Data-center communities could receive dividends from credit financing

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 1:24:15

   It's absolutely insane. And by the way, the same argument holds not just for data centers, but any sort of capital infrastructure. The same could have been true for oil, which is the source of the Alaskan fund, or maybe other industrial plant type CapEx. It's a very general argument that if a municipality is going to host some major capital investment, that it could strike a deal with the capital owners to distribute dividends that result from the capital investment.

2. 1:24:42

   for the life of me. Maybe it's like an issue with tax codes or something. I don't know why more municipalities don't strike broad deals like what Alaska has done. It may be a legal issue. I mean, do you know why more municipalities aren't just doing this for CapEx in general? Don't. But, you know, if if you have this battle going on in your community about a data center, go back and say we want you to cut our electric bill by half.

3. 1:25:10

   We want you to fund our schools, fund our teachers, actually reinvent our schools and and give us a better quality of life if you want. That's the company town argument. I mean, that the company town goes back to the second industrial revolution. We've had lots of company towns where the company is basically heavily subsidizing or completely subsidizing utilities. But to my knowledge, what we haven't seen, which is what I think the president is floating, is this idea of actually paying out stipends to all the residents of the town, not just subsidizing their utilities.

4. 1:25:39

   I think that's a great idea. Salim? There's a precedent for this when we came across when we were researching the first EXO book, which was a skyscraper in Bogota in Colombia. They couldn't find a real estate developer who wanted to take on the full risk of building the skyscraper. so they community sourced it and they said to the community everybody chip in we're going to crowdfund this skyscraper and then everybody in the community has vested interest in making sure it's it's there's decent tenants there's no crime in the area etc and it's doing unbelievably well so this idea of i think it it's better from the bottom up uh where a community goes hey we want to participate in this we'll we'll take ownership stakes in this thing and let us figure this out via community bonds or local equitable sharing or tax breaks at the local level, whatever the

5. 1:26:32

   mechanism is, it could be very powerful to do that. There are some states that have gone full crazy. Virginia, I think it's 16% of the GDP of the state is now data centers. It's a really huge number. I don't think this is the same thing. I think this is a really important point, but I don't think we're talking about the same thing. So I think what you're describing, one might call municipal development corporations that are typically bond-issuing organizations. A city or a state wants to build new highways, so they put up toll booths or they issue a bond, and then the bond goes to bond purchasers. And the bond purchasers are ultimately the broader market. It's not necessarily like, yeah, you do have local bond issuances where the creditors are the residents of the town, but that's only those who are writing a check to the bond issuer.

6. 1:27:23

   I would argue it's not at all the same thing as issuing, say, a universal basic dividend to all the residents, regardless of whether they've loaned. municipality money for the capex i think what you're suggesting is a better idea right like whatever the mechanism is right yeah if we can communicate easily the massive benefits that will flow and you know people forget we've had data centers in communities for for 40 years this is not a new thing it's just that we're doing a much more aggressive build out because we need it and we're gonna our lives are going to be made infinitely better and that's the part that's not getting through. I think we're circling an interesting, so bear with me on this. I'm thinking out loud for once. I think there's an interesting idea here, which is we've talked in

7. 1:28:08

   the past, including with Chamath, about a U.S. sovereign wealth fund where there's contributions of equity and then dividends come out to everyone. What we really haven't talked about, correct me if I'm wrong, is the notion of a fund where it's fixed income securities and not equities that live in there. And then what comes out are the stipends from a fixed income security. And to my knowledge, again, maybe correct me if I'm wrong, no one has talked about the idea of basically creating either at the municipal or maybe federal level, the idea of a fund where it's the interest and or the coupons that are coming out as a result of fixed income securities, which, by the way, most of the CapEx for the data center build out is coming in the form of credit, not equity at this point. No one has talked about that, but that could actually end up being a way to financially

8. 1:29:05

   structure sort of a UBE or UB credit at the municipal level that no one set up. I think it's an interesting idea. So for a point of information, the Alaska fund, right? So Alaska