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

Welcome and live show announcement

0:00Hello, Odd Lods listeners. I'm Joe Weisenthal. And I'm Tracy Alloway. We're the hosts of the Odd Lods podcast, and we've got something exciting for you. That's right. 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. That's right. So if you're in L.A., we're going to be recording a live show, some live recordings at the Vermont Theater in Hollywood on September 17th.

0:30We 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.com forward slash oddlots or click the link below in the show notes and come and say hi when you're there.

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The physical footprint of AI

0:56Hello and welcome to another episode of the Odd Lods podcast. I'm Tracy Alloway. And I'm Joe Weisenthal. Joe, there are a lot of interesting angles when it comes to AI. Yeah, you think so? 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. You know, in some sense, it's like the SaaS of yore. That's right.

1:28There's a window that you open on your browser and you type stuff into the internet and the internet spits 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. No, this has been like what is sort of fundamentally different about this, at least from a markets perspective. Right. Which is that when we had the SaaS boom of the prior decade, et cetera, like by and large,

2:04the successful companies, they didn't need to go into debt to build data. You could be in someone's garage or whatever, right? They were 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. There was always availability on an Amazon cloud. There was 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

2:37in a few hours. Like, yes, we are their physical constraints to the air build out, which basically in the history of the internet is totally novel. 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. There's no capital shortage. Right. There's no capital shortage. What there is, is a shortage of, again, power, land, regulatory and political approvals for actually building these things.

3:10Totally. 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 nimbyism. 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. But A, it's going to be, in theory, near somewhere. 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 have to be ideally near some sort of power infrastructure,

3:43some water infrastructure. These are things that also attract people. It's not hard to imagine that the middle of nowhere might not have a lot of energy and water infrastructure. Yeah, right. Exactly. Otherwise, there'd be a bunch of people there. Right. 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 Hochul, the New York governor, about her moratorium on building

4:15new data centers. So there seems to be a lot of, let's say, feelings when it comes to data centers. And, you know, it did not get as much attention as Kathy Hochul, 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. I have some reasons why maybe it didn't map to people's view of Texas as a state that's just open for business in a way that big blue states aren't.

4:45But as you say, it's bipartisan. And then I 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. Lately, we've been 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

5:20safety issues. What are they going to be responsible if everyone loses a job, etc. 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 backlash politics. 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'll kill you too. Well, I was going to say, you don't like data centers because you're worried about

5:53the noise complaints. I don't like data centers because I'm worried they're going to kill me. We are not the same. We are not the same. All right. Well, that is the perfect way to put it. And we

Road trip through the upper Midwest

6:01have the perfect guest to try to talk through all of these various things. We're going to be speaking once again with Jasmine Sun. 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 Substack. So Jasmine, thank you so much for coming back on All Thoughts. I'm so excited to be here again. 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

6:35center sites. 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 he 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

7:06Lakes than it did driving across the Texas desert. I'm sorry, Greg Abbott. 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, though 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 Elonverse, etc., and how much tech activity is happening there. I probably do think a little

7:41bit 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? 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 50 states. I think each of them have maybe around like 50, maybe 200 projects or proposed projects in the state. So it's not an

8:13incredible amount compared to, again, Virginia and Texas, where you have 600, 800 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 a sales tax exemption on the chips and on some construction costs. So that made it a somewhat attractive state. Gretchen 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

8:46data 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 there are both things that 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.

9:23I 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 there are data centers 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 Foxconn site, there was a huge fiasco where Trump said they were bringing all these manufacturing jobs back.

9:56They weren't built. So the de-industrialization history was really interesting. 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, the bipartisan politics of data centers. The fact that in both states, you were seeing roughly 70-30 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

10:30Abdul El-Sayed was talking a lot about data centers as sort of one of the examples of money infecting politics. Yeah. So we're recording this on August 12th. 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?

11:05Yeah, 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 a bellwether 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 salience. 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

11:40in Wisconsin, and just talked to random people at Fishgiving, which was this like funny fish festival that we went to in order to talk to the locals. I had never heard about it before. Yeah, we both want to go to Fishgiving. I kind of want to go even though I don't like fish. No, it was a real event. It was amazing. There's an Elvis impersonator. Obviously, it's Fishgiving. America is so good. That theme was life, liberty, and the pursuit of fish. It was amazing. It was on Lake Michigan. But every single person we talked to there had an opinion on the data center. Because when there is a gigantic, I think, 700-acre facility being built near you, you will care about it. And so

12:13salience 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 70-30, you're roughly against data centers. I talked to Charles Franklin and Marquette who had done this explicit polling. But the salience is much lower. Data centers does not rank in like the top five issues electorally unless you were literally living in one of those communities. Over 90% of publicly traded companies are listed outside the United States. So why limit your

Data center opposition and local politics

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15:44These are always very sensitive questions to ask a journalist, and we're supposed to just be like open-minded, et cetera. Of the people you talked to who were concerned about data centers, in your view, like, there are some really wacky reasons to oppose. There are some, like, I would, 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 totally get that. On the other hand, if I hear, you know, some conspiracy theory, you know, some maybe less informed

16:21water takes, or, you know, my pet has started vomiting because a new data center was nearby. I'm like, oh, 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? I think this is actually one of the biggest shifts for me. I think I came in with expectations maybe a bit

16:53more 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're 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 Francesca Hong 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

17:27centers, 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 of internet data centers. Some people said, I use AI, it helps me write emails, whatever. I would say the biggest difference was not, like, were people informed, but how much trust did 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

18:00mistaken about how data centers work. It was much more when DTE and open AI say they're going to cover the cost of electricity rate hikes. We don't believe them because DTE has raised their rates four out of the past five years, right? Or, yeah, sure, you know, they say they're going to bring 500 jobs, but, like, we saw how Foxconn 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.

The pitch for property tax revenue

18:27Can 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? 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 Loudoun County,

18:59Virginia, the data center capital of the United States. Data centers, I think, pay and make up over 50% of the property tax base. And part of the reason that Northern Virginia public schools are very well-funded is because of the data centers. And so people have sort of accepted that trade. Or when, you know, Microsoft brought their Fairwater data centers into Mount Pleasant on the site of the former Foxconn factory that was supposed to be, Microsoft is now paying on track to pay about 20 million in property taxes for 2026, which is a huge boon to the tax base. And so for a lot of

19:30local officials who are thinking, how do we bring back our commercial tax base 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. 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 500, 1,000 jobs. But those last two to four years, sometimes they're outsiders. They're not people

20:04from the community. These are the actual jobs associated with the construction of the data center. Right. Okay. Yes. You might only have like 50 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 worried that AI is going to go rogue and kill them all. Like people didn't bring up those kinds of fears as much. It was just like, why are we as a community taking the hit of

20:38having 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, we all need energy. 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 grok. And it's kind of unclear, like, how's that going to benefit me directly? Jobs, not really a big benefit. And then AI itself, people are kind of whatever about. In some of the places where data

21:13center projects are like well off the ground, some of these like tax benefits or whatever are real, right? Like isn't Facebook or Meta in Louisiana, like they are cutting really big checks. 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 it is likely that these can meaningfully move the dial on terms of pure dollars coming in? And like, would there be in theory a solution of like, well,

21:47we're going to, you know what, let us like pay your taxes for two years. That will show us, you 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 taxes 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. 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

22:20has 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 2023, 2024, 2025, there was no data center backlash. Right. And so at the time it almost feels like the opposite, like the mayor of Port Washington, where this 700 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 base again. And reeling from

22:54that, this guy Ted Nijske, 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 the same way, if you guys remember with HQ2, Amazon 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

23:27are 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 50K 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 increased community distrust and backlash. Now Microsoft is saying we don't want to do NDAs anymore. And I don't think local

24:01officials 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 in 2026 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?

Power asymmetry and corporate distrust

24:20Yeah, it feels like the balance of power has shifted a little bit. But that said, reading your 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 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. Yeah. And again, I think this is so informed by things like the Foxconn fiasco where people felt

24:53that their 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 $5,000 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 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

25:23data center developer is going to write in. 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 tax guarantees are some of these or making deals to say, we're going to pay for 80% of our forecasted electricity demand upfront because sometimes those forecasts are wrong and we don't want to like leave you guys on the hook. I think those are really important to make,

25:54but fundamentally it's just such a power asymmetry. I mean, one of the most egregious examples that I came across was that Saline Stargate center in Michigan, where Saline is a city town of literally less than 3000 people. It's super rural. It's a little bit out of Ann 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 over exclusionary zoning. And there is no way your town of like less than 3000 people is going to even bother with a lawsuit

26:27against like opening Oracle and related digital. It's just not going to happen. And so they immediately settle, of course, for some like improvements to like a fire truck and some investments in farms and whatever. But like, again, the power asymmetry 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. So it did occur. 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

27:02decades in American history, where you have the capitalists, the tech companies, and the hardhats 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, etc. The jobs that are being created are those jobs that like people might have in their head as like good middle class job or the

27:35jobs 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.

Construction jobs and community impact

27:47Yeah, 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 earth movers, 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 smoke stocks, and we heard the noise, that was what

28:22was 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 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

28:52created. 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 $100 cash per diems, 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. But again, it's just not that many people. So if

29:26you'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 brownfield that the factory was built on and leave $30 million of hazardous waste in the ground for the community

29:57to deal with, like that's a lot of broken trust. And so people are not thinking, oh, let's bring GM back. They're thinking, man, like we trusted that company and they screwed us over, right? Yeah, I wanted to ask you actually about the social dynamic between the construction workers 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 do they actually feel about each other? And I kind of I got to say, this is a free idea to anyone

30:28in 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. You could have some interesting storylines. That's just an aside. But what was that relationship 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 going to go see?

30:59Yeah, I was thinking something a little bit more lighthearted. But you know, you never know what direction it could go in. 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 NDAs. And also, I just heard anecdotally 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 counselors resigning bad blood between neighbors. The opposition is pretty intense. And so my guess is that

31:31these trades people are a little bit worried. I mean, everyone I talked to in the trades was aware of the backlash. They were like, yeah, we know some people are 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.

32:04Yeah, that was interesting. 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 50% 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

32:37construction project that may not even start paying taxes until 10 years in the future is, well, 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. Just to quickly go back to the influx of contractors thing, are there any local businesses like, I don't know, restaurants, sandwich shops, gas stations that are happy that like you now have 500 workers who maybe weren't there before and they're all getting their lunch at your shop or something like that?

33:07Yeah. 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 Lowe's equivalent in their community that sold like, whereas 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 orders now. So I do think that small businesses in the area are probably happy about the influx of new

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Industrial revitalization and unique opposition

37:10Right 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 Reduction Act and all of this re-industrialization efforts. But some of these issues are going to be exactly the same. If you're going to build an EV battery plant, that's going to be noisy. That's going to bring in a lot of temporary workers. If you're actually going to have state-of-the-art, it's

37:45going 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 the scale of the old River Rouge GM factory. Modern factories just aren't like that. But do you think some of these concerns, these fights, these issues where, I don't know, it seems like it's not democratic in the ideal sense if certain proponents simply do not feel comfortable

38:16making their voices known because they're 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? So I think any big, heavy manufacturing, any big industrial development does face some opposition, for sure. And that's kind of the classic NIMBY stuff, right? Yeah. But one thing that was really surprising to me is how much more intense data center opposition is,

38:51even when compared head-to-head against these other kinds of things. So Heatmap News has done some really good polling 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. Interesting. 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. But there is something about AI data centers, whether it's people don't really vibe with AI,

39:24they'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, like, I do think that the data center opposition is of a unique and different scale to the opposition to these other things. Well, then I wonder, I mean, if even people are more comfortable with solar farms or nuclear facilities, which, you know, a couple of decades ago, people did not want them around at all,

39:55is 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, etc. 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. 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

40:27to 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 like 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 that classic NIMBY story

41:01from 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 NIMBYs, it's like, I do want housing somewhere else. I do want a nuclear plant somewhere else. With data centers, people are saying, 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, and 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? Yeah, it feels like there's a lot of generalized downside, given that people are worried about

41:33things 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

State moratoriums and regulatory solutions

42:09the offer. Yeah, I mean, it's really interesting coming back to SF 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 like need to make the bribes bigger? Like, what if we just like mail checks to 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. I think

42:40another and I actually became much more sympathetic to the statewide moratoriums after my trip than before it. 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 Hochul's or Greg Abbott's or whatever, as like, again, we know that there's this power asymmetry between these tiny towns and these big companies, we shouldn't expect a town of 3000 or 20,000 people to get a good deal to extract the right guarantees. I think that actually bringing that up to the state

43:11level and maybe taking a pause for the state officials to figure out like, we want, you know, x millions of community benefits per megawatt, or we're going to mandate these environmental standards, closed loop cooling, x percent renewable energy, etc. We are these are going to be the rate prior protections we implement at the state level. And we will pause until everyone agrees to that. 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

43:41standards 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 buildup 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 case. Like I was disappointed, frankly, and a lot of the local officials I met with how poorly they were able to articulate like why it would

44:17be 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 community engagement process that is required in order to achieve that. But it's also just like very, very hard, you know, right? I 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

44:48corporate America at the moment, it feels very difficult to convince them otherwise. 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

45:20centers in space, for example, which is extremely speculative at this point, but is something that folks are investing in the ultimate nimbyism, send them to know, because 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. So when you get the aliens knocking on your door, oh, gosh, 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? I didn't explore the data centers issue as much as

45:52I would have liked to when I was there, because I was mostly sticking to the cities. And similarly, the data center built out was in, say, Guizhou 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 a hypothesis, my sense is that, as with other big developments in China, there is just not a culture of resistance. Like, nimbyism doesn't really exist in China, because people do not own private property anyway. And so like, when your land gets eminent domain, or taken for a government project, there's not as much of a

46:25channel in order to push back both culturally, there's not an expectation. And politically, it's not a democracy, it's an authoritarian 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 a local town can actually stop a hyperscale developer from coming in.

46:55That makes sense. By the way, you know, like when Governor Hochul came on OddLot, 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. Yeah. And I think a lot of people actually found that to be fairly convincing in the sense like, where it's happening so fast, these towns do not really have the sort of, I guess you'd call it state capacity or government capacity to really figure these things out on their own. They don't have the in-house expertise. Let's come up with a repeatable template that we have reason to believe

47:29works in town after town. I don't know. It seems plausible to work. Something I'm curious about, like putting back your SF hat on, you know, clearly the AI 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 going to need maybe to rethink the welfare state. We're

48:04going to need to think, you know, some VC rights to think about the meaning of work or whatever.

Lab anxieties and near-term harms

48:10How much of would you say 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. They thought it was going to be about jobs. 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

48:44to be one thing and it turned out to be another thing? I mean, I think that's a big issue. Jobs, of course, people are really concerned about. Like when you look at the national polling there, like people are certainly anxious about their jobs. But yeah, data centers, I don't think people expected. The kids 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 in 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 super intelligence and whether that's going to like

49:18have a coup or something like that. 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 a 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

49:49lives 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 this data centers thing. And even with the jobs thing, 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 collar job 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 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

50:21in 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. 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

50:55like within the labs or within SF more than data centers, even more than job loss, which they might be comfortable talking about because it can just sort of be solved maybe by tax and redistribute, et cetera, that like this, like sort of like real, like the big one is like growing in SF, like the big fear. 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

51:26that people here are honestly worried about is cyber attacks. Like I think mythos was a huge wake-up call, both through people in SF and frankly, people in DC is like, what does it mean that this thing is now an extremely effective cyber weapon? What does that mean for open source 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 12 months? What does that mean for the national securitization of this technology? And then the hugging face incident was to a lot of people look like

52:02these sci-fi stories that rationalist forums were talking about five years ago. They were like, shoot, is it coming true? Like our internal model that we were testing decided to like cheat on its eval, cheat on its homework, basically by like 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. That story is actually starting to play out in a

52:32pretty 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. I think that's a good place to end it. Maybe not a good place, but a logical place to end it. A place to end it. Jasmine, thank you so much coming back on All Thoughts. Always good to chat. Yeah, this is so fun. Thanks for having me.

The rising costs of the AI buildout

53:08Yeah, 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 bioweapon. That seems like a tough sales pitch. Right. But we'll give you a $50,000 bonus. And people still don't trust the $50,000 bonus. It is weird that I believe, maybe I'm wrong,

53:44but I believe there's still probably like cities, towns, states, et cetera, that have tax incentives for data centers. And it always blows my mind when I read that because like, this is the bottleneck to end all bottlenecks. This is the scarcity to end all scarcity. You should be milking it for all it's worth. 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

54:15that and just reverse all the signs. Right. It's like, no, you're paying double sales tax or whatever. This was the other thing I was thinking, because Jasmine described the balance of power shifting to exactly that. Right. Like there are a lot of places that still have, there are some, but not a lot that still have tax incentives to attract data centers. 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, hyperscalers and data center companies are really going to have to pay up for

54:45that space. It's another liability on their balance sheet, right? Everything is just getting more expensive. Yeah, that's right. So everything is getting more, every component and like, maybe look at the margins, metas, like cuts to teachers and that one parish in Louisiana is not really going to move the dial, but like on their own. And every one of these, yes, it's like the whole thing is just going to get more expensive. Think about every data center you have now has a tax guarantee. Like that could be a substantial liability, even for a big tech company. No, of course, every single thing

55:20is going to add up. 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 maybe like housed the cache 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 be how most people in

55:56the 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. Cause it's like, if you're worried about like AI causing human extinction, like you're probably not thinking like, oh, are the people in Janesville, like how have we convinced them enough that like their, their tax bill is going to go down. Hey, but if you want AI to cause human extinction, you got to get that data center up and running. That's the first step. All right. That's right.

56:29Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway. And I'm Jill Weisenthal. You can follow me at the stalwart. Follow our guest Jasmine Sun. She's at Jasmine New Sun. Follow our producers, Carmen Rodriguez at Carmen Armand, Dashiell Bennett at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to Bloomberg.com slash Odd Lots. We have a daily newsletter and all of our episodes. And you can chat about all these topics 24 seven in our discord, discord.gg slash Odd Lots. And if you enjoy Odd Lots, if you like it,

57:04when 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 ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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