WEBVTT - Britain’s Debt Problem, AI’s Local Burden, Poland’s Economic Boom 0:00:14.960 --> 0:00:18.400 This is Waltree Week. I'm David Weston bringing you stories 0:00:18.440 --> 0:00:22.160 of capitalism. The data center frenzy is in full bloom, 0:00:22.560 --> 0:00:25.400 but the neighbors are restless. Is there a way for 0:00:25.480 --> 0:00:27.520 the rest of us to get the benefits from AI 0:00:27.760 --> 0:00:30.280 without compromising the interests of those who will be living 0:00:30.520 --> 0:00:34.199 next door? Plus Earlier we brought you the story of 0:00:34.240 --> 0:00:37.199 the brain drain from New Zealand. People and talent are 0:00:37.200 --> 0:00:39.960 flowing the other way. For Poland, it's one of the 0:00:40.000 --> 0:00:43.640 fastest growing economies around, driven in part by the best 0:00:43.640 --> 0:00:47.960 and brightest returning home, and we use it for everything 0:00:48.000 --> 0:00:52.599 from military equipment to package goods. Aluminum is ubiquitous, and 0:00:52.640 --> 0:00:55.640 now it's caught in between Trump tariffs and a war 0:00:55.720 --> 0:00:59.880 in Iran. But we start with the drama that is 0:01:00.080 --> 0:01:03.000 politics in the United Kingdom, as the fifth Prime minister 0:01:03.080 --> 0:01:06.000 in eight years is finding to avoid yet another turnover 0:01:06.240 --> 0:01:09.800 at number ten and the markets are keeping score. How 0:01:09.920 --> 0:01:12.280 much say does the guilt market have in who gets 0:01:12.319 --> 0:01:15.800 to run the country? John Authurs is Bloomberg's senior editor 0:01:15.920 --> 0:01:20.920 for Markets. So John, there's a lot of political upheaval 0:01:21.000 --> 0:01:23.880 drama playing out in the United Kingdom right now. At 0:01:23.880 --> 0:01:27.480 the same time bonds are selling off guilts. Yes, the 0:01:27.520 --> 0:01:30.280 yields have gone up. Is there a connection between the two, 0:01:30.319 --> 0:01:30.600 and if. 0:01:30.520 --> 0:01:34.040 So, what Yes, there's certainly a connection, which is that 0:01:35.000 --> 0:01:37.840 Britain has even more than where we are here in 0:01:37.840 --> 0:01:39.839 the US the rest of the Western world, it has 0:01:39.880 --> 0:01:44.080 a fiscal problem. We don't have much headroom left to 0:01:44.160 --> 0:01:49.680 spend money in the UK. Any sign of concern about 0:01:49.680 --> 0:01:54.000 political instability will in its own right worry bond markets, 0:01:54.520 --> 0:01:57.360 and specifically at the moment, because Kirstama is in a 0:01:57.360 --> 0:02:00.720 lot of political trouble. Any challenger, even those who you 0:02:00.760 --> 0:02:04.680 could argue are to his political right, will want to 0:02:04.760 --> 0:02:07.840 do something to show they've made a difference once they 0:02:07.880 --> 0:02:10.120 take over from him, and that's going to involve spending 0:02:10.160 --> 0:02:12.600 some more money on something that's going to involve being 0:02:12.639 --> 0:02:16.799 more lenient on fiscal policy than labor has been so far. 0:02:17.440 --> 0:02:23.120 So plainly the risks are towards more fiscal spending. That's 0:02:23.200 --> 0:02:27.959 plainly something the guilt market dislikes. There's a long history 0:02:28.240 --> 0:02:35.959 of friction between a labor government that has its origins 0:02:35.720 --> 0:02:39.680 in socialism and the unions and bond markets. 0:02:39.919 --> 0:02:42.840 Naturally, there is also a more recent history between the 0:02:42.880 --> 0:02:46.720 Conservative government the Bard market. Yes read Ritler's Trust. We 0:02:46.840 --> 0:02:48.480 remember that. But one of the things you pointed out 0:02:48.480 --> 0:02:51.120 one of your columns is actually the yields and guilt 0:02:51.200 --> 0:02:54.640 right now are above where they got to unders Trust exactly. 0:02:54.680 --> 0:02:57.160 I mean that there are to be fair to the 0:02:57.160 --> 0:02:59.480 current labor government. There are reasons for that in the 0:02:59.520 --> 0:03:03.239 interests have risen across the world since then. And what 0:03:03.360 --> 0:03:07.480 really can endanger a financial extent is when yields rise 0:03:07.960 --> 0:03:12.120 very fast, which is absolutely what happened under Liz Trust. 0:03:11.919 --> 0:03:16.680 She took the market by surprise and thereby slipped on 0:03:16.680 --> 0:03:18.560 a banana skin, whereas what we've got at the moment 0:03:18.680 --> 0:03:22.359 is more of a slow motion car wreck with labor. 0:03:22.520 --> 0:03:27.600 But yes, the ultimate fact is true. The higher the 0:03:27.680 --> 0:03:31.240 yields go, and they are now even higher than when 0:03:31.360 --> 0:03:36.360 they toppled Liz trusts, the less room for maneuver any 0:03:36.440 --> 0:03:41.200 government has. And to some extent this is a systemic 0:03:41.280 --> 0:03:43.720 problem for the UK because as we've just said that 0:03:44.320 --> 0:03:48.920 Liz Trust was and is conservative. This is universal across 0:03:48.920 --> 0:03:53.680 the party is a certain lack of trust and the 0:03:53.680 --> 0:03:57.480 British two party system is breaking down at present, and 0:03:57.560 --> 0:04:01.280 both Greens, who are basically a British Woman of the 0:04:01.280 --> 0:04:05.120 the AOC Bernie Sanders left and the Reform Party of 0:04:05.160 --> 0:04:08.200 the Nigel Farash were obviously very similar to the Donald 0:04:08.240 --> 0:04:12.280 Trump margat Wright. Both of those are on the face 0:04:12.320 --> 0:04:14.960 of it, more inclined to splash money around and do 0:04:15.080 --> 0:04:18.120 things that the bond market really dislikes than the incumbents. 0:04:18.160 --> 0:04:23.840 There's a very worrying dynamic about the entire British political situation, 0:04:24.440 --> 0:04:27.480 or at least it's very worrying if you're a guilt investor. 0:04:28.360 --> 0:04:32.120 We know from your calm that you are a student 0:04:32.200 --> 0:04:35.239 of popular music. And I don't remember the Ritha Franklin 0:04:35.279 --> 0:04:36.360 song Who's Zoom and Who? 0:04:36.560 --> 0:04:36.760 Yes? 0:04:36.960 --> 0:04:40.080 So that the nineteen eighty five I remember that that 0:04:40.120 --> 0:04:42.240 was actually my first time in America. But anyway, carry on. 0:04:42.480 --> 0:04:44.560 But if you take the bond market the guilt market 0:04:44.560 --> 0:04:46.680 the one hand, and the political system on the other, 0:04:46.760 --> 0:04:49.400 Who's zoom and Who? I mean you've explained how that 0:04:49.400 --> 0:04:51.919 the political turmol can affect the guilt market. Is the 0:04:51.920 --> 0:04:54.640 guilt market affecting what's going on in politics as well. 0:04:55.000 --> 0:04:55.719 At the moment? 0:04:55.839 --> 0:04:58.800 I mean, certainly in the Liszt trust incident, Yes, that 0:04:58.960 --> 0:05:01.680 was very much case that it was the bond market 0:05:01.720 --> 0:05:04.960 that basically said no, you can't do this, and force 0:05:05.080 --> 0:05:07.680 the expulsion of first the Chancellor and then the Prime 0:05:07.680 --> 0:05:13.839 Minister itself. This time around, that's less clear. You could 0:05:13.839 --> 0:05:16.480 certainly say that at this point the bond market has 0:05:16.560 --> 0:05:20.520 become a kind of a sheet anchor or a straight 0:05:20.720 --> 0:05:23.800 jacket for whoever is in charge. But it will be 0:05:23.839 --> 0:05:27.000 more uncomfortable for, you know, a party of the left 0:05:27.040 --> 0:05:30.680 that actually has fewer hang ups about spending taxpayers money. 0:05:31.880 --> 0:05:37.160 But you know, the overall position is difficult either way. 0:05:38.080 --> 0:05:40.599 And the other thing that's quite interesting compared to history 0:05:40.640 --> 0:05:45.440 is that it used to be the currency market. So 0:05:46.040 --> 0:05:49.960 Harold Wilson have being forced to devalue in the pound 0:05:50.000 --> 0:05:52.839 and then going on television to say that the pound 0:05:52.880 --> 0:05:56.200 in your pocket, of course isn't worth any less, which 0:05:56.400 --> 0:05:59.920 absolutely wasn't true, and then Labor government of the seventies 0:06:00.080 --> 0:06:02.960 being forced by a run on the pounds to go 0:06:03.040 --> 0:06:07.359 to borrow from the IMF, and John Major's government basically 0:06:07.360 --> 0:06:10.840 never recovered from the Black Wednesday attack on sterling by 0:06:10.960 --> 0:06:14.520 George Soros and others. So it used to be the 0:06:14.600 --> 0:06:20.280 currency market that's really inflicted pain. And now that currencies 0:06:20.400 --> 0:06:26.360 do tends to float more gradually, more easily, and now 0:06:26.400 --> 0:06:29.560 that we've had many years of being used to extremely 0:06:29.600 --> 0:06:33.680 low bond yields, that cheap money is being treated as 0:06:33.720 --> 0:06:36.599 a fact of light for a birthright. Almost it's the 0:06:36.600 --> 0:06:39.080 bond market that has now taken over as the anchor 0:06:39.120 --> 0:06:40.039 the great limitation. 0:06:40.640 --> 0:06:44.159 The UNI Kingdom has a historically high ratio of debt 0:06:44.160 --> 0:06:46.880 to g gyps, but they're not alone in that. There 0:06:46.880 --> 0:06:48.040 may be a little bit more than some of the 0:06:48.040 --> 0:06:49.800 rest of us, maybe a little less than some as well. 0:06:50.960 --> 0:06:53.960 Is what we're seeing in the UK simply what's going 0:06:54.000 --> 0:06:55.680 to happen in other parts of the world, including the 0:06:55.760 --> 0:06:57.039 United States, just sooner. 0:06:57.480 --> 0:06:59.839 Yes, there's a reason that the UK has more of 0:06:59.839 --> 0:07:03.320 a problem, or more of an instant problem, which you 0:07:03.360 --> 0:07:07.040 can explain easily enough from geography and history. The UK 0:07:07.480 --> 0:07:10.280 is an island which got rich by trading with other people. 0:07:10.480 --> 0:07:13.360 The US is basically a continent that got rich by 0:07:13.400 --> 0:07:17.360 trading with itself. So exports have always been a much 0:07:17.480 --> 0:07:21.760 more important part of the UK equation. When you have 0:07:22.200 --> 0:07:26.040 pressure on the currency, when you have inflation elsewhere, it 0:07:26.080 --> 0:07:30.040 will affect the UK much more swiftly, much more dramatically. 0:07:30.320 --> 0:07:34.640 It is much more dependent on the generosity of others 0:07:35.160 --> 0:07:42.800 than the states. That said, America's share of GDP public 0:07:42.840 --> 0:07:45.800 debt as a share of GDP was in around numbers 0:07:46.120 --> 0:07:49.480 twenty years ago, before the global financial crisis sixty percent. 0:07:51.800 --> 0:07:55.240 Cause are occasioning great alarm. The Simpson bowls if you 0:07:55.280 --> 0:07:57.200 remember that attempts to cut the deficit. 0:07:57.480 --> 0:07:58.720 It's now one hundred and twenty. 0:08:00.640 --> 0:08:05.560 And whatever you think of the relative merits of Joe 0:08:05.560 --> 0:08:10.679 Biden and Donald Trump, both of them spent money, whether 0:08:10.760 --> 0:08:16.800 through tax cuts or fiscal larges or both, in a 0:08:16.840 --> 0:08:20.360 way that suggested that this just wasn't an issue. It 0:08:20.400 --> 0:08:23.480 will become an issue at a time. The US is 0:08:23.560 --> 0:08:28.239 a bigger, more closed economy than the UK. It can, 0:08:28.840 --> 0:08:32.280 and it has the exorbitant privilege of the dollar. It 0:08:32.320 --> 0:08:37.280 doesn't it's not it's not disciplined by potential runs on 0:08:37.320 --> 0:08:41.439 the currency like the UK is. But ultimately, if you're 0:08:41.960 --> 0:08:48.840 borrowing more than you have and can't generate the money 0:08:48.880 --> 0:08:51.400 to repay it, you're either going to get very bad 0:08:51.480 --> 0:08:53.560 inflation or you're going to go bust. You're not going 0:08:53.600 --> 0:08:55.320 to go bust. You're going to get very bad inflation 0:08:55.840 --> 0:08:59.720 and that that is ultimately the risk that afflicts this country. 0:08:59.760 --> 0:09:04.319 To you were a young lad, a young boy during 0:09:04.320 --> 0:09:07.960 the Wilson time and the crisis when there was really 0:09:08.040 --> 0:09:10.760 high inflation in the UK, and as you say, the 0:09:10.760 --> 0:09:14.920 power was devaluing, and I think some would say that 0:09:15.040 --> 0:09:18.680 was a predicate for what happened with Margaret Thatcher and 0:09:18.720 --> 0:09:21.880 a fundamental revision of the economy. Is there any prospect 0:09:21.920 --> 0:09:24.960 that could happen again in the UK. Could we have 0:09:25.000 --> 0:09:25.680 a new Thatcherer? 0:09:27.240 --> 0:09:29.920 We certainly can't see her yet. Although that being said, 0:09:30.480 --> 0:09:33.160 if you think back to seventy five seventy six, Margaret 0:09:33.200 --> 0:09:36.320 Thatcher wins the leadership of the Conservative Party in seventy five, 0:09:36.800 --> 0:09:40.360 doesn't actually get the general election which becomes prime minister 0:09:40.480 --> 0:09:45.439 until seventy nine. She certainly didn't seem to be quite 0:09:45.640 --> 0:09:48.040 the radical departure that she would turn out to be 0:09:48.840 --> 0:09:51.439 in seventy five. So maybe there is somebody out there 0:09:52.120 --> 0:09:55.280 who is hiding in plain sight already. I think the 0:09:55.320 --> 0:09:59.760 points I would make about the Thatcher regime I was 0:10:00.200 --> 0:10:02.560 when she got in twenty four, when she left, my 0:10:02.679 --> 0:10:05.760 generation of Brits still basically think she's running the world. 0:10:06.000 --> 0:10:08.360 And you could also argue there's an analogue to that 0:10:08.520 --> 0:10:10.839 in the States, which didn't get into anything like as 0:10:10.880 --> 0:10:13.560 much trouble in the seventies as Britain did, but did 0:10:13.559 --> 0:10:16.000 get into a lot of trouble. Paul Volka is the 0:10:16.080 --> 0:10:19.840 key figure who changes America around. He is appointed by 0:10:19.880 --> 0:10:20.720 Jimmy Carter. 0:10:21.160 --> 0:10:23.440 As was Alfred Kahan as deregulation. 0:10:24.200 --> 0:10:29.400 Yes, and would the American economy have boom the way 0:10:29.440 --> 0:10:31.320 it did in the eighties if you hadn't then had 0:10:31.480 --> 0:10:33.840 Ronald Reagan, who really believed this stuff, who was a 0:10:33.880 --> 0:10:38.680 really enthusiastic advocate for almost certainly not. But it was 0:10:38.800 --> 0:10:41.320 much easier for him to do what he did because 0:10:41.320 --> 0:10:44.240 he actually had the building blocks in place. Again, the 0:10:45.240 --> 0:10:49.120 ancien regime had accepted that the game was up and 0:10:49.240 --> 0:10:56.160 shifted before you then had the really exciting free market 0:10:56.600 --> 0:11:01.080 politician factor o Reagan to take things for So, I 0:11:01.120 --> 0:11:04.880 think the key moment is when is the game up? 0:11:05.120 --> 0:11:10.480 When does the market that the economy force a change. 0:11:10.600 --> 0:11:16.760 It's conceivable it could happen here that Donald Trump grasps 0:11:16.880 --> 0:11:21.520 that you just need to actually start cutting entitlements and 0:11:21.600 --> 0:11:25.760 cutting back on defense budgets or whatever. But I think 0:11:25.960 --> 0:11:30.840 it's more likely that circumstances force a change from the 0:11:30.920 --> 0:11:35.079 ancien regime and that's the critical change, rather than that 0:11:35.400 --> 0:11:38.360 voters elect in the person who will make the. 0:11:38.360 --> 0:11:43.600 Change coming up. The money is pouring in, the construction 0:11:43.720 --> 0:11:46.800 is underway. Data centers are paving the way for our 0:11:46.880 --> 0:11:50.079 AI future. But some communities want to know why they 0:11:50.160 --> 0:12:05.720 have to be in their backyard. This is a story 0:12:05.760 --> 0:12:10.080 about good fences making good neighbors. The promise of artificial 0:12:10.120 --> 0:12:13.200 intelligence has brought a wave of data center building across 0:12:13.280 --> 0:12:16.520 the country, and in success, we hope that AI will 0:12:16.559 --> 0:12:20.720 benefit the economy, investors, and the vast majority of Americans. 0:12:21.760 --> 0:12:25.520 A trillion dollars is an enormous amount of infrastructure. You 0:12:25.720 --> 0:12:28.720 have to have complete confidence that the trillion dollars you're 0:12:28.760 --> 0:12:31.719 putting down would be performant for as long as you 0:12:31.720 --> 0:12:32.360 could see. 0:12:32.440 --> 0:12:35.079 If you're building a multi billion dollar data center in 0:12:35.120 --> 0:12:37.360 the US or around the world, and you have a 0:12:37.440 --> 0:12:40.680 fifteen plus year contract with a company with a three 0:12:40.760 --> 0:12:43.439 trillion dollar market cap, that feels pretty good. 0:12:43.520 --> 0:12:45.199 If we knew how to get a trillion dollars right now. 0:12:45.240 --> 0:12:48.360 If we don't, would we be able to deploy that 0:12:48.360 --> 0:12:51.920 profitably in the next few years and I'm not sure 0:12:52.000 --> 0:12:53.120 about that, but I feel. 0:12:52.880 --> 0:12:55.280 Confident we can make five hundred billion of value back. 0:12:56.080 --> 0:12:58.559 But while we all wait for the full benefits of 0:12:58.600 --> 0:13:01.800 AI to be realized, what does construction of these massive 0:13:01.880 --> 0:13:04.840 AI data centers mean for the people living around them? 0:13:05.280 --> 0:13:07.400 And how much of us, say, do residents have and 0:13:07.440 --> 0:13:10.640 the type of fences keeping things in or out? 0:13:13.679 --> 0:13:19.160 Pushback today to a proposed AI data center. Amazon comes 0:13:19.200 --> 0:13:24.480 to town, starts emailing our town manager and wants to 0:13:24.520 --> 0:13:27.960 build an enormous data center and the citizens did not 0:13:28.400 --> 0:13:30.760 know about this, even though it was going to be 0:13:30.800 --> 0:13:32.880 a five hundred million dollar investment. 0:13:34.040 --> 0:13:36.960 That sort of massive capital investment brings with it the 0:13:36.960 --> 0:13:39.920 prospect that the data centers being built today will be 0:13:40.000 --> 0:13:41.640 with us for a long time to. 0:13:41.640 --> 0:13:45.520 Come, ultimately to be paid for the risk that we're taking. 0:13:46.120 --> 0:13:47.959 We're looking to get a lease that's somewhere in the 0:13:47.960 --> 0:13:50.880 neighborhood David between thirteen years and seventeen years. 0:13:51.440 --> 0:13:55.120 Mark Genzi is the CEO of Digital Bridge, an alternative 0:13:55.120 --> 0:13:59.560 asset investment firm specializing in data infrastructure. He's among the 0:13:59.559 --> 0:14:03.640 major players making long term bets for AI, massive bets 0:14:03.720 --> 0:14:07.080 that are being distributed across a wide array of investors. 0:14:07.559 --> 0:14:10.520 So on the equity side, you're seeing the traditional players, 0:14:10.559 --> 0:14:13.080 the big infrastructure players, and so we're seeing today as 0:14:13.080 --> 0:14:16.880 we're seeing the large megafunds, these big, big infrastructure players 0:14:17.040 --> 0:14:20.600 really lean into the AI thematic, and as a part 0:14:20.600 --> 0:14:23.200 of that thematic, when they think about infrastructure, they think 0:14:23.200 --> 0:14:26.520 about putting billions of dollars of equity to work behind 0:14:26.560 --> 0:14:30.120 these large data center platforms and projects. On the debt side, 0:14:30.400 --> 0:14:33.760 it's actually really interesting today. Of course, we see bank syndicates, 0:14:33.760 --> 0:14:37.320 we see construction financing club deals on the bank side, 0:14:37.480 --> 0:14:39.600 and now, David, you're beginning to see the emergence of 0:14:39.640 --> 0:14:43.800 private debt capital. So private debt capital financing projects that 0:14:43.800 --> 0:14:47.360 are a little tougher, perhaps less investment, great exposure, or 0:14:47.440 --> 0:14:48.440 perhaps even more risk. 0:14:48.480 --> 0:14:51.600 On the power side, projected investments in data centers have 0:14:51.720 --> 0:14:55.640 climbed past three trillion dollars. That's a three trillion dollar 0:14:55.880 --> 0:14:58.840 long term bet on the future, which requires a business 0:14:58.880 --> 0:15:01.320 plan with some pretty attractive returns. 0:15:02.000 --> 0:15:05.200 That is the long term nature of the cashlows, so 0:15:05.240 --> 0:15:07.640 that we go to build that facility, we're getting an 0:15:07.640 --> 0:15:11.440 imputed yield, and today most data center yields are somewhere 0:15:11.480 --> 0:15:14.600 between David on a cash on cash return basis somewhere 0:15:14.600 --> 0:15:16.320 between eight and twelve percent. 0:15:16.880 --> 0:15:18.520 It just depends on who the credit is. 0:15:18.560 --> 0:15:21.560 So if you're dealing with an investment grade tenant like Amazon. 0:15:21.400 --> 0:15:23.040 You're going to be at the low end of that guidance. 0:15:23.480 --> 0:15:26.000 If you're dealing with a brand new startup, or perhaps 0:15:26.040 --> 0:15:28.960 you're dealing with a quantum compute player that's non investment grade, 0:15:29.200 --> 0:15:31.160 you're looking at something more like an eleven to twelve 0:15:31.240 --> 0:15:33.560 cap rate. But you do need to be paid for 0:15:33.600 --> 0:15:36.120 the risk that you're taking, and that risk is measured 0:15:36.160 --> 0:15:39.520 in long durrated cashlows with some form of an escalator. 0:15:40.120 --> 0:15:43.800 But while investors anticipate that future payout over fifteen or 0:15:43.840 --> 0:15:46.960 twenty years, in the communities where data centers are going 0:15:47.040 --> 0:15:50.480 up right now, there are immediate potential effects on the 0:15:50.520 --> 0:15:52.080 people who live near them. 0:15:52.800 --> 0:15:55.520 To say that I have significant concerns is sort of 0:15:55.560 --> 0:15:56.640 an understatement. 0:15:57.280 --> 0:16:00.960 Dana Nessel is the Michigan Attorney General, who's job includes 0:16:01.040 --> 0:16:04.280 looking out for the interests of Michigan taxpayers, rate payers, 0:16:04.280 --> 0:16:08.280 and citizens. She is appealing the state's expedited approval of 0:16:08.320 --> 0:16:10.840 a very large data center set to be built in 0:16:10.880 --> 0:16:13.480 Saline Township, just south of ann Arbor. 0:16:13.960 --> 0:16:14.360 Well. 0:16:14.440 --> 0:16:18.200 It appears as though the project is underway. The first 0:16:18.240 --> 0:16:23.080 that I learned about it was really on Halloween of 0:16:23.640 --> 0:16:26.960 last year, that this was going to be an enormous project, 0:16:26.960 --> 0:16:29.320 a project bigger than any of its kind we've seen. 0:16:30.400 --> 0:16:33.640 It's not that Attorney General Nessel denies the potential upside 0:16:33.640 --> 0:16:36.200 of data centers in Michigan, but she wants to test 0:16:36.240 --> 0:16:40.000 the projections and promises, weighing both the benefits and the 0:16:40.040 --> 0:16:43.960 burdens of things like changing electricity rates, land values, and 0:16:44.040 --> 0:16:46.840 water needs, that her citizens will face the sorts of 0:16:46.880 --> 0:16:49.520 things that may require some pretty good fences. 0:16:50.040 --> 0:16:53.360 If you talk to Michigan residents, they don't want these 0:16:53.400 --> 0:16:56.960 in their backyard. Nobody knows yet what it's going to 0:16:57.000 --> 0:16:59.080 mean for that community. They don't know what it's going 0:16:59.120 --> 0:17:01.880 to mean for their water. They don't know what it's 0:17:01.880 --> 0:17:05.600 going to mean in regard to noise pollution or other 0:17:05.680 --> 0:17:08.960 types of pollutants. Until we have some of those questions 0:17:08.960 --> 0:17:12.160 that can be more fully answered and better policies put 0:17:12.160 --> 0:17:15.440 in place at the state level. Most people don't want 0:17:15.480 --> 0:17:21.200 to see these massive data centers continue to be erected. 0:17:21.680 --> 0:17:25.359 Michigan residents aren't the only ones with concerns. Pew Research 0:17:25.400 --> 0:17:28.520 Center found that an overwhelming share of Americans think data 0:17:28.520 --> 0:17:32.399 centers are mostly bad for the environment, home energy costs, 0:17:32.440 --> 0:17:35.960 and their overall quality of life. But Ganzhi says he's 0:17:36.000 --> 0:17:38.760 seen a version of this play before and that it 0:17:38.800 --> 0:17:41.040 can be handled in a way that satisfies the need 0:17:41.080 --> 0:17:44.680 for growth and the concerns of citizens. Do you need 0:17:44.720 --> 0:17:47.120 to take into account the reaction of the community. 0:17:46.840 --> 0:17:48.159 One hundred percent as a factor. 0:17:48.359 --> 0:17:51.560 I've been doing this for thirty two years, building digital infrastructure, 0:17:52.040 --> 0:17:54.199 and where I got my sort of humble start with 0:17:54.200 --> 0:17:58.800 building cell towers David in nineteen ninety four. And at 0:17:58.800 --> 0:18:00.879 that point in time, nobody wanted a cell tower in 0:18:00.920 --> 0:18:03.679 their backyard, and that was the rise of nimbiism, not 0:18:03.760 --> 0:18:07.320 in my backyard. Well, the sector got organized, we navigated 0:18:07.320 --> 0:18:11.960 through it, we explained the benefits of mobile communications, emergency services, 0:18:12.520 --> 0:18:16.880 and ultimately the fact that most Americans wanted ubiquitous mobile coverage. 0:18:17.480 --> 0:18:19.800 And so that carried through the early two thousands into 0:18:19.800 --> 0:18:22.960 twenty ten, twenty twenty, and today you don't hear a 0:18:23.000 --> 0:18:26.040 lot of skirmishes around cell towers because largely the industry 0:18:26.560 --> 0:18:28.320 has made peace with the local community. 0:18:28.880 --> 0:18:31.800 State leaders like Nessel don't deny that things might work 0:18:31.840 --> 0:18:34.439 out for all concerned, but for that to happen, she 0:18:34.560 --> 0:18:37.399 believes we all need to know in advance the scope 0:18:37.400 --> 0:18:40.560 of data center construction, the effects it's likely to have 0:18:40.640 --> 0:18:44.119 on the community, and what commitments the developers and owners 0:18:44.119 --> 0:18:47.280 are making to address the possible local downsides. 0:18:48.000 --> 0:18:53.520 The request was made before our utility regulator, the Michigan 0:18:53.560 --> 0:18:59.000 Public Service Commission, for this contract that was filed for 0:18:59.119 --> 0:19:04.400 an ex party hearing, meaning a hearing that would take 0:19:04.480 --> 0:19:07.199 place behind closed doors that we wouldn't be allowed to 0:19:07.200 --> 0:19:11.080 be part of. So the contract that was posted publicly 0:19:11.280 --> 0:19:16.560 was heavily redacted, and that included reactions to some incredibly 0:19:17.200 --> 0:19:22.320 important information, you know, evolving things like exit fees, what 0:19:22.359 --> 0:19:26.679 would happen upon the termination of the contract, Even you know, 0:19:26.720 --> 0:19:32.400 basic terms and definitions had been redacted, Customer credits, even 0:19:32.760 --> 0:19:37.639 the signatories to the contract had been redacted, so that 0:19:37.720 --> 0:19:41.040 we can't even know who signed this contract or what 0:19:41.200 --> 0:19:45.119 company they're affiliated with, which is pretty insane when you 0:19:45.119 --> 0:19:47.960 think about it. How are we supposed to know whether 0:19:48.320 --> 0:19:51.240 or not rate payers are getting a fair deal if 0:19:51.280 --> 0:19:53.359 we're not even allowed to see the contract itself. 0:19:54.359 --> 0:19:56.840 All of this comes against the backdrop of a rapidly 0:19:56.880 --> 0:19:59.800 evolving technology that is growing at a rate we've never 0:20:00.119 --> 0:20:04.160 seen before, raising questions about what happens if things evolve 0:20:04.240 --> 0:20:07.199 in ways that fall short of the best case. As 0:20:07.240 --> 0:20:11.240 an infrastructure investor, Ganzhi says, they're ready for that. How 0:20:11.240 --> 0:20:15.080 do you anticipate the further growth as well as the 0:20:15.280 --> 0:20:17.400 obsolescence of some of the technology you're putting in. 0:20:18.760 --> 0:20:20.760 Well, I think the great part about being the owner 0:20:20.760 --> 0:20:24.159 of the railroad is you don't known the actual cars 0:20:24.160 --> 0:20:25.440 that run on the tracks. 0:20:25.720 --> 0:20:28.040 We own the land. We build the power plant. 0:20:28.160 --> 0:20:31.280 Sometimes actually we're building power adjacent to the data center. 0:20:31.840 --> 0:20:34.720 We build the physical real estate structure inside the four walls. 0:20:35.240 --> 0:20:37.439 We bring the fiber connectivity, we bring the cooling, we 0:20:37.480 --> 0:20:40.200 bring the back of power. We create the data hall 0:20:40.280 --> 0:20:43.639 conditions where the UPC units are in and the cooling 0:20:43.720 --> 0:20:46.680 is in and the cable trays. But eventually, David, our 0:20:46.720 --> 0:20:50.320 customers put in the technology. So what makes our business 0:20:50.359 --> 0:20:55.040 great is we are candily we're GPU and TPU agnostic, 0:20:55.119 --> 0:20:57.280 And what I mean by that is we're not involved 0:20:57.320 --> 0:20:59.720 in the active compute. That is a bet that we 0:20:59.720 --> 0:21:02.000 don't make it digital bridge. What we are in the 0:21:02.000 --> 0:21:04.520 business of doing is providing that mission critical real estate 0:21:04.600 --> 0:21:08.040 and infrastructure to the top technology providers in the world, 0:21:08.560 --> 0:21:10.440 and we let them make the decision what kind of 0:21:10.440 --> 0:21:11.320 server they're going to buy. 0:21:11.800 --> 0:21:14.280 That may take care of the investor risk, but what 0:21:14.400 --> 0:21:19.040 about community risk. In Michigan, abandoned auto plants still dot 0:21:19.080 --> 0:21:22.560 the landscape, a constant reminder of an earlier era of 0:21:22.640 --> 0:21:26.600 technological promise and the costs that followed. Who will bear 0:21:26.640 --> 0:21:29.160 the cost this time remains uncertain. 0:21:30.320 --> 0:21:33.640 In the event that the bubble bursts and something happens 0:21:33.680 --> 0:21:38.479 and this hyperscale center in Saline Township is no longer needed, 0:21:38.880 --> 0:21:42.119 somebody is going to have to pay all of the 0:21:42.520 --> 0:21:47.600 extra costs of this new infrastructure. And who's going to 0:21:47.680 --> 0:21:50.560 pay it, Well, it's either going to be borne by 0:21:50.640 --> 0:21:53.880 the rate payers in this state, and we already are 0:21:54.000 --> 0:21:56.639 subject to some of the highest rates and the worst 0:21:56.680 --> 0:22:01.440 reliability anywhere in the country, or it'll be the taxpayers 0:22:01.480 --> 0:22:04.480 they'll have to bail out the utility companies who are 0:22:04.480 --> 0:22:07.639 making these in some instances, is you know, terrible bets 0:22:08.119 --> 0:22:10.359 that AI is going to be around for a long time. 0:22:10.440 --> 0:22:14.760 If you look at these contracts, it's clear that the 0:22:14.840 --> 0:22:17.199 cost is supposed to be born out not over the 0:22:17.800 --> 0:22:20.320 course of a few years, but over the course of 0:22:21.200 --> 0:22:23.359 really a few decades, you know, up to something like 0:22:23.400 --> 0:22:28.119 eighteen years. But we can't even see the exit fees 0:22:28.160 --> 0:22:31.520 in the next few years. Those that have encouraged these 0:22:31.600 --> 0:22:36.120 data centers to come here without any sort of guardrails 0:22:36.240 --> 0:22:40.199 at all, I think they've set us up for a 0:22:40.359 --> 0:22:41.840 very difficult future here. 0:22:42.600 --> 0:22:46.359 Which brings us back to those fences neighbors need. Ganzy 0:22:46.440 --> 0:22:48.320 sees a way to build what's needed in a way 0:22:48.320 --> 0:22:52.480 that accommodates everyone and doesn't stand in the way of progress. 0:22:53.280 --> 0:22:55.679 You're seeing Red states and blue states both look at 0:22:55.720 --> 0:22:58.640 the data center opportunity and quandary in the same way, 0:22:59.080 --> 0:23:02.879 which is, can't hurt consumers. So the industry has to 0:23:02.880 --> 0:23:06.280 get organized and has to explain ultimately the benefits of 0:23:06.400 --> 0:23:10.199 why these data centers exist, Why are they creating jobs 0:23:10.280 --> 0:23:12.760 not losing jobs, Why is it going to be good 0:23:12.800 --> 0:23:15.560 for them long term from a property value perspective, and 0:23:15.600 --> 0:23:18.320 why it ultimately isn't going to rise their utility bill 0:23:18.600 --> 0:23:21.080 and take away all their water. We got a pretty big, 0:23:21.160 --> 0:23:22.080 uphill challenge. 0:23:22.600 --> 0:23:25.720 We need data centers to build the technology of tomorrow. 0:23:25.840 --> 0:23:29.000 The long term promises are big, but so are short 0:23:29.080 --> 0:23:32.280