Friends,
I (Stoffel, here) am from the Rust Belt, specifically Milwaukee. Cities like mine -- once booming centers of manufacturing in the 1950s -- were hollowed out by globalization in the 1970s and 1980s.
As Ben Thompson argues in his Stratechery blog, the scars from that transition are still present today. And they are popping up in ways that are making it tough for the technology industry to build data centers.
"When companies were closing down American factories...none of the affected towns or workers had a say. They just suddenly no longer had a job.
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AI, however, is the opposite: building data centers requires permission, which is to say that people actually have a say.
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People who didnβt have a say in globalization are suddenly finding they do have a say about AI, and itβs not a surprise they are expressing their disapproval by blocking data centers."
From my own boots-on-the-ground view, Thompson is right. In Port Washington, WI, a 672-acre data center is under construction. I've driven past it; the enormity is jaw-dropping.
But the folks there aren't pleased. Last month, they passed a referendum; now, any project that offers public financing of over $10 million (the data center got $458 million) must be voted on and approved by the entire community. That's a high hurdle for future projects -- and other communities are watching.
How does the situation resolve? Thompson throws out an interesting possibility:
"Simply start giving people money. If data centers are a resource for our AI future, then start paying people for that resource.
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Once Big Tech starts paying people off for data centers, weβll suddenly have an AI-derived Universal Basic Income. [UBI]"
The point here isn't to say whether this is a good or bad thing. It's meant to do two things: offer an update on the most crucial part of the AI infrastructure buildout powering the stock market right now, and serve as a lesson in the law of unintended consequences.
Sure, many people predicted beforehand that AI could lead to UBI. But how many would have guessed that instead of being government-derived, it would come from tech companies?
It's a good reminder of how unpredictable the future could be -- and why it's so important to take the long view by investing in wide moat businesses constantly looking for new ways to fulfill their missions.
Wishing you investing success,
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Brian Feroldi, Brian Stoffel, & Brian Withers
Long-Term Mindset
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