Bytes and pieces: America’s Chinese-tech attack

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Hello and welcome to the intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Employees everywhere are worried there's a crippling recession, furloughs and job cuts to come. One thing not to worry too much about, though, is more automation, robots and software taking jobs. Turns out the pandemic might actually slow that transition. And since his time as a COVID 19 patient, Britain's Prime Minister has taken an unusual interest in matters of obesity. It's a known risk factor, but at the same time, his government is giving away cash for people to dine out. Guess we'll eat and run. But first, as the heads of Amazon, Alphabet, Facebook and Apple were being berated in Congress last month, how many competitors.

Did Facebook end up copying?

We called it Amazon Heroin.

Why does Google steal content from honest businesses?

TikTok, the goofy, funny video sharing app, was having an altogether better time of it.

Couples Beatbox.

Not so much anymore.

We're looking at TikTok. We may be banning TikTok.

On Thursday, the Trump administration issued a deadline of September 20 for ending all American transactions with ByteDance, TikTok's parent company, as well as with WeChat, which is owned by China's second most valuable tech company, Tencent. With parent companies Based in China.

Apps like TikTok, WeChat and others are.

Significant threats to personal data of American citizens, not to mention tools for CCP content censorship. China's government called the executive orders a nakedly hegemonic act. ByteDance is now looking for a fire sale buyer for some of its international TikTok operations. And it seems Microsoft is checking its pockets. But the administration's zeal is likely to harm America's interests as well as the Chinese tech champions.

We knew that a ban was in the offing, but it still took everyone by surprise.

Tamsen Booth is the Economist's technology and business editor.

I think most people were expecting President Trump to wait until a TikTok deal had gone through to kind of reach a resolution on whether there would be a ban or not. And it's also quite a surprise that he's gone after WeChat and Tencent. And the reaction from the two companies has been quite strong. ByteDance has said that it's going to fight the executive orders in court.

Well, as you say, there had been some expectations around TikTok and ByteDance. Why? Why was Tencent included in the end?

Well, there is a certain unfortunate logic to this. I mean, if you're going to say that you're concerned about TikTok on national security and espionage grounds, you sort of have to be consistent. And WeChat has about 19 million daily users in the US and the executive order basically bans people from making transactions on WeChat, which is a sort of super that is really widely used in China and by the Chinese diaspora.

What is the Trump administration's rationale for these orders, do you think?

So the stated reason from the administration is the Chinese government is spying on Americans, and here the evidence is kind of circumstantial. So the worry is that Chinese spy agencies have stolen massive consumer data sets from various companies over the past 10 years. So from Marriott, Equifax, Anthem Health Insurance, TikTok has been downloaded 2 billion times. It's the mother of all data sets. There is no hard evidence that ByteDance would ever cooperate in such an endeavor. But the idea is that if you've got engineers with access to TikTok ByteDance servers, then the government could lean on them to get the information out. So that's the stated reason from the Trump administration.

And you think that's enough for the American government to threaten to ban the app?

I gather from investors close to ByteDance that the real reason is a level playing field issue as much as the spying concern. So one Gathers that in particular, Mark Zuckerberg of Facebook has been outlining, pointing out to Trump that TikTok is wildly successful in the U.S. and yet Facebook, Google, they're not allowed into China. It's sort of the idea of why should TikTok be able to come and compete with us when we can't do so in the other direction?

And as things stand now, Microsoft is the evident suitor for TikTok's operations, at least in a few countries. What's in it for them?

I think for Microsoft it is a really stunning opportunity on their part. So ByteDance reckons that the TikTok US asset is worth in the realm of $200 billion. Obviously, they're putting a very generous estimate on that. So the price being talked about now that Microsoft might pay and that it's on the block for is sort of more like 15 to 40 billion. So it's just a real steal in terms of the price. I mean, TikTok is the hottest social media property out there right now. Its users are incredibly highly engaged. And Microsoft at a stroke gets into the territory of the social, the digital media giants, and it gets a massive data set on teenagers. Data is the new oil in tech. There is lots of skepticism that Microsoft just is kind of getting out of its core competence, that it won't really know how to get and keep the teenagers. The other risk for Microsoft is just kind of getting dragged into the milestone of content moderation and hate speech and all this kind of stuff that attracts a lot of political scrutiny and then regulatory scrutiny. Having said that, Microsoft is regarded as a really high quality acquirer of businesses. It generally tends to do it quite well. Microsoft CEO Sachin Adela notably is currently probably regarded as the best big tech CEO.

So now we've got this deadline of September 20th. What happens between now and then?

Firstly, Microsoft's going to carry on negotiating to try and buy TikTok. We're seeing more suitors for TikTok on the scene over the weekend. There were reports that Twitter is definitely interested. I know that Netflix is on the call list for the venture capital backers of ByteDance, possibly even Disney. I do think the likeliest thing is still that Microsoft probably strikes a deal just because it's got the deepest pockets. It will also be really interesting to see whether Microsoft manages to get more markets. At the moment, it's only going for the us, Canada, New Zealand and Australia. It's not buying the uk. Having the actual executive order from Trump will create more uncertainty around TikTok. And there's no doubt that it is already harming the asset. It's no joke to say the clock really is ticking on that deal.

And what about Tencent?

It's unclear what Tencent is going to do. It's unlikely to try and sell international WeChat as ByteDance is doing with TikTok. Perhaps it's possible that it could come up with some kind of structure to address U.S. concerns. It's a complete unknown how Tencent now is going to react, but I guess.

The question is, is this the right way for America to get its concerns addressed?

Well, the problem with Trump's approach so far is that it feels completely sort of ad hoc on on his whim. It really undermines investor confidence in the US As a place of the rule of law. And there are alternatives. I think there's three main steps that we would advocate. The first is to strengthen the vetting procedure that's already in place. So the Committee on Foreign investment in the U.S. cFIUS, their probes should start properly and end quickly. So in the case of TikTok and musically, the US app that ByteDance bought, therefore triggering this whole situation, they took two years to start looking at it and then did it in a rush, which guarantees this rather chaotic ad hoc situation. And overwhelmingly, the US Needs to tighten up its own data privacy regime. So the reason that TikTok is such a worry in terms of spying, theoretically, is that US Firms, your Facebooks and Googles and so on have normalized the slurping up of just masses of personal data from Americans. So what's required is a strong federal data privacy law. The third element is there's plenty you can do in terms of requiring transparency into the algorithms being used and auditing code that's coming in from overseas. For now, though, the question for those 2 billion or so people who've downloaded TikTok is whether their favorite platform is going to survive or or whether the current chaotic procedure that has affected the company will mean it, its rivals take it over and teens leave.

Thanks very much for your time, Tamsin.

It's been a pleasure.

The global economic downturn caused by the pandemic has left millions of workers worried about job security. COVID 19 presented bosses with a simple choice. Find ways for employees to do their work safely or shut down. That has reignited fears that an increasing number of jobs will become automated.

An awful lot of people have either been laid off or temporarily furloughed as a consequence of COVID 19. Many of them may be worried that their jobs might not be there for them when the pandemic begins to recede, in part because companies will have done things like install robots to replace a lot of the humans.

Brian Avent writes Free Exchange, our column on economics.

But on the whole, this is probably not something that should be near the top of workers concerns. Generally speaking, mass unemployment as a consequence of the introduction of new robots I don't think is going to be something that we see in the near term because of the pandemic.

But it really feels like this set of concerns does keep coming and going, that the sort of fear of the robot taking my job has its peaks.

And troughs whenever there is high unemployment, when there's any sort of economic crisis. This is something that you see fears of technological unemployment. It's not a new thing. If you go back to the 1930s, you had a lot of economists, including Keynes, saying that, you know what, maybe we are entering this place where technology can do more and more of what humans can do, and we're going to have to worry about whether or not humans are going to have jobs. What typically happens is things get better eventually, and then we discover that actually there still is plenty of work for human workers. That doesn't mean robots don't have any sort of effect on the labor market. But generally speaking, these things tend to peak during times of high unemployment, as we're suffering right now because of the pandemic. But then we suspect that when things get better, we discover that there's still plenty for people to do.

But it has to be said that the technology is advancing and there are sectors where robots can do the job.

It is true that over the past decade or two, more people, I think, have taken more seriously the idea that robots or artificial intelligence might really have a profound impact on the labor force. And I think that is leading to increased fears of automation in the context of the pandemic. And some of them are reasonable. You know, we have seen, particularly in industrial context, we've seen a much greater investment in robots. And that has had an effect on employment there, you know, over the past 20 or 30 years. And we've seen a lot of impressive development of AI tools that potentially could be used in an office setting over the next 10 to 20 to 30 years. I think we probably will expect to see a lot of displacement, but probably not this sort of abrupt. You show up to the office after the pandemic and you discover that everyone has been replaced by a robot. That sort of thing tends not to happen for a few reasons. And I think as impressive as New technologies have been. We're really not yet at the point where mass unemployment needs to be a.

Concern because there are still so many sectors for which a human is still the best kind of employee, you mean.

There are a lot of reasons why I think these fears are often overstated. One is that the technology, as impressive as. As it is, as dramatic as the advances have been, still can't do a lot of critical stuff that we need humans to do. The technology we have to translate speech or to understand speech has gotten a lot better. But computers can still be confounded by basic common sense questions that are, you know, very easy for a human to answer. Robots are really good at particular tasks, but they have trouble navigating unfamiliar environments, whether those are city streets or, you know, a crowded warehouse. It takes a lot more time to deploy this stuff in a generalized way. But despite the fact that because of the pandemic, there might be some incentive for firms to explore using robots, and despite the fact that we've had these advances in technology, in some ways, actually, surprisingly, the pandemic could in fact slow the process of automation.

What do you mean? How so?

When companies are thinking about whether or not to automate, they're not just considering what the capabilities of robots are. You know, they're also thinking about the economics. Does this make sense, given our costs and given the outlook for the market? And the truth is that when things are not very good for workers, wages, Wages don't grow very much. And that's certainly something we've seen over the past few decades. And when workers are cheap, that gives companies much less of an incentive to splash out and spend on a lot of expensive new machinery. So, interestingly enough, in a few ways, the pandemic, because it is so bad for workers in various ways, may discourage the use of expensive new robots to do tasks. And sort of a related point, I think, is that one of the big developments we've seen as a consequence of the pandemic is a shift to remote work. And in a lot of ways, working remotely is a substitute for automation. It allows companies to tap cheaper workers who may not be in an expensive city, may not even be in the country. And so because this makes it easier to use human workers safely and cheaply, it provides kind of a big disincentive to companies which might otherwise say, hey, you know, now's the time to roll out the robots.

So you say the transition won't be a sudden one, but the direction of travel seems clear, right? Automation will affect the workplace in its way. How do you see that playing out?

Even though the pandemic is probably not going to bring about this sudden outbreak of mass unemployment because of robots and AI, we are going to continue to see automation be something that has a disruptive effect on parts of the labor force sectors that we're already experiencing automation like manufacturing and logistics. That's going to continue and maybe accelerate. And then, you know, over the next 10 to 20 years, we're going to continue to see improvements in technology that allow firms to, to use machines in more context. But it's going to be gradual, it's going to be slow, something we need to be aware of, but not, you know, despite what you might think, because of the pandemic, not something that happens overnight.

Thanks very much for joining us, Ryan.

Thank you, Jason.

For a lot more analysis like this, subscribe to the Economist. To find the best introductory offer wherever you are, just go to economist.com intelligenceoffer In Britain, some beleaguered restaurateurs have reason to feel a bit optimistic.

There's that sound now, the clink of.

Glassware and the low mumble of voices.

But it's people being happy and I've missed that sound.

This month the government launched an initiative to help a hurting hospitality industry by subsidizing eating out. The price of fast food is the cheapest it's been in years. But at the same time, Prime Minister Boris Johnson is trying to tackle obesity. It's a known risk factor associated with the most serious COVID 19 cases. So he's telling the public to keep fit to help themselves and the National Health Service.

Boris Johnson has realized that he needs to stimulate the economy while also encouraging people to lose weight and protect their health.

Matthew Hullhouse is the Economist's British politics correspondent.

Prime Minister's had a damascene conversion as to the need for the government to step in and get people to lose weight.

So what has Boris Johnson been doing? What exactly is the plan?

He announced on July 27 that Britain would have a spate of policies to reduce obesity. The first thing is that there will be a ban on the advertising of unhealthy food on television before 9:00. And they will think about an outright ban of advertising junk food online. Restaurants are going to to advertise the calories on the dishes on their menus. And the government is also going to think about a similar system of calorie labelling for alcoholic drinks. The Prime Minister also wants to encourage people to cycle to work and even suggests that doctors should be able to prescribe people cycling if they're overweight.

But there is a bit of tension here in that at the same time, the government's money man is handing out a fair bit of money to subsidise people eating out.

That's right. For the month of August, Rishi Sunak, the Chancellor of the Exchequer, will subsidize you up to the value of £10 to eat dinner in a restaurant that includes Zenando's or Akepsi, a Big Mac, as well as healthier options. The idea is that because of coronavirus, all the restaurants and bars have emptied. They're worried about the impact this will have on jobs in the economy. There are 2 million people who work in these industries. I want to try and protect as many of those jobs as possible. And I think the Eat out to help out initiative will do just that. So they really want to encourage people to get out there and spend some money. So the Government's message is eat less but also eat more.

Right, I get the message, I think. But why is this the message now? Why is the government thinking about obesity now?

So many governments have toyed with obesity policy and they are conflicted because, on the one hand, Britain has relatively high levels of obesity. On the other hand, Conservative governments in particular are very averse to be seeing to be slapping people with taxes or telling them how to live their lives. The coronavirus pandemic has really highlighted the nature of the country's poor health. Britain has had a particularly high death rate. The link to obesity is not clear concretely, but a recent Government paper by Public Health England, the government's health agency, did say that they had discovered a pretty firm link between people who are overweight and those who are suffering particularly badly from coronavirus. Boris Johnson himself was overweight when he went into intensive care with coronavirus. And so that moment really seems to have shaped his thinking on this. That has convinced him that it is right that the state intervenes in this area.

And so, notwithstanding the confusion about eating out for cheap in August anyway, do you think the Government's obesity strategies will work?

Lots of people have had fun with this apparent contradiction, but they are slightly different things. And one is a temporary stimulus. The other is thinking about a much longer strategy of this problem, which really has been across several decades. Public health experts have welcomed the news. The evidence for these sorts of interventions isn't always great. There have been studies into nutritional labeling, which have found that advertising how many calories there are in a workplace canteen isn't always terribly effective. The other problem, which the government really has to grapple with is that the nature of advertising is changing. As we all know, children are watching far less traditional broadcast television because they watch far more on YouTube now. So the problem is that they have to make the advertising restrictions match where people. People's eyeballs are going. The other element to this is that this is not a new problem. Governments going back as far as 1904 were thinking about the health of the nation 120 years ago, how much white bread and sugary jam and tinned food people were eating then. And this really troubled policymakers because they're very worried about the fitness of British men to fight in the army and defend the empire. They concluded that actually getting people to change their eating habits would be very, very difficult and take many generations to do so. There is a historic parallel to this. This is not a new challenge. And the mission that Boris Johnson's set to himself will not be easily delivered.

Matthew, thanks very much for joining us.

Thank you.

That's all for this episode of the Intelligence. If you like us, give us a rating on UP Podcasts and see you back here tomorrow.