Intelligent Fanatics Project: How Great Leaders Build Sustainable Businesses by Sean Iddings & Ian Cassel

Author:Sean Iddings & Ian Cassel [Iddings, Sean]
Language: eng
Format: epub
Publisher: MicroCapClub Publication
Published: 2016-09-14T21:00:00+00:00

Then, divide profit per flight by Southwest’s systemwide average one-way fare of $58:

The bottom line, only five Customers per flight accounted for our total 1994 profit! In other words, just five Customers per flight—only 3 million of the 40 million Customers we carried—meant the difference between profit and loss for our airline in 1994. To take it a step further, to have lost the business of only one of those Customers would have meant a 20 percent reduction in profit on that flight. That’s how valuable each Customer is to Southwest and you!11

Such clear communication helped employees understand their significance in a large, multibillion-dollar organization. It also shows how important each customer interaction is for the company’s well-being. As a result, employee morale continued to be as strong while the company grew as it would have been if the company had never grown at all. Communication with employees at Southwest is not much different from the clear communication Warren Buffett has had with shareholders and with his owned operations, through Berkshire Hathaway’s annual shareholder letters. Intelligent fanatics are teachers to every stakeholder.

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Herb Kelleher and other early Southwest Airline managers could have been identified as intelligent fanatics early. So, what would be the reward for investing with such special individuals, in such a horrible industry? Investing in Southwest Airlines in June of 1971 and holding until Herb Kelleher stepped down as CEO in 2001 would have produced life-changing returns, turning $10,000 into $7.4 million dollars, excluding dividends. This would be a 25% CAGR, compared to the S&P 500’s return of 8.5% over the same period (see figure 5.1).

Figure 5.1

$10,000 Investment in Southwest Airlines Compared to S&P 500

(1971–2001)

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