Paul Kudrowski

I don't want to have to write off GPUs every three years because they're the most of the cost of the thing that we call a data center.

So you can't play the game of saying, well, there actually is capital here, money that I'm spending that will be valuable in a couple of years.

Again, unlike telecom, unlike the fiber boom.

Unlike in railroads, there is actually two assets here.

One that's long-lived, a building, which is essentially a small fraction of the cost of the center.

And then there's one that's very short-lived, which is the GPUs, which is the thing we'd like to have last and doesn't, but yet represents as much as 60% of the cost of the data center.

So there's the perversity and that's the problem.

Yeah, so the analogy I draw is looking back.

You can see how a similar effect happened.

That is, massive capital spending in one narrow slice of the economy during the 1990s caused a diversion of capital away from manufacturing and away from small manufacturing in the United States.

There's been some good studies on this showing exactly the effect.

And it's not surprising because people were rewarded for accepting that money to build out telecom and they were rewarded for spending that money because, look, I'm spending in an area with high returns.

But what that did was it starved small manufacturers of capital, which made it very difficult for them to raise money cheaply, which raised their cost of capital, meaning their margins had to be higher.

Now, let's follow that along.

During that same time, China had entered the World Trade Organization.

Tariffs were dropping.

We've made it very difficult for domestic manufacturers to compete against China in large part, not entirely, but because of the rising cost of capital because it all got sucked.

To use your Death Star term, it all got pulled into this Death Star of telecom.

So in a weird way, we can trace some of the loss of manufacturing jobs in the 90s to what happened in telecom because it was the great sucking sound that sucked all the capital out of everywhere else in the economy.

The exact same thing is happening now.