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With David Gardner
February 9, 2001

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David: The other side of the simplicity coin is stress. Steven, earlier when you were speaking to our company you asked for a show of hands of how many of us feel less stress than we did back in 1994. Within that room of about 50 people, maybe two people raised their hands. Stress does seem to be a growing problem, and that's why you point to the importance of what you call "stress heroes" as companies. I'd love to know some of those companies that you've invested in because of your grasp on simplicity.

Cristol: Well, when I think about how people are making their customer experiences simpler and less stressful, a lot of my investments would be in the high-tech sector because that's where I do my consulting and I tend to just know more about it.

One company I know you've done some coverage on is Siebel Systems (Nasdaq: SEBL), which makes customer relationship management software that takes all of these disparate views of a company's customer and internally provides them with one integrated, consolidated view of their customer which tremendously simplifies Siebel's customers' ability to serve their customers in turn.

Of course, I'm always looking for a really solid management team so that's sort of a given in any of these I might talk about. Recently I've been very impressed, despite some of its earlier fortunes, with 3Com (Nasdaq: COMS). You may have seen their advertising -- "Simple Sets You Free." That, of course, is not just a window dressing ad campaign but a place where Eric Benhamou, the CEO, has really said, "We are going to reengineer this company around radical simplicity and we are going to make things simpler for the customer and we're going to communicate that way to the customer to make networking something that people can deal with." I'm hopeful for people like that.

David: Steven, since you do a fair amount of consulting, are there any private companies that might be coming public in the next two years or so that you would fasten our eyes on now as coming to get this, or contributing to simplicity in our lives -- or not?

Cristol: I'd have to give that a little more thought. I would say that when you are looking at private companies, it's really important to be asking, are they just going to be coming up with something else for their customers to deal with and integrate into their lives, or are they actually going to be taking something off the customer's mental hard drive, if you will, and saying, "If you are going to use this stuff we're going to give you now, what are we going to replace? What are we now going to have you forget about?" Kind of the way voice mail replaced the answering machine.

David: The ATM replacing the bank teller is a great example you give in the book.

Cristol: There are lots of products that don't replace anything. They're just something incremental for the customer to have to assimilate into their lives.

David: In the last few years, Steven, we've seen tremendous growth in the Internet and I'm wondering, does the Internet simplify our lives?

Cristol: It depends on who is serving up the Internet at that particular moment, and it also depends on the technologies that it's dependent on. It's very hard to separate the user experience with the Internet  -- when does the pipe break, and suddenly the telephone line isn't working, or maybe my modem's on the blink.

There are so many problems attached to the Internet that there's a tremendous paradox. A lot of work's been done on paradoxes dealing with technology like the Internet. It enslaves me, but it frees me up. It gives me control, but it also introduces chaos and so forth and so on. When everything is working, the Internet is a terrific simplifier -- but when things aren't working or you get to a site where they are not paying attention to user navigation and content management, it can really be another stress producer.

David: I want to go back to Amazon.com, which we discussed earlier. It's a company that I'm invested in. It's built a business on simplicity and you identified it as being very good at simplicity and convenience, but Amazon isn't profitable so a lot of people listening might go, "This simplicity marketing guy -- I hear his stuff and he sounds smart and I agree. I want less stress in my life and I'd like my companies to help me, but why isn't Amazon profitable if they really embody simplicity?"

Cristol: Well I think we need to divide the discussion into revenue and cost because the fact is that simplicity, I believe, is a gateway to greater revenue streams and ultimately a great way to reduce costs because it is more profitable to serve customers long-term than to keep having them acquire new ones. But I can't account for Amazon's cost structure. I will say, in their defense, that delivering simplicity is a tremendously complex business because the company is absorbing the complexity on behalf of its customers and in terms of IT infrastructure and some of the other things that are required for Amazon to execute as well as they do, it is definitely a long-term opportunity.

What I'm looking for when I talk about simplicity, the payoff for simplicity, is long-term customer relationships which translate to shareholder value in terms of revenue, costs, costs of capital, all of those cash flow considerations and things that drive shareholder value. If what's really going to drive revenue is a longer-term proposition, I'm going to be more patient with those companies that get the simplicity piece.

David: I want to close with our buy, sell, or hold game. That means we're going to keep principles of simplicity marketing in mind here. If these things were stocks -- which they're not, but if they were -- I'd like to hear if you'd be buying, selling, or holding. Are you ready?

Cristol: Sure.

David: Okay, let's start off with Apple's CEO, Steve Jobs.

Cristol: I would definitely be buying Steve Jobs. The iMac was a tremendous tour de force in simplicity marketing because Steve gets it better than just about any CEO around and it sort of oozes out of the pores of the Apple culture. I'm hopeful about that.

David: Buy, sell, or hold this year's Super Bowl ads?

Cristol: That's probably a different answer than the concept of Super Bowl ads, which I think will probably continue to be viable. I didn't see a lot of ads that blew me away in the Super Bowl. I think there were too many ads for dot-com companies that are just sort of saying "here's our name" but we have no clue what they do. Really, the brands that have established franchises and we already know what they are about are really using the Super Bowl ads to better advantage, so I'd say it's a buy for established brands. For new products, if they put too many eggs in one basket, then it's probably a sell.

David: Buy, sell, or hold the marketing and branding efforts of Southwest Airlines (NYSE: LUV)?

Cristol: I'd say that's a hold. The genius of Southwest has always been the way they operationalize their value proposition. In terms of how they've marketed it, they have to get a lot of credit for the guerilla marketing. I'm not sure this is necessarily the first brand that comes to mind as a world-class example of how to go out and build brand equity at the macro level. They've done it in many ways -- the harder, scrappier way -- and should be applauded for that.

In terms of being the kind of value airline that they are -- in other words, we talked about cost structures when we talked about Amazon -- they've really been a master at managing their cost structure to the degree that I understand the airline industry, which is limited, and so in every aspect of their operations, keeping their eye back on drivers of shareholder value and reducing operating costs, it seems like doing that and passing some of the savings along to the customer has been a big part of their success.

David: Let me ask to follow up on simplicity, we're talking about it as a powerful force in business. Do you think it could be a powerful force in politics? Do you think a prospective politician listening today could say, "I hear what that fellow Cristol is saying. I am going to provide a simple message," or "I'm going to simplify government for people?"

Cristol: Absolutely. In fact, if you want to think in political terms, you can look and see that between the 1996 and 2000 Presidential elections, if you lived in a major city, on average you were asked to go to the polls over 20 times to vote on this incredible maze of local referendums and local candidates for this, that, and the other accompanied by 100-page-long voter information booklets.

This thing does not know commercial boundaries. It's elections, it's choosing a school for your kid if they are not going to public schools, and all of these other things that exponentially in the whole life context of a customer or a consumer or a citizen in a first-world country that we have to somehow sort through and deal with even though our brain capacity and speed of processing isn't increasing the way computer processor power is.

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