Were there legitimate security concerns that necessitated the sale of TikTok’s U.S. operations? Would the same concerns apply to other companies?
“TikTok is often presented as a frivolous threat. But it is right in the heart of U.S. technology networks, with easy access to credit reporting, outsourced specialized companies, iPhone systems, and advertisers.”
There are serious security concerns for several companies owned by China based in the United States. TikTok is often presented as a frivolous threat, showing the paranoid view of spying on teenagers and innocuous chit chat. But TikTok is right in the heart of U.S. technology networks. It thereby has very easy access to credit reporting, outsourced specialized companies, iPhone systems, and advertisers. It should be said that U.S. regulators were asleep when this penetration developed, and that most of what Chinese companies did here was perfectly legal.
U.S. intelligence has been asleep on this issue—that is, to assess what’s going on, what the threat is. The wall between foreign and domestic surveillance had a lot to do with this. Right now the U.S. government is trying to sort all of this jumble out, and so it may overreact as happened in the Cold War. On the other hand, it may underreact as well.
How does China view this move, and how are they likely to respond?
Beijing was greatly surprised by American moves over the last few years. In my SOM Problem Framing course we really emphasize the idea of a “branch point.” That’s a point at which a problem or trend changes in some fundamental way. Branch points present new problems, and also opportunities. In 2015 and 2016 the world started to look at China very differently. It was a branch point for China. Beijing is sorting out its options. So far, I think, they’ve not reacted all that much, just a few token moves. But this could change.
Let me add that multinational companies face their own branch point about investing in China. Multinationals are now rethinking how to operate in China without drawing too much heat from the Congress and the White House.
How should companies plan for the risks of this kind of political intervention?
There’s a lot going on here already. There’s a big increase in companies going to Washington to hire lobbyists, law firms, influencers, and the whole K Street crowd. Another trend I see is that companies are using role playing war games for business planning. The “enemy” in these games are the respective governments in the U.S. and China.
Another response is that product design is now taking awareness of IP theft, to make it a lot harder by designing against it. Multinationals are compartmenting data flows, restricting access, and tracking who has what information. Clearly, this has some negative impacts as well.
Other companies have shifted investment to Southeast Asia and India. I also find a lot more interest in scenario methods as a way to manage these big regulatory and political issues.
One big trend that’s often overlooked is how Chinese companies themselves see these problems. Far from being part of a monolithic state-directed economic machine, Chinese companies like Alibaba, Tencent, and others are trying to get out from under the yoke of their own government’s overregulation and corruption. One reason Chinese companies would like to go global is to escape the clutches of their own government.