Casey Handmer on Dwarkesh Patel: Why Solar Beats Gas for AI

1. 0:00 – 8:28

   Why doesn’t China win by default?

   1. DPDwarkesh Patel0:00

      Today I'm interviewing Casey Handwer. Casey has worked on a bunch of cool things. Um, Caltech PhD on some gravitational wave black hole gimmick stuff.

   2. CHCasey Handmer0:07

      Mm-hmm.

   3. DPDwarkesh Patel0:08

      Then hyperloop, then the Jet Propulsion Laboratory at NASA, and now he is founder and CEO of Terraform Industries. Casey, welcome.

   4. CHCasey Handmer0:16

      Thank you. It's great to be here finally.

   5. DPDwarkesh Patel0:18

      (laughs) Big picture question I'm interested in, to the extent that AI just ends up being this big industrial race, who can build the most solar panels, who can build the most batteries, who can build the most GPUs and, um, transmission lines and transformers and et cetera, et cetera-

   6. CHCasey Handmer0:35

      Mm-hmm.

   7. DPDwarkesh Patel0:35

      ... this is not what the US is known for, at least in recent decades. This is exactly what China is known for and right, where they have like 20X the amount of yearly solar, uh, manufacturing the US has.

   8. CHCasey Handmer0:46

      Yep.

   9. DPDwarkesh Patel0:46

      Obviously we have export controls right now, but over time, SMIC will catch up to TSMC's leading edge. So, what is the story exactly of how the United States wins this? Like, why does China just not win by default?

   10. CHCasey Handmer1:00

       Do you think that China is better at capital allocation than the United States? Do you think the Chinese business environment is better for business than in the United States?

   11. DPDwarkesh Patel1:06

       Every ... You make these first principles argument about these other industries where they're killing it, but like, doesn't seem to have hampered BYD or CATL.

   12. CHCasey Handmer1:12

       Well, people say, "Oh, look, they're so much better at building high-speed trains than the United States."

   13. DPDwarkesh Patel1:15

       Right.

   14. CHCasey Handmer1:16

       Right. I would never like hold up a flag saying, "I'm really good at building high-speed trains." Like that is just a sign that you're really bad at capital allocation. Like why would you devote in 2025 so much industrial effort and money, right?

   15. DPDwarkesh Patel1:26

       They're devoting a lot to solar over capacity, which in your opinion, is the key to future industrial growth.

   16. CHCasey Handmer1:34

       I think they might be like accidentally correct.

   17. DPDwarkesh Patel1:35

       They call the most important thing correct, right? Which should count for something.

   18. CHCasey Handmer1:37

       Well, they're in a similar situation to Europe, but unlike the United States. So the United States is, is the luckiest goddamn country on earth because it's surrounded on two sides by oceans and on the other two sides by like friendly allies, right? China is surrounded by 15 countries who are mostly hostile to it, right? With no good like mountain ranges or rivers or anything to really separate them. And then they get all their oil, al- almost all their oil from the Middle East, right? In countries that they don't control, don't have strong diplomatic relationships with, on fleets of oil tankers that they can't defend because their navy doesn't have-

   19. DPDwarkesh Patel2:08

       Right.

   20. CHCasey Handmer2:08

       ... the ability to operate effectively in-

   21. DPDwarkesh Patel2:10

       Yeah.

   22. CHCasey Handmer2:10

       ... the Indian Ocean.

   23. DPDwarkesh Patel2:11

       But they're working on this, right? If you, if you get synthetic fuels working at Terraform-

   24. CHCasey Handmer2:14

       Personally, yes.

   25. DPDwarkesh Patel2:14

       ... do- doesn't that asymmetrically help China? Which might be fine. Like that-

   26. CHCasey Handmer2:17

       It does. It absolutely asymmetrically helps China.

   27. DPDwarkesh Patel2:19

       Yeah.

   28. CHCasey Handmer2:19

       We're not currently working with China. We don't plan to, but like the physics is very obvious. You know, and synthetic fuels have been around for 100 years. Like there are projects in China right now working on synthetic fuels. It would not surprise me if they were thinking pretty seriously about this.

   29. DPDwarkesh Patel2:30

       Just to spell out for the audience, if China has all this electricity production, and the bottleneck is that only a third of final energy use in a modern economy comes from electricity, the rest you need gas and whatever to transport things.

   30. CHCasey Handmer2:44

       Or coal. They use a lot of coal in China.
2. 8:28 – 18:01

   Why hyperscalers choose natural gas over solar

   1. DPDwarkesh Patel8:28

      So you're a big solar bull.

   2. CHCasey Handmer8:30

      Yeah.

   3. DPDwarkesh Patel8:31

      Um, right now the hyperscalers are making decisions about the data centers that they're building that are gonna be one gigawatt, two gigawatts, in Meta's case five gigawatts, how they're going to be actually powered.

   4. CHCasey Handmer8:41

      Mm-hmm.

   5. DPDwarkesh Patel8:41

      And the people with actual money on the line are choosing natural gas and it's not like they can't see the learning rate and the... I mean, th- they are building things which will be online in '28 or '30 or something.

   6. CHCasey Handmer8:52

      Mm-hmm.

   7. DPDwarkesh Patel8:53

      So why are they wrong and you're right?

   8. CHCasey Handmer8:55

      I mean, that's their job. They probably know more about it than I do. But no, in, in all seriousness, if you're like xAI right now trying to build Colossus I data center-

   9. DPDwarkesh Patel9:02

      Right.

   10. CHCasey Handmer9:02

       ... in downtown Memphis, right, you wanna get it done super fast. So you're like, "What are all the different things we need? What are the factors of production to build this? We need a building. Well, we don't have time to build a building. We'll buy a building, okay, and we'll adapt it. Uh, we need power, we need thermal cooling." That's stuff you can deliver on a truck, so that's what they did.

   11. DPDwarkesh Patel9:16

       Right.

   12. CHCasey Handmer9:17

       Need access to gas. They had access to gas there. They could tap into a local gas line and actually, if you can tap into a gas line, generally speaking you, you can get enough power. Like, the trans- the energy transmission capacity of, like, your regular gas delivery pipelines is way, way higher than electricity overhead lines and it's easier to upgrade or, or whatever. And so if you're in this situation, uh, right now you say, "Well, you know, are we constrained by our ability to go and rent, uh, gas turbines?" And no, they're not because there was enough available once, maybe twice, right? But at a certain point you realize, well, as, as you grow, you start to touch all these additional constraints. Um, and some of those constraints include gas availability. So there's a lot of chat about doing this in Pennsylvania, for example, where there's quite a lot of stranded gas and parts of Texas. Um, but at the same time, United States is gearing up in its ability to export natural gas overseas, so y- the price will not be infinitely low forever. Um, you, you start to run into constraints around turbine manufacturing rate, around, uh, transformer, you know, uh, transformer production rate, around grid capacity, um, and, and also kind of running into problems where, where the AIs and, and the humans who depend on, like, kind of legacy electricity, uh, production and delivery utilities are kind of competing with each other. We just saw this recent, um, forward auction in, in PJM result in, um, i- in like kind of very high, like unsustainably high prices for, for consumers who depend on cheap electricity to, like, you know, heat then cool their houses-

   13. DPDwarkesh Patel10:35

       Mm-hmm.

   14. CHCasey Handmer10:35

       ... and have general prosperity. So, so if you kind of look far enough in the future you say, "Well, you know, you can just turn up the dial arbitrarily high." Like, you could say, "Well, we're gonna put in a gigawatt a year." Well, we can, we can meet that constraint with gas turbines, right?

   15. DPDwarkesh Patel10:48

       Mm-hmm.

   16. CHCasey Handmer10:48

       We're not gonna run out of natural gas at one gigawatt per year indefinitely. Okay, what if we're doing five gigawatts per year? What if we're doing 50 gigawatts per year? What if we're doing 100 gigawatts per year? Like-

   17. DPDwarkesh Patel10:56

       Right.

   18. CHCasey Handmer10:57

       ... uh, you can, you can just break the situation. (laughs)

   19. DPDwarkesh Patel10:59

       Yeah, yeah.

   20. CHCasey Handmer10:59

       Does that make sense?

   21. DPDwarkesh Patel11:00

       Yeah.

   22. CHCasey Handmer11:00

       Um, uh, not to reach prematurely for analogies, but, but, like, Henry Kaiser set up the, uh, shipyard in, in Richmond just down the road here, uh, in San Francisco, uh, over near Berkeley. Um, and uh, uh, initially making ships for the British and then by the end of the war, four separate shipyards operating in parallel to the point where, like, he was bottlenecked on his supply of steel because steel was rare enough in the war, 'cause everyone was using it-

   23. DPDwarkesh Patel11:21

       Right.

   24. CHCasey Handmer11:21

       ... for different things, that Kaiser Industries went off and built not only a steel mill but also a steel mine, right? They went and started digging rocks out of the ground to turn into ships.

   25. DPDwarkesh Patel11:31

       Yeah, yeah.

   26. CHCasey Handmer11:31

       Right? And it's the same sort of situation you have here where these, these massive industrial verticals... And here I'm quite bullish on xAI in particular because the Elon cinematic universe has just done so much industrial stuff compared to, you know, the Googles and Metas of this world, can kind of reach all the way through down into primary material supply if they need to.

   27. DPDwarkesh Patel11:48

       Mm-hmm. The reason that these current plans are being done based on natural gas is that this is a sort of like, um...

   28. CHCasey Handmer11:55

       Well, PJM has all kinds of different sources of power, right? They have nuclear as well. They have gas, they have coal, all kinds of stuff.

   29. DPDwarkesh Patel12:01

       Mm-hmm.

   30. CHCasey Handmer12:01

       A- and actually, this, this price here is, is probably driven more by the delivery cost growth.... than by the generation cost growth, if that makes sense. So when you pay your utility bill, the cost is sometimes broken down by, like, a delivery cost and a generation cost-
3. 18:01 – 27:02

   Solar's astonishing learning rates

   1. DPDwarkesh Patel18:01

      so, um, then why are we gonna get the solar future? Like, in 2032, we're gonna have hundreds of gigawatts of extra demand for data centers and at that point most of it's coming from solar, and why is that?

   2. CHCasey Handmer18:14

      Well, you just, there aren't enough turbines being, being manufactured.

   3. DPDwarkesh Patel18:17

      Right. But also I think, um, in the early 2000s if you j- uh, we can probably overlay the graph of, like, how many turbines are being manufactured. Like right now we're at a historical-

   4. CHCasey Handmer18:26

      They've ramped up basically to like the early 2000s rate again.

   5. DPDwarkesh Patel18:28

      But I don't know, you gotta make more solar panels as well, right? Like, there will be, uh, supply elasticities for both solar and natural gas. Is there some reason to think that it's worse for the supply chain involved than having a natural gas powered data center than a solar-

   6. CHCasey Handmer18:42

      Yeah, I do. Um, the learning rate for, for natural gas is nowhere near as steep as solar, which just tells you that it's easier to make solar panels.

   7. DPDwarkesh Patel18:48

      Hmm.

   8. CHCasey Handmer18:48

      Much easier to make solar panels. There are actually very few manufactured products which are easier to make. Like the learning, the learning, the, uh, the right solar coefficient is 43%, so every time we double communal production we get a 43% reduction in cost.

   9. DPDwarkesh Patel18:59

      And what is the basis of, um, like, why are we finding 43% worth of things that can be made cheaper or more efficient every single year?

   10. CHCasey Handmer19:07

       Well, I mean, roughly speaking there's like 10,000 manufacturing process engineers working on this full time.

   11. DPDwarkesh Patel19:13

       Right. But that can, that can be true of any process, right? But no other process sees-

   12. CHCasey Handmer19:16

       Well-

   13. DPDwarkesh Patel19:16

       ... uh, the kinds of learning rates-

   14. CHCasey Handmer19:17

       It's partially true. Um-

   15. DPDwarkesh Patel19:18

       ... that solar is seeing?

   16. CHCasey Handmer19:19

       Yeah, so in order to, like, sustain this over a long period of time you obviously need to have, like, a demand elasticity that exceeds, like, your learning rate.

   17. DPDwarkesh Patel19:26

       Yeah.

   18. CHCasey Handmer19:26

       Right? So- so otherwise you would, after, you know, a couple of booms you would, you would saturate your market at the current price-

   19. DPDwarkesh Patel19:32

       Right.

   20. CHCasey Handmer19:32

       ... and you'd have no additional growth. But in this case, like, you know, every, uh, roughly every two years we're doubling production to a two to, two and a half years doubling production, the price is coming down by a factor of 40, 40 odd percent.

   21. DPDwarkesh Patel19:41

       Hmm.

   22. CHCasey Handmer19:41

       Uh, so like roughly 20%, 15, 20% per year. And then just as a result of that price reduction, demand skyrockets by like probably six times more than that additional marginal capacity, like production capacity increase.

   23. DPDwarkesh Patel19:52

       Right.

   24. CHCasey Handmer19:52

       And this is one point where I'll say actually the pros, so-called pros, are definitely wrong. Conventional wisdom is like, "Oh, solar demand's gonna saturate, like, this, this week. It's gonna, it's gonna saturate." We've got a graph here somewhere that's like, "This year is it. It's never gonna grow anymore." And instead it's just like blasting out the top of the graph. And uh, uh, this conventional wisdom is wrong. I- it is not only the case that solar adoption production price decreases are continuing, they're accelerating and the rate that they're accelerating is still accelerating. Right?

   25. DPDwarkesh Patel20:17

       Wait, sorry. The rate that it's accelerating is accelerating?

   26. CHCasey Handmer20:20

       Yes.

   27. DPDwarkesh Patel20:21

       As measured in the total fraction of energy that's coming from solar? Or-

   28. CHCasey Handmer20:25

       In, in the sense that its fitness for the markets that it is being produced for is increasing over time.

   29. DPDwarkesh Patel20:31

       Mm-hmm.

   30. CHCasey Handmer20:32

       So it is, it's still extremely early. Right?
4. 27:02 – 40:24

   How to build 50,000 acre solar-powered data centers

   1. DPDwarkesh Patel27:02

      l- l- let's get into what this, um, if you've got a five gigawatt plant you wanna build-

   2. CHCasey Handmer27:07

      Yes.

   3. DPDwarkesh Patel27:08

      ... break down the numbers for me in how much land in terms of solar you need to farm this out. And especially, I was talking to somebody in this space and they said, "Look, the big problem is not, obviously, cost for, the cost of energy for these data centers is a small fraction of the total cost. Most of the cost is going towards chips. So then the issue is just can you, can you make the energy available?" And they were saying even though solar panels themselves you can acquire, the issue is getting that much contiguous land and getting the permitting to interconnect it or whatever the word is, is like apparently a big hassle.

   4. CHCasey Handmer27:45

      Yep.

   5. DPDwarkesh Patel27:46

      Um-

   6. CHCasey Handmer27:47

      It's kind of a nightmare.

   7. DPDwarkesh Patel27:48

      Yeah. And so they're like, well, at that point, is it actually easier than just getting on the grid or, uh, but yeah. What's your, like if you, if you need tens of thousands of acres of solar, where can you do that without a, g- and get like-

   8. CHCasey Handmer27:58

      Basically in Texas.

   9. DPDwarkesh Patel27:59

      Okay.

   10. CHCasey Handmer27:59

       I mean, uh, well, like, there's this very popular misconception that like there's not enough land to do solar.

   11. DPDwarkesh Patel28:04

       Right.

   12. CHCasey Handmer28:05

       Right? This is garbage. If you've ever flown in an aircraft in the United States and you've ever looked out the window, you'd be like, "Oh, wow, look, there's a lot of land you could put solar on," especially west of like 110.

   13. DPDwarkesh Patel28:15

       Yeah.

   14. CHCasey Handmer28:15

       Right?

   15. DPDwarkesh Patel28:15

       Does it need to be flat or no?

   16. CHCasey Handmer28:17

       No.

   17. DPDwarkesh Patel28:17

       Okay.

   18. CHCasey Handmer28:18

       It doesn't matter.

   19. DPDwarkesh Patel28:18

       (laughs)

   20. CHCasey Handmer28:20

       Um, like, do trees grow on mountain slopes?

   21. DPDwarkesh Patel28:22

       (laughs)

   22. CHCasey Handmer28:23

       So it doesn't matter.

   23. DPDwarkesh Patel28:24

       Right.

   24. CHCasey Handmer28:24

       Um, and the total amount of land, so just for reference, Nevada is something like 80 million acres or something like that.

   25. DPDwarkesh Patel28:29

       Yeah.

   26. CHCasey Handmer28:29

       So just Nevada, which is like 90% federal land-

   27. DPDwarkesh Patel28:31

       Yeah.

   28. CHCasey Handmer28:31

       ... is 80 million acres. And, uh, I would, I would never say that we should, we should sacrifice Nevada to the AI and, uh, and pave the entirety of Nevada from one wall to the other. But I just saw a bunch of things in my feed the h- last couple of days that like, you know, Vegas is, is falling apart and-

   29. DPDwarkesh Patel28:46

       Really?

   30. CHCasey Handmer28:47

       Well, like, no one, like, the Boomers are retiring-
5. 40:24 – 44:04

   Environmental regulations blocking clean energy

   1. DPDwarkesh Patel40:24

      Between the fact that the, um, maybe solar prices will go down and the fact that demand is gonna go up, do you think electricity prices are likely to rise?

   2. CHCasey Handmer40:33

      Yes, but electricity prices at this point are a reflection of a regulatory irrationality, right? It's the same situation in Europe, and Australia for that matter. Like, your prices will rise until you've had enough and you say, "No, we demand that you allow us to take advantage of power technology that's been invented in the last 50 years." In terms of things that are causing us to lose to China, tariffs are neither here nor there because as we've discussed-

   3. DPDwarkesh Patel40:58

      Interesting.

   4. CHCasey Handmer40:58

      ... we're not sensitive to cost on power, but the environmental regulations that are actively preventing us from deploying renewable energy in the United States, like this is the reason Texas is winning. Texas is out deploying California ten to one. The regulatory environment around solar is just insane. It's insane.

   5. DPDwarkesh Patel41:15

      Say more.

   6. CHCasey Handmer41:16

      The regulatory environment.

   7. DPDwarkesh Patel41:16

      Yeah.

   8. CHCasey Handmer41:17

      Okay. So in the United States, part of the reason that solar has not been deployed at massive scale yet is that, uh, a bunch of laws went into, into action in the early 1970s that were intended to protect our environment-

   9. DPDwarkesh Patel41:28

      Okay.

   10. CHCasey Handmer41:28

       ... and that makes a lot of sense and our environment's a great thing and we should protect it.

   11. DPDwarkesh Patel41:30

       But how, how do, how... I mean, I think people will be familiar with NEPA and whatever-

   12. CHCasey Handmer41:32

       Yeah.

   13. DPDwarkesh Patel41:32

       ... but like how is it especially impacting solar?

   14. CHCasey Handmer41:35

       Well, let's say you've got a bunch of private land out in the middle of no- nowhere, right? And you wanna build it, solar on it. You'll probably end up triggering NEPA-

   15. DPDwarkesh Patel41:41

       Mm-hmm.

   16. CHCasey Handmer41:42

       ... right? At which point you now have to do what is not in the law but considered necessary, uh, under current regulations, which is like your four-year environmental impact review which generates like so much paper that just the environmental impact of producing the report, 'cause you have to cut down trees to make paper, is more than the environmental impact of just deploying the solar.

   17. DPDwarkesh Patel42:00

       Mm-hmm.

   18. CHCasey Handmer42:00

       Like this is bonkers. It is crazy town, right? Uh, the thing that drives me particularly crazy in southern California is that just because solar's kind of new and off-grid solar is very new, unless you're very, very careful you end up getting regulated as though you're trying to build a chemical plant...... even though it's solar ray. And the impact of solar ray on desert is arguably positive because it shades the ground and i- improves like, uh, soil moisture retention. Um, there are, like if you wanted to reverse desertification, you would basically just place solar panels on it and that would pay for the process. Um, but you, you end up having to go through more stringent environmental review process than if you just wanted to like grade the whole thing and cover it in concrete.

   19. DPDwarkesh Patel42:35

       Mm-hmm.

   20. CHCasey Handmer42:36

       Or grade it and then park a bunch of like old rusting cars that are dropping oil into the aquifer.

   21. DPDwarkesh Patel42:40

       Right.

   22. CHCasey Handmer42:40

       Right? Which in many cases you don't need a permit for at all. Right? But to build the solar, it- you have to go through this whole process. And- and like if there's one thing that anyone listening to this can do, it would be like have a categorical exemption for solar deployment or- or just like, if I put money in an escrow account that says like if after 20 years we have to pull this out, like we'll pull the solar out of the desert and it goes back to being desert, right? I will do that in a heartbeat. But like if I have to hire another biologist for $10,000 to be like, "Well, on that 40-acre plot, we found a tuft of grass which we believe might be a, uh, a critical, you know, one of the 20 species that this particular species of bee, uh, sometimes eats, and this species of bee is not technically endangered but it might be at some point in the future, uh, therefore you can't deploy there," even though it's like zoned unrestricted industrial-

   23. DPDwarkesh Patel43:25

       Right.

   24. CHCasey Handmer43:25

       ... and it's sandwiched between a rocket test stand and like a chemical plant, for example-

   25. DPDwarkesh Patel43:30

       Right.

   26. CHCasey Handmer43:30

       ... in an industrial part of the desert, I will, like, I'm gonna become the Joker.

   27. DPDwarkesh Patel43:33

       (laughs)

   28. CHCasey Handmer43:33

       It is insane. It is like, I just think we need to be a bit balanced about this. It's like, I don't want it to like drive species into extinction, but like the meta problem here is if we don't move our industrial stack off fossil fuels in 10 or 20 years, first of all, we'll get poor the same way UK- uh, UK did, right? Because they ran out of coal basically. And the second thing is, we'll get poor because we'll flood our coastal cities in Florida underneath climate change.

   29. DPDwarkesh Patel43:57

       Mm-hmm.

   30. CHCasey Handmer43:58

       Um, we need, we need solar synthetics for that part, we also need to do sulfur injection and a couple of other things.

6. 44:04 – 49:14

   Batteries replacing the grid

   1. DPDwarkesh Patel44:04

      Yeah. People will point out that transmission line growth has been stuck in a rut for decades and we have all these bottlenecks and stuff-

   2. CHCasey Handmer44:10

      Yeah.

   3. DPDwarkesh Patel44:11

      ... and s- and in terms of substations and, um, transformers, et cetera, et cetera. Why will this not hamper this, uh, abundant solar future?

   4. CHCasey Handmer44:21

      Um, that's a really great question. Um, so actually, you and I had a conversation along these lines almost two years ago when we first met.

   5. DPDwarkesh Patel44:27

      Mm-hmm.

   6. CHCasey Handmer44:27

      And, um, and it- it caused me to go and write a blog post. So-

   7. DPDwarkesh Patel44:31

      Mm-hmm.

   8. CHCasey Handmer44:32

      Um, this is, this is a good way of thinking about it.

   9. DPDwarkesh Patel44:34

      I think there's another blog post you wrote though which was also to our conversation we had, which was How to Feed the AIs.

   10. CHCasey Handmer44:38

       That's much more recent, yeah.

   11. DPDwarkesh Patel44:39

       Yeah.

   12. CHCasey Handmer44:39

       That was after dinner, I think.

   13. DPDwarkesh Patel44:40

       Yeah.

   14. CHCasey Handmer44:40

       Um, and- and to be fair like, I usually am fairly clear in my blog posts if I'm posting or if I'm serious.

   15. DPDwarkesh Patel44:48

       Mm-hmm.

   16. CHCasey Handmer44:48

       Um, but, uh, but this one actually I'm dead serious on. It's actually the one where I'm, um, it's like the most out of the money bet as well, like-

   17. DPDwarkesh Patel44:55

       Mm-hmm.

   18. CHCasey Handmer44:55

       ... e- e- everyone else that I consider to be like a respectable forecaster in this area disagrees with me on it. So I'm, that's one side. Um, well, so the grid, we know why the grid's expensive. It's a lot of wires strung up in like hard to reach places that are hard to maintain, especially as, you know, the workforce ages and-

   19. DPDwarkesh Patel45:09

       Yeah.

   20. CHCasey Handmer45:09

       ... and regulations and all the rest and eminent domain and so on and so forth. Okay. So the grid's not gonna get cheaper anytime soon or easier to build. And if you look at the projections of like how much grid, you know, uh, DOE would have us needing to build in the next 10 years versus how much is actually being built, it's like, it's not even in the same order of magnitude. So you say, "Well, are we totally screwed?" The answer is no, we're not totally screwed because batteries actually do the same job that the grid does. But this is kind of weird, just hear me out. The grid transports power from one place to another. It transports almost instantaneously at the speed of light.

   21. DPDwarkesh Patel45:38

       Yeah.

   22. CHCasey Handmer45:38

       So it's actually performing a spatial arbitrage.

   23. DPDwarkesh Patel45:40

       Right.

   24. CHCasey Handmer45:41

       Right? So the idea being that right outside the local nuclear power plant, power is really cheap because they make a lot of it, and in your house, power is really expensive because you don't have a power plant in your house, uh, and you- you pay the intermediator a- a small fee and they allow this- this trade to take place. Um, and that's basically how the grid works. And until quite recently, the only way we had of meaningfully storing energy, like storing electricity on the grid was pumped hydro, and that only works in a handful of places in limited, limited capacity. And it doesn't work all that well, either. The efficiency is not great. Now we have batteries. Batteries store power at one time of day and they release it at another time of day. So batteries are performing a temporal arbitrage-

   25. DPDwarkesh Patel46:21

       Mm-hmm.

   26. CHCasey Handmer46:22

       ... an arbitrage over time. But they can be local or they can be more remote. I think we'll end up seeing batteries next to the solar arrays and batteries in the middle of the grid at substations-

   27. DPDwarkesh Patel46:31

       Mm-hmm.

   28. CHCasey Handmer46:31

       ... and batteries on the sites of existing power plants that get turned off and batteries in your house and batteries everywhere in between. One way of thinking of this is what is your per capita allocation of batteries in kilograms per head? And like when you and I were much younger, you know, the lithium-ion battery was in a cell phone size, so you're like, I don't know, 10 grams per person or something. And nowadays, half the people in this town drive Teslas, so your per capita allocation of- of lithium-ion battery is, you know, 100 kilograms or something like that.

   29. DPDwarkesh Patel46:59

       Mm-hmm.

   30. CHCasey Handmer46:59

       So we're talking like four or five ooms of increase (laughs) of total-
7. 49:14 – 58:45

   GDP is broken, AGI's true value must be measured in total energy use

   1. CHCasey Handmer49:14

   2. DPDwarkesh Patel49:14

      Okay, so let- let's assume you're right and then... I mean, I think at some point you will be right. Like maybe we disagree about... Sorry, I- I'm not qualified to disagree. Maybe you and some other person might, uh, disagree about what year it happens, but I think it's hard to deny that in the asymptote-

   3. CHCasey Handmer49:28

      Oh, yeah.

   4. DPDwarkesh Patel49:28

      ... our civilization is headed towards lots of energy used for AI and a lot of that coming from solar.

   5. CHCasey Handmer49:34

      Mm-hmm.

   6. DPDwarkesh Patel49:34

      Um, in that asymptote I've just like... I wanna get like the crazy nerd sci-fi like what does our civilization look like? What is happening in this, you know?

   7. CHCasey Handmer49:42

      Kardashev level one.

   8. DPDwarkesh Patel49:44

      Yeah. L- l- let's wait til get to turning the entire Earth into an AI factory, but more like, I don't know, the 2030s, um-

   9. CHCasey Handmer49:52

      Mm-hmm.

   10. DPDwarkesh Patel49:53

       ... where you've gotten multiple people who are building on the order of five gigawatt or 10 gigawatt sites. The value of the hardware is dependent on its complement, which is the software, right? Like right now AI models are fine and so the hardware they're running on, the economic value they can generate is sort of bottlenecked by how good the software is. But if you actually had AGI, if you had like a human level intelligence or maybe even better-

   11. CHCasey Handmer50:16

       Ideally better, yeah.

   12. DPDwarkesh Patel50:17

       ... yeah, um, running on an H100-

   13. CHCasey Handmer50:19

       Hmm.

   14. DPDwarkesh Patel50:19

       ... uh, that H100 is worth a lot, right? Like we're paying a lot for humans to do work. Right now I don't think AI is that valuable. Like the models themselves aren't super, super valuable in terms-

   15. CHCasey Handmer50:30

       Mm.

   16. DPDwarkesh Patel50:30

       ... of just pure economic value, right? OpenAI is generating on the order of 10 billion ARR or some- uh, you know, 20 billion ARR. And-

   17. CHCasey Handmer50:37

       That sucks. It's terrible. How do- how can they sleep at night?

   18. DPDwarkesh Patel50:40

       I know.

   19. CHCasey Handmer50:40

       (laughs)

   20. DPDwarkesh Patel50:41

       Um, but like for context McDonald's and Kohl's generate more yearly revenue than that. But I think the promise of AGI-

   21. CHCasey Handmer50:48

       Yeah.

   22. DPDwarkesh Patel50:48

       ... is to automate human labor. Human labor generates on the order of $60 trillion of economic value or like that's how much is paid out in wages to labor around the world, right? So that's what AGI can do and even if you curtail it to just white collar work, there's still tens of trillions of dollars of value. So once we have models which are actually human level-

   23. CHCasey Handmer51:07

       Hmm.

   24. DPDwarkesh Patel51:08

       ... they will be worth at least that, um, pending the fact that you can build them or you can run them.

   25. CHCasey Handmer51:12

       Well, I don't think we should constrain ourselves to being like, "Oh, well maybe there'll be some fraction of current payroll," right? 'Cause like that- that's kind of a very contingent on like humans being humans thing.

   26. DPDwarkesh Patel51:22

       Yeah, no, I- I think that's a lower bound, to be clear.

   27. CHCasey Handmer51:24

       Oh, yeah. Low- lower bound for sure. But like if you think about like someone- someone trying to like estimate the upper bound for the market value, the market cap of like Caterpillar, right? Based on like, well, it takes, you know, this many men and like-

   28. DPDwarkesh Patel51:37

       (laughs)

   29. CHCasey Handmer51:37

       ... burrows and wheelbarrows to like dig a trench and so, you know, it couldn't be more than that, right? But actually, you know, one way to think about the industrial revolutions is every time you figure out an industrial revolution what you're doing is you're finding some way of like bypassing a constraint or-

   30. DPDwarkesh Patel51:50

       Yeah, yeah.
8. 58:45 – 1:03:49

   Silicon wafers in space with one mind each

   1. DPDwarkesh Patel58:45

      Mm-hmm.

   2. CHCasey Handmer58:45

      ... of a computer.

   3. DPDwarkesh Patel58:45

      Let's actually go back to the original point of, like, I was explaining w- why I think it's plausible that there could be more than hundreds of gigawatts of extra demand from AI in the 2030s. I want to understand what that looks like in the real world. Like, at that p- point, it's become basically this industrial problem of can you generate enough solar panels and solar modules and batteries-

   4. CHCasey Handmer59:06

      Mm-hmm. Yep.

   5. DPDwarkesh Patel59:07

      ... and not to mention the chips themselves?

   6. CHCasey Handmer59:08

      So I've seen an industrial point, and then there's a cultural point as well which, like-

   7. DPDwarkesh Patel59:11

      Well, let's start with the industrial point. (laughs)

   8. CHCasey Handmer59:12

      Okay. (laughs)

   9. DPDwarkesh Patel59:13

      Um, I, I, I want-

   10. CHCasey Handmer59:14

       Okay, let's talk about it.

   11. DPDwarkesh Patel59:15

       I want to know what the year 2035 looks like if-

   12. CHCasey Handmer59:16

       Yeah, yeah, yeah.

   13. DPDwarkesh Patel59:17

       ... if we've got AGI and we're just bottlenecked by the ability to deploy it.

   14. CHCasey Handmer59:20

       Yeah. So you can ask a question like, what do you need in order to run, like, what is the minimum amount of matter that you need in order to perform these, these calculations?

   15. DPDwarkesh Patel59:28

       Yeah.

   16. CHCasey Handmer59:28

       So, so, so right now, we're talking about, like, AI racking and grid and transmission and a bunch of, like, ISOs and all that rest. You don't need any of that stuff, right? And, like, obviously, XAI is on top of this because the first thing that Elon will always ask is, like, "Delete anything you don't absolutely need." Um, so what you actually need is a big slab of relatively cheap silicon to make the power and then a small slab of relatively expensive silicon to do the thinking.

   17. DPDwarkesh Patel59:52

       Mm-hmm.

   18. CHCasey Handmer59:52

       And if it's in space, that's all you need, right, 'cause it's in the sun all the time, so you don't need a battery, right? But if you're on the Earth, you need a battery as well, so you need something to connect. Um, and you don't need a transformer, right? You don't even need a DC-DC converter. You can actually make do with buck converter or with relays or whatever to basically match the, the current output of your solar array with the charge state of your batteries and the power consumption of the, um, of your, you know, uh, GPU or something.

   19. DPDwarkesh Patel1:00:18

       Mm-hmm.

   20. CHCasey Handmer1:00:18

       But, like, a, a solar array about the size of this desk, for example, will generate about 500 watts in, in, in full sun. So you could actually imagine, like, a-... aliens who have different silicon technology stack, building their systems as, like, an integrated solar array with, you know, a bit of, uh, a bit of, you know, computronium in the middle, for example-

   21. DPDwarkesh Patel1:00:35

       Mm-hmm.

   22. CHCasey Handmer1:00:35

       ... uh, in, uh, on the same wafer. Uh, but that's, that's basically all you need, and then-

   23. DPDwarkesh Patel1:00:38

       On the same wafer, this-

   24. CHCasey Handmer1:00:39

       Yeah.

   25. DPDwarkesh Patel1:00:39

       ... because it's bo- it's all silicon?

   26. CHCasey Handmer1:00:40

       It's all silicon.

   27. DPDwarkesh Patel1:00:41

       Yeah.

   28. CHCasey Handmer1:00:41

       It's all silicon all the way down. And what's silicon made of? Well, it's an, it's an element. It's, uh, chemically in the crust. Uh, there's no shortage of it.

   29. DPDwarkesh Patel1:00:47

       This is a, this is a great prompt for a sci-fi exercise because if, especially in space, you don't need batteries, so you just like... The, the prompt is, uh, the, the future TSMC just manufacturers integrated solar, uh...

   30. CHCasey Handmer1:00:58

       And they can fly around.

Episode duration: 1:08:21