Pivot - Oracle wins Tik Tok, the future of AI chips, and Friend of Pivot Alex Stamos deep dives on TikTok privacy

Episode Date: September 15, 2020

Kara and Scott talk about Oracle beating out Microsoft in the bid to be Tik Tok's US partner. They also discuss Nvidia buying up a chip company from Softbank. Then Friend of Pivot and privacy expert Alex Stamos joins Kara and Scott to talk about privacy on Tik Tok. We are conducting an audience survey to better serve you. It takes no more than five minutes, and it really helps out the show. Please take our survey here: voxmedia.com/podsurvey.  Learn more about your ad choices. Visit podcastchoices.com/adchoices

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hours of entertainment, delicious dining, and warm, welcoming service that's designed around you. Check out virginatlantic.com for your next trip to London and beyond, and see for yourself how traveling for business can always be a pleasure. I just don't get it. Just wish someone could do the research on it. Can we figure this out? Hey, y'all.

I'm John Blenhill, and I'm hosting a new podcast at Vox called Explain It To Me. Here's how it works. You call our hotline with questions you can't quite answer on your own. We'll investigate and call you back to tell you what we found. We'll bring you the answers you need every Wednesday starting September 18th. So follow Explain It To Me, presented by Klaviyo. Hi, everyone. This is Pivot from New York Magazine and the Vox Media Podcast Network. I'm Kara Swisher. And I'm Scott Galloway. Scott, how you doing? People seem to be liking our act lately. We've been getting a lot of nice on the Twitters. Have you noticed that? Lately, yeah. People have been very generous with us.

They're being very nice. Except not you. Not you with me, I noticed. Your tweet was a drunk... What was your day-drinking tweet at me this week? I don't day-drink. I don't day-drink. Whatever. It was just pure bile. It was just people noticed, you know? I'm trying to bring...

I am trying to bring attention to the new gay nightclub in Fort Lauderdale and your second best podcast, Sway. Wait, hold on. Let me just pull up the tagline. First of all, it would be called The Hammer or Anvil or something like that. That's my gay club. Okay, this is the copy from the geniuses at the New York Times about sway. Okay.

Hold on. Hold on. Oh, my God. I think it's so apparent. A new podcast about power. Who has it? Who's been denied it? And who dares to defy it?

Oh, my God. We like ourselves. I'm their first guest, and I just want you to know, I'm going to come on. I'm going to snort Cialis because I dare to defy erectile dysfunction. I dare to defy it. That's your power? I dare. That's your power? What is, Scott, let me ask you. I'm going to ask you this. What is your power? Tell me your power besides being like obnoxiously tweeting at your very good friend, Kara Swisher, on the advent of a very exciting new opportunity for her. I was nothing but supportive of Prof G, et cetera. But let me, what is your power? What is your power, Scott? Well, my aspiration, I want to be known as generous

and fearless. What's your superpower? Superpower is about what you want to be. Oh, really? Why? Why is it what you want? Because as Al Pacino said, the definition of God is grasping beyond your reach. Your superpower is what you commit to that guides you. I love me just the way I am. grasping beyond your reach. Your superpower is what you commit to that guides you. I love me just the way I am. Oh, there we go. Sway! Introducing Sway, for those who defy it. Oh, my God.

I love my power the way it is. I don't have anything else. I'm so coming on that, Joe. You're not coming. You are staying. They have a perimeter around the New York Times, of which your picture is at every entrance, just so you know. I'm on the BBC today. I'm on the BBC. I'm on the BBC today. I'm on the BBC. Oh, that's nice. I'm on the BBC. I just testified at some fancy bag of Johnny.

I know, we're going to talk about that. We're going to talk about that. But I'm just saying, I'm not going to be able to invite you to the launch party, which is not going to happen because of the pandemic. But there you have it. What? Come on.

I'm great at parties. I get drunk. I have a great time. People love me at parties. Anyway, away from sex clubs right now and gay clubs and all kinds of clubs, let's talk about the big story. Speaking of clubs, TikTok.

Let's break it down. We've been following it for weeks. TikTok, as I noticed, don't knock Oracle out. Everyone make fun of me, including you. We'll be partnering with Oracle. I don't know what that means. Bypassing Microsoft's bid to buy the company. Just days to go before the imposed deadline from President Trump for a Chinese-based app to partner with a U.S. company or be

banned from being used in this country. The next step is for the White House and the Committee on Foreign Investment in the U.S. to prove the deal. The bid is on Steve Mnuchin's desk as of Monday morning. Something to think about, President Trump in August called Oracle a great company. It was six months after Oracle's chairman, Larry Ellison, hosted a fundraiser for the president. Microsoft also had a bid to buy the company, which it confirmed in a press release that the bid had been rejected. The company reiterated that their bid would have been focused on data privacy and actually ownership and control. What do you think?

I think the way it reads to me is this is the Series G financing by dance at an inflated valuation from an investor group led by Oracle. I don't, you know, people were giving us a hard time on Twitter saying, oh, you got your prediction wrong. It's been bought on Nordhausen. This is nothing but, it seems to me, a financing at a rich valuation. And quote, unquote, they'll be their technology partner. The other thing it signifies on a more meta level is we have become fully socialist. And that is socialism is when the means of production and the spoils are controlled by the government, that's socialism. And we have effectively the winning, the company that wins is a company that's blessed by the president because they held a fundraiser. I mean,

it's almost as if we're becoming kind of numb to this sort of state level corruption or, this isn't corruption, it's socialism, but I don't get it. And I'm sticking to our guns. I don't think this happens. I think that people at Microsoft were taking the Trump administration at face value that they wanted to do something to protect the American consumer when, in fact, this is not what's happening here. From what we can tell, we're going to be talking to Alex Stamos later about this, but Oracle was like a distant fifth or sixth in the cloud business. They recently got Zoom. They had gotten Zoom, which has been a big boon to them in their cloud business. But they've sort of had their head handed to them by Amazon,

by Microsoft, by Google, by IBM. I mean, they're way behind all those players. And now this is a big deal for them to get this deal. Now, it's interesting. Google actually has the cloud deal with TikTok for a three-year deal that was signed a year ago. So we'll be questioning what happens to that because this is not a sale.

When LinkedIn was sold to Microsoft because of a sale, they were able to get rid of that contract. This is not a sale. This doesn't seem to be a sale in any way. And it's just a vendor relationship. And the two questions are, one, does it accomplish anything Trump said he wanted to accomplish? I would say no. Two, you know, the idea that they're going to make significant changes to the algorithm in ways that will be protective of U.S. citizens, 100 million at this point, using it. It's just, this is just, I called it, it's just not what they said they wanted to do in any way. Yeah, it's a bit of a head fake. do in any way. Yeah, it's a bit of a head fake. If you try to think about what might have happened behind the scenes, it's that Trump makes this big, bold statement and his advisors, his legal advisors go, well, this is fraught with all sorts of legal challenges. And the best way to declare

victory and leave is to get the backers of ByteDance, who are American venture capitalists, and coordinate some sort of deal where you can declare victory and move on. And because this isn't a sale, as far as I can tell, it doesn't do, as you've pointed out, it has nothing to do with security, as long as the algorithm is controlled. I mean, this is, I spent the weekend on TikTok. Have you used TikTok? Yes, many times. I told you about it. I wrote an old column about it. It's really delightful. It's delightful. In the same way, kind of heroin is really delightful. I literally went on to TikTok Friday at 4 p.m. and I got off at about 30 minutes ago. I can't get over how good TikTok or addictive TikTok is. And it's so scary. And enjoyable. Let me just say, when I was. Yeah. And it's so scary because-

And enjoyable. Let me just say, when I was talking about enjoyable, it's like you, I didn't know I was interested in tie-dyeing or weird- Oh, you found it. It's so interesting. It's like a Rorschach test. What did you get? Well, I've, I'm, clearly I'm, according to TikTok, very interested in two things, hot

women with big asses and Labradors. Oh. And here's the thing, Kara, I didn't know I was into Labradors. I didn't know I was into Labradors. I thought I was more of a beach look guy, Kara. Anyways, sticking the pivot gun in my mouth, pulling the trigger and seeing what happens. Yeah, you just did it. You just did. So, but wait, I think the issue is that this does not solve the problem. And this was, so it was so much bullshit. It's sort of like a- Way to get us back on track.

Thanks for that. I'm going to try to get away from it. Real a man. Okay. Real a man. I get on TikTok, I get funny dances and tie-dyeing. A lot of- Yeah, not me.

Tie-dyeing. That's a big thing on TikTok. There's a whole bunch of different memes. Taylor Lawrence sent me a whole bunch of the latest memes and they're all really interesting. They're all- But the real power of it dawned on me. And that is, if you think about what artificial intelligence is, it's the ability to bring nuance around decision making. And I've always thought that the best example of AI was that if you're watching season four, episode three of House of Cards, it figures out, and you watch it the whole way through, it figures out that you would like episode four and three, two, one.

And part of that is the strength of it is not only the algorithm, but your ability for the algorithm to absorb as many data points, such that it can calibrate in on what you like and move you towards things that you just like a rabbit hole. You just can't get out of. And this thing is so because of short form video, it is so, it gets so many data points that it's effectively like, it's like flying on instruments where it has so many inputs and so many signals to take the plane exactly where you want it to go, which is in their case to content that you can't get off of.

And if you think about the power here around education, think about the power around e-commerce, immediately zeroing in on the things you need, the content areas that you are weak at in terms of test prep. And unfortunately, this could be very, very dangerous in terms of propaganda. Yeah, well, that's one of the issues. That's another issue that people were pointing out to me, that this doesn't solve the misinformation problem on this website. And

they've been recently dealing with it more and more. You can maybe put the headquarters in the U.S., for example. Now, this company was going to go public in the U.S., by the way, before Trump waded in here. Microsoft was going to make a big investment, and then it was going to go public. And it was trying to de-link itself from China already because they understood the problem. But Trump wades right in here and makes a giant mess of things. It could have been a public NASDAQ company, whatever, and probably valued it a ton. I think one of the issues is that misinformation can go big on this platform in ways that you don't realize because it's so entertaining. Or lack of

information, I guess, it keeps you involved in things that you don't know about or removing information about certain groups of people. And so that's where a lot of it's paralyzed. So now, I don't, what is Oracle going to do? Is Oracle going to be the cop of this thing? I just don't, it just like, it just wants to win this cloud deal. That's, and because it's been such a nice It just wants to win this cloud deal. And because it's been such a nice person, a company, corporation to Trump, they get to do that.

They get to get this cloud deal, essentially, which strategically was critically important. I think Microsoft really was going to go in there and really take it over. And I think probably the owners of ByteDance were like, we'd rather not have a lot of control and sort of win this ridiculous fight with Trump. Yeah. So Oracle, my understanding is their cloud actually has very strong security features, that some of their technology is very strong. Their stock is up 5% today, which is like a

$7 or $8 billion bump. So this feels like a win for Oracle. It never made any sense for Oracle to own the thing, but it sounds like it's a, I mean, effectively, it's a financing slash long-term vendor relationship here. And it gives Trump the ability to declare victory and leave around something that was just going to get increasingly obvious that he didn't know what he was doing and he was an over-escape. Right, but then does that solve the problem of surveillance and the control, the Chinese control? I mean, maybe if they move, it's going to be all like face-saving stuff and not real change, not real privacy changes.

I think that's the issue. And so we're sort of right back to where it was going to be anyway, just that he's allowed Oracle to get a deal that it would never have gotten. Google had it, right? Because whatever you think about Oracle's technology is fine, it still has gotten,

is not the number one cloud provider. And they certainly were in a position to be that. I mean, Amazon ran circles around them. And so it's sort of doling out, you know, goodies to its friends, to the friends of the Trump administration, which this is one of them. The danger or the threat that struck me spending a bunch of time on TikTok this weekend wasn't so much about surveillance because I thought, okay, the data they're garnering from me isn't as rich as the data. I think if somebody hacks into Uber and puts a limited amount of AI on it, they can say, oh, you're contemplating terminating a pregnancy. Oh, you're clearly having an affair. Oh, you have stage three cancer.

I think there's just so many things that you could figure out with a limited layer of AI on top of Uber. What I think is the biggest threat, if you will, of TikTok is if it said, okay, we want to influence the elections and we want to undermine the credibility of Joe Biden. And they slowly but surely start saying, well, how do you do that with a consumer? Is the best way through humor? Is it through conspiracy theories? Is it talking about economic policies? Is it talking about, you can just begin to calibrate so finely and see how do I guide this person? How do I be their Sherpa around their beliefs because the real power of TikTok is, A, the content community, the creators, where again, they're getting basically free content, and it's that 30-second bite size. So granted, if I watch House of Cards at six minutes, they get 120 data points for every one Netflix gets because they're in 30-second bites. So they can begin calibrating and leading you to the destination. So if someone on the back end has said, all right, we want to undermine this administration because they're less proscenic or whatever, contrary to our interests,

it strikes me that they can really have—I see it as a propaganda— Yeah, propaganda is exactly where you should focus. And also, it will do it through media. I mean, I always say they're like, oh, it's a social media. I'm like, no, it's a media organization. It really is. It's a very sophisticated socialized media organization, not socialism. So is your sense, I know that people were calling you last night and you were doing a reporting. Is your sense that this deal will actually go through? Did I send you a note saying this was going to happen before you read it in the news? Aren't you lucky to know me? But go

ahead. I know people. I know people. I know people. I know people. Yeah, I was trying to get you from not to tweet it. But go ahead. Sorry, what? But is your sense this deal will close? I don't know. If there will be a deal with Oracle? I think who's going to attack it, right?

Who's going to like, no one cared about this in the first place. And now they'll just declare victory. I think there's just that. We'll see if there'll be some pushback. But I don't think this solves the problem that President Trump said he was trying to solve. But we have to take a quick break. When we get back, we're going to talk a little about NVIDIA buying out chip designer company from under soft bank arm. Plus, we'll have more on the TikTok deal with our friend of Pivot, Alex Stamos, who's going to tell us

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The Capital Ideas Podcast now features a series hosted by Capital Group CEO, Mike Gitlin. Through the words and experiences of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories, and how do they find their next great idea. Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Welcome back. Let's talk shortly about NVIDIA buying chip company ARM from SoftBank. The deal

is worth $40 billion and NVIDIA said it will make it the, quote, premier computing company for the age of AI. NVIDIA is best known for supplying chips that render images in video games, but it's so much more than that. NVIDIA has become sort of the power player in this area. And I know you're not a chip expert, but this is a critical company for this term. And I do want to get into the idea of what it means for certain companies

sort of owning a space. And you just recently testified about single companies or a small group of companies owning spaces and how dangerous that is. Well, it feels like this was a bit of a forced sale because SoftBank has pledged to raising $40 or $50 billion. And my understanding is they're not going to make a ton of money. I think they bought this company, I think they bought Arm for about $30 or $32 billion just about three years ago

and they're getting a mix of stock and cash. What will be interesting is that now, first off, NVIDIA, the most impressive company I just don't know about, it's now got a larger market capitalization than Intel, which when I was in business school was considered kind of the most innovative giant company in the world. Which it's not.

Yeah, they've been blown by. And then what happens? Does Apple still want to do business with NVIDIA when they buy a competitor to their chip design? So the chip wars looks like it's about to get more interesting. Yes, agreed. A company that gets sold for $40 billion, although that's a bit of a headline number. It includes performance and all sorts of other stuff that does about $1.2

billion. You're talking about 30 times revenues. And then NVIDIA, I think it's got a $300 billion market cap with $12 billion in revenues. I mean, this stuff is just, it's seen as obviously very strategic. But that literally exhausts my total knowledge of the chip-making space. Do you have any thoughts on this deal? Well, I think people don't realize Jensen Huang, who's the CEO, is sort of this quiet person who's super—I tried to get him to come to code last year, and it was like, oh, chips. last year and it was like, oh, chips. But I think it's really important to understand how powerful this company has become and how innovative

it's been. You know, Arm Holdings was a designer of chips for mobile phones. SoftBank had struggled in this area. SoftBank was sort of into everything, but it bought it for $31 billion a couple years ago. So, you know,

it needed money because of all the other problems it's having and this is an opportunity for nvidia um but it's gone it's gone well beyond mobile uh for nvidia um and it's it's in graphics it's ai it's been moving into self-driving vehicles as an area that it's um that it's moved into um and so it just says that, you know, it's going to buy up everything. Like you were talking about all these opportunities that are, a lot of the focus here is going to be on SoftBank

because it's been involved in so many deals that have sort of blown up, you know, whether it be, you know, the overvaluation of WeWork or other issues it's been having or the collapse of the Vision Fund and things like that. So a lot of people like to focus on SoftBank because it's an interesting sort of ongoing traffic accident. But really, NVIDIA has quietly been becoming the go-to chip

company, not just with graphics and games and things like that, but artificial intelligence, self-driving is another area it's moving into. I think it's going to grow Internet of Things and stuff like that. And SoftBank was just not able to do anything about it. So I think you have to focus on NVIDIA being on this sort of tear beyond where they've started. And I think people don't realize

it's one of these companies that you don't pay attention to very much like, oh, I'm blanking. There's another chip company that just is doing incredibly well. It's run by Lisa Su. There's all these companies that are holding incredibly powerful positions, AMD, also on a tear, that are very important to the future. And so that, you're right, there's going to be a real focus on where the chip business is going. Well, it's a bit of a pandemic company. Its revenues are up 46% because we talked about,

obviously, people are at home spending a lot of time gaming. But remember when we had Mark Cuban on, he said that he thought one of the biggest threats in terms of the concentration of power and a quote-unquote strategic threat that if for whatever reason this company became impaired or was influenced, if you have the company making the brains for AI and autonomous driving vehicles or autonomous flying vehicles, I mean, this is a market that requires a robust ecosystem that is, it doesn't feel like it gets the

scrutiny it wants. Where, I mean, where you and I are spending a lot of time talking about, you know, the four, NVIDIA and the chip, the consolidation and concentration of power around the brains, you know, it really is Skynet. It does feel, it does feel like if for whatever reason this technology fell into the wrong hands or there was a deep espionage infrastructure inside of it. It could just be very, very bad for a lot of different entities. And then if you talk about this company all of a sudden has an inability to produce things during a crisis,

that, you know, we're talking about more than not being able to get cotton swabs to people. What it's doing is decreasing their reliance on the video game market. And I think that's what's really interesting. And, you know, it's, I don't want to call them like Cisco, but they're sort of moving into this. It's, it's doing, it's doing a lot of stuff, but it like bought this one company. And again, this is not my area of expertise, but I was interested in a company that makes ethernet switches and networking hardware. It's called Mellanox, um, in the, I think it was in the same quarter. Um, so it's just, this is a company to watch, just like AMD and others that we really don't pay

enough attention to going in the future. Lastly, to finish this up, you just testified about, you know, single companies becoming critically important. Talk just briefly about it and then we'll get to Alex Demos.

Yeah, it's sort of the same thing. I think states have decided that they can no longer depend on the federal government around antitrust. So New York and California are looking at proposing their own antitrust legislation. And I think Senator Gianaris in New York has got a real opportunity here. whether it's income inequality, whether it's lack of innovation, whether it's job creation, whether it's destruction in our tax base, whether it's Washington being overrun, power corrupts. And we have states starting to fill this void or this kind of lax or anemic antitrust. And New York hopefully is taking a leadership position on it. And we testified today, thoughtful people, taking a leadership position on it. And we testified today, thoughtful people, Professor Wu went before I did. We'll see. I mean, I'm hopeful. A lot of states, California is always seen as a state where, you know, as California goes, so goes the rest of the nation, but maybe New York can play a leadership role here. And Senator, everyone,

I mean, even going back to the HQ2, Senator Gianaris and AOC and Corey Johnson were all accused of being socialists when they said no to Amazon. Amazon is now hiring more people than it had originally anticipated. There's an opportunity here, I think, for New York to take a leadership position around antitrust because it just feels like the FTC and the DOJ have been kind of asleep at the switch. And now Bill Barr comes out and wants them to rush it in time for the election. And then you had a bunch of lawyers at the DOJ resign saying we can't do as good a job as we'd like. So anyways, it feels like New York and California are starting to fill a void around a lack of federal leadership. We'll see. I just don't know if there should be 50 different,

you know, it's the same thing with privacy. We don't get anything because there's so many different possibilities, even if there's leaders, you know, in these things. It just, I don't know. I just feel like, oh, really? This is something the federal government should be doing. They should be. But even if you think about tobacco, the states tend to do a better job, or at least the state AGs have traditionally done a better job coordinating than we've seen the federal government coordinate states lately. So I'm hopeful. I think in New York, obviously, New York or California have tremendous sway over these companies because as much as they threaten to leave or not locate their headquarters, these companies go where the human capital is.

And as long as the brightest young men and women in the world want to live in California or New York, there will always be a market and it will always have outsized influence. So, anyway, I'm hopeful again. We'll see. What you watch on TikTok when they get you to testify in front of fancy committees? No, I don't want an answer to that. Don't want an answer to that. Fancy committees. Listen to me.

Don't rag on my hobbies. Listen to me. Don't rag on my hobbies. You need to have better algorithms. That's all I have to say. Tie-dye. I don't think the algorithm is perfect. I think it just reinforces

the problems we have with you. Anyway. Labradors. I love Labradors. We have our friend of Pivot. We're going to go back to TikTok. We're talking to Alex Stamos. He's been on the show before because he's so smart.

He's a perfect person to go deeper on the TikTok Oracle deal today, such that it is. He is the director of the Stanford Internet Observatory. He's also former head of security for Facebook and now an advisor to Zoom to improve their privacy and security. And, of course, they use Oracle. So tell us what you think of your overall impression. First of all, how are you doing in California? We're doing okay. I mean, we're at the tail end of two weeks

of unhealthy air quality where we are. Our kids have been stuck inside. So not only are they going to school on Zoom all day, but then they can't even go outside to play. I mean, look, my wife and I have nothing to complain about. We're both employed and we're doing fine. We have enough space for our kids that I don't know how other families are doing it. And I'm really wondering what the long-term effect of this is going to be on kids, right,

of this period of a lost year educationally, but just the social-emotional aspect of being trapped inside and not really understanding what's going on. Yeah, my kid was two weeks in quarantine, and I thought he was going to leave. I was like, prison's not going to work for you, Luis, so you better not break the law. Right. Which is funny.

So talk to me about this Oracle, because you have experience with them with Zoom, because Zoom is their, they provide cloud services for Zoom. Yeah, I mean, I don't have a lot of direct experience with Oracle. They do run a cloud computing product. Zoom uses them for a couple of purposes.

One of the things they do that I think is a little bit different than some of the other cloud computing platforms is they do a lot of raw hardware cloud, right? So I think that's something that Zoom enjoys. But, you know, they're not considered one of the big three, right? Which are obviously Amazon, Microsoft, and Google. They're not even the big five, I think. Maybe not even the big five, right? Yeah, because you do have a number of other companies. So I do think, you know, one of their problems is they don't have a centerpiece

kind of keystone social media product, right? So if you look at AWS, their keystone product was Netflix. That was a big deal. I don't know if you guys remember, but it was a huge deal here in the Valley among technical people. When Netflix said, screw it, we're going to AWS. And everybody's like, that's crazy, right? Like at the time, the idea of pushing all of your infrastructure to somebody else. And the fact that they crushed it, and it meant a lot of good things for them financially, was a huge deal among executives in Silicon Valley of proving that this model works. Azure has a number of products. Google Cloud has Snap, right?

Azure doesn't need it so much because Microsoft gets all of these enterprise clients because they're moving from Windows environments, right? So Microsoft has kind of a built-in advantage. But Oracle, Zoom is probably Oracle's most famous client right now. And I think they are definitely looking for something to put them on the map. I mean, we don't know a ton about the deal, right? So Mnuchin was on CNBC this morning, so I watched that interview.

And he didn't give a lot of details. But what it's sounding like, you guys both read the Microsoft announcement, right? Like the incredibly passive-aggressive press release. It was aggressive-aggressive, but go ahead. It was pretty aggressive, yeah. I mean, as you guys know, and especially Scott, corporations don't communicate like this. Right.

Um, and you know, they had this line in there about all of the security things they were going to do. And basically like, well, we're interested to see what happens next. And then you could like insert the,

uh, Kermit drinking, sipping tea emoji. Right. Yeah. And, you know, reading between the lines of that.

And then the discussion of Oracle being a technology partner is, it sounds like this is going to be a much less aggressive integration than what Microsoft was considering, right? Right, it was, yeah. The discussion with Microsoft seemed to be that Microsoft would really own at least three or four regions of TikTok. They would have some kind of licensing deal, but they would own the stack top to bottom. And the people who would be running TikTok US would be Microsoft employees, right? That does not sound like what we're going towards now. It sounds more like, and again, I'm just reading the tea leaves here. So this might change significantly over the next week. That Oracle will be providing hosting services for sure. And then the question is, how much up the stack do they go there? And who are the employees that

have access to data? There are kind of three legitimate concerns about TikTok, right? The first is access to Americans' data, which is a great concern because there's a long history of the PRC doing stealing data and then looking at it in these big data warehouses. The second concern was the potential of a backdoor or what we call a bug door, which is an intentional mistake in your software that allowed people to get into your system. And the third would be kind of a subtle manipulation of the media environment in the United States through the control of the algorithm. And as much as people talk about algorithms on Twitter and Facebook, the number one determinant on most social media sites like those of what you see is who your friends are. TikTok doesn't have that, right? Like TikTok is 100% algorithm.

And that's why they've kicked so much butt so far is that their ML is really, really good. And the discussion now from these things is, one of the reasons that I think they're looking at this fallback position is that the Chinese Communist Party and the People's Republic of China, the government said,

we are not going to allow you to export certain things to the United States, and they tagged the ML algorithm. And so there's no way for ByteDance to sell all of TikTok US. And so I think they're looking for a face-saving half-measure. The problem is, if Oracle's just providing hosting and the actual operation and most of the software development is still happening in ByteDance Beijing, then it doesn't actually address any of those three issues, right? No, it does not. The Chinese aren't accessing data by going to the hard drives and pulling it out of racks

and then imaging it, right? Like the way they would access data would be that they have subverted ByteDance employees who have access to the data warehouse and they can do queries on behalf of the government. And I have not seen anything yet announced. Now, again, it's early days. But if it turns out that ByteDance employees are still running the backend operations, and if there's a huge amount of software

that's a black box to Oracle, then you can't claim that this was actually for security, right? There's no actual security benefit. This seems like a favor to Oracle, getting them a deal. It seems like it's a favor to Oracle. Larry Elson is kind of famously probably the most conservative, you know, other than Alex Karp and Palantir,

but of like the major tech companies, is the only one who's like a really obvious Republican. I think there's a lot of secret Republicans, but you know that better. Yes, they are. But he's just out there like doing fundraisers for Trump and such. And yeah, it just looks like a favor for Oracle.

And kind of a face-saving move, I think one of the things that happened here is Trump got over his skis on – banning TikTok is the kind of thing that, in theory, the executive branch has some power that's been given to it under CFIUS and some additions to CFIUS that have passed since then. In practice, it's never happened. And to really do it, you would have to go force Apple and Google. And I expect what the White House has heard is that Apple and Google would fight this one to the Supreme Court, right? So they're talking about,

you're not just fighting TikTok, but you're fighting two of the largest tech companies in the US. To not, to ban the app. Right, because they can't allow this to, all of a sudden for the US executive branch to be able to decide what's in their global app stores. That's the end of those companies.

Like every country will want that capability and nobody would trust the United States to wield it. And so I expect that this is kind of a fallback position because they got over their skis on what the power of the presidency is in this situation. And so they're looking for if they can both scratch the back of a big donor while also giving themselves a fig leaf of like, we've made everything secure. That's great. And this thing's so complicated, right? Like, you know, how many people are going to understand, oh, well, operationally, do you have control of the data warehouse? And like, you know, who has access to certain databases and who has access to the CDN? Like, nobody understands that, right? All they understand is that Oracle got some money. Yeah. So this is a fig leaf in that

this is not going to do the things that many of us, Tim Wu had talked about, that's really protecting Americans in any way. Why, what was your take on Mnuchin? Well, he was very careful to basically say this is still under review. And he said there's two processes, right? There's a CFIUS process, which is not a very technical process, right? Like generally CFIUS is kind of been seen as being kind of an economic competitiveness view, and that there's a national security process. The real interesting question is, generally CFIUS has kind of been seen as being kind of an economic competitiveness view in that there's a national security process. The real interesting question is,

is who's running that national security process? So if that's like the NSA Cyber Division, which is run by a very competent woman, Ann Neuberger, this is the new division of the NSA that does defensive cybersecurity on behalf of the United States, then they are absolutely going to understand those distinctions.

And I think I'm really looking forward to the Washington Post leaks of things leaking out from these secret committees where you very possibly have NSA and Cyber Command and DHS, CISA, which is the DHS's cybersecurity infrastructure security agency, saying, oh, this deal doesn't really do much, and then getting overridden for political concerns because they don't want to have to actually shut them down on the 20th. Wasn't Microsoft's fatal flaw here, believing the president that this thing needed to be sold? I mean, at the end of the day,

this just feels so cooked and so backroom. You have Ellison, a conservative CEO, you have the backers of ByteDance picking the winner here and saying, okay, how do we turn this into what is effectively just a follow-on round of financing and a big cloud victory for Oracle? It just feels so fake to me. The term acquisition, it really, the term acquisition, it just doesn't, we shouldn't be using. By the way, I heard, I heard, and Alex, tell me if you can confirm this, that Oracle was advised by the crack M&A team of Gerald Levin, Carly Fiorina, and Marissa Mayer, that they brought their acquisition expertise to this deal. That's a little M&A humor. That's a deep track M&A humor. A little bit alex has had a lot of experience with these types anyway uh yeah uh yeah i cannot confirm or deny that one

um yeah i you know you actually bring up a good point too which is there's all of these like there's sequoia there's a bunch of silicon valley kind of players and money people involved and so the the final ownership structure of whatever tikt looks like, which it looks like Oracle's going to own some, maybe some investors, is going to be really interesting. And I think following the money of who is making a ton of money from this is going to be really interesting. From the Chinese side, too, they're pretty pissed. And there is a legitimate risk from the PRC and from Chinese companies. There's absolutely a legitimate risk, which is why we have to be smart about this kind of stuff, right? Like we have to have

real rules that we enforce fairly and that the rest of the world has confidence we're doing so because what we want is we want our European allies. We want our Five Eyes allies. We want our Asian allies like Japan to be lined up side by side with us. And instead, if it looks like this is just a way to pay off a bunch of American donors, nobody's going to ever believe when we ring this bell again. And we're going to have to ring this bell. Sometime in the next five years, there's going to be a major security incident related to a Chinese

company having access to people's phones. This is a win for China, as far as I can tell. Like, they just get to, you know... Maybe. I mean, if this really is blinking, right? If, like, if the administration has really blinked, then they stood up to the U. Maybe. I mean, if this really is blinking, right? If like if the administration has really blinked, then they stood up to the U.S. and they forced

the Trump administration to blink and they've set a precedent that's going to really hurt. It's really going to hurt U.S. tech companies too because now if you're India, you want the exact same thing, right? You want Facebook to have to pay billions of dollars to some Indian company that has corrupt links to the government,

you know, everybody's going to get, it's basically going to create a situation where you have to bribe any country you operate in by paying some local politically connected company to do your actual hosting. There could be so many second order effects here that the Chinese could decide, I mean, if they wanted to take down our markets, couldn't they announce that we're contemplating forcing Apple to sell all its supply chain operations to, you know, a local provider, I mean, a domestic provider here. It just feels like this could go so many weird places. It feels to me like we've been played. This is nothing but Sequoia and I think General Atlantic Partners and Oracle deciding they're going to lead the Series G, or whatever it's called, that we accomplish nothing around security. And to your point, Alex, they've said to Trump,

you got out ahead of yourself here. You got to find a way to have peace with honor. And all it does is raise all this, gives everyone else ideas around how they can start abusing our companies, which are increasingly international, dependent upon local laws and consistent application of those laws. It's just, it literally is, this feels like Mayweather versus McGregor, and you have Xi and you have Trump, and the redhead gets the shit kicked out of him. I just feel like we have been so played here. Well, you know, and also to get this deal through, and Mnuchin probably knows this because he's relatively sophisticated in these areas, is Safra Katz, who's the CEO of Oracle, and Larry Ellison convincing Trump that they really are going to protect. Like, they'll do something tacitly like, we'll have the headquarters here. We'll have like, they'll have some dumb, beautifully designed headquarters.

Right. In Florida, across the street from a golf course. If you see that, they'll have some dumb, beautifully designed headquarters. Right. In Florida, across the street from a golf course. If I see that, they'll know. You'll know. Yeah, exactly.

So I think it's just really, this is just. Yeah. It doesn't matter where the headquarters is. Who are the data engineers? That'll be, we'll say,

now we have a headquarters in the US. Like they're, oh, who are doing DevOps? Who are the data engineers? And meanwhile, the Chinese continue to be,

yeah, continue to be a problem. You know what I would love to get from Alex while we have you here is, I can't think of anyone more knowledgeable to give sort of a notes on a scorecard, cliff notes, script on, give us the state of the cloud ores. I mean, Oracle all of a sudden, I didn't even know Oracle had a cloud product. Give us your state of momentum and the state of play in the cloud ores right now. I mean, Oracle's definitely coming from behind. Famously,

Larry Ellison said the cloud doesn't exist, right? That was a fight with Salesforce, right? You know, I think, I actually see there as a distinction between, that there's really two different cloud wars going on. There's the enterprise cloud war and the startup and everybody else cloud war, right? So, the kind of original cloud war and the startup and everybody else cloud war right so the the the kind of original cloud wars aws and google right in that aws is you know they've got enterprise customers but they also have a lot of startups and smaller companies and tech companies and kind of you know they have never made a big deal of enterprise integration as being a you know of of being their self like

if you build on aws you build your stuff from scratch. And again, they have a lot of enterprise customers. I'm not saying they don't. But they've never made it super smooth to get onto there. Microsoft's whole point is, okay, great, you're already using 50,000 Windows machines. We're going to give you a ramp onto Azure that's incredibly smooth. And I see that as Oracle's competitive direction,

is that they already have these enterprise clients. They've got their tens of thousands of salespeople deeply embedded. They've got all these companies that are running back-end Oracle systems, and they're going to utilize their on-prem domination into smoothing people out. So I see Oracle and Microsoft as in a fight, and then Google and Amazon in the other one. And they have been slow, though. I would say Google, of these people, Google was the slowest one and let Amazon come in and take the business, and was busy doing other things. I had a lunch with Sundar Pichai. I'm like, how did you let

this happen? This was years ago. He's like, oh, we were doing other things. We weren't really paying attention. And then in the enterprise space, Microsoft has run circles around Oracle and IBM and others. And everybody else, yeah. Everybody else. And so Oracle's really lost this one focus on, he just used a little enterprise term on-prem, which is on-premises. I think they really didn't see this coming in any way. And it's largely because Larry Elson had this idea that this was bullshit. Well, I mean, this is a problem for all companies. Because it went to the heart of their business.

Yeah, exactly. Is that you don't want to disrupt your own business, right? You always see this in tech, that companies build these big protective moats around a business and they don't want to disrupt your own business, right? You always see this in tech, that companies build these big protective moats around a business and they don't want to breach their own moat. And Oracle was never going to breach selling a database on a, they still charge per CPUs, right? Like they charge a ridiculous amount of money

for their products compared to building the equivalent in the cloud. So I am sure, and Oracle is also a very sales and lawyer heavy operation. It is not known as an engineering operation, right? Like they're a little bit, I mean, they're not, I wouldn't say they're a joke in Silicon Valley, but like people talk about going to work at Oracle is like dying, right? You're like, you know, oh, I'm so sorry. You know, I'll see you on the other side. I would not say they're terrible, but going there, it's like dying.

Well, right. From the technology's perspective, right? And so that's not how they compete. They compete on the legal side and the licensing side and the sales side. And they do a really good job. And Microsoft, Satya comes in and basically says, we're going to disrupt our own business, right? He looks at the trend lines. And that is the hardest thing for a CEO to do, is for a new CEO to come in,

to look at all of these things that just mint money for a company and say, we're going to blow that up ourselves because we know somebody else is going to blow it up. And it took Oracle a long time to do that. And is there any last question? Is there anyone coming out from somewhere else we're not seeing in this area? I think the other question will be

if there's another partner here. You could also see a deal here where you end up with Oracle with the lowest level and that there's somebody else coming into the TikTok deal where they're taking over some of the operations. Another social media company. I still think, I don't know if it was you guys who talked about that, a Snap TikTok US mashup would be the kind of thing that would be very powerful. Both of them are in not a you know

are have like a a strong but still you know tenuous competitive position against instagram um and those two companies together would be strong i hadn't thought of snapchat and also walmart can still drop in here too i suspect that is like i don't know what that is my friend i mean you might end up with tiktok US being this entity that's owned by 40 different Trump donors. We'll see where this ends up. And again, this is going to be really bad for US companies because the EU is going to demand this. India is going to demand it. Brazil. Everybody who has any kind of clout is going to want the same deal. And it's just going to be really bad for competition

too. Because you're going to end up with the Googles and Facebooks able to pay off basically bribing folks in these countries to do local stuff. And it will be very difficult for a smaller competitor to get into that. Thank you, President Trump, for this exercise in futility. Anyway, Alex, thank you so much. I knew you would bring wisdom and insight to this. Larry Olson is having a good day today. bring wisdom and insight to this. Larry Ellison is having a good day today. Yeah. Well, he hasn't been having as good day in his sailing on the water. So, you know, he's got to win something. I guess. All right. Thank you so much, Alex. We really appreciate it. Thanks, Alex. Okay, Scott, that was so illuminating. I knew Alex would do that. Did you know? I mean, he just explained the whole thing for us.

Serious candle power. Alex Stamos. He's really good. Serious candle power. Now I understand. What a cool name. The Stanford Observatory? Is that what it's called? Yes. That's such a cool name. The Internet Observatory.

I may join them and sit in a big chair. Sway. The jealousy just drips off of you. Everyone else loves it. Hey, listen. Don't forget who discovered. Oh, wait. You discovered me. Never you. Everyone else loves it. Hey, listen, don't forget who discovered, oh wait, you discovered me. Nevermind, nevermind, nevermind.

Let me go with my instincts on this one. All right, Scott, one more quick break. We'll be back for wins and fails. Support for this podcast comes from Anthropic. You already know that AI is transforming the world around us, but lost in all the enthusiasm and excitement is a really important question. How can AI actually work for you? And where should you even start? Claude from Anthropic may be the answer.

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Wins and fails, Scott. Go for it. Go for it, Scott. Wins and fails. Wins and fails, Scott. Go for it. Go for it, Scott. Wins and fails. Well, my fail is this nice woman came to my door over the weekend. Is it a door? Yeah, to my door.

To my gate. And I said, release the hounds. What do you mean, yeah, to my door. Anyways. And she was from the U.S. Census. And she started asking, and I believe in the census and it's important. And the amount of money allocated to local school systems, the census is important. And I immediately found myself when she started asking about my kids and ages, and I immediately thought for the first time, do I want to participate in this? And I said, okay, why is that?

And it's because I believe our government institutions have lost so much credibility because I think they've been weaponized by an administration that doesn't really have respect for their mission. And I think it's just so sad when you think about all these institutions, whether it's, I mean, the CDC is the latest one to have its reputation just kind of torn apart. And so I thought it's really upsetting and it's just too bad that in addition to the U.S. government, there's so many wonderful institutions. I think the census is a really good idea and important thing. Their continual attacks are working on you. You know what I mean?

Ultimately. Yeah. Do your census. And then all of a sudden, now I'm like one of those guys. It's worked on me. I don't trust government institutions. They have lost credibility with me because I'm worried about the administration. And you hear them putting a citizenship question on it.

about the administration and you hear them putting a citizenship question on it. So I think a loss, you know, a big fail is that there just seems to be such short-term thinking around trading off the reputation and integrity of our great government agencies and institutions for short-term or perceived short-term political gains. So that's my very political loss. My loss or fail? I was going to say this indoor, this is in that vein. I had a really interesting discussion with my son and he was like, how could he have an indoor campaign rally? And I said, he can just keep breaking the law and there's no repercussions because,

and he's like, well, why can't they stop him? I'm like, who stops him? Who? Like most people just follow the law, right? And then there's, but you don't have to really. Do you know what I mean? That's the big lie that we all sort of live in this society. We have sort of a tacit understanding that we're not really going to get enforced, but we might get enforced, right? There's no fear.

And so him doing it, there is no, you can have the governor saying this sucks, but no police moved in and why would you put police in harm's way at this crazy, you know, the running of the maggots, essentially. It's just, that's, the running of the maggots, essentially. It's just, that's, I was going to say that, but then I decided it was Rona McDaniel, whatever, Rona, whatever her name is. She runs the RNC. She's Mitt Romney's niece for, I don't even understand that, Thanksgiving dinner. But was saying that it was disgusting, the stuff that Joe Biden was doing around coronavirus.

And I'm like, he ain't running the country this this is this sort of this or like bill barr saying um uh you know it's there's not systemic racism i mean there's abuses but not systemic sort of the drip drip drip of cynicism that makes you question yourself just like you were doing with the you know the exotic like we're just going to break this law we're going to ruin the right house law and we're going to do this. And I think that's what I'm most scared of is the exhaustion factor of people just giving up, like, because there's nothing they can do about it. So that's my thing. Yeah. The, the early, the early data is, and there's such a wild card here because obviously we've never had an election and, or we haven't, I would say recently in a pandemic, but the early data looks very positive for Democrats in terms of who's requesting mail-in ballots.

But, you know, we'll see. My win is I read this wonderful article by Jeffrey Sonnenfeld, Senior Associate Dean at Yale. And I love Jeff. And then Albert Coe is a- He's a live one. Yeah, but he is, I love Raging Moderates and he's super thoughtful. Anyways, I'm a Coe. He's a live one. Yeah, but I love Raging Moderates, and he's super thoughtful. Anyways, I'm a big fan of Jeffrey's. Anyways, and Albert Coe, who's the

department chair of epidemiology at Yale, and they wrote this fantastic article about referencing a woman named Betty Lee Hample, and in 1955, she stood up at the approval meeting for a vaccine which had been rushed out. They wanted to get the Salk vaccine out as quickly as possible to try and address polio. And basically, almost every major pharmaceutical company bowed to that sort of pressure, put out a vaccine that ended up being flawed. 200 people were paralyzed. 70,000 were sick. And if you think about one of the best things that's ever happened to our society, that one of them would have to be vaccines. And when you undermine the credibility of a vaccine, you're basically tearing at something

wonderful for humanity. And this woman named Betty Lee or Dr. Betty Lee Hample at Merck stood up and said, I just can't recommend this. We're seeing problems. And Merck, to their credit, listened to Dr. Hample and decided not to hold off on the vaccine. to ensure that they followed protocols around late stage clinical trials before approving a vaccine that they were not going to give in to pressure, administrative or political pressure. And you see corporations stepping into the void. And when you think about, we always talk about a brand, when you put a pill on your tongue, when you put a basically a coated item on your tongue, you're not taking an antibiotic. When you have someone stick a needle in your arm, tongue. You're not taking an antibiotic. When you have someone stick a needle in your arm, you're not ingesting small microbes or fluids or antibodies. You're basically ingesting trust. I mean, it's all about trust. You're saying, okay, the thousands, the hundreds of thousands of people who have made incremental decisions to get me to ingest something, you're placing

so much trust in those people. And I thought the AstraZeneca, when AstraZeneca announced last week that they were temporarily halting the trials to investigate an aberration in one of their subjects who had become very ill, I thought that was brilliant marketing because immediately they've said to the world, we take this shit really seriously and we're not afraid to publicize when there's a problem. And I would bet they've already started again and have found that most likely it probably wasn't related to the vaccine. We'll see. But it creates that level of trust that people continue to ingest things they know nothing about, such that they can trust others.

Let's see how long they hold out. That's my fear is they don't hold out. But again, it is when you're looking at and saying big pharma is saving you, you know we're in trouble. But what on the plus side with all this exhaustion, you see things like the protests in Belarus. And especially there's an old lady there that went crazy on social media, which I love. Just like being pushed around by these beefy assholes. Like, you know, these soldiers all with the baklava, whatever it's called, whatever the thing you put on your face. Baklava? Isn't that a treat? Isn't that a Greek dessert? It is, but it's whatever that thing is called. The thing you wear, like skiers wear them. Anyway,

they're wearing all these masks and trying to hide who they are. And this woman kept trying to pull them off. And old lady, she's as tall as I am, maybe shorter, and has been at these protests. I was like, you can beat up this frigging old lady, but there's 100 million more behind her. And so I felt good about that. And I felt good that it got pushed out by social media. Maybe it gives you a sense of hope. But these people are facing down giant, scary men in masks with guns.

And I really appreciate the people of Belarus for doing that. And I think it's great. And this ridiculous leader should be taken out and taken out, just taken out by all means necessary as far as I'm concerned. Anyway, that's how I feel. Anyway, we've got to go. Lots of news this week, obviously, as TikTok ramps up and there's more to come. We have lots to talk about the rest of the week.

Is there any topic you want to discuss as we go on? Is there any company you think we should talk about? I'm super interested. Well, I'm writing up something on Palantir. Oh, yeah. I'm glad you're doing that. You know, it's really interesting because we were talking before about that Trump and the administration create purposely create these dumpster fires of controversy because they don't want you to just examine the core issue. And that is 5 percent of the population, 25 percent of the infections and deaths. It just kind of all begins and ends there.

So let's create let's create dumpster fires. Even if they make us look bad, we just create constant distraction. And I'm reading through this S1 and all this bullshit about how software will save the world and we are no longer a Silicon Valley firm. It's like, okay, they moved to Denver, which I guess means Liberty Media is different than every other cable company because clearly when you move to Denver, it means you're no longer part of our capitalist society. And they create all this weirdness. And I think it's a total page out of the Trump book.

And they're trying to distract from one core issue. It's a shitty business. It's taken them $3.5 billion in 17 years to get to a business that lose 60 cents on the dollar. I like that you're doing this. It's a shitty business. And it's really interesting. And then you have their greatest asset is this spy versus spy. We found

Osama bin Laden. Okay, Peter Thiel's a weirdo, but he's a genius. We should invest behind it. And at the same time, their biggest liability is Peter Thiel. because do you think Vice President Harris is going to decide to ever do business with Peter Thiel? And all of a sudden, Alexander Karp is claiming he's a socialist. This thing, and I went on to a bunch of these secondary marketplaces to try and find the pricing on Palantir. And what was interesting is these secondary market sales where they find shares and then sell them, they're trying to advertise these shares for $15 to $20 billion. And then it was leaked that Palantir is willing to take $10 billion. And I'm like, this is beginning to smell a lot like team spirit in the form of WeWork. And that is the people, the insiders with

shares are willing to take a 50% haircut on where the value was just a couple of weeks ago. And what does it mean when the existing shareholders are willing to take a 50% haircut on where the value was just a couple weeks ago. And what does it mean when the existing shareholders are willing to take a 50% haircut to get liquidity? It means that people that know this know that they're sitting on a steam pile of shit. I was just going to note to you that you should, because we promised to look at this more closely, especially with the number of mentions about Peter and Alex and stuff like that. So I am pleased. We will talk about this Thursday. I don't want you to give away anymore. I want to hear your entire analysis on Thursday. I'm so happy you followed.

Again, this is where you surprise me. Like here you are, you begin making fun of the name of my podcast and you end with a brilliant thing. This is the conundrum. It's how I keep our relationship fresh. How I keep it fresh. It's curious. It's strange. But here we are. Anyway I keep it fresh. It will continue to be. It's curious. It's strange.

But here we are. Anyway, Scott, read us up. There you go. Before we go, a big part of what makes our show special, obviously, is you, our listeners. Please take some time to take a short survey and let us know what you like or don't like and give us ideas for contents and specifically how your listenership or your listener viewer habits have changed over the past few months so we can hopefully reach more people, please go to voxmedia.com slash podsurvey. That's voxmedia.com slash podsurvey. Our episode was produced by Rebecca Sinanis. Our sound engineer is Fernando Finite. If you like what you heard, please download or subscribe. Also, special thanks to Drew Burrows and our executive producer is Erica Anderson.

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