Discover more from America 2.0 (by Gary Sheng)
The Only REAL Way To Save TikTok
The social media giant must “Escape to Community” and give its users the investment opportunity of a lifetime to survive the wrath of US regulators (and reach its full potential)
We all watched last week's congressional show trial of TikTok CEO Shou Zi Chew.
And if there's one takeaway from that bipartisan grilling, it's that the clock is running out for TikTok.
if they continue with the futile approach they are taking to try to stay alive 😬
Instead of passing sweeping legislation that enshrines data sovereignty into law (aka laws that ensure we own our data and create regulations that prevent it from being sold and exploited for financial and geopolitical purposes without our consent), Congress is banding together to pass a new Patriot Act that gives the government the ability to go after anyone it deems a national security risk.
The current legislation that has been put forth and endorsed by the Biden administration is DIABOLIC 🤮
In short, the RESTRICT Act harnesses Cold War sentiment as a Trojan Horse for policies that will kill our basic freedoms.
So if banning it using the RESTRICT Act is a terrible idea, what's an alternative to an outright ban?
I want to highlight a possible path forward for TikTok (Option 3) that will not only save the immensely popular platform from extinction, but also help it reach its full potential as a platform truly for the people.
But first, let me briefly review the current path TikTok is on (Option 1) and the other path the U.S. government is trying to push it down (Option 2).
OPTION 1: Try To Survive By Moving U.S. User Data To Texas 🇺🇸
To appease American regulators and politicians, TikTok has been working on an ambitious plan to move all American users' data to the most stereotypically "American" state of all: Texas.
They are doing this under the banner of "Project Texas," through which they are contracting with Oracle, headquartered in Austin, Texas, to store US user data.
Unfortunately for TikTok, this 1.5 BILLION dollar plan isn’t working.
Not because it's impossible to create a firewall between TikTok and the CCP.
But because US lawmakers are out for blood. The only thing Dems and Republicans seem to agree on is their belief that being "tough on China" makes them look good.
In this New Cold War era, any strategy by TikTok that doesn't involve completely separating it from its Chinese parent company ByteDance just won't cut it.
Banning TikTok is simply too big of a political win for lawmakers if ByteDance does not relinquish ownership.
OPTION 2: Get Sold To A U.S. Big Tech Giant 🤖
Speaking of legislators, the only option the US government is offering TikTok is to sell it off to ByteDance—otherwise it will be banned.
If you're worried about CCP surveillance, this may sound like a good solution.
But here's why selling TikTok to a US company makes no sense for two reasons:
We would be “fixing” one problem by exacerbating another: centralization of power in America. The only tech companies with enough money to buy TikTok—like Microsoft, Oracle, and Walmart—are already way too powerful. The US is experiencing RECORD centralization of power. We need more trust busting. While Amazon hasn’t publicly expressed interest in buying TikTok, there’s good reason for them to want to, since it would make the company extremely competitive in not just studio generated content, but also user generated content—solidifying their monopolistic dominance of online commerce. Also, it would eliminate TikTok as a competitor in shopping. And do I even need to talk about why the richest company ever, Apple, shouldn’t be allowed to purchase TikTok? Monopolies and conflicts of interest everywhere. Thank God for Lina Khan.
It’s not clear that these potential acquirers can be trusted to create a firewall with the CCP. Microsoft's ties in China is as tight as it gets in terms of an American tech company's presence and influence in China. Founder Bill Gates’ relationship with the CCP is equally worrisome. A network of local resellers helps funnel Oracle technology to the police and military in China. And Walmart has an extreme conflicts of interest—having entered the China market in 1996 and now having around 425 stores in the country. For the most recent year numbers are available, Walmart did $11.43 billion in annual revenue in the country, reminding us that Walmart has a lot of reasons to make sure content on TikTok would be friendly to the CCP.
OPTION 3: “Escape to Community” 🚀
So yeah, options 1 and 2 are really bad deals for TikTok and America, respectively.
But there's a third option that no lawmaker is talking about, and it's this:
"Escape to Community"
"Escape to community" is a play on "exit to community," a concept that explores alternative ways for tech startups to transition from venture-backed to community-owned and operated.
Instead of pursuing traditional exit strategies such as acquisition or IPO, Exit to Community focuses on transferring ownership, decision-making, and financial benefits to stakeholders such as users, employees, and suppliers.
The goal is to create more sustainable, equitable, and resilient business models that prioritize long-term value creation and align with the interests of the broader community.
The reason I'm remixing "exit to community" is to suggest that TikTok (ByteDance) venture investors would not only be "exiting" their shares for a big profit on their initial investment, they would also be ESCAPING the huge blow to TikTok's future and plummeting stock value if the app is banned in the US.
Part of the reason it would be so devastating for venture investors in TikTok is that the Western world pays close attention to U.S. politics.
So it is existentially important for TikTok to pursue a strategy that keeps U.S. regulators off its back.
The only way I can see TikTok surviving in the U.S. is if it allows its billion-plus users around the world to collectively buy TikTok from ByteDance.
If the platform is as much of a public good at this point as its CEO suggests, it's not crazy to think that the platform could raise tens of billions of dollars from its users as well as institutions that understand the value the company provides to the world.
ByteDance selling TikTok to its users would be by several orders of magnitude the largest "exit to community" ever pulled off.
And to do that, they need the right technology.
They need a platform that can handle millions of investors, each getting a tiny fraction of equity.
And guess what technology is PURPOSELY BUILT for this kind of use case?
Yes, I'm saying that TikTok should launch its own token to transparently represent micro-fractional ownership in the company.
With the power of crypto/web3 and the user-powered governance it can help enable (TikTokDAO, anyone?), TikTok can save itself and become a much better version of its former self:
Let’s call this new self TikTok 2.0.
How To Tokenize and Distribute TikTok Equity To Its Users 🪙
I'm no expert in financial engineering, but I think Republic Crypto has shown that it's possible to use tokens to represent securities and greatly democratize the ability of regular people (who aren't "accredited investors") to access high-quality deals.
(By the way, it's RIDICULOUSLY fucked up that we have a financial caste system where unless you make over $200k a year or have a net worth of $1 MILLION, you can't even TOUCH the best deals in venture capital).
Anyway, my point in mentioning Republic Crypto is that it shows us that there is a way to compliantly divide the equity of TikTok into really small pieces represented by a cryptocurrency that is perfectly designed to be divided into really small pieces.
The way these tokens would be distributed is in (at least) three ways:.
OGs 👩🏻💻: Tokens would be given to TikTok employees and investors to represent their equity in the company.
Users 👯♀️: There would be a window of time during which any person around the world who is KYC'd with the US government and able to meet anti-money laundering (AML) regulations would be able to donate as much money as they are legally allowed to given their income/net worth. I think it’s important that over 50% of the company is owned by its actual users.
Institutions 🏦: It also makes sense for institutional investors with billions to invest at a time to also get the opportunity to buy large stakes in the company.
I'm not sure how much money TikTok employees and investors should get, but the point is to open up a new pool of investors from the public who will get the opportunity to buy a stake in the ultra-popular content and social media app.
“Escaping to community” should feel like a no-brainer for TikTok executives.
Not only does this “escape” give TikTok staff and investors a passive payout, it gives its most loyal users and creators a way to...
Protect their accounts, which they may build a livelihood around 🛡️
Save a platform that has given them joy, education, and new friends 🫂
Own a piece of one of the most valuable companies ever created (and even co-govern it) 🤯
Also, imagine if users were given the opportunity to earn commissions on the amount of money they are able to inspire OTHER people (their followers) to contribute (or at least earn merit points that give them more governance rights in the DAO-like structure of TikTok 2.0).
TikTok is literally FULL of creators who have built trust with thousands to millions of people who listen to their suggestions. How many everyday users could be convinced to buy some equity in TikTok through the encouragement of their favorite creators?
Finally, imagine if after TikTok users collectively become the majority owner of TikTok, they vote to manifest the most meaningful asks of its users, including:
True user ownership over their content and metadata
Much greater revenue share with creators
If TikTok becomes user and CREATOR-owned, and they implement these other big changes, it would be hard to imagine any other platform being able to successfully compete for their top creators.
The irony of crypto/web3 saving the future of one of the most beloved web2 companies ever?
Conclusion: TikTok Can Escape To Community or Go The Way Of The Dinosaurs 🤷🏻♂️
The future of TikTok is at a critical crossroads as it faces increasing pressure from US regulators and politicians.
The traditional options of moving user data to Texas or being sold to a US tech giant are proving to be ineffective or undesirable.
Instead, TikTok should consider the unconventional approach of "escaping to community" by allowing its vast user base and stakeholders to collectively buy the platform from ByteDance through blockchain technology.
This strategy not only preserves the value of the company but also aligns with the interests of the broader community, fostering a more sustainable, equitable, and resilient business model.
By giving users and creators the opportunity to invest in and protect a platform that holds immense value to them, TikTok can potentially escape the clutches of government overreach and continue to thrive as a global social media powerhouse.
I invite leaders on TikTok’s team to chat with me on how to make this a reality.