Bonus Episode: A TikTok Verdict and Lots of Questions on Substack Live
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Hello and welcome to a special episode of sharp China. This is a sub stack live that bill and I hosted on Friday afternoon in the wake of the unanimous decision from the Supreme Court upholding the tick tock law and amidst.

All kinds of ongoing questions about what will actually happen to TikTok in the United States over the coming days and weeks. So here is the recording. The audio is a little different. Just be forewarned, we recorded this through the Substack app. So this is iPhone audio on both ends. But beyond that, it was a good conversation. 30 minutes for Bill and I.

Just processing all this in real time, asking questions aloud so you can get your instant reaction fix here. And we will be back with a regularly scheduled episode of Sharp China the middle of next week after inauguration. And we'll probably have more details on what is actually happening in TikTok. In the meantime, here is the show. And I hope everybody is having a great long weekend.

Okay, we got people joining, so the notification went out. We're live. We are live.

Hello, everybody. Thanks for joining. People are just filing in right now. And this is our first Sharp China Substack Live discussion. A Substack Live experiment. Here we go. I have my co-host, Andrew Sharp. And I guess I should start with hello, right? Hello. But thanks, everyone, for joining. Seriously, we have, I think, an interesting discussion. Obviously, we want to have a quick chat about what's going on with TikTok and the Supreme Court decision today. You know, we've been

Talking about this a lot over the last few months. It helps that Andrew is actually a lawyer, no longer practicing. Correct. But will help with the analysis. And so just to catch everyone up, the Supreme Court today declined to issue any sort of a stay or injunction and actually decided unanimously that the law that affects TikTok should be upheld.

Indeed. And it goes into effect January 19th. And even though the Biden administration has said they won't enforce it, it puts TikTok in a difficult position. And TikTok's partners like Google, Apple, AWS, probably Oracle, who face massive fines even for supporting the app for one day, potentially.

And here we go, you know, let's see what happens. Um, I feel validated by the Supreme court's decision upholding it nine zero, uh, that validates my fuzzy recollections of constitutional law one and two, and again, rejects the ACLU lawyers who were telling the New York times that this was unconstitutional. It was going to be overturned. And, uh,

Basically, both the D.C. Circuit and the Supreme Court deferred to Congress's assessment of TikTok as a national security threat, both because of the data access and because of the potential algorithm concerns, although the courts really focused more on the data.

And it's going to be interesting because Congress's assessment of TikTok appears to be evolving in real time as January 19th approaches. And I don't know. I mean, honestly, the reason I wanted to do this is because my brain is scrambled after the last four days tracking each update and various reports about what Trump was going to do, what the Biden administration was going to do, what Schumer wants to do with TikTok.

What interests you most about what happens next here? So, well, a couple of things. First, really, I think it's interesting to how, you know, the D.C. Court of Appeals, it was a three three to nothing, three to zero decision in support of upholding the law from, you know, three very experienced and ideologically, politically diverse judges.

Then you get the Supreme Court and it was nine to zero. And again, it's a very broad spectrum of political and ideological diversity on the court. And so I think that actually is it wasn't even close, basically. It is. And so now, though, you have.

The Democrats, you know, this law was passed by a massive bipartisan margin in the House and Senate. It had been actually drafted together. Folks on the Hill, like former Representative Gallagher, was drafted with help from Biden's folks on his National Security Council, as well as from his Justice Department.

And so this, and then of course Biden signed it. So it is a, it is, you know, this was the Biden administration was very supportive of this law. The Democrats were very supportive of this law. Now you have basically yesterday, the Democrats are like the dog who caught the car. They're like, oh, now it's going to happen. What do we do? It's going to be awful. We're going to like have people mad at us and it's going to hurt our politics.

And it's like, I mean, you guys passed this law. And then the Biden administration says, oh, we're not going to enforce it. We're going to, you know, the quote today from the from from his press secretary was basically, you know, TikTok should remain available to Americans, but simply under American ownership or other ownership that he addressed addresses the national security concerns identified by Congress.

Given the sheer fact of timing, this administration recognizes that actions to implement the law simply must fall to the next administration. I mean, it's pretty remarkable when you have a president who says, we're not going to enforce the law that I signed.

It's unbelievable. It undermines the rule of law generally to have any president do this because Trump had sort of talked about doing this also. But the timing isn't a surprise to the Biden administration either. No. And it's really dispiriting to see them approach it this way. And yet it may not matter because there have been reports that Apple and Google are going to stop hosting the app anyways on Sunday.

But yeah, from a Biden administration perspective, I saw that news because there were reports that they were leaning that direction Thursday night. And it's just so frustrating. It goes back to some of the chip conversations we had where I think back in December, I said, one of the things the Biden administration struggles with, they're really good at rhetoric. But when it's time to do something that's hard and potentially unpopular, they're

they tend to sort of beg off and try to split the difference somehow. And here they're just kicking it to Trump, which you for a long time, I mean, anytime we've talked about this, I've said Biden is going to have an opportunity to kick it to Trump and it'll be interesting to see how he handles it. Why would he do that? Why would he make it easier for Trump? Because Trump has not wanted to ban TikTok. And I think we both sort of concluded there's no reason he would not enforce the law

But I guess reality has a way of surprising us. Yeah, I mean, there was some talk that, though, they're not going to enforce the law because it starts on a Sunday and then it's a holiday on Monday. It's like, oh, really? So laws aren't enforceable on holidays? Great. Let's all, you know, I mean...

Anyway, and then we all have calendars. We all knew when January 19th was going to fall this year. You see, like Senator Schumer. I mean, it is just remarkable how they seem to really have realized like, oh, actually, people don't like this and maybe we're going to be even less popular. So but that's it's supposed to be rule of law. And so if this is how you end your administration, my base is that it will ignore this law. Well, then why give the next president to say I'm not going to force all these laws and then anyone on the other side of the aisle can't actually like fight that.

Because this precedent has been set. And so now, though, the question, right, is we had that report a couple of days ago on the information that TikTok was preparing to shut down on Sunday. And I assume it'll be 12 or 1 a.m. Eastern time when the law goes into effect. Basically, to comply with the law. The real question, right, is even if the president, you know, Biden says he's not going to force it, Trump will say he's not going to enforce it. Even if they say they will, that will the companies like Apple, Google, Oracle, Amazon, Apple,

Will they say, is that enough of a guarantee for them to risk the potential billions of dollars in fines that are written into the law? Or will they say, and I think there are two different pieces, right? Apple, Google say, we won't put you in the app store. We'll take you out of the app store. It means you don't get updated, but it still works. AWS, Oracle say, we're not going to support you. That means the app doesn't work. Interesting. Yeah. So technically speaking, Oracle complying

with the law or AWS. I'm not sure on their tech stack, for example, I know they have a big CDN, a content delivery network. Do they have a third party doing that? It's interesting and it may be that one of the reasons why TikTok has said we have to shut down is because they understand that some of the companies that they rely on for delivering the actual product

are not willing to take this risk. Yeah, well, it's a considerable risk. I mean, the number that's been thrown out the last several days was $850 billion, and that's an aggregate total of potential fines.

But I mean, that will get anybody's attention, Tim Cook, you know, whoever. And so Justice Kavanaugh in the oral arguments sort of raised that question with the lawyers for the governments who said Trump could choose not to enforce the ban. And Kavanaugh said, really, they're just going to rely on sort of an oral promise. They may need more than that.

And so it certainly looks like those companies are in fact going to comply with the law, regardless of what Biden or Trump try to do, at least in these early days here. But beyond that,

I don't know. I have no instinct on how exactly this is going to be resolved. Like I could look at the legal arguments over the last couple of months and say, I don't really see how a court is going to overturn this law, whether it was the DC circuit or the Supreme court. But now it just seems like there's a lot of powerful people who,

in both parties that are advocating to give TikTok what will now be like a fifth chance to actually divest. To actually do a divestiture. I mean, I think at this point, the only chance for TikTok

it to continue is the actual qualified divestiture. There's the whole Project Texas thing. I don't think basically the law has been upheld. The law, you know, unless Congress decides to somehow repeal the law, which seems unlikely, especially in the next 90 days, given everything else that's going on, this is the law. And so they have to... Trump, there's some talk that President Trump can trigger this 90-day extension if there's a...

a legitimate deal process underway that not just he, but Congress also says is legitimate, right? Yeah. Yeah. Well, I pulled some language on that. And it's interesting because I knew about the 90 day extension provision, particularly as the

January 19th date approaches and Trump, you know, continues to bang the drum about saving TikTok. I thought, OK, well, that's an avenue where he could easily grant a 90 day extension and then potentially bless a, you know, air quotes qualified divestiture deal.

But the language on the 90-day extension is pretty serious. From the law, they say, with respect to a foreign adversary controlled application, the president may grant a one-time extension of not more than 90 days if the president certifies to Congress that A,

a path to executing a qualified divestiture has been identified, B, evidence of significant progress toward executing such qualified divestiture has been produced with respect to such application, and C, there are in place relevant binding legal agreements to enable execution of such qualified divestiture during the period of such extension.

So it can't, like, Trump can't say, trust me, they're trying to divest. There has to be no substitute. He showed up at my inauguration, they sponsored something, and therefore the deal, and he sat next to Bezos or Musk, and therefore there's a deal underway. Exactly. Although, who actually is it, like, like,

allies in Congress could theoretically just sign off on whatever he sends them, right? Well, and that's the follow-up question is like, how does Congress hold Trump accountable for what he represents to them as far as the extension is concerned? And would he be able to trigger the 90-day extension a day after TikTok goes dark in the United States? I mean, January 19th may actually be the day that matters and Trump won't be president at that point.

Right. And so the question, too, is if the law takes effect, it goes dark and, you know, it kicks in on the 19th. You know, I still haven't found a good answer whether or not they can still actually trigger this 90 day deal clause. Right. Or or in a sort of one scenario, the service is offline in the US and the TikTok folks say, OK, this is real. They actually scramble to figure out a way to do some sort of a qualified divestiture.

And then that has to happen quickly. And as soon as that's completed, it can go back online. I don't know. And I don't know. It's one of those things where I see different people who shouldn't know what they're talking about give different answers. No, exactly. And that's why this little chat is going to be dominated by questions and not any firm answers because it's really all up in the air over the next several days. I am taken aback by...

some of the support that TikTok has received publicly from people who voted in favor of the bill. I mean, even aside from the Biden White House, this is just unbelievable. But it's all part of the circus here, I suppose. Right. And the thing that's the thing is, right, it was it was obviously it was a politicized process to get the bill passed.

Right. You know, TikTok had all sorts of opportunities to lobby against it and their lobbying was unsuccessful. The idea or the hope was right. Once it was signed by the president and gets kicked into the court system, then it would be a not an unpoliticized process. Right. It would they would get their day in court. It would work through and they have an answer. And so I think the court process was not politicized. But now we're back to just like this political concho. Yeah. And the thing is, is what's so frustrating is.

is more whether or not the fate of the app is an American. It's like, okay, you sort of expected this on the Trump side, right? This is how he rolls. But the sort of lawlessness from the Biden side is just kind of surprising and the Dems in the Congress. Yeah. Well, and I mean, I was thinking about this earlier and I jotted down three notes in terms of why I've cared about this issue all along. And so I'll read the list here.

One, as a matter of national security and just general national security principles, it's really irresponsible to allow a hostile foreign government to have control over an information resource that's as influential and as easily manipulated as TikTok is. So that's sort of the baseline concern.

Two, I also just personally don't like TikTok very much. And that's part of it. That's not a legal argument or a national security argument. But its net impact on U.S. society is pretty clearly negative as far as I'm concerned. I mean, we have two teenagers and we've seen what TikTok, you know, it's forget the ownership question. So I find it to be a really, unfortunately, horrible app.

Right. And you could say the same for American social media companies. But I do think TikTok is even worse than American social media companies and more corrosive in a lot of ways. And I'm sure the next generation of social media giants will be even worse than TikTok. It is what it is. But three, the real reason I've been super interested in this all along is

It's a relatively low stakes test of the American system and whether U.S. capitalism has the ability to potentially forego profits and adapt to very serious threats from the PRC that exist on a variety of fronts.

And in the case of TikTok, it's not necessarily private profits that we're talking about, but there's been an exceptionally well-funded lobbying effort and donor network that has been influencing the political process around TikTok for several years now. And so it's all sort of a reflection of the U.S. system a little bit. And, you know, we

We're not flunking the test, but it's getting rocky here as January 19th approaches. And it's still an open question as to whether the U.S. is going to have the metal to actually pass what should be a really simple test in terms of what we're willing to tolerate in this country. So I know those are all great points. You know, Trump had a call with Xi Jinping yesterday.

And Trump said he talked about TikTok. The Chinese readout doesn't mention anything about TikTok. But it is interesting from a broader US-China relationship framing where when you look at what was behind the crafting of this bill in Congress, especially when it was coming from the Select Committee, it was about China as a foreign adversary, China as this threat.

you know the china is this big competition where it's like a generational competition and the chinese side clearly believes that and you know we we're not going to argue about it she think that because because the us was mean to him or you know it's all sort of who's reacting to whom but it's where the relationship is and so you wonder from the you know if you think about it like how does the chinese leadership see this action

I mean, some ways it looks like, wow, the U.S. really doesn't actually have the stomach. You don't have the fortitude. They can't even shut down an app. No, exactly. I mean, I would be emboldened by the chaotic process here if I were a party leader in Beijing. Or any government, because you look at, again, it goes back to the process, right? It went, it

TikTok went through the legislative, the executive and the judicial branch, right? It ran the gamut of how the U.S. system is supposed to work. And yet even after the Supreme Court said lost hands, now they can go do their lobbying with the new president. It's really like, and so I think it's also a view into politics.

how corruptible and how you can influence the U.S. political system from the very top. Yeah, no, exactly. And if we go back to the outreach to Trump from Jeff Yass,

I mean, I think that happened at a time when Trump was under siege on several fronts with various lawfare efforts and was in need of some liquidity. And the relationship there has proven pretty durable. Like, I wasn't sure how how serious Trump was.

about potentially wasting a bunch of political capital on TikTok literally the day he takes office. But he seems pretty serious. I mean, Shoji Choo is going to be on the dais at the inauguration, which I guess is going to be inside since it's going to be six degrees in D.C. on Monday. And in Shoji Choo's statement on TikTok a few hours ago, he specifically talked about

sort of how, you know, I think the quote was something like, you know, there were 60 billion views of Trump's content on TikTok, right? And maybe that's enough. Maybe it's not about yes and any donations. I mean, I'm sure it's that. I think it's a combination of all sorts of things. And so now...

When you look at, okay, if there has to be a qualified investor in it and it has to at least pass the smell test, although I think the bar is probably lower than probably some people would expect, who are the potential buyers, right? I mean, you think Facebook or YouTube or Google, unless the Trump DOJ decides to drop

The antitrust efforts against those companies, they're probably out of it. Microsoft, Oracle were rumored. We've looked at it before. There are a couple of different groups that may be bidding on it that don't seem to have a lot of technical chops but can raise the money. Maybe Musk can merge it with X and it can become like Xtalk or ToxX or something. I don't know. Well, it's funny because in the past, Ben Thompson, my colleague at Stratechery,

He would always throw out Walmart and Amazon as potential buyers of TikTok because

because they can sort of use it as a conversion channel and a funnel. And they have the money, they have the capital. They have the capital and it would make sense. Beyond that, though, I don't think those guys are going to be willing to try to buy it in a span of 72 hours at this point. All of these talks could have been happening nine months ago. Right. And it seems like the ByteDance, TikTok people really either...

were actually thought they could win their legal case or just understood that

And actual divestment was not really an option because they probably won't be able to sell the algorithm. And what are you buying? Are you buying TikTok US? And then somehow that product has to be separated from the rest of the world. So you're going to have like the Tholien version for the PRC. You'll have TikTok rest of the world for, you know, in all the countries where it's not banned. And then you'll have TikTok US, which is US users.

I mean, that's going to be, that's a pretty, I think, complicated transaction, both in terms of valuation, but also in sort of technical and user design. Right. And from a technical standpoint, I think TikTok has repeatedly argued that decoupling TikTok from a lot of the ByteDance operations is really difficult, if not impossible. And so that's part of the case they've been making. Right. And it's interesting because like,

If you're ByteDance strategically just fighting this bare knuckles and saying, no, we're absolutely not going to divest. This law is unconstitutional. And putting that foot forward for the last nine months isn't crazy and trying to call the U.S. sides bluff. And only now will they potentially think about a divestiture over the next couple of months because they could go dark and be banned and then.

they could divest and the law will no longer apply to them. So TikTok US could come back to life at some point. It's not crazy for them to approach it that way. So it's not necessarily evidence that ByteDance has always been sort of a CCP entity and viewed TikTok as an information weapon more than a business. But it remains to be seen in terms of potential buyers

Musk is really the only person that I could see partnering in this situation because of all the questions you raised in terms of what you're actually buying in the case of a real divestiture. I don't know that a real divestiture is possible. Yeah, I mean, that would be messy. He could certainly raise the capital. He could certainly find the people with the technical chops to make it work.

It doesn't matter that Twitter is worth a fraction of what it was worth when he bought it. It obviously has other value for him and for the incoming president. It's going to be really interesting. And Trump, I guess, said today, he's going to say he respects the Supreme Court decision and he's going to basically make a statement later. I think they are kind of scrambling to figure out what they can do that's actually...

both feasible, palatable, and credible in terms of a next step to get TikTok to either not shut down or put it back online if it does shut down on the 19th.

Yeah, well, there was a quote. This was Trump to Pamela Brown on CNN. He said, it ultimately goes up to me. So you're going to see what I'm going to do. Congress has given me the decision. So I'll be making the decision. And then Brown adds he did not provide further details on what that decision would be and not clear what that decision could be. Like, honestly, I mean,

I guess he could try to grant an extension, but there are real requirements that he'll have to satisfy in order for that extension to take effect. And the congressional dynamic will be interesting because you had Senator Cotton and Senator Cruz who were on the Republican side who come out and basically say the law is the law. But you probably would have a fair number of Democrats who would come out and sort of want to figure out and work with the president to find a way to sort of make it work.

Yeah, I mean, the Dems seem to be saying when we voted for this, we didn't expect it to actually happen. Dogs who caught the car. It's really it's really apologies to Tashi. It's really, really embarrassing. And, you know, the other aspect that I find interesting going forward is, you

Actually, I told you my brain was scrambled. I just forgot what I was going to say. Oh, no. I was looking here at a question from Blake. I have a question about the algorithm threat. Has there been any evidence that Beijing has already been purposely manipulating the American side's TikTok algorithm, or is it just on the basis of the possible capability threat?

um my understanding is that it's not clear the extent to which beijing has been purposely manipulating the american side's tiktok algorithm uh do you have any insight there bill no there's been nothing public i think that has that has come out either um sort of released publicly by say you know even like the select committee in the house or showed up in media that actually would would sort of

Show that there was some sort of manipulation. I think at least in the public domain, it's been more theoretical They could and you know, I think that the theoretical bid is is not unreasonable, right? You know, there was anyone they were making the world arguments, right? There was suppose there is this classified evidence or classified testimony there have been sealed portions of the freeing the justices and the judges can see but even tick-tock couldn't see mm-hmm

And so whether or not there is stuff in there, I don't know. And I don't know whether that really affected the Supreme Court decision or they're just more about generally deferring to Congress on national security issues.

Right. And there were sealed portions of the congressional briefings as well. And I believe that there have been demonstrations that TikTok elsewhere in the world has been manipulated by Beijing and whatever has or has not happened in the U.S. is unclear, at least as far as the general public is concerned. I would say that the threat that TikTok could one day be manipulated by Beijing

party leaders in Beijing is enough of a problem to prompt action. And the data access is also its own problem. I mean, look how other social media services algorithms get manipulated by their owners.

No, exactly. The change in ownership in Twitter and the change that we've seen on that platform over the last four years is enough evidence of how powerful algorithmic control is for all these resources. Right. And then the Supreme Court, I guess part of the decision was that foreign corporations don't have First Amendment rights.

It wasn't at all ruling on the First Amendment or I think they tried to craft it very narrowly. So it's really just about TikTok, right? Right. Not really be oppressive or anything else. What is interesting, though, and then we should probably wrap up pretty soon, but is whether or not, you know, this process has been very ugly around TikTok. I was talking to a friend earlier who was sort of making a more of a constructionist

constructive point, you know, besides sort of how crazy the politics are, which is that, okay, you've got the TikTok issue and what really is going to happen and what the, you know, Biden non-enforcing law and Trump, what he's going to figure out. But basically there is now a framework. There is now a law for banning other types of apps that are foreign adversary controlled, including lots of other Chinese apps going forward. And some of those apps probably won't have the same kind of political, uh,

power and political backing that TikTok has. TikTok by then seemed to be a pretty unique case. Well, yeah. I mean, that's why it would have been easier to execute all this in 2020 because TikTok did not yet have this massive following and massive lobbying apparatus to sort of combat some of these efforts.

And it's good that the law is written that way. I think it applies strictly to sort of social media platforms and not like a Timu operation or something like that. They tried to craft it, I think, pretty narrowly. Yeah.

And I guess we'll see what happens. They don't need to ban Xiao Hongxu because I think that's probably going to be off limits to Americans sometime in the next couple of weeks. I think also its appeal is sort of fading away. We will make one correction. Somebody commented on our podcast where we talked about it, and we talked about whether or not it's actually named after the Mao's Little Red Book. And, you know...

I said no. And a lot of people said no. But this person, I said, well, my wife remembers a podcast from the founder when they were starting out, who specifically said that actually it's a fashion book. We got the idea from the Mal's Little Red Book. So I have not yet found that podcast. If someone has a link to it, we'd love to see it.

because that would be pretty interesting. So I got to say, thank you everyone for showing up. Tashi's Napping got 50 more users than we did. So we, I don't know what, maybe it's Friday afternoon. Oh boy. I'm feeling really...

I think we have to invite him to nap in the corner. Maybe we'll get more listeners. And we got some questions. I will say the interface is a little hard to answer questions when stuff's scrolling by really quickly. But let us know if you think this was useful. We will have a recording of it that we'll probably post later over this weekend. But let us know if you want us to do more of these or not. And thank you, Andrew, for your time. It's great to see you. Absolutely. I know. I just, I gotta say, I just finally,

Leaving aside the whole question of whether or not TikTok should be banned, it's just this whole process has just been so gross. It's actually getting grosser.

Well, it's definitely, it's actually funny because you said it was gross when we recorded, which was Tuesday afternoon. And it did in fact get grosser and grosser successive day this week. Because when you said it on Tuesday, I was like, I don't know. It doesn't seem that gross to me. And then it's just gotten more and more dysfunctional as we go. And then on Monday, we're going to have show two on the day is standing.

behind Trump. Yeah, well, now it's going to be inside me, so-called. So we'll see where he actually gets put. But I guess there's still going to be like a VIP area. There'll be some sort of dais, yeah. One other, I will say one positive note from a U.S. political system perspective. I will say, though, there have been two cases, TikTok, one of them, the sentencing of Trump for the hush money payments where the Supreme Court rejected his pleas or appeals to rule in his favor. Mm-hmm.

Mm hmm. So potentially the Supreme Court is sort of setting out a marker and saying we are actually an independent. There's a real independence there. Yeah. Yeah. And I mean, the Supreme Court could have been a lot more divisive on the TikTok issue also and could have tried to kick it down the road a little bit. Yeah.

I was talking to somebody who actually was involved early on, like right around the oral arguments. And one of the things he said, they're worried about like the horseshoe effect where you could have this strange coalition of justices actually ruling in favor of TikTok. And the fact that it is both the appeals court and Supreme Court were unanimous, I do think says something, though, about how well the law was crafted, but also how well the government actually had was able to mount pretty good.

convincing arguments. And also Congress was not unanimous, but overwhelmingly in favor of this legislation, at least until it wasn't. And now at least it's all actually what's going to happen. And they might get angry calls from people and like, oh, my God, do something. How did this happen? Oh, my God. Well, we'll all find out what happens on Sunday. But this has been fun. Thank you to everybody who's joined. And Bill, go enjoy your Friday afternoon with Tashi.

You too, Andrew. Thanks, everybody. Thank you, Andrew. Yes, sir. Enjoy your weekend. Cheers.