Whatever passes for industrial policy in the United States seems to revolve around the petulant whims of President Donald Trump. Whether a company will be rewarded with government contracts, castigated on Twitter, or banned from doing business largely depends on the president’s brittle feelings. So it goes with TikTok, the breakthrough Chinese video-sharing app that has become a zoomer favorite and, for Republican hawks like Secretary of State Mike Pompeo and Missouri Senator Josh Hawley, a symbol of the growing Chinese challenge to American tech hegemony.
After a recent phone call between Trump and Microsoft Chief Executive Officer Satya Nadella, Microsoft announced that it was going to pursue a purchase of TikTok’s operations in the United States, Australia, New Zealand, and Canada—four members, along with the United Kingdom, of the Five Eyes surveillance alliance. Playing off GOP fears of Chinese communist surveillance of America’s lip-syncing children, Trump had been agitating for a ban of the app in the U.S. Instead, he told Nadella that he would delay his decision until September 15. Of course, Trump expects a cut; “a big percentage” of any deal, he told journalists, should go to the U.S. Treasury.
But bringing TikTok under the
American security umbrella hardly means its users’ data will be immune to abuse
and exploitation. They will be exchanging one opaque regime of surveillance and
data extraction for another.
Arguably the first Chinese social media platform to find a worldwide audience, TikTok has an estimated 100 million U.S. users, a good chunk of them lured to the app through a massive advertising campaign pegged at $1 billion in 2018. (TikTok’s huge ad spend to gain American users demonstrates how hard it is to break into the U.S. market, which is dominated by monopolists like Facebook, Google, and, naturally, Microsoft.) TikTok is actually not available in China—although the app that inspired it, Douyin, is—and its parent company, Bytedance, draws 70 percent of its investment capital from American firms. At least 400 people work for TikTok in the U.S.
In an August 3 internal letter, Zhang Yiming, the founder of ByteDance, told employees, “In the current environment, we faced the real possibility of a forced sale of TikTok’s U.S. business by [The Committee on Foreign Investment in the United States] or an executive order banning on the TikTok app in the U.S.” Anticipating this possibility, TikTok has reportedly been trying to hive off its American operations from other regions, but it’s not clear what that entails or whether the price—$50 billion, according to one Reuters report—is worth it if Microsoft isn’t able to control the app in other countries. (TikTok is currently banned in India—formerly its most popular market—which has been engaging in border skirmishes with the Chinese military.)
But given Microsoft’s more than $135 billion in cash reserves, the price may be immaterial if it brings Redmond tens of millions of avid young users and the hoard of data they produce. And despite its reputation as a lumbering business-centric firm that’s botched acquisitions like Nokia, Microsoft has had recent successes in acquiring already thriving companies and letting them run quasi-independently. Mojang (maker of Minecraft), the code-sharing site Github, and even the hopelessly banal LinkedIn have all enriched the Microsoft portfolio.
China has long been a difficult market for American tech companies to penetrate, but Microsoft has had research and development centers in China for decades, including four in Shanghai alone. A Microsoft news page features a hymn to the “booming economy” in China and claims an ecosystem of 17,000 local partners. Last month, Microsoft spun off its Xiaobing chatbot—an immensely popular AI-powered teenage girl chat program that Microsoft claims has 660 million Chinese users—into a separate company.
“We help Chinese companies do business abroad; this is one of the biggest streams of activity,” said Alain Crozier, chairman and CEO of Microsoft Greater China.
That may be, but Microsoft gets less than 2 percent of its revenue from Chinese markets, and it’s declined to provide services like email and facial recognition there, fearing how they might be used to compromise privacy and human rights. With growing disagreements over privacy, regulation, and data sovereignty, Microsoft President Brad Smith has spoken of a burgeoning tech cold war between the U.S., China, and Europe. In 2019, China ordered all government agencies to replace any Western computer technology in their systems. And the ongoing battle over Huawei, the world’s largest producer of telecoms equipment, has hampered the global effort to roll out 5G communication services.
Whatever muddled brand of techno-nationalism Trump and other American political leaders might subscribe to—and Republicans aren’t alone in warning against the Chinese tech menace—Microsoft is not as unlikely a standard-bearer as it might seem. The company has a clutch of government and law enforcement contracts, including powering the NYPD’s Domain Awareness System, the highly disputed JEDI cloud for the Department of Defense, and the production of sophisticated HoloLens augmented-reality spectacles for the Army. Like other American tech Goliaths, Microsoft is wired into the PRISM program and regularly complies with National Security Letters and other legal entreaties from our ever watchful national security apparatus. With its surveillance capitalist underpinnings, TikTok should fit comfortably into this suite of products and services.
A recent report from Protonmail, a respected privacy-centric Swiss email service, warned: “The Chinese government has a history of strong-arming and co-opting Chinese tech companies into sharing their data and then using this data to intimidate, threaten, censor, or engage in human rights abuses.” It would be hard to argue that the United States, even in this lawless late imperial phase, is less democratic than the People’s Republic of China. But we have our own gulag system, our own long record of abusing protesters, our own illegal invasions of sovereign nations, our own secret laws and clandestine agreements between industry and those in power. Our intelligence community’s greed for data, and its ability to hack computer systems around the world, is unparalleled. Every fear that has been ascribed to TikTok and its relationship with the Chinese government could be recast, with minimal adjustment, to describe America’s tech monopolies and their obsequious relationship to the security state, whose crimes don’t require enumerating for anyone alive who’s witnessed the last few months of police rioting.
If there’s anything to learn from the ginned-up TikTok controversy—which, given the pressures at play, will likely end in a Microsoft acquisition—it’s to remind us of one of the dreary constants of the last four years. That is, major decisions of economic policy and diplomacy are being adjudicated by some of the dumbest, most venal people in American public life, often for reasons that seem arbitrary or insane. Steve Mnuchin, Peter Navarro, Donald Trump—these are the big brains debating how much, precisely, our government should put its thumb on the scales. Microsoft, with its trillion-dollar market capitalization, might see this as a great opportunity to add to its portfolio. It also might, like so many other prominent institutions in American life when faced with the reality of Trumpism, be too cowardly to do anything but go along for the ride.