A few links-and-comments from the week:
(1) Don’t Believe Them
Ezra Klein interviewed Jasmine Sun this week about the data center backlash. It’s an interesting conversation, well worth a listen.
One bit that stood out to me was this point about data center activists simply saying “I don’t believe them” in response to promises from the hyperscalers.
Sun: One of the things that was the most surprising to me, when I talked to data center activists, was that they responded to so many of the pro arguments with: I don’t believe them.
So this company says that they are going to treat the water with chemicals in it so that it doesn’t flow into the lakes. People would say: I don’t believe them. I don’t think they can do it.
The companies would say: We are going to cover the costs of our own electricity grid build-out. We are going to ensure that rates do not go up for all Michiganders. A lot of folks would say: I don’t believe them. DTE Energy has raised our electricity rates basically every year since 2022. Why would this be the year that they decide not to do it? I do not believe them.
Companies say: We are going to create 500 jobs, and some of these will stick around after the data center is built. People just said: I don’t believe them.
It was really clear to me that data centers are showing up in an environment of extremely low trust in both governments and in corporations, to the extent where the pro arguments almost do not land because people just aren’t interested in anything an outside tech company is going to tell them. They say: They have big public relations teams. They can say whatever they want.
The bit that I want to emphasize is: Good. You absolutely should not believe the data center proponents. Every assurance they make is subject to subsequent revision. It’s 2026, and we should all know this by now.
I recently read Eric Ries’s new book, Incorruptible: How Good Companies Go Bad and How Great Companies Stay Great. It was delightfully much more radical than I expected. (I don’t usually see startup gurus take a sledgehammer to Milton Friedman’s corpse. More of this, please!)
Ries’s main thesis is that well-meaning companies have to take governance and corporate structure very seriously, or else they will get sabotaged by private equity/hostile board members/other avatars of the worst excesses of present-day capitalism. Good companies go bad because we prioritize immediate shareholder value over all other types of value-creation, with disastrous consequences both for the companies themselves and for society writ large. (I’d recommend reading Megan Greenwell’s Bad Company and Catherine Bracy’s World Eaters first, but Ries’s book is a welcome addition to the genre.)
Anyway, as Ries makes clear, the question that you have to ask whenever a tech company (or any large company) strikes a deal with a local government is “what penalty does the company pay if they go back on the deal?” If the penalty for reneging is cheaper than the cost of fulfilling the stated terms, then you should assume that the company will renege. (Because that’s how the company maximizes shareholder value in the upcoming quarter. Everything else is secondary.)
We’ve seen this phenomenon for decades with environmental/health and safety regulations. It is cheaper for coal companies to pay the fines than to follow the law, so the coal companies just pay the fines. We’ve also seen it in Elon Musk’s legal arbitrage. We know how this goes.
When a company says they are “going to treat the water with chemicals so it doesn’t flow into the lakes,” that is a limited-duration promise. What the company actually means — the only thing that it can mean, in fact — is that it is willing to make this promise to the community right now in order to sign the deal it is pursuing. At some later date, some C-suite executive (or outside consultant, or politically-connected VC, take your pick) is free to notice that treating the water with chemicals costs a lot of money, and that it would be cheaper to just stop treating the water with chemicals. And then, unless the enforcement mechanism is absolutely ruinous (and, in 2026, they never are), the company will abandon its former promises. And probably give the exec a bonus.
The companies could build out the electric grid, constructing massive solar farms to support their massive data centers. But it would be cheaper (for them, in the short term) if they didn’t. So, in practice, they generally won’t.
You don’t have to believe the hyperscalers are particularly villainous companies to conclude you shouldn’t believe their promises. You just have to believe they behave like large companies, and obey the same short-term profit-maximizing incentives as every other large company.
(2) The Situation with Situational Awareness
The whole Leopold Aschenbrenner thing is such a fascinating trainwreck. If you haven’t followed the details, read Liz Lopatto’s (perfect) writeup from last week.
The TL;DR version: Aschenbrenner (a former OpenAI and FTX employee) wrote a manifesto in 2024, insisting that scaling laws would go on forever and superintelligent AI would completely transform the economy by 2027. It included a bunch of chart-crimes. Silicon Valley loved it. Then he launched a hedge fund. The manifesto was great advertising, and the investment thesis was basically “leveraged bets on AI lines going up.” Good thesis, for the past couple years at least. He made a ton of money for his investors. But then, last week, he lost basically all of it and had to sell the assets to mega-investor Ken Griffin.
Aschenbrenner’s chart-crime. This is bad. Do not ever make a chart like this.
This seems to be less a sign of that the AI financial crash has finally arrived and more a sign that sophisticated AI thinkers don’t know what they don’t know about finance and hedge funds. (As always, read Matt Levine).
Also, too: this all happened on Thursday last week. Last week, the news was that Leopold Aschenbrenner had lost roughly $35 billion of his investors’ money. And then this Tuesday, he relaunched the fund with a fresh $400 million of private investment. AND OVER THE WEEKEND THE GUY GOT MARRIED!
I am so, so curious about the vibes at that wedding. Congratulations to the happy couple. May the rest of your lives be so much less hectic than the beginning of your marriage.
That’s all for this week. August is going to be a pretty light month, newsletter-wise. I’ve got some vacation planned, and am training for a marathon right now (in August. In DC. I may not have fully thought this through), so I’m basically dividing my time between (1) running and (2) being exhausted from running.