Clamping Down on ‘Spiritual Opium’

You’d think the biggest story in tech to watch right now is the increasing power of the giant U.S. tech firms — and how to regulate them (regulation will come, at some point). But I can’t stop paying attention to what’s happening to China’s enormous tech industry and the entrepreneurial leaders who built it.

Maybe there are no real lessons in this story for Americans. No U.S. government — or any other democratic one — is inclined (or able) to do what the Chinese government is doing to rein in tech companies. And by “rein in” I mean this: The Chinese government appears to be taking control of significant parts of the industry.

Everyone who covers tech has long been aware that the Chinese tech phenoms — including Tencent, Alibaba, Huawei, JD.com, Baidu, Xiaomi and Lenovo — have worked with their government in ways that the big American tech companies have not done with the U.S. leadership.

But the power that the Chinese government has held over its tech firms has always been mostly implicit: No company made a big move without first considering how the Communist Party leadership would react.

But what was once implicit has become explicit. In the last several months, we’ve seen a laundry list of new regulations appear, beginning with the suspension of Ant Group’s I.P.O. at the end of last year.

(Ant, of course, was the brainchild of China’s most famous tech hero, Jack Ma, an energetic chatterbox of an entrepreneur — good luck trying to get a word in edgewise in an interview — who has essentially been silenced. Imagine a stifled Jeff Bezos and Elon Musk combined and you get the general idea.)

The Chinese government has aimed antimonopoly legislation at its powerful platform companies and has enacted stringent data and cybersecurity laws, along with high fines for violators. The government has also stopped companies from signing up users and cracked down on how money is raised abroad.

The leadership has also sought to limit the use of some tech by consumers. For example, companies have been forced to restrict the use of gaming apps by young people to a few hours a week and only on weekends. Strict regulations on celebrity fan clubs have been put in place.

The goal appears to be to reduce social unrest (or the potential for unrest) by targeting the addictive nature of tech, which was clear when Chinese state media called video gaming “spiritual opium.”

Some of the changes in China would be good in any country — privacy and data laws are much needed globally, especially in the United States. And who doesn’t agree that we all should put down our tech devices more often?

But the by-fiat nature of what China has done makes for an unstable situation. No surprise: These government moves have knocked a reported $1.5 trillion off the value of the Chinese companies because of uncertainty about what will come next.

Chinese regulators have sought to assuage those worried investors. One top Chinese official reportedly said at a recent gathering with Wall Street executives that the government still encouraged innovation and the tech sector in general.

Overall, that appears to be true, since the government has placed big bets across the map, like on artificial intelligence. So, too, in the genetic area, which is ripe for opportunity — and abuse.

In a “Sway” interview with me this week, the chief executive of 23andMe, Anne Wojcicki, underscored that the race with China is on: “There’s an information war that’s going on with respect to understanding the human genome. And China absolutely recognized that, and they want to win it. They are sprinting ahead,” she said. “They have Beijing Genome Institute, they are sequencing huge numbers of people, they collect medical — I mean, they’re doing a lot. And so the U.S., frankly, is just behind.”

It remains to be seen if a stronger Chinese tech market will emerge from this increase in regulation, but the implications for what happens here in the United States are profound.

American tech leaders have long pointed to the expansion of Chinese tech companies as a reason to keep U.S. companies big. But if the Chinese tech companies are subject to such overwhelming regulation and end up still performing well, what excuse will the U.S. firms have?

Obviously, such regulation here needs to be done democratically, which favors the tech giants, since democracy is so slow-moving and disputatious. But, as I noted above, it’s inevitable, and China might be showing the path forward.

4 questions

My chat with the journalist John Carreyrou, whose reporting exposed the misdeeds of Elizabeth Holmes, the disgraced founder of Theranos, whose trial began this month.

Be honest: Are you sick of covering Holmes? Or do you have a duty to the bitter end?

Both. Part of me is tired of this story; it’s gobbled up the past six years of my life. But I do feel I have a duty to cover it to the end. I opened this can of worms with my first Wall Street Journal story in October 2015. I feel like I owe it to myself and to everyone who’s followed this saga to see it through to its conclusion.

OK, the bitter end it is! Rank her defense arguments from most persuasive to “next stop: prison.”

Most persuasive: How was this a fraud if its chief perpetrator didn’t profit from it? As the defense attorney Lance Wade pointed out in his opening argument last week, Holmes never sold a single Theranos share.

Next most persuasive: The people who put money in Theranos were sophisticated investors who knew they were taking risks by investing in a private start-up.

Least persuasive: Sunny Balwani, Holmes’s ex-boyfriend and Theranos’s former No. 2 executive, was her Svengali and held her in his psychological grip. But that’s not what employees saw. According to the many employees of Theranos I talked to, this was a partnership of equals and if anyone had the last word, it was Holmes. Let’s not forget: She was founder and chief executive and controlled 99.7 percent of the voting rights.

If you had to pick one hero in this story — not you — who would it be and why?

The biggest hero is the former Theranos lab director, who was my first and most important source. If he hadn’t taken the risk to talk to me in early 2015, this scandal might never have been uncovered.

What do you think is the most important story in the health care field going forward?

Right now and for the foreseeable future, it’s the Covid pandemic. I still wonder every day where the hell this virus came from. I mean, I know it came from China, but did it jump from a bat to a rodent to humans or did it escape from a lab? That remains a huge unanswered question. Another one is: Will this pandemic ever end, or do we just have to learn to live with it? I’m inclined to think the latter.

What Nick Clegg got wrong

In a short but vague reply to a series of solid and sometimes devastating recent reports in The Wall Street Journal called “The Facebook Files,” Nick Clegg, the company’s smoothest operator, took a shot at defending his employer. But I honestly have no idea what he was trying to say.

Which may have been his goal. When you have a weak case, make things confusing. So let’s try to clear the obfuscation.

To begin, Clegg, who is the vice president of global affairs and has become quite powerful at the social media giant, probably had to say something; he was likely compelled to do so by his bosses.

I can almost hear the silent screaming from 1 Hacker Way in Menlo Park, Calif.: “WHY DON’T THEY LOVE US FOR ALL WE DO!??!?”

Maybe because the Journal reporting was so wide-ranging in its coverage of icky topics — from the toxicity of Instagram for teenage girls, to “let the celebs trash the place” rules, to a basic sense that whatever Facebook does is unfixable because the architecture is so rotten.

Most of the initial responses to the Journal series came from ham-handed execs, as I noted in my last newsletter, who made an even bigger mess, since techies are not so good at the communicating thing. So, it was up to the cashmere-P.R. stylings of Clegg to set things straight.

Which he did not (although he did not embarrass himself either). What Clegg claimed in his post, “What The Wall Street Journal Got Wrong,” was hard to argue with: that Facebook’s challenges are complex and that the people at Facebook working on them are trying really hard, so give them a friggin’ break. Who can argue with that? No one, since no one is asserting that Facebook is Thanos.

Still, he persisted: “These stories have contained deliberate mischaracterizations of what we are trying to do, and conferred egregiously false motives to Facebook’s leadership and employees. At the heart of this series is an allegation that is just plain false: that Facebook conducts research and then systematically and willfully ignores it if the findings are inconvenient for the company.”

Eh, no, they didn’t. The Journal pieces note that these issues are indeed complex and that there has been disagreement internally about how to fix them. The articles say that Facebook’s chief, Mark Zuckerberg, gets final say and that he has made some bad calls.

Clegg also rolls out the “cherry-picking” accusation about “selective quotes,” asserting that the Journal reports present “complex and nuanced issues as if there is only ever one right answer.” Again, anyone who read them can see that they carry a consistent message that social media involves thorny issues that present vexing challenges. No one says this is easy stuff.

Irony alert: Clegg then proceeds to cherry-pick a study that is favorable to Facebook, while also saying the jury is still out on whether social media is to blame for, say, a decline in general social well-being. Fine, it’s early to make definitive conclusions, but it is abundantly clear that tech overall has been working the last nerve of a very delicate society.

These are vintage P.R. tactics, putting out there the time-will-tell narrative and minimizing impact. Except that few are saying Facebook created the Jan. 6 attack, for example; many are saying social media gave malevolent players like Donald Trump and his ilk all kinds of powerful tools and then let them run wild. Asking Facebook to please stop that is really a low bar — even if it’s complicated.

Since Clegg got here late in the game, I get that he might feel beleaguered. But he is also well paid and dialing up the faux indignation is, um, complex.

JoJo goes viral

I usually hate “Dancing With the Stars,” but you must give it up for the YouTube phenom JoJo Siwa, who was introduced to me via my toddler. She’s making history by being part of the first same-sex couple on the popular show, in the most glittery way possible. It’s a step, even if it’s a quick step. Enjoy this clip.

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