Hiatus, US-China Tech Cold War, Reflecting on {Time_Period} At {Company}

Hiatus

Shifting priorities have resulted in not publishing anything over the past few months. To be sure, I have always intended to write only irregularly, when (I think) I have something worthwhile to say. Per the name, I aim to distill rather than to chronicle.

In this piece, I do something different. Instead of focused discussion of a topic, I comment on the best essays that I have come across over the preceding few months, while largely keeping with the usual themes. In today’s age of information overload, a good heuristic is: something that is not worth re-reading is not worth reading once. I find myself going back to these essays repeatedly and I hope the curation is valuable to you too.

Finally, a shoutout to the readers who write in. It is always a pleasure to meet like-minded folks on the Internet and do consider telling your associates about Distilling Frenzy.

US-China Tech Cold War

On this front, the events of the past few months have been downright bizarre.

The US government has gradually tightened its Huawei sanctions. So while the Mate 40 series is among the first Android smartphones to feature a (TSMC-manufactured) 5nm chip, it is also likely to be Huawei’s last flagship-level smartphone, if the status quo persists.

In September, the much-discussed WeChat/TikTok ban has, at the time of writing, amounted to not much. Federal judges have since put the ban on hold and what was supposed to be a “forced “sale” of TikTok has now been reduced to a sweetheart Oracle Cloud deal.

With the (likely—who knows, really) election of Joe Biden, how these situations might evolve is anybody’s guess.1 An acquaintance correctly observed that the US holds the whip hand in the tech cold war in China, but recent events show that imputing “the US” as a singular agent that pursues coherent goals cannot be taken for granted.

In a sense, the growing role of politics in tech has made analyzing tech much less worthwhile. Market-generated outcomes are more predictable than politics-generated outcomes, as the former adheres to economic logic in a way that the latter (at least in the short-term) does not. Cool-headed analyses become crowded out by hot-takes. (The recent grilling of tech CEOs in Congress fits this general argument too—full of sound and fury signifying nothing.)

Rather than to add to the noise, I would like to signal-boost the following timeley and timeless essays.

First, Eugene Wei’s three-part series on TikTok. So far, only two parts have been published, but Wei’s essays are erudite as always and both parts are worth reading in full. (Twitter summaries, for the time-scarce). More than just an account of TikTok’s ascent, in part two, Wei discusses TikTok’s algorithm-centric design and how this differs from other social media products.

Wei’s exposition is corroborated by a detailed exposé of Douyin’s rise, which indicates that the product itself is created by different “waves” of executives and employees and many of its features (including the naming of the product) are decided via A/B testing. All of this suggests that TikTok/Douyin are built in a much more iterative fashion that is quite unlike, say, WeChat, which is intimately tied to the product vision of Zhang Xiaolong.

Second, Benedict Evans’ piece on The End of the American Internet. His charts are excellent (which is exactly what you’d expect from someone who became a partner at a16z by making charts on the Internet). He brings a much-needed correction to the predominant US-centric perspective:

This is the first time that Americans have really had to deal with their teenagers using a form of mass media that isn’t created in their country by people who mostly share their values. It’s from somewhere else. That’s compounded by the fact that the ‘somewhere else’ is China, with all of the political and geopolitical issues that come with that, but I’d suggest that the core, structural issue is that it’s foreign. This is, of course, a problem that the rest of the world has been wrestling with since 1994, but it comes as something of a shock in Washington DC. There’s an old joke that war is how God teaches Americans geography – now it’s regulation.

He sensibly argues for a “systematic, repeatable approach” to regulating non-American technology companies, rather than the largely make-it-up-as-you-go approach of the current administration.

Third, Richard Allan, Facebook’s European director of public policy from 2009-2019, has a good piece on data localization.

The timing of the essay is probably triggered in part by the US and Indian ban on Chinese Internet companies, but the essay itself elucidates from first principles. It begins by depicting the ‘old’ world of telecoms and contrasting it with the new, boundary-transcending Internet world, its attendant challenges, and the potential solutions. While the China/RoW dynamics is new and exciting, Allan points out that similar dynamics have long been at play between EU and the US, as evidenced by instruments like EU–US Privacy Shield and CLOUD Act.

Fourth, Digits to Dollars and Mule’s Musings provide good coverage of the semiconductor industry, though the latter skews towards equity research. See e.g. How Huawei Will Survive and Intel’s Troubles and Lam Research’s Cautious Optimism.

Reflecting on {Time_Period} At {Company}

Moving from the macro to the micro, I recently came across two great essays by Patrick McKenzie and Alex Danco reflecting on their time at Stripe and Shopify respectively:

  1. Four Years At Stripe (Twitter summary).
  2. Six Lessons from Six Months at Shopify

Both essays are full of observations of each company’s internal operations, with the rather clear subtext that their employers are high performance organizations and that you should join them. Why should anyone care about these excessively verbose recruitment ads?

Apart from the general Internet karma McKenzie and Danco have accumulated from writing online, Stripe and Shopify are both “entrepreneurship companies” that help entrepreneurs create websites and accept payments respectively. Both also belong to the “next era” of mega-cap tech companies that succeed not by “being a platform” (Microsoft, Apple) or “aggregating consumer demand” (Google, Facebook, Uber, Amazon retail, Airbnb etc.), but by providing key functions to Internet-first entrepreneurs. (Paul Graham has gone further to call Stripe the “next Google”.)

Pertinently, such a business model benefits disproportionately from facilitating the success of their users. To quote McKenzie:

B2B software companies’ success scales with both the count of their users and those users’ success, because their pricing model will generally (unlike most B2C companies) capture a portion of the customer’s upside. They have the same incentives in growth that B2C companies do, but they have an additional lever: making the user more successful directly incrementally helps them. Additionally, they participate in underlying growth of users, similar to an equity holder.

Besides enticing readers to join their respective employer, both essays contain concrete, replicable advice on how high performance organizations sustain their high performance. The aforementioned incentive alignment thus boosts the credence of their advice, because good advice implemented by their users would feed indirectly into their companies’ bottomline. (In the case of Stripe, there is even an entire page of guides for entrepreneurs.) It also says something about the companies’ confidence in their market position, i.e. they would benefit more than their competitors from the success of each marginal entrepreneur.

For the rest of the world, such thoughtful advice becomes publicly available at no cost. As someone who has recently started a new position in a large organization, I find it thought-provoking to consider how my employer compares to these admittedly somewhat idealized portrayals of Stripe and Shopify.

  1. To this external observer who assiduously avoids commenting on US politics, there is something interesting about the fact that Trump is widely perceived to be Russia’s favored candidate and that Biden is widely perceived to be China’s favored candidate…[]