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Inside Mnuchin’s far-fetched plan to rebuild TikTok from scratch

Former treasury secretary Steven Mnuchin is telling rich investors he has a plan to take over TikTok: rebuild the wildly popular video app from scratch.

The investment banker who served under President Donald Trump has told potential backers that he aims to maneuver around two giant obstacles facing those vying for the platform: its estimated price tag of more than $100 billion — far beyond what most suitors, including Mnuchin, could afford — and the Chinese government’s ban of the export of recommendation algorithms, TikTok’s secret sauce.

Mnuchin has indicated that he could overcome those hurdles by offering to buy the app without the export-blocked code, essentially forcing his consortium to remake a service built on billions of lines of code before it could be usable again.

He has told prospective investors that the provision might even let them get TikTok at a discount, according to two people familiar with the pitch who spoke on the condition of anonymity because they were not authorized to discuss it.

Observers, and at least one person familiar with the pitch, have said the idea is so far-fetched that it suggests a lack of familiarity with how tech companies work. TikTok users flocked to the app because of its surprising suggestions for videos they might like to watch, and there’s no guarantee any Mnuchin-driven version could duplicate that success — or beat rivals like Meta and Google, which have worked for years to mirror the experience within their own respective apps, Instagram and YouTube.

“Everyone wants to build a TikTok-level algorithm. That’s a key element of competition in the tech sector right now,” said Matt Perault, a University of North Carolina professor and former Facebook director who studies technology policy.

“All the biggest companies have thrown a lot of money and engineering talent at that issue and have struggled to do it,” Perault said. “If Steve Mnuchin thinks he can do that and succeed where a lot of successful companies have struggled, good luck.”

Mnuchin, a former hedge fund manager and Hollywood producer with no social media experience, has informed potential partners that omitting TikTok’s algorithms would be the key to unlocking control of one of the world’s most popular apps.

But the challenges that Mnuchin would face are massive, beginning with the fact that TikTok is not for sale: Though the House passed a bill calling for the app’s China-based parent company, ByteDance, to divest it or face a nationwide ban, the effort has stalled in the Senate and faces likely resistance in the courts.

As a digital platform, TikTok is reliant on a vast and interlocking network of code, and it’s unclear how Mnuchin would mimic the complex infrastructure that the app uses to reach more than 170 million U.S. accounts.

The divestiture deadline of six months — which would result in a nationwide ban if missed — would force Mnuchin’s team to replicate what TikTok’s research, development and engineering teams have created and refined since the app’s international launch in 2017.

Beyond the algorithm, TikTok offers billions of videos, users, comments and interactions; in-app utilities, like a video editor and live-streaming tool; libraries for background music and visual effects; and systems for advertising, online shopping and flagging rule-breaking content.

“This is like rebuilding Facebook — that’s the task here,” one of the people knowledgeable of Mnuchin’s pitch said. “It can’t be done in 180 days — or even years.”

Mnuchin declined to comment through a spokesman. But on CNBC this month, he offered a general outline of the proposal when he said that TikTok needed to be “rebuilt in the U.S.” and that “there’s a lot that can be done in six months.”

“Hopefully, we can find a solution where China will allow it to be sold,” Mnuchin said. “The Chinese will agree to do that as long as there’s not a transfer of their critical technology, which I don’t think we need in the U.S.”

TikTok and ByteDance declined to comment.

Mnuchin said he has discussed his pitch with an assortment of billionaires and big businesses, including the tech giant Oracle and the former head of the Activision Blizzard video game empire Bobby Kotick, the two people said.

After the House passed a bill that would force TikTok to be sold or banned in the U.S., it’s up to the Senate to send the legislation to the President’s desk. (Video: Anna Liss-Roy/The Washington Post, Photo: AFP/Getty Images/The Washington Post)

The Wall Street Journal reported this month that Kotick had floated the idea of buying TikTok over dinner with his fellow guests at an elite business conference. Kotick did not respond to requests for comment.

TikTok executives have said ByteDance is 60 percent owned by large international investors, three of whom — Susquehanna International Group, General Atlantic and Coatue Management — are based in the United States and have directors on the company’s five-person board. (The other 40 percent is split between company founder Zhang Yiming and ByteDance’s employees, thousands of whom live in the United States.)

In 2020, Mnuchin led the Trump administration’s attempt to force TikTok’s sale to a revolving group of companies, first to Microsoft, and then to Oracle and Walmart. At the time, Trump was calling for the Mnuchin-led Treasury Department to be given a cut of any sale’s proceeds.

And as chair of the Committee on Foreign Investment in the United States, a federal group that has negotiated with the company over ways it could address national-security concerns, Mnuchin was afforded access to private and classified information about its inner workings — a fact that has drawn criticism given his renewed interest in a government-assisted takeover attempt.

After leaving the Trump administration in January 2021, Mnuchin formed his private equity firm, Liberty Strategic Capital, with money from sovereign wealth funds in Saudi Arabia and other Middle Eastern countries. If Mnuchin were to bring together a group to purchase TikTok, his own foreign ties could be subject to scrutiny.

Dan Wang, a visiting scholar at Yale Law School’s Paul Tsai China Center who studies Chinese tech and policy, said Mnuchin’s proposal would probably hit a dead end in China, which has shown no interest in consenting to a forced sale and could use its “highly discretionary” political system to block the deal.

China’s export-control list — which the country updated to prohibit the transfer of personalized-recommendation software during the Trump standoff over TikTok in 2020 — relies on the same style of trade regulation that the United States now employs to block sales of computer chips to China. But the Chinese government could also assert that any forced TikTok sale would break its regulations around data control or enact something entirely new, Wang said, adding that “if Beijing wants to do something, it almost always has the discretion to do so.”

Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, said in a statement that the Chinese government would “continue to firmly safeguard the legitimate rights and interests of Chinese enterprises” and that the United States was using “robbers’ logic” to “snatch from others all the good things that they have.”

The Chinese government, Wang said, does not view ByteDance as one of its “proudest creations”: It is not a state-owned enterprise, and its products aren’t cutting-edge reflections of technological growth. “If ByteDance loses a chunk of revenue and hurts its private-market investors, who are mostly American, there’s not going to be too much grief in Beijing,” he said.

An American ban of TikTok, he added, would probably be celebrated as a propaganda victory in China, which has argued that Washington is hypocritical in its professions of free speech and enterprise. Mnuchin’s involvement could further that argument.

Imagine “if the highest-ranking minister in China ordered Apple or Tesla to sell the entirety of their operations to a Chinese consortium, and then eventually this minister ended up leading the consortium in the sale,” Wang said. “That would look bad not just in Beijing’s eyes, but in anyone’s eyes.”

Tony Romm contributed to this report.

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