WEBVTT - Time's Up for TikTok? 0:00:04.400 --> 0:00:07.800 Welcome to text Stuff, a production from I Heart Radio. 0:00:12.600 --> 0:00:15.720 Hey there, and welcome to tech Stuff. I'm your host, 0:00:15.880 --> 0:00:19.160 Jonathan Strickland. I'm an executive producer with I Heart Radio 0:00:19.280 --> 0:00:22.600 and I love all things tech and Back in March 0:00:22.760 --> 0:00:29.360 twenty twenty, which, according to my notes here was approximately 0:00:29.600 --> 0:00:33.880 a billion years ago, I did an episode about the 0:00:33.960 --> 0:00:38.080 video social media platform TikTok. Now, in case you have 0:00:38.320 --> 0:00:43.320 somehow missed out on the TikTok craze entirely, I'll explain 0:00:43.440 --> 0:00:48.240 what that is briefly. It's an online video sharing app 0:00:48.640 --> 0:00:52.920 that let's users create videos, typically stuff like lip sinking 0:00:53.040 --> 0:00:56.040 videos using an archive of sound clips. But they could 0:00:56.040 --> 0:00:59.800 also shoot very short, like you know, fifteen second long 0:01:00.080 --> 0:01:05.000 videos that can be anything from a stunt to a joke. Uh. 0:01:05.120 --> 0:01:09.840 They can even create really sophisticated editing tricks to make 0:01:09.880 --> 0:01:12.480 it look like you're doing you know, magic tricks and stuff. 0:01:12.959 --> 0:01:15.760 They could use reply feature to create a duet like 0:01:15.880 --> 0:01:19.080 experience where you can create a video that's sort of 0:01:19.120 --> 0:01:21.479 in response to a previous video and have them play 0:01:21.520 --> 0:01:24.000 side by side and create the appearance of an interaction 0:01:24.000 --> 0:01:27.040 between the two. It's pretty cool stuff. Lots of folks 0:01:27.280 --> 0:01:32.119 have used TikTok creatively, from making political or social commentary 0:01:32.600 --> 0:01:35.400 to you know, doing those kind of cool special effects 0:01:35.400 --> 0:01:38.319 sort of videos. I've seen some really clever ones, and 0:01:38.760 --> 0:01:42.480 there's good stuff, and of course there's plenty of bad 0:01:42.560 --> 0:01:45.960 stuff on there too. And by bad, I don't just 0:01:46.080 --> 0:01:49.960 mean folks who haven't mastered the skills of creating videos, 0:01:50.360 --> 0:01:54.800 but also people just you know, behaving badly, spreading misinformation 0:01:55.040 --> 0:01:59.320 or disinformation, or being hateful. In other words, it's a 0:01:59.400 --> 0:02:04.000 microco some of the Internet at large. TikTok was already 0:02:04.040 --> 0:02:10.600 in the news back in March. Now it's August twenty twenty. 0:02:10.720 --> 0:02:14.040 I had to look to make sure and uh, TikTok 0:02:14.120 --> 0:02:16.919 is popping up in headlines again, and enough has happened 0:02:17.040 --> 0:02:19.880 since that March episode that I kind of needed to 0:02:19.919 --> 0:02:23.160 do another episode about this. Part of that is because 0:02:23.200 --> 0:02:26.120 the President of the United States has a bit of 0:02:26.160 --> 0:02:29.960 a vendetta against the service. Now, as I record this, 0:02:30.320 --> 0:02:34.880 he has signed an executive order to impose sanctions against TikTok. 0:02:35.120 --> 0:02:38.520 But by the time you hear this episode, I'll expect 0:02:38.560 --> 0:02:41.840 we'll understand a little more regarding how those sanctions will 0:02:41.880 --> 0:02:45.120 play out. We've got some hints right now, but it's 0:02:45.160 --> 0:02:47.840 still kind of vague. The assumption right now is that 0:02:47.880 --> 0:02:51.800 American companies will be banned from advertising on TikTok, you know, 0:02:51.840 --> 0:02:55.040 advertising is kind of where TikTok gets its revenue, and 0:02:55.160 --> 0:02:59.200 that companies like Apple and Google will remove TikTok from 0:02:59.240 --> 0:03:03.560 their app store, respectively. Trump also stated that the sanctions 0:03:03.560 --> 0:03:06.880 will hit unless the company agrees to a deal where 0:03:06.960 --> 0:03:10.679 some US company will acquire it. In other words, it 0:03:10.720 --> 0:03:14.240 will move from the hands of ownership it currently sits 0:03:14.240 --> 0:03:17.280 in to new ownership. Now, I'll get back to some 0:03:17.360 --> 0:03:21.919 of the reasons that the Trump campaign and administration may 0:03:22.000 --> 0:03:27.280 have to pursue a campaign against TikTok beyond the you know, 0:03:27.520 --> 0:03:30.520 stated reasons. They don't all have to do with trade 0:03:30.520 --> 0:03:33.120 wars and national security in other words, but we'll get 0:03:33.160 --> 0:03:36.040 to that towards the end. Now, another reason TikTok is 0:03:36.040 --> 0:03:39.520 in the news is because Microsoft is making a move 0:03:39.560 --> 0:03:43.560 to purchase some or perhaps all of TikTok. It all 0:03:43.560 --> 0:03:47.480 depends on the reports you read and believe, and whether 0:03:47.560 --> 0:03:49.600 or not it's it talks to acquire some of it 0:03:49.680 --> 0:03:51.880 or the whole ding dang durn thing. I mean, at 0:03:51.880 --> 0:03:55.400 the time I'm recording this. Microsoft disputes that it's after 0:03:55.480 --> 0:03:58.040 the whole company. Part of it has to do with 0:03:58.080 --> 0:04:01.680 an ongoing discussion about whether or not TikTok stands as 0:04:01.680 --> 0:04:06.360 a threat to national security in the United States, because again, 0:04:06.400 --> 0:04:10.120 the parent company for TikTok is a Chinese company called 0:04:10.200 --> 0:04:13.600 byte Dance. So when Trump is saying an American entity 0:04:13.840 --> 0:04:17.000 must buy TikTok, the current candidate to do just that 0:04:17.120 --> 0:04:20.000 happens to be Microsoft. But what I really want to 0:04:20.000 --> 0:04:23.320 focus on for much of this episode is what Microsoft 0:04:23.360 --> 0:04:25.720 and the US government are kind of using as a 0:04:25.760 --> 0:04:29.760 justification to rest ownership of TikTok away from byte Dance, 0:04:30.200 --> 0:04:33.160 at least in some parts of the world. And that's 0:04:33.200 --> 0:04:36.919 the Committee on Foreign Investment in the United States or 0:04:37.160 --> 0:04:40.760 c f i u S. Because whether you care about 0:04:40.800 --> 0:04:44.200 TikTok or not, this committee has played a big part 0:04:44.320 --> 0:04:47.480 in several big moves in the tech industry, or in 0:04:47.520 --> 0:04:53.279 some cases prevented big moves from ever happening. So let's 0:04:53.360 --> 0:04:57.520 trace the history of this committee, because until recently, I 0:04:57.520 --> 0:04:59.560 don't think a lot of people had heard about it. 0:04:59.640 --> 0:05:02.120 Even out you may not have heard about it unless 0:05:02.120 --> 0:05:05.680 you were specifically looking into news stories about all this stuff, 0:05:06.240 --> 0:05:09.240 but the Committee has been active for a while and 0:05:09.680 --> 0:05:14.560 has been instrumental in some major deals, and yet tends 0:05:14.600 --> 0:05:18.160 to kind of get overlooked. By the end of this episode, 0:05:18.200 --> 0:05:21.160 I'll talk more about what's specifically going on with TikTok, 0:05:21.279 --> 0:05:23.640 as well as my own sort of complicated thoughts on 0:05:23.680 --> 0:05:26.320 the whole thing, because this is one of those situations 0:05:26.360 --> 0:05:31.479 where I really don't know what the right move is. Now. 0:05:31.680 --> 0:05:34.480 Like a lot of historical stories, it can be tricky 0:05:34.520 --> 0:05:37.719 to figure out just where I should begin with this one. 0:05:37.880 --> 0:05:40.760 I mean, you can cite a specific law or action, 0:05:41.320 --> 0:05:44.400 but chances are whatever you site will have a precedent. 0:05:44.839 --> 0:05:46.360 And I don't want to trace this all the way 0:05:46.360 --> 0:05:49.200 back to the founding of the United States or even 0:05:49.200 --> 0:05:52.320 further back than that. But really we need to focus 0:05:52.360 --> 0:05:55.640 on the modern industrial age. So for that reason, I'm 0:05:55.680 --> 0:05:58.520 going to talk first about the War Powers Act of 0:05:58.600 --> 0:06:03.160 World War Two. Nineteen forty one, Japanese forces attacked the 0:06:03.279 --> 0:06:07.560 US at Pearl Harbor in Hawaii. Two weeks later, the U. 0:06:07.640 --> 0:06:10.760 S Government put into place the War Powers Act of 0:06:10.880 --> 0:06:14.880 nineteen forty one. This act expanded the federal government's powers 0:06:14.920 --> 0:06:18.480 and authority, giving the Executive Branch. For those who are 0:06:18.520 --> 0:06:21.640 not familiar, that would be the branch that the president 0:06:21.880 --> 0:06:25.560 is in. Gave that branch a great deal of flexibility 0:06:25.640 --> 0:06:28.440 to reshape the government to focus efforts on all things 0:06:28.520 --> 0:06:31.800 related to war. Then you had the War Powers Act 0:06:31.800 --> 0:06:35.719 of nineteen forty two. That one gave US military branches 0:06:35.800 --> 0:06:38.640 the authority to seize US land for the purposes of 0:06:38.760 --> 0:06:42.280 establishing and expanding bases, among other things, and it also 0:06:42.320 --> 0:06:45.080 allowed the government to fast track the research and development 0:06:45.120 --> 0:06:49.120 of atomic weapons, leading to the Manhattan Project. The president 0:06:49.200 --> 0:06:53.200 here was that in times of national emergency, the federal 0:06:53.240 --> 0:06:56.880 government could expand powers beyond what would normally be acceptable 0:06:57.080 --> 0:07:00.839 in the United States. By nineteen fifty, the US was 0:07:00.880 --> 0:07:04.360 in a post World War to boom period. But that 0:07:04.480 --> 0:07:08.080 year the Korean War started and the US got involved. 0:07:08.400 --> 0:07:11.520 While the central conflict was in Korea. For the US, 0:07:11.960 --> 0:07:15.720 this was part of an ongoing power struggle with the 0:07:15.720 --> 0:07:19.520 then Soviet Union. The US government passed a law called 0:07:19.520 --> 0:07:24.520 the Defense Production Act of nineteen fifty. This law granted 0:07:24.560 --> 0:07:28.000 powers to the US president to influence domestic businesses for 0:07:28.040 --> 0:07:31.760 the purposes of national defense. The ideas that, again, in 0:07:31.800 --> 0:07:35.520 a time of crisis, the president can command industry in 0:07:35.560 --> 0:07:39.800 this country to provide what is deemed quote essential materials 0:07:39.840 --> 0:07:43.920 and goods end quote for the purposes of boosting national defense. 0:07:44.600 --> 0:07:48.520 So now the powers of the government were again expanded 0:07:48.680 --> 0:07:51.240 and president was set in which a U. S President 0:07:51.560 --> 0:07:55.800 could issue directives to private industry. By the way, if 0:07:55.840 --> 0:07:59.160 you are so inclined, that act is available for free 0:07:59.240 --> 0:08:01.480 on the internet. You can read the whole darn thing 0:08:01.520 --> 0:08:05.320 if you like. It's more than a little dry, if 0:08:05.360 --> 0:08:10.000 I'm being honest. This brings us up to nineteen seventy. Coincidentally, 0:08:10.440 --> 0:08:14.000 the year I was born. Gerald Ford, who had served 0:08:14.040 --> 0:08:17.840 as vice president to Richard Nixon, was president at this point. 0:08:17.960 --> 0:08:22.000 After Nixon had resigned due to the Watergate scandal, Ford 0:08:22.120 --> 0:08:26.600 issued an executive order, Executive Order number one one eight 0:08:26.800 --> 0:08:31.800 five eight to be precise, titled quote foreign investment in 0:08:31.840 --> 0:08:35.959 the United States in the quote, and this executive order 0:08:36.160 --> 0:08:39.920 cited section seven twenty one of the Defense Production Act 0:08:39.960 --> 0:08:43.080 of nineteen fifty. So there's a lot that we have 0:08:43.160 --> 0:08:48.040 to unpack here. First, What exactly is an executive order? Well, 0:08:48.080 --> 0:08:51.240 it's an official directive from the President of the United States. 0:08:51.520 --> 0:08:55.880 The commands some action of the federal government. Every president 0:08:56.080 --> 0:08:59.959 in US history has signed at least one executive order. 0:09:00.440 --> 0:09:03.640 George W. Bush signed two d ninety one of them 0:09:03.720 --> 0:09:06.600 during his two terms. That made him the president who 0:09:06.720 --> 0:09:11.319 issued the most executive orders in history. Executive orders are 0:09:11.440 --> 0:09:15.280 legal documents and typically instruct various government powers to take 0:09:15.320 --> 0:09:20.840 specific actions. They're not always straightforward legal documents, and they 0:09:20.840 --> 0:09:24.760 are sometimes controversial, and occasionally they end up being challenged 0:09:24.880 --> 0:09:29.520 or even ignored. Okay, So what was Section seven twenty 0:09:29.600 --> 0:09:33.720 one of the Defense Production Act of nineteen fifty as amended? 0:09:34.240 --> 0:09:36.400 Because the Act has been amended since it was first 0:09:36.400 --> 0:09:38.960 issued in nineteen fiftyes, so that's how we refer to 0:09:39.000 --> 0:09:43.120 it now. Well, Section seven twenty one falls under the 0:09:43.240 --> 0:09:47.240 General Provisions under Title seven of the Act, and the 0:09:47.280 --> 0:09:53.160 title of that section is quote Authority to review certain mergers, acquisitions, 0:09:53.200 --> 0:09:57.240 and takeovers end quote. Now, essentially, this part of the 0:09:57.280 --> 0:10:00.640 Act established the authority of the federal government to investigate 0:10:00.679 --> 0:10:07.240 any planned major changes in ownership among certain companies. Certain 0:10:07.559 --> 0:10:12.760 doesn't really get defined, but the implication is companies that 0:10:12.800 --> 0:10:15.960 are important to the welfare of the United States. So 0:10:16.040 --> 0:10:19.520 the idea here is that some companies might be vitally 0:10:19.679 --> 0:10:23.000 important to the US and for national security, and so 0:10:23.440 --> 0:10:27.320 the ownership of those companies is a matter of national interest. 0:10:27.720 --> 0:10:30.800 It's also important if you want to avoid situations such 0:10:30.800 --> 0:10:34.640 as monopolies, where a single company or really a small 0:10:34.640 --> 0:10:38.040 group of companies dominates an industry to a point that 0:10:38.120 --> 0:10:42.880 it hurts citizens and it discourages competition. The Act expressly 0:10:42.880 --> 0:10:46.520 gives the President authority to quote take such action for 0:10:46.559 --> 0:10:50.680 such time as the President considers appropriate, to suspend or 0:10:50.720 --> 0:10:54.960 prohibit any covered transaction that threatens to impair the national 0:10:55.000 --> 0:10:59.520 security of the United States end quote. Covered transaction just 0:10:59.800 --> 0:11:04.880 means that certain types of transactions like mergers and acquisitions 0:11:04.920 --> 0:11:08.920 are specifically covered by the section. The big, big time stuff. 0:11:08.960 --> 0:11:13.160 Not like this company has gone into a limited partnership 0:11:13.160 --> 0:11:15.200 with this other company for the purposes of this one 0:11:15.240 --> 0:11:19.679 and only thing that would probably fall outside of covered transactions. 0:11:20.000 --> 0:11:24.319 So the US President may halt any covered company transaction 0:11:24.400 --> 0:11:27.199 that could stand as a threat to US security. Now 0:11:27.200 --> 0:11:29.920 there's a lot more nuanced to this, but there's not 0:11:30.040 --> 0:11:33.239 much point in going through it all in this podcast. 0:11:33.280 --> 0:11:37.120 It would get bogged down super fast. Ford's executive order 0:11:37.400 --> 0:11:42.040 officially established the Committee on Foreign investment, which was first 0:11:42.040 --> 0:11:45.640 outlined in that nineteen fifty Act and the original Acts 0:11:45.640 --> 0:11:49.160 stated that the membership of this committee would include the 0:11:49.200 --> 0:11:54.920 following US officials Secretary of the Treasury, Secretary of Homeland Security, 0:11:55.280 --> 0:12:00.320 Secretary of Commerce, Secretary of Defense, Secretary of State, the 0:12:00.360 --> 0:12:04.280 Attorney General of the United States, the Secretary of Energy. 0:12:04.480 --> 0:12:08.480 And then there were two non voting members of the committee, 0:12:08.720 --> 0:12:12.480 the Secretary of Labor and the Director of National Intelligence. 0:12:13.000 --> 0:12:18.200 Now these are mostly appointed offices, meaning the President appoints 0:12:18.240 --> 0:12:22.200 those officers. Some of them require confirmation from the Senate 0:12:22.280 --> 0:12:25.199 before that can happen. But you could argue that this 0:12:25.320 --> 0:12:28.720 deck is kind of stacked in the favor of the 0:12:28.760 --> 0:12:33.280 executive branch because the President is the one who's appointing 0:12:33.320 --> 0:12:38.600 all these individuals. Ford's Executive Order in nineteen added two 0:12:38.840 --> 0:12:41.320 new members to this committee, and that would be the 0:12:41.400 --> 0:12:45.520 United States Trade Representative and the Director of the Office 0:12:45.600 --> 0:12:49.840 of Science and Technology Policy. Plus both the nineteen fifty 0:12:49.840 --> 0:12:53.599 Act and the nineteen seventy Executive Order made allowances for 0:12:53.640 --> 0:12:56.720 the President to appoint any other heads of agencies or 0:12:56.760 --> 0:13:00.360 offices to the committee on a case by case basis. 0:13:00.679 --> 0:13:04.199 The U s Secretary of the Treasury acts as chairperson 0:13:04.320 --> 0:13:07.640 for this committee, and the rules by which the Committee 0:13:07.720 --> 0:13:12.160 may review transactions gets fairly complex and they're often open 0:13:12.240 --> 0:13:16.480 to interpretation. Not all transactions fall under the purview of 0:13:16.480 --> 0:13:19.559 this group, as I mentioned, and moreover, deciding which proposed 0:13:19.559 --> 0:13:24.880 transactions could impact national security isn't really cut and dried either, 0:13:25.280 --> 0:13:28.119 So in some respects you could say that the Committee 0:13:28.160 --> 0:13:31.559 defines whether or not an individual case is a potential 0:13:31.720 --> 0:13:38.760 national security matter, case by case. So it's frustrating because 0:13:38.800 --> 0:13:41.559 there's not like a clear and dry set of rules 0:13:41.600 --> 0:13:43.600 that you could look at and say, all right, well 0:13:43.640 --> 0:13:46.760 this falls outside of that, so everything's okay or no, 0:13:47.120 --> 0:13:50.760 that rule covers this particular case, so we've gotta adjust things. 0:13:51.280 --> 0:13:55.080 It's a little more free form than that. Back in 0:13:56.200 --> 0:13:59.560 when Ford really got the Committee into action, much of 0:13:59.600 --> 0:14:03.679 the needs that were under scrutiny fell into the energy sector. 0:14:04.000 --> 0:14:07.440 The world was going through an oil crisis, more countries 0:14:07.440 --> 0:14:11.360 were industrializing, and their need for resources was on the rise. 0:14:12.040 --> 0:14:17.920 Industrialized countries got industrialized er, which isn't a word, but 0:14:18.000 --> 0:14:20.960 by that I mean they grew more complex and their 0:14:21.000 --> 0:14:25.760 need for energy resources was growing as well. Moreover, here 0:14:25.800 --> 0:14:29.160 in the US, we were depending heavily on oil from 0:14:29.200 --> 0:14:32.840 foreign countries. We weren't producing enough domestically to meet all 0:14:32.840 --> 0:14:37.040 our needs. So this was truly a matter of national security. 0:14:37.080 --> 0:14:40.360 As the oil crisis taught us, is that if that 0:14:40.520 --> 0:14:44.640 supply gets cut off, then we find ourselves in trouble 0:14:44.680 --> 0:14:49.560 pretty quickly. So energy power and national security are very 0:14:49.600 --> 0:14:55.240 clearly tied together, pretty tightly. The tech sector, on the 0:14:55.240 --> 0:14:59.480 other hand, was generally ignored at this time. Now their 0:14:59.520 --> 0:15:02.840 works options. There was the time where the US government 0:15:02.840 --> 0:15:06.840 accused a group of Japanese companies of colluding to sell 0:15:06.880 --> 0:15:11.200 electronics here in the US at below market prices, all 0:15:11.200 --> 0:15:14.840 in an effort to undermine the tech industry in the 0:15:14.920 --> 0:15:18.240 United States and to undermine American companies. And that was 0:15:18.280 --> 0:15:22.360 totally happening, and moreover, ultimately the US failed to really 0:15:22.400 --> 0:15:26.320 do anything about it, but tech companies largely fell outside 0:15:26.360 --> 0:15:31.360 the scope of this committee. However, tech has changed significantly 0:15:31.480 --> 0:15:35.280 over the past forty years. Major tech companies are now 0:15:35.400 --> 0:15:39.960 global entities. The shift to cloud services means that data 0:15:40.080 --> 0:15:44.320 isn't just stored in one data center on domestic territory. 0:15:44.480 --> 0:15:47.480 You've got data centers around the world, and that's a 0:15:47.560 --> 0:15:50.960 necessary component if you want to provide a global service 0:15:51.040 --> 0:15:53.880 and you know, not have terrible latency when people are 0:15:53.920 --> 0:15:57.840 far from those domestic data centers. You've also got hardware 0:15:57.920 --> 0:16:02.400 and software interacting with one another. They're exchanging information, creating 0:16:02.440 --> 0:16:05.960 new ways for data to power various services. But that 0:16:06.040 --> 0:16:09.280 also means that the data is passing through numerous hands. 0:16:09.800 --> 0:16:13.200 Data is powerful stuff. I mean, it's really the currency 0:16:13.400 --> 0:16:16.560 of the technological age. The more data you have at 0:16:16.560 --> 0:16:20.040 your disposal, the more influence you've got, and the more 0:16:20.080 --> 0:16:23.800 money you make, the more catastrophic an event you could cause, 0:16:23.840 --> 0:16:28.240 either by accident or we're on purpose. By the twenty tens, 0:16:28.280 --> 0:16:32.800 we started seeing the aggressive startup company culture that dominates 0:16:32.840 --> 0:16:36.560 the tech world today, and founders would launch a company 0:16:36.600 --> 0:16:39.960 typically around you know, like an app of some sort, 0:16:40.040 --> 0:16:43.520 and then they would seek out investment. The ideas that 0:16:43.560 --> 0:16:46.800 we're really compelling would get a ton of money behind them. 0:16:47.120 --> 0:16:51.080 For a lot of tech company founders, the goal was 0:16:51.200 --> 0:16:55.800 never necessarily to build a working, profitable app as a 0:16:56.040 --> 0:16:59.080 sustainable business, but rather to create an idea that is 0:16:59.120 --> 0:17:04.080 so interesting ing that some other more established entity, like 0:17:04.200 --> 0:17:09.040 an enormous company on the scale of Google, would sweep 0:17:09.080 --> 0:17:11.720 in and then purchase the whole ding ding during thing 0:17:11.800 --> 0:17:16.160 for like a ridiculous amount of money. Then as a founder, 0:17:16.200 --> 0:17:19.560 you could either go buy an island somewhere, or better yet, 0:17:19.640 --> 0:17:22.800 you do the whole dance again, only with a new idea. 0:17:23.480 --> 0:17:27.240 But investment can come from places other than US based 0:17:27.280 --> 0:17:30.440 companies like Google. It can come from venture capital firms 0:17:30.560 --> 0:17:34.560 or interested companies that might have their roots in other nations. 0:17:35.240 --> 0:17:38.400 Some of those nations might not have the friendliest perspective 0:17:38.440 --> 0:17:41.840 regarding the United States, and that was starting to look 0:17:41.880 --> 0:17:44.920 like a problem. I'll explain a little bit more after 0:17:44.960 --> 0:17:55.480 we take this short break. So there was a growing 0:17:55.520 --> 0:17:58.600 realization towards the end of the twenty tens that, you know, 0:17:58.840 --> 0:18:02.080 maybe data is impoor it. Well, I should say there 0:18:02.160 --> 0:18:06.440 was a growing realization within the US government. The tech 0:18:06.480 --> 0:18:12.360 world had long had a deep understanding about this. Google, Facebook, 0:18:12.400 --> 0:18:18.080 and other companies didn't become multibillion dollar global corporations by chance. 0:18:18.640 --> 0:18:23.080 They did it by realizing how valuable data is, including 0:18:23.280 --> 0:18:26.840 but not limited to the personal data of their user 0:18:26.960 --> 0:18:31.320 basis you know, you and me. People and companies will 0:18:31.440 --> 0:18:34.639 pay for data, or for access to data, or for 0:18:34.680 --> 0:18:38.919 ways to leverage data, but governments tend to be a 0:18:38.920 --> 0:18:42.560 little more slow on the uptake, particularly when it comes 0:18:42.560 --> 0:18:46.119 to technology. It's not uncommon for us in the United 0:18:46.160 --> 0:18:49.920 States to see governments only address issues revolving around tech 0:18:50.480 --> 0:18:54.720 after those issues have grown to become potential or actual threats. 0:18:55.400 --> 0:18:59.159 Even in an era of data breaches, security leaks, and 0:18:59.240 --> 0:19:03.280 predatory business practices, it takes a while for the government 0:19:03.320 --> 0:19:06.480 to come up with a response beyond pulling a tech 0:19:06.600 --> 0:19:10.840 leader into a special hearing in Congress and then, you know, 0:19:11.840 --> 0:19:15.040 not really doing anything else about it. I mean, sometimes 0:19:15.359 --> 0:19:19.280 they might impose a fine on these companies, and sometimes 0:19:19.320 --> 0:19:21.400 that could be in the range of hundreds of millions 0:19:21.400 --> 0:19:24.040 of dollars, which, don't get me wrong, that's a lot 0:19:24.040 --> 0:19:27.240 of money. But the crazy thing is these companies deal 0:19:27.320 --> 0:19:31.399 in the billions of dollars, and so a hundred million 0:19:31.440 --> 0:19:35.040 dollars that's unimaginable to me. That's so much money, But 0:19:35.600 --> 0:19:38.040 it would just show up as a relatively minor blip 0:19:38.400 --> 0:19:42.120 on some of these companies ledgers. Moreover, I would say 0:19:42.200 --> 0:19:45.600 that the guiding spirit of technological development in the Internet 0:19:45.640 --> 0:19:49.280 age has been one of optimism, perhaps even to the 0:19:49.320 --> 0:19:52.520 point of naivete. When you read up on how the 0:19:52.640 --> 0:19:55.680 architects of the Internet and the Web viewed their work. 0:19:56.040 --> 0:19:59.359 You tend to see ideas like how information wants to 0:19:59.400 --> 0:20:03.000 be free, and that the ability to exchange ideas freely 0:20:03.320 --> 0:20:09.400 leads to better outcomes and better communication. The ideals are admirable, 0:20:09.440 --> 0:20:13.639 but because information has value, and because that means you 0:20:13.640 --> 0:20:18.080 can use information to create an advantage, either economically or 0:20:18.119 --> 0:20:22.119 strategically or in some other way, it just hasn't really 0:20:22.240 --> 0:20:27.600 panned out to be a data utopia. You probably you 0:20:27.680 --> 0:20:32.439 probably have noticed this yourself. So while the design of 0:20:32.480 --> 0:20:36.359 the web and the Internet mostly orbited this general point 0:20:36.400 --> 0:20:39.600 of view that data should be able to move effortlessly 0:20:39.680 --> 0:20:44.280 across networks, that doesn't line up with how entities like 0:20:44.880 --> 0:20:50.400 governments tend to view information. To a government, information can 0:20:50.440 --> 0:20:54.520 be an asset, something that could give the respective country 0:20:54.600 --> 0:20:58.280 a leg up on other countries. Governments typically are not 0:20:58.359 --> 0:21:03.719 in favor of giving advantages. Certainly the US government is 0:21:03.760 --> 0:21:07.359 not keen on that idea. So when you start viewing 0:21:07.440 --> 0:21:11.720 data as another national asset, it becomes imperative that you 0:21:11.760 --> 0:21:15.160 figure out ways to protect that asset. You don't want 0:21:15.200 --> 0:21:19.639 it to flow freely. And there's one major component I 0:21:19.720 --> 0:21:23.120 haven't really talked about yet when it comes to this 0:21:23.200 --> 0:21:28.320 whole situation, and that's the specific role of China, not 0:21:28.440 --> 0:21:32.680 just a foreign country in general, but China in particular. 0:21:33.160 --> 0:21:37.120 Over the past decade, Chinese companies have become far more 0:21:37.160 --> 0:21:41.840 active in the tech space, making significant investments in numerous 0:21:41.920 --> 0:21:47.480 tech companies. This ranges from social media platforms to game companies, 0:21:47.480 --> 0:21:51.239 to communications companies and everything in between, and that has 0:21:51.359 --> 0:21:56.040 raised concerns in some other nations, particularly in the United States. 0:21:56.480 --> 0:21:59.359 A big reason for this is that China and the 0:21:59.480 --> 0:22:05.000 US frequently find themselves on unfriendly terms. It's not quite 0:22:05.080 --> 0:22:09.040 a full on Cold War status like the United States 0:22:09.040 --> 0:22:11.359 had with a good old U. S. S R. But 0:22:11.440 --> 0:22:15.280 it's not buddy buddy. The US and China depend heavily 0:22:15.440 --> 0:22:19.560 on one another economically, and that makes things particularly tricky. 0:22:19.920 --> 0:22:22.879 At times. One country will attempt to put leverage on 0:22:22.920 --> 0:22:27.280 the other through various trade restrictions or sanctions or levies 0:22:27.440 --> 0:22:30.320 or whatever. We've seen that quite a few times over 0:22:30.359 --> 0:22:33.720 the last couple of years. But there's a concern in 0:22:33.760 --> 0:22:36.840 the US that if China gets much more influential, it 0:22:36.880 --> 0:22:40.800 will become the leading world power and possibly extend its 0:22:40.840 --> 0:22:46.640 influence beyond its own borders and beyond economic influence. China's 0:22:46.640 --> 0:22:50.880 government is very different from the United States. The country 0:22:50.920 --> 0:22:54.160 has a lot of state backed companies, meaning the Chinese 0:22:54.160 --> 0:22:58.000 government will actively support certain companies and give them a 0:22:58.160 --> 0:23:02.320 huge boost in capability or limit any competition that they 0:23:02.359 --> 0:23:05.840 might face from foreign competitors. By the way, there's a 0:23:05.840 --> 0:23:09.080 whole discussion we can have about how in the United 0:23:09.080 --> 0:23:12.600 States companies can sometimes get similar benefits, but that's a 0:23:12.640 --> 0:23:15.480 topic for another show. And a huge issue for the 0:23:15.520 --> 0:23:19.160 United States is that the Chinese government is effectively dominated 0:23:19.200 --> 0:23:23.800 by the Chinese Communist Party. This party is involved, sometimes 0:23:23.880 --> 0:23:27.919 at very intrinsic levels, in pretty much every aspect of 0:23:27.960 --> 0:23:33.080 life in China, including business. The government requires companies operating 0:23:33.080 --> 0:23:35.960 in China to reserve a spot in their committees for 0:23:36.160 --> 0:23:40.480 representatives of the Communist Party. This pretty much fundamentally goes 0:23:40.520 --> 0:23:44.119 against the economic philosophy of the United States, which typically 0:23:44.280 --> 0:23:48.240 condemns the government getting involved in any sort of decision 0:23:48.440 --> 0:23:53.679 making capacity for an individual company. Another big kicker is 0:23:53.720 --> 0:23:57.760 that back on June two thousand and seventeen, the Chinese 0:23:57.840 --> 0:24:01.040 government passed a law which the world at large generally 0:24:01.160 --> 0:24:06.120 refers to as China's National Intelligence Law. The law created 0:24:06.240 --> 0:24:11.120 obligations for Chinese companies and citizens and to certain foreign 0:24:11.280 --> 0:24:16.320 individuals operating within China. As Murray Scott Tanner, writing for 0:24:16.520 --> 0:24:20.960 the website lawfare blog dot com puts it, the law 0:24:21.080 --> 0:24:27.800 quote repeatedly obliges individuals, organizations, and institutions to assist public 0:24:27.840 --> 0:24:31.639 security and state security officials in carrying out a wide 0:24:31.760 --> 0:24:36.840 array of intelligence work end quote. This blog, which I 0:24:36.960 --> 0:24:40.720 highly recommend, by the way, breaks this down into segments. 0:24:41.000 --> 0:24:44.560 It explains that the law includes language giving Chinese intelligence 0:24:44.560 --> 0:24:47.239 agents the authority to go so far as to not 0:24:47.359 --> 0:24:51.399 just demand cooperation from companies and citizens, but even go 0:24:51.920 --> 0:24:58.240 to the limits of uh common deering the communications equipment, transportation, buildings, 0:24:58.240 --> 0:25:01.560 and other facilities of individuals as well as organizations and 0:25:01.680 --> 0:25:05.840 government organs. Now Tanner points out that the vague language 0:25:05.960 --> 0:25:08.840 of the act means that Chinese officials can take a 0:25:08.920 --> 0:25:13.800 fairly broad approach to interpreting and executing upon it, which 0:25:14.200 --> 0:25:17.600 was probably by design. An earlier draft of the law 0:25:17.680 --> 0:25:22.119 specifically mentioned enterprises and companies, but the government struck that 0:25:22.200 --> 0:25:25.040 language from the law before they passed it and made 0:25:25.040 --> 0:25:29.160 it more general, with words like organizations, which leaves room 0:25:29.200 --> 0:25:32.400 for interpretation as to whether the government would assume authority 0:25:32.440 --> 0:25:36.720 to compel a company to cooperate with intelligence demands. Could 0:25:36.720 --> 0:25:39.560 this mean that a company operating in China would be 0:25:39.600 --> 0:25:43.000 obligated to hand over data to the Chinese government if 0:25:43.000 --> 0:25:46.680 intelligence agents demanded it. There are a lot of foreign 0:25:46.720 --> 0:25:52.159 companies that are operating in China, Google, Apple, Disney, A 0:25:52.359 --> 0:25:56.960 T and T, Blkan Sony. All of these have branches 0:25:57.119 --> 0:26:01.640 in China, which makes sense. The Chinese population represents an 0:26:01.840 --> 0:26:05.639 enormous market and expanding there is a no brainer from 0:26:05.680 --> 0:26:08.760 a revenue standpoint. At some point you're going to find 0:26:08.760 --> 0:26:11.800 it hard to continue to grow in a saturated market, 0:26:12.119 --> 0:26:17.119 So getting into a relatively new market is incredibly valuable. 0:26:17.240 --> 0:26:20.040 It's like discovering a new continent and going on a 0:26:20.160 --> 0:26:25.119 land grab. Moreover, what about companies that aren't in China 0:26:25.520 --> 0:26:29.920 but end up being acquired by Chinese companies or investors. 0:26:30.359 --> 0:26:34.600