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July 25, 2021

Whose Story Wins?

Soft power is coming to tech.

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André Michelin knew the problem: there weren't enough cars. 

What was it now — 3,000 in the entire country? Less? Hardly enough to build a business around, particularly from the relatively small city of Clermont-Ferrand. 

But along with his brother, Édouard, André was an innovator. Since taking over their grandfather's virtually defunct hose manufacturer in 1886, the duo had resurrected Michelin through a series of deft moves. Chief among them was Édouard's creation of the pneumatic tire, first for bicycles, then for automobiles. The younger brother's invention had proven a marked improvement on the status quo, making replacing and repairing wheels significantly easier. It became the cornerstone of the revamped company. 

Still, the brothers kept running into the same problem: the market was too small. There were too few cars, and those that did exist weren't driving enough. Few used their automobiles to take the kind of long journeys that would produce significant wear-and-tear and precipitate the purchase of new treads. 

So André hatched a plan unusual in its far-sightedness and obliqueness: the company would launch a guidebook designed to promote travel by car. In 1900, the Michelin Guide was born. 

It proved to be an extraordinarily savvy business decision. Though it began as a free resource for motorists, featuring maps and automotive information, the Michelin Guide became a defining cultural and gastronomical resource. It succeeded in encouraging touring (and thus increasing the purchase of tires) and creating a story that others began to tell themselves to tie to their values and identity. In that respect, Michelin's move is perhaps the purest example of "soft power" applied to the corporate world. Rather than winning with might or money, the manufacturer appealed with its ideas. 

As the tech sector grows more capitalized and professionalized, this kind of persuasion may become even more relevant. In the decade to come, we should expect startups of different sizes to develop soft power initiatives alongside their core offerings. Those that do will succeed not only in building distribution but popularizing the narrative that defines their business. They will create a story that wins. That can have wide-reaching effects, both tangible and vaporous. 

In today's briefing, we'll explore the following:

  • Defining soft power
  • Differences between soft power and traditional marketing
  • How the venture capital asset class accelerates the need for soft power
  • How Robinhood, Stripe, a16z, and others are winning
  • The future of soft power

An introduction to soft power

In the firmament of international affairs, few shine as brightly as Joseph Nye. Arguably, no thinker articulated power in the post-Cold War era better than the former dean of Harvard's Kennedy School. In a 1990 edition of Foreign Policy magazine, Nye described the new methods of influence open to nation-states, coining the phrase "soft power." 

Nye's argument was, essentially, that independent action was often untenable in an increasingly interdependent world. The "hard power" of military force or economic clout had diminished in the face of multi-nodal complexity: 

Although the United States still has leverage over particular countries, it has far less leverage over the system as a whole. It is less well-placed to attain its ends unilaterally, but it is not alone in this situation. All major states will have to confront the changing nature of power in world politics. 

For Nye, there was a clear alternative to this approach. If hard power won through coercion, soft power sought to seduce through influence. In a later address, Nye explicitly outlined this new source of strength: 

Hard power can rest on inducements ("carrots") or threats ("sticks"). But sometimes, you can get the outcomes you want without tangible threats or payoffs. The indirect way to get what you want has sometimes been called "the second face of power." A country may obtain the outcomes it wants in world politics because other countries admire its values, emulate its example, aspire to its level of prosperity and openness. This soft power—getting others to want the outcomes that you want—co-opts people rather than coerces them.

Though most closely associated with foreign policy, Nye believed in soft power applied to non-governmental organizations, including those in the private sector. While businesses didn't exercise hard power in the same way as a nation might — Apple does not kick your door down and force you to buy an iPhone — soft power functions similarly. 

In the business world, smart executives know that leadership is not just a matter of issuing commands but also involves leading by example and attracting others to do what you want. 

This passage highlights a critical distinction for Nye. Soft power is about attraction

[S]oft power is more than just persuasion or the ability to move people by argument, though that is an important part of it. It is also the ability to attract, and attraction often leads to acquiescence. Simply put, in behavioral terms, soft power is attractive power. Soft power resources are the assets that produce such attraction.

This enunciation makes it easier to place soft power into a business context. In citing examples of corporate soft power on Twitter, a common refrain rose: How is this different from marketing? 

Framing the inquiry in the world of this article, the question becomes: is the Michelin Guide just content marketing? Or is it somehow different? Is every corporate Medium account an example of soft power, or is more needed to attain that descriptor? 

Let us try and answer the question.

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André Michelin knew the problem: there weren't enough cars. 

What was it now — 3,000 in the entire country? Less? Hardly enough to build a business around, particularly from the relatively small city of Clermont-Ferrand. 

But along with his brother, Édouard, André was an innovator. Since taking over their grandfather's virtually defunct hose manufacturer in 1886, the duo had resurrected Michelin through a series of deft moves. Chief among them was Édouard's creation of the pneumatic tire, first for bicycles, then for automobiles. The younger brother's invention had proven a marked improvement on the status quo, making replacing and repairing wheels significantly easier. It became the cornerstone of the revamped company. 

Still, the brothers kept running into the same problem: the market was too small. There were too few cars, and those that did exist weren't driving enough. Few used their automobiles to take the kind of long journeys that would produce significant wear-and-tear and precipitate the purchase of new treads. 

So André hatched a plan unusual in its far-sightedness and obliqueness: the company would launch a guidebook designed to promote travel by car. In 1900, the Michelin Guide was born. 

It proved to be an extraordinarily savvy business decision. Though it began as a free resource for motorists, featuring maps and automotive information, the Michelin Guide became a defining cultural and gastronomical resource. It succeeded in encouraging touring (and thus increasing the purchase of tires) and creating a story that others began to tell themselves to tie to their values and identity. In that respect, Michelin's move is perhaps the purest example of "soft power" applied to the corporate world. Rather than winning with might or money, the manufacturer appealed with its ideas. 

As the tech sector grows more capitalized and professionalized, this kind of persuasion may become even more relevant. In the decade to come, we should expect startups of different sizes to develop soft power initiatives alongside their core offerings. Those that do will succeed not only in building distribution but popularizing the narrative that defines their business. They will create a story that wins. That can have wide-reaching effects, both tangible and vaporous. 

In today's briefing, we'll explore the following:

  • Defining soft power
  • Differences between soft power and traditional marketing
  • How the venture capital asset class accelerates the need for soft power
  • How Robinhood, Stripe, a16z, and others are winning
  • The future of soft power

An introduction to soft power

In the firmament of international affairs, few shine as brightly as Joseph Nye. Arguably, no thinker articulated power in the post-Cold War era better than the former dean of Harvard's Kennedy School. In a 1990 edition of Foreign Policy magazine, Nye described the new methods of influence open to nation-states, coining the phrase "soft power." 

Nye's argument was, essentially, that independent action was often untenable in an increasingly interdependent world. The "hard power" of military force or economic clout had diminished in the face of multi-nodal complexity: 

Although the United States still has leverage over particular countries, it has far less leverage over the system as a whole. It is less well-placed to attain its ends unilaterally, but it is not alone in this situation. All major states will have to confront the changing nature of power in world politics. 

For Nye, there was a clear alternative to this approach. If hard power won through coercion, soft power sought to seduce through influence. In a later address, Nye explicitly outlined this new source of strength: 

Hard power can rest on inducements ("carrots") or threats ("sticks"). But sometimes, you can get the outcomes you want without tangible threats or payoffs. The indirect way to get what you want has sometimes been called "the second face of power." A country may obtain the outcomes it wants in world politics because other countries admire its values, emulate its example, aspire to its level of prosperity and openness. This soft power—getting others to want the outcomes that you want—co-opts people rather than coerces them.

Though most closely associated with foreign policy, Nye believed in soft power applied to non-governmental organizations, including those in the private sector. While businesses didn't exercise hard power in the same way as a nation might — Apple does not kick your door down and force you to buy an iPhone — soft power functions similarly. 

In the business world, smart executives know that leadership is not just a matter of issuing commands but also involves leading by example and attracting others to do what you want. 

This passage highlights a critical distinction for Nye. Soft power is about attraction

[S]oft power is more than just persuasion or the ability to move people by argument, though that is an important part of it. It is also the ability to attract, and attraction often leads to acquiescence. Simply put, in behavioral terms, soft power is attractive power. Soft power resources are the assets that produce such attraction.

This enunciation makes it easier to place soft power into a business context. In citing examples of corporate soft power on Twitter, a common refrain rose: How is this different from marketing? 

Framing the inquiry in the world of this article, the question becomes: is the Michelin Guide just content marketing? Or is it somehow different? Is every corporate Medium account an example of soft power, or is more needed to attain that descriptor? 

Let us try and answer the question.

Differences from marketing

In Against Interpretation, Susan Sontag argues that modern hermeneutics have destroyed our understanding of art. Rather than grapple with form — a work's physicality and structure — we have become obsessed with content. This has left us incapable of genuinely seeing art, relying instead on short-hand interpretations, vision clouded by theory. 

To distinguish between soft power and traditional marketing, we must look at both content and form. 

Content

Let's begin with content. The concept of "attractive power" helps make a differentiation here (after all, how "attractive" is the average Medium banality), as does one of Nye's later passages. In an attempt to reckon with the age of the internet, Nye remarks, "Politics in an information age may ultimately be about whose story wins."

While Nye is speaking about politics here, it implies a personality for soft power that assists in disambiguating the content of soft power and marketing. That difference is roughly the distance between a sales pitch and a story. 

By definition, marketing content seeks to sell. The text is scripted, geared toward producing a specific outcome. Its content makes a demand: will you do this? Language seeks an explicit end. For example, Michelin's marketing content looks something like this: 

It focuses on the product, enunciates its benefits, and seeks to drive toward a purchase. 

Soft power acts more gently, like a story. No explicit demand is made of the listener, and as a result, a state of openness is achieved. The content of soft power is more symbolic or metaphorical, enforcing values and norms through narrative. Browsing a Michelin guide, by contrast, operates subtly. Few references to tires are made; it is possible to peruse many of them without making a connection between guide and parent company. 

Rather than trying to drive a specific outcome, then, Michelin guides' content bolsters the parent company's story, its worldview. That might be summarized as: the world is smaller than you think. Magic is within reach. If that story sticks, you may prove to be the kind of car-driving traveler ideally suited for Michelin tires. 

Though there may be occasional blurred lines, marketing and soft power rely on fundamentally different content types. One is a sale, the other, a story. 

Form

Marketing and soft power initiatives differ when it comes to form, too. Each may demand a different vehicle. 

Since marketing looks to drive a specific outcome, it is often best when tied closely to the company. It might make sense to pump out content marketing on the business's blog page if you're trying to optimize for subscribers or commercial inquiries within a specific timeline. You're trying to create a funnel from content to commerce that can be improved upon over time. Similarly, marketing initiatives may make most sense when explicitly branded by the company — if prioritizing brand recognition or website visits, visibility is preferable. 

We can usually feel when we are being sold to, and we don't like it much. In that respect, soft power initiatives may work best when sitting orthogonally to the central business, seemingly unconcerned with driving a specific outcome. Books or short films feel so out-of-kilter with modern digital marketing that it's almost hard to take them seriously as attempts to generate tangible ROI. That makes them the perfect, disarming vehicle for a soft power play. 

Through the disambiguation conducted above, we arrive at a practical definition of soft power, distinct from marketing. It is the combination of an attractive story (content) and an indirect vehicle (form). 

Beyond that, we can say that soft power looks to operate on a longer time horizon and pursues intangible value creation. That raises a new question: is it worth the trouble?

Why bother?

It hardly sounds like the most enticing endeavor: complex, high-effort, and with an uncertain outcome. Why does anyone bother with soft power?

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