Happy Thursday! This is a slightly shorter edition than normal because I recently toured TikTok’s first-ever transparency center here in Los Angeles. My full write-up was just published on The Verge with photos of the space. 

Walking through the center reminded me of the Facebook election “War Room” from 2018, when the company was using the spectacle of a physical space to illustrate that it cared about protecting elections. This time, TikTok wants to convince everyone that it shouldn’t be banned from the US. I got the message loud and clear during my tour of the transparency center, which ironically was on the condition that I treat what was said by employees as “on background” and not for direct attribution.

My story on The Verge delves into the uncomfortable political situation TikTok finds itself in, and how it is hoping to avoid a ban through a complex proposal to wall off American user data through a new legal entity. There’s also the question of whether sequestering off TikTok in the US would make it a worse product, and the potential implications for the global internet. I expect that other countries will look to TikTok’s proposal as a potential model to wall off their own digital economies from the rest of the world. Whatever the downsides, ByteDance has decided that any amount of red tape is worth saving itself from losing the US market completely.

This week, I have the scoop on a quiet, controversial directive inside Jack Dorsey’s Block to cut costs. And I’m sharing some commentary from an ex-Googler about why the company’s in-house startup incubator failed, and what that failure signals for a broader shift underway across Big Tech.

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With the news this week that Intel is aggressively cutting employee compensation all the way up to the C-suite, other tech companies are making similar cost-cutting measures.

One example is Block, the fintech conglomerate led by Jack Dorsey. Managers were recently given the order to designate 10 percent of their teams as low performers, making them ineligible for any pay increases this year, including additional equity grants, according to an internal FAQ I obtained. 

"We are being particularly intentional this cycle about how we allocate our compensation budget to ensure we're differentiating among team members and investing in those having the greatest impact,” the document reads, which goes on to say that there is “no formula for how to consider and weigh the designation criteria as you determine the right compensation designation for each of your team members.”

That ambiguity isn’t sitting well with some. “As a manager being asked to make these decisions for my team, none of whom would be ranked as ‘low’ performers by any measure of KPIs or performance, this feels ethically wrong,” one Block manager told me. The company’s FAQ for managers says they shouldn’t tell affected employees that their low designation keeps them from getting raises, and it’s unclear if Block’s senior leadership is subject to the same process. (I asked the company for comment multiple times and didn’t get a response.)

Google’s recent layoffs decimated Area 120, its in-house startup incubator. Originally created in 2016, the idea behind the division was to give employees the space to work on startup ideas without leaving Google altogether. Meta set up its own version of Area 120 a few years later with a team called New Product Experimentation.

Like Meta’s NPE group, Area 120 never amounted to much. What is left of it has now been folded into Clay Bavor’s experimental Labs group, which also houses Google’s VR and AR efforts.

I’m interested in what happened to Area 120 because of the Big Tech era it represented that is now coming to an end. Gone are the days of letting employees work on whatever they want. As Meta CEO Mark Zuckerberg made clear during the company’s earnings call yesterday, “efficiency” is the management buzzword of the year. In his internal memo explaining the rationale for shuttering 120, Google’s Bavor wrote: “we need to shift to a model of new product development that is opinionated and focused.”

As with most initiatives in big companies, it turns out that Area 120’s struggles were ultimately a product of poor communication and misaligned incentives. Here is what went wrong, according to a former member of the team who requested I grant him anonymity to speak without Google’s permission:

“Area 120’s biggest issue was that we never had a clear remit from Sundar beyond ‘have Googlers work on their ideas 100% of the time instead of 20% of the time’ (the origin of ‘120’). The closest we got was when in year 2 of the program he shared with us that he expected more ‘app-like experiences’ rather than marketplaces like Kormo or B2B tools like Chatbase. In terms of bottom-up innovation, Area 120 had a real brand and was a beacon of hope for Googlers with ideas. But the mission was unclear.

Area 120 was always at the whim of the core Product Areas (PAs). It was clear that PA needs came first as they were organizationally more powerful. We had a lot of back-and-forth with legal in particular, where we would get into nitpick arguments about YouTube’s terms of services for video projects we were trying to launch. Nobody in a PA would ever get promoted for letting an Area 120 project launch, so there was no incentive for PAs to help us.

The new Labs strategy is basically ‘hammer looking for nail.’ They want to do AI — but to solve what problem? The best Area 120 projects were based on a user need. GameSnacks (our biggest hit IMHO) was based on the insight that people don’t want to download games on the App Store or Play Store, so why not just have them in the browser? Labs will produce cool technology demos, but not much more.”

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