TikTok and the Long Competition
Alan Pentz, CEO
If you have kids you know what TikTok is. Increasingly you know what it is if you read the news. The Trump Administration is currently pressuring the company’s Chinese owner to sell the part of the service that operates in the US, New Zealand, Australia and Canada. An odd assortment of companies has come out of the woodwork to make a bid: Microsoft, Oracle, and Twitter so far. All of these suitors strike me as bizarre. Microsoft is focused more on productivity and cloud computing as a service. Oracle sells stuff like cloud budgeting software to businesses and governments and Twitter is about half the rumored size of TikTok itself.
I think this incident is a sign of things to come. It is an opening battle in the Long Competition between China and the US that will play out across multiple arenas. What the Berlin Airlift was to the Cold War is what the TikTok divestiture is to the Long Competition. It’s a defining moment and gives us clues about what’s to come. First it shows that the US will no longer allow China to get away with restricting its own market while participating fully in ours. No American social network operates in China and US media is severely restricted. What’s good for the goose has to be good for the gander.
Second, I think this incident says a lot about how US tech is positioned for the Long Competition. This incident shows us three emerging trends. The first trend is obvious. Everything is a national security issue now. If the junk that’s on TikTok is subject to national security reviews then anything is. The US is clearly saying it won’t tolerate non-aligned powers to serve the US market at least as far as intellectual property goes.
Second is the rise of antitrust concerns. Facebook, Google, and Apple won’t be able to buy anything else and the second tier tech players (Snap, Twitter, etc.) aren’t big enough to digest anything as viral and valuable as TikTok. It seems old-line companies are either leery of dipping their toes into the social media space or aren’t big enough to do so. For example, Disney hasn’t made a bid reportedly due to a worry about toxic content on TikTok. I don’t see Berkshire Hathaway making any moves in that direction either. So really that leaves big tech companies without much consumer presence: enter Microsoft and Oracle.
That brings us to our last trend: technology convergence. As fewer companies dominate their space more completely, the new ground they can capture in tech without triggering antitrust concerns is shrinking. That’s why I think you see Microsoft as a leading bidder. They might not be able to buy another large cloud computing provider but social media is wide open for Microsoft. If they want to grow and maintain software margins, there aren’t that many areas left. So I think we will see a form of conglomerate come to big tech similar to what we saw in the 60s with companies like GE, Teledyne, and other conglomerates.
These developments show how interwoven our economic and military competition with China will be. It will play out with jerky dance and cat videos as well as autonomous jets. Welcome to the Long Competition. It’s going to be a wild ride.