Getting to the Bottom of the TikTok Deal

Seven days ago, I wrote about Presidential powers to halt mergers, specifically looking at the TikTok deal. Since that time, it has been announced TikTok will go public in the US with an IPO, with Oracle and Walmart will having shares in the new company.

Let’s try and tease out some of the reality of this from the attention-grabbing headlines.

Can Trump block TikTok in the US?

Before we get started, let’s review what happened a week ago. In this post I explained where the president gets the power to interfere in merger and acquisition activities of private companies:

Via executive order, Trump invoked the International Emergency Economic Powers Act (IEEPA). The IEEPA was enacted in 1977. It gives the president “to regulate international commerce after declaring a national emergency in response to any unusual and extraordinary threat to the United States which has its source in whole or substantial part outside the United States.”

[via Wikipedia]

Executive Order 13942 can be found here. TikTok is the US subsidiary of the Chinese company Bytedance, which is said to be the most valuable startup in the world. This CNN Business article does a very good job at laying out the security issues posed by TikTok.

I personally agree that TikTok is a huge security risk. More on that in a minute. First let’s examine the details of the TikTok deal.

What’s in the TikTok Deal?

The TikTok ban was announced in a US Department of Commerce press release on Friday (9/18). After the TikTok deal was announced and preliminary approval given by the president, the DOC posted this update.

Some of the details of the TikTok deal can be found in an Oracle press release. Let’s evalulate the Oracle press release.

Announcement of new American company – TikTok Global

TikTok is creating a new company called TikTok Global that will be responsible for providing all TikTok services to users in United States and most of the users in the rest of the world.

Oracle Press Release

TikTok will be an American company offering the service globally. This seems to be a play to get Bytedance into countries already banning it (like India).

TikTok Global will be majority owned by American investors, including Oracle and Walmart. TikTok Global will be an independent American company, headquartered in the U.S., with four Americans out of the five member Board of Directors.

Oracle Press Release

TikTok ownership will be 80% Bytedance, Oracle will have 12.5% share, and Microsoft will have 7.5%.

Walmart will bring its omni-channel retail capabilities including its assortment, eCommerce marketplace, fulfillment, payment and measurement-as-a-service advertising service.

Oracle Press Release

The language in the Walmart press release language is different than Oracle’s – its much less political. However, the fact that Walmart’s press release was just a paragraph before the Oracle press release indicates to me that Oracle is driving this deal.

The key thing to look at here is Walmart’s measurement-as-a-service advertising service. I can’t find information on what this service actually does, but it sure seems like it will have privacy implications.

TikTok Global will have an Initial Public Offering (IPO) in less than 12 months and be listed on a U.S. Exchange. After the IPO, U.S. ownership of TikTok Global will increase and continue to grow over time.

Oracle Press Release

This is a pretty amazing claim – they are guaranteeing an IPO in less than 12 months. What happens if they can’t make that deadline?

TikTok deal promises 25K new jobs

TikTok Global will create more than 25,000 new jobs in the Unites States and TikTok Global will pay more than $5 billion in new tax dollars to the U.S. Treasury.

Oracle Press Release

25K jobs doing what? LinkedIn shows 451 jobs available now in the US. Some of the positions are in Austin (folks are saying the jobs will go to Texas). Again, what happens if this milestone isn’t met?

Is Oracle Intentionally Bypassing the Real Privacy Issue?

The statements on privacy in Oracle’s press release are either deliberately misleading, or they demonstrate exactly why Oracle cannot handle the job of being TikTok’s secure platform. They don’t understand the privacy issues at stake, or they aren’t wanting people to understand them.

All the TikTok technology will be in possession of TikTok Global, and comply with U.S. laws and privacy regulations. Data privacy for 100 million American TikTok users will be quickly established by moving all American data to Oracle’s Generation 2 Cloud data centers, the most secure cloud data centers in the world.

Based on decades of experience securing the world’s most sensitive data, Oracle’s Generation 2 Cloud fully isolates running applications and responds to security threats autonomously.  This unique technology eliminates the risk of foreign governments spying on American users or trying to influence them with disinformation.

Oracle Press Release

That press release sounds security is only focused on traditional data- pictures, comments, passwords, identity. The problem is that isn’t the security threat TikTok poses.

TikTok is an application driven by algorithms that extract data points about you (read more on that here). Those data points are turned into information about you that feeds into a profile of who you are, what makes you tick. Finally, that information becomes actionable information to someone – the question in the case of TikTok is who.

This is no different than what other social media sites like Facebook do. We know from the Cambridge Analyitica scandal that Facebook doesn’t care how their customers target their users. As a refresher, Cambridge Analytica targeted voters in the 2016 elections with disinformation with the goal of persuading them not to vote. Looking back, it is obvious that the strategy worked.

Teaching the Kids

This may be the most controversial story emerging from the press release:

TikTok Global, together with Oracle, SIG, General Atlantic, Sequoia, Walmart and Coatue will create an educational initiative to develop and deliver an AI-driven online video curriculum to teach children from inner cities to the suburbs, a variety of courses from basic reading and math to science, history and computer engineering.

Oracle Press Release

The President is claiming this will fund his 1776 project, an educational initiative aimed at suppressing education about the real origins of the US.

When I first saw this, I thought it was just Trump using details of the deal as a campaign talking point. After reading Oracle’s press release, I’m not so sure.

….. create an educational initiative to develop and deliver an AI-driven online video curriculum to teach children from inner cities to the suburbs, a variety of courses from basic reading and math to science, history and computer engineering.

Oracle Press Release, emphasis mine

An AI driven curriculum is very scary. If I was looking for children to radicalize, I would use a powerful AI like TikTok (or Facebook) to look for characteristics in kids that would make them susceptible to videos that would change their thinking. Once I found the best targets, I could target those kids with persuasive videos to start changing their mind. I would use the algorithm to feed the kids more and more of my persuasive videos, until I had completely radicalized them.

With the TikTok deal we are looking at least two potential means of radicalization: a white supremacist view of American History or a foreign government’s view of the how democracy should work. That’s pretty frightening.

Real Talk

The TikTok deal is dominating our news cycle right now, so it’s really important to understand what the fuss is all about.

I believe it was proper for our government to investigate TikTok. However, I’m concerned that our government officials don’t understand the technology enough to make the best decisions for the nation.

Additionally, we are bombarded with headlines that don’t really speak to the real issue. I urge everyone to chase down primary sources – videos of people talking (the entire video if possible), government and company press releases. Learn what privacy is really at risk with these algorithms. Digital literacy is more important now than ever.

Most of all, I urge all of us to discuss what is happening with the goal of coming to a common understanding. Disinformation campaigns are designed to sow chaos and distrust. If you don’t agree with me – let’s chat!

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