Casey Handmer: preference

Transcript context

…It's their job. They probably know more about it than I do. But in all seriousness, if you're like xAI right now trying to build the Colossus data center in downtown Memphis, you want to get it done super fast. “What are all the different things we need? What are the factors of production to build this? We need a building. We don't have time to build a building so we'll buy a building. Okay. We'll adapt it. We need power, we need thermal cooling.” That stuff you can deliver on a truck so that's what they did. You need access to gas. They had access to gas there. They could tap into a local gas line. If you can tap into a gas line, generally speaking, you can get enough power. The energy transmission capacity of your regular gas delivery pipelines is way, way higher than electricity overhead lines, and it's easy to upgrade. So if you're in this situation right now, you say, “Are we constrained by our ability to go and rent gas turbines?” No, they're not, because there was enough available once, maybe twice. But at a certain point, you realize as you grow, you start to touch all these additional constraints. Some of those constraints include gas availability. So there's a lot of chat about doing this in Pennsylvania where there's quite a lot of stranded gas, and in parts of Texas. But at the same time, the United States is gearing up in its ability to export natural gas overseas, so the price will not be infinitely low forever. You start to run into constraints around turbine manufacturing rate, around transformer production rate, around grid capacity, and also running into problems where the AIs and the humans who depend on legacy electricity production and delivery utilities are competing with each other. We just saw this recent forward auction in PJM result in very high, unsustainably high prices for consumers who depend on cheap electricity to heat and cool their houses and have general prosperity. If you look far enough in the future, you can just turn up the dial arbitrarily high. You can say we're going to put in a gigawatt a year. Well, we can meet that constraint with gas turbines. We're not going to run out of natural gas at 1 gigawatt per year indefinitely. What if we're doing 5 gigawatts per year? What if we're doing 50 gigawatts per year? What if we're doing 100 gigawatts per year? You can just break the situation. Not to reach prematurely for analogies, but Henry Kaiser set up the shipyard in Richmond, just down the road here in San Francisco near Berkeley. He was initially making ships for the British and by the end of the war he had four separate shipyards operating in parallel, to the point where he was bottlenecked on his supply of steel. Steel was rare enough in the war, because everyone was using it for different things, that Kaiser Industries went off and built not only a steel mill, but also a steel mine. They went and started digging rocks out of the ground to turn into ships. one was using it for different things, that Kaiser Industries went off and built not only a steel mill, but also a steel mine. They went and started digging rocks out of the ground to turn into ships. That's the same sort of situation you have here where you have these massive industrial verticals. Here I'm quite bullish on xAI in particular because the Elon cinematic universe has just done so much industrial stuff compared to the Googles and Metas of this world. They can reach all the way through down into primary material supply if they need to. The reason that these current plans are being done based on natural gas is that this is the sort of……

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