Thu, Sep 28, 2023|Whitney Tilson

TikTok Employees Say Executive Moves to U.S. Show China Parent's Influence; My thoughts on Estonia

1) Following up on two recent e-mails...

A week ago, I shared a Wall Street Journal article about how TikTok appears to have avoided getting banned in the U.S. – something I have long called for – because billionaire Jeff Yass owns a stake in the company worth $21 billion.

Yass has spread a few million dollars around to buy off TikTok's critics, which I called "a sickening indictment of our political system, whereby China is effectively able to bribe our politicians – via U.S. billionaires – to further its interests, at the expense of ours."

I'm not holding my breath, but maybe this article on the front page of today's WSJ will spur people to action, as it undercuts the preposterous claim that the company's U.S. arm is somehow independent of its Chinese parent company, ByteDance (and therefore the Chinese government): TikTok Employees Say Executive Moves to U.S. Show China Parent's Influence. Excerpt:

TikTok has spent the past three years trying to convince U.S. lawmakers it can operate independently in this country from its China-based parent company, ByteDance. After recent personnel moves, some employees aren't so sure.

Since the start of the year, a string of high-level executives have transferred from ByteDance to TikTok, taking on some of the top jobs in the popular video-sharing app's moneymaking operations. Some moved to the U.S. from ByteDance's Beijing headquarters.

The ByteDance executives have taken on roles overseeing swaths of TikTok's advertising business, human resources, monetization, business marketing and products related to advertising and e-commerce initiatives. Some have brought teams from Beijing.

The moves have concerned some U.S.-based TikTok employees, who have complained internally to high-level TikTok managers, according to current and former employees familiar with the discussions. The TikTok employees say they are worried that the appointments show ByteDance plays a greater role in TikTok's operations than TikTok has disclosed publicly...

Other employees say they are struggling in meetings where Chinese has become the default language on some teams in the U.S., even though ByteDance CEO Liang Rubo has told employees internally that meetings at the company are to be conducted in English.

How can we be so stupid as to allow our greatest rival unfettered access to more than 150 million of our citizens?!

China certainly isn't this foolish, as it has banned all foreign social media companies – and requires a completely different version of TikTok locally: Is TikTok different in China compared to the U.S.? A social media analyst compares it to opium and spinach. Excerpt:

Although they're owned by the same company, TikTok in China offers a child-friendly version, with educational videos and a time limit, that isn't offered in the U.S...

In an interview with CBS' 60 Minutes, a tech expert stated that the U.S. version of TikTok – a Chinese-owned social media platform – is different than the Chinese version of the app, comparing the two experiences to opium and spinach.

TikTok in China

Although they're both owned by ByteDance, Douyin – China's version of TikTok – offers a different version of the social media app that is unavailable to the rest of the world, especially for children.

"It's almost like they recognize that technology is influencing kids' development, and they make their domestic version a spinach version of TikTok, while they ship the opium version to the rest of the world," Tristan Harris, a former Google employee, and advocate for social media ethics, said of China's approach to TikTok.

"If you're under 14 years old, they show you science experiments you can do at home, museum exhibits, patriotism videos and educational videos," said Harris, according to 60 Minutes, adding that children in China were limited to only 40 minutes a day on the app.

"There's a survey of pre-teens in the U.S. and China asking, 'what is the most aspirational career that you want to have?' and in the U.S., the No. 1 was a social media influencer, and in China, the No. 1 was astronaut," Harris said. "You allow those two societies to play out for a few generations and I can tell you what your world is going to look like."

2) When I was in Estonia on August 22, I wrote in my e-mail that day:

Today, I had the pleasure of meeting and spending three hours with the president of Estonia from 2006 to 2016, Toomas Hendrik Ilves, who actually grew up in New Jersey and attended Columbia University and Penn (I'll share more about him and Estonia in a future e-mail):

Today, I'd like to fulfill that promise, starting with the picture I included in yesterday's e-mail:

On the left is Malcolm Nance, who I called "one of the world's most interesting people."

After we met and had lunch on Friday, we went to a meeting with four Estonians, three of whom were in town for the UN General Assembly: Foreign Minister Margus Tsahkna (third from left)... the Consul General in New York, Arvo Anton (center)... Anna-Greta Tsahkna, founder and CEO of Timbeter and Vice-President of the Estonian Association of Information Technology and Telecommunications (and Margus' wife) (next to Malcolm)... and Mari-Liis Sulg (next to me). (The last person in the picture is my friend Evan, a fellow investor who has been very supportive of Ukraine.)

Having been brutally occupied and subjugated by Russia from 1938 to 1991, the Baltic countries hate Russia, so they have been highly supportive of Ukraine in a humanitarian way as well as technologically and militarily. For example, primarily to support Ukraine, Estonia recently raised taxes so it could take its military spending from 2% of GDP (which every NATO country is supposed to be doing, but many aren't) to 3.3%.

Foreign Minister Tsahkna told us about how he is leading the push in Europe to make Ukraine part of NATO and how the government is working on legislation that would allow Estonia to seize Russian assets and give the proceeds to Ukraine – something that terrifies Russian President Vladimir Putin and his oligarchs.

Overall, Estonia reminds me of a hybrid of Israel and Singapore, though it has a fraction of the population (1.3 million versus 9.4 million and 5.5 million, respectively) – a tiny nation that punches far above its weight technologically, economically, militarily, and diplomatically. (Note the Estonia and its sister Baltic countries, Latvia and Lithuania, are part of NATO, the EU, and the eurozone.)

Estonia claims to have the highest number of "unicorns" – private companies with $1 billion valuations or more – per capita than any country on earth, with 10 in a population of only 1.3 million or one per 130,000.

Not surprisingly, despite having a population only 15% that of New York City, Estonia ranks 16th in the latest Global Innovation Index:

Estonia's tech prowess isn't an accident...

When I talked to former President Ilves, the thing he was most proud of was getting computers in every classroom nearly two decades ago and putting the entire country online. Today in Estonia, all government services – paying taxes, getting medical care, voting, registering a business, etc. – is fully online. To learn more about what he did, I recommend watching these videos:

It's a remarkable story. When Estonia was occupied by Russia in 1938 and forced to become part of the Soviet Union for more than a half century, its GDP per capita was similar to nearby Finland.

By the time it earned its freedom in 1991, according to President Ilves, Finland's GDP per capita was 10 times Estonia's – that's what a half century of communism will do.

But today, thanks to embracing technology (and a lot of hard work, driven people, and strong leadership), Estonia has closed more than half the gap – $28,000 versus $54,000 – a trend that I think is likely to continue.

So I encourage you to learn more about Estonia – and if you have a chance to visit, take it! The old town of the capital, Tallinn, is especially beautiful, as you can see in these pictures:

Best regards,

Whitney

P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.