Ted Audio Collective Hello everyone, this is After Hours.
I'm Felix. And I'm Sarah.
And we're missing...
me here. Who's not feeling so great, unfortunately.
Yes, there have been so many winter colds going around.
It's a shame that he has fallen victim to one, and I hope he gets better soon.
Yes, we're very optimistic that he will be with us this coming week.
In the meantime, of course, there's so much to talk about.
Nothing quite like a holiday break to make you think about, oh my God, there's like 15 things we haven't even spoken about and that we absolutely need to discuss with one another.
Yes, I was looking forward to this chat and wondering what you would be making of what we're going to be talking about today.
Yeah, this is exactly what happens to me now.
I look at the newspaper, I read some articles, and I'm thinking, oh my God, what would Sarah say?
What would me here's take be like?
So it's really fabulous to be together again.
Yes. And you brought topics.
I brought a topic. So this was everywhere over the holiday break.
I wanted to talk about Southwest Airlines.
Oh yes, the big meltdown.
They're huge, huge, huge massive meltdown.
And you brought a topic to Felix.
What's your topic? I wanted to talk about the ban of TikTok.
So it's happened in India a little while ago, but now also the federal government and I wanted to get your take on it.
Great. Well, I'm excited to talk about both of these.
Okay, Felix, you've been following this hesitancy around TikTok, but now actually some outright bans of TikTok in India and for people who use US government phones.
What are your thoughts on what's happening with TikTok and why has this struck you as an especially interesting story to start 2023?
Well, of course, if I'm totally honest, I will say I'm mostly worried about myself because I'm such an enthusiastic user of TikTok.
But then of course it poses really all kinds of interesting issues.
The first one has to do with sharing data across national borders.
You might remember this was such a big issue when EU privacy legislation first came along.
Companies had to adopt in all kinds of ways to make sure that they were in compliance.
And then more lately, there's sort of this security twist.
Any data that China can touch now seem very problematic to a group of lawmakers.
Just a week ago, Brendan Carr, the leading Republican representative on the FCC, he said that India created the blueprint.
You just cannot allow apps like TikTok to operate.
And the argument is basically that one way or another, the Chinese government will be able to get access to US data, will be able to observe what US users do on the app.
And that is, at least in some circles, deemed irresponsible, deemed dangerous.
And as a result, we need a TikTok ban.
And I'm curious, what do you make of it, Sarah?
Is it going to work?
Is it real? Will it happen?
I think it's very interesting as part of a larger trend.
TikTok is the most successful example of an app that really takes off with users that then later regulators and other people come along and say, oh, wait a minute, there's some security concerns there.
So one example from a few years ago was an app called FaceApp, which turned out to be a Russian app where you would upload photos and they would age them so you could get an early look at what you looked like as an old person.
There have been other apps like this too.
More recently, last month, there was just Lenza AI, which was another app that altered your facial appearance.
And after these images of people with the face of an astronaut or the face of a woodland fairy had sort of gone viral, people said, wait a minute, in an era where your face is often a password to get into your phone, maybe you don't want to have this data just be shared in the cloud and you can't really
ever be sure that it's fully deleted.
I think in the case of TikTok, there is this extra layer of the Chinese government and how the U .S.
relationship with the Chinese government has evolved over the last few years.
Yeah, I think that sounds exactly right.
And India is leading the way in that respect also.
There are a little more than 300 apps now that are banned in India.
It happened right after the military clashes between Chinese and Indian forces.
All of this takes place in a geopolitical context.
What strikes me as particularly interesting is when people talk about the security concerns, it's always incredibly vague.
It's like, oh, somehow we have data and somehow the Chinese know something about U .S.
users. It's worth drilling down a little bit.
What is it actually that you give away when you use apps like TikTok?
So the most obvious is what you watch, how long you watch, who you follow.
In TikTok's case, maybe not such a big deal because the main mode of using the app is not that you actually follow people but that the app's algorithms figures out what you really like.
And then as a result, we serve you lots and lots of content that is close to what you like.
And as I look through the data, the only one where I can imagine that there is some real concern is probably geolocation.
So imagine a situation where someone's close to an abortion clinic, where someone is close to an embassy, actually knowing in real time where people are is more of a problem than many of us had spent a lot of time thinking about.
I think what you're also seeing is just a sort of increasing paranoia that is not necessarily tied to any specific use of data or articulated use of data, but that's coming from a sense that we can't always trust that these apps are just what they say that they are.
Can we definitely know that there's not some kind of spyware or keystroke tracking or microphone manipulating or camera manipulating aspect of these different apps?
We always say trust but verify.
And I feel like the challenge here is with verifying how these things work.
We're sort of entering, I think, a different phase of the internet.
I used to think it was crazy that people put tape over the cameras of their computer.
And then I saw a photo of Mark Zuckerberg with tape over the camera of his computer and I was like, apparently I'm a chump if he's doing it.
There are two interesting aspects to me.
From a company perspective, you don't want to give away the secret sauce.
The way TikTok serves the videos and the way they use user information.
That is part of what has made the app so enjoyable and what has invited all the creativity and the memes.
What helps me is to always think about, say, national security concerns.
Is the data that a particular app has, how unique is it?
So say China, at some point in time, really decided that using geolocation of US users is something that they wanted to look into, maybe to have some sort of influence over people.
That, I think, is often the scariest story that people will tell about the likely use of the data.
And then when you think about it for two minutes, there is a huge marketplace for geo information.
We know that the US government buys geolocation data from private users.
A little while back, there were two apps, Muslim Pro and Muslim Mingle, that sold app to a data broker called Xmode.
Xmode sold it to defense contractors and from these defense contractors, he then went to the government and the military.
So the very fear that we have, that we don't want our government and other governments to know, there is a huge marketplace for this kind of information in the first place.
And so I feel the current conversation about the ban of TikTok is one of these performative acts in politics.
It has nothing to do or almost nothing to do with, A, keeping us safe.
It has almost nothing to do with really being concerned for anyone's welfare.
It's just, you want to be known as the politician who stood up to China.
You want to be known as the politician who is really tough on social media.
It creates a kind of superficial conversation that you look at and none of this really makes any sense.
But of course, it serves political purposes first and foremost.
Yeah, I totally agree with politics.
There's always an element of performance.
You're always playing to the crowd.
It's impossible to really separate the geopolitical context from this debate because we don't feel like we're in a very different time.
I was remembering 10, 15 years ago, there was all this hype about the BRICS and how these emerging markets were like such a great opportunity for firms from wealthy countries to sell products and services to.
And now, Russia and China have a very different relationship with the US.
We're in a more paranoid time generally.
There is grandstanding, but I'm also aware that there might also be real stakes here too.
To me, what's so interesting about this change that you allude to, BRICS is a great example.
If you went to Washington and you were really critical of China, you'd be all by yourself.
Now, you go to Washington, you say anything positive about the China -US relationship, and you are all by yourself.
And many people will look at you with great skepticism.
And when you think about the relationship, not that much has changed.
And many things have actually gotten much better over time.
Think about the likelihood of enforcing IP rights in China.
Oh, my God, we have made so much progress in a relatively short period of time.
China has recognized IP rights now not in a perfect way, I think no one would say that.
But it's made much more progress in a much shorter time period than many countries have historically, including the US, where it took forever to recognize, say, for instance, copyright of foreign authors.
What worries me the most is it sometimes feels a little bit like an Iraq moment, where we're talked into a paranoia that serves mostly domestic political purposes on both sides.
It's all tangled up together, and I think it's something that I'm relieved is not my job to figure out.
I think what I would find much better than the way we're doing it right now is that we had clear rules of what companies can and cannot do.
So, for instance, if you said geolocation data is just not something that should be available to government, and we have rules in the US, and those same rules we apply to any foreign government.
And that would then imply that you shut down the market for geolocation information.
It is no longer legal to sell geolocation information.
Because today, when every government can easily buy all the geolocation information you want on the open market, it's just not very credible to say we're shutting down that one way you might be able to get it.
So, be really sincere, and be really open in what the rules are, what you can and what you cannot do.
And then let the market play out within a set of guidelines that all companies have to follow.
The moment it's directed at particular companies from particular countries that we happen not to be so enamored with at this moment in time, things just get very murky.
And I have a little more difficult to believe that it's really motivated by welfare considerations for everyone.
That's a fair point, and I feel sort of obligated to also point out China has blocked a number of US technology companies and has the sort of great firewall of China limiting what you can have access to when you're in the country.
And we in the US view that as also a terrible thing.
Yeah, exactly. That's a fabulous point.
And I think it should mean that's exactly not something that we're going to do.
We'll figure out a better way to regulate these companies.
Maybe we'll see with some of the tech layoffs that have been happening in the US tech sector, maybe some of those really smart people can go help the government understand how all this technology really works.
Because sometimes you have these congresspeople standing up and railing about the new app or this or that phone thing, and I'm thinking you probably don't really know much about this.
Yeah, spend a little time on TikTok.
I think that might be good advice for policymakers and for the rest of humanity.
Well, I am a little bit less afraid than when we started.
No, that is huge progress in just 15 minutes.
All right, Sarah, Southwest, the big meltdown at the worst moment in time.
Exactly. In some ways, I love this story because I feel like we can all relate to a big meltdown that happens at the worst possible time and that is in some way self -inflicted because we put off doing some things we knew we should have done along time.
But I also really feel for the travelers who were stranded in airports on Christmas Day, Southwest canceled more than 16 ,000 flights over one of the busiest travel periods of the year.
A total nightmare for everyone involved, and it's costing them maybe as much as $825 million.
And it's actually going to mean that they have a loss in the fourth quarter.
So big financial repercussions on the company.
And it basically seems now that there's a couple reasons that this was so crippling for Southwest when other airlines managed to rebound much faster from the winter storm that started the problem.
There's the technology issue that Southwest was relying on as outdated technology.
And then there's also their point to point flight system where instead of relying on these hub airports, they just fly direct flights between smaller airports.
So I'm super interested in this in part because Southwest has so long been a big business success example.
And so when the flights all got canceled, I was thinking, how can this be happening to Southwest?
As it happened, I actually was thinking to myself, I want to know what Felix thinks about this.
So what do you think about this?
So the first thing, it is just terrible that it happened at that moment in time that we had this really big winter storm in so many places in the country at the same time.
And then just lots of bad luck, I think, on Southwest's part on top of it.
So for instance, Denver and Chicago, which are really important airports for them, were particularly affected.
This point to point system that they fly where you don't get tracked through a hubs, it has a lot of advantages in normal times.
And Southwest Airlines is the only large airline that uses it, but it actually sets it apart from competing airlines in a really nice way.
And so it's this confluence of unfortunate circumstances.
Here's maybe a different way of thinking about it.
Southwest is a low cost airline.
It doesn't offer many of the service amenities.
It doesn't have business class or first class really, for instance.
On many flights, you used to have no seat reservations at all.
You find your own seat.
And I think we need to allow for low cost provider of services to exist.
As long as they don't endanger lives, as long as they don't create big negative externalities, we should probably live with companies who work with outdated IT legacy systems.
And that means every now and then I know it's not going to work.
My plane is not going to fly.
It gets cancelled. And in exchange, I get incredibly low prices.
What I find particularly interesting about Southwest, that actually works for them really well.
So if you look at J .D.
Power reviews, their ratings.
Southwest is rated the number one in the eyes of the customers for exactly that reason.
No one thinks it's like the very best experience on the planet.
And of course, in Europe, you have examples that are even worse where the service is really terrible, terrible.
But guess what? The flights are incredibly cheap.
And I'm always a little nervous in moments such as these that we wipe out this possibility that someone comes along and says, you're asking me, is my service amazing?
And my honest answer is no, not at all.
Yeah, it's interesting because I feel like Southwest's prices are lower than some other carriers in the U .S., but they're not as dramatically low as some of the European airlines that are the low cost carriers.
You know, where you can fly from city to city for 30 bucks.
I think what always had set Southwest apart was that they could offer a lower price and also a direct flight between a lot of these smaller airports, which people liked.
And they put such an emphasis on customer service.
At some of the low cost European carriers, you sort of feel lucky if you come out without being insulted by some flight attendant or something.
But at Southwest, they always tried so hard to be friendly and funny.
And it was like a really different experience.
And I think what this shows is you can have that experience.
But if you can't get people to their families on time for Christmas, it doesn't matter how many jokes the pilot makes.
It doesn't matter at this moment in time.
But is your prediction that people will not go back to flying Southwest?
I think they'll go back.
But it seems that there has been a real breach of trust.
Some people still don't have their bags back.
The epicness of the meltdown, the fact that they weren't just delayed an hour or a day, but like four days, people were stranded for the better part of a week or they had to cancel their trips entirely.
And two weeks later, they still don't have their bags back.
And the fact that Southwest prices are not dramatically lower than at this point, a lot of other airlines, they're competing on route and they're competing to some degree on price.
And I think that this was really catastrophic for them.
Employees have now been telling reporters that they begged senior leaders for years to update the software system.
So it's like, how do you manage to get the faith back from your employees to employees who had to call in and be on hold for hours in some cases just to tell you their location?
So it's a big mess.
I think it'll take them a while to recover.
It's interesting to me to think about how I would have reacted to their IT upgrade plan.
Say, if we go back 2015 -16, I think were sort of when they made the first big investments in IT.
And the sequencing is actually quite interesting.
So they started out by focusing on maintenance and the scheduling of maintenance crews also, which was a similar sore point that scheduling was cumbersome and didn't always work.
And if I had been on the board, I would have said, yes, that's absolutely priority number one because that's directly related to the safety of the passengers and the safety of our customers.
You've got to do that first.
And then after they had upgraded the maintenance software, they worked on their reservation system.
And that, I think, made a lot of sense because it was one of the sore points.
It also introduced much better ways to do yield management.
So the pricing was more responsive to changes in demand, which is really important for the business.
And then this is now the piece of the software, the crew scheduling, that they hadn't done yet.
So it's not that it's not on some roadmap to be updated, but it wasn't first.
Now, in the moments of complete meltdown, I think it's such a healthy exercise to go back and say, what you have said in 2016, this is totally crazy.
You've got to do crew assignment systems first before you do maintenance.
I wouldn't have said that.
And what I have said, you need to dramatically accelerate the speed at which you update these systems.
If you look at Southwest profitability in the last quarter, which is a great quarter for travel overall, their return on investor capital was not quite 5%.
That's still below their cost of capital.
There's cash on the balance sheet, but it's not as though you're incredibly profitable.
You have to go back all the way to 2018 or so when they, in fact, are much more profitable than other carriers.
And that, I think, is a combination of having lower costs and then having these prices that are somewhat differentiated, but not that much differentiated.
And so you could have said at that moment in time, maybe there was a little more wiggle room, but generally speaking, it's not that forward looking from that moment in time that I felt like it was completely irresponsible of what they did.
Many different companies, like IRS also runs on old software, like a lot of places.
And there's nothing inherently wrong with old software.
People like to come out and say, oh my God, I can't believe XYZ system still runs on cobalt.
But it's a pretty fault tolerant system that does the job and it's expensive to change.
And if it's not broke, you know, why fix it?
A lot of older systems also are not the ones targeted by hackers.
So in that sense, you get a little bit of security through obsolescence.
I don't mean to sort of be like poking at them unfairly for not updating their technology, but it does seem literally a perfect storm.
Cause them to come to a screeching halt.
And it was especially striking to me just given that they are always held up as this example of managerial excellence, strategic excellence, customer service excellence.
And you know, sort of left wondering how could this happen to this company about which I've read so many wonderful things over the years.
But maybe that's the point.
If you go back to not this complete meltdown, you go back to a more typical issue.
Say in October, 2021, they had a mini meltdown.
I think it was 2000, two and a half thousand flights canceled, something like this.
And it cost them about $75 million.
If you're thinking about how to best allocate your capital, is that something you can probably live with?
They have found a low cost way that under particular circumstances, it doesn't work well.
And if all hell breaks loose and you're incredibly unlucky, there is a complete meltdown.
But does it say something about the model not being right or management not being careful?
I'm less sure about that.
I wonder too, if there is maybe a lesson here in resilience that as we see more of these extreme weather events, anyone whose business is affected by extreme weather needs to just think a little bit more about investing in more resilient systems.
Because we're going to see more and more of these.
We're going to see more superstorms that get the entire country, not just one city.
And maybe it makes the math look a little different on that new IT system.
If I realize, in part, I'm seeing these low prices because maybe the airline is not quite as resilient as other airlines.
That over time we will see customers gravitate towards airlines that have better resilience.
Which then, of course, would give Southwest every incentive to invest more in IT and other elements that create resilience.
In the meantime, I'm just super curious what the passenger numbers for the spring will look like.
If I had to make a prediction, I will say, you see nothing.
I will say that value proposition that Southwest stands for, more or less untouched.
Do you think I'm right or do you think I'm wrong?
I actually think you're right.
And it would probably be a better podcast if I was like, you're wrong, but I think that you're probably right.
Because the thing is, if you live in Charlotte, North Carolina, or you live at Reno, Nevada, or some smaller airport, where you don't have as many options, are you going to roll the dice on a more expensive flight that takes you through a big hub?
Like Atlanta or Chicago?
Or are you going to say, you know what, this direct flight looks pretty good.
And I heard that Southwest had some issues, but this will probably be fine.
You'll probably do that.
We're doing something wrong in this country and I don't know what it is.
It seems like our planes are old, our airports are sort of falling apart.
There's got to be a better way.
Maybe this is in part by European upbringing.
Sometimes I feel, oh my God, every little piece of infrastructure is optimized to an extent that is really hard to believe.
And I think it's particularly true for Switzerland, where just everything works all the time at incredible cost.
And then to experience a country like the U .S.
and say, well, you know, there's potholes and things don't always work.
When there's a storm, our power goes out regularly and it takes a little getting used to.
But in the end, where do you spend the resources?
Where do you want money to flow?
And maybe the situation we have is really, really, really uncomfortable when things melt down.
Don't talk to me right after we don't have power for three days.
But overall, it's maybe not the worst thing.
Indeed. We get what we pay for and we don't pay very much.
So I will see you on my next Southwest flight.
Yes. So recommendations, Sarah, what do you have for us?
Well, I brought two in part because I knew that me here wouldn't be able to make it today.
So you feel the void.
I can feel the void of bringing two recommendations that he often brings.
And also I was like, maybe we'll have time for two.
The first one is a novel called No One Is Talking About This by Patricia Lockwood.
This came out a couple of years ago and actually it just feels incredibly prescient.
And if you had asked me a few months ago when I finished reading the book, if I would recommend it, I probably would have said no.
But yet I can't stop thinking about it.
So the first part of the book is kind of like reading Twitter.
The protagonist is engaging with a social media platform and a lot of the book reads like you're reading Twitter.
And then the second half of the book is like a hard left turn and just becomes much more of a narrative while she deals with this sort of family health crisis.
There's something about this book that just has grabbed hold of me.
And as we've watched the dramatics playing out of Twitter, I have just not been able to stop thinking about it.
So it's called No One Is Talking About This by Patricia Lockwood.
And even though it's kind of a crazy book, I can't get it out of my mind.
Why is it that you would have not recommended it to begin with?
It's challenging format wise to read a novel where the first half of it is unpunctuated tweets.
And then the second half, I would say, is very emotionally draining.
And I actually had to look up whether this had really happened to her and it is based on the story that her family went through.
So if you're talking about a book that's sort of a challenging format, and you will cry at some points throughout the second half of the book, too, I'm eager to really tell people you should really spend your weekend with this book.
But it's an amazing book and like all great art, it kind of makes you think and see things differently.
Wonderful. Good. So what did you bring, Felix, before I jump to my second pick?
I'd love to hear your pick.
So since we talked about TikTok, of course, I have to recommend someone on TikTok.
She is Cleo Abram, who used to be with Vox a little while ago.
And she has a stream of TikTok videos called Huge If True.
And these are many explainers of technology.
And what I love about it is it's everything under the sun.
All the things you never really think about, like how does Wi -Fi actually work?
Or the World Cup uses this high -tech football.
It's like, how does that change the game?
What's the implication of this?
How does an eglue work?
Why is an eglue warmer than the rest of Antarctica?
What's really going on with nuclear fusion?
And maybe the most miraculous thing about what she does is the breadth of topics.
And then the explanations are incredibly short.
And maybe this is also to do a little bit with, I'm not so happy that TikTok videos have become so much longer than they used to be.
I think there was something really charming and daring about the super short formats.
And she's kept that really short format.
So if you're interested in random explainers on technology, Huge If True by Cleo Abram, you'll find it, of course, on TikTok.
If I'm not wrong, she might be on YouTube as well.
That's super interesting to me, especially because I know that it is so hard to make things short.
Cool. And you have one more.
Yes, of course. I have one more.
I have one more. This is also a book.
It's called Wintering by Katherine May.
And I find that often during this dark time of the year, I look for books about winter or that explore winter as a way to kind of enjoy this bleak season.
And it's all about sort of hibernation and rest, not just for animals, but for humans and how the rhythm of this season can help us slow down and retreat.
And if you feel like you've been doing too much in your life, or maybe you're just stretched a little too thin, then I feel like this memoir slash look at hibernation would be appealing to you.
So it's a very gentle book and an easy quick read.
I can tell you had a lot of time to read during the holidays.
I did have a lot of time to read during the holidays and it was wonderful.
So this is it for today.
Thank you for listening.
This was After Hours from the TED Audio Collective.
Thank you.
