Goldman Sachs is exercising its "soft power."
The basic idea may have originated with the ancient Chinese poet and philosopher Lao Tzu, but Harvard University’s Joseph Nye popularized the concept of “soft power” way back in 1990.
His timing was apt. The Soviet Union had recently collapsed, some people were declaring “the end of history,” and it looked like the U.S. would single-handedly command the world stage for the coming decades.
Nye’s premise was that the U.S. defeated Communism largely through the exercise of “hard power,” i.e., the threat of over-whelming military and economic force. But getting the rest of the world to follow our lead from that point on, he said, would require the exercise of “soft power,” i.e., the power of attraction.
It was a controversial idea to some. Practitioners of realpolitik, who believe the only power that works in the real world is the kind that can be dropped on cities, considered it naive. But even Machiavelli – the original political realist – noted that, while it’s better to be feared than loved, the ultimate danger is to be hated.
Now there are signs that the likes of Goldman Sachs has discovered the advantages of developing and exercising soft power.
"We have influence,” CEO Lloyd Blankfein told television interviewer Charlie Rose, “but it's the softest of the soft power, the softest of the soft influence. What we do is we put out ideas. We defend our ideas, we are provocative, we show initiative. But at the end of the day, we don't have the power to execute."
Maybe not. But if the ideas a company floats are compelling enough, it can play an important role in shaping the environment within which it operates. In the world of public relations, this is called “thought leadership.”
Blankfein’s chat with Charlie Rose, for example, came in the context of the firm’s “North American Energy Summit” which brought corporate CEOs, public officials, and industry experts together to debate how the region can achieve its energy potential while meeting environmental concerns.
Among the attendees? A host of public officials who once would have thought twice about being seen in the firm’s Wall Street headquarters, including vice president Joe Biden, Treasury Secretary Jacob Lew, Environmental Protection Agency administrator Gina McCarthy, and Energy Secretary Ernest Moniz, as well as several U.S. governors, government officials from Canada and Mexico, and the CEOs of a number of energy companies.
There’s an obvious business benefit to being perceived as the intermediary between such powerful players. But it also gives the firm an attractive “pull” with longer-term benefits. Expect Blankfein and other top Goldman executives to be increasingly outspoken on the topic of environmentally responsible energy development as a spur to job growth. The topic is at the center any Venn diagram of stakeholders' concerns, the firm’s competencies, and its long-term business interests.
That’s where the seeds of soft power are.