Soft Power in Tech

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 French 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 long journeys – the kind that would produce significant wear and tear and precipitate the purchase of new treads.

André hatched a plan unusual in its far-sightedness and obliqueness: the company would launch a guidebook 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. 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 narrative.

As the tech sector matures, this persuasion may become even more relevant. In the coming decade, we should expect startups of different sizes to develop soft power initiatives alongside their core offerings. Those who do will succeed in building distribution and popularizing the narrative that defines their business. They will create a story that wins. That can have wide-reaching effects, both vaporous and tangible.

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 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 you want – co-opts people rather than coerces them.

Though most closely associated with foreign policy, Nye believed 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, shrewd executives know that leadership is not just a matter of issuing commands but attracting others to do what you want. This notion of attraction is critical to Nye’s definition:

Soft 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 articulation makes it easier to place soft power in a business context. In citing examples of corporate soft power on Twitter, a common refrain arose: 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 bland, corporate Medium post 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. Our vision has become clouded by theory.

Sontag’s framework is useful for distinguishing between traditional marketing and soft power. Here’s how both look from the perspective of content and form:

‍Content

“Politics in an information age may ultimately be about whose story wins,” Nye writes. In his words, we can see the core content-level discrepancy between marketing and soft power. 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. It may do so subtly or bluntly, but ultimately, its content makes a demand: will you do this?

For example, a Michelin ad 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 often 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 the guide and its parent company.

Rather than trying to drive a specific outcome, Michelin guides’ content bolsters the parent company’s story. It fortifies a worldview that might be summarized as The world is smaller than you think. Magic is within reach. The resonance of that story should lead to purchasing more Michelin tires, but that outcome almost seems like a coincidence.

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, each demanding a different vehicle.

Since marketing aims to drive a specific outcome, it traditionally works best when closely tethered to the company. The goal in such circumstances is to minimize the distance between intent and purchase. To do that, things like brand recognition and proximity to the moment of purchase matter greatly.

Soft power initiatives sit orthogonal to the central business, ostensibly unconcerned with driving a specific outcome. That may take the form of a guidebook like Michelin or something else. Podcasts, films, exhibits, and magazines are all viable formats. These mediums 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 perfect, disarming vehicles for soft power plays.

The lines are not perfectly drawn, but the above disambiguation gives us a practical definition of soft power and its difference from marketing. In short, it combines 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?

Eroding advantages

In the search for an edge, in a quest to influence customers, companies may have few better options. That’s thanks to the erosion of four strategic advantages upon which startups could once rely:

1. The availability of funding has weakened capital advantages.
2. The popularity of startups and the availability of wisdom have diminished other first-mover advantages.
3. The rationalization of performance marketing has hamstrung acquisition advantages.
4. The noisiness of social channels has impeded distribution advantages.

Although venture funding is down from its bull market peak, the asset class has undoubtedly grown over the past decade. In 2013, global venture funding totaled $25 billion. Last quarter alone, it surpassed $73 billion. Though its rise is not linear, the direction of travel is clear. The result of this proliferation is that it is harder than it used to be to build up a capital advantage.

Even if a company raises hundreds of millions of dollars, its coffers are unlikely to put off motivated competitors or financiers. Hundreds of millions of dollars may have once looked unassailable; now, it’s simply validation.

Other first-mover advantages have also diminished over the past decade. As tech has increased in popularity, industry information and parochial wisdom have spread. This makes it easier for willing entrepreneurs to identify promising ideas and fast-follow. In the process, they may leverage existing playbooks codified by former and current operators. Much of Silicon Valley’s implicit knowledge has been made explicit through dedicated outlets and social media.

Faced with a pitched battle, startups often turn their resources toward acquisition. Here, too, competition has sanded away edges. Whereas once Facebook and Instagram marketing represented a relatively untested channel, making it particularly rewarding for those who mastered it, the world has caught up. Every large company now competes in these arenas, armed with millions of dollars and teams of relentless optimizers. The result is greater competition and higher costs.

To compensate, some businesses have attempted to build up organic distribution channels. Rather than relying on paid marketing, these firms leverage their content marketing chops to develop followings on channels like TikTok, YouTube, Instagram, or Twitter. While there are certainly instances of considerable success, the increasing noisiness of these platforms makes breaking out difficult. Additionally, while this is not an example of “paid” marketing, it does not come for free. Doing it well requires considerable internal buy-in and resources. Ultimately, while ad dollars ensure some degree of visibility, no such promise exists for organic social posting. Companies often find themselves lost in a sea of brighter, funnier, more authentic voices.

Narrative and magnetism

To present soft power as simply a last resort would be misleading. Though traditional advantages may be disappearing, exercising soft power represents an opportunity irrespective of their health.

That’s because companies that popularize a compelling story about themselves create rare magnetism. By distilling its worldview into a phrase or meme (in the Dawkinsian sense of the word), companies earn enduring mindshare and develop a sense of destiny or mythology.

Think, for example, of Stripe. What is the first phrase that comes to mind?

I would guess some variation of “increasing the GDP of the internet.” That you know it at all is remarkable — how many payments companies have a story that rolls off the tongue? What is Adyen’s super-narrative? What is PayPal’s? That framing is part of a larger story Stripe is telling, bolstered by soft power initiatives. (We’ll discuss them a little later.)

What has been the effect of that one articulation? Stripe would be successful without it, certainly. There is much more to that business than a tagline. But distillations like this can subtly alter the trajectory of a company. It’s a narrative that is magnetic to investors (simplifying the complexity of the product and enunciating an unusual, precise view of the internet), talent (advancing a desirable mission that feels worth working on), and the broader ecosystem (signaling this is not just a payments company).

This is a slightly uncomfortable argument to be making in that it’s so utterly unprovable. And yet, if that phrase — and the rest of the story Stripe is telling — has simplified recruitment by just a few percentage points or convinced a few key investors, it will have had an extraordinary impact. As Nye noted:

If a state can make its power seem legitimate in the eyes of others, it will encounter less resistance to its wishes.

Ultimately, soft power provides a smoothing of the terrain in front of you, a greasing of the wheels. To understand its impact, we must study its application.

Modern masters

We have by now established the composition of soft power and impact. To understand it fully, though, we must study its application.

While our investigation focuses on the tech sector, starting with older examples can provide useful framing. Which well-known businesses have mastered the art of soft power?

Drink brand Red Bull is one such example. As outlined in one of The Generalist’s most popular pieces, this company manufactures nothing. It does not even make its own drinks. Instead, Red Bull invests in crafting a mythology. It buys sports teams, sponsors athletes, and hosts competitions. In theory, none of these directly ask you to buy a can of sparkling caffeine – but all promote the maximalist lifestyle that Red Bull is interested in espousing.

LVMH is another classic example, with a particularly interesting twist. It is both an agent and an instrument of soft power. Luxury purchases tend to be hard to justify from a purely rational perspective, no matter how exceptional the raw materials and craftsmanship. To elevate its work (and subtly vindicate its price tag), LVMH engages in all manner of soft power initiatives, producing short films, helping to launch a university, and hosting retrospectives for beloved painters like Mark Rothko. Through these projects, LVMH elevates the importance of its work and creates the idea that what it produces is not perfume, handbags, or clothing. It is art made slightly more accessible.

This is LVMH as an agent of soft power; it is also an instrument. Increasingly, its products are seen as part of “Brand France,” how the rest of the world views the country. Former Minister of Culture Jack Lang – mentioned by Index’s Danny Rimer in a recent interview – highlighted the power of companies like LVMH in international affairs. “Foreign citizens might recognize France now by its brands and names,” Lang said. “It’s an opening. This path will lead them to writers; to the technology that’s advancing in many domains.” For France, LVMH is a way of solidifying a grand narrative.

Who in the worlds of tech and venture capital have aced this art? In the current landscape, three organizations stand out as modern masters: Y Combinator, a16z, and Stripe. Each has a straightforward story and powerful vehicles through which it is shared.

Y Combinator

There are many startup incubators; there is only one Y Combinator. The organization that capitalized companies like Airbnb, Brex, Stripe, and Flexport has unique cultural power in Silicon Valley. Its motto of “Make something people want” has served as pragmatic inspiration for innumerable entrepreneurs. While that slogan serves as a worthy goal for its entrepreneurs, that’s not really the super-story it’s telling about the world. That might sound more like this: Entrepreneurship is a legitimate, learnable discipline that deserves attention from the world’s most ambitious people.

YC is lucky that its leaders have tended to be masters of influence. Founder Paul Graham has written many of the best essays about entrepreneurship. His successor, Sam Altman, is another especially clear and compelling writer. YC’s core narrative is built and bolstered by its archives.

New CEO Garry Tan, a prolific YouTuber, has brought a different flavor of influence to the organization. It has leaned away from its more literary, intellectual soft power initiatives to focus on broader mass-market mediums. Look at its website today, and in just a scroll or two, you’ll come across YouTube thumbnails that wouldn’t look out of place on Mr. Beast’s channel – complete with bold, san-serif fonts and emotive headshots. Head over to the incubator’s revamped Library, and you’ll see more of the same, with featured video and audio series prominently displayed.

YC’s use of video is not new, of course. It has been publishing videos on YouTube for a decade; many of its most popular videos date back at least six years. However, how Tan appears to be emphasizing this medium – and productizing it – suggests a shift in approach. To YC’s credit, they have built up an impressively large audience, with over 1 million YouTube subscribers.

Whether this approach appeals to you or not, you can see the strategy at play. Y Combinator wants its gospel to spread to the next generation of builders; to do that, it believes it must meet them where they congregate with a compelling narrative.

A16z

Though venture capitalists have spent much time and money on branding exercises and content marketing, definitive philosophies are uncommon. Plenty of websites are adorned with information on the kind of founders a firm seeks out or the help they offer. But seeing a VC articulate their beliefs about the world is unusual. (Thesis-driven funds sometimes get close, but these usually map out a commercial opportunity rather than disclose an overriding ontology.)

A16z is the rare VC with an attractive, crystalline story: technology is good. Entrepreneurship and innovation move the world; those who build are worthy of high esteem.

While Marc Andreessen’s “Techno-Optimism Manifesto” is the most direct example of this philosophy, the firm has been advancing it for years. “Software is eating the world” and “It’s time to build” are earlier variations on this theme.

A16z has built ownership around this story through its content efforts. Though it may monetize as a venture firm, it is also a media company. Beneath its umbrella sits six podcasts, eight newsletters, and several other media initiatives, from reports to lists. It hosts live shows, turns its podcasts into snackable video clips, and has key team members publishing books at an impressive cadence. Next up: Chris Dixon’s Read Write Own.

Naturally, not all of a16z’s media initiatives have worked. It pushed Future as the home of its combined media efforts for a time but seems to have pulled back on it. (I really liked this idea – finding the separation from a16z’s brand intriguing.) The site’s most recent posts harken back to the fall of 2022. During the pandemic, it also aggressively leaned into Clubhouse, a fund investment. While its live show is still hosted on the audio platform, it has adapted its media strategy to fit the demands of the rest of the world.

Though a16z is the best example of a soft power venture firm, it is not the only example. First Round Capital is also exceptional. The seed investor has turned the First Round Review into one of the most reliable sources of practical operational advice for founders.

Stripe

Stripe is one of the most adventurous interpreters of soft power. Like YC and a16z, the fintech company has a story: Progress is not an accident. The concerted effort of great builders and thinkers propels humanity.

This encapsulates memorable positioning, including: “Increasing the GDP of the Internet” and “Ideas for progress.” The company primarily disseminates this story through its publishing arm, Stripe Press.

Despite its direct affiliation, Stripe Press provokes a distinctive, emotional feeling. It’s an example of how form affects soft power. By focusing on actual, physical books — and giving them a loving, literary treatment — Stripe shows this project is firmly outside the world of “marketing.” Rather, this is a place for Stripe to demonstrate its ideological affinities and reinforce its philosophical positioning. The affection this project has earned suggests it has found distribution.

To date, Stripe Press has published 15 books. It has also produced a full-length documentary about writer and technologist Stewart Brand, We Are As Gods, and created a podcast about infrastructure, Beneath the Surface.

Like a16z, not all of its strategies have worked. It ran an engineering-focused magazine called Increment for a time, winding it down in 2021. It also purchased the popular entrepreneurial community Indie Hackers in 2017. Patrick Collison’s rationale for the purchase echoed a familiar logic:

Our goal in acquiring Indie Hackers is to simply ensure that the site becomes as successful as possible. The Stripe upside we’re hoping for is that more companies get started and that they’re more successful. We already see a very large fraction of new internet companies choose Stripe; we’re mainly hoping that Indie Hackers can help us grow the overall number rather than to grow our fraction. (Our product has to do the latter part.)

Just as the Michelin brothers launched guides to increase automobile usage, Stripe’s incorporation of IH aimed to expand the market. (See also: Stripe Atlas.) Though strategically compelling from that vantage, it doesn’t seem to have worked as well as Stripe might have liked. Earlier this year, Indie Hackers’ team announced it was spinning out into an independent organization again, with Stripe’s blessing and investment.

Patching storytelling

How can companies address deficits in soft power?

Most obviously, they can invest in it via in-house initiatives. Even moderately sized tech companies have large marketing teams capable of running interesting experiments, especially if augmented with external talent. Business banking platform Mercury has made strides in this area over the past couple of years, launching a glossy, thoughtful publication named Meridian.

It can be difficult to prioritize soft power initiatives given their uncertain timelines and pay-offs. But tech founders, in particular, should be used to this sort of bet. There is plenty of risk and ambiguity, but the impact can be profound.

Another approach is looking to the creator economy. As those following this newsletter know, the last few years have given rise to an unbundling in media. Platforms like Substack have drawn talent from traditional outlets while spawning a new generation of creators. This has allowed many to make an income from their abilities, but it is a tricky business. As Dave Nemetz highlights, succeeding in this world requires a mix of “creativity,” “audience building,” and “operational excellence.”

Though the sector is awash with talent, much of it is untethered, learning to execute on the fly, trying to duct-tape together infrastructure in tandem with artistic expression. The result is a fractured, semi-professionalized ecosystem in which creators vie for consumer attention. While some will prefer to succeed on their terms, either learning or adding missing skills, many excellent storytellers may feel most effective when supported by a more mature business.

One solution could be patching on storytelling capabilities via acquisition. Just as developers patch up weaknesses in their code, businesses can seek to address missing pieces through M&A. Bringing on a creator company can solve problems for both parties: providing security and liquidity for creators and bringing soft power to businesses.

This might make more sense than seeing legacy media businesses bundling up the budding creator class. For one thing, tech companies are arguably in greater need of creators’ abilities. While media conglomerates already have distribution and narrative chops, this is considerably rarer in other businesses. Neatly, an acquisition also solves the matter of obliqueness. While some companies can spin up soft power initiatives in-house that operate with admirable subtly, it is a difficult needle to thread. Buying an existing creator business solves this problem.

Valuing these creator companies may present a particular challenge. While looking at traditional metrics offers one approach, buyers should instead ask how such an acquisition might accelerate the business’s core functions. Given the intangibility of soft power, that query is tough to answer and rather idiosyncratic. And yet, to look only at the downside would be foolish — how might a cleaner narrative and inbuilt distribution change the magnetic field of a business?

In particular, those operating in commodified fields with highly variable outcomes may find a soft power patch critical. Venture capital fits this bill, of course. How revolutionary might it be to have a respected storytelling entity onboard in a sea of undifferentiated funds? What effect would adding a strong creator business have on winning a deal? When the outcome of winning one great deal can be so monumental — returning a fund many times over — what is the value of an entity that raises your odds, across the board, by a few percentage points?

In this light, the solution to being storyless looks obvious: buy the storyteller.

“Power is also like love, easier to experience than to define or measure, but no less real for that.”

Nye’s words feel especially true of the influence he identified: soft power. While military and economic strength has obvious manifestations, stories, values, and shared beliefs are impossibly immaterial. And yet, as Nye notes, that does not make them less real. Soft power is still power, after all.

As tech companies and capitalists find themselves constrained by an increasingly competitive, cacophonous environment, they may realize that exercising control is best managed through subtle means. That may see more organizations emulate masters like Red Bull and LVMH and follow in the footsteps of tech’s best exponents, Y Combinator, a16z, and Stripe.

Slowly but surely, true soft power is coming to tech. It will be happy to go undetected.

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*There is no good place to put this bit of trivia, but I can’t, in good conscience, leave it out. In his native France, the Michelin Man’s name is “Bibendum,” taken from the Latin phrase, “Nunc est bibendum,” or “Now is the time to drink.” It’s not exactly the best name for a company equipping drivers. It referenced Michelin’s promise to “drink up obstacles” it faced. Look at this nightmare.