The Innovation Stack by Jim McKelvey

Author:Jim McKelvey
Language: eng
Format: epub, azw3, mobi
Publisher: Penguin Publishing Group
Published: 2020-03-09T16:00:00+00:00

The Federal Airline Protection System

My first goal was to learn why Southwest didn’t just copy the other airlines. “The airlines set up federal government regulation in 1938 to protect themselves from competition,” Herb explained to me, “and they were enormously successful because the airlines that had 90 percent of all the revenue passenger miles in 1938 had 90 percent of all the revenue passenger miles in 1978.”

So the US government not only forbade innovation, but also forbade entering the market in the first place. The only legal path to the skies went through the courts. Herb did not actually start out as an airline executive or a businessperson; he was Southwest’s lawyer. Herb fought the government and the airlines for four years before Southwest could make its first flight. The battle took them to both the Texas and the US Supreme Courts. When Southwest Airlines finally won, Herb cried and kissed the first airplane.

Copying was almost forced on the industry by government regulation. Any carrier would have to fly within the government’s rules. And these rules had a strange side effect: they not only discouraged innovation, they actually changed the way people thought.

“There was a growing consensus in Washington that only rich people and people on corporate expense account wanted to fly.” My jaw almost landed in his ashtray, but Herb kept going: “I am serious. I used that word deliberately, because I saw the look on your face.

“When I first got into litigation involving the Civil Aeronautics Board lawyers, I thought they were just kidding when they were saying things like, ‘None of these people want to fly.’ Well, let me see, if we can take you from that Rio Grande Valley to the MD Anderson Cancer Center in Houston on an airplane in forty-five minutes for $15, I think I would choose that over being put on the mattress in the back of the station wagon and being driven for six hours. I thought that they were just making it up, but they weren’t.”

Living behind a wall long enough not only causes people to become comfortable with their circumstances, but they also start to believe there is nothing beyond the wall. Why would Bob, for example, want to accept a credit card, or have a bank account, or own nice furniture, or visit his grandma? Why would normal people want something that only the wealthy have?

Southwest eventually won the right to fly, but that victory only allowed them to fly certain routes within Texas. They were still legally prevented from copying much of what the other carriers were doing. Southwest was born outside the wall.

Herb confirmed it. “We were not going to copy. We may do the same things operationally; after all we are all flying airplanes. But fundamentally we decided we won’t do anything the way the legacy carriers did.” Howard Putnam, a former vice president at United Airlines and Southwest’s CEO for three years, once said that the greatest thing he ever did for Southwest was “not implementing anything I learned at United.

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