Full Transcript for True potential and consequences of data centers and AI with Dr. Rod Hewlett

federal government, we're about 135% debt to GDP ratio. We're actually exceeding what we did in World War II, actually saving the world, right? And so there's a limit, and that's the post-intervention era. Keynes was a proponent of intervention. Those who followed on and became what you call Keynesians We believed in stimulus, stimulus, stimulus, right, that the government could fine-tune the economy. What I'm saying– and that was the intervention era. What I'm saying is we're reaching a post-intervention era. You can't keep spending other people's money like the prime minister Thatcher said. It's fine until you run out of other people's money. Well, that's just about where we're at. And so what we're trying to envision, and economic theory really doesn't take us there, there's two theses within economics. One is somehow it magically heals itself, and number two, we drop off a cliff. I reject both of those. I think the market is powerful. I think the American people and people in the West are powerful. I'm arguing that what we really need is agency. People have to understand they are stakeholders in this economy. Not the old stakeholder concept, but truly have value in the economy, and they need to take agency in it. 00:07:20 Speaker 1: And that's a big story, because stakeholder, first of all, different than shareholder. And stakeholder has been utilized as a political construct. It's the idea that people who live in a neighborhood have a right to decide what businesses come in and out of a neighborhood because there are stakeholders in it. It's often a tool utilized for more left wing politics and philosophies. I don't think you mean it like that, but rather you mean that whether you're an investor or not, this is affecting your life and you should have some some say in what happens here. What so what do you mean by stakeholder and then what do you mean by agency? 00:07:57 Speaker 2: Excellent. You're exactly right. Shareholder, which is the University of Chicago concept, big Friedman thing, was that everything comes back to making money for the shareholders and everything else is secondary or tertiary to it. Well, that's not working right now. The other concept on the left is, you know, everybody has a vote. Well, yes and no. They have a rightful place for a vote. You know, and the idea that there's only two forms of capital, which is financial and physical capital are dated. And so what I do is open it up and say, look, there's human capital, which is also a University of Chicago concept as well. And people have a right to vote where they invest that human capital. And then there's intellectual capital. And intellectual capital is this idea of there's this whole body of knowledge that's outside of humans. We find it in libraries. We find it in research. We find it in a variety of places, the person next door, universities, experience. And that this intellectual capital helps fuel the economy as well. And then, of course, what I suggest here is there's various people that actually make these investments into business. And they do it as employees. They do it as supply chain partners. They do it as people that provide finance, the typical idea of financial capital. They do it as owners of a business where they take great risk and reserve and deserve returns that come back to them. But a lot of the research is showing that if you actually recognize these other investments people are making in your business value creation, and you actually give them a proportional return, they are stakeholders in the business. Not that owners say, ah, gee, you know, these people have a right to vote on my business. No, what I'm saying is they have an investment in your business, recognize it. And if that capital isn't adding value, get rid of it. It's a really, it is an expanded view. Well, what does that do? All of a sudden now you've got massive participation in the market with that concept. And so we have to talk about agency, what people feel empowered to do and what they do. And you just started with voting for the election and people felt empowered to voice their opinion. But when it comes to the market, people think of themselves as consumers. They don't realize every time you buy a product or make an investment, you're voting. You're voting for what you'd like or you don't like. 00:10:15 Speaker 1: But that's a different argument, sir. Talking to Rod Hewlett, Dr. Rod Hewlett, economist, formerly of Bellevue University. And then was it Governor Western? I always get the name wrong. 00:10:27 Speaker 2: Western Governors. 00:10:28 Speaker 1: Western Governors. Why? I can't say that. 00:10:29 Speaker 2: Largest university in the United States now. 00:10:31 Speaker 1: Yeah, except, you know, me, I can't say it. Western Governors University and now doing adjunct work at St. Bonaventure and writing these books on AI. Stakeholder agency, as you write it right there, stakeholder agency in the age of AI, new signals. for a post-intervention economic era is the name of the book. If you're anybody who's interested in where the investments are going to go, this is the kind of stuff you need to be reading. But this concept of investment, the stakeholder is not an investor. And words have meaning, and it is a fundamentally different thing. Yes, when you buy a product, you are voting. You're voting for what that product stands for. It could be you're voting for how that product is sourced or made. Is it made in the USA, for example? That being something you vote with your purchasing, you're voting on price or you're voting on quality and a whole host of things here. The way you're describing this first part is the idea of whether or not the thing should be in existence to begin with. So you start with a premise, and the premise is the AI is here to stay and the AI is good. True or false? Absolutely. 00:11:40 Speaker 2: Absolutely. It is misunderstood, and there's hype, and then there's, of course, the world's

going to fall in tomorrow, the chicken little concept with it. The truth is, like any technology, it's in between. But the promise of AI, powerful, incredibly powerful where it can take us. 00:11:58 Speaker 1: What do you put into the backlash, the anger, the hostility towards AI as a whole, data centers in specific? 00:12:12 Speaker 2: People don't understand what AI is. I played with it about 30 some years ago when the neural nets were being compared with statistics and such. And so about 30 years ago, I started playing with the algorithms. And I was amazed by them, but I could statistically outperform the neural nets. And today I cannot, not by any stretch of the imagination, nor can anyone else. We're solving massive problems with AI. It's advanced that far. And it is a promise for America. And we can get into that in treating it as intellectual capital rather than a replacement for human capital. People are confusing the two. And that's why I distinguish the capital and who are the stakeholders in this. When you start to think this is a replacement for human capital, this is a replacement for me, people freak out. It is not. It is intellectual capital. It can't make a judgment. It doesn't have a moral component to it. It can't be held responsible. The people who own it can be held responsible, but AI can't be held responsible. It's an algorithm with massive data search capability. It's predictive. And so when you understand it can amplify, and the book, the first book, Beyond Algorithms, is how do you set it up to amplify? How do you teach and educate people? You don't run away from it. You engage it. You teach people how to use it powerfully, ethically, and morally right, and then set it free. If you want to solve our debt problems, there's two pieces to it. Empower the market where it's a problem-solving creativity environment. where the stakeholders can participate fully and get returns on it. And the second thing is, is teach people how to use AI, where you make massive advancements in growth of the economy globally. I think those are the real answers. Without AI, we are at a massive disadvantage. Shifting to the data centers? 00:13:57 Speaker 1: Hold on. Stay right there. Because before we get there, we got to take a step back. Stay right there. Dr. Rod Hewlett, the book, Stakeholder Agency in the Age of AI. If you want to get wonky, you get wonky with Dr. Hewlett, because that's what professionals do. Keep it here. This is Tony Katz today. So is it serious or is it hype? Is it an op? Is it madness? The anger, the frustration, all the talk about data centers. Let me bring back Dr. Rod Hewlett, former college professor, economist, now retired. There's people in terms of jobs and there's people in terms of communities. And in both of those cases, what we hear is that there is serious concern about what AI is going to do to jobs and communities, jobs in terms of taking the jobs, and communities in terms of data centers. So let's start, let's go back to the jobs argument. Your argument is, is AI a replacement for human capital? No, that is different than whether or not AI can do a job in baseline finance or baseline accounting or base all sorts of things that absolutely could take a job. Are the people concerned that AI is coming for their careers? Are they completely without foundation? 00:15:19 Speaker 2: No, they're not completely without foundation. The idea here, and this is really the important part, if you, in fact, are doing a job that can be, in fact, replaced by technology, Data summing. Simple stuff, right? Clerical. A lot of clerical. It doesn't have judgment. It doesn't have a lot of the attributes of what you would consider professional judgment. Yeah, you're in trouble. Supply chain cleric. at a heating and air conditioning place. Yeah, you're in trouble because AI can do it. Are you the plumber? Are you in trouble? Are you the electrician? Are you in trouble? Absolutely not. In fact, this is going to help you on what's the best way to troubleshoot. How do you load your truck up to go to these different places and do it well and do seven or eight customers instead of three or four in a day because you're making all these trips back and forth and going down all these dead ends. Everybody thinks it's just about white collar. This will amplify everybody in the data tasks that can be automated with AI at a high degree and shift them toward more of a knowledge-based economy. And that requires reformation, redevelopment of people. And it also requires, and I want to make this point, Tony, when you put people in charge of AI, that means they have to have mastery of the task that they're looking at to make sure it's going in the right direction. And they also have to have a moral ethical component. They have to be able to understand what lines you don't step over with people, what lines you don't step over in the law, structural environment in society. They have to have that. So we have a development task that's huge. People are saying, well, what are universities and colleges and high schools going to do? What are mom and dad, what are the synagogues and churches going to do? You're going to help provide those componentries. That's what you have to do in an age of AI. 00:17:03 Speaker 1: Let's go back to the jobs before we move on to data centers. Some of the more mundane tasks can be replaced. What people hear is, oh, sure, people who don't have certain skill sets get replaced, but other people who make all this money in their skill sets, they get rewarded. And then you're talking about rewarding in the United States H-1B visa holders. You're bringing people in from other countries. This is the way it gets played down the line. I will say that I, for example, favor bringing manufacturing to the United States of all sorts because some people can handle the biomed manufacturing, but there's also a need for the baseline manufacturing. And I think a good job is a good job

depending on the person. And we shouldn't say, hey, too bad for you. We don't need that job, even though we still need that manufacturing. So are we benefiting... A society by telling a certain segment of it, your job we have deemed replaceable by the bots and everybody else, they're protected. 00:18:05 Speaker 2: Let me take a short step back. 00:18:07 Speaker 1: Sure. 00:18:08 Speaker 2: Technology has always displaced people in certain roles. Always. The history, thousands of years of technology has always displaced some and always required additional skills in other areas. AI is no different. In fact, it's putting more of a premium on the moral, ethical, cognitive capability, skill capability of people than ever before. And so that is what's valued. If you think you're going to drop out of high school, have no skills, and trip through a job, even at McDonald's, that's going to change. When you see a holograph that looks like a human, can speak multiple languages and take your order, those other jobs are gone. Let's be honest. That's gone. Because technology can do it better. They can connect it to inventory. They can do a variety of things intelligently. Now, do you need a human-to-human contact in these retail environments? You bet. Do you need a premium on the human-to-human contact? 00:18:58 Speaker 1: You bet. 00:18:58 Speaker 2: That's what people are paying the price for. Somebody to talk to, someone to take an order, someone that you can stop and say, hey, I didn't get what I wanted. Those jobs are going to become a premium in the new economy. And so it's not going to displace all jobs that don't require university degrees or It is going to change the skill set in that it's going to, in fact, change the environment of where you go. Smart people, capable people are going to, in fact, be amplified through AI. 00:19:25 Speaker 1: Talking to Dr. Rod Hewlett, formerly of Bellevue University, Western Governors. I got it right this time. Western Governors University. Look at me. I'm such a such a pro. Thank you. And doing adjunct work now after retirement at St. Bonaventure, the book Stakeholder Agency.com. In the age of AI, new signals for a post-intervention economy. era. So that's the jobs point. And I take that as true, by the way. Technology has the car displaced the horse and buggy is usually the example that you often see. And certainly we've seen what the internet has done to the actual printing of newspapers, magazines, etc., Now we get into the communities part, which is certainly a jobs part, but is the idea of building the big clunky, stealing all the energy, stealing all the water data center and the mob mentality around data centers. That has existed to the negative. I think that this mentality is wrong. I argue that data centers have a value, but maybe have a value in some communities, not other communities. Let them decide. But certainly don't let those building the data center drive the deal flow. You as the community drive the deal flow. Extract as much of them from them as you can. You're the ones with the land. They're the ones who need the land. Get it done. The anti-data center push in America, how do you respond to those people? 00:20:56 Speaker 2: I think you've got to put it, there's two different levels you've got to talk about. Number one, you're in generative AI generation right now. And you do have these large, huge data centers. They do suck up water. They are polluting. They do suck up energy. And you're right. The problem is, is everybody's sort of like, come in. 00:21:12 Speaker 1: We love you. 00:21:13 Speaker 2: This is an investment. They haven't negotiated intelligently at all. And so therefore, they don't know what they're getting. And so I think you're exactly right. This is a mutual negotiation and saying, well, how are you going to pay for this additional capacity? 00:21:25 Speaker 1: How are you going to do this? 00:21:26 Speaker 2: How are the jobs going to work? How are you going to, in fact, pay taxes to help us out? What are you doing here, right? What's your longevity? Those are normal due diligence questions that didn't get asked. So that's part of the problem. Community should be definitely involved in that. The other part of the problem is we're moving to a new technology calledogenic technologies. where the chips are less polluting, the water is closed circuit, smaller, more contained environments for healthcare, for traffic, for this, for that, for the other thing. So the evolution to the new generations of technology for AI is going to reduce that physical footprint. It's going to reduce the pollutant footprint. It's going to do many of the things that people want it to do. It's just like in the early days of trains, everybody reacted to You're changing our time. You're putting us on standard times. You're these ugly steel plants, this metal, all these banks that are consolidating all this capital. This is going to kill us. Well, trains went their way. They peaked. There was a bust. And we still have trains today. They found their natural place, right? And so it didn't go away. The internet with the dot-com pop, same thing. It didn't go away. And AI is not going to go away. It's going to hit a more intelligent pace. 00:22:40 Speaker 1: Is the anti... Anti-AI push, anti-data center push. I had discussed it earlier when we started about the idea of an op. I think that's unquestionably true. When we talk about faith in institutions, one of the things I have total faith in is that the Chinese Communist Party will lie to you all the time, 24 hours a day, seven days a week. And when you see things on TikTok, when you see other conversations moved... It is about the United States not being a place of data centers so China can be. And while they may have lost control of 5G protocols with the Internet of Things, which was a big fight a few years ago, if they win the data center fight, they win the future. I don't think that that's some

kind of sloganeering. I think that's factual. Is there a. 00:23:30 Speaker 1: How much resistance are you getting to your conversations here that you can't pretend that the world isn't here? It's here. It's here to stay. Now, who's in control? Do you get these responses, these reactions, this pushback regarding how we'll just leave it to China? We don't really want that stuff here. 00:23:50 Speaker 2: Of course, both sides try to take advantage of the conversation. 00:23:55 Speaker 1: One, it's all hype. 00:23:56 Speaker 2: Other one, it's all hysteria, right? Here's the truth. Technology isn't going to turn back. Technology is our solution set. For instance, let's go back and bridge this conversation. Right now, in medical profession, we're short medical doctors. We know that. We're importing medical doctors left and right. Problem is, of the medical doctors who are graduating, about a third of them do not enter actual practice because it's a bureaucracy. AI can get rid of the bureaucracy. It can get rid of all the insurance problems or many of the insurance problems they face, the billing, the conversation piece where they have to go back and record themselves and then do their notes and everything else. Same with nurses. Get rid of that administrative burden through AI. Let them practice medicine, and you're going to find more people on task, more people wanting to be in the profession itself. It solves a lot of problems that we face as a society and economically. The second part of it is You're right. We're in a global– it's not just China. Everybody's China, China, China. India has not gone away. These other economies haven't gone away. There are other powerful economies out there that are trying to build chips, that are trying to build the technology. They're trying to build– and people stop at this point. The human capital, the capability to build these powerful algorithms and control them. and get them right morally and ethically. That takes human power, brain power, human capital. If we become a center of antagonism, where do you think they're going to go? We worry about H-1B. They'll go anywhere in the world where the return for that human capital is there, and they can do what they want to do with the technology. So yes, we have to be engaged with it. The post-intervention era, you're not going to solve it simply by austerity. You got to grow. You got to build value and grow, or you're not going to grow yourself where your GDP is outsizing your debt. It's as simple as that. And AI is the promise to do it. 00:25:47 Speaker 1: Your book is about new signals for a post-intervention economic era, and you discussed government intervention and what I refer to as Keynesian economics and the idea that somehow you can spend your way to prosperity or you can spend your way to levels of self-correction. Your argument here is that those days are done. That is a finished mentality. But certainly you're seeing more and more money every day going into AI investment to the tune of trillions of dollars. So if it's the post-intervention economic era in terms of government, that's not to say it's still not an era of serious investment. That's exactly right. What is the guiding principle that you want people to take away? 00:26:35 Speaker 2: We're shifting to a market-based economy. And the market-based economy, people have these terms since 2008, crony capitalism, you name it, blah, blah, blah, where the market's bad. And you've heard it. I know you have. I have, too. I mean, I was on a bus going to a financial economist convention, and there was people outside protesting us. I mean, I get the conversation, right? But here's the reality of it. If you're going to have people make a decision in the marketplace and you want it to be a more ethical, moral, a better distribution, you've got to have smarter people that are educated and can make good decisions in the marketplace. They have to be putting the money into companies and investing and buying from companies that move forward the general benefit of society. And you've got to say to yourself, if I buy all this Chinese junk because it's cheap, what am I doing to my own jobs, my own health care benefits, my own retirement benefits? If I do all these dumb things because I'm just a consumer and it comes back to haunt me, I not only have a lack of agency, I have a lack of awareness of what I'm playing with. And so the argument in the book, and it streams through it, is you got to get smart. How do we as a society help people get smart? How does the market and how does AI? And a lot of people think it's only about these. AI can help you get smart, folks. It can help you actually get smarter in the choices you're making. And so you got to learn. Mom and pop, broad, everybody has got to learn how to use AI in your choice sets, not making your choice for you. helping you build a decision architecture where you're making the very best choice. And as you decentralize, we get back to the promise that a variety of people, Hayek and a variety of people said, knowledge in the economy, you're going to make better choices. The Austrian model, AI is going to put the knowledge in the economy to do exactly what Hayek said back in 1945 about the knowledge economy. And we have to become empowered to know how to use it. That is stakeholder agency in the age of AI. We have to get smart. We have to use it. And then we have to make empowered decisions with it. And believe it or not, the market is the tool for creativity and problem solving that will solve our child care issues, our health care issues, all these issues. It's not the nanny state. They can't do it. They don't have the money. 00:28:50 Speaker 1: Dr. Rod Hewlett, Western Governors University, retired adjunct at St. Bonaventure, while he's just, you know, enjoying a retirement, writing books like Stakeholder Agency, In the Age of AI. You can get that at Amazon.com, wherever fine books are sold. Dr. Hewlett, good to talk to you. I appreciate you taking the time. More is coming up. This is Tony Katz today.