Join us as we gather around the hedge,
where we dig into technology, business, and culture
with the finest minds in computer networking.
Good morning, Tom. So you were saying you
were saying
that your wife has been pulling the dead
leaves off the plant. I believe
that is cheating.
Cheating. No.
No. This is grooming. What are you talking
about?
Cheating. Yeah. Is it cheating when you brush
your teeth for us? Come on.
Yeah. You can't say the plant looks beautiful,
and all you're actually doing is taking the
dead parts off. I don't I don't think
it works that way. Well, the thing is
great. I think the plant needs some I
thought the plant needed some landscaping. I think
this
is
okay. It did.
Oh, boy.
This is this is going downhill really fast.
And, eventually, it will re reach
George Michaelson's area of the world if it
keeps going down. It goes down the far
north. Hello.
That's a long way. And we have biosecurity
laws, so I will have to ask you
some questions.
Has that plant been near beekeeping
equipment in the last three months?
No. It has not.
If we ever get this new piece of
property, we're thinking about keeping bees. But, you
know, we're trying to figure out good move.
Yeah. We like we like bees. I like
honey, so I like bees.
Alright. Cool. So that's George. George is in
Australia
some place or another. Who knows where?
And
I I don't know. George doesn't have his
Christmas tree up yet, so I'm not really
no.
We just put our yeah. We we start
now?
Well, we're gonna start early because my wife's
out of town pretty soon. So yeah. Okay.
You You wanna surprise her with the treat
when she comes home and pine needles in
a circle underneath a bare wooden form? No.
She wants no. She yeah. Like, the Charlie
Brown Charlie Brown Christmas special. But, anyway, no.
No. She she wants to help put it
up. So if she wants to help put
it up, it's gotta go up before she
leaves, and she's leaving right around US Thanksgiving.
So
you know? Oh, wow. Being on the road
at Thanksgiving,
is she mad?
Well, we have a granddaughter coming. Oh, well.
And so she so she wants so she
wants to be there for the
Family rituals are important. It's good to do
these things. Yeah. So that's fine. Alright.
So
oh my goodness. Am I that old? Alright.
So let's talk about data centers and cost.
Yep.
So
I kinda wanna come at this at three
different tax,
and they all got a good side and
a bad side. Well, mostly a good side
and a bad side.
Mostly. And there's a techy and there's a
techy part,
and there's an economic part, and there's, like,
a green part.
Okay?
Or and we could just say energy part
because that might be a little more.
But, you know, go ahead, sir.
Energy part of water, but there's water as
well. Yeah. And waste.
Yeah. That's true. Downstream consequences.
There's a bunch of stuff there. Okay. So
DCs,
I mean, they are amazing. Right? When you
think back to the early days of the
Internet, tin cans and string and the way
we glued everything together, the idea We still
had server rooms
in our office buildings, and it was on
and and, you know, the joke at BASF
was that the server room was in the
basement, so you had to put on your
asbestos suit on your way down
because, you know, you were going so deep
into the earth that, like anyway.
So yeah. You've done duty in these places.
You've done the machine room
gig. Yes, sir.
Yeah. They are scary places. There's a lot
of industrial equipment. There's a lot of risk.
There's a lot of noise.
There's potential trip hazards. There are any number
of times I've been in these places thinking,
wow. Did I tell anyone I was in
here? If one of these cabs fell over,
would anybody
know?
But
they exist. Right? So DCs, data centers,
they are absolutely
structurally
central
to constructing a network by point to point
links. We needed them in order to make
the clearinghouses
where people could come into the room, put
their communications equipment,
and exchange data in the room, be peers,
do stuff.
Right? Store servers.
Yeah. Have lots of compute, have lots of
storage. Yeah. It's all very important. The physical
space is important.
So they kinda grew out of a technology
that we were in for a very, very
long time, which is essentially the infrastructure for
telephone exchanges and for electricity
distribution.
Things like gas, water,
heating, cooling,
those things, they ran a slightly different system.
They put equipment in the basement of every
building. They ran trunks and pipes between them.
And there was a grumpy old guy in
a boiler suit with a corncob pipe in
the corner who kind of fed the thing
and kept it going. Mike Mulligan and his
digger working it away. But for telecommunications,
you had a small amount of that stuff
in the bottom of the building, but you
had a lot of stuff in a central
point, the data center. Right? And so the
Internet
coming on board, taking over the AT and
T role, taking over Marbell's role,
occupied that ground. Oh my god. They've got
copper between buildings. Cool. Let's run two megabit
services.
Oh, they use Krone. Okay. We'll use Krone.
So, you know, the technology that we're all
used to using to build out
grew out of the telecommunications
industry right down to the glorious
u,
the unit.
How many u's is your computer? How wide
is a rack? 19 inches. Why is it
19 inches? Because
it just is.
Yeah. What which telco standard should you follow
for your power and your cabling?
And should airflow be front to back or
side to side or
back to front? Hot aisle cola. Yeah. So
these things are absolutely critical, but they were
part of gluing together a point to point
link where if I was dealing with a
company that had my credit card information
and they were an American banking corporation,
we all kind of knew the packets had
to flow from me in Australia down the
transcontinental
links into
Bank of America's headquarter in Phoenix, Arizona and
do stuff. That's how the world worked. Right?
Data was close to the computing center. The
trunk links ran through the DCs, and there
was a mega DC
somewhere
where a bank had their computers. And there
was another one where,
I don't know, the weather forecasting people had
their computers. And there were rumors about Cheyenne
Mountain and enormous computing infrastructure down there to
do missile defense. Everyone had their own right.
That's not what we're really here to talk
about.
We're here to talk about the idea that
a DC
is now
a commodity
construction activity,
and you are probably, for any value of
you, you are probably sitting
at the central point of three of them
within an incredibly short distance of where you
are. The number of people in the world
who live rural and who necessarily are a
long way from a DC is, of course,
enormous. But in the modern Internet, in the
online world,
there actually aren't that many of the Internet
users who are not really close to a
DC. I know that I'm within about 10
kilometers of three right now, and I suspect
almost all of the content I'm consuming
comes out of them. And that has been
a massive shift
in the nature of the network.
We no longer think we're sending our bank
transactions
over to Phoenix.
We think we're sending them to a local
computer running in a DC close by. Right?
Yeah. Yeah. Well, as a matter of fact
and and part of the reason of this
is economics. It used to be
you go back in time
and New York City and Atlanta, for instance,
in Washington DC
had lots and lots of connectivity. Why?
Because they had lots and lots of train
tracks.
Because that was where you laid fiber and
Because rights of way Mhmm. Were expensive.
Exactly. And so you built in places where
there were a lot of train tracks because
you get a lot of connectivity
very quickly
onto those train tracks
now or through those train tracks and through
that existing infrastructure.
And now things have changed
such that
running fiber is cheaper than finding power.
And that's why things in water. Yep. And
that's why data centers themselves are being distributed.
So people think, oh, I live
in Sydney, Nebraska.
Nobody there's no data center around here. We're
too poor. Oh, yes. There is. Because Yep.
Because you have water and power.
So I think the reason
I I think we should make a distinction
though because there are facilities, colocation facilities,
that are more like
they'll be offended by me saying this, but
that's okay. They're more like the the thing
we talked about at the beginning, the the
thing in the in the basement that you
put your your couple of servers in Oh,
yeah. Than mega scale data centers run by
the people who run all of the Internet
now, basically.
Like, you know They still exist.
Yeah. Yeah. You can't you can't put your
server in AWS data center, But but I
think they're they're still there, and I think
we should at least, you know, make the
distinction between the two personnel. Should, and we
should acknowledge them. That localization,
you're right about the power. You're right about
the the cooling, and we're gonna come back
and talk about that. But the other magic
piece here is that we became
incredibly intolerant of delay.
And in a network,
distance is just unavoidable delay. There's no getting
around it. The further you send them, the
longer it takes. And things become trains of
packets. You're building into states where the behavior
of the protocol
is bound up in the delay bandwidth product.
And if you bring all the data that
we're consuming
close to you as a consumer,
life is sweet.
Yeah. And as a matter of fact, we
don't think about it in terms of you
don't just
when you when you hit a website nowadays,
you're not getting that stuff from that server.
You're getting stuff from that server. That's fine.
But it's not just caches. And we always
think of CDNs when we think about this,
but there's also entire advertising networks behind this
that are doing
microsecond
bidding.
And and we're pulling typefaces and fonts and
rendering
them from some website some some server across
the world. And, like, this stuff is all
interconnected now, and it's it's Yeah. And the
delay, like you said, is really bad.
Politics aside,
that's like the good side of the data
industry moving to localized. It's quick.
It's onshore.
You kind of get a warm fuzzy glow
that you're getting things like your neighbors at
the same quality. It's quite equalizing in some
ways. It can be personalized to suit you.
And, Tom, you're right. There are the bespokes
who are letting people put small industry servers,
one or two u of rack in a
facility and run it locally to supply service.
But also the majors
are looking at us saying,
you don't want to own nuts and bolts.
You don't want to have to the hassle
of owning your own. Look. We can build
out an instance of Amazon for you close
by. It's economically viable for us now. We'd
like to do that. How would you feel
about rehoming in one of ours? How do
you feel about sharing a CPU? And you
know what? Everybody's doing it. So there's kind
of a warm fuzzy glow on that.
Especially if your compute is in US East
1.
Well,
I was kind of I was kind of
gonna mention that we've recently had a feeling
that maybe the warm fuzzy glows here aren't
so fuzzy and warm. Right?
Because kinda cold and blue, aren't they?
They are.
Because in parallel
with
everything comes local because the DC came local,
everything went super scale because the big guys
took over the niche market.
Running a DC, as we're probably going to
talk about later, is not a mom and
pop business. Right? It's a major investment.
And the economic scale here
ran to, let's really only have three or
four providers who do this gig. And the
problem
is supply chains,
which you wanna be short. Right? You don't
wanna have 16 intermediary middlemen handling every bit
of your service delivery. You kinda wanna keep
that tight.
Got a little too tight.
And there's dogfooding in the story too. People
like Amazon necessarily
use their own equipment to run the service
that they're selling to you and me and
the companies we work for. Well, part of
their boxes didn't work right because they had
an upgrade moment. And that want of a
nail loss of service
didn't just take down an internal fragment of
AWS.
It took down customer facing infrastructure,
and
a lot of people lost service. Now here
we are a few days later. Oh my
goodness.
Azure have just had a major outage.
And suddenly,
a whole different cohort of the known world
is going, I can't do Okta.
I can't do
three six five. I can't do my email.
And people who've built hybrid, unfortunately,
have now gotten the worst of both worlds.
Right. You think you're getting resilience by having
two provider
construction, but what you actually have done is
you've doubled your surface of exposure, haven't you?
Yeah. Exactly.
So
this component that we've got a DC close
by,
we've got all the promise of cost coming
down,
we've centralized on big providers with Five nine's
SLAs, Although, I think probably from The US
East outage, they just lost their five nines
for a long period of time.
Yep. I'm thinking of those pictures on the
wall, you know, number of days since a
major dinosaur attack on our infrastructure, and there's
a tyrannosaurus
claw marks down the wall.
Did you have that?
I should have. I should have. Yeah.
So the downside
of this it's fast because it's local, it's
reliable because it's operated at scale is that
when it fails, it fails hard. And when
it fails, it fails bad. And the things
that you actually come to rely on, you
have to now think about duplicate and triplicate.
Things get more expensive because you have to
think about building the resilience
you initially didn't think you wanted. You go
from diversity,
like you said. And
Yeah. And and in fact and in fact,
redundancies,
this should go to show us that redundancy
is not resilience.
These are completely different things.
You can redundancy is a component
of a good resilient
design.
But just because something is redundant
does not mean it is resilient. Don't if
you've got those two things together in your
head,
separate them right now because because it's not
true.
So there's another part here,
which is
we've kind of walked into
a political domain. And I'm not gonna get
too
heavy and specific about this because I don't
think we need
the atmosphere.
But there's
data extraterritoriality
about this, that the company
that becomes a major is almost certainly not
a Vietnamese company or a Thai company or
a Singaporean company. It's going to be an
American company because the vast bulk of the
providers that are hyperscaling
to do these things
have come out of the tech venture capital
scene
in America, and they've gone worldwide. And that's
great,
but the problem is their governance structures
reflect the needs of being an American
owned entity. And that doesn't necessarily align with
what the Singaporean government needs in terms of
its data states and integrity of control over
its data. And we're starting to notice that
a lot of economies, and I I do
mean strategic partners of The US, so this
is not
adversarial in that sense, But people like Australia
are saying, you know, there are some things
that maybe we actually have to operate for
ourselves here. And so although a hyperscaler like
Amazon does an amazing service for us, we're
gonna have to build out one that is
just for us, where we buy the machines,
we buy the racks, we buy the cables.
Because otherwise,
what's our level of control over things that
are national strategic interest?
And
a number of people are starting to look
at this and go,
you know, I'm glad you're doing that.
But I've got a bit of a moment
here because I'm living in Google. I'm living
in Amazon hosted services. I'm doing things where
I think I'm subject to Australian laws and
rules. So in Australia, it's totally legal to
do circumvention.
If there's a
IPR lock that is part of the American
intellectual property regime, it's legal in Australia to
say, given the size of our market, our
local laws permit us to circumvent those locks.
They don't apply here.
That's legal
in my economy. If I have bought the
goods, I'm allowed to break the lock.
But if it's hosted on a machine that's
being operated by Amazon, and Amazon
operate Kindle, and Kindle operate the IPR, and
the IPR terms and conditions
are American terms and conditions,
how does Amazon feel about me breaking the
lock on the book?
Yeah. Well, we had this problem with DNS
in the early days, by the way.
And and it's still
it's still an issue in many ways. But
yeah.
But now this is only one component of
what I would consider still to be the
cost.
Right? Oh, yeah. This is this this is
a cost issue that people don't think about
as a cost issue, but it actually is
a cost issue.
Oh, yeah.
And this is cost
in the sense of inside the framework, inside
data, inside information,
inside intellectual property. We're not thinking about political
costs, social costs, legal costs,
risk, consequence. No. There's there's Numbers. No. There's
an economic cost
when a government says, I want my data
stored in my country, my people's data stored
in my country. That's just So there just
is. So so let's go there.
You know, I used to know some lovely
people who worked as geologists.
They were Australian geologists.
They said they did shake and bake. They
preferred to do the shake, but the problem
is after a shake, you get the fire.
So they did shake and bake, like shake
and bake pancakes,
except for its buildings.
And they told me there's really good economic
modeling that all that destructive energy from the
earthquake that you guys are gonna get on
the West Coast Of America
is going to lead to a civil construction
boom.
There are gonna be so many jobs
rebuilding the West Coast when it finally slides
off into the ocean.
It's gonna be great. There's an upside.
And so you go The broken window theory.
Let's all go break everybody's windows so they
have to replace it. So Doesn't
work right.
Doesn't work. But
if you ignore
total loss rebuild and you think about constructing
new investments to supply services in your data
centers, that is economic investment.
And so during the construction phase,
you're employing jobs in civil engineering. There's people
doing grading, then there's concreting,
there's truck drivers doing delivery.
That puts money into the local economy. It's
really well known that during the construction phase,
there's probably
five times or more the jobs
during that phase. And for a small town
in a rural area that hasn't had much
investment,
that can be really massive upside. It's actually
quite a big benefit.
Alongside that, as you've already alluded to, there's
power and cooling costs, which implies upgrading infrastructure.
And again, that can be an amazing benefit
for people in locations
that are getting these services, because they don't
have the population
to pay for sewage,
clean water, potable water, recycling,
electricity supply at that scale. People suddenly go
from one wire delivery of power to full
three three phase power. Maybe they get local
solar. So there are all of these components
of spend that bring jobs into the area,
that bring production into the area.
Really great. It's lovely
if that's what you want.
But then
the construction ends.
Now what are you left with?
How many jobs are there in a DC
if it's running properly?
Yeah. Right. That's what I was gonna say.
This is all temporary.
You and and and it doesn't necessarily mean
you're employing local people because some of those
trades and skills
are very specialized.
Oh, yeah. You have to write the contracts
to require the people doing this to incur
the cost of using your local labor, having
apprenticeships,
employing people locally,
keeping people locally, not flying them in and
out to do the construction.
So we could talk about this as an
effect in, you know, rust belt in America,
but think about economies like Vietnam
or Malaysia
or Cambodia who are looking at potentially supplying
service in their region.
They're coming up from zero. So if people
fly in and do all this construction, whoopee
doo, there's all this local trade,
it's a lot more like a US army
base. You know? People fly in the food.
They fly in the Wendy's from overseas. They
fly in
the product. They fly in the labor, and
they go away again, and you're left with
a cost burden.
Because let's talk about that power and that
water.
How much power does a DC consume? Okay.
I saw the other day now we talked
to somebody before who does power on the
hedge. I don't remember what her name was,
but we did this whole thing. And she
said they were starting to build 250 k
w,
racks. Now I'm hearing that's fairly common now.
250
k w. You have to, like, put this
in context.
Twenty years ago, when I built
a new house
Yep.
We put in
we requested an upgrade from a 100 k
w to one seventy five k w so
we could put up a shop.
Today,
the average house
probably has a one seventy five.
Some smaller ones have a 100.
Townhouses
and stuff like that have a have a
100 k w feed.
You know, like I said, larger houses may
have one seventy five. Yeah.
In the new house I'm trying to build
right now, we're trying to get two fifty
because, again,
we have a shop, and we wanna be
able to run two twenty volt equipment.
Alright. But 250
k w, we're talking about a single rack
consuming
what a house
consumes.
And in some cases, two houses. One rack.
So one rack.
So end of Indiana Jones, they're pushing the
Ark of the Covenant into the warehouse, and
the wheels are going squeak, squeak, squeak, and
you see the warehouse stretching off into the
distance with all those piles of treasure.
Think about a building that size Yep. But
instead of treasure, it's a DC.
That's how many racks there are. There's a
thousand racks in a DC.
They're not counting the total power supply for
that location
in kilowatts.
They're counting it in hundreds of megawatts. Yep.
Exactly. It's a small
town
in power supply.
And and even if a small town. It's
it's a mid sized city almost. And even
if somebody like Amazon comes in and builds
one data center and Akamai comes in and
builds another little,
another little data center for their whatever, and
then, you know,
Facebook comes in and build a little data
center and Google. Well, you might think each
of those are actually small. They're only, you
know, oh, these people are only building 100
rack data centers. You get 10 of them,
you're still building a thousand racks.
Yeah. Right? So
the decision
to say, we're going to direct
400 megawatts of power
into a location to supply data services twenty
four hours a day because these
places are not running
diurnal cycle. They're running constant load.
That's civil infrastructure. It's utility infrastructure.
So that thing you said about getting right
of way down the railway lines to put
the fibres,
you wanna string high voltage cables.
You have to think extremely carefully about the
ground you're going over. There's tree risk.
There's frost risk. There's fire risk. Pacific Gas
and Electricity in California
can tell you a lot of stories about
the problems
with maintaining
these power lines. Right? Yeah. Oh, yeah. Yeah.
Definitely. So This is a decision that has
consequence
for decades.
It's going to involve
affecting the natural environment, and we're gonna come
to that a bit more later. It's decisions
about constructing an infrastructure investment
that will affect the balance of power in
a kind of electrical sense, not in a
political sense,
for decades.
And so
your
domestic consumption pattern is a very well understood
thing that the power companies have been used
to balancing
their generation cycles against.
Constant load is different.
You need a different source of power, and
there are really
kind of two or three choices.
You can go all new agey, and you
can install your own solar and wind and
some kind of storage mechanism.
Which isn't which actually isn't consistent enough. Yeah.
You have to store it. Right? You do.
It's not it's not just the generation. It's
the store. No. And one of the things
that I've heard about is people going out
there and looking for old aluminium smelters that
had at a dam or a power facility
that's end of life. And they're saying, we'd
really like to take that off your hands
because it's absolutely perfect for them.
Yeah. So the the second thing is that
you look at doing something like that, but
you also install
gas turbines.
So these are basically
GE motors exactly the same as the turbines
on a seven eighty seven, except for instead
of pushing a plane, they're connected to a
huge gearbox that connects to a dynamo and
they generate electricity.
But they are exceptionally
fine machines.
They're also very expensive machines. And they're loud.
Oh, they're loud. So if you're the neighbor
within about
a four kilometer horizon of this place, you're
putting up with a lot of noise now.
But even better than this, they're in short
supply,
which means these companies are now bidding against
each other, buying all the supply chain for
these babies
at the same time
that the Texas power supply network is looking
to buy some surplus gas generators to supplement
its power burdens because of losses in system
and to get system resiliency,
those parts aren't available.
You wanna get a thing called a syncom,
a synchronous condenser that regenerates
inertia back into the system just by being
a huge flywheel.
They're on, like, a five year waiting list
now. So the effect of that is
a lot because
the hyperscaler
data centers are buying up the technology
to give you and me access to better
Netflix,
but it's starting
to interfere
with the utility function of general electricity supply.
So we're talking about reliable electricity
for hospitals,
for public transport systems For people's houses. Yeah.
Everything. People's houses.
So these decisions,
I'm gonna have a hyperscaler
build a center near me.
The power side of it is a whole
bag of concern.
So out in left field is something quite
interesting.
There are actually amazing machines that will generate
power 24 by seven, and they don't need
coal.
They actually make less radioactive
waste than coal does,
and they're called
nuclear reactors.
And
I just saw a story I just saw
a story this morning or yesterday.
Microsoft is asking has asked for permitting to
open a closed
nuclear power plant
Yeah. Because they want the whole thing. And
3 Mile Island
has been bought up by some data. I
don't know if it was Microsoft who it
was. And there, they were like, they were
supposed to shut that down. And nope. They're
not shutting it down. They're gonna run it.
So
we are on the cusp of a technology
decision that is going to have a long
term tail here.
Because
to date, nuclear power investment has been somewhat
stalled in the West and proceeding at breakneck
speed in Asia,
but it's centered around traditional large
reactor investment. You make a hole in the
ground and you spend about $15,000,000,000,
and you make a gigawatt of power,
and then you're really happy for the next
fifty years modulo some operational issues and fuel.
Nobody wants to do that anymore. It's very
risky.
If they run over cost, then they're late.
So Rolls Royce and a bunch of other
companies like GE
have proposed building something they call SMRs, small
modular reactors. These are much more like things
that admiral Rickover
put inside tin cans and sent around the
world on a goodwill mission for the US
Navy. They're amazing machines. They're tiny, and they're
even fuel once, operate for fifty years. They're
not gonna make a gigawatt.
They're gonna make
couple 100 megawatts. They're pretty good size for
a data center. They could be really nice.
But, Tom,
is anyone actually sending you a letter through
the mail saying how do you feel about
having a small nuclear reactor up the road?
Yep.
Yep. So they're not asking me
if this is something I feel comfortable with.
And I have to say,
I'm not actually oppositional,
but they're not even talking
about asking. Right? Yeah.
So the agenda of social control that comes
along with the deployment of nuclear technology
does not get discussed very much. You can't
just put one of these babies out there
without building a risk model around what does
that do to us to have one of
these puppies running? Well, they're still regulated by
the NRC, aren't they, at least in The
United States? It's not like they state regulation
because they're private.
No. Indeed. But that regulation includes that for
a circle around them, normal
social constructs around engagement with law enforcement are
radically different. It's the same as the effect
of the borders.
If you live within five miles of the
border in America, your normal civil rights have
been
interrupted in the interests of guardians
of the border being able to do what
they have to do to protect mainstream America.
It's exactly the same with nuclear power plant.
Rights of entry, rights of evidence, rights of
action
completely change in a circle around these things.
And the people who do it are good
people. I'm not saying that we're dealing with
bad people, but the social construct
around how do we conduct our lives is
subtly different when you have nuclear power plants
next door. But we're not talking about it.
Yeah. And that's just one of the costs.
And now, you know, you talk about the
cost of the day center,
That also comes back to economic cost. Like,
it's not cheap to build those small those
SMRs.
And I know. And so, you know, we're
out here
not only and those SMRs, by the way,
also require water. And that's something else we
haven't talked about is that the data center
itself
list. Yeah. The data center itself consumes
huge amounts of water even if it's not
liquid.
Amounts. And and SMRs require water as well
because they're reliant on cooling
from these things. So
let's talk a bit about water.
Water
is really interesting
because we just take it for granted that
it's available in a lot of places.
But when you get into an economy
like, let's say, The Middle East where pure
water is extremely hard to come by,
you have to invest energy to take seawater
that you have access to and convert it
to pure water to use for things like
drinking and flushing toilets and running data centers.
That water is expensive.
So we now have people who are talking
quite seriously
about the booming market for information
services in The Middle East, in Oman, and
Dubai, and Saudi Arabia, and Yemen.
These countries
are totally up for a global Internet experience.
It's part of their social structure now that
people expect
for having put up with a very odd
political economy
that they're getting access to these amazing benefits
of buying
EA.
They own esports. Right? They're not gonna watch
esports that are being played on servers over
in America.
They want to be what an Australian would
colloquially call a loping bastard.
They want those esports servers in racks
where they are in Downtown Dubai, which means
the water supply for a massive city now
has to be put up against
the needs to supply data services
to that massive city.
It's the same gig as the power. This
has got fifty to a hundred year consequence.
Yeah. If it weren't for latency,
and latency is the real killer, but if
it weren't for latency,
I actually worked on a project in Greenland
where we were talking about going up the
West Coast Of Greenland,
and there are these huge, huge mountain,
valleys that go that that fall right into
the ocean.
And there's a huge amount, I mean, millions
of gallons of water melt off every spring.
And they just it just goes right into
the ocean. And they were thinking, well, you
know, we could damn one of those,
and we could not only have millions of
gallons of water to cool data centers,
but we could have millions of gallons
of water
to push through,
hydroelectric
dam, and we could build data centers, and
it wouldn't really cost us a lot other
than building the dam
and and blasting out a flat spot. Because
there's no flat spots. I mean, there's nothing
There's a lot of people in Iceland who
are thinking very much the same. We have
glaciers and we have geothermal power. Why don't
we operate as a data center for the
Northern sphere? And people are going, yeah. But
No. The problem the problem with, like seconds
of delay.
Yeah. But it's not only that, but Iceland
has a lot of,
geoactivity.
They hit a lot of little bitty earthquakes,
and people don't realize that. Because you don't
feel so cool. Hey. Yeah. That's not so
good for a data center. It's much much
harder on
a hard drive, a spinning hard drive, or
even electronics connectivity
than it is. You can't even feel it
walking across the ground, but there are hundreds
of these little tremors all the time.
So yeah. So this but but the delay
and all of those kinds of environmental factors
trying to build in those areas,
it's just it's just very hard. What we
basically need is we need to convert all
networking to quantum.
So the
No more latency.
I already told you that. And the reverse
of it. You got both. Pick one. What
do I care?
But I wonder
No. Yes.
So it's so it's a little bit ridiculous,
but what would happen if there was no
latency?
What centralization would happen? And, you know, people
wouldn't be considering Iceland anymore. Right? Like No.
So
this
is something that an economist might call a
negative externality
if I have the jargon right, that you
make all these plans, then it would make
a lot of sense to do this build
out and do something.
Yeah. I'm gonna build a data center, and
I'm gonna build it to take GPUs from
NVIDIA, and I'm going to run a massive
AI farm in this data center, and I'm
gonna build it in Malaysia
because
they have an amazing tax offset right now.
I've done a deal with a landholder. I'm
gonna make a lot of money all the
way down the line. You get six months
of the way in, and NVIDIA say,
I'm really sorry to tell you this, but
the Chinese did this thing called DeepSeek, and
they can run the same model we sold
you but on a tenth of the capital
cost. And a guy up the road has
actually done that. He's already built out because
it's a tenth size, tenth the power budget.
He stole your lunch, dude.
Yeah. Well, this is the other yeah. This
is another economic
and social cost we don't think about Yeah.
Because we are building permanent infrastructure
around specific
task and specific
ways of building networks.
Those that infrastructure is not going away.
I mean, you can't convert that into a
mall and go shopping in it.
That is the externality.
Because when somebody decides
that the deal isn't going to work, but
they've already clear felled the forest, laid the
concrete floor, built the trunking, built the utility,
and then they walk away from the deal,
what they leave behind
isn't their problem. It's somebody else's problem.
And we are actually already
beginning to see signs of this in Southeast
Asia. It's a growth market. It's the logical
place for a lot of data centers to
build out because it's got very cheap cost
of construction,
and it's got very strong potential for a
future market. But the problem is
some locations like Singapore
have already exceeded their foreseeable power budget, and
they passed
new legislation
basically saying no more DCs.
And
then people who bought land on the prospect
of a future DC sale with some joint
venture partners
are sitting there wondering, what exactly am I
going to do with this asset?
So then there's hungry developers looking at Malaysia,
say, or Vietnam,
buying into the idea of a DC build,
and they make an investment there. Okay. Let's
talk a little bit about power in Vietnam.
What is Vietnam's primary source of electricity
power? It's not hydro. It's coal.
Yeah. So Yeah. You are now moving
a decision about megawatts of power generation
into an economy that is going to perpetuate
coal market, which is great for my economy
because I get to sell them the coal.
But we were kind of on a road
map to try and get out of coal
production.
Oh, that's no problem, you say. Let's do
an SMR.
I'm sorry. You cannot strategically
sell
SMRs
into
that economy.
You can't. It it also impacts connectivity in
ways we don't think about this costing model
and where we build things and where the
power is. Right? Because
when I've worked for multiple providers,
operators, whatever you wanna say,
they have always chosen Singapore or Hong Kong
as a way a gateway into China
because you don't want to necessarily
have a drop point. It's like it's like
India has its weirdness
that you can go through India cheaply, but
you cannot terminate circuits in India.
You can, but they cost a lot of
money.
You can't build a fiber that terminates in
US territories like Guam or on the West
Coast. Yeah. Huawei is a venture capital, and
you cannot terminate it in Hong Kong. You
can't. Right. Exactly. And so you have these
you have these weird things like this. And
Singapore was always this place where you could
go. You could get to China.
You could get to the entire Asian Pacific.
It's an intrapot in every sense. But unfortunately,
Singapore can't afford to host the DCs that
people would need to have there
to use it to provide this service. The
markets are having to move, which means fifty
year plans about cable routing and investment in
power and investment in water
are moving around. They're sloshing around like giant
buckets of money and consequence,
and you or I as consumers
don't actually have an awful lot to say
in this.
Yeah. Yeah. We don't, honestly. Even many operators
don't have anything to say in this because
it's all on the real estate
and the and the power side, power, water,
and real estate side. So if you're somebody
like Akamai or Facebook or LinkedIn or whoever,
Microsoft, whatever it is, you're just trying to
play the market. You don't have any.
Like, you can't say, oh, I'm gonna open
in Singapore this year.
Okay. Good luck with that.
Because,
you know,
no. You're not.
So in the margins,
because I don't like only bad news stories,
there are actually some good news stories that
come out of things like that. You being
a positive
Australian.
I know. I know. I just I can't
do doom and gloom, Russ. It's just not
in my making.
So
there aren't many jobs, but there are jobs.
And those jobs during the construction phase leave
behind people who've got amazing skills in rapid
construction, tilt slab,
power engineering, driving. It actually does leave behind
capacity and capability for the local economy to
do other things. So people start building piggeries.
People start building
other things that consume the margins of this
power that wouldn't have been economically feasible for
them before because the power wasn't being delivered.
There are side benefits.
There's also
the data component that as more places build
out DCs,
it's going to get more common for governments,
local governments,
communities
to say,
I really want this within my own territory.
And the hyperscalers
may not be the ones, but somebody's gonna
stick their hand up and say,
okay. I have a price point to hone
your data on machines you can understand
that are within your geopolitical control.
If that's what you want, this technology has
been commoditized.
Tell me the supply chains that you're comfortable
with. For Americans, it's gonna be Dell or
it's going to be whoever.
Maybe for Chinese backed entities, it's gonna be
a different source of product going in those
racks. That's okay. It's the nature of the
beast. But the localized control story,
I think, is going to get better. And
I think the RTT story about everybody wants
data local,
I don't think that's wrong. I think it's
true. I I didn't need my finance transactions
going all the way to Switzerland and coming
back again.
So there is a component of this where
the resilience
sort of comes back into the system if
you build it right. Because if power goes
out
at the wrong end of a long line,
you have no recourse.
When power goes out close to you and
you can't do things, if it's taken out
your local DC,
it's kind of the island of you and
the DC that are offline. The other people
who have other DCs to operate from
probably get continuing service. So we talked about
US East going offline.
It didn't affect everything. Right?
Same with this Azure routing. It was outage.
It was it was local effect. It was
a little bit distributed because these guys don't
necessarily follow boundaries, and sometimes things have
political side of this, one thing I would
want to be doing or saying is
if you're gonna build a data center in
my area,
I want the physical facilities to be at
least somewhat fungible.
I want them to be usable for something.
If you decide to drop out, I don't
want you building a building where the doorways
are specifically
designed to fit this particular NVIDIA processor. As
stupid as that might sound, you know
Oh, no. That's real. These doorways have to
have enough system strength that if I convert
it to repairing buses,
I can fit them in the doorway and
drive them on the concrete floor. Exactly. Yes.
There have to be there has to be
some fungibility,
some amount
of flexibility
built into these things. And, yes, that's gonna
cost more upfront. I know that. That's okay.
Yeah. But that's that's the that's that's the
social trade off that this So these up
front costs
aren't that dissimilar to the kinds of costs
that people doing green power build outs routinely
have to talk about. You want to put
wind towers up, you pay the farmer
rent for use of the land.
You pay the neighbors
lower rent for the effect on their environment
having that power there. You wanna drag a
power line? Rights of way come with rent.
So maybe
data centers have a social capital rent.
They have to employ locals,
and they have to build fungible facilities.
And that power budget that's bought in for
them has to have a percentage cap component
that's power for the local schools, power for
the local churches Yeah. Power for the community.
Yeah. Because, like, you would never buy a
house
that if you repainted the walls, the house
could could no longer be used.
Or if you wanted to knock out a,
you know, if you wanted to knock out
a wall and make the make the kitchen
bigger, well, no. Every wall in the house
is load bearing.
Nope. You can't touch any of the infrastructure.
Oh, if you if you if you hang
up, it's your I live in I live
in Australia. We build houses out of asbestos
fibro cement.
Yeah. But I mean, even like even, like,
oh, you can't you can't drill it. Like,
I I once lived in a house where
I wanted to be able to hang stuff
from the ceiling of the garage.
And the builder said, absolutely
not. If you drill if you drill any
sort of lag bolt into those,
joists or whatever, those rafters or whatever, you
are destroying the structural integrity of the whole
house.
And you're like, if that's not cool, I'm
sorry. No. There's something that's not cool about
this.
That's not how it was meant to be,
was it? Just not like that. Kinda different.
I wanna democratize
net. I kind of wanna get to power
to the people on this. You know? And
I think
democratizing the DC would be a really, really
good first step.
Yeah. I still know how you do it.
It's gonna look different for every region.
Some places are gonna be,
you know, they're gonna be much more about,
you know, like freedom or not freedom, but
tilting towards the business because they want the
business
there and other places are gonna be more
tilting towards the community because they want the
community there.
I I don't know how you you can't
one size fits it all.
It's all There's gonna be a range of
solutions. After the microphone goes off, the three
of us can have a good old sing
song of Kumbaya
and fix the problems of the world.
No.
The four of us because the plant has
the drum kit. Yeah. That's right.
So we've talked about the water cost.
A lot of people don't think about the
water cost, the power cost,
the social cost. Is there anything else?
Like, we we we've tried to we've tried
to push some of the good stuff back
in, but is there anything else
that
we can think of?
And I'm gonna say this. This is kind
of tangential. A lot of people say, like
you said earlier, oh, it's leaving behind electricians
and people who know how to who know
how to do concrete and plumbing and stuff
like that. I am utterly convinced
that the trades
will eventually
be the same thing
as taxi drivers.
You think they'll skill down? I think they'll
skill down. I think there will be a
ski
a a cream on the top of elite
drivers who drive,
not taxis, but they're, like, well trained in
how to do
evasion and
all this other stuff who are driving around
very important people and doing limos because they
have the big cars, and then there'll be
Uber drivers.
And I think this is the same thing
is gonna happen to electrical
and
plumbing at least. I don't know about concrete
because concrete's actually to me harder
and
and stuff like that. But
I think that's a thing that's coming.
So I think resilience
in a local community comes
in many shapes and sizes.
And
I used to believe very strongly that the
technology was more good than bad and that
exposure to technology
tended to the more good than bad.
And
I have become slightly more conservative as I
got older. I swore I wouldn't do this,
but I have. And I'm not convinced
it's a good idea for local communities to
expose kids to an online life early.
And I worry
that the increasing
investment in technology we're making
means that people are going to look for
things that they can invest in to leverage
that technology investment. And I'm pretty sure education
and social structures for kids are gonna get
there. Now we're scared
of the aspect of kids getting into big
online environments where we don't have a boundary
of control. There are social issues there that
are just horrible. I don't want to even
think about them. Yeah. But I would actually
say show. We should do that. I would
actually say
ignoring all that, just the mere existence of
a kid's life bounded online,
to me, is not a resilient life. It's
not a good idea, folks. And if we're
building these DCs and we're building social structure
into these DCs,
we have to be very careful to build
a component of our lived experience,
not in the DC.
Yeah. Yeah.
I know Tom needs to drop, so I
know he has some other meeting. I don't
have any other meetings ever, so, you know,
I could just go on for hours. We
can talk about your Cherokee.
So alright. Cool.
Alright. So, Tom, where can people find you?
LinkedIn.
And
the after the dramatic pause, where can people
find the plant?
No. No. Nowhere yet, but I'll say this.
If, if the people want,
a social media account for the plant, then
I who am I to deny the people?
Right?
To the people. Alright. George, where can people
find you?
You can find me at a p Nick's
blog, blog.apnick.net.
LinkedIn, Twitter, anything else? X? I'm sorry. Whatever
else it is. No. Don't do that stuff.
Alright. Cool. Alright. I'm Russ White. You can
always find me here at the hedge. You
can find me at rule eleven dot tech.
You can find me on x every now
and again,
and LinkedIn.
We know that we live in an attention
driven economy
and that you've paid attention
all the way to the bitter end of
this episode of The Hedge. So thank you
for listening, and we will catch you next
time.