Remembering Jack Bogle and Herb Kelleher, Two Great Strategists

Executive Summary

Within a two-week period, America lost two great business icons, Southwest Airlines co-founder Herb Kelleher and Vanguard founder Jack Bogle. To me, they exemplify the true strategist in action. This is despite Kelleher’s seeming dismissal of strategy.  Perhaps his most famous quote, in response to a question about Southwest strategy, was: “We have a strategic plan. It’s called doing things.” And Bogle really only talked about his recommended strategy of how his customers should invest their savings: Buy and hold for the long term. With respect to Vanguard itself, he talked more about its philosophy than its strategy per se. But the heart of true strategy is not about plans or proclamations or vision statements, it is about making the few key choices that enable you to serve customers in a distinctive and valuable fashion. These two business giants were all about choices and when they made them, they chose distinctively. It would also be nice to see others follow their attitudes toward gaining personal wealth from their customer-focused enterprise.

Credits from left to right: Taylor Hill/Getty Images, William Thomas Cain/Getty Images

Within a two-week period, America lost two great business icons, Southwest Airlines co-founder Herb Kelleher (March 12, 1931 – January 3, 2019) and Vanguard founder Jack Bogle (May 8, 1929 – January 16, 2019). I never met Kelleher but admired his work from afar. Jack Bogle and I had a longstanding friendly exchange of ideas that I will miss.

To me, they exemplify the true strategist in action. This is despite Kelleher’s seeming dismissal of strategy. Perhaps his most famous quote, in response to a question about Southwest strategy, was: “We have a strategic plan. It’s called doing things.” And Bogle really only talked about his recommended strategy of how his customers should invest their savings: Buy and hold for the long term. With respect to Vanguard itself, he talked more about its philosophy than its strategy per se.

But the heart of true strategy is not about plans or proclamations or vision statements, it is about making the few key choices that enable you to serve customers in a distinctive and valuable fashion. It doesn’t matter if you call it strategy or “doing things.”  These two business giants were all about choices and when they made them, they chose distinctively. Where competition zagged, they consistently zigged.

For Southwest, it was a point-to-point route structure rather than industry norm hub and spoke; Boeing 737s vs. multiple aircraft; one class of travel vs. many; no seat selection vs. advanced selection; partnership with labor vs. war with labor, and so on. For Vanguard, it was the index fund vs. the managed fund; lowest fees possible vs. highest fees you can get away with; etc.

Many CEOs hope that they can achieve distinctive results without boldly distinctive choices. However, these two realized that the only path to distinctive results is with distinctive choices – but not just any kind of choices. Theirs were distinctive choices utterly in favor of customers. Southwest customers would enjoy cheap, reliable, and pleasant travel. Vanguard customers would get to keep as close as possible to 100% of the returns their investments earned. Start with the customer and make choices that no one else was brave enough to make: that was their formula. It is a formula that more CEOs would be wise follow.

It would also be nice to see others follow their attitudes toward gaining personal wealth from their customer-focused enterprise. Yes, they both got rich by any reasonable standard. But that outcome genuinely seemed to matter little to them. That is especially the case for Bogle who broke completely with industry norms to structure Vanguard to be owned by its funds, each of which in turn is owned by the customers whose capital is invested in that fund. As a result, Bogle’s net worth at time of death was estimated to be about $80 million. In comparison, Vanguard’s most direct competitor, Fidelity, is owned by the Johnson family, the members of which, according the latest Forbes 400 list, have a combined net worth of about $30 billion. Kelleher died a much richer man than Bogle with a net worth widely estimated at $2.5 billion. But he famously never asked for or received a pay raise or bonus increase from his initial compensation as a startup in 1967.

When both employees and customers see a CEO who seems unconcerned about compensation and comfortable that it will all work out fine, they are more confident that leadership of the organization is more likely than not to do the right thing – which has the effect of making those bold choices more effective and lasting.  Making bold choices and doing the right thing: that is the wonderful legacy of leaders like Jack Bogle and Herb Kelleher.

Spread the love

Leave a Reply

Your email address will not be published.