Tik Tok, Oracle and Walmart
Seconds and Cents Episode 31. We're going to talk today Tik Tok Oracle. We've talked about Tik Tok a lot on this podcast considering that we're only 31 episodes in I think they've occupied content, like four or five of them. I don't even have the app. And I talked about Tik Tok what feels like an awful lot Tik tok, Oracle, and Walmart, the President, quote, unquote, gave his blessing to the CEO, the executive team, co CEOs, the executive team over at Oracle to do this deal with Tik tok, which would make Tik Tok not be banned. We're going to talk about whether or not it matters. I don't like the deal, we're going to talk about why don't like the deal. My hope for the listeners is not that you necessarily adopt my point of view here, but that you're able to kind of think a little bit deeper about about what this means about the role of social media about the role of government and business, right, and the role of government in global politics. Because this game, while it started out, was the kind of the app and the banning of the app started out as what I thought was a national security issue, which was a national security issue. I think if you talk to any serious cyber-security kind of individual any serious geopolitical Information Technology individual those said, the security of tech talk is of the utmost priority, especially as it continues to grow like absolute wildfire.
And now it seems like it has become an issue of kind of, not necessarily partisanship. But I think political showmanship, I am not thrilled about this deal. I am not thrilled about the way that this is going down. I don't like that This is going down in the completely public forum where you have Satya Nadella over at Microsoft just calling up the president and then Microsoft issuing a press release saying after a great discussion with the President. Like that's not necessary, I just don't think that this is a great way for, for the government to be interacting with business. And so we're gonna dive into it, we're gonna dive into like, kind of what is the situation here with tik tok, Oracle and Walmart? Why do I think it didn't solve the problem? But what do I like about this? What do I think is the silver lining about this whole situation? So what's happening first and foremost, what was released this weekend, this weekend, what was released was that Tik tok, which is owned by Chinese conglomerate called bite dance, is going to create a new company, I believe called Tik Tok USA or Tik Tok us, that new company is going to have the data be hosted by Oracle. So all the data for all the United States users, at least I know that the United States users might be other user bases in their New Zealand, I think was being thrown around as a possible user base, the European Union might be
let's talk about the United States. And the United States user base here because this is a an issue purely related to the Department of State and President Trump, the United States is going to have Oracle all of our data is going to be hosted by Oracle, which means that
in theory, again, this is in theory, right? The Chinese government will not have access to all the raw data for all the millions upon millions upon millions of users based in the United States. And so Oracle gets that deal, Walmart is going to buy Oracle gets 12 and a half percent of this new company, Walmart is going to get 7.5% of this new company, totaling 20% of this new company, 20% total ownership. And so Walmart and Oracle going into this deal together, basically, what's this going to be? I think there are a lot of venture capital firms that are going to make a bunch of money on this deal.
This is what's referred to as a shareholder dilution, which means that while the value of the business got larger, so while Tik Tok is going to be valued at a larger valuation, each kind of investors ownership stake is going to go down. But at the end of the day, that investor is going to be making more money today than they were yesterday. So Oracle is going to get this large cloud deal contract Oracle Cloud, they've been pushing this kind of division of their business for a while Oracle historically, as an enterprise database company, why consumer would ever need a database is the reason why no consumers still have databases, outside of like Excel. And Oracle has been looking to compete with Amazon Web Services, AWS with Google Cloud with Microsoft Azure with those big players. And this is going to be a really great deal for them. They're going to be able to leverage this into a lot of other cloud deals for a lot of other fortune 500 fortune 1000 startups whatever it's going to be right where now they have kind of a huge marquee client, another huge marquee client and tik tok and they have an ownership stake in tech talking. You know, Oracle wasn't really making the news before all this started and now all of a sudden Oracle's making the news
So I think this is a good deal for Oracle, I think Oracle actually got a got a really good end of the deal. What's Walmart get out of this, I think Walmart's gonna get a great deal as well, and that they're getting the data for a customer demographic that they do not have. So, when I think about Walmart, I think about kind of young people, to be honest, not shopping there. I think they're all on Amazon. I think they're all on Pinterest. I think they're all on Etsy. I think they're using Facebook marketplace. And I don't necessarily think that they're shopping online at Walmart, I just, I just don't see that. I think there are a lot of kind of teenagers and 20 somethings all the way up to 29 3031 that are using their parents, Amazon Prime accounts, and Walmart really wants to compete against Amazon, in the e commerce space. And so far, the last five years they've been doing, they've been really successful at it. And so I think that Walmart getting all this user data is going to be really good for Walmart, I also think Walmart's gonna make a ton of money on this deal, because I think Tik Tok is going to make a ton of money when they IPO. And so that's just kind of it what's happening. is going to sell 20% of the company, they're going to to Oracle into Walmart, Walmart is going to get the customer going to get access to customer data, Oracle is going to host the customer data, in theory, the Chinese government is going to have access to that customer data, and also that user data, and that's just going to be it. Now I don't love this. I'm in kind of my in a little bit here. I'm going to get into why I don't love this. Do I think that it's good for Oracle and Walmart? Yeah, I do. Do I think it's great for the venture capitalists that invested in bytedance, like, five years ago, six, seven years ago. I think this is brilliant for the venture capitalist, because I think they're just gonna make a boatload of money. But before we go into why I don't like this, we have to go into kind of what happens so earlier in the summer, President Trump signed an executive order that said, Hey, if a United States company does not buy tik tok, or does not buy a division of tik tok, where all the data and all the algorithms and everything can be stored inside of the United States, and are not subject to Chinese law, then I'm going to ban the app and the app is going to be banned on September either 15 or 17, or 20. But in the middle of September, the app is going to be banned. And at the time, the issue here was that there was a a news report that had come out a couple of months earlier that said, that Tik Tok was uploading all of the kind of all of the text that you had on your clipboard. So when you copy on your phone, it copies to what's called a clipboard and whether or not you allowed Tik Tok to upload that data, it was uploading that data. I have built mobile apps before I know exactly how easy it is to upload to upload information from the clipboard. I've done it before. I didn't, we never did it in a production release. So we never did it to actual users. But at the time, we were exploring features and just kind of built out this feature in a matter of an hour or two, literally an hour or two. And it turns out, it was really easy to upload the content from the clipboard up to up to a database up to servers up to do whatever you wanted to do. And an iOS 14, which was just released. I don't know about Android, but an iOS 14, which was just released to iPhone users here a couple days ago. They now give you a notification, which says that something was copied or pasted from the clipboard or that the clipboard was being activated, which I think is a really, really good update. I can't believe Apple didn't do that earlier. But basically, what was happening here is we had 10s of millions of tik tok users having their data uploaded to China and having the Chinese government being able to access that data and change minds of the American people using using that data and using their algorithms. And that is the problem. That was the chief issue here that I think went overlooked. I know Ben Thompson over its trajectory, thought that it went overlooked, which was that the real problem isn't the user data. I mean, Facebook has user grade Instagram as user data, Twitter as user data. Pinterest has user data. Google has user data, Apple has user data, everybody has user data. If you're a big player in tech, you have user data. Uber has user data. Uber has a ton of data, they know where you're going, right? Like there are all of these sorts of there all of these sorts of companies that just have a ton, a ton, a ton of data. And not only do they have a ton of data on you, but they have a ton of data and everybody else who's just like you. And so even if they might have a missing data point from you, they're gonna get 9899 99.9% accurate guesses on whatever that missing data point is on you because they know so many other people that are exactly like you.
So the app the issue here is that the Tik Tok algorithm was being actively used to censor content. It was being actively used. I mean, there are numerous cases if you had to Google
And you just Google Search Tik tok censors Hong Kong content, you'll see dozens of cases of Hong Kong content being censored or shadow banned off of tik tok or just straight up banned off of tik tok. And if you look at like Tik Tok promotes pro Chinese content, it's gonna, it's gonna show the same thing, which is that Tik Tok was actually kind of elevating content that made the People's Republic of China seem great, seem glorious, seeing whatever the term is that like a good whatever the term is that you want to use. And, and the algorithm being in the hands of so many people, that's where the issue lies. Now, the algorithm is a function of the data. But there are still lots of different instances where it's not just data, it's making the algorithm there are other components to the algorithm. And ultimately, like anybody can create a social media app, right. And anybody can create a reasonably good algorithm, it's open source, you can go Google search, create a news feed algorithm, and you know, what you're going to find out of the box news feed algorithms that are going to work 80% of time.
And so having Oracle own all the data doesn't seem to make a lot of sense to me, because the algorithm at the end of the day was where I think a lot of the issues really arose, which is that it was truly changing the hearts and minds of the American people that it was really able to kind of shift people to the right, or to the left on any certain issue, it was able to bring certain topics to the forefront of people's minds and put other topics away in people's minds. And so I'm very critical of this. I don't think that this is a great a great idea. I don't think that the way that this was executed was well done.
And so first of all, why don't necessarily like this from political purpose, I don't necessarily think the president should be involved in something like this.
And I understand that the Chinese government has been plenty of United States based services, Facebook, you can't get there, Google, you can't get there.
Uber had to sell its whole division. I don't know if you could get Uber there. But I know they had to sell their whole division. There are all sorts of Twitter, I believe is not is not allowed in, in China. And so yes, the Chinese government does kind of have unilateral control over what should and or what is and what is not going to be allowed. And in the borders of the People's Republic of China. I think, in the United States, we don't operate that way. I think in the United States, there is a component to this that is just simply like this is the freedom of Americans to be able to do what we want to do with who we want to do it. And as long as we're following the law, right, as long as we are following the rules of society, and then we should be allowed to do that. And I don't think it's necessarily government's place to interfere now, do I think that we were having national security issues here, and so the government should step in? Yes. But I don't like the way that we did it in that it was, Hey, you, Chinese company have to sell to United States company, otherwise, we're just going to block you from our market. And that feels very unilateral. It feels very totalitarian to me. I don't love the precedent that that sets, I think the precedent that that sets is that the government can decide who does business. And that, to me feels very un-American, That, to me feels quite a bit against the ideals The country was founded upon. And so I'm not a huge fan of how this has gone down so far. And I think it doesn't solve the problem. The primary problem here is that the algorithm is still under Chinese ownership. The Chinese government, one of the big huge complex of fires in this whole thing was that a couple of weeks ago, the Chinese government came out and said that it could deem a technology algorithm
unable to be sold to other investors, meaning or the source code to an algorithm to be unable to be viewed by other investors or unable to be sold to other investors. Meaning that the Chinese government could say, hey, you Chinese company are not allowed to sell your algorithm. And and in this deal, Oracle gets the data, but they don't get the algorithm and Oracle can view the algorithm, but they can't utilize the algorithm, or they can't own the algorithm. And so the algorithm is still still owned by byte dance and China, to me that it just it just doesn't make sense. I'm kind of curious here, what a bunch of user data is going to get is going to get us that fixing or changing the algorithm or creating ownership and ownership structure of the algorithm wasn't going to get I think the algorithm was the problem here. And so I want to be clear that that the Oracle employees the Oracle development team, the Walmart development team, is allowed to view the documentation and to view the algorithm and one of the primary problems however,
That the documentation for the algorithm is in Chinese do I think that that's like a large complex of fire? No. But is it inconvenient enough? Absolutely. On top of that, it's a machine learning algorithm. And so part of the algorithm is kind of the structure of the algorithm. But it's not a y equals mx plus b here, there are a bunch of there are thousands upon thousands upon thousands of matrices that are all full of 128 or 256 numbers, or 540 numbers, right? They're just tons and tons of matrices full of numbers, which are actually what are making the decisions here. I'm not going into what machine learning algorithm is today. But trust me, it doesn't look like y equals mx plus b. So do I think that this really solved the problem? No, I don't? Do I think that this was this kind of devolved into President Trump getting kind of a parade? Or like getting a victory kind of a notch in his belt? To his a part of his very loyal base of people who are anti China? Absolutely. Do I think that bite dance is getting the best end of this deal? Probably, to be honest with you, I think bite dance got a bunch of new investors, I think they got a huge influx of capital. And I think now they got kind of the green light from the United States government to continue acting the way they were, they just have to use somebody else's database services. And so I'm, I'm just not thrilled about it.
And I and I think that people don't really understand why,
why this is such a big deal. It's like this is this is the same thing that was happening in Facebook in 20, with Facebook in 2016, during the election, it's not that Facebook got hacked, Facebook did not get hacked, your user data was not taken. But the Facebook algorithm was perfectly optimized by bad actors. And I think there's a possibility here that the Tik Tok algorithm could be perfectly optimized by bad actors. And it can reach 10s of millions of people and a matter of a week, or in a matter of a day, in some instances. So let's talk about the kind of precedent here that I do think can help society because I there was one precedent that was set that I think is very interesting. And that's the precedent of the fact that the Oracle engineers get to review the documentation and the algorithm inside of tech talk because of this deal. And so this is the first deal where a social media algorithm or a social media company has been forced to divulge intellectual property in and it's in the stake of a company that already owns meaning bytedance still owns the algorithm for Tik tok, the entire value of Tik Tok boils down to two things, the algorithm and the number of users sharing content and byte dance still owns the algorithm. But they're being forced to show Oracle the to show Oracle the algorithm to show Oracle the documentation. Normally, a majority shareholder in a business which bite dance is would never be forced to show a minority shareholder. In this case, they are and this is Tik Toks real competitive advantage. So what do I think is kind of a precedent that I'm excited about? I think that we have set a precedent now that is that social media companies have to divulge their algorithms. And I'm going to talk in a second about why I don't think that that's going to harm a single social media company. But I think this is great that social media companies have to divulge their algorithms, they have to show the American people they have to show the world at large, what their algorithms are doing and how their algorithms are really operating. I think if it became a national security order, I think if it became something where Hey, we know that Facebook is truly changing the hearts and minds of billions of people every month, or that Twitter is truly changing the minds of billions of people every single month. And you know what, for the good of society, you have to show us what this algorithm actually is you have to show us how this is actually being used. I think
I think that the American people will be a lot wiser for it, I think that the world at large will be a lot wiser for it. And that each individual person will be able to make smarter decisions about how they use social media and how they don't use social media. What information do they get from social media versus what information do they not get from social media? I think one of the things here that this mimics quite a bit is this mimics people being able to fact check an article. I think even since the dawn of newspapers, hundreds of years ago, there were libraries that allowed you to fact check the articles. You could go talk to somebody and see what was true and what was fake. And while you can do that now, the algorithms are in such control over what you see there and such control over how your viewpoint is being shaped like
did you ever realize that
advertisers can request to be placed next to certain types of content. Meaning, if there is a piece of content about about someone's family a picture, your mom posts a picture of you and your family, an advertiser can figure out how to get an ad right underneath that. And now you're starting to associate that advertiser with great feelings about you and your family. Right? Like, there's just a bunch of stuff that these algorithms control that you have absolutely no idea or changing inside of your brain, the way that the algorithms are sending notifications as bananas, the way that they're able to kind of control how they keep you on their site longer is bananas. I haven't I deleted Twitter and the Facebook blue app and Facebook Messenger and tik tok off of my phone, I only ever use Instagram, to post content. Now I don't even really look at Instagram to scroll through the feed. And so I think that this is a really good thing for the United States. And for the people to be able to really understand how is Facebook doing, what it's doing? How is Twitter doing, what it's doing? And how can we treat Facebook and Twitter like utilities a bit more where we know how our energy is created, we know where we get water and how our water is filtered and how our water is cleaned. And a bit less like it's a black box. And we don't really understand that, hey, our friends are there. And let's talk about why I think this isn't going to harm them. And I actually think that there's a strong possibility here that it helps Facebook and Twitter, these other social media companies, it's because their competitive advantage is in their users. Facebook's competitive advantage. The reason why Facebook is so valuable is not in the algorithm. It is not in their algorithm to keep people on the newsfeed like that is not that sophisticated of an algorithm. That algorithm has been out for 10 years now.
Every major social media company has it. But the difference between that social media company and other social media companies is purely the number of people using the platform it is the number of people publishing content, it is a number of people engaging on your content, it is a number of notifications that they're able to send that are relevant to you. It is a number of relationship status updates on Facebook, or the number of birth announcements or engagement announcements or whatever it's going to be the value of Facebook and Twitter and Instagram and everything is in its users and its users posting content, it is not in the ranking order of the algorithm. And so I don't think the share price would be her I don't think the economy would be hurt. I think that these social media companies would lobby like hell in order to make sure that they can keep their technology safe. But at the end of the day, do I think that? Do I think that it's a net positive for the American people to have these things? Have these algorithms published? Absolutely. I hope that I don't have to talk about Tik Tok a whole lot more. And I'm sure I will, honestly I this thing just continues to go on and on. But hopefully we put it to bed a little bit.
not thrilled about this. But you know what, that's how it goes. Sometimes, I think that there's always a silver lining. And in this case, I think the silver lining is that we can treat social media companies a little differently. We can treat the big algorithms that shape our lives a little bit differently. And maybe we can get we can get some better algorithms that remove some clickbait that remove some of the hate spreading that remove some of the divisions spreading that really create a better, a better life, a better frame of mind and a better world.
I think that we're moving in the right direction. I think that this is a step in the right direction. Even though I don't love the partisanship even though I don't love the way that the administration handled it. Have a great day, everybody. We're going to talk again soon. See ya.
The above is an AI transcription of Evan’s Seconds and Cents podcast.