TikTok Sale Or Ban Moves Forward In U.S. — With Mike Solana

0:00Mike Solana from Founders Fund and Pirate Wires joins us as the U.S. House of Representatives votes on whether to force TikTok to sell itself or be banned. We'll discuss the push, the rationale, and the results right after this.

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0:45Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. We have a great show for you with a great guest. Mike Solana is here. He's the CMO at Founders Fund and the editor-in-chief of Pirate Wires. And we're going to talk about this potential TikTok ban from the House of Representatives as Congress votes. This is the first time we're going to actually do a podcast with C-SPAN open in the second window. It's very exciting. And I'm thrilled to welcome Mike to the show. Mike, welcome. Thank you for having me. Thanks for being here. So obviously a big vote seems like it came out of nowhere.

1:18But reading Pirate Wires, it seems like there was actually something that happened that's been really under discussed that you pointed out that I think we should begin with that sort of precipitated this whole event. So you write, last week following a classified hearing with officials from the FBI and the Justice Department, which we still know almost nothing about, for which a bipartisan group of lawmakers resurrected Trump's attempt at TikTok divestiture. So, yeah, lead us into that. Well, we don't know much about it. We do know that it happened. And this was like, but the people who first sort of went forth with the information included this one straight piece of information, which is accurate and no one knows really anything else about, which is that there is some kind of intelligence thing happening that has been shared with lawmakers, which triggered the entire thing, which should have been shared.

2:03I believe there was more information. I'm not sure in the exact timing, but there was another brief today with the Broadhouse. I'm not sure how much was shared, maybe part of the classified information, maybe none. Who knows? Again, this is wildly underreported and I've not been able to get my hands on the information. All of my contacts in Washington know that that had a major part of the triggering. And then someone else pointed out on Twitter that the entire thing coincided with a handful of high-profile spy cases, one in tech, one with the Google AI guy who got taken down. But all of this within like a few day period, regardless of what was shared with them, we know that TikTok has had this data problem for, you know, years and all the way, including including after Project Texas.

2:51It just that wasn't enough to really, I think, get the Democrats going. And then suddenly it was something happened and it was. And all of this came together within a week. Yeah, the timing is incredible, especially there was a Wall Street Journal story talking about how TikTok leadership basically went back to China. And said, all is clear, Joe Biden is on TikTok. And I think we've made it past some of the big hurdles. And then I guess - Right, which just happened. That was the Super Bowl, right? That was like not long ago. Yeah. And then clearly they didn't understand something. And it does sound like this intelligence briefing probably, I mean, must've triggered it.

3:25So you mentioned data, right? That there was this Project Texas that was supposed to handle the data, partnership with Oracle, that Oracle secures the data. And I wonder, so, you know, this is something that's been known for a while, like the way that the data is going to be stored so i'm just trying to think about like the possibilities of this intelligence briefing like what could have sent this off now maybe it was mishandling of data but it also i mean we have an election coming up and i think the biggest fear for me and others around tic tac has just been like it's a black box algorithm yeah we have no idea how the people there are controlling culture uh here and i'm curious if you think it's it's more of that that precipitated this i mean i know we don't know or a data thing the crit the crazy thing about and i think the problematic thing about the tiktok um the the pro argument for tiktok divestment is that it seems to be driven by people with a million different reasons for wanting it like there are no shortage of reasons for people to not like tiktok and they're not really all in agreement on just the American user data going to China, even though that seems to be the reason that the bill is happening.

4:33And so I want to give, I'm pro divestment, but I want to give the anti-divestment people, especially the sort of anti-divestment people suspicious of government power in general, a little bit of grace here, because the truth is it is like very chaotic. And as you mentioned, there are arguments totally focused on the propaganda component. And that does seem to be one of the major motivating uh motivating forces here i think there's from what i've seen there is less proof really on that side there is no like smoking gun where we do know the data has been sent over but surely both of those are being used both of those reasons are being used to justify um forcing divestiture and on the propaganda side it's kind of like we don't know but also why on earth would we take a risk like that um then of course you get people who say well our own companies do that as well and we also don't know what those algorithms look like and i think that's a fair critique um to a certain extent like i just am not personally moved by the argument that mark zuckerberg is a greater threat or an equal threat to xi xi pang and I do genuinely see people making that argument.

5:49And I guess, again, that's something I maybe understand coming out of the last election, but I just, yeah, it's tougher for me. I'm not sold completely. Right, and even Trump is making that argument. And we'll get to that in a minute and Facebook in a moment. But I think it's important just to sort of set the table here and talk a little bit about what this bill is. And obviously the House of Representatives should be voting on it momentarily. And, oh, they're voting now. So we'll talk about the result as we're on air. But the bill is not, you know, TikTok has referred to this bill as a bill to ban.

6:24It's not exactly a bill to ban. So can you describe exactly what the bill says? Right, it's divestiture. Yeah, and what happens if it makes it out of the House of Representatives? So it's a divestiture bill, which means that TikTok's going to be forced to sell, and not even necessarily to an American. It just has to sell to someone that's not one of our, uh, uh, what is it adversarial powers or whatever? I forget the exact phrasing they use in the bill, but that's an actual, that's like a, you, you like, there's a list of four countries that have been determined by Congress to be, you know, these adversarial powers.

6:57So if you're not controlled by one of those four powers, um, you know, you can buy the, you can buy the app. I think that that is honestly also a bit of a, a pickle for Tik TOK. It's forced to sell, who do they sell to? You know that Lena Kahn's not going to allow Facebook to buy it or TikTok. God, no. Is Elon Musk going to be allowed? I don't even know that Elon could buy it right now, but it doesn't even matter. It's a moot point. It'll never be allowed. So there's a question of who has to buy it. But certainly the letter of the law of this bill is if you are a company, an app specifically, maybe also has a website and you are controlled by one of these four powers, And there is a national security risk as determined by the president.

7:41And like, that's kind of a wishy part where it's like, I don't know, that seems like a problem to me to give that much power to the president. But you have these powers too. So it's not super broad. It's not nearly as broad as the detractors are saying. if these things line up divestiture can be forced that means they have to sell they have six months to do so i believe it's six months i'll have to double check and um and then it would be removed from the app stores and things like this and shut down but uh you have six months to sell and there are no shortage of buyers it's just a question of i do wonder who is going to buy it right and biden has said that he'll sign it if it comes to his desk we still don't know what the senate's going to do so yeah i mean from what i've heard that's a slam dunk it's just like they're going to pass it.

8:20So if the vote in the House works, it'll go to the Senate where I've heard it's much more likely to pass. Right now, this vote, I think it seems like it's going to pass, but you never really know in the House. And from what I was just watching before we started, there seems to be, it's interesting to see bipartisan support and bipartisan opposition. We rarely see things like this where it's like it's not it seems to be i don't know cross ideological in in both directions right and it's right now 45 7 yay in terms of passing so it has to get two thirds but we got 11 minutes left so uh we'll we'll see how it goes but early lead to to ban which is which is wild uh we'll obviously keep you posted through the episode well to the best the best the band thing is that this this distinction is important i think because a ban really is that's way more more aggressive that's like you know we don't want this thing to exist and when we talk about reasons that people are supporting divestment and i said you know the two big ones are certainly the reason that is being argued in today's hearing is the information and we hear a little bit of the propaganda um but there are a million reasons and one of them is people just don't like the app right there are a lot of people who are just like i fucking hate tiktok and i want to ban it and yeah that's crazy and wrong and not a good reason to ban something and then there are people who are like they want more control or they want less control or things like this there are people who just think it's degrading society again not a good reason to ban something there are people who think it's digital fentanyl and addiction which I mean maybe but so is that obviously implicates every social media company to a certain degree and also I think like television granted this is television that lives in your pocket so it's much worse and it's designed to find exactly what you want to see and give it to you.

10:16But these are things that these are questions where like, we don't really have good answers yet in terms of what it's doing to you. And I think that you need more information before you act like this is cigarettes or something. I don't know that we really know that. No, I totally agree. And I, so I said ban, I must've slipped because it sort of leads into my next question, which is whether this is going to be a de facto ban and whether it is what that says about the whole TikTok operation in the first place. And that, of course, is, you know, it comes to China and whether they actually are willing to divest.

10:46So first of all, CNN story from 2023 says, an outright divestment isn't in the cards, not least because the Chinese government views TikTok's technology as sensitive and has taken steps since 2020 to ensure it can veto any sale by its Beijing based owner, ByteDance. And then as we get closer to the vote today, you have someone who used to basically he's a Chinese government propagandist. He used to work for China state media. He's actually kind of an interesting follow on X. His name is Hu Jijin. He writes, I support TikTok's tough response. Either it is ByteDance's TikTok or the government might as well shut it down.

11:25But ask the 170 million TikTok users first, do they agree? Basically, he's saying, if you're going to force the divestiture, we're going to just shut this thing down. And a lot of people have pointed this out, like that's kind of a tell, like that's interesting. I'm curious what your response is to the fact that this is the position. yeah so it's interesting for a couple of different reasons the first one is byte dance tiktok comms is going overdrive saying that this has nothing to do this app has nothing to do with china no control like it's all misinformation and then you mean to tell me that china is like whatever xi jinping wants is how this is gonna go like if xi jinping doesn't want to sell then it can't be sold then they're in fucking control like what are we talking about here like it's just a complete lie that they're not in control.

12:16But let's table that. And then I think you're getting at something very interesting, which is why wouldn't they want to, why would you want it? Why would you want this to go to zero? Right? It's such an important, it's like a huge, successful company. Like why zero? And it's because you don't want people to find out what is there. We all lived through what happened when Twitter changed ownership and how much information was released and what was revealed and i think that is the reason i think it's like it's worth 80 100 billion dollars to china to not to to not reveal anything it's just it's just it's like an easy it's like an easy it's an easy buy for them like they're they're buying secrecy um and that again yeah i agree it's a tell it's like that alone just like it's just crazy thing that they wouldn't, that they would rather go to zero than sell.

13:10But I mean, it's crazy until you think about what must be hidden. And then it's like, okay, well, that makes sense. And it's another really good reason to force divestiture. Now, the one thing that I'll say is it could, it's first of all, it seems like a red flag to me. I mean, it's definitely a red flag. It could just be positioning, like basically like, you know, saying, all right, if you're going to ban us, we're going to shut down. And then there's going to be political consequences for you. And I do want to ask you about the political consequences because what do you so people do love TikTok.

13:42What do you think happens to the party that ends up banning or the politicians that vote to ban TikTok? Because we do we did see their their offices flooded with all these calls from kids and maybe parents saying don't ban the app. You got a lot of mentally ill teenagers who TikTok encouraged to call Congress. That did happen. um i think come on they the people there's definitely mentally non-ill teenagers that also called it's true that people use tiktok we see that like four hours a day it's clearly i mean i said we don't know that it's an addiction i think we should definitely look into the effect of social media on people um i think that people want to be able to afford rent and i think that like that is the thing that people are going to vote on it's going to be the economy it's going to be rent it's going to be probably things like abortion and stuff really motivates people i think these are the things that persistently move people to the polls um it's very hard to mobilize people on this tech stuff unless it really impacts their life the i saw a vote on the last time i saw this was maybe the closest comparison would be like the California anti-ride sharing bill.

14:59And that was shut down by voters, but it costs so much money to get people to vote in a way on that bill that would lead to ride share apps kind of remaining in operation. And that's something that people use every day. That's an app that actually makes their life easier. They maybe you need to get to work or whatever. This is entertainment and it will be very interesting. I highly doubt. I think people will be really upset and like yell about it. And then it's like, well, where are they going to yell about it? Because TikTok's gone. If TikTok's actually banned, where are they going to yell about it?

15:33And I don't think they're voting on it. I don't think they're voting on like, oh, this one streaming app is gone. Meanwhile, you have YouTube Shorts, you have Instagram, you have whatever else emerges. And again, that's if it that's if it if china shuts it down which yeah at that point who cares if china is so willing to shut it down that like there's something nefarious you were like confirmed something going on then it was definitely the right choice how upset they are and i think the average american won't care either exactly we have a uh cnn story that just showed up tiktok content creator says the bill could that could ban the platform would influence her vote on election day like you might get some influencers who will make their vote based off of that but but i i doubt it will extend although who knows it's it's interesting how people well one other thing is that tiktok's going to influence the vote on election day one way or the other right um whether it's whether they are uh forced to divest and they choose to be banned instead um or they go live and the content continues to shape the electorate in ways that we don't understand for years to come like they're is a certain amount of shaping that is to be honest and fair true of all social media platforms right like our opinion is being shaped we just don't know how and the question now is like do you feel comfortable with it being shaped by someone in beijing and i personally do not right all right three and a half minutes left it's currently 137 yay 22 nay so we still have 273 votes that are about to come in but uh the vote to divest is is leading right now um All right.

17:12So let's actually talk about TikTok's official response to this. This is from Semaphore. TikTok says the concerns are baseless. It notes that about 60 % of the company is owned by global institutional investors, including financial giants, Susquehanna International Group and BlackRock. It also says there are three Americans on its five-person board, and it spent more than a billion on a plan that stores sensitive U.S. user data domestically on servers operated by Oracle. Is that convincing at all to you? And yet one man and one man only is able to decide if the company divests or not. And that man's name is Xi Jinping.

17:49So, like, what are we talking about here? It's just it's very silly to even entertain it for a second. If what they're saying is true, this wouldn't be an issue. you. Let's talk also about the First Amendment, right? Because that's going to be so let's say they do, you know, we go through the whole process, they voted, the divestiture bill goes through. Tick-tock's obviously taken it to the courts. And they're going to say it's a First Amendment issue. And you know, it's been interesting is that I think there has been, you know, obviously debates bipartisan, but people who I've like been surprised on the Democratic side have basically said First Amendment shouldn't apply here.

18:24Here's Tim He says, TikTok, while I'm using, is also a national security vulnerability hiding in plain sight. Basically, a foreign-owned spyware installed in millions of phones. I think Congress would be right to direct investiture from ByteDance on pain of an app ban. The idea that the First Amendment would stand in the way of a directed sale of TikTok in the USA is unserious and would take an already overstretched amendment into new territory. The First Amendment is not the right to spy on people nor a suicide pact. Well, I agree. And as someone who kind of came up in anarcho-capitalism and like hardcore libertarianism, there is a principled, I do see some principled pushback on an extremely liberal interpretation of the First Amendment, which is, you know, basically maximum, not only freedom of speech, but freedom of association, like to the point where, you know, if I want to be spied on by the Czech Republic, government.

19:28And, you know, I want to opt into a situation where I'm, I, it doesn't matter that, let's say that Xi Jinping is openly running. He's got, I mean, he's running the algorithm himself, right? He's got like a little laptop open and he's deciding exactly what we see. There is a certain kind of libertarian who would say, well, that's my right. I am allowed to be, have my opinion shaped by, you know, 150 million Americans are allowed to have their opinion shaped by Xi Jinping specifically. They're allowed to spy on us. We're allowed to spy for them. I think that this argument could also be applied to literal spies.

20:02They have a freedom of association. Americans should be free to send trade secrets from different companies or whatever information they pick up from the US government to China. You should just be allowed. I don't see how that argument is much different. There are trade-offs everywhere that you look. I actually, I do acknowledge that there is a slight trade-off to a sort of libertarian's maximum concept of liberty here. There is some trade-off, whether or not the app successfully divests. It's just that I am comfortable with that trade-off in this case. I'm comfortable with trading off some amount of freedom of association when it comes to national security.

20:48Yeah, which is like there are always exceptions to the rules, right? And this sounds like it might be a reasonable one. There's also the question of retaliation or like our values, right? So this is from Anupam Chander from Georgetown. He's a professor there. He says on X, for those supporting the ban on TikTok, did the Chinese get it right decades ago by banning Twitter and Facebook? And should they not also ban Apple and Microsoft under the same reasoning? I mean, that's I think the second part is interesting. Like if this does go through or let's say this the bill fails, but we still I mean, that's another possibility is the bill fails, but we still have this persisting in the US.

21:28There might be, you know, there might be retaliation at some point. For instance, we already know China's encouraged like government employees to go away from iPhones and towards Huawei phones. And Apple Apple iPhone sales have dropped 24 percent in the first six weeks. And in 2024 in China, while Huawei is up 63 percent. So what is the risk of blowback here? Well, I would say that first, you know, we've done this before. This is not an alien concept. Grindr was forced to divest, and for good reason. Like, you do not want the Chinese government to have access to, like, every American's weird sexual stuff.

22:04It's like, obviously, blackmail waiting to happen. but on the question of retaliation, like in a sense, this would be like, like in a set, if you want to talk about just the business, the trade dynamics of this, if they're already banning all of our social media apps, this is reciprocity. This is like, like, yes, we're doing it too. There you go. If they want to escalate beyond that and, you know, really get into a trade war and you're talking about, well, you know, Apple's going to take a hit. Probably Elon Musk is going to take a hit. I think these are the dangers probably that a lot of people are thinking about.

22:41And we can really sort of judge their public opinion on this bill based, I think, into some extent on how much people have to lose if China and the US get into a real trade war. And I think that like for some people who have a lot of manufacturing over there, it will be very bad for the average American consumer would mean really expensive iPhones, probably like we're talking$10 ,000 plus more, it'll be exorbitantly cost for a while. Meanwhile, for China, if they want to get into a real trade war and they lose all of the U.S. business and food trading and things like this, it's like we are at risk of very expensive phones and they are at risk of starving their entire population.

23:19Their entire economy is built on trade. I don't think they really want an all-out trade war. I would be very surprised if they went to that length. And if they did, we would survive it and they would have a hard time surviving it. Right. Right. And India, I mean, you're right, because like she was just in San Francisco speaking with Biden about, you know, potential economic deals and giving us the panda backs. Very, very important. We need those pandas. So did it happen? I know that we asked. I wasn't sure that it actually. They are. Yes, I think they're they're either already in San Diego or I are on their way.

23:53It's interesting, the D.C. Zoo really where it hurts. Right. There's no pandas there anymore. And the whole zoo is just pandas, you know, panda pancakes and panda everything. So you can feel the ire right in the nation's capital. So, you know, it's also interesting to think about. Oh, well, one other point about that is that India did ban TikTok and everything seems to be fine on that front. Yep. People get on with it. It does not matter. I think that if they ban this, there's like a maybe broader thing here where like I think about social media in general, not just TikTok. I think about, you know, what if Twitter was banned?

24:32How would I feel? I'd be outraged on First Amendment grounds if the government came in and just shut it down because they hate it, whatever. Obviously, that's a clear, massive violation of our First Amendment. And that is like, it's a US company. It's a US, it's under US control. It's clearly political. That's crazy. But if you could separate the politics from it and like, just get emotional about it, like how would my life change if I no longer had access to Instagram and Twitter and I would be happier. I think that probably most people would be happier. And that's what places it in a very different context than something like if Amazon Prime were banned or ride sharing were banned, things that actually improve your life.

25:10Social media does not do that. You can make really abstract arguments for its importance, which I do agree with on information sharing and learning the truth about things and individuals investigating stories on their own and all this stuff is true but on the other hand like just emotionally it is it's these they these digital spaces suck and they suck the life out of you certainly me someone who writes professionally and is like very involved in the media like i would love a break and i think on some level probably most people will i this is why i find it kind of very unconvincing that people are going to be so outraged if this happened if she forces uh the band to take place um they'll be so outraged that they're what who they're gonna vote for which which side are they gonna vote for but they're both sides support it who are you voting for exactly and not to not to mention i mean we have exactly like they're not as good but we have competitor products on instagram for instance and you know it's it'll suffice if we're left with reels i think that we'll we'll be able to get you're like you like you said get along with it so i want to talk to you about trump because uh trump obviously like was for the ban he pushed a pushed a ban really or he pushed a divestiture when he was president said did this whole thing um now now he is anti-divestiture and he was on cnbc this week he said frankly there are a lot of young people on tiktok that love it uh and there are a lot of young kids that will go crazy without it and banning it would give a leg up to Facebook and Facebook is the enemy of the people.

26:52And you called his flip-flop on this an incredible scandal. So talk a little bit about what's happened with Trump on this issue and sort of the money circulating in the background that's influenced his position and some others. Right. So the man's name is Jeffrey Yass and this is a billionaire Republican daughter. He's very important and very influential in Washington politics. He is also a major, enormous investor in ByteDance. I've tried to figure this out. There's a range of estimations from like 22 to 35 billion dollar stake that he has in ByteDance, which presumably could go to close to zero if she forces the ban.

27:39and so he's and that's like most of his wealth is tied i think i'm pretty sure it's so fact check me on this i'm pretty sure most of his wealth is tied up in this at this point um so he is all in naturally on preventing this divestiture from going through um and in a way that i think is i'm almost grateful that it's just like an understandable motive it's like a clear money emotive. I was in DMs with people who are all trying to be like, these are, they're like Chinese assets and they're being run by the government. It's like, it's just money. You just like, just look at the money, look at the financial interests.

28:18Like Jeffrey S has an interest to keep this alive. So he's been lobbying hard. Um, he has a standard set of people who he's lobbied for in the past, including like Rand Paul, who's one of his favorites. Um, but then you have Trump who he's been at war with for months and months and months. He was like a, you know, never trumper kind of person um and now uh about a month ago that relationship started to thaw and the very week that the tiktok divestiture dropped he trump spoke before club for growth which is jeffrey ass's super pack they became friends trump talked about them bridging all bonds um so like within days it's like that happens tiktok divestiture drops a couple days later uh trump comes out and um and in and in uh he equivocates on the issue of tiktok which is a divestiture that he kicked off in the first place um there is clearly he's getting paid he's like clearly taking money from jeffrey ass and that has clearly uh influenced his new i would say you know pivot ish on this issue my sense now while there are some that are clearly all in on stopping divestiture who are getting money from jeffrey asked ran paul is one of them vivek is one of them right while there are a bunch of points on vivek and your story are just amazing i mean it's the vivek stuff is crazy but it's like he he's obviously less important than than the others um you have uh people in trump's sort of circle who are now working for bite dance or close to ByteDance including uh like Hope Hicks most recently you have uh what's her name um isn't she working for Sheehan or she's also working for ByteDance maybe was it Sheehan okay sorry I might have gotten that wrong then Marjorie Taylor Greene uh Killian Conway is um working not working she's getting paid now for by Club for Growth again this is like the Jeffrey As connection so like you're not getting money america first people yes um and i do want to talk about that i just want to say that i want to give trump something here really quick which is that trump could i think trump could have really turned like the entire republican party against this bill um he could have gone all in he could have done sort of what he did during the immigration bill and just really put weight behind this instead he kind of his statements have been ambivalent to a certain extent.

30:50They're clearly not supportive. They're clearly drawing false equivalencies between Facebook. He's clearly saying, you know, we don't want Facebook to have more power or blah, but he's calling it a ban, which is a propaganda sort of talking point. But he hasn't done as much as he could. And I think he's trying to sort of have it both ways, kind of correctly understanding that he doesn't have to make a decision right now. This is in Biden's court. But yeah, these are the America first people. And that brings us to, I think, a point that has been raised quite a bit in tech, which is like, let's get rid of the question of the First Amendment.

31:22Let's get rid of the question of the data sharing or the espionage or the propaganda, whatever. If you table all of that and you just talk about the trade issue, which is a sort of nationalist America first issue. This is a major thing that Trump and Bernie Sanders have talked about. Just like there should be reciprocity. We shouldn't have these crazy trade deals where we're getting screwed. This is classically one of them. This is one where we have products that we cannot sell in China, that they have the sort of comparable products that they're selling into our market. And that just doesn't make any sense.

31:57That's not an America first position. That's a populist right-wing position. It is a position that you could only really have if you are a principled libertarian, which is not what the sort of anti-globalist nationalist people are, or you're getting paid. Those are the two reasons that you would change, that you pivot on this issue. Yeah, I just want to jump in quickly to say the bill's passed. So it's a landslide right now. There's still 26 votes left to be counted, but they matter only to the extent of the margin. It's 343 to pass this divestiture bill to 63 nay and one present, which is remarkable.