- The speaker has a personal email list where he shares his top 10 highlights from the books he reads.
- He was recently interviewed on the Invest Like the Best podcast.
- He will be doing a live show with the host of Invest Like the Best in New York City.
- The presenting sponsor of the episode is Vesto, a company that helps businesses invest their cash in U.S. treasuries.
- The speaker summarizes his notes from the book "Herb's Heroes" about Herb Kelleher, the founder of Southwest Airlines.
- Herb Kelleher had a difficult childhood and learned from his mother that adversity is an opportunity for success.
- He had a strong work ethic and was a fierce competitor.
- He built Southwest Airlines with a focus on keeping costs low and had 47 straight years of profitability.
- He admired Winston Churchill and operated on little sleep.
- He emphasized the importance of a business model that endures hard times and was fiscally conservative.

- Herb, the founder of Southwest Airlines, was a gifted storyteller and persuasive leader.
- He viewed his company as a crusade and his employees as missionaries.
- Herb emphasized the importance of dedication, devotion, and loyalty in achieving success.
- He believed that serving customers was the company's main priority.
- Herb was an avid reader, particularly interested in history, which helped him avoid making the same mistakes as others in his industry.
- He questioned conventional wisdom and pursued better ways of doing things.
- Herb led by example, often performing tasks such as loading baggage himself.
- Southwest Airlines was founded by Roland King and John Parker, with Herb as their attorney.
- They saw an opportunity to start an intrastate airline in Texas, similar to successful ones in California.
- Herb believed there was an untapped market for affordable air travel.
- The company faced legal battles and opposition from competitors, but Herb fought relentlessly to secure Southwest's certificate to fly.
- Herb framed the company's mission as a validation of the free enterprise system and a desire to win against competitors.
- Southwest faced resource constraints, which forced them to innovate.

- Southwest Airlines, a severely resource-constrained company, had to innovate and question assumptions to compete with established carriers.
- They believed there was an untapped market of Americans who had never been on a plane and aimed to stimulate new travel with low fares and superior service.
- Southwest implemented a two-tier fare system, catering to both convenience-oriented business travelers and price-sensitive leisure travelers.
- This system resulted in a significant increase in passenger traffic and became widely emulated in the airline industry.
- Southwest also used truthful advertising to communicate with customers and differentiate themselves from competitors.
- The company's focus was on profitability rather than market share, and they prioritized keeping costs low to maximize profits.

- Southwest Airlines prioritizes keeping costs low to maximize profitability rather than focusing on increasing market share.
- The airline believes that confusing market share with profitability has led other airlines astray.
- Southwest is willing to forgo revenue opportunities in markets that would increase costs disproportionately.
- One key strategy is flying only the Boeing 737, which reduces training requirements and simplifies operations.
- Southwest has significantly fewer employees per aircraft compared to other airlines, resulting in cost savings.
- The airline modified its ticket stock to address a problem of customers accidentally throwing away their tickets.
- Southwest emphasizes the importance of being flexible and adaptable to seize opportunities quickly.
- The company holds future scenario generation meetings to prepare for various situations and reduce the likelihood of being caught off guard.
- Speed and a bias for action are valued traits at Southwest.

- Southwest Airlines operates at a fast pace and expects its employees to do the same.
- The CEO, Herb Kelleher, emphasizes the importance of taking competition seriously and using memorable language to motivate employees.
- Kelleher is a voracious reader and believes that curiosity and knowledge enhance job performance.
- Southwest faced a challenge from United Airlines and Kelleher rallied his employees with a passionate letter.
- Kelleher advises other CEOs to spend more time with their employees and less time with other CEOs.
- The podcast host recommends reading books about Herb Kelleher and offers support for the podcast through book purchases and newsletter subscriptions.

- The speaker shares his top 10 book highlights with his email list and was interviewed on a podcast.
- He will be doing a live show with the podcast host in New York City.
- The episode is sponsored by Vesto, a company that helps businesses invest in U.S. treasuries.
- The speaker summarizes a book about Herb Kelleher, the founder of Southwest Airlines.
- Herb Kelleher had a difficult childhood and learned from his mother that adversity leads to success.
- He built Southwest Airlines with a focus on low costs and had 47 years of profitability.
- Herb was a strong leader, emphasizing dedication, loyalty, and customer service.
- He questioned conventional wisdom and pursued better ways of doing things.
- Southwest Airlines faced challenges but innovated to compete with established carriers.
- The airline prioritizes profitability over market share and keeps costs low.
- Southwest values flexibility, adaptability, and a fast-paced environment.
- Herb Kelleher believed in the importance of knowledge, curiosity, and motivating employees.
- He rallied his employees during a challenge from United Airlines.
- The podcast host recommends reading books about Herb Kelleher and supports the podcast through book purchases and newsletter subscriptions.

What I learned from reading Nuts!: Southwest Airlines' Crazy Recipe for Business and Personal Success by Kevin and Jackie Freiberg and  Herb’s Heroes by David Sanders.

So I just have 4 quick things to tell you about before we jump into this episode on 1 of my all-time Favorite founders herb keller her number 1 I do a terrible job of letting you know But I have a personal email list for every book that I read I take somewhere between 50 to maybe 150 different highlights for my email list.

I whittle those down and this actually takes a long time to do to my top 10 highlights.

So if you are interested in getting my top 10 highlights for every single book that I read and you want me to email those to you, I will leave a link down below.

You can also go to founderspodcast.com and put your email on there.

And I will email you every single time that I read a new book.

Second thing, I was interviewed recently on the Invest Like the Best podcast.

I talked with the my friend and the host of invest like the best Patrick on what I've learned for the last year in the last 12 months of doing founders podcasts and reading all these biographies.

If you are interested in hearing that long form interview, I think it's about 90 minutes long.

You can search for invest like the best in your favorite podcast player.

Listen to episode 3 43 in the service of founders.

The third thing I want to tell you about is I'm actually doing a live podcast, a live show with Patrick from Invest Like the Best in New York City on October 19th.

I think that's a little over 3 weeks from now.

If you have not already got your tickets, that link will also be down below.

If you live in New York, I think it's a no brainer to come out, but it's also a great excuse to travel to New York City.

And the last thing I wanna talk to you about is the presenting sponsor of this episode and a product that a lot of my founder friends are using.

And what Vesto is really good at is helping businesses of all sizes invest their cash in U S treasuries.

You'd want to do that because when your business owns treasuries, that cash is backed by the U.S.

Government and it earns interest while it sits there.

I have 1 founder friend who raised a bunch of venture capital money and he uses Vesto as a way to extend his runway.

And I have another founder friend who bootstrapped his company and he uses Vesto to get a better rate of return than if that cash was just sitting in his bank account.

If this sounds interesting to you, I highly recommend you go to Vesto.com and check out what they have to offer.

I know the founder, Ben, actually just saw him again last week.

So if you go to Vesto.com and schedule a demo, you actually speak directly to the founder, Ben.

And I think if you speak to him, you'll be impressed to make sure that you tell him that David from Founders sent you.

And with that, let's jump into the episode.

I actually read 2 books to make this episode.

1 plan, no matter how well laid out, couldn't possibly respond to all of these situations.

This is why Kelleher does not put much stock in traditional strategic planning.

He explains it this way, reality is chaotic, planning is ordered and logical.

When US Air pulls out of 6 cities in California, they don't call me and tell me they're going to do that.

Now, if we had established a big strategic plan that is approved by our officers and the board of directors, I would have to go to the officers and the board and tell them that we want to deviate from this plan.

They would want to know why I want to buy 6 more airplanes.

The problem is we'd analyze it and debate its merits for 3 months instead of getting the airplanes, taking over the gates, and dominating California.

The meticulous nitpicking that goes on in most strategic planning processes creates a mental straitjacket that becomes disabling in an industry where things change radically from 1 day to the next.

When a financial analyst chided Kelleher about not having a strategic plan, he said, we do have a plan.

That is an excerpt from 1 of the 2 books that I'm going to talk to you about today.

That is from NUTS, Southwest Airlines Crazy Recipe for Business and Personal Success.

That was written by Kevin and Jackie Freeburg.

The other book is called Herb's Heroes and was written by a pilot that worked at Southwest for 37 years.

I have not been able to find a comprehensive biography on Herb Kelleher.

I think he was an extraordinary person, a gifted entrepreneur.

He built the most successful airline in history, which we'll get into today.

So to make this episode, I used these 2 books.

I reread, this is the second time I read the nuts book but I use these 2 books and I took notes on interviews that Herb did when he was alive.

So what I'm going to do first is I summarized all of my notes from the book Herb's heroes.

I just want to go over that outline which I think will give you a good overview as to the type of person Herb was and why he was that way.

So he's born during the Great Depression.

Herb's older brother was killed in World War II.

After his brother dies, his father dies unexpectedly the year after.

And then within a few years of that happening, Herb's 2 surviving older siblings move away for college.

The second half of his childhood is just him and his widowed mom.

And so her influence and the lessons that his mom taught him he uses his entire life including in building his company so they would have late night talks almost every night at the kitchen table and even when he was a kid they're staying up to like 2 in the morning and she's teaching her about life and 1 of the most important things that she did was she taught him that adversity is a normal way of life.

This is a woman that lost her son, lost her husband, and yet there was no self-pity whatsoever.

She said that stress in difficult times was not de-habilitating, but opportunities to excel and achieve.

And so even from a young age, he starts to find problem solving invigorating.

The reason, I've always admired Herb, I've tried to consume as much information about him as possible.

And the reason it came to the top of my mind to make an episode about him right now is because I was reminded of something that he said during a talk and this came many years later in his life.

He's already been working on Southwest for multiple decades at the time and he was asked you undergo a lot of stress all the time.

And so that's a maximum that I want to repeat to myself.

As we're building our companies, difficulties and hard times are inevitable.

And I'm just gonna remind myself, I don't handle my stress.

It completely changes your mindset into like, this isn't something I have to do.

Back to his early life, he was a gifted athlete.

In high school, he ran track, played basketball and football, and lettered in all 3 sports.

Before college, he works at the very same soup factory that his dad had worked at, and he worked there for 6 years.

This is something he's gonna continue to do at Southwest, which we'll talk about later.

He called his 6 years working in a soup factory, right?

This is a guy that's going to go on to, he's really gifted at everything he does, gifted at athletics, he's really good at college, gets a law degree, clerks for the Supreme Court, has a successful law practice, and at 35 with 4 kids decides, hey, I'm gonna be an entrepreneur, I'm gonna try to run, I'm gonna try to start an intrastate airline in Texas.

And so with all that, the fact that he said the 6 years at the soup factory doing every single job, he called it the best education he ever had.

And so even when he was younger and then throughout his entire career, people say the same thing about him over and over again.

They describe him as a fierce competitor and they said he had a hard work ethic that is a quote a hard work ethic he was working a hundred hour weeks at the beginning of Southwest because he still had to practice law to pay the bills it took them 4 and a half years between the time they raised money for the company they start the company and then they're actually allowed to fly their first flight.

Another thing about Herb, he was old school.

He was a hard driving, hard drinking, fast living Texan.

He started every day early, regardless of how late he was out the night before drinking.

This is gonna come up over and over again.

He smoked 5 packs of cigarettes a day and drank wild turkey bourbon every day.

He said wild turkey and fill up more cigarettes are essential to the maintenance of human life.

When he was in his 60s, He fought and beat prostate cancer.

And then he was asked if he thought his smoking habit contributed to his cancer.

And he said, I do not smoke with my prostate.

He felt he was born to be an entrepreneur.

He thought the spirit of an entrepreneur was within him.

He says, if you're crazy enough to do what you love for a living, then you're bound to create a life that matters.

He designed his entire business model to keep costs at the lowest possible level.

He built the most successful airline in history.

Southwest was profitable for 47 straight years.

To put into context about how outrageous that accomplishment is relative to his competitors and peers, he was profitable for 47 straight years.

The next most successful airline was profitable for 5.

And when you read about Herb or if you listen to his interviews, like he's hilarious.

So and he says, like, I don't take myself too seriously, but I take competition very seriously.

Unsurprisingly, 1 of Herb's favorite people was Winston Churchill, who quote Churchill all the time.

He'll use Churchill's ideas in talks and speeches to his employees and to his team.

1 of his innate talents that jumps out if you read a book about him is the fact that he was able to operate on very little sleep.

There's a lot of stories in both books about the fact that he'll be out drinking till like 3 in the morning and then he'll be at the office at like 7 a.m.

He also talks a lot about and repeats the importance of having a business model that endures the hard times.

He talks about most of the airlines are set up, they'll reap a bunch of profits in good times and then yet they give it all back when the inevitable downturn happens.

And so 1 thing he talks about is like, listen, we'll joke around.

We're very extravagant in our marketing, but we're very fiscal, fiscally conservative.

They paid for 80 percent of their planes out of earnings.

Most other airlines are borrowing that money.

They own the largest amount of planes outright than any other airline.

And the quote that came to mind when I was reading about Herb's financial approach to building his company is this fantastic quote from Charles DeGaulle, where he said, all that matters is to survive.

Herb was also a gifted storyteller, and he was very persuasive.

He says, our indomitable dedication is the core of our success.

That is the most difficult thing for a competitor to imitate.

They can buy all the physical things that we have.

The things that you can't buy are dedication, devotion, loyalty, the feeling that you are participating in a crusade.

And the 1 thing that Herb was insistent that they do better than anybody else was serve.

Last week on the Working with Jeff Bezos episode, I mentioned this text I got from a friend where he noticed, he'd raised a bunch of money for his company, and noticed like every single billionaire that he interacts with reads a ton, and they usually read a lot of history biography.

You know, he starts off as an attorney before he dies as a billionaire.

He did it when he was younger, did it when he was older.

He said this is why he said he read history.

He says, reading history kept me from making the same mistakes that was inside and outside his own industry.

He definitely knew the history of the airline industry, and he talked about over and over again that you should read the history of the airline industry as a cautionary tale.

That's why the main thing I want to talk about today is the fact that this guy, very obviously capable of independent thought, his main advantage was the ability to question every single conventional, quote unquote, conventional wisdom in his industry and ask, like, does this make sense or not?

Some of it did make sense, so he would do that.

But in many cases, he realized there was a better way, and so he would pursue that regardless of what people around him were doing.

And then finally, before I jump into the other book, he led from the front.

This is 1 of the most, 1 of the most admirable things about him.

On the busiest day of the year, which is Thanksgiving Eve, you would find her out on the tarmac loading and unloading baggage.

And he would do so regardless of the weather.

There's a great story in the book where somebody walks up to him.

They just see this really tall guy in a yellow poncho loading and unloading bags.

They realize that's the CEO and the founder of the company.

Okay, so now I'm going to pick up the book called nuts and I'm going to go right into the founding of Southwest.

He's an attorney in San Antonio and he's got 4 kids.

Southwest Airlines was the brainchild of Roland King, a San Antonio entrepreneur who owned a small commuter air service and his banker, John Parker.

Parker had complained to King that it was inconvenient and inexpensive to travel between Houston, Dallas, and San Antonio and suggested starting an intrastate airline.

And So Herb gets involved because he's Roland King's attorney.

And so Roland King goes to Herb and he draws this thing called the Golden Triangle, which shows Dallas, Houston, and San Antonio.

That cocktail napkin is still framed inside of Southwest headquarters.

This is why they think there's an opportunity.

First of all, they use the word intrastate airline, which is fascinating.

So their main goal is, okay, there's different regulations.

You have state regulations if you're only flying within the states, and then obviously federal regulations once you go state to state.

Getting approved to fly inside a state is easier than at the federal level at this time in history, although it was still very difficult getting approved.

But the reason what I found fascinating is Roland King had this idea by seeing California already had a successful interstate airline, And he thought there was a lot of similarities between California and Texas, obviously the size of the states, but the fact that there was hubs of cities that were experiencing rapid economic and population growth, but they're also far enough apart to make travel by bus or car very inconvenient.

And So at the beginning, their idea is like, well, why don't we just take what's obviously working in California and do the Texas version of this?

And in 1 of his interviews, Herb talks about this time.

He's like, why would you want to do something like take this big of a risk when you're 35 years old, you have 4 kids, you're married.

And he said the allure of doing something different.

Had never flown because it was too expensive.

I believe there was a huge untapped market out there.

And his assumption that there's a huge untapped market out there was proved correct.

To prove that assumption, he had to first fight through 4 and a half years of a legal battle and unfair trade practices in the state of Texas.

So he files Southwest application on November 27th, 1967.

And he does so with the TAC, which is the Texas Aeronautics Commission.

They say, yes, you can fly between Dallas, Houston, and San Antonio.

What he didn't know at that time was that he inadvertently started a war that would last for years and almost drive Southwest Airlines out of business before it put a plane in the air.

So he had 3 main competitors, Braniff, Trans Texas, and Continental.

And they immediately sue, and they get a temporary restraining order that prohibits the TAC from issuing Southwest a certificate to fly.

They argue, hey, these markets that Southwest wants to serve there are a saturated there's no room for another carrier the truck the court that they bring it to a grease this immediately sparks herbs innate like competitive have to win personality and so he appeals that appellate court also says no you cannot do this.

So they lose that case to at this point they had raised.

So it says the original investors 543000 dollars.

It's a lot of money had been eaten up in legal expenses.

The corporation's liabilities grossly exceeded its assets, and there was no prospect of raising new capital without the TAC certificate in hand, which 2 courts have both denied them.

Some members of the board thought it was wise to cut their losses and close down.

At this point, Kelleher's street fighting spirit surfaced.

Gentlemen, let's do 1 more round with them.

I will continue to represent the company in court and I'll postpone any legal fees and I will pay every cent of the court costs out of my own pocket.

The directors agreed to give it 1 more shot and Kelleher argues this case all the way up to the Texas Supreme Court.

And he convinces them to overturn the lower appellate court's decision and Southwest gets its certificate to fly.

And so we go back to this idea that Herb framed life and everything he did is this grand epic right we're not building a company we're on a crusade together.

It's always a mission bigger than himself and he talks about like he was asked in an interview like why would you do this like why would you willing to fight for years for free?

And he said it's because these other airlines were trying to offend 1 of his ideals.

He said if other airlines could prevent Southwest Airlines from starting, then that means the free market system is failing.

And 1 of the things that motivated him was to validate the free enterprise system.

And the other reason, he said, was that it was very hot competition and I like to win.

So then they're able to raise more money.

2 days before their first flight, their competitors wind up getting another injunction and they get another restraining order, this time from a different regulatory body, that would prevent Southwest from beginning service.

He went straight to the law library and worked all night to decide how to proceed.

He found a precedent and presented his argument to the court the next morning.

The Texas Supreme Court ruled in Southwest's favor again and ordered the lower court judge not to enforce the injunction.

So at the very beginning, he was not running Southwest.

He is still going to for the first years, he's going to be a founder and a board member of Southwest, and he's still running his law practice.

It's not until the CEO that the founders hired this guy named Lamar Muse, he's going to leave to start a competitor against Southwest.

The CEO that comes after Muse doesn't work out.

And so the boards like Herb, if this is going to be like, you have to do this.

And here's an interesting side note for you.

Lamar Muse, who I'm about to introduce you to here, winds up when he leaves and starts Muse Airlines many years later when he's about to go bankrupt.

Herb buys his airline, But that's many years into the future.

So the Texas Supreme Court says, hey, you know, you cannot enforce this injunction.

Kelleher then calls Muse on the phone and says, put the planes in the air.

When Muse confided to Kelleher that he was still concerned about a sheriff showing up to enforce the injunction, Kelleher didn't mince any words.

I told him, you roll right over that son of a bitch and leave our tire tracks on his uniform if you have to.

The very next day, June 18th, 1971, Southwest Airlines was finally off the ground.

And so this is the first mention of something that repeats over and over again the fact that Herb was a master at turning things into a cause.

So it says, The seemingly insurmountable obstacles thrown at Southwest are what created Kelleher's passionate love for the airline.

They would put 12 or 15 lawyers on a case and on our side there was just Herb.

They almost wore him down to the ground, but the more arrogant they were, the more determined Herb got.

This airline was going to go into the air and stay there, he said.

Herb is a master at turning things into a cause.

He said if you're going to let these guys get away with this, it is a radically different type of country than the 1 I want to believe in.

His competitors were out to get Southwest and they were willing to break the law to do so.

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#322 Herb Kelleher (Southwest Airlines)