Is that a causal relationship? And if not, what are people missing here?

Great question.

So as I'm sure everybody who's listening to this knows the data center fight is massive and bipartisan.

We have seen governor Hochul of Maine.

We have seen Greg Abbott of Texas all jump on this bandwagon of being anti data center.

There is a prominent energy reporter.

His name is Robert Bryce and he's been reporting on energy for decades.

that? Just to build off what Dev's saying there, have you paid any attention to the Ratepayer Protection Act that's currently going through Congress?

What do you mean by that?

What I mean by this is that higher prices indicate to entrepreneurs to go into a specific type of industry.

If a price is rising, this signals to somebody with an entrepreneurial bone in their body saying-

Either way, Julia says look at another example, copper wire.

Folks were very concerned that the price of copper was gonna go so high and we weren't going to be able to build new homes and businesses because the price of copper was prohibitively high.

So what happens? Um, fiber optic comes in and boom, we don't need as much copper anymore, and that is exactly what I anticipate happening in our data center moment.

So I'm kind of curious, kind of thinking about what Sam was just talking about and thinking a little bit about like how Darren Asimoglu, kind of peak of our profession, talking about society and culture and like whether that seems, you know, similar or kind of different in terms of what he seems concerned about.

Well, he talks about why liberal democracy has failed.

And I don't think he talks about civilization maybe explicitly as much as was done in the past.

But his call is really for a civilized approach to this.

And he actually talks about how the majority of folks have kind of lost a lot of that, I hate to say like interpersonal connection, but even community building within people.

And he realizes that it is incumbent to have some type of moral foundation to any type of economic policy or economic type of planning.

Again, he doesn't necessarily put it in that specific language, but that is what he is talking about.

Wouldn't you go first, Julia?

Is he right? And if not, why would industry ask to be regulated?

I think Fram Emanuel needs to read a little bit more history because not only have there been myriad examples of industries being regulated, this is par for the course.

And I think it's important when we're viewing this to view it from the benevolent side, but also view it from the cynical side.

And I think the truth is somewhere in between here.

The powers of AI, this is a new technology.

We don't know where it's going to go.

Obviously, coupled with robotics, we could potentially see some type of Terminator situation, right? There needs to be a way for something that's happening on the computer to actually come to fruition in real life.

though? Isn't that the

But the other thing I would say is that high high housing costs in California in the northeast don't just affect people who live in those places they affect people who would otherwise live in those places but have moved away or choose not to go there because of the high housing costs and that's a substantial number of people

And just to add a little bit more to specificity to what Jason is saying in his spot on, but one in three Americans are considered housing cost burden.

So that's going to be spending the over one third of their income on housing.

And of course, we see this concentrated in more, right, more dense cities.

And I just want to point us to that three number.

Even the most affordable major cities, Pittsburgh, Cleveland, St. Louis, Detroit, are all above that affordable number.

So Pittsburgh is at 3.2 price per income.

Julie, you want to tackle your thoughts on the comparison globally for again?

But what challenges and opportunities do you foresee the labor secretary grappling with, and what would be your key advice to him or her?

I, [chuckles] I think he's going to face a lot of challenges around the perceived unemployment around AI.

And not only is it perceived, but most folks are saying, "Oh, if there's higher unemployment, it must be due to AI." And part of it, I definitely think is, is due to AI, but this environment is very dynamic right now, and there's a lot of fear around unemployment.

If we look back 100 years ago, over 80% of Americans worked in farming.

And if we said, "Whoa, we don't want these tractors to come in.

We don't want this technology to come in," that is very disruptive to the labor market.

So if you zoom in into a specific point in time in the labor market, there is quite a bit disruption while companies and employers figure out the best way to incorporate technology.

This is kinda like the Earth, uh, smoking a cigarette, and we're getting the secondhand smoke from it.

But you're saying basically they never even get a start because of the subsidies.

Definitely.

And this is a product of the government currently saying, "We are open to being purchased." So big businesses love this because they're able to entrench their interests into law, and this creates what's called a barrier to entry for small businesses, because now they have to climb much bigger regulatory hurdles, maybe they have to get more lobbyists themselves in order to engage in, um, various regulatory capture.

So it can be really difficult.

One tricky thing that the government does, oftentimes in procurement, will pick somebody as a sole source instead of, um, issuing a competitive bid.

So an example of this is Lockheed Martin for, um, hundreds of millions of dollars of Navy equipment, and the government did not say, "We're going to put out a competitive bid for these various manufacturers of military equipment.

We are just going to choose Lockheed Martin as the sole source of the, uh, producer of the specific Naval equipment." So a way to try to disentangle this would be to, if there is a procurement, ban the use of sole sources, because this, uh, sole sourcing prevents competition from happening.

Do you see energy for them in Washington now, or is it business as usual?

How does it work, Julia?

Regul- regulatory capture is a concept, and you can think of it, about it as the government being the referee within an industry.

So an industry per rent-seeking is effectively able to capture specific regulation that favors incumbents.

So an example of this, and again, this is, uh, across both Democrat and Republican administrations, but a good example of this in the Biden administration would be the CHIPS and Sciences Act.

So this is over $50 billion to big tech firms.

So these tech firms have effectively captured that specific regulation and that bucket of money that's going towards semiconductor manufacturing, specifically for a small subset of firms.

In the Trump administration, a great example of regulatory capture would be the purchase of about 10% of Intel.

A second example.

More of this tonight.

So rent extraction is, you can think of it as politicians threatening costly action towards businesses if they're not within compliance, and I'll give three examples, one from each of the three past administrations.

So the Obama administration, in their effort to curb carbon emissions, instituted what's called CAFE standards, and this is corporate average fuel economy standards.

And you may have remembered that, um, in this, the aftermath of the CAFE standards, many more car companies were creating hybrid or electric cars that didn't necessarily see a lot of consumer demand.

The f- these various car companies had to create a fleet that corresponded with these CAFE standards, so they were artificially, um, providing the market with both hybrid and electric vehicles that were not necessarily demanded by the market.

And we are seeing this in t-, uh, 2025 probably more than ever, especially with a lot of the sunset of some of these, um, electric vehicle subsidies.

So CAFE standards is a good example of rent extraction where the government is forcing the hand of business into compliance.

How does that work?

Yeah.

Great question, John.

So i- if you have two types of goods, for example, a luxury home and an affordable home, developers want to supply all of the different market segments with housing.

They're incentivized to do that, and it's not necessarily that something more luxury makes more money.

Just depends on the cost structure of, um, the development.

However, if there are fixed costs that are put on each development regardless of whether or not it's affordable or luxury...

Malibu is not left out of this but is the California Coastal Commission part of the problem?

Is not that po- am I, am I illogical here?

(laughs) Oh, so after the fires? The, so the fires in LA in January burned over 16,000 structures, including homes, and to your point, John, we should be able to just say, "Hey, this house was here.

We can rebuild it." But California has approved fewer, or around 15% of the permits that were submitted, which is about 52 permits of the 16,000 buildings that need revision or, uh, rebuilding, and absolutely to your point, this should be something that is relatively straightforward.

California, though, is notorious for slow and bureaucratic turn through the system relative to other states.

Uh, Texas, for example, it is 2.3 times more expensive to build anything in California, and it takes on average 22 months more to pass all the building and permitting, um, inspections than average times.

So, that, the, the fire rebuild, unfortunately, is on top of that already existing bureaucracy.

There must be something else going on here.

Yeah.

More of this tonight.

The ...

So I think Governor Newsom can do a lot with the overarching California rules.

But many of these building codes have to do with city or county specific.

So the Palisades, for example, is going to be r- like, they have very strict building codes.

One of the things, and as you can imagine, near the beach, height restrictions are very, um, strict in beach locations because people want a view of the ocean.

Right.

So i- ca- uh, Governor Newsom is pushing for slight deregulation.