News Information and Media Site: Byers Market: Eric Schmidt's TikTok warning

August 26, 2020

By DYLAN BYERS in Los Angeles &

AHIZA GARCÍA-HODGES in San Francisco

Good morning. 🏖️ Dylan is taking the rest of the week off, starting tomorrow. Ahiza will take the reins. Please send all tips and leads her way: ahiza.garcia@nbcuni.com.

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🌎 Moving the Market

Eric Schmidt on TikTok, China and the 'Splinternet'

Former Google chief Eric Schmidt warns that President Donald Trump's move to ban TikTok's U.S. business could set a precedent for other countries to take similar actions against U.S. tech firms, a trend that would accelerate the breakdown of the (mostly) global internet.

• "What I worry about is the U.S. taking a data sovereignty position, which ... sets the precedent that this will now be done against American firms that have global presence," Schmidt says in an interview with our CNBC colleague Andrew Ross Sorkin.

• His warning comes as Microsoft, Oracle and others are in a race to acquire TikTok's U.S. operations ahead of a Sept. 15 deadline, when Trump says he will ban the Chinese-owned app on national security concerns. (TikTok has sued to block — or at least delay — that ban.)

• As an aside, Schmidt also notes that rather than ban TikTok, the U.S. could simply require it "to work with a cloud provider like Amazon, Google or Microsoft, who have the necessary security protections and are covered by U.S. law."

The big picture: Schmidt says America has "benefited enormously by American values and American technology being used globally." By moving to establish sovereignty over U.S. citizens' data, the White House could inspire others to do the same, splintering the internet and putting its own global tech dominance at risk.

• "Essentially every American tech firm has data that is stored in the U.S. — and subject to U.S. law —that is used by Europeans," he says. "They bristle at that. So now you're setting the precedent that [Europeans] can insist on this, too."

• "Be very careful about the multi-move scenario, the back and forth in these things," Schmidt, an adviser to the U.S. Defense Department, warned. "It seems appealing, but then it sets in motion a whole bunch of things that can affect American dominance."

• "I worry ... that what we're doing is we're splintering the internet because it's so easy for a country to say we don't like these other people. But we are safer as a world because we're using each other's applications, and we're getting to understand each other better."

What's next: Schmidt says that while "you have to make accommodations for national security ... the best solution ... [is] to have a strong competitor in the United States and that strong competitor should be able to wipe them out competitively."

• "I'd rather have strategies where I'm quite sure the U.S. will win. We can win these battles with focus, great innovation – all the things that we do so well – and open borders and lots of people using it outside the country."

Bloomberg/Getty

🌁 Big in the Bay

Alex Karp rips Silicon Valley

Palantir chief Alex Karp has filed to take the company public (via direct listing) while revealing that it lost about $580 million last year and has never turned a profit.

• He also blasted tech giants who profit off user data, contrasting their technologies with Palantir's software, which, he said, "is used to target terrorists and to keep soldiers safe."

"The engineering elite of Silicon Valley may know more than most about building software. But they do not know more about how society should be organized or what justice requires," Karp wrote in the S-1 filing.

• "We have repeatedly turned down opportunities to sell, collect or mine data. Other technology companies, including some of the largest in the world, have built their entire businesses on doing just that."

• "For many consumer internet companies, our thoughts and inclinations, behaviors and browsing habits are the product for sale. The slogans and marketing of many of the Valley's largest technology firms attempt to obscure this simple fact."

The big irony: The indictment seems to be pointed squarely at companies like Facebook. And yet Peter Thiel, Palantir's co-founder, is a close friend of Mark Zuckerberg, a member of Facebook's board and one of the social media giant's earliest investors.

• What's next: Karp confirmed that he will be moving Palantir's headquarters from Palo Alto to Denver.

🌁 Big in the Bay 🌁

We used this space yesterday to prep you for a Facebook announcement on the small business / commerce front. That's out now: Facebook has launched a Shop tab, just like the one in Instagram, and significantly expanded its shopping tools.

• The big picture: Facebook is "moving more aggressively into commerce as a way to enhance its targeted advertising business and build revenue from businesses beyond ads," Bloomberg's Kurt Wagner writes. FB stock climbed 3.5 percent on Tuesday.

Bloomberg/Getty

🇺🇸 Talk of the Trail

Republican convention, Pt. 2

"President Trump made a bid to sand down his divisive political image by appropriating the resources of his office and the powers of the presidency at the Republican convention on Tuesday ... in an effort to broaden his appeal beyond his conservative base," NYT's Alex Burns and Jonathan Martin report.

• "Where the convention on Monday emphasized predictions of social and economic desolation under a government led by Democrats, the second night speakers ... hailed the president as a friend to women and a champion of criminal justice reform."

• "There was no effort to reconcile the dissonance between the two nights' programs, particularly the shift from Monday's rhetoric about a looming 'vengeful mob' of dangerous criminals into Tuesday's tributes to the power of personal redemption."

The big picture: "The convention again put on display Mr. Trump's unchallenged grip on Republican politics, with the proceedings unfolding as a showy pageant led by members of the Trump family."

• About that unchallenged grip. ... If you haven't read Tim Alberta's piece in Politico yet, we can't recommend it highly enough.

Market Links

• Mark Zuckerberg unifies Facebook's AR/VR teams (TC)

• Susan Wojcicki touts AI-driven content moderation (Axios)

• Alicia Boler Davis is Amazon's first black senior leader (CNN)

• Maria Bustillos launches the Brick House news network (NYT)

• Peter Micelli capitalizes on a talent agency reckoning (THR)

📸 What's next: Read NYT's Taylor Lorenz on "the influencer paparazzi market" and how the pandemic, which forced A-listers inside, has accelerated the rise of the Gen Z social media celebrities who are still going out in pandemic-era Los Angeles.

See you tomorrow.