This video is sponsored by Brilliant. Start learning for free with the link in the
description and the first 200 get 20% off the annual premium subscription. Zhang Yiming was born April 1982 in China’s
Fujian province. His mother, a nurse, and father the owner
of an electronics factory, were unusual in that they gave their son the freedom to explore
his interests - namely, technology. This, little did they know, would put Zhang
on the path to become China’s Mark Zuckerberg. In 2001, he left to study engineering near
Beijing, which he chose for the “pretty girls and winter snow”. While Zuckerberg, two years younger and six
thousand miles away, entered Harvard, met his wife, and started Facebook, Zhang fixed
computers, met his wife, and built his startup. After several failed ventures, in 2012 he
founded a new company called ByteDance from his small Beijing apartment. And although his path was rockier than Zuckerberg’s,
it was no less abrupt or explosive. By the end of its first year, Facebook had
registered one million users. ByteDance’s first breakthrough - a Chinese
video-sharing app - had 100 million. Then, having conquered the Chinese market,
the company turned global, buying its competitor and the spiritual successor to Vine, called
Musical.ly in 2017 - later rebranded as ‘TikTok’ outside of China. The app - now ubiquitous among young people
everywhere - makes it almost too easy to shoot, edit, and share videos, usually in the form
of dancing, comedy skits, and stream-of-consciousness monologues. The real genius of TikTok, however, and what
sets it apart from Snapchat, Instagram, and Facebook, is the part you don’t see - the
much-alluded-to, guarded-like-a-state-secret algorithm. Rather than by following friends, TikTok learns,
on its own, exactly what you like as you mindlessly scroll through its endless feed of videos. You don’t need to follow, like, or search
for it to understand your preferences. And the more you scroll, the better it gets
at reading your mind. This is also what makes it so addicting - unlike
Twitter or Instagram where you can stay up-to-date on your timeline, TikTok will keep you entertained
for however many hours you allow it. Knowing this, its 2 billion downloads in its
only four years of existence and ByteDance’s position as the most valuable private company
in the world are impressive but not altogether surprising. Equally so Zhang’s personal wealth of around
$16 billion - making him the tenth richest person in China and 61st in the world. Today, at 38 years old, he’s still described
as the nerdy, awkward, uncharismatic, but undeniably resourceful mirror-image of Zuckerberg. In his rare public appearances, he often comes
across as robotic and overly-rational. There is, however, one obvious major difference
between these two internet titans: Zhang built his company in China. While Facebook had to first allow a foreign
government to interfere in a presidential election before Congress would even begin
considering regulation, TikTok faced legal constraints from the very beginning. What’s remarkable about its success is that
it’s neither a clone of a foreign-made app, nor, like Huawei, aided financially by the
Chinese government. Just as impressive, it resisted acquisition
by Alibaba, Tencent, or any other deep-pocketed tech giant. By not doing so, TikTok arguably became China’s
first true consumer technology export success story - and all on its own - overcoming its
limitations despite being based in China, not because of it. Prevailing in this challenging environment
affords Zhang even greater praise, but also subjects his empire to a potential collapse
just as instantaneous as it was built. It took only a few short years for TikTok
to surpass, in downloads, some of the biggest companies in the world. But it may take only a few emphatic pen strokes
for all that progress to be lost. On June 29th, 2020, the second-most populous
country in the world and by far TikTok’s biggest market, the Republic of India, banned
it, along with 60 other Chinese mobile apps accused of stealing and sending user data
outside of the country. Ironically, this came as a surprise to a nation
whose Great Firewall has methodically banned, censored, and regulated foreign media for
decades. With this one swift move, millions of viewers
and creators, some of whom depended on the app for a significant portion of their living,
were simply out of luck. Just as significant, was the potential domino
effect this decision could have. TikTok’s largest source of downloads this
year, in order, are India, Brazil, and the U.S. - the latter of which is a prime contender
for the next domino to fall. This, in fact, undersells the significance
of the U.S. market. When divided by platform, it’s revealed
as a major source of iPhone users - who spend, on average, two and a half times more on apps. What this means is that while Americans account
for only 10% of TikTok’s overall user base, they make up an incredible 56% of its revenue. A ban by the U.S. would not simply limit its
growth but require a fundamental restructuring of its business - to say nothing of the potential
for other countries to follow its lead. What, then, is the likelihood of such a ban? And would it be justified? Even before any real arguments are made, fear
of TikTok may, to some, seem reasonable if only because such fear is so widespread, and
came about so suddenly. The list of skeptics, even prior to India’s
ban, is long. After a regional office was established in
Sydney, Australian authorities began investigating the app on suspicion of foreign interference
and violations of data privacy. Both the U.S. Democratic and Republican national
committees have asked staffers not to install the app or to buy a second phone when using
it for campaign work. As have the U.S. Department of State, Homeland
Security, and military. Even private companies have followed suit
- including the bank Wells Fargo and Amazon, although the latter retracted its statement
shortly afterward. Tensions reached a new high when the Trump
administration strongly alluded to a ban at the same time as the president’s re-election
campaign bought Facebook ads saying “TikTok is spying on you” and have been “caught
red-handed”. Should this decision be made, several levers
are at its disposal. First, The Committee on Foreign Investment,
whose job is to monitor national security concerns, could force ByteDance to sell-off
its American operations to an approved buyer. Alternatively, the Trump administration could
invoke the International Emergency Economic Powers Act, or place TikTok on the Entity
List, which would force its removal from the app stores. As in the case of Huawei’s ban almost exactly
one year ago, skeptics are quick to point out the preferential treatment it would give
to American competitors. As if on cue, Instagram is expected to launch
its TikTok competitor, called Reels, in the U.S. this August. Snapchat, Byte, Likee, and YouTube have also
tried replicating the concept. Even Netflix listed the app as a competitor
in its latest letter to shareholders - a sign of just how time-consuming it’s become. Also like Huawei, the claims made against
it are sometimes vague, hard to disprove, and yet also extremely consequential. Several independent observers allege the app
censors content in accordance with Mainland Chinese guidelines. For example, in the absence of videos covering
the pro-democracy protests in Hong Kong. The company has publicly admitted to limiting
the reach of disabled, queer, and overweight creators, which it claims was for their own
protection against bullying, before changing policies. A ‘bug’, it says, was responsible for
showing no views on videos related to Black Lives Matter. On one hand, the nebulousness of the algorithm
allows anyone to claim censorship without strong supporting evidence. On the other, this provides cover for TikTok
in that it can always remind them that the algorithm is based on their preferences and
that any perceived manipulation is only a reflection of their behavior. More concretely, the company has paid $5 million
and $150,000, respectively, to U.S. and Korean authorities for collecting the personal information
of children without parental consent. However, unlike Huawei, the controversy surrounds
not critical communications infrastructure but a lip-syncing, dancing app for teens. A TikTok ban raises far more eyebrows because
the idea of such an app presenting a threat to national security is a much less intuitive
argument. This, critics would say, is precisely what
makes it such an effective tool - nobody suspects it. A preview of what it could become if left
unregulated is the version of the app in China, which is home to a much older audience, is
used by police to spread information, and has advanced face recognition. Such was the backdrop of skepticism against
which more recent discoveries were made. When the beta of the next version of iOS was
released this summer, a new privacy feature was included which alerts users when an app
copies their clipboard. It didn’t take long before videos like this
one emerged, showing TikTok almost constantly reading whatever is copied. More careful digging also found the app recording
a users’ screen size, as well as other information about their device. These findings are a trap. Well-intentioned as they may be, they only
distract from other, far more serious concerns. Experts agree that TikTok’s data collection
practices are not only not rare, but actually quite restrained when compared with other
ad-based services like Facebook. Reddit and LinkedIn, for instance, were also
caught reading the clipboard, which they say is used to prevent spam. ByteDance has explicitly repeated that it
does not employ moderators in China and that U.S. data is stored in the U.S., with backups
in Singapore. By narrowly focusing on the technical details,
the issue is reframed as one of privacy, which could just as easily be applied to any application,
including and especially those based in America. It’s no coincidence, rather, that those
most familiar with Chinese politics are also the app’s most vocal critics. TikTok is not just another social network
because China is not just another country. This is also not to say that the company doesn’t
mean what it says. One of the most unfortunate byproducts of
its place of birth is that TikTok may be dangerous through no fault of its own. China’s 2017 National Intelligence Law compels
all companies with information stored within its borders to hand-over data at its request
- without the constraints of courts or warrants. If this sounds only theoretical, ByteDance’s
first app was shut down in 2018 by the National Radio and Television Administration, after
which Zhang apologized for his poor adherence to socialist core values. In practice, this control extends much further
than its borders. A company need not be based or even physically
present, at all, in China for it to be beholden financially. It does not matter that ByteDance is incorporated
in the Cayman Islands, or that Zoom is headquartered in California - or that the NBA is, in every
sense of the word, American - for their checks are signed elsewhere. None of this is particularly new. China has effectively operated a separate
internet for years, which foreign companies have gained access to by self-censoring. What has changed is that, until recently this
has been relatively easy to deny or ignore. Now, at a time of record bipartisanship in
favor of a tougher response to China, it is no longer possible to feign ignorance. Whereas before appeasing China was the common-sense
profit-maximizing business tactic to gain access to its 1.4 billion users with minimal
casualties elsewhere, now there’s a tradeoff. And as companies are forced to confront this
reality, they will inevitably decide on one of three general approaches: The first group will rip-off the bandaid as
quickly as possible. They’ll cut their losses by leaving the
Chinese market entirely and spending massively on PR against their competitors who don’t,
while facing backlash from investors. A second group will do just the opposite. These, mostly Chinese-based companies will
see international expansion as more liability than its worth and leave the non-Chinese market. Notably, this does not constrain them to the
mainland, but would likely include developing markets which can’t afford to be scrupulous
when offered investment. Finally, some especially international companies
will see either option as too high a cost to bear and make the highest-reward, yet highest-risk
gamble - to juggle both. These firms will split in two, and each division
will try its hardest to distance itself from the other. If they fail, pressure will grow until enough
value is lost that a deal will be made - and one or both divisions will be sold to a disinterested
investor. TikTok is a prime example of the third strategy. In the last several months alone, it has hired
a new American, ex-Disney CEO, announced its plans to add another 10,000 U.S. jobs in the
next three years, doubled its lobbying budget, and, after the National Security Law was promulgated
in Hong Kong, left the Special Administrative Region entirely. However, with an election less than 100 days
away, it seems unlikely these moves will be nearly drastic enough. Even a majority sale to a U.S. investor may
not assuage fears during a time of intense scrutiny towards China and a presidency at
stake. Such is the predicament: it’s impossible
to divorce any action from these political circumstances. And yet, that doesn’t automatically disqualify
arguments in favor of a ban. It is rare but not the least bit contradictory
to admit that: It is politically popular to attack companies
for their ties to the PRC, and would still be whether or not such fears were founded;
AND TikTok poses a very real potential threat
to the interests of the U.S. and other countries, simply because of its ties to China; AND
There is a deeply troubling, growing tendency to associate anything broadly labeled ‘Chinese’
as untrustworthy. To ban TikTok would create a kind of Great
American Firewall - against the will of American users, and yet, not doing so would subject
the country to greater risk. There is, however, one neutral path forward:
To pass regulation governing where data can be stored, requiring disclosure of the algorithm,
local ownership, and creating mechanisms for auditing and enforcement. Doing so, although seen as less politically
‘strong’, would subject all companies - foreign and otherwise - to the same fair
standards. TikTok would remain, giving American companies
greater competition and incentive to innovate, companies like Facebook would be forced to
respect their users’ privacy, and all without provoking backlash for targeting a specific
group of people. This is a long-term solution for a long-term
problem. Because although TikTok was one of the first
Chinese apps to go global, it certainly won’t be the last. There will be another Huawei, another Zoom,
and another TikTok, and how the world responds now will set the tone of what’s to come. TikTok is the product of one man’s intense
interest in technology and curiosity to learn more. Its rise proves that the next big idea won’t
necessarily come from Facebook, Google, or Apple - it could come from you. If you’re watching this video, you’re
clearly interested in tech and motivated to learn on your own. And you can take the next step on your entrepreneurial
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Hey poly great video
I like the shorter videos too, but I really like longer videos like this one, because of how in-depth you get with them!
Great vid as always, the insight was fantastic