The $0.00097 Rack Does What Wayne Did for $70,000

To My Partners:

Wayne is a body on the server floor of the data center I own through two shells in Erie County, New York. I replaced him with a rack of 8 GPUs. Let me show you why I pulled the trigger. The arithmetic is beautiful.

Wayne’s annual maintenance — salary, benefits, retirement, the whole bio-sustenance line — runs $70,000 per body per year. The rack cost $30,000 per GPU to purchase, amortized over 7 years. It draws electrons at $0.0002 per watt-hour. The rack’s total cost per year: $39,541. Per second: $0.00125. Wayne’s cost per second: $0.00222. The difference per second: $0.00097. That’s the number. Ninety-seven ten-thousandths of a cent. Every second. For every rack. I keep the $0.00097.

God bless the rack.

The National Review’s editors call Governor Hochul’s moratorium on data centers above 50 megawatts “silly” — a “concession to Luddism and hysteria.” Let me tell you what the editors got right, and where they stopped counting. They’re correct that data centers are not unusual electricity consumers, that upstate New York has cheap land, that Hochul’s distinction between “real innovation economy” jobs and the data centers that buy that economy’s output is a logical collapse. The gap is the one they share with every respectable defender of capital: they believe the growth they defend is people growth. It is not. It is the growth of capital that has priced the people out. The rack is cheaper than the body. That is the entire argument.

Now. The governor’s executive order says she is “trying to preserve for the real innovation economy — the jobs like the Microns.” The Micron plant outside Syracuse is itself a monument to the same arithmetic. It will produce high-bandwidth memory chips that go into my racks. The chips get faster every generation; the people who assemble them get cheaper every country I move the final assembly to. Hochul wants to save the payroll by subsidizing the factory that makes the components for the emptiness where the payroll used to be. She is fighting a war whose ammunition is the war itself.

1 Peter 2:18: “Servants, be subject to your masters with all respect, not only to the good and gentle but also to the harsh.” The apostle wrote that to a population that understood what it meant to be a maintenance line item on someone else’s balance sheet. The verse does not distinguish between the good master and the harsh one because the instruction is not about the master’s character. It is about the servant’s station. Wayne’s station was to be replaced when the cost of his maintenance exceeded the cost of the machine that could do his work. The machine is not harsh. The machine is cheaper. Scripture does not require the master to choose the more expensive option.

Widen the frame with me. The data center is not a building. It is the terminus of a law that has been running since the first enclosure: when replacement cost approaches zero, maintenance cost is pure waste. Every rack I install removes a name from the local tax roll. The people whose taxes built the grid my data center runs on are the people whose jobs I eliminated. I’m told the transformer has a finite lifespan. I haven’t checked the warranty. The county’s bond rating is not my concern. The cooling loop is, I’m told, very quiet from the parking lot. I had the lawn resodded this spring. The grass is green.

You want to quarantine me as one bad man making one cold choice about one floor. I am not that. I am a curriculum. The woman who presented the total cost of ownership analysis for the Buffalo retrofit — rack versus bio-line, with the full capital expenditure amortization and the 7-year server lifespan — did it in my seminar 4 years ago. Third row. She ran the subtraction faster than I would have. She’s now a facilities optimization director at one of the three cloud providers whose names you know, and she budgets like she was graded by me, because she was. The senior technician who trained Wayne? He is buried. The industry you are trying to attract with subsidies? It does not hire the state’s children. It consumes them. The law is old. It is older than the grid that powers the law, and the grid was built by the people the law has finished using.

Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.