US lawmakers are going studs up on TikTok. The House of Representatives has passed a bill to force owner ByteDance to sell off the app’s US assets or face a ban. Sure, we’d all be less enlightened about Kate Middleton conspiracy theories, but maybe we’d finally get a hobby?

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The Market for Lemons

What happens when trust breaks down in a market? This is the question George Akerlof explored in his 1970 paper, The Market for Lemons. Imagine a used car market where sellers know more about the quality of their cars than buyers. The theory goes that buyers are wary of buying a ‘lemon’ – a dud car – so they’re less likely to take a risk on an expensive vehicle.

This creates adverse selection: sellers of high-quality cars leave the market because they don’t want to accept the lower prices offered. As a result, only low-quality cars remain in the market. This makes buyers even more suspicious, driving more sellers out of the market.

Akerlof's lemon problem highlights the importance of information transparency in markets. Without mechanisms to overcome information asymmetry, such as warranties, certifications, or third-party inspections, markets are prone to inefficiencies and breakdowns.

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US House passes a bill forcing a TikTok sale or ban

The US House of Representatives has passed a bill that would give TikTok owner ByteDance about six months to sell its stake in the US version of the app or face a ban. The bill now heads to the Senate, where it faces a more uncertain journey.

It’s not clear whether China would approve a sale of TikTok’s US assets, or whether they could be divested in six months. If ByteDance failed to do either, the Apple’s App Store, Google’s Play Store, and others would not legally be able to offer TikTok or provide web hosting services to ByteDance apps.

White House national security adviser Jake Sullivan said the goal was ending Chinese ownership, not banning TikTok. But TikTok’s CEO warned a ban would take “billions of dollars out of the pockets of creators and small businesses”. China has described a potential TikTok ban as “an act of bullying” that would backfire on the US.

The content we're consuming today

• WSJ: Women aren’t getting the big jobs at Goldman Sachs, and they’re heading for the exits ($)

• Cosmopolitan: What’s the price of a childhood turned into content?

• Intelligencer: Why are there still illegal weed stores all over New York?

Off-balance sheet items

• Don’t get manipulated during arguments. Here’s how to crush your opponent instead.

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