Dwarkesh Patel: belief

Transcript context

…No, it’s good. You’re doing good. I just think it’s funny. A million people listen to this guy who just learned about debt this month. Suppose the interest rates rise 1%. Over a five-year basis, the fraction of tax revenue that goes towards servicing the debt goes from 20% to 25%. If it rises 5 percentage points, that would go north of 40%. But if you take into account the fact that the government is borrowing $2 trillion every single year, then that goes from 40% to north of 60%. So 60% of tax revenue just goes towards paying interest payments on the debt. Now, I think the US is going to be fine because the tax base will increase if we let data centers get built in America. Other countries are absolutely fucked, in my opinion. I was just looking at which countries have a lot of debt, have very little tax revenue, and also a lot of their debt is serviced quite often. Those countries, like Pakistan or Nigeria, I think are just going to be very fucked in this new interest-rate regime. This crowding-out effect is the reason it’s not YOLO 1 billion gigawatts. You’ve got all these industries and countries that use a lot of debt, all these impoverished countries that you mentioned earlier that are just going to default. You’ve got consumer packaged goods, all of these companies that make things you see at Trader Joe’s or wherever. They use a lot of debt. All these telecom companies use a lot of debt. Banks use a lot of debt. So if interest rates go up in the market — not necessarily the government-set interest rate, but the spread between what the government says their federal rate is versus what everyone else is charging, because Amazon wants to raise $100 billion of debt next year or whatever the hell the number is, probably less — you end up with this really challenging problem of, where does the cash come from? There is some level that is funded by cash flows and the cash flows keep going up. But the logical thing to do is to invest way more than your cash flows because then the returns in future years will be amazing. So you have this delta. Then what’s pushing down on the delta is all of these other things: regulations against data centers, consumers getting mad, politicians getting mad, regulations against AI, the AI labs not releasing their latest models because of safety reasons. Interest rates going up are an influence on all of these things. So all of these things bend the curve from what capitalism wants in terms of pure, simple economics to what the complex system that we have wants, and bend it lower and lower to where not as many gigawatts as should be built will be built.…

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