was a disastrous experimentation with employee ownership, we were the progenitors of employee ownership.
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We had the first profit sharing plan in the airline industry, introduced in 1973.
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And just to give you an illustration of what that's meant to our people, we had one of our captains that retired a couple of years ago and took $8 million with him just from his profit sharing plan, not including his 401k plan, where we have a full 7. 3% match.
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But we've always felt that it's very important to have your employees as owners of the organization, but not controllers of the organization.
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Because sometimes when you come out of a particular environment that tends to be your total focus, you tend to be a little tunnel visioned.
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And I don't think it's worked out too well at other airlines where they've, for instance, had labor leaders on their board that have a very special interest in the well being of their own constituency.
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Customers, generally speaking, also tend to have somewhat of a narrow focus.
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And we're looking for people that have more of a worldview, I think, on our board, and we're looking for people that are very diversified in their interests so that they can bring from their own activities, a broader scope to our board.
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And so that's kind of the way we've always felt about it.
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As I said, we were the progenitors of employee ownership in the airline industry, we were the first, but we never thought that meant that employees should control the company.
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And number two, as far as customers are concerned, we bring them in to interview our prospective new hires.
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But what I meant by the narrow sliver of focus, instead of having a global view is that, when they talk to me about coming in and interviewing our new hires, prospective hires, they always want to interview the flight attendants.
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I mean, nobody ever says to me, hey, Herb, I want to come in and interview the mechanics, or I want to come in and interview the pilots.
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They always want to interview the flight attendants, and that's what I mean by having sort of a narrow focus on things that we try to avoid.
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>> Speaker 1: Okay, the other thing that of course comes across partly in this introduction and just in your whole Persona, and your whole career, is that you've been a fabulous innovator.
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I mean, just thinking out of the box all the time, I'm wondering, in your experience, whether there's anything that you might have to say about the extent to which that spirit of innovation, that passion for innovation can be learned, can be taught.
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Or do you think it's simply congenital? Were you born with it?
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>> Speaker 2: That is a fascinating question because I have pondered over that myself.
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And the way I've always viewed it is I think you have to have that spark in your DNA to start off with that you're a little bit of a risk taker, you're a little bit of a visionary, you're a little bit of an idealist.
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But I do think that it's helpful at the college level, for instance, to be exposed to that type of thinking, It may ignite a fire that wasn't there.
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I think it can teach you a good bit about the pitfalls that you can avoid when you're trying to start something.
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And so I think that courses in entrepreneurship at the college level can be very helpful in that respect.
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But on the other hand, there's no point in doing it if your basic objective in life is to be a third level executive at a huge corporation, that would be a waste of time.
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But you know, it is the smaller companies, the startup companies, the new companies that are creating the jobs, and creating the wealth in America as the old line companies downsize.
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And so I think that anything we can do to encourage that innovative entrepreneurial spark is good.
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And one of the things that you do, and then I'll shut up.
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I'm Irish, so I just talk, you ought to hear me at midnight, but after a quarter, Wild Turkey.
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I spoke to the Air Force, you think I'm a novice?
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Novice, I know what asymmetric means, I've been asymmetric at midnight for 55 years, it's a new term to you, but not to me.
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But as your company gets bigger, I think you want to have a cluster of people that you really encourage and stimulate to continue to be entrepreneurial and innovative in their thinking.
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And one of the ways that you do that, by the way, is never scorning an idea, because when you scorn an idea, you ensure that you'll never get another one from that person.
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And we try to show the respect that we have for anybody's ideas, our rule is that you get an answer in a week.
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And get in touch with anybody, Gary Kelly, me, Colleen Barrett, doesn't make any difference.
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You get an answer back in a week because we want you to know that we respect you as a person, and we respect your thought process, and we want you to come back with additional ideas.
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And the other thing is, we never just say no.
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no is an exercise of power, I have the power to say no, and I've just done it, and we're not doing anything about it.
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We send lengthy explanations to our employees about the testing that we've done and why we're not adopting this idea, and how it was tried at some other carrier and proved to be a disaster.
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So it's always a reasoned turn-down rather than just an arbitrary peremptory turn-down.
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And that's one way you can stimulate those ideas, I'll give you an example, Professor Parker.
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We had quite a crisis in the airline industry where the FAA ruled that you had to take some seats out, to provide more room for access to the over the wing exits.
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And all the carriers were just, my Lord, I mean, this is going to be a crushing burden, and we're losing a lot of our seats.
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And so one of our mechanics sent me a little diagram, said, herb, I figured out how we can add a seat and still comply with this rule.
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Just out of the blue, when the other carriers were coming up with Continental Light, United Shuttle, etc, they threw us all out of their computer reservation systems.
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GDS Global Distribution Systems, and the American Society of Travel Agents, ASTA, came to see me, and they said, we have to hand-write tickets on Southwest Airlines.
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we can't auto generate tickets, And I said, well, how about if we just do without tickets?
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if you don't need a ticket, you don't have to write anything out.
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And they said, that would work pretty well.
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>> [LAUGH] >> And then they left, and I said, okay, now how do we do that? And.
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Four of our people, unbeknownst to me, on their own time, had been working on how to do it for about a year and a half.
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And we brought it up, Lickety split.
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So, didn't have to write any tickets, we didn't have any.
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[LAUGH] >> Speaker 2: Let me have a follow up- >> Speaker 1: It's kind of axiomatic, I guess.
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>> Speaker 2: Let me have a follow up question on the innovation question, and then I want to invite a question from the audience here.
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One of the things that you said right off the bat is that you have to have a culture that's friendly to risk taking. >> Speaker 1: Yes.
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>> Speaker 2: And I think all of us know that and have heard that.
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And of course, risk taking means just what it says, risk.
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What has been your biggest screw up amidst all your successes?
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Where was something that went awry and how fast did you recognize it?
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What did you do about it?
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>> Speaker 1: Well, I think Southwest Airlines' biggest screw up was hiring me.
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>> Speaker 1: [LAUGH] >> [LAUGH] That's number one that looms over everything else as Everest looms over the Serengeti.
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>> Speaker 1: [LAUGH] >> But what I remember is a story about Thomas Watson, which I know you've heard, but I just loved it vis a vis the point that you're making.
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This is what we've always followed at Southwest Airlines.
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Vice president of IBM came in and said, Mr.
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Watson, I've got a tremendous idea.
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Of course, this was long ago. This is the original Mr.
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Watson, and I want to set up this little division to work on it and I need $10 million to get it started.
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Well, it was a total failure.
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And the guy came in to Mr.
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Watson, he said, I proposed this additional business, this line of business, and you gave me $10 million, we've lost it, it's a failure.
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And here's my resignation. And Mr.
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Watson said, hell no, I just spent 10 million on your education.
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>> [LAUGH] >> I ain't going to let you leave.
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And essentially, that's what Southwest Airlines has done.
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And very quick recovery, if you make a mistake, don't sit around and mourn about it.
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Don't dwell on it, don't destroy yourself, just correct it lickety split as fast as you possibly can.
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Because with mistakes, recovery time is very important and there's no ego involved.
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Many corporations really weigh themselves down.
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They walk around with stones hanging around them because they say, my Gosh, we did this, and if we stop doing it too quickly, we'll be embarrassed.
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That's institutional worship.
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That's saying, what we're concerned about is the reputation of the institution and its appearance rather than the results that you achieve in the field.
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And companies that fall into institutional worship probably won't be around very long, and don't buy any of their stock.
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>> Speaker 2: Okay, right there. Yep, that's you.
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>> Speaker 1: Okay, great.
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It's kind of well documented, you actually have very good relations with your labor unions- >> Speaker 1: Yes.
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>> Speaker 3: Compared to your competitors.
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Can you comment on, I guess, how you foster those relationships or how you've been able to maintain that record?
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>> Speaker 2: Everybody hear that question, has to do, okay.
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>> Speaker 1: Yeah, actually, I think the key to that is that we have never treated our labor unions, and we've been the most heavily unionized airline in the industry for quite some time, we've never treated them as adversaries.
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We've always treated them as partners.
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Because if that canoe goes down, we're all going to go down with it.
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And when I say that, I don't mean just in a perfunctory, superficial way.
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When we hold company events, we invite all the labor union leaders to come to them, because they're part of the company too.
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If they have an issue, we take care of it as quickly as we possibly can.
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Remember, they have a political constituency as well, called their membership.
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And I'll give you an example of what I mean, being sensitive to who they are and the problems that they have.
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One of our captains who was the head of SWAPA, Southwest Airlines Pilots Association, came in and said, I'm under a lot of fire from the membership.
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And I said, well, we gotta distract them.
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>> [LAUGH] >> And I said, why don't you write a letter to the membership just attacking the hell out of me. So he did.
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>> Speaker 1: [LAUGH] >> Then all of a sudden, I was getting all the fire. It was off him. He was a great guy. He appreciated that.
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>> Speaker 1: [LAUGH] >> A number of our officers ratted and said, did you see this letter that John Snowbrook wrote about you?
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And I said, well, yeah, I kind of did. I wrote it.
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>> [LAUGH] >> In other words, having a little realism, recognizing that the people that you're dealing with have their responsibilities too, and being very cognizant of their needs, and they reciprocate.
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They respond to that very, very well.
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And it's interesting because, after you've established a relationship of trust and understanding, a couple of times we've had leaders that probably were not too conducive to the well being of Southwest Airlines as a whole.
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And their own membership has voted them out of office without any urging or effort on our part.
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And I think that's a real tribute to the kind of relationships that we have.
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>> Speaker 2: I think it's absolutely right, Southwest Union relationships have been absolutely exemplary, and in many instances, quite unusual.
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And a lot of that does stem from your philosophy about that, which comes across loud and clear.
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>> Speaker 1: We have fights, but not vendettas.
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We yell, we throw things, we get a contract, and it's behind us.
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It's not like the Jukes and the Kallikaks of the Hatsfields and McCoys, that they're feuding with each other for generations and still killing each other for reasons they can't even remember.
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>> Speaker 2: But usually, you keep flying while you're doing that.
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>> Speaker 1: Yeah, we do. We do.
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And I'll tell you what I said to our pilots one time.
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I went in and negotiated a contract with them, and I said, gentlemen, I want to tell you right at the outset, I will not take advantage during these negotiations of the fact that I know that you would do this for nothing.
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>> [LAUGH] >> That's where pilots come from, they want to fly.
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>> Speaker 2: They do, yeah. Yes, right here.
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>> Speaker 4: Curious, you said that you had a phenomenal time building this exceptional business, I would you like to know, what's been your worst day at work?
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>> Speaker 1: Well, this is going to sound a little Pollyannish, but I've never had a worst day at work. I really haven't.
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I mean, the worse things are, the better I feel about it, and the more useful I feel in trying to get them corrected and get them changed.
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We brought in a guy one time, I didn't bring him in, Professor, somebody else did.
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>> [LAUGH] >> That talked to our leadership group, and he said, the way you handle this is, if there's something you don't like to do, take that monkey off your back and put it on somebody else's within the company.
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And I said, get your ass out of here, I don't want to see you again.
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>> [LAUGH] >> [LAUGH] So if you enjoy the responsibilities, if you enjoy the challenges, if that's the kind of thing that makes you passionate, you don't have bad days.
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>> Speaker 2: That's an unusual answer.
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>> Speaker 2: [LAUGH] >> Yes, over here.
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[INAUDIBLE] to be here today, I have two questions.
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The first is, Can you talk a little bit about your passions and what fundamentally drives you?
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And the second question is, can you give your perspective on leadership in your leadership style?
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>> Speaker 2: Yeah, what drives me is the desire to do right by other people and to serve them with excellence.
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And it's just a question of satisfying my own inner need to be excellent and to serve people well.
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And it doesn't matter what you're doing. I don't care what it is.
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It can be very inconsequential.
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But if you're trying to help somebody else out, if you're trying to improve their lives, if you're trying to help them even psychologically, you work as hard as you possibly can in order to accomplish that.
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And that's driven by, I think, an inner need to help people and to do it in a very worthwhile way.
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And leadership, I think, basically consists of that.
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And people say they don't have any passion for what they do.
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Well, I think if you're doing something for somebody else, I don't have any passion for what I do for myself.
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That's why I lose my car for three days.
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It doesn't make any difference because I can't find my keys, so it's immaterial.
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But I'll stay up 48 hours in a row trying to get something right for somebody else.
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And if you have that passion to be a servant, everything you do is infused with passion.
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>> Speaker 3: Yes, right there. I'll catch you in there.
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>> [LAUGH] >> Speaker 1: A personable individual.
25:44
How did you scale your own abilities [INAUDIBLE].
25:50
>> Speaker 2: How do I scale my ability? >> Yeah.
25:53
>> Speaker 2: Like, you would have systems technology.
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Is that what you're talking about [LAUGH]?
25:59
[INAUDIBLE] >> Speaker 2: The same way?
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Essentially, there's no difference.
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You have to adapt different tactics, but your behavior is the same.
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We just exerted ourselves in different ways to communicate with our employees, to send other people into the field as ambassadors or missionaries, to go around and talk to our employees in person in the various sections, areas of our system.
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Each year to put in a daily communication to all of our employees instead of just a monthly communication, to have an intranet and just all kinds of ways of communicating.
26:47
Plus making sure that our officers get out of the general office and actually load bags on the airplane, take reservations at the reservation center.
26:57
And it's amazing what an education they get when they actually have to perform those functions.
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And so that's the way that you do it.
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But the main thing is that it has to be job one.
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It can't slip to being job two, three, four, or five, because then you've lost it.
27:14
No matter how big you get, taking care of your employees, being interested in your employees, communicating with your employees, honoring your employees is still job one.
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[INAUDIBLE] >> Speaker 2: Well, I spoke to the International Air Transportation Association in Washington recently.
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I was quite surprised that they asked me to do that.
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I rented an Italian suit.
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>> [LAUGH] >> So that they would think I was more cosmopolitan than I really am.
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But it's a ranking of priorities with what we do and the way that we do it.
28:01
We think that we still have tremendous opportunities still available to us domestically in the United States.
28:08
We haven't gone into Newark yet, for instance.
28:11
>> [LAUGH] >> Speaker 3: Don't try.
28:18
>> Speaker 2: But it's my old home.
28:22
I know, Tom Wolf, you can't go home again, okay?
28:27
>> Speaker 3: Philadelphia is your home.
28:28
>> [LAUGH] In Philadelphia, I told him, I said, Philadelphia was my big city when I grew up.
28:36
But before you get too chesty and egotistical about that, remember the other choice was Camden [LAUGH].
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But that's not high on our list of priorities.
28:47
I'm not going to say that we will never do it. Don't misunderstand me.
28:51
But when you can open Raleigh Durham as an example, and on day one, operate with an 84.
28:56
3% load factor, it's just easier to do.
29:01
You don't have to worry about exchange rates.
29:02
You don't have to worry about international security.
29:06
You don't have to worry about language issues.
29:09
And some carriers have said to me, they said, well, why don't you just do this out of San Antonio?
29:15
That wouldn't be a problem if you just stood out of San Antonio.
29:17
I said, well, suppose somebody comes up and wants to buy a ticket in Amarillo to go through San Antonio to Mexico as an example.
29:25
In other words, you have to change your whole system.
29:28
And thus far, it hasn't been the most productive thing that we think that we could do.
29:36
So it's never say never, but it's just not up there towards the top of our priorities like Newark.
29:43
>> [LAUGH] >> Speaker 3: It'd be all right if you said never, Herb.
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>> [LAUGH] >> Yes, in the back.
29:53
>> Speaker 1: Southwest without [INAUDIBLE] loses all its personality and culture, true or false?
29:58
>> Speaker 2: Absolutely.
29:59
>> [LAUGH] >> Speaker 2: No question about that.
30:07
I'm glad I could answer that definitively.
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>> [LAUGH] >> Speaker 3: Yes, yeah.
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>> [LAUGH] >> Speaker 3: Yeah, you?
30:25
>> My cousin back there, the last one problem.
30:28
>> Speaker 1: Do you think others can imitate Southwest's business model? >> Speaker 1: Yes.
30:34
Can others imitate Southwest Airlines business model?
30:37
Yes, there have been two generations of imitators.
30:40
There were a number of carriers during the 1980s that said they were going to be the next Southwest Airlines.
30:45
They would apply to the CAB, and they've mentioned Southwest Airlines 26 times in their applications.
30:52
But they weren't very profound.
30:57
I mean, they looked at little things and said, this is Southwest Airlines, when actually it's a huge mosaic composed of thousands of pieces.
31:06
And so they didn't do very well.
31:08
They basically disappeared.
31:11
This new generation is much more astute and much more knowledgeable.
31:17
The jetblues, the air trans.
31:20
And they're doing a good job.
31:23
And they have varied from our model to some extent, but it's more of a tactical rather than a strategic departure.
31:38
And that's one of the things that we have to really keep our eye on from a competitive standpoint, as well as Newark.
31:52
>> Speaker 3: I want to ask a question to just plug one in right here.
31:57
Getting back to a little bit of the financial angle Not with standing all the other dimensions here, but some people have observed, many people have observed.
32:05
That if you take the cumulative profits in the airline business since the beginning of flying, the profits, and the losses all added up at nets to zero, or maybe a little less than zero.
32:20
Why does capital still flow into this industry, where do you see the opportunity, are people investing in this industry out of their minds, or what?
32:30
>> Speaker 2: Do you know what, Professor Parker, I have pondered that question because it is really a horrible business.
32:37
I mean, [LAUGH] it's capital intensive, labor intensive, fuel intensive, intensely cyclical, tremendously competitive, your capital assets travel at 500 miles an hour.
32:51
>> [LAUGH] >> [LAUGH] Not shoe factories.
32:53
>> [LAUGH] >> The government tells you what you can do in the air and on the ground every day.
33:01
Whether you can take off, whether you can push back, when you can take off, what direction you go, what altitude, how to process your passengers, as a result of 9, 11.
33:14
And I'll tell you what my theory is, because you're right, there's always a lot of capital, ready to flow into the business.
33:21
And I think it's people who can't buy a professional football team, a professional basketball team, or a professional baseball team, and they say, well, I just got to have a hobby.
33:37
>> [LAUGH] >> And so they start an airline, and most times it turns out to be a hobby.
33:44
>> [LAUGH] >> As a matter of fact, I counseled Carl Icahn, when he was at TWA, during an industry gathering.
33:54
And Carl was Carl, [LAUGH] he just couldn't believe it.
33:58
He said, it's crazy, the revenues come in $200 million below what they project, the costs come in $200 million higher, and I asked them, what are you going to do?
34:07
And they said, we're going to get more airplanes and fly our way out of this.
34:10
>> [LAUGH] >> And so, I told Carl, I said, I can save you millions of in psychiatric fees.
34:17
>> [LAUGH] >> And this is a story I told him, I said, the two guys are in the dress business in New York, and the older one retires, and he goes to Miami.
34:27
And he buys a condo, and the younger partner is still working, he comes to see him, and he says, [LAUGH] what do you do for a hobby?
34:38
Do you play high lie, no, you go to nightclubs, no, chase women, no, well, everybody's got to have a hobby, what do you do?
34:50
He says, I raise bees, he says, you raise bees, how can you raise bees in a condo in Miami?
34:59
He said, it's easy, let's go out and get some bees, put them In a shoe box, put it up on the shelf in my closet, I got my bees, got my hobby.
35:09
>> Yeah, well, off I go, the other partner said, well, don't they die, and he said, yeah, but screw them, it's just a hobby.
35:14
>> [LAUGH] >> Speaker 1: Well, that's what I told Carl, just to preserve your sanity, just think of it as a hobby, [LAUGH] >> Speaker 1: You want a question? >> Speaker 1: Yeah.
35:33
>> Speaker 3: Can you describe if these, is it possible to have a work life balance?
35:36
>> Speaker 2: I'm sorry, I couldn't hear.
35:37
>> Speaker 1: Work life balance.
35:38
>> Speaker 3: Is it possible to have a work life balance in your position, and if so, can you talk a little bit of how you balance your life?
35:46
>> Speaker 2: Yeah, well, it is possible to have a balance, first of all, you have about four hours a day for drinking.
35:57
>> [LAUGH] [APPLAUSE] >> Make sure that is sacrosanct and nobody trifles with it.
36:02
>> [LAUGH] >> But basically, the way I've always balanced my life is by working probably 16 to 18 hours a day.
36:12
And making sure that I did everything that my kids did, four of them at the same time, never missed any event that they ever had any Christmas dinner, etc.
36:24
But I would go back to the office on Christmas, and work for 6 or 8 hours until, two or three in the morning, go to the office Saturday night and Sunday, to balance those things.
36:38
Fortunately, I didn't need a lot of sleep, and that's really true, I used to sleep 5 hours, less, so that's how I balanced it.
36:48
>> [LAUGH] >> Speaker 1: Now, how would you grade that answer?
36:56
>> [LAUGH] >> Yes, did you have a question here?
36:58
>> Speaker 2: Isn't that bounce?
37:01
>> Speaker 3: You had a vision for an airline which was founded on a lot of principles that I'm sure many consider impossible, say the 15 minute turnaround, different types of planes.
37:10
>> Actually started out at 10, 10 minute turnaround.
37:14
>> Speaker 1: Then they remembered the fuel. >> Speaker 2: Yeah.
37:17
>> [LAUGH] >> Yeah, we got tired of that [LAUGH] >> [LAUGH] >> I can imagine, you cannot a lot of skepticism, how did you get your employees, your investors to buy into your vision?
37:37
>> Speaker 2: Well, I'll tell you, [LAUGH] you just have to be confident of what you're doing and not pay any attention to it.
37:43
I was excoriated by the outside world, the financial community in New York for a decade, as an example after deregulation, because they said, well, you got to be American, you got to be like United.
37:56
There was some think tank in Washington, I think most of them were drunk tanks.
38:00
>> [LAUGH] >> And anybody that has a big chief tablet and a crayon, is an intellectual.
38:07
>> [LAUGH] >> But he said, there's six things that you've got to have in order to survive.
38:14
And I ran around saying, I guess I'm going to have to communicate with everybody through a swami.
38:18
Because we don't have any one of the six, and we're not going to, and you have to be strong enough to withstand that.
38:25
And finally, Mike Durchin from who was then at first Boston, Mike got up, in 1991.
38:33
And he said, for the last decade, we've been telling Herb how to run his airline.
38:41
And for the last decade, Herb has been ignoring us, and it's the most prosperous airline in the world, you think maybe it's time to stop telling Herb how to run his airline?
38:54
[LAUGH] Those things never bothered me.
38:58
>> [LAUGH] >> Any way, shape or form, because all the people that were telling me those things, we're expressing conventional wisdom.
39:08
And if it's conventional, it ain't wisdom, [LAUGH] and if it's wisdom, it ain't conventional. >> Speaker 4: Yes.
39:18
>> Following 9, 11, the airline industry was certainly in bad straits, and most of them did very, very poorly.
39:24
But it's my memory that Southwest actually was able to continue turning a profit.
39:28
>> Speaker 2: Yes, we were, we continue to turn a profit.
39:30
>> Speaker 4: How can you talk about what leadership roles you had to provide to your employees, and all when everyone was talking about the industry was just going to deploy?
39:39
>> Speaker 1: I've been asked to repeat the question, particularly for some of the people in the front.
39:44
Question was, after 9, 11, almost all the airlines lost money, Southwest did not lose money, how did they do that, and what was the leadership style that did that, yeah?
39:56
>> Speaker 2: Well, I'll tell you, it wasn't so much leadership.
39:59
Style, although we are very good at responding to emergencies.
40:03
But it's actually a philosophy that involves a sense of historicity and a sense of futurity, and that is that things happen, bad things happen more often than not in the airline industry.
40:15
And anybody that knows anything about it knows that there's going to be at least two crises every decade.
40:21
Now, what does that mean?
40:24
We'd better be ready for that. Uh-huh, an amazing idea.
40:31
So my slogan has always been, we manage in good times so that we'll do well in bad times.
40:37
Just to give you an illustration of what I'm talking about, when fuel was real low, jet fuel, I said, I think we're deceiving ourselves with respect to how well we're doing on our costs.
40:49
In other words, because jet fuel is so low, our costs really look low. But take jet fuel out. And how are we doing?
40:56
We got a problem with escalating costs.
40:59
That was when the industry was making record profits.
41:03
So when 9/11 happened, when it took place, we had the lowest cost per available seat mile in the US Airline industry.
41:15
We had the strongest balance sheet in the US Airline industry.
41:21
We had proportionally the most liquidity of any airline in the industry.
41:28
And so as a consequence, we were prepared.
41:30
Semper paratus, always prepared.
41:32
That's the only Latin I know, by the way.
41:35
[LAUGH] I don't want to deceive you.
41:37
After all, I'm not practicing law now, but- >> [LAUGH] >> It's being ready.
41:43
So there were no furloughs.
41:46
As soon as DOT allowed us to come back up, we brought all the planes up, didn't cancel any flights.
41:51
And what about our business? Because we were ready. >> Speaker 2: Yes.
41:58
>> Speaker 3: We have a lot of admins in the audience and a lot of us are thinking about how best to approach our careers and kind of exploring our dreams and passions, etc.
42:08
Do you have any advice for people in kind of our age group how we should think about our careers in our lives?
42:15
And we have a corollary question kind of, what matters most to you and why.
42:19
>> [LAUGH] >> Speaker 1: If you don't come to Stanford, you just labeled yourself as a dummy.
42:24
>> [LAUGH] >> Speaker 2: Are you prepared to be invited back almost every week?
42:33
>> [LAUGH] >> Speaker 1: I would love it. >> Speaker 2: Yeah.
42:38
And the second question is, what advice do you have for people of the age cohort that are the admits here, and what matters to you in life and work and what matters to you most, I guess.
42:51
>> Speaker 1: Well, first of all, I wouldn't be too serious about things, and I think that keeps things in proportion.
42:59
Be open, be curious, be inquisitive.
43:02
And it's amazing how things will just come out of left field.
43:04
You'll say, ha, ha, this is my passion, this is my future.
43:10
So I would say always keep your mind open to new experiences, to new learning, whether you're in college or not.
43:17
After you get out, it shouldn't stop when you graduate.
43:21
You're just better able to appreciate it.
43:25
So I think that's one thing.
43:28
Read a lot, study a lot of different fields, look at a lot of different ideas, don't cabin and confine yourself necessarily.
43:36
And I guess the thing that was most important to me was succeeding on behalf of other people.
43:43
I couldn't charge clients fees because I was so wedded to their cause by the time we got finished that I didn't want to charge them because we were in this together like the Marines.
43:54
And so all the lawyers at the law firm refused to allow the younger lawyers to come talk to me about fees as a consequence of that.
44:04
But I think sometimes we restrict ourselves a little too much when we're perhaps a little too young.
44:10
Fortune had an article some years ago that said most of the successful business leaders of that time had really only gotten into what they finally did after they were 40 years of age or more.
44:28
So I think be flexible, be open, be curious, learn all the time from other people and books I read omnivorously. >> Speaker 2: Yes.
44:44
>> Speaker 1: Outside of the workplace, what are some of your interests and hobbies in addition to drinking of- >> [LAUGH] >> I'm not under oath, but I'm going to take the fifth anyhow.
45:00
>> [LAUGH] [APPLAUSE] >> Well, hunting.
45:11
>> [LAUGH] >> Speaker 2: Hunting what? [LAUGH] Iguanas. >> Speaker 2: Okay.
45:28
>> Speaker 1: There's an island in Florida that's overrun with iguanas.
45:30
>> Speaker 2: Yeah, it's right down here, yeah.
45:37
>> [LAUGH] [INAUDIBLE] >> [LAUGH] >> The question was, would you tell about your travel arrangements?
45:52
How did you get here to Stanford today?
45:55
>> Speaker 1: Now, I want to tell you, this gentleman is having a near death experience.
46:01
>> [LAUGH] >> Because of the restrictions of the Right Amendment circumscribing interstate service into and out of Love Field in Dallas, Texas, in the age of deregulation of the domestic industry so that some unnamed carrier can charge much higher fares at DFW airport without competition. I flew another carrier.
46:28
>> [LAUGH] [APPLAUSE] >> Wave goodbye to him.
46:40
>> [LAUGH] >> Remember those iguanas I was talking about?
46:46
>> [LAUGH] >> Speaker 2: Yes.
46:49
>> [LAUGH] >> Speaker 1: [INAUDIBLE] So I was wondering if you found that there was some kind of counterbalance that you really needed to have in order to support.
47:06
[INAUDIBLE] >> Speaker 1: Yeah, we both really focused on quickness and simplicity is very helpful that way.
47:13
The simpler you keep your business, the faster you can move.
47:18
But I think one of the things that you have to do is wage an unending fight against bureaucracy and hierarchy.
47:25
Because you get bigger, those things naturally tend to propagate themselves.
47:30
And so you have to look at every opportunity and say, hey, wait a second.
47:34
No, I'm sorry you're not getting 12 extra people to handle this program.
47:39
I'm sorry that we're not going to do a thousand different things that really won't contribute much to the end result that we're trying to achieve.
47:50
It's kind of like, I'm talking about the focus on it.
47:56
It's kind of like the army inspector general going to a tank corps and giving them an A because all their tanks are real nice, and they're lined up beautifully, and they look great.
48:09
None of them run, but the paperwork is all done, and he goes to another tank corps, and their tanks are all dirty.
48:19
They look kind of scummy. But guess what?
48:21
They're ready to go into battle.
48:24
We're looking for the second type of tank.
48:28
>> Speaker 2: We're going to have one last question.
48:29
This has gone quickly, but we have to conclude. One last question.
48:33
Let me have it right down here in the front row. Yeah.
48:34
>> Speaker 1: So you talked about serving your employees, you got a specific example where it would be especially rewarding [INAUDIBLE] >> Speaker 2: The question is, give us an anecdote or an example where serving your employees was especially rewarding and fulfilling to you.
48:56
>> Speaker 1: Well, this is the kind of thing we do, and I use this as an exemplar, because, of course, there are millions of things that we do for our employees and have done for a great many years.
49:05
But I'll just give you the flavor of it.
49:08
One of our flight attendants from Houston calls me, and she's crying.
49:11
She and her husband have separated, and because he didn't make the payments on her car, it's been repossessed.
49:20
So I promptly call the legal department and say, you got a new case.
49:24
Get that car back for her today. And they did.
49:29
That's the kind of thing that Southwest Airlines does for all of our people every day.
49:37
>> Speaker 2: Well, with that, I think you can understand why ever since Herb was CEO at Southwest, it's been listed as one of the 10 best places to work in America. >> [APPLAUSE]