The TikTok Time Bomb

Photo by Andy Feliciotti on Unsplash

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Cherry blossoms, Congress, China and control

The cherry blossoms are blooming in DC early this year, but that flowering sakura of ephemeral beauty is hardly lightening the mood in the corridors of the nation’s power. This week — outside of the on-going meltdown in banking, of course — the primary focus was on TikTok, and specifically the Congressional hearing pitting TikTok CEO Shou Zi Chew against the members of the House Committee on Energy & Commerce.

It had all the ingredients of a surrealist spectacle, and a spectacle it was. It had a loaded title: “TikTok: How Congress Can Safeguard American Data Privacy And Protect Children From Online Harms”. It offered a rare opportunity for bipartisan consensus, given the ease of punching down to a foreign-run company CEO without much of a domestic employment constituency.

And as always, you have the lurid dynamic of mostly aged congressmen pontificating on a technology platform mostly used by teens with a 40-year-old at the helm. Of 52 committee members, only Kat Cammack of Florida (aged 35) and Dan Crenshaw of Texas (aged 39) were younger. Only one congressman on the committee, according to WaPo's David DiMolfetta, even has a verified account on the country’s second most popular social media platform (YouTube is number one based on Pew Research polling).

Ignoring Chew’s vetted obfuscations and evasions as well as the committee’s expected grandstanding, TikTok offers an excellent Rorschach test for many prime themes in tech and politics today. Is the concern about China and foreign influence over youth? Is it about protecting American industry from foreign competition? Is it about data privacy, a perennial issue around social media hardly unique to TikTok? Is it about the zombie-like state that teenagers seem to enter as they start scrolling through their feeds? Is it about youth mental health as their minds drown in spastic, rapid, short-form videos?

TikTok embodies and entwines so many of our society’s ills as well as our completely inadequate responses to them. For all the fury unleashed during Thursday’s hearing (and the hearing was definitely heated), we must remind ourselves that all of our anxieties about TikTok were years in the making and always preventable by a functional legislature. Foreign influence could have been checked, data privacy bolstered, and youth mental health ameliorated with legislation. The same threadbare conversations are simply being re-argued again.

Nonetheless, political momentum and DC bandwidth has coalesced toward making a decision: what to do about TikTok? A ban, a divestiture, a new set of operating rules, a data sovereignty agreement — the possibilities are endless. Our own Josh Wolfe posted on Twitter that “TikTok maybe started innocently or maybe was a brilliant Trojan Horse—there is 0 doubt it is a tool of the CCP to engineer, influence, make susceptible the beliefs and emotions of US citizens while also censoring info they see + openly surveilling keystrokes + biometrics.” He’s in the ban camp.

As is our own Bilal Zuberi live in DC at The Hill & Valley Forum, who tweeted that “It’s pretty amazing that from USA to India to New Zealand, governments and intelligence agencies have figured out that TikTok is spyware, but we can’t seem to find out a way to shut it down? How much of our country are we willing to put at risk for entertainment?”

TikTok is the most brazen and well-known hole in America’s information defenses, but it’s merely the largest of a wide-scale intelligence mesh that encompasses tens of thousands of other apps and tech companies (many but certainly not all of them foreign owned and operated) that suck up and exfiltrate the data of American citizens every single day. TikTok is hardly unique, even if it is the most successful at parlaying its data collection into an addictive social product.

Why do we keep allowing this covert data collection to occur? For more than a decade, large tech companies led by Google and Facebook have normalized the open sharing of private user data for the purpose of personalized targeting of advertising and revenue growth. They have been wildly successful, despite widely-read books like Shoshana Zuboff’s The Age of Surveillance Capitalism and widely-covered whistleblowers like Frances Haugen. State-led initiatives in California like the CCPA and elsewhere have tried to tackle the problem, to relatively limited effect.

Despite 1,802 data compromises in 2022 and report after report of the surveillance possible with our apps and devices, there’s been little political momentum to fix the country’s laws allowing the open sharing of private data. That shouldn’t come as a surprise though — the American public is hardly attuned to the issue, although certainly more and more people are actively taking steps to protect themselves where the government won’t (which leads to Lux’s own thesis around privacy technology and our investments in privacy companies like Cloaked and DuckDuckGo).

Banning TikTok may provide some immediate gratification in a short-form world, but that action shouldn’t be a sui generis performance of legal retribution. Instead, it should be a lighthouse that guides the DC blob to a wider conversation about the extent that tech has leached into our lives, our families and our data, and where exactly the line should be drawn between the commercial sphere and the privacy of our own information.

That debate was already fraught before given the trillion-dollar scale of the digital economy underwritten by our current lack of privacy. With the skyrocketing growth of generative AI and chatbots, that debate will only intensify given the voracious need for AI training data to perfect these products in a competitive marketplace. Plus, the quality of products will widen considerably between people conscious of privacy (and therefore limiting the training data available to their AI systems) and those who freely upload their data to every service.

Less than an economic or policy question, this is a question of values and capabilities. There are tradeoffs between the pace of innovation and the protection of our individual sovereignty to choose how we manage our affairs. There are tradeoffs between the instant ease-of-use that Americans expect of new technology products and privacy-preserving features that require users to think and consent to how their data might be used.

But we need to have that debate on values, since data is fundamentally fungible and also overflowing today. If China doesn’t get data via TikTok, it will get it through dozens of other popular Chinese-owned apps, or even via agreements with other companies, or frankly, just buying it wholesale through the existing data brokering market. If the data is “out there”, it’s discoverable by a nation-state dedicated to seizing it. If we truly desire to protect user information from evil actors, then we actually have to protect it.

That might include strict legal liability for corporate data breaches. That might include the creation of what I’ll dub a “Data Force” as a new military branch dedicated to defending cyber data and retrieving it when necessary. It would certainly include more requirements for user control over how their personal information is used, and explicit power to block the transfer of all data to third-party brokers and other data resellers. It might also include a blanket ban on data brokering in the first place.

TikTok is a test, but it’s one that we only solve if we look beyond its phantasmagoric Rorschach shapes and start to consider the wider landscape of its place in the ecosystem. A ban would be effective in stopping some Chinese data collection, but much like a cherry blossom, the app’s quick bloom and disappearance will simply come once again in new configurations in the years ahead unless more complete action is taken.

Thematic opens up smart democratized finance for all investors

Screenshot of the Thematic platform.
Screenshot of the Thematic platform.

We’ve mentioned Thematic in the newsletter a bit, but it’s a platform to easily build custom thematic market indexes as well as ETFs. Conceived by serial entrepreneur Steven Carpenter and Lux’s own Peter Hébert, Thematic officially launched and announced their fundraise from us this week.

A lot of the attention around democratizing finance got sucked up into the crypto trading world the past few years, but the core of the movement is about helping the unbanked and underbanked move into traditional banking, and then progressively opening all products and layers of the financial system to carefully regulated competition. Better products, lower fees and greater access combine into something special.

Thematic’s goal is to offer a balance between the day-trading frenzy of a platform like Robinhood and the extremely passive and low-signal big ETF funds offered by the likes of Blackrock and State Street. By having individual experts craft tailored thematic ETFs on the Thematic platform, investors can access a greater range of high-quality investment products that capture alpha.

For instance, our own Grace Isford constructed The Lux Web3 Infrastructure Index last year to capture blockchain networks and companies building on and adjacent to the Web3 world. It’s up 37.72% the last three months (and, of course, past returns do not equal future performance). Be sure to check out other indexes from Lenny Rachitsky on SaaS and Howard Lindzon’s DROP DEAD index.

The perturbations ushering in the next generation of biological research

Shaq Vayda, Rahul Satija and Danny Crichton. Image by Chris Gates via DALL-E
Shaq Vayda, Rahul Satija and Danny Crichton. Image by Chris Gates via DALL-E

There’s been a quiet revolution in biology, and it’s a quintessential example of how small changes in science (in this case literally) can lead to large advances.

Over the past decade, scientists have harnessed the exponentially increasing power of next-generation sequencing, single-cell analysis instruments, and other laboratory tools to begin understanding molecular differences between individual cells. Now, those tools are increasingly parallelized, allowing scientists to experiment on tens of thousands of cells with precise, tiny changes to their genetic code in order to glean how cell functionality is derived.

This “perturbation biology” method is rapidly improving our knowledge of the inner workings of the building blocks of life. This week on the “Securities” podcast, I talked with Rahul Satija, an associate professor at New York University and a core member of the New York Genome Center as well as Lux’s own Shaq Vayda about the implications of perturbation bio, how our understanding of cell heterogeneity is improving, and why fundamental molecular biologists will soon have to work with the applied world of large-scale clinical trials.

🔊 Listen to “How exponentials on top of exponentials in single-cell analysis is transforming biology today

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