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Microsoft’s TikTok: But why?

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The marriage of Microsoft and TikTok seems so bizarre that I couldn’t help but be reminded of another such bizarre Union – late actress Anna Nicole Smith and her billionaire octogenarian husband, J Howard Marshall. But weirdness aside, Microsoft’s possible take over of TikTok’s operations in the US, New Zealand, Canada, and Australia, brought up one question that continues to nag me: Why Microsoft?

  • Why not someone like Disney which has dreams of being part of the digital revolution? Disney has the audience. It has sprawling global operations. It has the ability to walk the middle of the road where it can appease the autocratic governments and make the democratic countries satisfied. It also has a brand that has many sub-brands that cross many demographic categories. Disney wanted to buy Twitter. TikTok makes more of a strategic fit.
  • Why not Comcast?
  • Why not Apple? It has money. It has the desire to blunt Facebook and Google, even if it hasn’t said or done so explicitly! Or is it because they are a bunch of hard asses when it comes to privacy and may not play ball with the US government when it needs to access data of some TikTok-er?
  • Hence my question, why Microsoft?

I ask these questions but can’t help myself and not think about the event of last week?

  • Why was Microsoft not part of the showdown between BigTech and Washington DC? What makes them better than the other four? Why do they get to be excused from on-air humiliation while others get spanked for their monopolies?

And that does make me wonder? Does Microsoft have some sort of a quid-pro-quo in place with the US Government that makes them the most preferred nation when it comes to buying this company?

Of course, it is just that Microsoft smells a good deal. Sure, but so should others. On paper, it might make sense for Microsoft to buy them.

On the plus side: it has the ability to rebuild the software and service to comply with the US needs. Just as it rebuilt Skype as a SIP-based platform, away from the unbreakable distributed peer-to-peer platform that was a preferred tool of those with dubious intentions. It certainly has the cloud infrastructure and team to rebuild the platform.

But the question is why? What is the benefit for them as a business? Given Microsoft’s self-stated goals to focus on cloud, data, intelligence, and serving large customers, the whole TikTok deal makes me wonder: Why are they doing this?

One somewhat far-fetched explanation that I could come up with was that since it would already own Minecraft and TikTok, Microsoft could buy another company, say someone like Epic Games, and merge them all into a single entity. In doing so it would become a business with access to the new users of the Internet — the Gen Z and beyond. It could then all be bundled together and spun-out as a stand-alone company that is a mega tenant for Microsoft Cloud.

My theoretical projections aside, I can’t get rid of the nagging question: why did President Trump pick Microsoft. And why is Microsoft playing ball? Nowhere in the blog post does Microsoft address the question of why it will buy the company and spend shareholder capital on an expensive asset.


11.40 am, August 3, 2020: And in late-breaking news that makes everything even more bizarre are the comments from the US president:

“Here’s the deal, I don’t mind whether it’s Microsoft or somebody else—a big company, a secure company, a very American company buy it. I did say that ‘If you buy it…a very substantial portion of that price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen.’ Right now they don’t have any rights unless we give it to them.

US President in The Wall Street Journal.

Techcrunch has the full transcript. If you ask me, this deal is dead. I regret even publishing this piece – the whole thing has left me supremely disgusted.


PS: Worth reading is this memo from Kevin Mayer, CEO of Tiktok about what the company is willing to do in order to stay in business in the US, including giving access to its algorithms.


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Belfong
5 days ago
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Interesting but not surprising that the POTUS even influence business. It's like our GLCs here in Boleh-land.
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Cooking the books

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The Information this morning reported that Headspin, a network performance software provider, restated its revenues — down from $100 million annual recurring revenue to $15 million ARR after an internal audit. It had fired its co-founder and CEO, Manish Lachani. Headspin was also returning $95 million, a hefty chunk of capital it had raised during its most recent financing round. The company’s valuation – $1.16 billion – was going to be revised downwards, to $250 million.

Wow! That is some jaw-dropping revelation and Enron-style skullduggery. And it also reveals rot in the Silicon Valley ecosystem that is far worse than this one company. It also shows that some folks know how to exploit Silicon Valley’s one real Achilles heel — Fear of missing out or FOMO. Here what we have is a scenario that occurs all too often.

Say, you have two or three well-placed people talking up a deal (or a founder.) They tell their network of investor friends to take a look at the company for a potential investment. The words start to fly. And if those two well-placed deal sources have a good track record — aka if they have made some good investments and referrals — the words take on an urgency. The deal gets momentum, and more often than not, investors get overcome with FOMO.

They know that others are knocking on the company’s door with a pot of gold, so they better hurry up. The FOMO leads to looser diligence and bending of rationality. More often than not, the deal gets done by capitalizing on the vanity of the founders. These days Silicon Valley has been afflicted by lunacy, affectionately named after a fictitious being, unicorn. A unicorn in Silicon Valley parlance is a company valued at over a billion dollars. No matter how rational, smart, or intelligent, every founder wants to be the head of a unicorn. Never mind that unicorns are mythical and non-existent in real life.

Since the emergence of the iPhone (and later the smartphone,) we have seen the Silicon Valley ecosystem grow by multiples. Uber, Spotify, Airbnb, and more have upended the old way of doing things. This success has not gone unnoticed by financiers who are always looking for an opportunity to make money.

Whether it is Softbank, Saudis, or hedge funds of all colors and hues — they all see the future, and it is in Silicon Valley. This has resulted in a significant influx of new cash into the system. Add to the mix, a much larger pool of money available to the establishment investors, Silicon Valley ecosystem is awash in cash. Let’s face it. Silicon Valley is growing up and it isn’t the cottage industry of Don Valentine and Arthur Rock. For most of its history, the Silicon Valley ecosystem has worked on a system of trust. Trust as a governor only works when everyone in the ecosystem knows each other and has dependencies.

However, that isn’t the case anymore. The complexity of the ecosystem and divergent incentives means that we have to stop thinking about the old way of doing things and instead come to a basic understanding that Silicon Valley (as a notion) is an asset class. Like all asset classes, it needs to develop a much more rigorous approach to measuring and valuing the companies.

Time and again, we have seen public markets value unicorns — SNAP, Pinterest, Uber, and others — much lower than private markets. It is because they valued these companies using data and audited metrics. If we are going to see more billion-dollar-plus valuations for startups, perhaps there is a need for a more rigorous approach to data and diligence.

If we don’t, what we are seeing with Headspin won’t be a solitary case. Rush to be a unicorn, an excessive amount of cash, too few companies that look like good bets, and FOMO is a witches’ potion of delusion, that often leads to situations like Headspin.


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Belfong
5 days ago
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Major American Companies With a Consumer Internet Presence in China

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Liza Lin, Jing Yang, and Eva Xiao, reporting for The Wall Street Journal:

President Trump’s remark over the weekend that he was weighing an outright ban of TikTok in the U.S. sparked nationalist sentiments in China, where the Global Times, a Communist Party tabloid, derided the situation as “the hunting and looting of TikTok by the U.S. government in conjunction with U.S. high-tech companies.”

On Chinese social media, users likewise expressed outrage. Many on the Twitter -like Weibo platform accused the Trump administration of pandering to voters by stemming the rise of TikTok — and by extension, China.

On Douyin, Bytedance’s domestic analogue to TikTok, where videos commenting on a possible U.S. ban circulated widely, one popular comment suggested Huawei be allowed to buy Apple Inc.’s China operations.

“Be allowed to buy” is some euphemism for a forced sale. But if China decides to retaliate — and why wouldn’t they? — what company might they target other than Apple? Facebook and Google are already banned in China. Amazon has AWS, which has a fair-sized presence there, but AWS is sort of the anti-TikTok in terms of being consumer-facing. Microsoft would be the obvious tit-for-tat target. But does Microsoft have a neatly bundled consumer presence in China?

If I were the dictator of China, and I was angry about the Trump administration forcing a proud Chinese company like ByteDance to divest itself of TikTok, and I was looking for a way to show that China cannot be pushed around by the U.S., I’d look at iCloud and the App Store, and humiliating the biggest company in the world.

But AAPL shares are trading at an all-time high so I’m sure all is good and Apple has nothing to worry about with a rapidly escalating trade war with China and a cornered-rat deranged narcissist steering the U.S.

Link: wsj.com/articles/microsofts-talks-to-buy-tiktoks-u-s…

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Belfong
5 days ago
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NYT: ‘When COVID Subsided, Israel Reopened Its Schools. It Didn’t Go Well.’

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Isabel Kershner and Pam Belluck, reporting for The New York Times:

Confident it had beaten the coronavirus and desperate to reboot a devastated economy, the Israeli government invited the entire student body back in late May.

Within days, infections were reported at a Jerusalem high school, which quickly mushroomed into the largest outbreak in a single school in Israel, possibly the world. The virus rippled out to the students’ homes and then to other schools and neighborhoods, ultimately infecting hundreds of students, teachers and relatives. Other outbreaks forced hundreds of schools to close. Across the country, tens of thousands of students and teachers were quarantined.

Israel’s advice for other countries?

“They definitely should not do what we have done,” said Eli Waxman, a professor at the Weizmann Institute of Science and chairman of the team advising Israel’s National Security Council on the pandemic. “It was a major failure.”

That’s Israel’s experience reopening schools after getting infections under control. Here in the U.S. COVID new infections remain out of control already, with nearly all schools closed for summer.

Link: nytimes.com/2020/08/04/world/middleeast/coronavirus-israel…

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Belfong
5 days ago
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Ugh.. and in Malaysia, school started two weeks ago. Hope we have things in control!
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How Much News Is Too Much News?

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I have always prided myself on being someone who does not need to delete apps. You know, someone who deletes Twitter or Instagram every few months so they can avoid getting lost in that and instead focus on creating something. I am lucky enough that I can put limits on those things—or at least I thought I could. It turns out that the news can be my undoing.

The year 2020 has been a doozy. Getting lost in the news is a lot easier this year than in years past, and I am spending too much time on it. Keeping informed is good. Reading different versions of the same story repeatedly is nothing more than a fancy bit of procrastination. When I was growing up, the news was contained for us. It came on in the evening and lasted about 30 minutes. With 24-hour news channels and so many websites, now the news can get crammed down your throat like Homer Simpson’s donuts. This is bad for several reasons:

  • It takes a lot of time. I need to make a living and support my family. Excessive time with the news gets in the way of that.

  • It closes my mind. With the way modern algorithms work, once I read one story, the computers decide what kind of news I like and try to feed me more of that. The longer I go, the more biased and extreme the feed gets.

  • It wipes me out. This year. This year. Do I need to explain how reading too much news drains me of the will and energy to do anything productive?

So, I am taking steps. I am rerunning my timers, this time with the idea of putting a 30-minute box around the news every day. Once I hit 30 minutes, I am done. Rather than get lost in the news, I would rather use that time for something else. Maybe I can spend a bit of it trying to make things better.

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Belfong
9 days ago
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I feel the same way, drowned in news!
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Levelator Lives

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Levelator Icon.png

For many years, the single bit of advice all experienced podcasters gave to novice podcasters was, "Get Levelator". Levelator was a free piece of software that would take an audio file with unbalanced audio levels, chew on it for a moment, and then spit out an audio file with balanced audio. Uneven levels are particularly a problem when multiple people are recording, but can even be an issue when recording yourself (or yourself and some other audio source, like system audio).

Well, our beloved Levelator suffered from lack of attention and then abandonment. So you can imagine my surprise when I found out that Levelator Lives again, this time in the Mac App Store. If you ever have need to work with audio files (or *think* you may need to), "get Levelator".

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Belfong
22 days ago
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