Tech Brew Ride Home - Fri. 08/07 – The Executive Order To Ban TikTok and WeChat

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Techmeme ride home for Friday, August 7th, 2020. I'm Brian McCullough today. The president officially signs in order to block BiteDance and Tencent. Apple confirms the reason why XCloud and Stadia probably aren't coming to iOS anytime soon. Uber is now officially more burrito delivery

Starting point is 00:00:51 company than taxi company and of course the weekend long read suggestions. Here's what you miss today in the world of tech. Well, he went ahead and did it. President Trump has signed an executive order to block all transactions with TikTok maker bite dance, as well as all transactions with Chinese tech giant Tencent beginning on September 20th. Now, it's worth noting that September 20th would be five days after Microsoft's deadline to acquire the non-Chinese parts of TikTok or not. Quoting the verge. The spread of apps controlled by the Chinese government continues to threaten the national security, foreign policy, and economy of the United States, the order reads. The United States must take aggressive action against the owners of TikTok to protect our national

Starting point is 00:01:43 security, end quote. A parallel order banned transactions with WeChat, a popular texting app in China that maintains a small user base in the U.S. In both orders, the president names the International Emergency Economic Powers Act as authority for the move, as well as the National Emergencies Act, effectively naming TikTok's continued operation within the United States as a national emergency. Such a move is highly unusual and will likely be subject to a legal challenge. The executive branch has the power to levy sanctions against individuals and corporations by placing them on the entity list, as the U.S. did against Huawei and ZTE last year. But such sanctions are typically put in place by the Commerce Department rather than the White House

Starting point is 00:02:25 and subject to specific rulemaking procedures that seem to have been short-circuited by the surprise executive order. The president also has the power to force the divestiture of U.S. companies from foreign ownership through the Committee on Foreign Investment in the United States, or Cepheus. But doing so also requires a specific process that seems to have been discarded in favor of a broader executive order. It's unclear how the order will affect TikTok's ability to operate in the short term. Unlike Huawei and ZTE, the company does not require licenses to operate its network, and nothing in the order seems to require app stores to cease hosting the app. However, it explicitly covers subsidiaries of ByteDance, specifically the U.S.-based TikTok

Starting point is 00:03:06 division, and will apply to any and all financial transfers to and from those subsidiaries. As a result, TikTok is likely to seek a stay of the order in court or be forced to abruptly discontinue services as it takes effect, end quote. So everyone is basically scrambling to figure out what all this means. There does appear to be a loophole in the order because the order has a clause that reads, quote, the extent permitted under applicable law, end quote. But also, as Alex Hearn tweeted, quote, if I'm reading this EO correctly, it obliges Apple to remove WeChat from the Chinese app store, which would effectively kill the company's phone business in China. China represents a little under 15% of Apple's global revenue. But at the same time, the order says WeChat, quote,

Starting point is 00:03:55 has over one billion users worldwide, which means it's counting Chinese users as WeChat users. Given the references to WeChat having more than a billion users, it's clearly intended to apply to the app globally, I think. That would be substantially more damaging for Apple in China than losing Google services was for Huawei in the West, I think. And yet this is the U.S. government doing it to both, end quote. Indeed, Bloomberg has a piece up arguing that if WeChat is banned from the Chinese app store, the ramifications would be huge because WeChat is a communication and transaction cornerstone in modern Chinese life. Being without WeChat would be a big enough deal for Chinese users as to essentially possibly kill the iPhone business in China. And at the very least,

Starting point is 00:04:41 would probably be a big enough deal as to go to China into some major form of retaliation. Now, Tencent owns WeChat. Tencent has a market cap of $687 billion. Its stock was down more than 10 percent after word of this executive order came down. As Dan Premak tweeted, quote, The Tencent WeChat order may be more consequential for U.S. tech companies because it seems to ban any transactions with Tencent. Tencent invests in lots of U.S. tech companies, including Fortnite Maker Epic Games. Let's play this out. Tencent has an investment in Reddit.

Starting point is 00:05:20 Tencent can't do U.S. transactions after 45 days. So must Tencent divest within 45 days? If not, how would it ever sell? trying to get clarity on this too, end quote. Yeah, I want to put aside the questions as to whether or not Chinese apps represent a security threat for the moment. I, for one, have uninstalled TikTok on my phone because I don't trust it. But more immediately, I think most in Silicon Valley are watching to see if there is going to be any immediate cascading of retaliatory actions by the Chinese that could put a cramp in what Silicon Valley can do, globally. Sources are telling BuzzFeed news that at an all-hands meeting, Mark Zuckerberg told

Starting point is 00:06:04 Facebook employees that banning TikTok would set a really bad precedent. Quote, I just think it's a really bad long-term precedent and that it needs to be handled with the utmost care and gravity, whatever the solution is, Zuckerberg said. I am really worried it could very well have long-term consequences in other countries around the world, end quote. While Zuckerberg noted that TikTok banned in India in June was being hit now, he alluded to the idea that a Facebook products could become a target for another country later. He did, however, sympathize with the Trump administration's national security concerns. Quote, I certainly think that there are valid national security questions about having an app that has a lot of people's data that follows the rules of

Starting point is 00:06:44 another country, a government that increasingly is kind of seen as a competitor, Zuckerberg said, end quote. What scenario is Zuckerberg specifically worried about? Well, consider the scenario laid out earlier in the week by former Facebook security chief Alex Stamos on Twitter. Quote, this whole episode is going to jumpstart the efforts of other countries slash trading blocks, the EU and India especially, to use data protection as a tool of competition policy and to force data localization. In the long run, that would be a disaster for Facebook. This is a fight that Silicon Valley has been waging for years. To support the idea that you can have one platform service the entire planet, with various content rules applied, but on a uniform.

Starting point is 00:07:25 infrastructure. Until now, U.S. policy was aligned against internet balkanization. There was an alternative approach where tightly applied and well-defined data protection policies could have avoided the contagion effect, but the naked use of Cepheus as a trade war tool immediately justifies the actions of other powerful economic entities, end quote. In other words, this gets back to what I was saying about potentially breaking Silicon Valley's business models. Forget Facebook merging the backends of Instagram, WhatsApp Messenger, and whatever, you think any social network wants to face a scenario where they effectively have to have as many functionally different apps as there are legal regimes in the world? That is by definition the opposite of scale.

Starting point is 00:08:11 But there's one more angle here, of course, wither Microsoft. This comes from Dan Premack on Twitter, and it sounds like a bit of inside knowledge. Quote, two notes on the at-real Donald Trump order. Number one, it doesn't make sense. Microsoft was led to believe it had 45 days to strike a deal that was amenable to all sides, including the White House. Almost impossible to believe it could now close a deal in that time frame. There's still tons to be negotiated.

Starting point is 00:08:39 And number two, that said, Microsoft has always taken that 45-day window seriously. Some believed Trump would kick the can down the road if lots of progress was made, Microsoft wasn't planning to take that chance, end quote. And let's talk Balkanization in a different context. Remember how Microsoft's X-Cloud gaming service is launching on Android but not iOS? Well, maybe that's because Apple has confirmed that cloud gaming services like X-Cloud or Google's Stadia violate App Store guidelines and will not work on iOS. Why? Apple says it doesn't like the fact that it can.

Starting point is 00:09:23 cannot review each game offered as a part of these services, quoting the Verge. Microsoft, in a new statement given to the Verge on Thursday, says it could not find a solution to bringing XCloud to iOS via the app store, and it now pins the blame solely on Apple, which it says stands alone in denying consumers the benefits of cloud gaming by, quote, consistently treating gaming apps differently and, quote, applying more lenient rules to non-gaming apps. The company adds it plans to continue looking for a way to bring cloud gaming and Xbox GamePass Ultimate to iOS devices, end quote. And you might remember that Facebook had its Facebook gaming app rejected time and again on iOS. Quoting the verge, Facebook is joining Microsoft in condemning

Starting point is 00:10:07 Apple's app store policies today. The social media company is launching its Facebook gaming app for iOS, primarily an app used to watch streamers play video games, but has had to remove the app's mini games feature to pass Apple's strict App Store approval process. Facebook isn't happy about the compromise. Quote, unfortunately, we had to remove gameplay functionality entirely in order to get Apple's approval on the standalone Facebook gaming app, meaning iOS users have an inferior experience to those using Android, said Cheryl Sandberg, Facebook's chief operating officer in a press statement given to the verge.

Starting point is 00:10:39 We're staying focused on building communities for the more than 380 million people who play games on Facebook every month, whether Apple allows it in a standalone app or not, end quote. very interesting because as we said streaming games seems to be the future of the gaming industry a pretty major industry and the whole point of streaming gaming is the idea of gaming on whatever device is at hand whatever screen is nearest to you so if apple sticks to this policy does this mean that streaming gaming will not happen on iOS, that would be pretty huge. Also, why is Apple drawing the line at gaming? I mean, Apple doesn't get to approve every movie streamed by Netflix or any of the other streaming video iOS apps. The argument seems to be that game stores function like app stores in effect,

Starting point is 00:11:33 and that's why Apple doesn't like them. And of course, Apple doesn't have to allow other app stores inside its app store. Here's a tweet thread from John Gruber making this argument, quote, I can see why folks aren't happy about it, but I don't think it's horse s. Do you think Microsoft would let Apple arcade on Xbox or PlayStation's streaming thing or Steam? Apple runs iOS like a console. Xbox is a console. Xbox doesn't allow a service like XCloud from other providers. So why should Apple, unless they agree to financial terms, end quote. To which I would note that EA has a store on Xbox, but I assume that means they've come to terms, which I guess is the point Gruber's trying to make. From the definitely impacted by COVID department, Uber reported

Starting point is 00:12:28 its Q2 revenue was down 29% year over year, and its mobility gross bookings, thus all of its ride-hailing business, was down 73% year over year. So that's pretty huge. That's the COVID effect right there. We've been waiting to see that show up in numbers in a tech company's earnings report, and there it is. Seventy-three percent less rides were hailed year-over-year at Uber. However, delivery bookings for Uber grew 113 percent year-over-year. In other words, to quote, at Stathis 65 on Twitter, Uber's delivery business, better known as Uber Eats, is now bigger than its original and core ride-hailing division based on adjusted net revenue. Now, adjusted net revenue tells only a piece of this evolving Uber story, end quote. But to be a little more clear about it, quoting Z Bulger on

Starting point is 00:13:21 Twitter, Uber is now a food delivery company, not a taxi company, end quote. Also, I'm going to jam this in here, even though it's completely unrelated. Remember how I told you other Silicon Valley companies were going to probably follow suit after Google announced that its employees wouldn't have to come back to the office for at least another year? Well, Facebook officially extended its work from home policy until July 2021. But then Facebook has already said that it is planning on having up to 50% of its workforce working remotely on a permanent basis in five to 10 years. And real quick as well, Troy Hunt says he will be open sourcing the have I been poned code base. Quote, I have been giving a great deal of thought to how I want this project to evolve lately, especially in the wake of the

Starting point is 00:14:13 M&A process that ended earlier this year right back where I started with me being solely. responsible for everything. The single most important objective of that process was to seek a more sustainable future for have I been poned, and that desire hasn't changed. The project cannot be solely dependent on me. Yet that's where we are today, and if I disappear, have I been poned, quickly withers and dies. The philosophy of have I been powned has always been to support the community, and so now I want the community to help support have I been poned. Open sourcing the code base is the most obvious way to do this. It takes the nuts and bolts of have I been poned, and puts them in the hands of people who can help sustain the service regardless of what happens to me,

Starting point is 00:14:52 end quote. Welcome news, if it means that have I been poned, will live on. Hats off to Troy for making this decision. Time for the weekend long read suggestions. It's been another oddly busy newsday amongst what has been an oddly busy two weeks or so. I don't know whatever happened to the slow summer newsdays of your. Anyway, in the interest of not giving you yet another 23-minute episode. I'm going to share the long reads now, and I'll share the same number of links that I do every week, but I just won't quote as liberally as I do in the interest of time. First up, we've been talking all week about bite dance and have thrown around the term that bite dance is the biggest startup in the world. Indeed, in year eight of its life,

Starting point is 00:15:44 bite dance is approaching $20 billion a year in revenue. At a similar point in their lives, Google, Facebook, and Amazon were all at only about. about $5 billion a year in revenue or even less. And yet there's another company right now that is growing even faster and it's even younger. Let me introduce you to PinduO Duo, which is only five years old and is already at $5 billion or so in revenue, something that it took everyone else eight years or more to achieve. Yes, PIN Duo Duo is another Chinese success story. Call it the vertically integrated social commerce company, quoting from Turner Novak's substantiated

Starting point is 00:16:22 substack. Quote, pin-duo-duo, meaning together, more savings, more fun, eliminated layers of middlemen and flipped the retailing model from being supply-driven to demand-driven. The team used a mobile-first approach that gave it a fundamentally different product DNA than incumbents. It used fruit as a wedge to combine consumption with entertainment and created a vertically integrated gaming company. It took advantage of down payments from suppliers and used stretch payment terms to create float out of customer transactions. It used that to fund customer acquisition, and then leveraged clever growth tricks on an emerging distribution channel, which was WeChat, to acquire hundreds of millions of overlooked customers for practically

Starting point is 00:17:03 free, end quote. Next, the ballwork has a piece up saying that Netflix might be making middle of the road or lowbrow content, as lots of people have been pointing out on social media lately. But hey, at least it's making a lot of it, and frankly, that's just fine. Quote, Netflix strikes me as, more or less, the modern equivalent of broadcast networks, a reinvention of TV's place in the cultural landscape as the Great Okay. They're making mass market mediocrities and delivering it in a slightly new way, but Netflix isn't reinventing the wheel. They're just repackaging broadcast TV, end quote. To which I'd say, that's what Reed Hastings has basically been telling us he's wanted to do from day one. VICE has a profile of a video game

Starting point is 00:17:52 vigilante, a vigilante against video game cheaters. Quote, this 24-year-old Iraqi who lives in London has spent two years hunting cheaters in Overwatch and Valerent, getting thousands of cheaters ban and helping gaming companies improve their games, end quote. And you've heard, of course, of the PayPal Mafia, the ex-Payalers who basically seed and angel funded. The last 20 years, of Silicon Valley's success. Folks have had their eyes on Uber and Airbnb alumni networks as possible next-gen PayPal Mafias, but Protocol makes a compelling argument that the current startup mafia is probably the alumni of Square.

Starting point is 00:18:33 Next, a literal tweet thread from Dan Rose about the lessons he learned from Jeff Bezos when Rose had the opportunity to work with Bezos to develop the first Kindle. I like this tweet especially, quote, Cannibalize yourself. Steve Kessel was running Amazon's media business in 2004, which meant books, music, DVDs. Books alone generated more than 50% of Amazon's cash flow. Jeff Bezos fired Steve from his job and reassigned him to build Kindle.

Starting point is 00:19:02 Steve's new mission, destroy his old business, end quote. And finally, because it's obviously timely, from the New York Times, a look at how Bite Dance, the owner of TikTok tried and failed to cross the U.S. China divide. Quote, the founder of BiteDance, Zhang Yaming, dreamed of building a global tech company based in China. Then the geopolitical reality set in, end quote. That is all for this week. There's not going to be a weekend bonus episode again this weekend, but I do have one lined up for you next weekend.

Starting point is 00:19:44 As always, you can follow me on Twitter at Brian MCC. The show has a subreddit, 1,500 users strong, where you can post stories for me to use on this show, or just talk about stuff from the show with other listeners. You can find it at R-slash ride home. You can also find our YouTube channel by searching YouTube for TechMeme Podcast. If you search, why not subscribe? And finally, if you like the work that I do every day and feel like supporting me directly, there's a link at the bottom of the show notes to an ad-free version of the podcast.

Starting point is 00:20:17 Talk to you on Monday.

Tech Brew Ride Home - Fri. 08/07 – The Executive Order To Ban TikTok and WeChat

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