I had debated just reposting the Common Weal Daily Briefing here because I want more people to see the content. But on reflection I think I’ll expand it a bit to pull out more specific messages to take away. Because the AI data centre battle is a battle of ‘information asymmetry’. A lot of the lobbying works on the basis that you don’t really understand what is being said (and the politicians certainly don’t).
So let me peel this apart. To understand this you want to look at two stories. One is the chief executive of Scotland’s financial service lobbying body saying that anything other than wild-eyed joy at data centres is “sending the wrong signal”, and the other is a think tank that basically says ‘tech lobbyists are lying through their teeth’.
Let me give you the info to break down the real economics of data centres so you at least understand what is going on. You need to get to grips with the four economic entities who gain from data centres, what they want and why.
The first is the simplest. The AI companies want some schmuck to host their insanely energy-intensive processing centres on a suicidally low-cost basis. As in ‘here, take all our energy and water and in turn could you give us nothing at all please’. The AI company whose data these centres are processing don’t even own a lot of them, they just rent processing power.
Where that processing power is doesn’t matter a jot – Indonesia, Kenya, Scotland, space, whatever jurisdiction will give them the cheapest deal. All they want is to minimise the cost of the processing power. Full stop. That way they can sell it with maximum profitability. Location is utterly irrelevant to them.
It is largely irrelevant to the second group too – the investors. They simply believe/hope that this really is the next big thing that will change everything and pay for itself many times over. They just want their money doubled. That’s it. They were investing in aerospace or oil and gas last week. They just think this might return more.
Geography isn’t quite irrelevant to this lot because they also want to be assured of low tax and low regulation, but they’re largely US or Gulf equity capital funds or fund managers for pension funds etc. They are starting to get cold feel, but they’re still footing the bill. And they just want gullible hosts.
We sell them our electricity, but since we don’t own our own electricity generation all that money goes to Spain
The next economic interest is the site-specific partner. This is the Scottish bit, and by far the best way to think of this is as a property development deal. The Scottish side just finds a big site for a factory, gets planning permission and perhaps hires someone to build a warehouse. That’s it. Imagine a property deal that doesn’t create property (no-one lives or works in these things). That’s the Scotland end.
Finally you have the termites. In western capitalism you can’t blow your nose without sixteen business services companies getting in the way. They’ll risk assess your sneeze, produce a no contamination contract, procure nose decontamination services, negotiate a hankie funding package (15 per cent cut). They literally just cling on to the big money like a midge and suck out as much as they can. They get paid to ‘cut the deals’. That’s it. They’re just sell-out merchants flogging Scotland to Saudis.
It is best to understand who is not a player in this – and it is the Scottish nation. That takes us to the second story. The long and short of that is that Tech UK (the aggressive and incredibly influential UK lobbying body for Big Tech) claims that data centres will create 43.7 jobs per megawatt of electricity used.
The Verdant think tank has gone and counted the actual jobs from existing data centres and the real number is 8.6 jobs per megawatt. And that is based on the current generation of small data centres. The monsters they’re trying to build now are projected to produce only 1.6 permanent jobs per megawatt of energy.
But is even 43.7 jobs per megawatt a good deal? Well no, not really. Basically a megawatt of electricity can power about 1,000 homes. (If this isn’t intuitive, a megawatt is a ‘rate of flow’, and if you have a constant megawatt of energy flow, that will create either enough to power the lives of a thousand families or create a handful of jobs. Doesn’t sound like such a good deal, does it?)
What else does Scotland get? Well, we sell them our electricity, but since we don’t own our own electricity generation all that money goes to Spain (and some to Ireland, some to Norway). We’ll collect a little tax from them. There are those handful of jobs, and some of those are presumably cleaning jobs.
There is the property deal, but that is worth as much as any other warehouse and it is just a handful of Scottish speculators getting rich. As for the economic activity taking place in these warehouses, well there is nothing really taxable in it. These are services that are being sold from international companies to Big Tech.
This is a transaction between (for example) CoreWeave (a US company) and OpenAI (a US company) that takes place in Scotland but looks virtual, location-less. It isn’t clear the tax implications are positive for us. Which leaves the business consultancy termites and they’re the ones Sandy Begbie of Scottish Financial Enterprise is worried about. He’s worried that Scotland sends out the signal that it is no longer happy to be asset stripped, facilitated by the Edinburgh consultancy and business services sectors.
Hosting data centres is a signal that you have a weak economy and that you’re desperate – let’s not be that country
But Robin, I hear you ask, AI is the future and how can Scotland ‘get a share’ if we reject AI infrastructure? The answer is simple; AI adoption has got nothing to do with where the data centres are. Or put it another way, Sam Altman isn’t building a data centre next to his house. Is he opting out of the AI revolution?
Just for once, Scotland could say ‘being the world’s cheap source of land, electricity and water is beneath us and we’re not going along with this, let’s just freeload of the poor suckers who fall for this’. There are no data centres in New York, in Washington, in Los Angeles. They dump them in low-developed Mid Western-communities.
Having a data centre isn’t a sign that you’re part of the AI revolution, it’s a sign that you’re not, it’s a sign that you’re the duffer handing over your resources so someone else can run an AI revolution. And just remember what the ultimate goal of the finances of this are. The reason they want super-cheap data centres is so they can sell the Pentagon cheap AI for warfare, and similar.
This is not about saving you pennies on your AI credits. It isn’t about making AI more accessible for public institutions or small businesses. These marginal cost saving matter only to investors and to enormous corporate users of AI where pennies very quickly mount up.
Is this an anti-AI rant? Not a word of this entire article has been about the use of AI. It is only about who is the mug who chooses to be the sacrificial lamb for the big guys. We could have no data centres at all and yet press on with ambitious AI adoption nonetheless (not that we really should yet). Monaco will probably never have a data centre; you think it will be an AI desert?
And actually there are ways we could role out ‘compute’ (this is the real concept you need for data centres – they don’t store data like first gen data centres, they process data like computer) which would bring public benefit, but this is not even nearly it.
When I write against this con trick it is not luddite or a statement of anti-AI sentiment or is it denial or environmental reductionism. It is because I understand what their propaganda actually means.
So let me repeat this Scotland. Let’s move confidently into the modern world. Let’s work out how to use AI to transform how we do things. Hell, let’s develop a sovereign AI model of our own. Let’s set up a national consultation on how to role out ‘compute’ in a way that benefits us.
Just don’t be so fucking daft as to let these con merchants persuade you that if you don’t act like a third world country and hand them over hundreds of thousands of megawatts in return for one and a half fucking jobs for each megawatt you’re a backward nation. The opposite is true; hosting data centres is a signal that you have a weak economy and that you’re desperate. Let’s not be that country.