Elon’s "Place" in US-China Relations

Elon Musk has become the focal point of US-China relations once again. The Wall Street Journal reported a couple of weeks ago that Tesla’s will be banned from military and some state government employees in China for fear of spying. Elon responded one day later at the 2021 China Development Forum that Tesla’s will never be used for spying.

As is often the case with Elon, there’s a mismatch between what he spent most of his time saying and what ends up getting reported. This happened last year when he appeared at the 2020 World Artificial Intelligence Conference in Shanghai for a Q&A session. The headlines that were produced from that event were all about his prediction that Tesla is close to achieving L5 self-driving capabilities. But what he spent most of his time talking about was how much “original engineering” Tesla plans to do in China and how aggressively he was hiring top-tier Chinese AI engineers -- a 15-minute recruiting pitch that has big implications for the on-going US-China technology competition. I discussed those implications in-depth last year in “Tesla, China, the ‘Tech Cold-War’”, so I won’t repeat myself here.

So what did we miss from Elon’s Q&A this time?

Lost in the Physics

The discussion was between Elon, Lan Xue (Dean of the Schwarzman College at Tsinghua University), and Qikun Xue (President of Southern University of Science and Technology. The two academics and Elon all studied physics, so most of the Q&A was a hardcord “nerd fest” about different types of renewable energy, difficulty in conducting academic exchange during today’s US-China tension, and how to make physics fun and cool in school. All three want more young people to become hardcore physicists to work on sustainable energy sources or building rockets, not computer programmers or financial engineers. One interesting tidbit was Elon wanting more students to study physics in conjunction with economics, so they could better grasp the real-life costs and tradeoffs of applied physics, like building electric vehicles or sending people to Mars.

The best video of the entire session is this one on BilliBilli. Elon’s words were dubbed with simultaneous translation into Chinese, because the audience is all Chinese.

The topic of Tesla possibly being used for spying was never brought up directly, but only tangentially in the last question, when Lan Xue asked Elon for his thoughts on the trend where every piece of technology can be treated as capable of “dual use” -- as in suitable for both civilian and military purposes.

Elon may not have the best dance moves, but he is quite adept at public relations. He took the chance to clarify that Tesla does not spy, and it’s in the company’s commercial interest to protect users’ privacy. He also shared his opinion on the pointlessness of the US TikTok ban (that wasn’t implemented) -- a view he has shared publicly before, so it wasn’t news.

Elon’s answer for this last question was the portion that received wide reporting, but the question’s context on “dual use” was mostly missing.

To be fair, I don’t blame mainstream media reporters for not writing about the future of physics education or how to replace fossil fuels with hydrogen. Those topics are more suitable for niche trade publications and blogs, and would put most people to sleep.

But the big story here is how regulators in the US, China, and elsewhere are all struggling to understand what “dual use” means in the 21st century and how to make policies accordingly. This struggle extends to most commercial companies, who have to navigate a fluid and increasingly incoherent regulatory landscape, while still trying to operate and sell products.

Putting it another way, do policy makers these days know enough about technology to carve out “narrowly tailored” restrictions, and not succumb to the mere possibility and fear of “dual use”, as well as the political pressure that comes with it?

(Note: I’m using the term “narrowly tailored” in a more plain language sense, not as it is used in a constitutional law sense.)

Narrowly Tailored

When it comes to cross-border tech products -- your Tesla’s, TikTok’s, iPhone’s, and Huawei’s -- the rationale of “national security” often gets over-applied and abused.

The TikTok ban is one such example. The ban would have been more reasonable and “narrowly tailored”, if the app was banned on all government-issued smartphones and other devices. But the ban was broadly construed to include all American users to protect them against spying and data gathering by a Chinese-made app. It was a fear-based ban, not an evidence-based ban. (You can read my multiple analysis on this issue here from last year, when the TikTok ban was in the headlines almost every day.)

By comparison, China’s ban against Tesla is more “narrowly tailored” to restrict use near military sites or by employees of certain sensitive agencies. The directive was not broadly applied to all government departments, let alone the entire population. It still made Tesla look bad, so Elon took the first opportunity he got to defend his company. Such reputational damage always affects a product’s trust with its civilian consumers, even if the ban is strictly for government. But as far as a piece of policy is concerned, the “Tesla ban” is more reasonable than last year’s “TikTok ban”. Military and sensitive government agencies have always received a higher level of protection for legitimate national security interests, no matter which country we are talking about.

This isn’t to say the Chinese regulators are some kind of model to follow, while American regulators are categorically bad at their job. In 2018, the US Congress passed a prohibition on federal agencies and government contractors from buying equipment made by several Chinese firms, like Huawei and ZTE, as a component of the Defense Authorization Act. Is this ban too broad? That’s a valid question to ask, but the provisions are, at least, somewhat “narrowly tailored”.

For most companies, helping one country spy on other countries is simply bad for business, unless the government is your business. This dynamic does not just apply in a cross-border context, but domestically as well.

There’s a common misconception that the Beijing central government is omnipresent and omnipotent. Whatever it wants, all layers of government and 1.4 billion people march in lockstep forward to deliver, like a military parade.

Simply. Not. True.

I illustrated the messy, call-and-response relationship between the central and municipal/district government in “China's ‘Semiconductor Theranos’: HSMC”. An even more complex web of incentives exists when dealing with domestic data collection.

Last April, the Financial Times published a detailed report on this complexity, which I wish more people read when they discuss China. The report illustrated many places of tension related to user data collection -- between companies like Alibaba and Tencent and provincial governments, between state-owned telecoms like China Mobile and local governments, and even between different departments inside the government, many of which do not trust each other enough to share data.

The popular narrative that whatever user data the Chinese government wants, it will get from Chinese companies does not reflect reality. As one Chinese tech executive shared in the FT report:

“We spend a lot of effort resisting Chinese authorities’ attempts to convince us to give over our data,”

Handing over data to a government, any government, is detrimental to a company’s commercial interests. This risk is especially high for publicly-listed ones, like Tesla, Alibaba, Tencent, Apple, Zoom, to name just a few. It also damages huge unicorns like ByteDance, whose public market debut is simply a matter of time.

On the other hand, there is less risk and accountability when you are not a publicly-traded company. That’s why Huawei -- an opaque, family-run business -- gets the brunt of the scrutiny. (That's also why I advocated for Huawei to go public in the US, if it truly wants to be seen as a trustworthy company.)

Elon, Earth’s Chief Recruiter

After Elon attempted to protect Tesla’s commercial interest at the China Development Forum and in a subsequent interview on CCTV, the Washington Post’s editorial board panned him for being “craven” to the Chinese government. I’m not sure how useful such a critique is.

So far, there’s no evidence that Tesla or any of Elon’s other companies have sold anything to aid and abet what’s happening in Hong Kong or Xinjiang. Panning every American executive, regardless of what their products or services do, for not bringing up Hong Kong or Xinjiang every time they do anything public with China seems too broad, and not so “narrowly tailored”. That is the job of senior diplomats and other government officials. Secretary Blinken is delivering on that.

What people tend to forget about Elon is his unique personal background. In some sense, he is a classic “global citizen”, having grown up and gotten bullied as a nerdy kid in South Africa, then briefly attending Queen’s University in Canada before transferring to UPenn. He moved to California, because he got into Stanford’s Physics PhD program and promptly dropped out to start a company and took full advantage of the first internet boom. When California was good to him, he stayed. When it wasn’t, he left to move to Texas.

Elon may be an idealist, but he is no purist. He is an ambitious pragmatist. He is not a national or geographical loyalist. Elon wants (and needs) all the countries on planet earth to get along, so he can live his dream of dying on Mars. He could care less about the ideological brinkmanship between the US and China.

What he cares about is getting more physicists, engineers, robotics programmers, and other technical talent trained to build EVs and rockets. And he will recruit from wherever he sees the potential.

Right now, America is still good to him, so he is still here. If and when that is no longer the case, he will leave, just like how he left California for Texas. He already has a Chinese “green card”.

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