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Meet the 'American' TikTok

Image: Caspers / Protocol
TikTok Made in China

Good morning! This Monday, the TikTok deal seems to be done (and it doesn't seem to do much), other countries are following America's lead in getting involved with tech companies, and Satya Nadella is a half-decent baseball player.

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The Big Story

Meet the 'American' TikTok

After all that, we have an actual TikTok deal. At least, it looks that way: We've all learned to never say anything for certain here.

For the most part, it's the same one we've been talking about for the last week. TikTok will become its own company, TikTok Global, with Oracle and Walmart taking a minority stake of 12.5% and 7.5%, respectively.

  • TikTok also promised to work with its investors to create "an educational initiative" for teaching kids all over the country. Like TikTok, but for school, I guess?
  • TikTok also promised to pay $5 billion in "new tax dollars to the U.S. Treasury."
  • There's been some confusion over those two separate contributions, though, with President Trump appearing to conflate them on Saturday when he said the deal included "about a $5 billion contribution toward education," which he said satisfied his demand that the government get paid as part of the deal. But ByteDance claimed Sunday to be unaware of a $5 billion education program.

ByteDance will own 80% of TikTok Global, The New York Times reported, though reports over the weekend pointed out that the percentage of Chinese ownership is diluted slightly by the fact that ByteDance has non-Chinese investors.

  • In fact, there are some complicated mental gymnastics that make the company look like it's majority American-owned — and you can bet the Trump administration will do those gymnastics.
  • One source told the Times that when including the Oracle and Walmart stakes and considering stakes in ByteDance, it's possible to claim that TikTok's new ownership would be made up of 53% American investors.
  • But appearing to undermine that line of thinking, ByteDance said Monday that TikTok Global would be its subsidiary, according to Reuters. The company added that the idea that U.S. investors would be TikTok Global's majority owners was a "rumor."

If all this was really about national security, was anything accomplished? As Emily Birnbaum and Issie Lapowsky wrote on Protocol, there still seem to be plenty of remaining concerns, and likely even more being discussed inside CFIUS that we have no knowledge of. But here's one key point: TikTok's core algorithms and tech will still be in China, and the Chinese government appears to like the deal.

  • In announcing the deal, Oracle called itself "TikTok's secure cloud technology provider," and Safra Catz said that "Oracle will quickly deploy, rapidly scale, and operate TikTok systems in the Oracle Cloud."
  • So, basically, two things actually happened. A couple of American companies got a stake in a Chinese company, and one of those American companies got a lucrative cloud-services contract.

Nothing's been officially signed yet, but Trump said on Saturday: "I have given the deal my blessing." All sides saw that as the toughest domino to topple, and the rest should go quickly now.

Meanwhile on the campaign trail, Joe Biden essentially shook his head at the whole thing: "All of a sudden he's decided he's going to deal with TikTok, and he's talking about how we have to make money off of it. I mean what the hell is he talking about. Either it is a security risk or isn't a security risk."

What's Next

Everyone's learning a TikTok lesson

The longest-lasting effect of this deal won't have anything to do with TikTok. Instead, it looks like the machinations of the last few months could change the way companies and countries do business. It seems like it's now normal for politicians to get super involved in these deals? Here we go.

  • The EU is considering giving itself the ability to make tech companies sell or break off their European operations, Thierry Breton, an EU commissioner who's helping write the region's new digital rules, told the FT. "There is a feeling from end users of these platforms that they are too big to care," he said.
  • China is preparing "a blacklist of foreign companies" that threaten China, The New York Times reported, similar to the way the White House said TikTok threatened the U.S.
  • And the U.S. government continues unabated: It's now looking at Tencent's holdings in the U.S., Bloomberg reported, which includes everything from Snapchat to Epic to Riot Games. As we've mentioned before, that could have much bigger ramifications than banning TikTok.

Expect this kind of intrusion to continue, and for the idea of a global tech company to become a lot more complicated in the near future. This will surely end in a lot of legal battles around the world, looking at how much power governments have to involve themselves in these ecosystems.

The next one to watch is WeChat. Its fortunes in the U.S. have whipsawed this weekend:

  • A federal judge Sunday issued an injunction saying that the Trump administration can't ban WeChat. At least, not yet.
  • "Certainly the government's overarching national-security interest is significant," Judge Laurel Beeler wrote. "But on this record — while the government has established that China's activities raise significant national security concerns — it has put in scant little evidence that its effective ban of WeChat for all U.S. users addresses those concerns."

A MESSAGE FROM PHILIPS

Philips

Stronger care … from more efficient operations

In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.

Learn more.

People Are Talking

If you use GitHub, the company said it's time to change your vocabulary a bit:

  • "Main is the most popular replacement for master that we're seeing across GitHub. We like it because it's short, it keeps your muscle memory intact, and it translates well across most languages."

In response to an interesting Hacker News thread, Tarsnap's Colin Percival dug into why he decided to spend his time "on backups instead of solving millennium problems":

  • "In many ways, starting my own company has given me the sort of freedom which academics aspire to. Sure, I have customers to assist, servers to manage (not that they need much management), and business accounting to do; but professors equally have classes to teach, students to supervise, and committees to attend."

Aaron Levie took issue with the precedent set by the TikTok deal:

  • "The problem with this TikTok deal is that the U.S. is the largest player in tech globally. You can do this move once or twice, but we have far more to lose long term by setting a precedent like this."

Coming Up This Week

Tesla's Battery Day and annual stockholder meeting is Tuesday, and Elon Musk is expected to show off a new kind of battery cell. It's hard to make that sentence sound like a big deal, but it might just be!

PagerDuty Summit and Microsoft Ignite both take place virtually this week. It's conference season, people! Only over Zoom instead of in the world's nicest hotels.

Look out for a lot of Apple vs. Epic chatter this week, ahead of their official hearing Sept. 28.

In Other News

  • Nikola founder Trevor Milton resigned as its chairman. Board member and former GM vice chairman Stephen Girsky replaces him, picking up the unenviable task of dealing with all those fraud investigations.
  • On Protocol: Pandemic waivers led to a telehealth boom that made it easier to get treatment for opioid addiction. But that could all go away next month, when the waivers are set to expire.
  • Facebook told Irish judges that it may not be able to operate in the EU if standard contractual clauses can't be used to transfer data from the EU to the U.S., the Business Post reported. That's a problem, because Ireland has made a preliminary decision that SCCs cannot be used (though its order has been temporarily frozen).
  • Don't miss this piece about Facebook's QAnon struggles, from The New York Times. Facebook has tried to limit the conspiracy theory's spread, but seems to have failed.
  • The FTC and DOJ may not have the resources needed to regulate Big Tech, reports Big Technology. Big Tech can afford a long and messy fight, and that can affect how regulators might approach a case.
  • YouTube has boosted its human moderation again. It started relying more heavily on algorithms during the pandemic, and found it was taking down more videos — including some innocent ones — as a result.
  • Two Amazon employees were indicted on bribery charges. They were among six people accused of bribing other Amazon employees to manipulate third-party listings in an effort to boost sales of their products.
  • Lyft wants to redesign cities. The company released its vision for "resilient cities," which includes street redesigns that include more bus and bike lanes — the latter of which could help Lyft's own bike-sharing business, of course.
  • NBC and Roku had a fight. NBC threatened to black out its channels on the platform over a dispute around Peacock distribution, while Roku said NBC was asking for "unreasonable terms." The two made up in the end though: Peacock is finally available on Roku.
  • Disney+ won eight Emmys, mostly for special effects in "The Mandalorian." Apple TV+ only won one, but it was more prestigious: Best supporting actor in a drama series. Prime Video won four, Netflix won 21, and HBO put everyone to shame with 30.

One More Thing

Now to the mound … Satya Nadella?

Satya Nadella threw out the "virtual first pitch" at a Mariners game Sunday. Which is to say, he stood on some grass and threw a baseball while a camera was rolling. You'd think this would be lame! But when Nadella brought out Master Chief and the Halo crew, I was back in. And while Nadella's solid throwing isn't too surprising from a lifelong cricketer, it's still pretty impressive. But please, someone, send me the outtakes.

A MESSAGE FROM PHILIPS

Philips

Stronger care … from more efficient operations

In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.

Learn more.

Today's Source Code was written by David Pierce, with help from Shakeel Hashim. Thoughts, questions, tips? Send them to david@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you tomorrow.

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