Southwest Airlines: Herb Kelleher

In 1968, competitors sued to keep Herb Kelleher's new airline grounded. After a 3-year court fight, the first plane took off from Dallas. Today Southwest Airlines operates nearly 4,000 flights a day. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Guy Raz?

  You were basically introducing these really low fares. Were these airlines trying to match your prices?

• 0:07Speaker 01

  Yes, in some cases, they were. And we told the public of Texas that you could fly at the lower fare, but 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.

• 0:28Guy Raz?

  From NPR, it's How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 0:42Guy Raz?

  I'm Guy Raz, and on today's show, how an eccentric Texas lawyer turned a crazy idea into Southwest Airlines, now one of the biggest airlines in the world.

• 0:57Guy Raz?

  Could you just start by introducing yourself, Mr. Kelleher?

• 1:00Speaker 01

  Make it Herb, if you would.

• 1:01Guy Raz?

  Herb?

• 1:02Speaker 01

  Please.

• 1:02Guy Raz?

  Okay, Herb, can you just say your full name?

• 1:05Speaker 01

  This is Herb Kelleher.

• 1:07Guy Raz?

  And you're best known as the...

• 1:09Speaker 01

  Founder of Southwest Airlines.

• 1:12Guy Raz?

  Great. How old are you now?

• 1:13Speaker 01

  85.

• 1:14Guy Raz?

  Okay, great. Perfect, okay. We are very excited to talk to you about your story. Now, I'm just going to jump in here for a sec to mention that before we really started our interview, I had some time to just chit chat with Herb, and I learned some interesting things about him, like what he eats for breakfast.

• 1:29Speaker 01

  Normally, for breakfast, I have cheese crackers.

• 1:32Guy Raz?

  And what he likes to drink.

• 1:34Speaker 01

  Wild Turkey bourbon.

• 1:36Guy Raz?

  And that he's been a smoker for pretty much his entire life.

• 1:40Speaker 01

  I just enjoy the magical, mystical aroma and sight of smoke.

• 1:46Guy Raz?

  So how soon after you wake up do you have a cigarette?

• 1:49Speaker 01

  Well, it's a nanosecond.

• 1:51Guy Raz?

  Oh, it's that quick, okay.

• 1:52Speaker 01

  Yeah.

• 1:53Guy Raz?

  With your cheese crackers?

• 1:54Speaker 01

  Yeah, even before my cheese crackers.

• 1:58Guy Raz?

  Now, for the story of how Herb launched Southwest Airlines, you have to go back about 50 years, 1966, to be exact. Herb was a young lawyer. He was living in San Antonio in Texas, where he had started his own law firm, helping clients to start companies.

• 2:15Guy Raz?

  And one day, one of Herb's clients, a guy named Roland King, calls him up and he says, hey, I heard about this airline called Pacific Southwest. It flies only in California, and I have an idea. Let's meet for a drink.

• 2:27Speaker 01

  And Roland came to me with the idea of setting up a similar operation in Texas.

• 2:32Guy Raz?

  And how soon after he sort of floated this idea to you saying, yep, let's do it. Let's start a company?

• 2:40Speaker 01

  It was a very short period of time, maybe, you know, like a minute.

• 2:45Guy Raz?

  That fast? Wow.

• 2:47Speaker 01

  No, it was longer than that. I was just joking. But within a very short days, within days.

• 2:53Guy Raz?

  Within days?

• 2:54Speaker 01

  Well, at first, I was very skeptical. But then I did some research and discovered that PSA was very successful in California, that Texas supplied all the requisites for an intrastate airline, because it was a big state that had large metropolitan areas, far enough apart to justify flying. And so Houston, Dallas, and San Antonio were the obvious first targets, because they were the three largest cities in Texas.

• 3:22Guy Raz?

  What did you know about airlines at the time?

• 3:25Speaker 01

  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 think that was very helpful.

• 3:43Guy Raz?

  So at this point in-- how old were you, by the way, at that point in your life?

• 3:47Speaker 01

  I was 35.

• 3:48Guy Raz?

  35, okay. So you had a-- and you had a family?

• 3:51Speaker 01

  Yes, right, four children.

• 3:52Guy Raz?

  Four children, and you've got this successful offer. By the way, was the airline industry profitable at that time?

• 3:58Speaker 01

  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 1903, the economy would probably be better off. And so it didn't have very great returns. It was constantly in difficulty.

• 4:21Guy Raz?

  So why did you even think that this was a plausible idea?

• 4:27Speaker 01

  Well, I think it was the allure of doing something different, doing something that was exciting. I really always have had a great deal of curiosity. And then I thought to myself, well, you know, most of the adults in the United States of America haven't been able to fly because of the cost barrier.

• 4:48Guy Raz?

  It's too expensive.

• 4:49Speaker 01

  It's too expensive. You know, they just thought it was business people on expense accounts. And so what I'm saying is that in terms of market analysis, there was a huge untapped market for flying out there.

• 5:04Guy Raz?

  Okay, so you decided with Rollin to start a company, was that right?

• 5:11Speaker 01

  Yeah, I actually incorporated it in March of 1967. But of course, that was just a piece of paper. And we started to raise seed money to the extent of about $500,000.

• 5:24Guy Raz?

  That's a, that was quite a lot of money to raise, I guess.

• 5:26Speaker 01

  Yeah, it was at that time, it certainly was. And we were set to go.

• 5:31Guy Raz?

  And what was the competition like at the time? Like, were there other airlines that were doing these Texas flights, like, for, like, between Houston and Dallas and these other places?

• 5:39Speaker 01

  Oh, yeah, they proved to be our biggest adversaries because they were not exactly warm, welcoming, and hospitable.

• 5:47Guy Raz?

  I bet.

• 5:47Speaker 01

  Yeah, we didn't get kisses on both cheeks when we announced that we intended to create an intra-state carrier. So Braniff Continental and Trans-Texas, later Texas International.

• 5:58Speaker 01

  Really took out after us and they kept us involved in political fights and fights in the courts. And they just thought that they would apply their incumbency and their financial strength to bleed Southwest Airlines to death before it could ever fly.

• 6:17Guy Raz?

  So they were suing Southwest Airlines?

• 6:20Speaker 01

  Correct.

• 6:21Guy Raz?

  I mean, what was their argument? Why were they saying you shouldn't operate?

• 6:24Speaker 01

  Well, you know, the arguments that they made in court were actually all kind of specious. And this is one illustration of where people attempt to use to manipulate the government to prevent competition. That's what they were up to.

• 6:39Guy Raz?

  So how long did it take you to fight these legal challenges?

• 6:43Speaker 01

  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.

• 6:52Guy Raz?

  Wow.

• 6:53Speaker 01

  It took a little pertinacity.

• 6:54Guy Raz?

  Yeah.

• 6:55Speaker 01

  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 of my own pocket?

• 7:14Guy Raz?

  Huh.

• 7:15Speaker 01

  Would you be willing to continue under those circumstances? And they said, oh, sure.

• 7:20Guy Raz?

  So what was it that motivated you to fight for four years to launch this airline?

• 7:27Speaker 01

  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 things that motivated me was to, in effect, validate the free enterprise system. And another one was, of course, that it was very hot competition and I liked to win.

• 8:01Guy Raz?

  But what's not, like, what I don't get is, it was such a huge gamble anyway, because you could have spent those four and a half years fighting and then winning, and then Southwest Airlines might have fizzled out anyway.

• 8:14Speaker 01

  I'll tell you what, Guy, you put your finger on something. Because 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."

• 8:32Guy Raz?

  Hmm.

• 8:33Speaker 01

  I'm very serious about that. Several people told me, they said, they were glad to see how much the fight energized me and that I was enjoying it. But Herb, don't kid yourself, it'll never make a dime.

• 8:43Guy Raz?

  Did you ever get sad or depressed? I mean, how did you keep your spirits up?

• 8:48Speaker 01

  Wild Turkey helped. It may have provided, hey, Guy, it may have provided a little boost. But frankly, my spirits just don't get down. I don't stress very easily. I'll give you an example only. They had stress classes at Southwest Airlines years ago, many years ago, and they invited me to come over and speak, you know, the fellow that was running the classes. And he said to the class, he said, "Well, you know, Herb undergoes a lot of stress all the time. Herb, tell the class how you handle it." And I said, "I don't handle it, I like it." That was the last time I was asked back to the class.

• 9:27Guy Raz?

  So you, I mean, you were going in and out of courtrooms for four years. How were you making a living at that time?

• 9:36Speaker 01

  Well, I was still practicing law. I mean, I was doing a lot of other things during that time, which led to very long weeks. On one occasion, I was in the law office for two full days. And at the end of those two full days, I went home, shaved, and went to a fundraising dinner for Southwest Airlines. But that's kind of the perseverance that it demanded, to help get Southwest Airlines started while still practicing law and doing many other things.

• 10:06Guy Raz?

  So what happened in the courts with the Southwest case?

• 10:09Speaker 01

  It went through the United States Supreme Court and through the Texas Supreme Court twice before we could fly.

• 10:20Speaker 01

  And the Texas Supreme Court handed down an order 19 hours prior to our first flight.

• 10:26Guy Raz?

  When was that?

• 10:27Speaker 01

  That was in June of 1971. We started flying on June 18, 1971.

• 10:33Guy Raz?

  What was the flight? Where did it go?

• 10:34Speaker 01

  The first flight went from Dallas to San Antonio. But the one that received all the publicity went from Dallas to Houston. And we were the underdog. It was sort of David versus the Goliaths, you know? Not just one, but three of them. So there was a lot of news coverage about it. And that's the reason people paid a lot of attention to us finally getting underway.

• 10:57Guy Raz?

  So were you on that first flight, by the way?

• 11:00Speaker 01

  No, I wasn't. I was busy working to make sure there was a second flight.

• 11:06Guy Raz?

  Do you remember that day that that first flight took off? And do you remember how you felt? Did you feel like, finally, this is done?

• 11:12Speaker 01

  Oh, it was wonderful. And I'll tell you an experience I had. When the first airplane came in, it was over in Fort Worth, an American's hangar. So I went over there, and there's this airplane. After four and a half years,

• 11:28Speaker 01

  I went up and stuck my head in the back of one of the engines. And the mechanic grabbed me. He pulled me back. And he said, "You realize if that thrust reverser goes off, it will decapitate you." And I said, "At this moment, I don't give a damn."

• 11:49Guy Raz?

  So at this point, Southwest Airlines, what? It starts advertising. It starts flying many-- What was the-- Was it flying more than one route? Was it flying multiple routes?

• 11:59Speaker 01

  Well, it was Dallas-Houston, Houston-San Antonio, and San Antonio-Dallas.

• 12:03Guy Raz?

  And what was the-- What did it cost to go to do one of those legs?

• 12:06Speaker 01

  Well, on some flights, we had fares as low as $10. On others, we had fares as low as $15 or $20. We were about 45% lower than the other carriers.

• 12:20Guy Raz?

  So how were you able to do that? How were you able to charge so much-- such a lower fare than the other airlines in Texas?

• 12:27Speaker 01

  Through enormous productivity.

• 12:30Guy Raz?

  But how? I mean, I'm assuming you just had a few planes at the time.

• 12:34Speaker 01

  Well, we started out with three. And then we got a fourth one. 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.

• 12:50Guy Raz?

  How do you do that?

• 12:51Speaker 01

  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, you know, were operating 12 hours a day sometimes. So each one of those additional flights represented a revenue generation opportunity that the other carriers didn't have.

• 13:14Guy Raz?

  Okay, but even so, I mean, those other carriers like Bran F. and Texas International, right? I mean, they were charging much, much higher fares and it couldn't, it couldn't have just been that you turned planes around faster.

• 13:27Speaker 01

  No, it was a whole conjure thing. You're, you're right about that. I was just giving you an example with the 10-minute turn because it's a vivid one. In addition to that, they were by definition monopolists. They had been under 40 years of federal government supervision through the C A B.

• 13:47Guy Raz?

  The, the Civil Aeronautics Board?

• 13:49Speaker 01

  Yes, right. And during that time, if they had a little financial problem, the C A B 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 C A B.

• 14:06Guy Raz?

  Okay, so you weren't regulated in the same way, but I mean, but were you doing other things like, like paying your employees less?

• 14:13Speaker 01

  Well, it depended. Initially, we were paying them less. As the years went on, we were paying them more. Their total compensation was superior to the other carriers. And in addition, when we turned our first very slim profit in 1973, we set up the first profit-sharing plan in the American airline industry. And I think we made a profit of, I don't know, $100,000 that year or something like that. But that went on, of course, to pour billions into our employees' pockets.

• 14:45Guy Raz?

  And your employees were, were unionized as well?

• 14:48Speaker 01

  Yeah, 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.

• 15:01Guy Raz?

  So you were basically introducing these really low fares. Were these airlines trying to match your prices?

• 15:08Speaker 01

  Yes, in some cases, they were. There's no question about that. As a matter of fact, Braniff, at one point, put in a lower fare than ours, which they called an introductory fare. Of course, they'd been serving Texas, you know, for 40 years by that time. But in any event, one of the things that came out of that was, 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. Hmm. And so for a couple of months, we became the largest liquor distributor in the state of Texas.

• 15:44Guy Raz?

  So Herb, you know, if I think about flying at that time, like, I'm thinking of like Mad Men and, you know, tumblers with scotch and like a glamorous experience. But Southwest was competing on price. I mean, you were not, you were not doing in-flight cocktails. So like, what did people think of your service versus the competition?

• 16:04Speaker 01

  Guy, I got a story to tell you on that. It was Thanksgiving of 1971. Remember, we'd been in business since June.

• 16:11Guy Raz?

  Yep.

• 16:12Speaker 01

  And my sister-in-law, a delightful lady, called me at my law office. And she said, Herb, she said, I just flew from Houston to San Antonio on Southwest Airlines, and I've traveled most of the world's airlines, which was true. You know, she was a world traveler. And she said, I know you're going to be a big success. You've got the best in-flight service that I have ever experienced on any airline.

• 16:37Guy Raz?

  Wow.

• 16:38Speaker 01

  And I said, boy, am I glad to hear that. How many passengers were on the airplane? She said, just me.

• 16:51Guy Raz?

  In just a minute, Southwest goes national, and Herb convinces travelers that airlines do not have to serve in-flight meals. I'm Guy Raz, and you're listening to How I Built This from NPR.

• 17:13Guy Raz?

  It's How I Built This from NPR. I'm Guy Raz. So throughout the 1970s, Southwest Airlines, they still only fly within the state of Texas. But then, in 1978, something really important happens. Congress decides to completely deregulate the airline industry. And for Southwest Airlines, that means they could now start flying to new cities outside of Texas. You know, Herb, at this point, Southwest is expanding, and your competitors are no longer just Texas airlines. You're competing with, like, American and Pan Am and TWA, right?

• 17:50Speaker 01

  Right.

• 17:51Guy Raz?

  Like, the national, major international carriers start to become your competitors.

• 17:54Speaker 01

  Yeah.

• 17:55Guy Raz?

  So were people skeptical that Southwest would be able to compete in, you know, the big leagues?

• 18:00Speaker 01

  Oh, yes. We were described as a Texas airline that could only be successful in the state of Texas, OK?

• 18:07Guy Raz?

  Yeah.

• 18:08Speaker 01

  And then we were described as a Sun Belt airline that could not be successful outside the Sun Belt. There was a press conference, we went into Baltimore, where one of the reporters there said, "Well, you know, Mr. Calhoun," he said, "I know you've been very successful out west, but now you're coming to the east, the most competitive part of the country as far as airline service is concerned." And I said, "Yeah? It's so competitive that when we start out here, we're reducing your existing fares by 60%. How competitive does that sound to you?"

• 18:46Guy Raz?

  I mean, was Southwest at that time, were you guys already sort of no-frills?

• 18:50Speaker 01

  Well, we were no-frills, in the sense that we were short haul. And that kind of restricts what you can do. You have relatively short flights.

• 18:57Guy Raz?

  So like peanuts and drinks.

• 18:59Speaker 01

  Yeah, yeah, exactly. And then pretzels and that sort of thing. But, you know, when we started flying longer haul, like from San Antonio to Los Angeles, we had a press conference, you know, to announce a new service. And one of the reporters there said, "Well, are you going to serve meals on those flights?" And I said, "No, we're not. We're going to charge you $400 less per trip, right? And I understand you can get a pretty good sandwich at Chasen's for $400."

• 19:30Guy Raz?

  So when, at what point did you give up your law practice?

• 19:34Speaker 01

  Actually, that was at the request of the board of directors in 1981.

• 19:38Guy Raz?

  So you were still, you still had your own law practice that you were doing other work for throughout the entire 1970s?

• 19:45Speaker 01

  Oh, yes, yeah. And I'll tell you the truth. You know, I didn't really hanker to be part of corporate life because, you know, lawyers have a lot more freedom to do their own thing when and where they want to. But we hired a very excellent fellow named Lamar Muse, who was a real battler, to get the company off the ground and operational. He had substantial airline experience, and he did a wonderful job. And so, you know, finally, in 1981, we'd lost this successor to Lamar, and the board director said to me, "You've got to do it."

• 20:19Guy Raz?

  And, and did you want to do it?

• 20:20Speaker 01

  Well, I felt I had to do it. And I'll tell you why. Because the start of the 1980s, you had unemployment of 10.8 percent. You had a double dip recession. You had the air traffic controller's strike. Then Lamar Muse, the guy we hired to get the company off the ground, he launched a competitor against this called Muse Air.

• 20:42Guy Raz?

  Oh, wait, he, he left Southwest and then launched a competitor?

• 20:46Speaker 01

  Yeah, so that's three years after he left called Muse Air.

• 20:48Guy Raz?

  How did you feel about that?

• 20:50Speaker 01

  Well, I thought it was somewhat immodest on his part.

• 20:52Guy Raz?

  Because he called a Muse Air after himself?

• 20:54Speaker 01

  Yeah.

• 20:57Guy Raz?

  But were you, were you like, "What are you doing? I mean, I, we worked together all these years, and now you're, I mean..."

• 21:03Speaker 01

  No, we bought him later.

• 21:05Guy Raz?

  You bought, you bought him later?

• 21:08Speaker 01

  Yeah, when they're on the verge of bankruptcy, yeah. We bought Muse Air. But it was there in 1981. So I figured I'd better do what the board asked me to do and come to Southwest Airlines full-time.

• 21:23Guy Raz?

  Was, was Southwest Airlines making money at the time?

• 21:25Speaker 01

  Yes. We've been profitable every single year for 43 years, I guess, now.

• 21:33Guy Raz?

  It must have made the other airlines crazy because they were, a lot of them have had good years and bad years, but it seems like Southwest has just, has never had a bad year.

• 21:42Speaker 01

  Well, we've had years when, you know, our earnings were down, but we've never had a loss for a full year since 1972. And 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.

• 22:03Guy Raz?

  Hmm.

• 22:04Speaker 01

  Basically, we looked at history and said, this is a very dicey business to be in. You know, the airline business?

• 22:11Guy Raz?

  Yeah.

• 22:12Speaker 01

  So, we may be flamboyant from the marketing standpoint, but we're going to be very conservative from the fiscal standpoint. And I established a rule of thumb that we're going to pay 80% of the cost of all of our new airplanes from internally generated funds.

• 22:30Guy Raz?

  Hmm.

• 22:30Speaker 01

  And actually, we wound up paying 100% for most of our airplanes. So, we had the largest percentage in our fleet of owned airplanes of any carrier of any size.

• 22:41Guy Raz?

  So, so what did that mean?

• 22:43Speaker 01

  Well, I mean, you're not taking on debt, right, when you do that? So, when you get into bad times, you're not threatened by the debt payments, which has put carriers into bankruptcy and out of bankruptcy and back into bankruptcy, you know, for 35 years.

• 22:59Guy Raz?

  You know, Herb, from the outside, from listening to your stories, the airline industry seems so brutal. Like, is it, do you think it's more savage than than other industries?

• 23:10Speaker 01

  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.

• 23:24Speaker 01

  Move at 540 miles an hour.

• 23:26Guy Raz?

  Yeah.

• 23:27Speaker 01

  And, you know, if you have a shoe factory that fails in Seattle, as an example, you can't, within hours, transport that shoe factory to Chattanooga, Tennessee, to compete there. But if your Seattle air service fails, you can have your airplanes in San Antonio or Chattanooga within a matter of hours. So the very mobility of your capital assets breeds a lot of competition.

• 23:54Guy Raz?

  Did you like that competition? Like, did you like being an airline CEO and managing all that stuff? Was it fun for you?

• 24:01Speaker 01

  Well, I had to adapt myself. Yeah, I loved being with the people of Southwest Airlines. That was like a fountain of youth for me. They were so wonderful and entertaining and, you know, great to be with. That's part of it. But when you're practicing law, you pretty much do your own thing. And it's a swift pace. Well, things didn't move as swiftly at first when I came to Southwest Airlines full-time. And I'm removing swiftly compared to the rest of the airline industry, but not compared to my experience.

• 24:36Guy Raz?

  Were you pushing for expansion and growth and all those things during your tenure?

• 24:41Speaker 01

  Oh, yes. I mean, Southwest Airlines expanded enormously, you know, from a very small base. But I soon realized, it was a speech that I went to hear, where a guru said, "If you can improve a corporation 5% in a year, that's a miracle." I said, "Oh, okay. I was trying to do 25%."

• 25:05Speaker 01

  Maybe that's why I feel a little frustrated. So it really brought my thinking, you know, more in line.

• 25:11Guy Raz?

  You know, I'm thinking, even if it might have seemed like it was a slow process for you, the fact that Southwest was growing and kind of prevailed in this industry is pretty remarkable. It's pretty unbelievable, given that, you know, so many of those early competitors don't even exist anymore. And some of the great iconic airlines, TWA, Pan Am, they're gone.

• 25:32Speaker 01

  Exactly. Many of them. There are very few left.

• 25:36Guy Raz?

  What mistakes did they make that you seem not to have made?

• 25:40Speaker 01

  Well, we just did things differently, like market share, you know, a shibboleth, supposedly. And I told anybody if they mentioned market share, I'd punch them in the nose.

• 25:54Speaker 01

  Because here are all these big companies fighting over their market share and losing money and furloughing employees.

• 25:59Guy Raz?

  Yeah.

• 26:00Speaker 01

  So I said, let's focus on profitability. And if we have 4% of a market and we're profitable, that's better than having 90% of a market and being unprofitable.

• 26:14Guy Raz?

  What's the value of Southwest today, do you know?

• 26:16Speaker 01

  Overall?

• 26:17Guy Raz?

  Yeah.

• 26:17Speaker 01

  Oh, probably $20 billion, something like that.

• 26:22Guy Raz?

  So we're talking about one of the biggest airlines in the United States, easily?

• 26:26Speaker 01

  In the world, in terms of passengers carried.

• 26:29Guy Raz?

  It's unbelievable.

• 26:30Speaker 01

  Yeah, it really is. It's like I've had too much wild turkey, you know, and I'm fantasizing.

• 26:38Guy Raz?

  By the way, when you started the company, how much did you invest personally?

• 26:43Speaker 01

  I invested $10,000.

• 26:44Guy Raz?

  Which must be worth quite a bit today, I imagine.

• 26:47Speaker 01

  Well, it's gone up some since then. But at the company is what I thought was a requirement of good leadership. I always turned down pay increases, bonus increases to set a good example, I thought, for all of our people. Of course, the stock that I got rose enormously in value, but that was in lieu of cash compensation.

• 27:11Guy Raz?

  So you were mainly paid with stock options?

• 27:15Speaker 01

  Yeah, basically with stock. I got the biggest kick out, just to give an exemplar, when I did a stock option deal in lieu of pay raises with our pilots, so they got Southwest Airlines' stock options in lieu of a pay increase, I took no pay increase along with them. And I'm not trying to single anybody out, but there was a, the head of an airline that was smaller than Southwest Airlines and on the verge of going out of business, whose salary and bonus were three times what mine were at Southwest Airlines, and that's the way I wanted it.

• 27:47Guy Raz?

  By the way, are you ever worried that some, you know, some young, you know, Herb Keller-type character is going to come around and put up some upstart airline and knock Southwest off its throne?

• 27:58Speaker 01

  I'm concerned about it all the time. I wrote a letter to our employees, and it was about my 10 foremost concerns for the next decade of Southwest Airlines, okay?

• 28:08Guy Raz?

  Yeah.

• 28:09Speaker 01

  And number one was us, that we ignore competition, that we get complacent, that we get cocky. And I used the line, "Think small and act small, and we'll get bigger. Think big and act big, and we'll get smaller."

• 28:26Guy Raz?

  So it could happen one day.

• 28:27Speaker 01

  Oh, it's possible. You know, I'm a history buff, and if you look at the largest companies in the United States as the 19th century turned into the 20th, most of them are gone. The Central Leather Company in 1900, 1901, was the 17th largest company in the United States. But it didn't anticipate what the advent of the Ford automobile was going to mean. You know what it did?

• 28:58Guy Raz?

  Hmm.

• 28:59Speaker 01

  It made buggy whips and saddles.

• 29:01Guy Raz?

  Hmm.

• 29:02Speaker 01

  And never stopped doing it until it was gone. And if you look at countries, or you look at companies, they perish. And if you have any sense of history, you realize that and, you know, try to avoid it.

• 29:17Guy Raz?

  You know, hearing the story of how you made this happen and all the work you put into it, I wonder if you think you're just wired differently to be able to put up with all that stuff for so many years?

• 29:28Speaker 01

  Well, I think, yeah, I probably am wired a little bit differently from many people, and they're probably very happy about that difference themselves. But one of the things is that I never look back. You know, I don't spend a lot of time regretting things that went wrong. And furthermore, I think that I've always had a great deal of fun out of what I was doing. And, you know, people would say to me, "Why aren't you burned out?"

• 29:57Guy Raz?

  Yeah.

• 29:58Speaker 01

  You know, "I was working 100 hours a week." And I would answer very simply, "Well, it's easy when you have a passionate joy in what you're doing. You don't burn out."

• 30:12Guy Raz?

  Herb Kelleher co-founded Southwest Airlines 50 years ago, and he served as CEO and then on the board before retiring in 2008. By the way, Herb Kelleher once resolved a trademark dispute with a rival airline. They were both using the slogan "plane smart." He resolved this not in court, but by challenging the other CEO to a public arm wrestling match, which Herb Kelleher lost. And you can see that entire arm wrestling match. Just go to Google and type in "the malice in Dallas." Hey, thanks for listening to the show this week. If you want to find out more or listen to previous episodes, you can go to howibuiltthis.npr.org. You can also write to us at [email protected].

• 30:56Guy Raz?

  And if you want to send a tweet, it's at howibuiltthis. Our show was produced this week by Casey Herman, with music composed by Ramtin Arablouei. Thanks also to Neva Grant, Sanaa Zemeckis, and Jeff Rogers. I'm Guy Raz, and you're listening to How I Built This from NPR.

• 31:17Guy Raz?

  Hey, glad you're still with us, because one of our listeners has an amazing story about the company she is building. And here it is.

• 31:24Speaker 02

  My name is Caitlin Majentel. I'm in Los Angeles, California.

• 31:28Guy Raz?

  Actually, Caitlin grew up in Chicago. But when she went to college in LA, she noticed that there were all these juice bars everywhere. And one of her friends had a juicer at home.

• 31:37Speaker 02

  So I see her put this carrot in the juicer, and out comes like a tiny, tiny amount of liquid. And I see these mounds of vibrant carrot pulp. You know, and it smells so good. It's so fresh. And she just looks at me and she goes, I usually throw away the pulp. I have no idea what to do with it.

• 31:55Guy Raz?

  And that is how Caitlin came up with an idea for a business.

• 31:59Speaker 02

  The next day, I was like, wow, like, what if this juice pulp could be used to create healthy snacks at a more affordable price point? And so I called up a bunch of juiceries right then and there. And I asked them, what are you doing with your juice pulp?

• 32:13Guy Raz?

  So she found some juice bars that agreed to give her their fruit and veggie pulp. And then she found a small commercial kitchen where she could turn that pulp into snacks, snacks like granola.

• 32:23Speaker 02

  Have five different flavors, so apple pie, peanut butter and carrot, red velvet, beet red velvet.

• 32:29Guy Raz?

  Caitlin's business is called Pulp Pantry, and it's still a small batch operation, just a few hundred bags of snacks a week, mainly selling in health food stores in LA and online. And she's funding the business with money from an incubator and some from her savings. So she's still in the red and working pretty crazy hours.

• 32:48Speaker 02

  I mean, it just becomes an obsession, you know? And it's like, it's kind of pathetic, honestly, to be, you know, seeing these bins of pulp and being so happy just to see it processed into like a better product. And then to be seeing it sold on the shelves, I just think that's the craziest thing. So I love it, yeah.

• 33:03Guy Raz?

  If you want to tell us the story of the company or the movement that you are building, go to build.npr.org. That's build with a D dot npr dot org. And thanks. One more thing before you go. There's a new show at NPR, and it's called Radio Ambulante. In fact, it's our first ever podcast in Spanish. The show takes a look at Latin America and US Latino communities, bringing you stories that you might not otherwise hear. Stories about punk rock in Cuba, stolen books in Colombia, or junk bonds in Puerto Rico. Radio Ambulante tells Latin American stories from the inside. Check it out on the NPR ONE app and at npr.org/podcasts.