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.
Oh yeah, I want to have some interesting story lines. Sorry. Oh, yeah. I mean, just 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 to look at him, 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 you to see? Yeah. I was thinking something a little bit more lighthearted, but, you know, you never know what direction it could go in.
Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway and I'm Joe Weisenthal. Joe, there are a lot of interesting angles when it comes to AI.
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 SaaS of yore.
That's right. There's a window that you open on your browser and type stuff into the internet, and the internet spits stuff out at you.
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. Now this is being like what is sort of fundamentally different about this, at least from a market perspective.
Yeah, right. Which is that when we had the SaaS boom of the prior decade, etc., like by and large, the successful companies were not they didn't need to go into debt to build their garage or whatever. They were like building data centers and 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 companies building on top of that, they just plug into there. There was always availability on an Amazon cloud or it'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 are there. Physical constraints. Did the AI 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 yeah, 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.
Totally. And, you know, this is like such a big country that it's like I always think like, yeah, data centers are great. I 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 like, everybody has that thought, oh, there must just be somewhere out in the middle of nowhere to put it. But hey, 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 an axis near some sort of power infrastructure, some 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. Yeah, right. Exactly. Otherwise there would 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 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. 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. That has some reasons why maybe it didn't map to people's view of Texas is a state that's just open for business in a way that big blue states aren't. But it's a as you say, it's bipartisan. And then I'd say like one other thing that I think is interesting about it is like AI in general. 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 loss. 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, you know, again, literal like safety 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 thing are the fears, even though I'm, you know, anxious like, that are really like driving the polit, 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 the 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 have 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 Odd Lots.
I'm so excited to be here again.
So congrats on the piece. We were saying earlier, it 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.
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 in the Upper Midwest is because it sounded a lot more pleasant to spend July by Great Lakes than it did driving across the Texas desert.
I'm sorry, Greg Abbott. No, I think that's a totally good reason. The Midwest, 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. But Northern Virginia, 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 versus, etc., 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.
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 to 100 projects or proposed projects in the state. So it's not an incredible 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 data centers. And so she did a very controversial photo op with Sam Altman at the Stargate site. And Saline, which has become one of the big data center fights in Michigan. And so they're 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 and hour out of, you know, an hour out of Detroit, an hour out of, you know, 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 deindustrialization. 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 they're 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, in Mount Pleasant with the Foxconn site, there was a huge fiasco where Trump said they were bringing all these manufacturing jobs back. They weren't built. So the deal and our civilization 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 I 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 Abdul El-Sayed was talking a lot about data centers as sort of one of the examples of money, in fact, in 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?
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 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 ceilings. 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 2 to 6 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 the locals? I had never heard about it before. We don't want to go. I kind of want to go even though I don't like that. No, it was a it was a real event. It was amazing. There's an Elvis impersonator. Obviously it's fish giving. America is so good. It was. Yeah, it was really great. 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 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 70/30, you're roughly against data centers. I talked to Charles Franklin in Marquette, who had done this explicit polling, but the salience is much lower. Data centers does not rank. And like the top five issues electorally, unless you were literally living in one of those communities. Interesting.
So I'm curious, like, these are always very sensitive questions to ask a journalist. And we're supposed to just be like open minded, etc. like of the of the people you talked to who were concerned about data centers, in your view. Like there were some really wacky reasons to oppose. There were some like, I would I 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, you know, some maybe less informed water tanks or, you know, our my pet is started vomiting because the new data center is nearby. I'm like, oh, maybe you're reading too much like Instagram Reels, etc. 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 was. So I think I came in with expectations 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 Francesca Hong event who's wearing a hot 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 are 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 of internet data centers. And, you know, some people said they I use I help you my 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 don't we're just mistaken about how data centers work. It was much more when DTE and OpenAI say they're going to cover the cost of electricity rate hikes, we don't believe them because DTE has raised our 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.
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, that ugly slab of concrete that's just been sitting there for years, and we want to put something on top of it.
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, Virginia, 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 local 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, 1000 jobs, but those last 2 to 4 years, sometimes they're outsiders. They're not people from the community.
These are the actual jobs associated with the construction of the data. Yes. Right. Okay. Yes.
You might only have like 50 permanent jobs. It's, 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 the AI is going to, you know, go rogue and kill them all. Like people didn't bring up those kinds of fears as much. It was just like, you know, 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, we all need energy. I think the trade with a 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 is 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 center projects are like, well off the ground.
Some of these, like tax benefits or whatever have proven are real, right? Like, isn't Facebook in LA or Meta in Louisiana? Like they are cutting really big checks. Yeah. In your view, if they're like Jasmine, come here and like bring both sides together and solve this like a would you argue that like no. Like there it is likely that these can meaningfully move the dial on terms of pure dollars coming in and like, you know, would there be, in theory, a solution of like, well, we're going to, you know, let us like pay your taxes for to let us pay your taxes for two years. That will show us, you know, even before we break ground, like just setting aside all the complicated things. Could you imagine as we go forward, eventually, like some structure is where it's like, okay, the company does give some tangible upfront commitment. People get to feel it. They get to see their tax 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 has changed so dramatically in the last 1 or 2 years. So at the time that a lot of the, proposals show up to, say, your city council in 2023, 2024, 2025, 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 the 700 acre, big data center facility is being built in Wisconsin. He was telling me, like, 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 that, this guy tonight, 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 up town to Sheboygan. Like, what if we lose the bid to another city in the same way? If you guys remember with HQ2? Yeah, 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 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 $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 increase community distrust and backlash. And 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 AI 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?
Yeah, 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, you know, 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 are 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 that their part time city councilman 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 you, 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 OpenAI'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. So let's say that the AI bubble pops or you know, OpenAI 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. But 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 OpenAI 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 against, like, OpenAI, Oracle and related digital. It's just not going to happen. And so they immediately settle, of course, for some like improvements. So like a fire truck and some investments and 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.
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 then you get the hard hats are actually kind of excited, 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 a good middle class job. But the jobs that we had in our glory days, how influential within these communities are? There's sort of construction companies, some of them, or workers, some of them unionized in some of these cases who are like, no, we really want the, we want that activity.
Yeah. I mean, I think one of the most memorable conversations I had was with this guy, Terry McGowan, who's, senior VP at the International Union of Operating Engineers. So people who operate like trains or, sorry, operate like cranes. And, like, I don't know what these gigantic machines are called, but earthmovers people like that. He was he was awesome because he was thinking about this from kind of 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 smokestacks and we heard the noise, that was what was going to feed our kids, that was going to send our kids to 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 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 $100 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 or the past couple of years. 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 and Janesville was the, was sort of revered as this is what the community is built on. This is the thing that keeps us going. But when 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 to deal with, like, that's a lot of broken trust. 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 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 do you how do 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.
