To understand the video-app saga, consider quantum mechanics
I F YOU DESIRED to understand the arrangement between TikTok, a Chinese-owned video-sharing service, and Oracle, which offers corporate software application (see article), it is useful to think about Schrödinger’s feline. Like the theoretical feline of quantum mechanics, simultaneously alive and dead, the offer seems to be in two states simultaneously– one hunky-dory to Beijing however fatally flawed to Washington, the other vice versa.
Take the question of who owns TikTok Global, the brand-new company to be spun out of ByteDance, TikTok’s Chinese owner, to provide the data of American users a safe house in America. ByteDance insists that it will hold 80%of the new entity. The Americans state they will control a majority stake. Oracle and Walmart, a supermarket titan which has taken part, will own just 20%of TikTik Global in between them. But American venture-capitalists already own 41%of ByteDance. Apply the ideal mathematics and both the Chinese parent and the Americans own more than 50%of TikTok Global, which the deal values at $60 bn and which is supposed to go public within a year.
What about TikTok’s innovation? Beijing says that ByteDance’s eerily precise recommendation engine is not for export. Security hawks in America want to make sure no information is diverted and the algorithm is not used to spread out false information. The source code will stay in China however Oracle will have access to it. How this will operate in practice is about as clear as Schrödinger’s formula is to non-physicists.
In typical times everybody would resolve the ambiguities at the negotiating table. But times aren’t typical, specifically in America. Ahead of November’s election, President Donald Trump prizes ambiguity. He wishes to slam China however not irritate America’s 100 m users of TikTok, which he has threatened to ban (together with WeChat, a messaging app owned by another Chinese tech giant). A federal body that takes a look at foreign financial investments in America looks all set to approve the Oracle offer, anticipating a Department of Commerce edict banning Americans from doing business with TikTok from September 27th (a federal judge today obstructed the WeChat restriction on free-speech premises). Naturally, primarily positive sounds from Washington have actually provoked mad ones in China, where state media have denounced the offer. Observe Schrödinger’s feline close enough and it ends up either dead or alive. ■
This short article appeared in the business section of the print edition under the heading “The principals’ uncertainty”