China’s acquisition spree, TikTok reaches U.S survival deal, Tech Giants hit by spying | Diet TBPN

0:01What did you write about today, John? I wanted to dig into the question that we had with Joe Weisenthal yesterday. What does China actually import? Obviously, this was off the back of Davos. Vice Premier Haley Fang highlighted China's determination to become the world's market. They said, hey, we're the world's factory, but we also can buy stuff. Send us your stuff. We'll buy it. But what are they going to buy? So he said boosting domestic demand was now on top of their economic agenda. This is in their 15th five-year plan, something like that. And we were going back and forth. Like, what are they actually importing?

0:33We were saying semiconductors, but, you know, obviously there's chip deals and GPU bands. Now, interestingly, China, like the number one trade deficit for China is semiconductors. And it has been since 2005. So they want to buy semiconductors. Obviously, U.S. trade policy oscillates. But semiconductors are the single biggest deficit for China. In 2020, even before the AI boom, China imported 350 billion worth of semiconductors, which was more than the value of the crude oil it imported that year. And it's been the largest importer of chips since 2005 and accounts for huge chunks of revenue for Qualcomm.

1:09It's over 50 % of Qualcomm's revenue, I think, and over 25 % for Intel. So everything that you get from China, if it's an electronics product, it's some gadget, it has a chip in there, that's probably going to be made in the West, sent over to China, assembled. But then sent back out. And then sent back out, exactly. Energy is a big driver of the trade deficit with China. China imports 74 % of its oil supply and 42 % of its gas supply. Soybeans, which you mentioned, and iron ore are also big categories. The iron ore obviously goes into a lot of, again, the factory, the world's factory. Why can't China make enough soybeans in China?

1:44I don't know. It must be climate-related. They love making stuff. Yeah, I don't know. That's a good question. We should dig into that. Luxury is a clear net import category for China. Estimates are around$100 billion annually. Now, it's not the biggest driver of their trade deficit or trade surplus. But it is, and it's also not critically important in the way chips or oil or soybeans or iron or are. But it is an important story. And almost all of Chinese luxury good imports are from European conglomerates. You've got to think LVMH and Caring. It's not strategically important, really. And the foreign luxury market in China, so European conglomerates sending their goods to China, it actually completely fell off a cliff in 2024.

2:33Imports went down about 20%. Domestic Chinese luxury brands are on the rise. Laopu Gold is now drawing from the same customer base as Louis Vuitton, Hermes, Cartier, Bulgari, and Tiffany. Gucci is closing stores. I think around 18 stores are closing. While the local champion Songmong is seeing significant growth in their handbag business. So China does want to be the world's market, but they're also buying domestic a lot. The basic trend is China excels at developing efficient supply chains, streamlined manufacturing operations, and it doesn't stop with cars. They're doing it with TVs now. So on Tuesday, Sony announced that they would be spinning off its home entertainment business, which includes the TV brand Bravia, to their Chinese rival TCL Electronics Holdings.

3:16Sony's selling a 51 % stake to TCL, while the brand will remain Sony. the display technology will be TCL. Sony's been falling behind Samsung, TCL, LG, Xiaomi in terms of TV shipments for a while. But the brand still holds a ton of value. Like Sony TVs were the best a decade ago. And still today, people like the software a little bit more. And the Sony brand, it still has the aura of the Walkman, the PlayStation. Like it's just beloved electronics. And you see the Sony logo, and it's just way more familiar than TCL. You think Japanese excellence? Yes, you do. And so Sony has been falling behind on the manufacturing front.

3:55TCL has been basically delivering a much stronger value prop on a price-to-quality basis, and the panel technology is loved and very competitive. But there's just more faith in the Sony name, so the Chinese manufacturer is effectively pulling forward heritage and brand legacy by buying the name. And this feels like a trend that will continue for a while. China's fantastic at quickly grinding down manufacturing learning curves, developing high-quality products at affordable prices. But creating an iconic brand, it just takes decades. And so it's better to buy than build. This is the one thing you buy instead of build.

4:28I don't know if Chinese manufacturers will ever make money, but I came away not wanting to invest in any manufacturing business in the rest of the world. And Ian Roundtree says, I'm going to keep investing in American manufacturing. So people are still pushing it. There's also big news. Anderle is bringing a 1 million square foot union built campus along with 5 ,500 jobs to the city of Long Beach. The office of Mayor Rex Richardson, the Long Beach mayor, posted this. Over the next three years, Anderle will be building this. This is the largest private investment in Long Beach history. And it's a major vote of confidence in Long Beach's leadership in aerospace and advanced manufacturing.

5:08China unveils EV that can violently eject its battery in case of a fire. We can see this in action and see what kind of situation. Yeah, this is so wild. I remember when this video went viral. It's like, what is the point? Oh, it's because if it crashes and it's going to burn, it'll shoot it out. But, oh, that just seems like so, so dangerous. but at the same time people people you know watch these videos and they and they think like oh this is like widespread chinese best practice when really like this is probably like their gundo equivalent you know just like a couple dudes it is interesting that they're like we don't just need to get it 10 feet away we need to get it 30 feet away yeah yeah because you could just like like gracefully drop it out or something or like or like slide it out sort of slowly with a little But they have to shoot it out like a cannon.

6:00I think we gotta watch the video about AI industry news. Every two weeks, one of these models is destroying someone else's model. Destroyed Pinterest and ChatGPD. ChatGPD destroyed Perpexity and Google AI. LinkedIn AI just ruined WhatsApp AI. Meta AI. No. Hmm, IRCTCAI just destroyed Uber Olai. Wow. Wow. Good. It's so good. What is that last one? IRCTCAI? He's just making stuff up. He's just making up acronyms at this point. But it really is so true that, like, there's just a time-honored clickbait title of, like, destroyed in all caps. I used to do it on my YouTube videos. Always went viral. It's been proven.

6:50What's going on with TikTok? TikTok is sort of the reverse, honestly. It's very interesting. You have this dynamic of like the American companies or the Western companies, MG and Sony selling to Chinese because they have great manufacturing. And then TikTok, you know, we want America wants control over the algorithm, over the data, security. And so you have a Chinese company that's now going to be operating in the U.S. And the Wall Street Journal has a piece here on it. The agreement was negotiated to comply with a 2024 law requiring the company to do a deal to address U.S. national security concerns.

7:25Rome wasn't built in a day and TikTok was not divested in a day. TikTok officially established a joint venture that would allow it to keep operating in the United States. The company said Thursday, resolving a years-long fight to address Washington's national security concerns. Under the terms of the deal negotiated by the Trump administration, the popular video sharing app will be operated by a new US entity controlled by investors seen as friendly to the US. Its data management and algorithm training on American users will be overseen by Oracle, the cloud computing giant that has safeguarded its data for the US for years and has close ties to the Trump administration.

8:00The deal was negotiated to comply with a law passed in 2024. President Trump delayed the implementation of the law a year ago after starting his second term to keep TikTok operating in the United States. He signed a series of executive orders to extend the deadline for completing a deal until it was met Thursday. Trump said in a social media post, I'm so happy to have helped in saving TikTok. He thanked Chinese leader Xi Jinping for working with us. Trump and TikTok's investors and allies pushed the deal through despite lingering concerns among lawmakers and security hawks that China could still influence the new entity through TikTok's parent, ByteDance.

8:35It makes sense that this took so long. It sounds really simple, just divest. But in reality, you have to effectively rebuild an entire app. Right. Yeah. It's got to be it's got to be it's going to be like a new app figuring out the logistics of that. Yeah. There's also just a ton of hair on the deal. Right. There's a huge revenue share that's going back to ByteDance in perpetuity that is obviously reflected in the valuation. The other factor is like if you have a U.S. TikTok now and then you have normal TikTok. If I'm on the U.S. TikTok, am I sharing content to international TikTok? If I'm on the international TikTok, is it sharing my content back into the U.S.

9:13app? How does that all work out? And so there's a lot of stuff that still needs to be handled. Most of the social media app, pretty much every social media app that you use, if you just cut off all international content creators, the experience on the app would get worse. So there needs to be like some content still flowing back and forth. But figuring out how exactly that works is still in process. The majority American-owned joint venture will operate under defined safeguards that protect national security through comprehensive data protections, algorithm security, content moderation, and software assurances for U.S.

9:47users. The whole TikTok debate really erupted when TikTok CEO Sho Chu was in front of Congress and was not really acting like he was the boss, basically. That was the main criticism. It felt like he didn't have full control over the entity because, of course, it's a subsidiary of ByteDance. And some of the US lawmakers were pressing him on how much control he actually has. Did they send the right person to the congressional hearing? So who's in the deal? You got Oracle. You got private equity firm Silver Lake. You got Abu Dhabi-based MGX. They will each own 15 % of the new entity, while TikTok investors will own about 30%.

10:26Other notable investors include J.D. Vance's former firm Revolution and tech executive Michael Dell's family investment office. Dell's getting in the deal. Vance spent a brief stint at the firm founded by AOL co-founder Steve Case during his time as a venture investor, which preceded his 2022 Senate campaign. Vance has said previously that the deal values the new entity at about$14 billion. A lot of people thought that that was really, really low given TikTok's immense growth. But there is another side of this, which is that TikTok, I don't believe, was ever monetizing or as profitable as its competitors, YouTube, Mark Zuckerberg and the Google team were not exactly slow to move and launch competitive products.

11:15And so a lot of the, you see this continuously where Snapchat comes out, Stories is on a tear, and you're looking at the Snapchat growth curve, and you're like, this is going to kill Facebook. It's going to be the next Facebook, and Mark Zuckerberg needs to acquire it. He puts in an offer, gets declined, and it looks like it's over. But then the Instagram team moved really quickly. they launch stories and that effectively you can see in the chart stories launches on Instagram and people stop moving on to Snapchat. And so a lot of people went back who were on Snapchat, they went back to Instagram and Instagram continued to grow and Snapchat, it didn't flatline, but it like definitely put a dent in their growth.

11:51And I think the same thing is true for TikTok. A lot of people who just want that format, vertical video, endless scrolling slop, they can get that. We got American made troughs all over the place, everywhere the eyes can see. so uh the investors are paying the u.s government a multi-billion dollar fee for arranging the deal a concept trump previously called a tremendous fee plus tiktok said it had 200 million users in the u.s up from its 2024 estimate of about 170 million users so decent growth but i don't know i mean 200 million in the u.s is a lot like that's pretty much everyone yeah i guess the question is will they ever get the rest of the U.S.

12:32in the way that YouTube, you could assume, has, like, effective... You think they have, like, 300 mil? Yeah, I would assume that... I don't know. There's a lot of Philistines out there. There's a lot of Luddites who are just like, nah, I want DVDs. I want VHS tapes. Trump touted his popularity on TikTok earlier Thursday posting on Truth Social that his posts on the platform TikTok get more engagement than posts on TikTok competitor Instagram, which is owned by Meta Platform. for what it's worth that's always been the case right like tiktok has always had allegations that they were botting yes like as a platform effectively people would go on there and they'd be like getting a tremendous amount of followers tremendous amount of just engagement broadly far more than uh than they would have on instagram with the same content and you know some people would say oh that's because the tiktok algorithm is so good but uh and there certainly are a bunch of very real people on TikTok.

13:28I don't mean to say that it's all bought it, but the experience of using TikTok, a lot of creators will just naturally have six times as many TikTok followers as they do Instagram followers. Yeah. Yeah. It does seem like the algorithm is set up to serve you more content in a 10 minute session because you're more quickly scrolling. And then there's also accounting issues like on some platforms, if you just scroll past something for even one second, that counts as a view. On other platforms, it might take three seconds. On other views, other platforms, it might take ten seconds, a minute. Gen Z are arriving to college unable to even read a sentence, says Fortune, reposted by unusual whales.

14:08See if you can read this. See if you can read this. See if you can read this. Try and read this. Wow, he can't. He can't. He can't do it. Slopped. I need some subway surfers or something. Yeah, for sure. I'm going to need some subway service. We have some drama that's continuing to unfold in the payroll space. The Justice Department opens a criminal probe into Silicon Valley spy allegations. Subpoenas seek information on allegations that deal valued around$17 billion, recruited a spy inside a rival company. This is a huge story last year. And then it's been pretty quiet. And both companies have just kind of been chugging along.

14:48Yeah. So the Justice Department opened a criminal investigation. Grand jury subpoenas were sent out in recent weeks. Keith O 'Brien alleged in an affidavit filed in April that Deal CEO Alex recruited him and gave him instructions for what information to take from Rippling. O 'Brien alleged that other executives were involved in the spying plot, including his father, who is Deal's executive chairman and chief strategy officer. A spokeswoman for Deal said the company isn't aware of a criminal investigation but is willing to cooperate with authorities. That's an interesting statement. The Wall Street Journal is reporting this, and you find it out from a Wall Street Journal reporter.

15:22That's wild. So the company has previously said, we deny any legal wrongdoing and look forward to asserting our counterclaim. So Deal says we didn't do anything wrong. Of course, the affidavit from Keith O 'Brien is extremely dramatic. There's that whole, like, you know, oh, send that watch to London. We're going to be like James Bond. Like, it's a really dramatic read. And you can go back and watch some old TVP episodes if you want to hear a full take on that. Yeah, it's interesting. Yeah, I wonder what information is actually available kind of publicly on this. Because, like, obviously in a situation like this, you have both sides that are kind of, like, feeding the media their side of the story.

16:01But, I mean, the facts are the facts here. Like, the Justice Department did open this because the Wall Street Journal confirmed that the Justice Department opened the investigation. So, anyway. Anyway. It didn't stop the deal. I think a lot of people weren't expecting this to actually have any type of criminal component. Yeah, I think a lot of people were just expecting a lot of drama, a lot of hot takes on the timeline. And they would eventually just settle. Exactly, settle. And the worst case was like, okay, maybe it's like a Series D size payment for Rippling, but they're both going to just keep grinding.

16:33But it seems like it's going to the courts, so we will see. Maybe there will be courtroom sketches of these folks. OpenAI chair Brad Taylor says AI is, quote, probably a bubble. expects a corruption in the coming years. Nick, his camera roll is truly just filled to the brim with images of Sam Altman in various, like, you know, The guy has probably the largest collection of Sam Altman. Rare Altman. He has every photo that's ever been taken of Sam. Nowhere, of course, would Brett Taylor be like, oh, yeah, I think LLM usage is going to fall off a cliff. Yeah, totally. It's like, yeah, yeah, there's a variety of different companies and kind of subcategories that could be overheated.

17:15You could easily dig into that. And he's like, there's a bubble in like seed stage valuations. Like I can't get an angel check-in at less than 50 pre. The bubble can take a lot of different shapes and stuff. Who knows what he was actually commenting on. Another clip from Demis from the Big Technology podcast. He's taking shots at open air, according to Yuchen Jin. Actions speak louder than words, going back to the original conversation we were having with, you know, Sam and others claiming AGIs around the corner, why would you bother with ads then? So that is, I think, a reasonable question to ask.

17:48But I think, look, from our point of view, we have no plans at the moment to do ads if you're talking about the Gemini app, right, specifically. I think we are going, obviously, we're going to watch very carefully what, you know, the outcome of what ChatGPT is saying they're going to do. I think it has to be handled very carefully. but I think action speaks louder than one. He's an absolute dog. There's a reason, post-AGI, the clankers need to advertise to each other. You got to do ads for the clankers. The thing here is like OpenAI has to not only like figure out how to actually implement ads within the product, but they have to build out all the advertising like infrastructure, the platform infrastructure in order for people to run campaigns successfully and at scale.

18:32So Google already has all of that. It is far easier. Do you think it's like 100 times easier for Google to turn on ads in Gemini? They already have all the customer relationship. Literally, any company that advertises online is already working with Google. And so it's really just like you can just flip the switch. And so I could easily, you know, don't have any inside knowledge, but I could easily see Google just like having it all basically ready to go. And it literally just being like, okay, we can launch this whenever we want. There is an interesting steel man here. Let me try and do it. The steel man on Sam Alton and claiming that AGI is around the corner, but we still got to do ads.

19:09Well, around the corner, even if that means six months, like if you have an incredible capital expenditure to get over that hump to create AGI, it's only six months away. But you got to do that last data center and you got to raise that last 50 billion. And all of the investors. Yeah, it's easy. It's easy to say, like, we don't want to do ads when you have hundreds of billions of dollars in existing ad revenue coming in funding everything that you're doing. So, anyways, I think this is, you know. I mean, we can also debate whether or not ads will exist post-AGI. I would argue that they would. But what do you think, Tyler?

19:43There was that headline about how OpenAI, maybe their thing about, like, taking a percentage of the share of, like, the discoveries. I don't know how they would actually do that or if it's, like, they're being serious at all. But that's, like, much more AGI-appealed, right, than ads. Yeah, yeah. Oh, yeah, that's a good point. So they're doing both. They're doing both. Almost everyone at Vimeo was laid off, including the entire video team. I would assume that most of their team. So unfortunate. I have some fond memories of being a teenager when Vimeo was like really. Vimeo was so differentiated.

20:13Yeah. It was where there was like a level of quality that it wasn't just like some random person. I would go there to watch short films. In my case, it was like surf. Yes, yes, yes, yes. It was like if somebody was putting a ton of effort into making like a surf movie or, you know, some snowboarding movie, it would be on Vimeo. Yeah. And they wanted higher quality footage. You could get higher bit rates, 4K, HD. Like they were really on the frontier of that. Yeah. I remember watching a lot of ski videos there. There were some great ones. And also just like it was a place where people would put their their short films.

20:44They had the Vimeo like, you know, awards with the little wreath laurels that you could rest on. Eventually, YouTube just went everywhere, all places. The ads went away for the people that care about that because they had premium subscriptions. And ultimately, the quality on YouTube just got better and better and better. And now you can get 4K, really high bit rate on YouTube, and it's indistinguishable from Vimeo. High Yield Harry has the meme for the moment. He says, but now we shall both surely drown, said the frog. LOL, said the scorpion. I don't think this is exactly right. If you're a private equity firm and you buy an asset like this and you lay off the team, there are still people that are going to be trying to extract the value from that asset.

21:31It just might be a team in a different section of the firm or an outsourcing agency or something else. I would be surprised if this means that Vimeo is shutting down. I would imagine that they're trying to continue whatever business relationships they have and whatever subscriber base they have. Vimeo was cool, but if you know about Vimeo, it probably means you're old. That's true. That's certainly true. You know about Vimeo? Yeah, I know what Vimeo is. What's the last thing you watched on Vimeo? I have no idea. Yeah. No, but I remember, yeah, it was like artsy films would be on there or something.

22:04Yeah, it was good. So Coinbase established an independent advisory board on quantum computing and blockchain. Quantum computing, if built at scale, have the potential to reshape entire industries. We were talking to Kathy Wood about this a little bit yesterday. From finance to healthcare to material science and national security. For blockchain, the stakes are especially high. The cryptographic foundation that secures digital assets today could be challenged by the advances of the coming years. At Coinbase, security is our highest priority and preparing for future threats, even those many years away, is crucial for our industry.

22:35Most people, I think, handicap the quantum thing at like 2030, 2032, 2040. I think Kathy Wood's estimate was 2040 for serious quantum adoption, even if you get on a Moore's law type adoption curve. If you can crack like whatever the Bitcoin or any like blockchain with quantum, like surely you can also just get into like banks or like tons of like actual like things that are like probably way more important than crypto. It's like if we have a world where you have like these incredibly powerful quantum computers, like is crypto actually the most important thing that you need to be worrying about?

23:06or is it like the nuclear codes that are, surely those are stored. Yeah, you're probably right with the nuclear codes, but in terms of just like fiat stored in a bank, there are a series of backups that are offline. There's even paper backups at certain points. And so like the financial system, although they probably don't want to talk about it, does have the ability to like effectively roll back. So if there was like some massive quantum hack and like all the Morgan Stanley or JP Morgan accounts or Goldman Sachs accounts were like drained, they would just be like, let's revert. But you can't do that on a blockchain necessarily.

23:40More importantly, Buzzballs is selling a$35 ,000 diamond engagement ring shaped like it's drinks. The ring will be auctioned on eBay starting February 3rd. Maybe it's$35 ,000 worth of diamonds. It costs them$35 ,000 to make it. And they're going to put it on eBay starting price,$100, and then it'll get bid up, I guess. I don't know. So, proceeds from the sale will benefit a heart-related charitable cause. It's kind of odd for an alcohol brand to be like, we're... I don't know. That's cool. I mean, if anyone out in the audience is wanting to propose and doesn't really know how to... is struggling to figure out the right kind of moment or way to propose, this is kind of an easy, out-of-the-box...

24:24That's the woman in your life. Toss the buzz ball at the woman in your dream. If she catches it, she has to marry you. Is this rage bait? Is this good marketing? Do you think this is good for buzz balls? strategically? What do you think? I don't know if it's... I find plenty of moments to talk about BuzzBall already. Unnecessary. Did you know? Do you know who came up with the idea for BuzzBall? Absolutely not. I have no idea. A public high school teacher. What? Marilee Kick, a former public high school teacher, has become one of America's richest self-made women after selling her ready-to-drink cocktail business BuzzBalls for at least$500 million.

24:58What started as a side hustle has now transformed into one of the biggest brands of the ready-to-drink cocktail industry. Kick founded Buzz Balls in 2009, inspired by a simple idea while grading papers by her pool. I thought, I shouldn't have this glass container out here. I should have a plastic pool-safe type of cocktail. From this spark of inspiration, Buzz Balls was born. Fun, high-proof cocktails served in colorful, plastic, spherical containers. Buzz Balls quickly gained popularity as an asshole at supermarkets, liquor stores, and convenience stores. She says, I've been living the American dream.