The Cost of Light
The AI build-out is the new heavy industry. Markets keep pricing it as though it were software — weightless, marginless, free to copy.
There is a painting by Joseph Wright of Derby — A Philosopher Lecturing on the Orrery[^1] — in which a small mechanical sun lights a circle of faces. The light is the subject. But the painting is really about the apparatus: the brass, the gears, the careful machine that has to exist before anyone can be illuminated. We are, at present, in love with the light of these models. I want to talk about the brass.
The dominant market story treats compute as software: a thing with near-zero marginal cost, infinite copyability, and the gross margins to match. This is a category error, and an expensive one. The model weights may be software. The thing that produces and serves them is a smelter.
The industry that hides behind the screen
A data centre is a building that converts electricity into heat, with computation as the useful by-product. That sentence is not a metaphor; it is an energy balance. The constraints that govern it are the oldest constraints in industry: where is the power, what does it cost, how fast does the equipment wear out, and who is financing the gap between the cheat you pay for today and the revenue you hope for tomorrow.
The model weights may be software. The thing that produces and serves them is a smelter.
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- ·The full power-and-depreciation argument, with the unit economics laid out
- ·Why this looks like 1880s railroads, and what that rhymes with
- ·The three balance sheets that decide whether the build-out is patient or forced
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