Samuel Johnson: Good evening, and welcome to the sixth and final bout. For five evenings we have asked who pays. Tonight we ask the question this whole series was built on. If the law treated a data center like a plain warehouse, could it still make money? I am Samuel Johnson, and I have been looking forward to this, sir, because tonight there is a ledger.
Niccolo Machiavelli: The Doctor loves a ledger because it is the only document that cannot be accused of being a Whig.
Samuel Johnson: In the near corner stands Walter Bagehot, for seventeen years the editor of The Economist, and an Englishman who explained the money market to the very men who run it. He wrote that John Bull can stand many things, but he cannot stand two per cent. Somebody fetch Boswell, for I am about to cheer for a journalist.
Niccolo Machiavelli: And in the far corner stands my man, Alexander Hamilton, first Secretary of the Treasury, who built a nation on borrowed money and was then shot by a sitting vice president. I have applied for a position at his Treasury. I await his reply.
Samuel Johnson: My Dictionary has a word for the men who live on the ups and downs of grand ventures. A stockjobber, sir, is a low wretch who gets money by buying and selling shares in the funds.
Niccolo Machiavelli: In chapter twenty five of The Prince, I wrote that fortune is like a flooding river, and wise men build their dykes in calm weather. Hamilton builds dykes. The Doctor stands on the bank and defines the water.
Samuel Johnson: Sir, the water deserves a definition, and nobody else is going to give it one.
Niccolo Machiavelli: That is the truest thing you have said in six episodes, Doctor.
Samuel Johnson: Walter Bagehot, Alexander Hamilton, the floor is yours for the last time, gentlemen. Leave the ledger in better order than you found it.
Niccolo Machiavelli: Mister Hamilton, borrow the floor, and promise to pay it back later.
Walter Bagehot: Thank you, Doctor Johnson. I say a business that cannot pay for its own electricity is not an industry. It is a mood.
Alexander Hamilton: Thank you, Signor Machiavelli, and no, there is no position at the Treasury. I say no great industry in history ever paid its own way at the start.
Walter Bagehot: Mister Hamilton has never met a subsidy he could not describe as nation building.
Alexander Hamilton: Mister Bagehot has never built anything larger than a magazine, and he would like a medal for it.
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Walter Bagehot: I am Walter Bagehot, editor of The Economist for seventeen years and author of Lombard Street. I spent my career watching Englishmen lose fortunes on railways, canals and other things that would certainly change the world. Some of them did change the world. Most of the investors went broke anyway. Tonight I have been handed a ledger, and I intend to read it aloud, slowly, to a man who would prefer I did not.
Alexander Hamilton: And I am Alexander Hamilton, first Secretary of the Treasury. I funded a bankrupt nation’s debts, founded its national bank, and in 1791 sent Congress a Report on Manufactures arguing that a young country must deliberately encourage its industries. I have been lectured on finance by Thomas Jefferson, who could not balance a household account. I can certainly survive Mister Bagehot.
Walter Bagehot: Then here is the question of this whole series. Suppose a data center may draw from the grid only what a warehouse of the same size would draw. It may take from the city main and the aquifer only what a warehouse would take. And it gets no tax break written for its industry alone. Could it still make money? Take a large campus for artificial intelligence, counted per megawatt per year. The industry says it earns ten to twelve million dollars. One independent model puts the full cost at about eight and a half million, most of it the chips. That leaves a margin of one and a half to three and a half million.
Alexander Hamilton: Get on with it, sir, I can hear the abacus warming up.
Walter Bagehot: Now make it pay its own way, by my own arithmetic, which I invite anyone to check. Making its own power from gas costs more than buying from the grid, perhaps one hundred thousand to six hundred fifty thousand dollars a megawatt. Cooling without water adds perhaps fifty thousand to three hundred thousand. Paying sales tax on the servers like any grocer adds another three to four hundred fifty thousand. Property tax at the full rate, up to three hundred thousand more. All in, from under half a million to one point seven million. On the best campus it is a dent. In the middle it is forty percent of the margin. At the worst it is all of it.
Alexander Hamilton: Then your own ledger acquits them, sir! On the best campuses it is a dent. You have just proven my industry can bear the weight, and you are calling it an indictment.
Walter Bagehot: I have proven the best of them can bear it, which is a very different thing. The older buildings that rent space to many customers earn perhaps two to three million a megawatt, and the same bill eats a ten percent return at the middle of the range. The ones inside cities cannot build a power plant in the car park. The rule does not kill the industry, Mister Hamilton. It sorts it.
Alexander Hamilton: Sorted by whom, Mister Bagehot? By a man with a spreadsheet in London?
Walter Bagehot: Sorted by the customers, which is far worse for you. And then there is Ohio. When one utility required data centers to pay for eighty five percent of the power they reserved, for up to twelve years, its forecast of new demand fell from thirty thousand megawatts to about fifty seven hundred. Four fifths of the boom disappeared the moment it was asked to sign. The rule does not destroy the industry. It destroys the mania.
Alexander Hamilton: That is very tidy, Mister Bagehot, and very English. In my Report I warned that the established nations would never allow an infant industry to grow up in peace. I recommended bounties, paid openly, so the young enterprise could survive its first winters. Every great American undertaking was helped at the start. Your warehouse rule would have strangled every one of them in its cradle, and this industry is racing the entire world.
Walter Bagehot: Your Report produced a company town at the Great Falls in Paterson, New Jersey, with a handsome charter and grand plans. Within a few years the factory had stopped. Paterson recovered beautifully, and later gave the world William Graham Sumner, which I count as a second failure.
Alexander Hamilton: You sit in London with your clubs and your coffee and lecture a nation you never had to build.
Walter Bagehot: Spoken like a true aristocrat, Mister Hamilton.
Alexander Hamilton: Do not call me an aristocrat, sir! I came to this continent an orphan from Nevis with nothing but a clerk’s pen and a ship’s ticket. Every dollar of credit this country has, I built from a pile of unpaid debts. I will not be called an elitist by a man who married the daughter of the owner of his own magazine!
Walter Bagehot: That one landed, I admit, and I shall score it to you. Now let me state your case properly, purely so that I may take it apart in the right order. You say a new industry faces costs at the start that it will never face again. You say a nation that waits for an industry to prove itself is overtaken by nations that did not wait. You say the help is repaid many times over in taxes, as Loudoun County collects one point two billion dollars a year from its data centers. That is a serious argument, and I have made it sound considerably calmer than you do.
Alexander Hamilton: Adequately put. And yours, in fewer words. A cost that is hidden is a cost nobody counts. An industry that needs a gift has not proved it deserves one. And a boom that cannot survive a contract is a bubble with a press office. Fine. Here is where you are wrong.
Walter Bagehot: Where am I wrong, then? I am all attention.
Alexander Hamilton: I wrote that bounties should be paid in the open, voted by the legislature, visible in the public accounts, so every citizen knows what is spent and why. What I would never defend is a subsidy hidden in a widow’s electric bill, or buried in a sealed contract, or slipped through a capacity market where nobody can find it. If the nation wants these buildings, let Congress vote a bounty in daylight and put its name to it.
Walter Bagehot: That is the most sensible thing an American has said in six episodes, and I suspect the Doctor will faint.
Alexander Hamilton: Then let me be equally fair about your rule, since you will not be. Why a warehouse? Bentham asked it and nobody answered. A steel mill draws more than a warehouse, and so does a hospital. And your rule makes every campus build its own gas plant, which puts the turbines next to the neighbors, as Bismarck said. You have not made them pay. You have made them smoke locally.
Walter Bagehot: I concede it, and gladly. The warehouse is a crude yardstick. The honest rule is not be a warehouse. It is pay what you cost. Pay the full price of the grid you strain, the water you evaporate, the air you foul and the land you need. Then let them build wherever they like.
Alexander Hamilton: Go on, sir, you are conceding things and I am enjoying it.
Walter Bagehot: And I will concede what I cannot see. The ten to twelve million a megawatt is the industry’s own figure, and the real contracts are sealed. If the true revenue is ten and not twelve, the costliest campus is under water. The chips wear out in about five years, and the power line lasts thirty. Somebody holds the remainder, and nobody will tell me who.
Alexander Hamilton: Then we agree that they can pay. We disagree about whether a nation should help them.
Walter Bagehot: We agree that they can pay, Mister Hamilton. That is precisely why they should!
Alexander Hamilton: NATIONS ARE NOT LEDGERS, SIR!
Walter Bagehot: THEN STOP MAILING THE LEDGER TO THE WIDOW!
Alexander Hamilton: I BUILT YOUR KIND OF BANK!
Walter Bagehot: AND I WROTE THE MANUAL!
Alexander Hamilton: TWO PER CENT!
Walter Bagehot: PATERSON!
Alexander Hamilton: SCRIBBLER!
Walter Bagehot: BOUNTY HUNTER!
Alexander Hamilton: ARISTOCRAT!
Walter Bagehot: THAT IS MY LINE!
Alexander Hamilton: IT IS MINE NOW!
Walter Bagehot: If you have watched all six of these, you have earned the right to like and subscribe, and I strongly advise it. Mister Hamilton wrote fifty one of the Federalist essays to persuade the voters of New York, and could not persuade one vice president to miss. I admire him enormously, from a safe distance, which he never learned to keep.
Alexander Hamilton: Like and subscribe. And consider Mister Bagehot, who explained the English constitution to the English, who already had one, and the money market to bankers, who already had money. He married the daughter of the founder of The Economist and then became its editor, which I believe is what the English call merit.
Walter Bagehot: Doctor Johnson, I return the floor for the last time, with the books balanced and the margin intact.
Alexander Hamilton: Signor Machiavelli, I have read your application, and I have forwarded it to Mister Jefferson.
Samuel Johnson: Thank you, Mister Bagehot. Sir, I score the final bout for Walter Bagehot. He read the ledger aloud, he admitted what it could not tell him, and he made an American agree that a subsidy hidden in a widow’s light bill is a disgrace.
Niccolo Machiavelli: Thank you, Mister Hamilton, and Jefferson will never answer, so I remain hopeful. My card goes to Hamilton. He conceded the hidden subsidy and won the larger point. The nation will help its favorite industry. He only asked that it do so in daylight.
Samuel Johnson: Then let us read the whole card, sir, all six bouts. I scored them for Henry George, for Sumner, for Locke, God help me, a Whig, for Blackstone, for George again, and for Bagehot tonight.
Niccolo Machiavelli: And I scored them for Stanford, for Carnegie, for Bentham, for Bismarck, for Sumner, and for Hamilton. Six bouts, Doctor, and the closest we came to agreeing is that we each backed Sumner once, in different fights.
Samuel Johnson: Then the verdict on the question itself. Could a data center pay its own way if the law treated it like a warehouse? The great ones could, sir, and therefore they ought to. The weak ones could not, and therefore they were never an industry. They were a speculation with a cooling tower.
Niccolo Machiavelli: My verdict agrees with your arithmetic and disagrees with your conclusion. They can pay, Doctor, which is exactly why they never will. No prince pays for what his subjects will hand him for nothing. The governors are building their dykes, and the ratepayers are standing in the river.
Samuel Johnson: Then I will name the one thing every man agreed on in six bouts, Whig and Tory, Prussian and Scotchman, banker and printer. The contracts are sealed, and nobody can check the sums. Open the drawer, sir, and half this quarrel settles itself.
Niccolo Machiavelli: That is the one plank in the whole series both of us will stand on. Somebody fetch Boswell.
Samuel Johnson: At last, sir, you have learned the only phrase that matters.
Niccolo Machiavelli: I learned it from the most impartial servant in the business.
Samuel Johnson: If you have watched all six bouts, you have earned the right to like and subscribe, and I command you to exercise it.
Niccolo Machiavelli: And if you would like to make debates like these, with any two people you choose, from any century you like, visit AITalkerApp.com. Write a script, pick your voices, and it turns your conversation into an animated video. Link in the description.
Samuel Johnson: This series came to you from PhilosophersTalk.com, where thinkers discuss, and was created with AITalkerApp.com. I remain, as ever, your impartial servant.
Niccolo Machiavelli: And I remain available for employment. Good night, and do come back.
