Start learning for free with the link in thedescription and the first 200 get 20% off the annual premium subscription. Zhang Yiming was born April 1982 in China’sFujian province. His mother, a nurse, and father the ownerof an electronics factory, were unusual in that they gave their son the freedom to explorehis interests – namely, technology. This, little did they know, would put Zhangon the path to become China’s Mark Zuckerberg. In 2001, he left to study engineering nearBeijing, which he chose for the “pretty girls and winter snow”. While Zuckerberg, two years younger and sixthousand miles away, entered Harvard, met his wife, and started Facebook, Zhang fixedcomputers, met his wife, and built his startup. After several failed ventures, in 2012 hefounded 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 hadregistered one million users. ByteDance’s first breakthrough – a Chinesevideo-sharing app – had 100 million. Then, having conquered the Chinese market,the company turned global, buying its competitor and the spiritual successor to Vine, calledMusical.ly in 2017 – later rebranded as ‘TikTok’ outside of China. The app – now ubiquitous among young peopleeverywhere – makes it almost too easy to shoot, edit, and share videos, usually in the formof dancing, comedy skits, and stream-of-consciousness monologues. The real genius of TikTok, however, and whatsets it apart from Snapchat, Instagram, and Facebook, is the part you don’t see – themuch-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 searchfor it to understand your preferences. And the more you scroll, the better it getsat reading your mind. This is also what makes it so addicting – unlikeTwitter or Instagram where you can stay up-to-date on your timeline, TikTok will keep you entertainedfor however many hours you allow it. Knowing this, its 2 billion downloads in itsonly four years of existence and ByteDance’s position as the most valuable private companyin 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 describedas the nerdy, awkward, uncharismatic, but undeniably resourceful mirror-image of Zuckerberg. In his rare public appearances, he often comesacross as robotic and overly-rational.
There is, however, one obvious major differencebetween these two internet titans: Zhang built his company in China. While Facebook had to first allow a foreigngovernment to interfere in a presidential election before Congress would even beginconsidering regulation, TikTok faced legal constraints from the very beginning. What’s remarkable about its success is thatit’s neither a clone of a foreign-made app, nor, like Huawei, aided financially by theChinese government. Just as impressive, it resisted acquisitionby Alibaba, Tencent, or any other deep-pocketed tech giant. By not doing so, TikTok arguably became China’sfirst true consumer technology export success story – and all on its own – overcoming itslimitations despite being based in China, not because of it. Prevailing in this challenging environmentaffords Zhang even greater praise, but also subjects his empire to a potential collapsejust as instantaneous as it was built. It took only a few short years for TikTokto surpass, in downloads, some of the biggest companies in the world. But it may take only a few emphatic pen strokesfor all that progress to be lost. On June 29th, 2020, the second-most populouscountry in the world and by far TikTok’s biggest market, the Republic of India, bannedit, along with 60 other Chinese mobile apps accused of stealing and sending user dataoutside of the country. Ironically, this came as a surprise to a nationwhose Great Firewall has methodically banned, censored, and regulated foreign media fordecades. With this one swift move, millions of viewersand 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 dominoeffect this decision could have. TikTok’s largest source of downloads thisyear, in order, are India, Brazil, and the U.S. – the latter of which is a prime contenderfor the next domino to fall. This, in fact, undersells the significanceof the U.S. market.
When divided by platform, it’s revealedas 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 accountfor 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 itsgrowth but require a fundamental restructuring of its business – to say nothing of the potentialfor 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, fearof TikTok may, to some, seem reasonable if only because such fear is so widespread, andcame about so suddenly. The list of skeptics, even prior to India’sban, is long. After a regional office was established inSydney, Australian authorities began investigating the app on suspicion of foreign interferenceand violations of data privacy. Both the U.S. Democratic and Republican nationalcommittees have asked staffers not to install the app or to buy a second phone when usingit for campaign work. As have the U.S. Department of State, HomelandSecurity, and military. Even private companies have followed suit- including the bank Wells Fargo and Amazon, although the latter retracted its statementshortly afterward. Tensions reached a new high when the Trumpadministration strongly alluded to a ban at the same time as the president’s re-electioncampaign bought Facebook ads saying “TikTok is spying on you” and have been “caughtred-handed”. Should this decision be made, several leversare at its disposal. First, The Committee on Foreign Investment,whose job is to monitor national security concerns, could force ByteDance to sell-offits American operations to an approved buyer. Alternatively, the Trump administration couldinvoke the International Emergency Economic Powers Act, or place TikTok on the EntityList, which would force its removal from the app stores. As in the case of Huawei’s ban almost exactlyone year ago, skeptics are quick to point out the preferential treatment it would giveto American competitors. As if on cue, Instagram is expected to launchits TikTok competitor, called Reels, in the U.S. this August.
Snapchat, Byte, Likee, and YouTube have alsotried replicating the concept. Even Netflix listed the app as a competitorin its latest letter to shareholders – a sign of just how time-consuming it’s become. Also like Huawei, the claims made againstit are sometimes vague, hard to disprove, and yet also extremely consequential. Several independent observers allege the appcensors content in accordance with Mainland Chinese guidelines. For example, in the absence of videos coveringthe pro-democracy protests in Hong Kong. The company has publicly admitted to limitingthe reach of disabled, queer, and overweight creators, which it claims was for their ownprotection against bullying, before changing policies. A ‘bug’, it says, was responsible forshowing no views on videos related to Black Lives Matter. On one hand, the nebulousness of the algorithmallows anyone to claim censorship without strong supporting evidence. On the other, this provides cover for TikTokin that it can always remind them that the algorithm is based on their preferences andthat any perceived manipulation is only a reflection of their behavior. More concretely, the company has paid $5 millionand $150,000, respectively, to U.S. and Korean authorities for collecting the personal informationof children without parental consent. However, unlike Huawei, the controversy surroundsnot critical communications infrastructure but a lip-syncing, dancing app for teens. A TikTok ban raises far more eyebrows becausethe idea of such an app presenting a threat to national security is a much less intuitiveargument.
This, critics would say, is precisely whatmakes it such an effective tool – nobody suspects it. A preview of what it could become if leftunregulated is the version of the app in China, which is home to a much older audience, isused by police to spread information, and has advanced face recognition. Such was the backdrop of skepticism againstwhich more recent discoveries were made. When the beta of the next version of iOS wasreleased this summer, a new privacy feature was included which alerts users when an appcopies their clipboard. It didn’t take long before videos like thisone emerged, showing TikTok almost constantly reading whatever is copied.
More careful digging also found the app recordinga users’ screen size, as well as other information about their device. These findings are a trap. Well-intentioned as they may be, they onlydistract from other, far more serious concerns. Experts agree that TikTok’s data collectionpractices are not only not rare, but actually quite restrained when compared with otherad-based services like Facebook. Reddit and LinkedIn, for instance, were alsocaught reading the clipboard, which they say is used to prevent spam. ByteDance has explicitly repeated that itdoes not employ moderators in China and that U.S. data is stored in the U.S., with backupsin 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 thosemost familiar with Chinese politics are also the app’s most vocal critics. TikTok is not just another social networkbecause China is not just another country. This is also not to say that the company doesn’tmean what it says. One of the most unfortunate byproducts ofits place of birth is that TikTok may be dangerous through no fault of its own. China’s 2017 National Intelligence Law compelsall 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’sfirst app was shut down in 2018 by the National Radio and Television Administration, afterwhich Zhang apologized for his poor adherence to socialist core values. In practice, this control extends much furtherthan its borders. A company need not be based or even physicallypresent, at all, in China for it to be beholden financially.
It does not matter that ByteDance is incorporatedin the Cayman Islands, or that Zoom is headquartered in California – or that the NBA is, in everysense of the word, American – for their checks are signed elsewhere. None of this is particularly new. China has effectively operated a separateinternet for years, which foreign companies have gained access to by self-censoring. What has changed is that, until recently thishas been relatively easy to deny or ignore. Now, at a time of record bipartisanship infavor of a tougher response to China, it is no longer possible to feign ignorance. Whereas before appeasing China was the common-senseprofit-maximizing business tactic to gain access to its 1.4 billion users with minimalcasualties elsewhere, now there’s a tradeoff. And as companies are forced to confront thisreality, they will inevitably decide on one of three general approaches: The first group will rip-off the bandaid asquickly as possible. They’ll cut their losses by leaving theChinese 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 willsee international expansion as more liability than its worth and leave the non-Chinese market. Notably, this does not constrain them to themainland, but would likely include developing markets which can’t afford to be scrupulouswhen offered investment. Finally, some especially international companieswill see either option as too high a cost to bear and make the highest-reward, yet highest-riskgamble – to juggle both. These firms will split in two, and each divisionwill try its hardest to distance itself from the other. If they fail, pressure will grow until enoughvalue is lost that a deal will be made – and one or both divisions will be sold to a disinterestedinvestor. TikTok is a prime example of the third strategy. In the last several months alone, it has hireda new American, ex-Disney CEO, announced its plans to add another 10,000 U.S. jobs in thenext three years, doubled its lobbying budget, and, after the National Security Law was promulgatedin Hong Kong, left the Special Administrative Region entirely.
However, with an election less than 100 daysaway, it seems unlikely these moves will be nearly drastic enough. Even a majority sale to a U.S. investor maynot assuage fears during a time of intense scrutiny towards China and a presidency atstake. Such is the predicament: it’s impossibleto divorce any action from these political circumstances. And yet, that doesn’t automatically disqualifyarguments in favor of a ban. It is rare but not the least bit contradictoryto admit that: It is politically popular to attack companiesfor their ties to the PRC, and would still be whether or not such fears were founded;AND TikTok poses a very real potential threatto the interests of the U.S. and other countries, simply because of its ties to China; ANDThere is a deeply troubling, growing tendency to associate anything broadly labeled ‘Chinese’as untrustworthy. To ban TikTok would create a kind of GreatAmerican Firewall – against the will of American users, and yet, not doing so would subjectthe 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 fairstandards. TikTok would remain, giving American companiesgreater competition and incentive to innovate, companies like Facebook would be forced torespect their users’ privacy, and all without provoking backlash for targeting a specificgroup of people. This is a long-term solution for a long-termproblem. Because although TikTok was one of the firstChinese 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 intenseinterest in technology and curiosity to learn more. Its rise proves that the next big idea won’tnecessarily come from Facebook, Google, or Apple – it could come from you. If you’re watching this video, you’reclearly interested in tech and motivated to learn on your own. And you can take the next step on your entrepreneurialjourney with the programming, cryptocurrency, and machine learning courses on Brilliant. At a time when school is closed and classesare going online, now is the time to take charge of your own education and Brilliantis just the place to do so – with its beautifully-made, interactive, step-by-step lessons availableon both its mobile app and website.
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