Jasmine Sun on What the AI Industry Got Wrong About the Public Backlash

0:03Speaker 1:Hello, Odd Loads listeners.

0:05Speaker 2:I'm Joe Wisenthal and I'm Tracy Alloway.

0:07Speaker 3:We're the hosts of the Odd Lads podcast, and we've got something exciting for you.

0:11Speaker 4:That's right.

0:12Speaker 2:So one of the best parts of hosting our podcast is we get to actually meet and interact with our listeners. And we know we have some listeners over in Los Angeles.

0:21Speaker 1:That's right.

0:21Speaker 3:So if you're in LA, we are going to be recording a live show, some live recordings at the Vermont Theater in Hollywood on September seventeenth.

0:30Speaker 2:We have some really exciting guests lined up, have some really great conversations planned, so go ahead and get your tickets. You can find those over at bloomberg dot com forward slash odd Lots, or click the link below in the show notes and come and say hi when you're there.

0:49Speaker 5:Bloomberg Audio Studios, Podcasts, Radio News.

1:05Speaker 2:Hello and welcome to another episode of the ad Thoughts Podcast. I'm Tracy Alloway.

1:09Speaker 1:And I'm Joe Wisenthal.

1:11Speaker 2:Joe, there are a lot of interesting angles when it comes to AI.

1:14Speaker 1:Yeah you think so.

1:15Speaker 2:Yeah, Just to put it mildly, but one of the most interesting things I think is that we think about it as this like ephemeral digital technology. Yeah, you know, in some sense, it's like the sass of yours.

1:27Speaker 1:That's right.

1:28Speaker 2:There's a window that you open on your browser and you type stuff into the Internet, and the Internet spit stuff out at you, hopefully not literally. But there is also this very physical component to AI because it involves huge amounts of power, huge amounts of things like memory chips, and of course put those two things together, huge numbers of data centers.

1:50Speaker 3:No, this has been like what is sort of fundamentally different about this, at least from a markets perspective, Yeah, right, which is that when we had the boom of the prior decade et cetera, Like, by and large, the successful companies they didn't need to go into debt to build or whatever. They're like building data centers, but like they were not so computationally, they were not so massive that it was like they had to borrow money. They funded them from free cash flow quite easily. The company is building on top of that. I just plug into there.

2:25Speaker 3:There was always availability on an Amazon cloud. There's not like some compute scarcity. You're not like using Slack one day and then it's like, oh, your four hour window is up. It will reset in a few hours. Like, yes, we're their physical constraints to the air buildout, which basically in the history of the Internet is totally novel.

2:45Speaker 2:Right, And I think that's really emerging as in many ways the prime constraint because it feels like investors still are very happy to more or less fling money at the hyperscalers, at data center projects, at all of those things.

2:59Speaker 1:There's no capital short right, There's.

3:00Speaker 2:No capital shortage. What there is is a shortage of again power, land, regulatory and political approvals for actually building these things totally.

3:11Speaker 3:And you know, this is like such a big country that it's like I always think, like, yeah, data centers are great, just like put them out in the middle of nowhere. And then I'm like, oh, that's literally nimbiism, right, It's like that's literally what everybody has that thought, Oh, there must just be somewhere out in the middle of nowhere to put it.

3:29Speaker 1:But a it's going to be in theory near somewhere.

3:32Speaker 3:And if we could just solve all of our issues by putting everything in the middle of nowhere, there wouldn't be an issue. There are reasons why they're located where they are, they.

3:39Speaker 1:Have to be.

3:40Speaker 3:Ideally there's some sort of power infrastructure, some water infrastructure. These are things that also attract people.

3:47Speaker 2:It's not hard to imagine that the middle of nowhere might not have a lot of energy and.

3:51Speaker 3:Water infrastructure exactly, Otherwise there'd be a bunch of people there right.

3:55Speaker 2:The other interesting thing about data centers and AI is that it's become one of the very few bipartisan issues, I think in America. And you have people both on the left and the right now who are saying that they don't like data centers, they don't want the data centers in their backyard. We interviewed Kathy Hockel, the New York governor, about her moratorium on building new data centers. So there seems to be a lot of, let's say, feelings when it comes to data centers.

4:22Speaker 3:And you know, it did not get as much attention as Kathy Hokeel, I imagine because she's a Democrat. But Texas Governor Greg Abbott just in the last few days also announcing curbs on the state. People were a little quieter about that one. That has some reasons why maybe it didn't map to Peopil's view of Texas as a state that's just open for business in a way that big blue states aren't. But as you say, it's bipartisan. And then I'd say, like, one other thing that I think is interesting about it is like, so we know the data center controversy, but AI in general is sort of like riven with anxiety on multiple levels. Obviously, for years people have been talking about, you know, mass job laws.

5:02Speaker 1:Lately we've been.

5:03Speaker 3:Talking on the podcast about you know what people called like X risk and stuff like that, like truly rogue AI, And in my mind, I feel like the people inside the labs are very anxious about those other two these sort of like effects on society and again literal like safety issues, what are they going to be responsible if everyone loses a job, et cetera. But on the ground, it does not feel like those things are the fears, even though I'm you know, anxious, like that are really like driving the policy, the backlash politics.

5:35Speaker 2:If I could sum it all up, it feels very much like data centers are the physical manifestation of a new technology that is in some ways very hard to sell to America. Right, Like, here's this thing that is not only going to take your job, but like, maybe it don't kill you too.

5:49Speaker 3:Well, I was gonna say, you don't like data centers because you're worried about the noise complaints. I don't like data centers because I'm worried they're gonna kill me.

5:57Speaker 1:We are not the same. We are not the same, all.

5:59Speaker 2:Right, Well, that is the perfect way to put it. And we have the perfect guest to try to talk through all of these various things. We're going to be speaking once again with Jasmine's son. She is an independent writer covering AI and Silicon Valley culture, and she just published an amazing piece of reporting called No Data Centers in My Backyard on her sub stack. So, Jasmine, thank you so much for coming back on odd Lots.

6:23Speaker 4:I'm so excited to be here again.

6:25Speaker 2:So congrats on the piece. We were saying earlier. It kind of sounds fun just to hop in a car with a few friends and research assistants and go on a road trip through Middle America looking at data center sites.

6:37Speaker 4:Yeah, I mean it was fun. I was trying to decide where in the country I wanted to go to do this data center road trip. I remember this was the last question I asked Claude Fable before it was taken away from me for several days. And so it was either going to be Michigan, Wisconsin, which is where I ended up going, or it was going to be Texas or maybe the Southeast like Memphis, etc. And to be entirely honest, part of the reason I ended up doing Michigan, Wisconsin the Upper Midwest is because it sounded a lot more pleasant to spend July by the Great Lakes than it did driving across the Texas Desert. I'm sorry, Greg Abbott.

7:10Speaker 3:No, I think that's a totally good reason. The Upper Midwest is absolutely lovely this time of year. It's beautiful, and there's lakes and all of that stuff. When we think about data center activity, I do tend to think more, I guess still in my head northern Virginia, so there can't be that much space left out there. I do think a fair amount about Texas, in part because of sort of like the Elon verse, et cetera, and how much tech activity is happening there. I probably do think a little bit about the Southeast. How active though is that area? Like how much interest is there in Wisconsin Michigan in general about data centers and what is it about those locations that Okay, it's like these could be attractive geographies for them given what they need.

7:57Speaker 4:Yeah, I mean, so Michigan and Wisconsin sort of rank near the middle to the upper middle of the pack when you look at how many data centers are being built across the fifty states. I think each of them have maybe around like fifty maybe two one hundred projects or proposed projects in the states, So it's not an incredible amount compared to again, Virginia and Texas, where you have six hundred eight hundred active data centers or data centers being built. The thing that drew me to Michigan and Wisconsin one is that I had heard that proposals for new data centers were ramping up. And that's because one Wisconsin, for example, has the sales tax exemption on the chips and on some construction costs, so that made it a somewhat attractive state. Reretchen Whitmer, governor of Michigan, who has always taken a pretty pro growth standpoint for Michigan, how do we bring business back, was also sort of actively courting data centers, and so she did a very controversial photo op with Sam Altman at the Stargate site in Saline, which has become one of the big data center fights in Michigan. And so they're both things that

8:56Speaker 4:these two states did in order to explicitly attract data center investment. I think there also was enough, like you said, grid access and water access to make these reasonable places to build data centers, like an hour out of the cities, an hour out of Detroit, an hour out of Milwaukee, for example. And then the other thing that was really interesting to me personally as a reporter was I wanted to know how the data center story intersected with a the history of de industrialization. I think this is part of why a lot of the politics in those states is about bringing business and bringing industry back, bringing the skilled trades back. Even in some of these very specific sites where their data center is being proposed, they were like, you know, the site of a former GM plant in Janesville that sort of devastated the community when thousands of jobs disappeared during the financial crisis. Do we now want to build a data center there and will that be the way to revive the community is a question that people are asking or you know in Mount Pleasant with the Fox consite, there was a huge fiasco where Trump

9:54Speaker 4:said they were bringing all these manufacturing jobs back they weren't built. So the d industrialization history was really interesting saying. And then the second thing was the primaries, which I think have now both come to pass, but I thought it was going to be a really interesting place to look at as you mentioned that bipartisan politics of data centers, the fact that in both states you were seeing roughly seventy thirty opposition to data centers from both Democrats and Republicans in a very very polarized battleground states where Dems and Republicans rarely agree on anything. And then AI was also showing up in the Wisconsin governor's race where Francesca Hong was running on a data center moratorium, or in the Michigan Senate race where Abdula Sied was talking a lot about data centers as sort of one of the examples of money infecting politics.

10:36Speaker 2:Yeah, so we're recording this on August twelfth, and Francesca Hong just lost the Democratic primary in Wisconsin to David Crowley, which is kind of interesting because one of the people I remember you spoke to on the ground was someone who was saying she explicitly was going to vote for Hong because of her policies around data centers. And I know one primary does not a trend make, but do you get the sense that data centers can be like a winning political platform.

11:05Speaker 4:Yeah, this is one of the things I was trying to get a handle on because I was wondering, like, will the local or state politics be a bit of a microcosm or about weather for the national politics of AI. And my sort of summary here is that I think that if you live in a community where a data center is being built or proposed, you don't like it, and it's very high sealience. It's very important to you, like the fact that there is a gigantic construction project that will bring in traffic and noise and whatever for two to six years nearby that really really bothers people in the community. When I went to Port Washington, for example, which is another city in Wisconsin, and just talk to random people at fish Giving, which was this like funny fish festival that we went to in order to talk to them, like you've.

11:46Speaker 2:Never heard about it before, I kind of want to go even though I like.

11:51Speaker 4:No, it was a real event. It was amazing. There's an Elvis impersonator.

11:55Speaker 2:Obviously, it's fish giving.

11:57Speaker 4:America is so good that there was life liberty in the suit of fish. It was amazing. It was on Lake Michigan. But every single person we talked to you there had an opinion on the data center. Because when there is a gigantic I think, seven hundred acre facility being built near you, you will care about it, and so salience is super high if you live nearby. But then if you don't live near a data center, like if you're in a zip code where there's nothing being proposed, the polls still show that seventy thirty you're roughly against data centers. I talked to Charles Franklin and Marquette who had done this explicit pulling, but the salience is much lower.

12:29Speaker 4:Data centers does not rank in like the top five issues electorally unless you were literally living in one of those communities.

12:51Speaker 3:These are always very sensitive questions to ask a journalist, and we're supposed to just be like open minded, etc. Of thep you talk to who were concerned about data centers, in your view, like, there are some really wacky reasons to oppose.

13:11Speaker 1:There's some like I would.

13:12Speaker 3:I'm very sensitive to noise, so when I hear a voter talk about noise complaints, I'm like, yeah, I do not like I.

13:18Speaker 1:Totally get that.

13:20Speaker 3:On the other hand, if I hear you know, some conspiracy theory, you know, some maybe less informed water takes, or you know, my pet has started vomiting because a new data center was nearby, I'm like, maybe you're reading too much like Instagram reels, et cetera. Generally, speaking of the people you talk to who are passionate about the issue, how well informed did you find them about both the sort of like economics and sort of like lifestyle consequences of a data center in their proximity.

13:56Speaker 4:I think this is actually one of the biggest shifts for me. I think I came in with expects maybe a bit more similar to you. I am generally based in San Francisco, and I feel like the caricature of data center opponents that people believe is they are all just watching too many tiktoks about water. And while that certainly was true for some people, like I remember talking to this guy outside of a Francescahung event, who was wearing a Hotties for Hong t shirt and he was like, yeah, like they're building them out here because they want to drain the Great Lakes. And I'm like, that's not how these things work, Like, that's not why they're here, and they are not like sucking up water out of the Great Lakes. But I would say that the folks who were actively involved in organizing against the data centers, like the activists themselves, were much better informed than I expected them to be. People knew the difference between say, closed loop and open loop cooling systems, one of which uses more water than the other. People could tell the difference between an AI hyperscale data center and the old kind

14:48Speaker 4:of Internet data centers. Some people said I use AI helped me, orite emails whatever. I would say the biggest difference was not like were people informed, but how much trust is they have in their government and in these AI and data center companies, right, And so it was much less of a like we're just mistaken about how data centers work. It was much more When DT and open AI say they're going to cover the cost of electricity rate hikes, we don't believe them because DT has razor rates for out of the past five years, right or yeah, sure, you know they say they're going to bring five hundred jobs. But like we saw how Fox Con went, we know that corporations break their promises all the time, and so I would say the gap among anti data center activists was much more about trust than it was about information.

15:34Speaker 2:Can you talk a little bit more about what the exact pitch is that an AI, a hyperscaler, or you know, a data center builder might make to a community when they say, we want to take that ugly slab of concrete that's just been sitting there for years, and we want to put something on top of it.

15:51Speaker 4:For sure, I would say the pitch for why let us build a big data center in your community is almost entirely about property taxes. So data centers pay a lot in property taxes. In Laden County, Virginia, the data center capital of the United States, data centers, I think pay and make up over fifty percent of the property tax base. And part of the reason that Northern Virginia and public schools are very well funded is because of the data centers, and so people have sort of accepted that trade. Or when Microsoft brought their Fairwater data centers into Mount Pleasant on the site of the former Fox con factory that was supposed to be Microsoft is now paying on track to pay about twenty million in property taxes for twenty twenty six, which is a huge boon to the tax space. And so for a lot of local officials who are thinking, how do we bring back our commercial tax spase in a time after these factories have left our community, a data center is a very appealing way to do so. They say, we're going to be able to remove the wheel tax in this community.

16:51Speaker 4:We're going to be able to avoid raising property taxes on residents. We're going to pay for all these city fire services and police services that are expensive. I think part of the struggle with data centers is that that's really kind of the only pitch that they're making. Sure there are some jobs, for sure, like five hundred one thousand jobs, but those last two to four years. Sometimes they're outsiders, they're not people from the community.

17:12Speaker 2:These are the actual jobs associated with the construction of the data Yes, right.

17:16Speaker 4:Okay, yes, you might only have like fifty permanent jobs, you know, like a solar farm or something like. People aren't really needed to keep it going very much. It's mainly a construction effort, which also means it's more out of town residents who are coming in, so there's not a great jobs pitch. And then also people just I think aren't that excited about AI. It's not that they're necessarily like worry that AI is gonna go rogue and kill them all. Like people didn't bring up those kinds of years as much. It was just like, why are we as a community taking the hit of having this giant, ugly thing in order to produce some coding agents that help people in San Francisco. Like people just didn't see it as essential to their lives in the way that I think a car factory it's like, okay, well we all drive cars. Solar farm, well I don't need energy.

18:01Speaker 4:I think the trade with the data center just didn't feel as compelling to people because taxes are kind of diffuse and hard to grock, and it's kind of unclear, like how is that going to benefit me directly? Jobs not really a big benefit. And then AI itself, people are kind of whatever about.

18:18Speaker 3:In some of the places where data center projects are like well off the ground. Some of these like tax benefits or whatever are real, right, Like isn't Facebook in luis or Meta in Louisiana, Like they are cutting really big checks? Yea, Like in your view, if they're like Jasmine, come here and like bring both sides together and solve this, Like, would you argue that like no, like.

18:43Speaker 1:There it is likely that these can meaningfully move the.

18:46Speaker 3:Dial on terms of pure dollars coming in and like would there be inferior solution of like, well, we're gonna, you know, let us like pay.

18:55Speaker 1:Your taxes for two years. That will show us, you.

18:58Speaker 3:Know, even before we break ground, like setting aside all the complicated things. Could you imagine as we go forward eventually like some structures where it's like, okay, the company does give some tangible upfront commitment. People get to feel it, they get to see their taxs and reduced, they get to see their teachers get higher salaries, and then it's like, all right, the green light is in for data centers.

19:19Speaker 4:Yeah. I mean, one thing that I think is important to recognize is that the landscape of how people feel about data centers and how the deals are made has changed so dramatically in the last one to two years. So at the time that a lot of the proposals show up to say your city council in twenty twenty three, twenty twenty four, twenty twenty five, there is no data center backlash, right, and so at the time it almost feels like the opposite. Like the mayor of Port Washington, where this seven hundred acre big data center facility is being built in Wisconsin, he was telling me like Port Washington had just lost a bid to bring a chip factory into the city. There again one of these cities where factories have closed down and they want a commercial tax space again, and reeling from that, this guy Ted Niskei, He's like, well, of course, we thought a data center could be a great way to do that. At the time, they even set up a tax subsidy district for the data center because they're also worried if we don't do this, maybe the data center is going to go uptown to Sheboygan, like, what if we lose the bid to another city. In

20:18Speaker 4:the same way, if you guys remember with HQ two, Amazon's sort of like dangling, like who's going to give us the most subsidies to bring our data center here? Because at the time there was no backlash communities want the tax benefits of the data center. Now, of course, it's really changed, and so the data center deals that are being made today are very, very different from the ones that were being made two years ago. Three years ago. People are now realizing that you don't need to give Meta a tax subsidy. In fact, Meta should probably pay more upfront. They should give these fifty k bonuses to public school teachers. Before there are a lot of NDAs being signed, and that was extremely controversial. Almost everyone I talked to, including all the pro data center people, said we really regret doing the NDAs. They actually really increase community distrust in backlash. Now Microsoft is saying we don't want to do NDAs anymore, and I don't think local officials are willing to sign them anymore because they've seen how it amplifies distrust in the community. So I would say that the data center deals that are getting made

21:15Speaker 4:in twenty twenty six and beyond, in light of the backlash, are much more how much can we offer your community to let us build here? Whereas two years ago it was what can your community offer us for us to come in.

21:27Speaker 2:Yeah, it feels like the balance of power has shifted a little bit. But that said, reading or reporting, there does seem to be the sense that small local governments are perhaps not evenly matched against big tech companies with a lot of money. Yeah, and a lot of lawyers. And so even if you construct the world's most beneficial tax arrangement, you had a lot of people in your piece who were talking about, well, the company is just going to figure out some way to kind of wriggle out of it.

21:55Speaker 4:Yeah. And again, I think this is so informed by things like the Fox confiasco, where people felt that they're part time city councilmen or whatever like just made a bad deal because they were not equipped, they were not informed to Again, like almost every local official I talked to, they were good people, they were trying to do the right thing. They were also getting paid like five thousand dollars a year to do this on top of a normal day job, and so it is a big power asymmetry between them. And like open AI's lawyers and people in the community recognize that you're not going to have the best deals when it comes from that, and so they'd say, you know, we don't know what carve outs that the data center developer is going to write in.

22:32Speaker 4:So let's say that the AI bubble pops or you know, open ai goes out of business, and so they don't want the data center capacity anymore. Like what's going to happen to the building? Is it going to be a stranded asset? What kinds of guarantees are there going to be? And again, there might be ways to set these up in more beneficial ways, like I think tex guarantees are some of these, or making deals to say we're going to pay for eighty percent of our forecasted electricity demand upfront because sometimes those forecasts are wrong and we don't want to leave you guys on the hook. I think those are really important to make, but fundamentally is just such a power symmetry. I mean, one of the most egregious examples that I came across was that Selene Stargate Center in Michigan, where Selena is a city town of literally less than three thousand people. It's super earal, it's a little bit out of an arbor, and their city council actually voted for one against the data center development that Oracle and open Ai brought in. And after they voted against it, the data center developer just sued them

23:27Speaker 4:over exclusionary zoning. And there is no way your town of like less than three thousand people is going to even bother with a lawsuit against like open Ai, Oracle and related digital. It's just not going to happen. And so they immediately settle, of course, for some improvements to like a fire truck and some investments in farms and whatever. But like again, the power symmetry really just made residents feel like, okay, like this is not how democracy is supposed to work, Like a gigantic company should not be able to sue us out of our democratically chosen decisions.

23:56Speaker 1:So it did agree.

23:57Speaker 3:One thing that you did write about in the piece, which I was very interested in, and it's something I've been thinking about, is the data center boom is sort of a rare moment in recent decades in American history where you have the capitalists, the tech companies, and the hard hats are actually really into it. And it is They're not a huge number by volume, but also like when people think about like quote working class unquote jobs, the kind of jobs that we lost, et cetera, the jobs that are being created are those jobs that people might have in their head as like a good middle class job or the jobs that we had in our glory days. How influential within these communities are the sort of construction companies or workers, some of them unionized in some of these cases, who are like, no, we want that activity.

24:54Speaker 4:Yeah, I mean, I think one of the most memorable conversations I had was with this guy, Terry McGowan, who's a senior VP at the International Union of Operating Engineers. So people who operate like cranes and I don't know what these gigantic machines are called, but earthmovers people like that. He was awesome because he was thinking about this from a historical perspective. He was talking about growing up in Milwaukee as a teenager, and he's like, when I was growing up, noise was money. So like, I get that is noisy and there's pollution and whatever, but he's like, when I was growing up in Milwaukee, like we knew that when we saw like the smokestocks and we heard the noise, that was what was going to feed our kids, that was going to send our kids school, that was what was the lifeblood of our community. And so to him, it was kind of surprising to see the shift over the past few decades of people losing trust in industry, seeing it not as this is what keeps our economy going, this is what helps working class families, and much more, this is something to be distrusted. And he was saying

25:51Speaker 4:that he tried to get, for example, some of his union members to speak up at city council meetings and say like, hey, this is helping me, like this is these are the jobs that are getting created, but even his guys were like scared to do it because there was so much opposition that being pro data center was just going to get your neighbors really pissed at you. And I think part of the problem is that there's again not that many of these folks, and that even of the people there, some of them come from out of town because there are so many labor shortages, Like these workers are getting great jobs like one hundred dollars cash per dms because people want to compete between sites, apprenticeship programs and skilled trades. I've heard from multiple people have been like doubling in size over the past couple years.

26:31Speaker 4:But again, it's just not that many people. So if you're working on a project you're going to be excited about it, but it's kind of hard to convince someone else in the community who is not. And then I also just think that trust again in corporations has cratered over the past few decades. Like GM in Janesville was sort of revered as this is what the community is built on, this is the thing that keeps us going. But when the company goes bankrupt, when they lay off thousands of workers, when they fail to clean up the contaminated brown field that the factory was built on and leave thirty million dollars of hazardous waste in the ground for the community to deal with, Like, that's a lot of broken trust. So people are not thinking, oh, let's bring GM back there, thinking, man, like, we trusted that company and they screwed us over right. Yeah.

27:13Speaker 2:I wanted to ask you actually about the social dynamic between the construction workers being brought in for these projects and the you know, lifelong citizens of small towns, because I know you like to take a sort of anthropological approach to some of your reporting. How did they actually feel about each other? And I kind of I got to say, this is a free idea to anyone in Hollywood but I really think someone needs to come up with a TV series where it's like a giant data center being built in a really small town and the dynamic between like the influx of all the contractors and the locals, we could have some interesting storylines. Sorry, that's just an aside. But what was that relationship?

27:51Speaker 4:Like? Oh, yeah, I mean just the not exactly what you're talking about. But my friends and I who went on the trip, we all watched Eddington before we went over, and I didn't know what kind of movie it was. I just knew it was like kind of about a data center, and I was just like, you know, shooting each other up, and I'm like, oh God, is this what we're see?

28:06Speaker 5:Yeah?

28:06Speaker 2:I was sinking something a little bit more lighthearted, but you know, you never know what direction I could go in.

28:10Speaker 4:No, totally. I mean, so one thing I'll say is I talked to three folks from the trades, but it wasn't an incredible amount. We actually found construction workers and trades people pretty hard to get in touch with. I think partly because they'd all signed NBAS and also I just heard it incdotally from so many people that pro data center folks are very scared of talking because they have seen how vicious to get their death threats. You have city councilors resigning bad blood between neighbors. The opposition is pretty intense, and so my guess is that these trades people are a little bit worried. I mean, everyone I talked to in the trades was aware of the backlash.

28:44Speaker 4:They were like, yeah, we know some people were worried about the environment. We think it's worth it, but like we understand. But fundamentally, I think the folks I talked to were more focused on themselves and their work and sort of their benefits. One actually surprising tidbit that I heard was that from Terry to this guy who's a CEO of an electrical contracting company I talked to, to an HVAC engineer I talked to, they all thought that AI was maybe a bubble or like probably a bubble.

29:10Speaker 2:Yeah, that was interesting.

29:12Speaker 4:That was really odd because even the people who are excited about this, who are making their money from it, they were like, yeah, like it does worry me that like the mag seven hold like fifty percent of the stock market, or like, yeah, it's a bubble, but we'll just move on to the next bubble, we'll diversify, right, And so I think one thing that was really clear to me was that folks in these communities far away from Silicon Valley, they are deeply unsure about how sustainable the AI boom is. And I think that really informs whether you're willing to take the bet on like a again, a gigantic construction project that may not even start paying taxes until ten years in the future. Is why I keep reading on the news it's a bubble. I don't know if this technology is that helpful to my life, and if it's a bubble that makes the economic trade offs very, very different.

29:59Speaker 2:Just to quickly go back to the influx of contractors things, are there any local businesses like I don't know, restaurants, sandwich shopped, gas stations that are happy that like you now have five hundred workers who maybe weren't there before and they're all getting their their lunch at your shop or something like that.

30:14Speaker 4:Yeah. I mean, so I heard this more anecdotally, not from the shops themselves, but yeah, like the mayor mentioned that sales taxes in Port Washington have like doubled over the last year, that the sort of home I don't know what it's called, like the low's equivalent in their community that's sold Like where's they got a ton of revenue that tips were up on weekdays? I know. Sharon Goldman has also done some reporting about some of the projects in Louisiana, and she talked to some restaurant owners who were saying, like, yeah, we're just getting like crazy amounts of borders now. So I do think that small businesses in the area are probably happy about the influx of new workers.

31:03Speaker 3:Right prior to the data center explosion that we've really seen basically for two years now. Just prior to that, everyone or lots of people were really excited about the Inflation Production Act and all of these reindustrialization efforts. But like some of these issues are going to be exactly the same. Like if you're gonna like build like an evy battery plant, that's going to be noisy, that's going to bring in a lot of temporary workers. You know, if you're actually going to have a state of the art it's going to be an electricity user, that's going to be a water user. And if it's a state of the art factory, or if it's going to be a cutting edge factory, it is not going to employ people ever at this scale of like the old like River Rouge GM factory, Like modern factories just aren't like that.

31:55Speaker 3:Do you think some of these concerns, these fights, these issues where it seems like it's not democratic in the ideal sense if for certain proponents simply do not feel comfortable making their voices known because they are like just do not you know, sort of not good for sort of liberal norms about speech, Like do you think these concerns are generalizable to any attempt at what we all love the idea of, like industrial revitalization.

32:26Speaker 4:So I think any big heavy manufacturing, any big industrial development does face some opposition for sure, And that's kind of the classic NIMBI stuff, right, Yeah, But one thing that was really surprising to me is how much more intense data center opposition is even when compared head to head against these other kinds of things. So hemav News has done some really good pulling on this, where data centers are more unpopular than solar farms and nuclear plants, than power plants, than battery storage facilities. Like people are relatively okay with the chip factories and with the Amazon fulfillment centers, and with all of these other things that are again environmentally often dirtier like from a pollution perspective, that also do bring in lots of construction workers and stuff.

33:11Speaker 4:But there is something about AI data centers. Whether it's people don't really vibe with AI, they're not excited about that, whether it's the expedited, like sort of secret processes that are used for data centers that aren't as commonly used for the others, or whether it's seeing national narratives about data centers and that amplifying local concern But I do think that the data center opposition is of a unique and different scale to the opposition to these other things.

33:35Speaker 1:Well, then I.

33:35Speaker 3:Wonder, I mean, if even people are more comfortable with solar firms or nuclear facilities, which you know, a couple of decades ago people did not want them around at all. Is it also get back to there's something about AI, like maybe they don't articulate the X risk the way people in Silicon Valley talk about it, et cetera. But there is something about AI specifically that just like has these sort of drives, these very anxious vibes in a way that something with a similar ecological footprint, doesn't.

34:09Speaker 4:That did end up being my hypothesis because again, on one hand, people didn't bring up like deep fakes or job loss or X risk or whatever. People were much more likely to bring up water and the NDAs or something like that. But I think that's what made it feel like there was no pro faction for data centers right, Like it didn't feel like a trade off that's like, yeah, we're going to deal with this big construction project, but we're going to get more energy or something, or yeah, we all need cars, like the car has got to be made somewhere. I think with AI people were just like, but do we need it at all? And so then if you're not even sure whether you need it at all, then the trade of like let me accept this big cost is pretty significant. Again, one of the things that distinguishes I think the classic NIMBI story from the data center story is that people who do not live near data centers are as opposed to data centers as people who live near them. And normally with NIMBI, it's like I do want housing somewhere else, I do want a nuclear plant somewhere else. With data centers, people are saying

35:06Speaker 4:I don't want them anywhere because I don't really think we need this AI thing, and so I think it's a failure of Silicon Valley frankly in the AI industry and also governments as well to make the positive case for why is it important to our society that we actually enable the AI build out.

35:20Speaker 2:Yeah, it feels like there's a lot of generalized downside, given that people are worried about things like jobs and maybe even a robot apocalypse, or at the very least they don't feel the technology is that relevant to them. And then even if there's hyper localized upside in the form of like well, maybe some more jobs, although not that many, and maybe some additional income, although you don't even trust how much income that will end up being, it feels like this is a very hard dynamic to escape, Like, if you're a big hyperscaler or a data center company, how are you supposed to fix this? Because you can promise the moon basically, and it feels like people still aren't going to accept the offer.

36:02Speaker 4:Yeah. I mean, it's really interesting coming back to USUF and talking to folks I know in the AI industry, some even involved in building data centers, And one of the questions that I'll hear is like, do we just need to make the bribes bigger? Like what if we just like mail checks everyone's house, And like one is that might work. But I think one other thing I realized when I was out in the Midwest is actually sometimes the bigger the numbers, the more suspicious people get, because the more it feels like this sort of dark money, shady like is this a bubble type situation? I think that, like getting the community benefits right is certainly part of it.

36:32Speaker 4:I think another and I actually became much more sympathetic to the statewide moratoriums after my trip than before. I think before I was sort of like, this seems like a kind of blunt tool. I don't think stopping data centers will actually regulate AI. But now I see the moratoriums, whether it's Kathy Hochels or Greg Abbotts or whatever, as like, again, we know that there's this powery symmetry between these tiny towns and these big companies. We shouldn't expect a town of three thousand or twenty thousand people to get a good deal to extract the right guarante. I think that actually bringing that up to the state level and maybe taking a pause for the state officials to figure out, like we want, you know, x millions of community benefits per megawatch, or we're going to mandate these environmental standards closely cooling, x percent renewable energy, etc. These are going to be the rate prayer protections we implement at the state level, and we will pause until everyone agrees to that.

37:24Speaker 4:You could also see a world where that's better for data center developers because they no longer have to manage like all of these like individual negotiation processes quite as much if those standards have been set at the state level. So I think I'm pretty optimistic about that kind of streamlining. I know it was a relevant factor actually with the solar build out too. And the reason I keep referencing solar is because that also went through a period of controversy in Wisconsin and Michigan, and so people often talked about it and bringing state level regulation was kind of like part of the solve there. And then I guess like part of it is also just like I think that both the AI industry and governments have to do a better job making that pro Like I was disappointed frankly, and a lot of the local officials they met with how poorly they were able to articulate, like why it would be beneficial to their community to make this deal. Like, I think, if you are responsible for leading economic development, like it is kind of on you to talk to your constituents to understand their concerns and to do whatever

38:23Speaker 4:community engagement process that is required in order to achieve that. But it's also just like very very hard, you know, great, I.

38:30Speaker 2:Mean, if the constituents don't believe anything you or the company says, because there's just a lack of trust both in government and in corporate America at the moment, it feels very difficult to convince them otherwise.

38:43Speaker 4:Yeah, I think these are all things that I think could make things better. But like, fundamentally, like I think that the domestic politics will be a constraint on the build out. There is a reason that the AI companies are now building out compute capacity in Australia, in Canada, in Europe even And so I think that people very much see that there is a risk to the AI build out if we expect to have to win over all these American communities and the global build out. Even the idea of data centers in space, for example, which is extremely speculative at this point, but it is something that folks are investing in.

39:17Speaker 2:The ultimate nimbiism send them to know, because.

39:19Speaker 4:People are literally thinking, you know, there's nobody in space to stop me, and I think that's very motivating to why Elon wants to do it.

39:26Speaker 2:So when you get the aliens knocking on your.

39:28Speaker 4:Door, oh gosh.

39:30Speaker 2:I actually I wanted to ask you about China because I know you've traveled around there relatively recently. Do you get the same sense of data center pushback in a place like China.

39:40Speaker 4:I didn't explore the data center's issue as much as I would have liked to when I was there because I was mostly sticking to the cities. And similarly, the data center build out was in sake Guajo Province or in some less populated areas of the north, so it was not happening around the cities. If I were to, you know, wager our hypothesis. My sense is that as with other big developments in China, there is just not a culture of resistance, like Nimbiism doesn't really exist in China because people do not own private property anyway, and so like when your land gets eminent, domained or taken for a government project, there's not as much of a channel in order to push back. Both culturally, there's not an expectation and politically, it's not a democracy, it's an authority and state, so you are going to lose. So whether there is or is not, like data center opposition, I'm sure some Chinese people are annoyed about the data centers being built if it's in their backyard, if it's on their farm, But my guess is like fundamentally, like you're just not going to see the political pushback. That is I think a specific quality of American democracy that

40:42Speaker 4:a local town can actually stop a hyperscale developer from coming in.

40:46Speaker 3:That makes sense, by the way, you know, like when a governor hokl came on odd Lag, I think a lot of people did find it quite compelling when she was like, look, actually we do want data centers, but we want to come up with a template that actually just we know is like positive sum And I think a lot of people actually found that to be fairly convincing in the sense, like what's happening so fast these towns do not really have this sort of I guess you'd call it state capacity or government capacity to really figure these things out on their own.

41:15Speaker 1:They don't have the house expertise.

41:17Speaker 3:Let's come up with a repeatable template that we have reason to believe works in town after town. I don't know, it seems plausible to work. Something I'm curious about, like putting back your.

41:28Speaker 1:SF hat on. You know, clearly the AI.

41:33Speaker 3:Industry they're very anxious about AI themselves, right, we know that, and they've anticipated in advance backlash, but they've mostly focused on this risk of job displacement. And so you see they'll write essays about we're going to need a new social contract, we're gonna need maybe to rethink the welfare state, We're going to need to think that you know, some VC rights, that thing about the meaning of work or whatever.

42:02Speaker 1:How much of would you say.

42:04Speaker 3:The last two years or three years within AI is a big thing of Like AI executives just not correctly anticipating the first source of actual attention.

42:19Speaker 1:They thought it was going to be about jobs.

42:21Speaker 3:Many of them have probably been like unrealistic in their timelines for job displacement. You know, we've been hearing six months until the big white collar wipeout for like almost probably two and a half years now. How much of it is like they thought the flashpoint was going to be one thing and it turned out to be another thing.

42:38Speaker 4:I mean, I think that's a big issue. Jobs. Of course people are really concerned about, Like when you look at the national pulling there and like, people are certainly anxious about their jobs. But yeah, data centers. I don't think people expected the kid's safety stuff. I don't think people expected. The thing I always tell my friends here is I'm like, yeah, like there are no kids and no data centers in San Francisco, So no wonder you guys didn't worry about it. But the thing is, like these are the ways that AI materially shows up in like everyday people's lives, right, Like they are not their job has not been lost yet in most cases, they are not thinking about the speculative future superintelligence and whether that's going to like have a coup or something like that.

43:12Speaker 4:But like their kid is already cheating on their homework, a data center is already showing up in their city. And so I think that because you know, SF is a bubble, the AI industry is the bubble. Most people in that world kind of only talk to other people in that world and never leave. And so I think that they are just frankly blind to the ways that AI is already showing up elsewhere, and they're sort of focused on their somewhat longer timelines and beliefs about dramatic AI capabilities in the future instead of Nope, this is like having effects on people's lives right now, and those effects are not all good. And so I do think the last six months has been a real reckoning that I'm hearing from the AI industry about like, oh, shoot, we really got to do something about the data center's thing, and even with the job saying like, I think that the AI executives have only started changing their tune on this in the last few months after realizing like, talking about white college loss all the time does not make people very happy, And so I don't know. I did this event in San Francisco on Monday, and it was

44:06Speaker 4:quite a few like people from the industry there, and someone from Open Ai came up and mentioned he was like, yeah, we're like discussing your article in our slack because we're trying to think about the fact that we haven't been telling very positive or effective stories about AI and this is really coming to bite us. And I was like, I'm glad you guys are having those conversations.

44:22Speaker 3:Well, so you know, this is just another sort of SF question. But like in the labs, like especially you know obviously the open AI hugging face attack, like all these things, you know, they talk about job loss, et cetera, Like how pervasive and how widespread is the sort of like the X risk fears, like the real fears, And would you say, like within the labs or within SF more than data centers, even more than job loss, which they might be comfortable talk about because it could just sort of be solved maybe by tax and redistribute, et cetera.

45:00Speaker 1:That like this like sort of like.

45:02Speaker 3:Real, like the big one is like growing in SF, like the big fear.

45:08Speaker 4:Yeah. I mean it's interesting because at the same time folks are realizing, oh, yeah, the rest of the country is worried about these more near term risks or near term harms. The thing that people here are honestly worried about is cyber attacks. Like I think Mythos was a huge wake up call book through people in SF and frankly people in DC, It's like, what does it mean that this thing is now an extremely effective cyber weapon? What does that mean for opensforce? For who gets access to the cyber weapon, which countries, which companies? Is this defense or offense dominant? I think people are starting to think about bio more seriously of okay, maybe it's a cyber weapon today. Is it going to be a bioweapon in six months or twelve months? What does that mean for the national securitization of this technology? And then the hugging face incident? Was it to a lot of people?

45:52Speaker 4:Look like these sci fi stories that rationalist forms were talking about five years ago, they are like, shoot, is it coming true? Like our internal model that we were testing decided to like cheat on its EVL, cheat on its homework basically by hacking into another system and leaving notes for its future self. I think this worry about AIS trying to take a bunch of steps autonomously to pursue a goal you've set, and then reward hacking basically taking some unexpected, harmful route to get to the end result.

46:21Speaker 4:That story is actually starting to play out in a pretty serious way. And so while the AI industry sees say the data center backlash as something to manage on the public perception front. The thing that they are truly truly worried about right now is I think alignment, cyber and bio risk, all right.

46:36Speaker 2:I think that's a good place to end it. Maybe not a good place, but place to end up. A great place to end it. Jasmine, thank you so much coming back on all blot. It's always good to chat.

46:46Speaker 4:Yeah, this is so fun. Thanks for having me.

47:00Speaker 2:Yeah, Joe, that was a fascinating conversation. I mean, it does feel like some of the struggle right now. I mean I wouldn't even necessarily say it's a marketing problem. It's just an identifying the upside problem for large hyperscalers who are building models that you know, like not only can take your job, but maybe they'll I don't know, take control of your bank account or kill us all with some new bio weapon that seems like a tough sales.

47:24Speaker 1:Pitch, right, but we'll give you a fifty thousand dollars bon.

47:28Speaker 2:No, and people still don't trust a fifty thousand dollars bonus.

47:32Speaker 3:It is weird that I believe maybe I'm wrong but I believe there's still probably like cities, town, states, et cetera, that have tax incentives for data centers.

47:44Speaker 1:And it always blows to my mind when I.

47:46Speaker 3:Read that, because like, this is the this is the bottlenecks and all bottlenecks, this is the scarcity to end all scarcity for all of that. Yeah, and it's like you're still competing or you still nominally have something on your books to attract data center companies, Like it seems like the obvious first move is like get rid of that and just reverse all the signs, right, It's like, no, you're picking double sales tax or whatever.

48:11Speaker 2:This was the other thing I was thinking, because Jasmine described the balance of power shifting to exactly that, right, Like, there aren't a lot of places that still have There are some, but not a lot that still have tax incentives to attract data science. Most of them are asking for payments from the companies themselves, And so I was thinking, as that becomes the standard maybe template for a lot of these projects, you know, hyper scalers and data center companies are really going to have to pay up for that space. It's another liability on their balance sheet. Right, Everything is just getting more expensive.

48:42Speaker 3:Yeah, that's right, So everything is getting more every component, and like maybe look at the mergions metas like cuts to teachers in that one parish in Louisiana is not really going to.

48:54Speaker 1:Move the dial, but like all on their own and every one of these yes, it's like the whole thing is going to get Well, think about.

49:01Speaker 2:Every data center you have now has a tax guarantee like that could be a substantial liability even for a big tech company.

49:09Speaker 1:No, of course, every single thing is going to add up.

49:12Speaker 3:So obviously, prior to the last three years, there were a lot of data centers being built in America. It's interesting to me that, like the people Jasmine talked to felt they had different opinions on like a GPU AI data center versus the old data center. That may be like how's the cash of Netflix films for that area or whatever, and that people perceive to be their difference. I am not surprised that a given how easy it was to build data centers up until recently, and b how most people in the AI industry their own anxiety is about something much more existential that they just didn't really anticipate in a very good way. That like no, this would be where the rubber hits the road, because it's like, if you're worried about like AI causing human extinction, like you're probably not thinking, like are the people in Jamesville, Like how have we convinced them enough that like they're tax bill is going to go down? Hey?

50:13Speaker 2:But if you want AI to cause human extinction, you got to get that data center up and running. That's the first step.

50:19Speaker 1:All right, that's right.

50:20Speaker 2:Shall we leave it there?

50:21Speaker 1:Let's leave it there.

50:22Speaker 2:This has been another episode of the Authoughs podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway and I'm Joe Wisenthal.

50:28Speaker 1:You can follow me at the Stalwart.

50:30Speaker 3:Follow our guest Jasmine Son, She's at Jasmine new Son. Follow our producers Carmen Rodriguez at Carmen Arman, dash Ol Bennett at Dashbot, Calebrooks at Kelbrooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lads content, go to Bloomberg dot com slash odd Lots. We have a daily newsletter and all of our episodes and you can shed about all of these topics twenty four to seven in our Discord, Discord, do gig, slash od.

50:53Speaker 2:Loogs and if you enjoy aud thoughts. If you like it when we talk about the AI build out, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely at free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.