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There is a great new Substack article about the populist backlash to AI data centers by Jasmine Sun. She also did an interview with Ezra Klein for those of you who like audio content.
I like the article because Sun speaks fluent Silicon Valleyish while also taking the time and effort to visit and talk to the people on the ground in the rural Midwest instead of condecending at them from the coasts. She asks an important question: why precisely do people hate data centers so much?
Looking only at the statistics, AI land use and water use issues are fake. Nowhere is running out of land, and nowhere (West of San Antonio at least) is running out of water. Are the people in these communities stupid? Do they not know how to shut up and multiply?
It turns out that a lot of the fear and anger stems from a combination of distrust and PTSD from deindustrialization. An interesting example is Janesville, Wisconsin, a town with a giant concrete slab in the middle of it where the GM plant used to be.
Fascinating. The collapse of the auto industry in 2008 was apparently so bad that it is better to prevent industrial development alltogether in order to avoid the risk of another collapse. It almost makes sense until you think about it for 30 seconds.
Some of the objections Sun hears in other towns fare a bit better.
This is the steelman of the anti-data center position. People are worried that the big companies proposing data centers are going to Foxconn them and not deliver the supposed benefits.
One of the things that comes across especially clear in the Ezra Klein interview is just how unprepared the AI companies were for the backlash. They didn't realize how sketchy it comes across to insist on NDAs with local officials when negotiating deals. They thought, as a straightforward application of Coase's Theorem would tell you, that any bumps in the road could be ironed out by handing over a big bag of money. It turns out that people don't work that way. It feels like a bribe, and Americans do not like being bribed.
I'm not anti-data-center as a general idea. But somehow every data center plan in my town is absolutely moronic.
My particular town has one main commercial corridor. On this corridor you have stores, movie theaters, banks, offices. People moving back and forth across it throughout the day. Now there used to be a major company headquartered there, they since moved to new offices down the road. Developers want to convert the old offices into data centers, a few million square feet.
My first thought upon looking at the plan was, you'd never do this in Sim City. You have one of your most prime pieces of commercial real estate in the region, and you want to turn it into a box that no one uses and nobody goes to. You want to give away that access, that site with easy walkability and simple drivability to literally everything in town, and turn it into a box that hums. You're going to take this prime real estate away from people.
It's just a stupid development choice. And I get that the market doesn't owe me Sim City type optimal decision making, but it's a weird thing. I'm not anti-data-center, but there's obvious good places and obvious bad places to put them, and so many of the choices made seem to be obvious bad places.
It does seem to me that the most parsimonious explanation is that the developers involved in this are mostly treating it as a gold rush rather than coming in with well-thought-out plans. OK, maybe it's cheaper to convert an old company headquarters into a data center, but it's also certainly understandable that people don't like it. Not helped by the AI companies' intentionally terrible PR strategies.
I think the AI bubble is uniquely confusing, because the real estate pros building them out are treating it like musical chairs and the companies commissioning them are treating it like the Rapture. Real estate pros figure it's a bubble, in the sense that eventually they will be overbuilt and stop building, so if I want to cash in on it I need to do it right now before the music stops I can't wait around. AI companies treat it like the Rapture, it doesn't matter if they overspend now because AGI is right around the corner and then money doesn't matter. They're unconcerned with the idea that the music will stop, they're concerned with controlling the playlist because whatever song is playing today will be on repeat forever. Combine the two and you're getting a toxic bubble.
It's also a problem in my town because of prior government interventions to subsidize the construction of new office buildings, creating a glut of new office space, which in turn makes building office space impractical. So you have sites that would be perfect for an office park being turned into data centers.
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