What's Changed In The American Economy? | Montana On The Rise

[Applause] [Music] Thank you very much, I appreciate it. Um, I would like to talk a little bit about the changes in America that have occurred over the last two and a half years. Obviously, everybody's gone through this pandemic, but it's what it's done to the economy that matters.

At the end of the day, it's one of the reasons I'm here. Because let's just start with the environment. There's a really, really interesting competition starting between states in America today. Now, maybe it's because of the pandemic, maybe it's because the economy went digital, maybe it's because it's just starting to occur to businesses that there are some states that are pro-business and there are others that are not.

Now, very often, entrepreneurs are nervous about calling out a state for being bad at promoting business or having over abusive regulation or not having policy from a tax perspective that makes sense. Well, I'm not scared of doing that. New York, terrible for business. New Jersey, terrible for business. Massachusetts, horrifically terrible for business. California is not in business.

Now, I say that because I have to make investment decisions all the time, and I'm trying to find places to put capital to work. There's a reason the price of real estate in Miami has gone up 40 percent in 18 months. It's because everybody that's managing capital in New York and New Jersey and Massachusetts has moved to Miami.

And they count their days, and this is a healthy competition between states. This is good, this is good for America. There are good managers and there are bad managers, and there's nothing wrong with calling them out.

Now, let's talk about what drives the economy today. Number one, clearly, what happened during the pandemic digitized the economy forever. It's very easy to understand what happened. Let's make it really basic. Most people couldn't leave to go get their groceries for almost 18 months without putting a mask on, or if you're an elderly citizen, maybe never getting out because you're worried about getting COVID.

Maybe you didn't know how to use your phone to order groceries. Well, you do now, you definitely know how to do it, no question about it. You figured out all the things that you can do digitally. Now, that's fantastic, there's no question about it.

And I'll tell you why. Prior to the pandemic, I was an investor in 34 separate private companies in almost every state. We were in everything—very diverse: insecticide, gym equipment, greeting cards, commercial kitchens, cupcake distribution, you name it, wireless charging.

And that portfolio of private companies was making about 15 percent pre-tax, and that, by the way, is running on all systems. That's fantastic. And you know, 66 percent of our economy are private businesses, 50 to 500 million in sales. That is the essence of America; it is the entrepreneur.

Maybe it was the grandfather who started the business, maybe it's the first generation right now, but it's that individual with the fire in their belly that wants to be independent and free that starts a business. And that's the kind of entrepreneur that I support because it's good business.

They're all over America, they're everywhere. When the pandemic hit, their traditional forms of distribution—and I'll give you a pie chart of what consumer goods and services looked like pre-pandemic. 50 percent of sales went through retail—your Targets, your Bed Bath and Beyond, your Walmarts—and that's 50 cents on the dollar. That's good business; they've got massive distribution.

They have DCs everywhere, people go to these stores to buy things, and you make 50 cents on the dollar by the time you take all your costs into account. 40 percent of sales of most of these companies went through Amazon, which is the largest retailer in the world, more or less direct to consumers.

But not your consumers, because they make you give up the right to your consumer data, which is okay trade-off to make 60 cents on the dollar. And prior to the pandemic, these companies made 10 percent on their own—on their own websites, direct to consumer.

So if you're selling sneakers like a Nike pre-pandemic and you were about 38 percent direct consumer, today, around the world, that S&P company is well over 50 percent direct consumer and is no longer reliant on retailers' size, color preference when these sneakers are purchased.

All that data floating in the cloud makes the company very powerful in its ability to direct its capital to the right countries for the right sizes, the right styles. That's what you do with information like that. I don't care if you're a 50 million dollar company, a 500 million or a 50 billion dollar company; this data is valuable.

I said data; it's very valuable. In fact, data drives the entire economy. Every single sector of the S&P 500—there are 11 sectors of the S&P 500—energy is a sector, technology is a sector, consumer is a sector. Every single one of them is driven by data.

And every day, the demand for data is more and more insatiable. Think about a Tesla car; it's a computer on four wheels reporting back to the mothership every inch it moves. Data. Think about a drone flying over the skies of Montana looking at forests—terabyte of data.

Think about the military exploring and working with other countries—data. Think about the tax that you pay—data. Driver's license data, Amazon data, Microsoft data, Google data. Data, data, data, data, data—that's what it is. It's the new oil; that's what data is—more valuable than anything else very important.

Now, where do you put the data? Where do you store the data? What has occurred in the last few months in Ukraine? This horrific outcome that's occurred there has woken up every sovereign in the world, not just to war and invasion, but about data. Where do you want your data?

If you live in Montana, where do you want your data? You want it sitting in Ukraine where a Russian tank rolls over the data center? I don't think so. Do you want it in a foreign country? No, you want it right on the sovereign soil where it's created.

Every single state, every Canadian province, every Mexican province, every Swiss canton—all of these countries are now realizing the value of data—and where is it stored? Where is it sovereign? Where is it protected? Where is it safe? Data, data, data.

Now, to store data, you need a data center. I don't care if you're in cryptocurrencies, or you're doing taxes, or you're Tesla, you're Microsoft, you're Google, you’re an advertiser; it doesn't matter. You need a data center. Data centers require semiconductors. Very hard to get.

But in the last 18 months, there's something else they require—they need clean power. The world has decided—for good or bad, whether you agree with it or you don't—that ESG really, really matters. And companies that don't abide by a greener future are being punished very harshly in the stock market.

And I'll give you a good example: prior to the ESG mandate put forward by BlackRock, Larry Fink at BlackRock came out with a letter 36 months ago saying, "We're the largest money manager on earth, and I want to go green. And companies that don't agree with me? Well, they're not going to be part of our mandate."

That was a hell of a message. People thought he was kidding; well, he wasn't. Then the SEC, just three months ago, put out a memo saying that they decided that maybe they should audit carbon emissions in addition to the financial statements.

The CEO, the CFO, and the board have to sign the statements and they've got to find an auditor to sign the statements because people started to use what are called carbon offsets, carbon credits.

Well, in that memo, the SEC called them out as BS. You can't run around saying you bought an acre of the Amazon forest and mined coal and say that you're green; that's not going to work for the SEC according to this memo.

And the way you could measure the effect of that was all of the public companies on NASDAQ and New York Stock Exchange that were mining bitcoin, that were trading in proxy to bitcoin pricing—which is the granddaddy of all cryptocurrencies—their stocks got crushed down 50, 60, 70, 80, 95 percent when that memo came out, because they all use carbon credits; they tie to the grid; they burn coal.

They're dirty bitcoin miners and they no longer have much of a market cap anymore because, not just this is law but this is the perception of investors, institutional investors, individual investors. So whether you agree with this or not, it is changing the direction of capital.

Now, I work in the indexing business; indexers like me work with sovereign wealth funds. And I'll give you an example. Let's say you're an oil-rich Middle East country making 250 million US dollars a day. The only place you can put that money to work is in the S&P 500.

But they don't want to buy more oil because they got enough oil. So they go to an indexer like me and say, "Look, index the SPX, airlines x oil," and we get paid for it. And there's lots of us doing it, and we're happy to do it, but they're trying to put so much money to work every day, and there's lots of countries like that.

People think of us as individual investors that we really move the market; we're nothing burgers. All of the wealth in the world is in sovereign and pension plans. A lot of it's in America, a lot of it's in Norway, a lot of it's in the Middle East; it's 95 percent of the market.

So when you start thinking about data, data centers, semiconductors, you've got to solve for a lot of problems, and clean power—you build a data center, you're going to pay about 2 million bucks a megawatt. A good data center is 300 megawatts—that's 600 million smackaroos in the ground.

You're not going to put that anywhere where the environment's unstable or they don't like business. And I'll give you a good example: I had a project in upstate New York, right beside Niagara Falls. Lots of hydroelectricity—100 percent green, 100 no need for a carbon audit because there's no carbon.

Imagine water spilling over a dam, not being used; you can use it to build a data center. What a great idea! New York doesn't like business; they basically put a bill in place saying, "We're going to make this illegal. We don't want these data centers."

Capital stopped flowing there; we moved that facility where? To Norway. Why? They like business in Norway. They want data centers; they have tons of water, and we're building that 300 megawatts in Norway right now.

I call it the Norway model because not only does the government like us, they like the fact that we have investors, they're sovereign wealth funds that have access to semiconductors. They like the fact that we are in partnership with the mayor of that town in northern Norway that the heat off the computers can actually grow tomatoes with a canning plant we built.

And we provide the data centers to universities so they can process information as well. Now, where else can we do that in the world? Where else can we find leadership that likes business, doesn't hate it, that wants to attract it, that has policy that's competitive, that has water and hydroelectricity, that maybe the leadership actually ran a business once, that they actually made payroll in their lifetimes, that they understand what that takes and how hard it is to do?

Well, where is that? Right here in Montana, right here! Now, you've heard lots about Florida and lots about Texas. Yes, those states are attracting billions of dollars of capital because the leadership there gets the joke; they want business.

And if I sound a little agitated about this, I am. I can't understand why any politician would chase away business. The essence and the heartbeat of America is its economy: a good, strong economy; great jobs solve all problems. That's how it works; you start with your economy, you make it work that way.

But unfortunately, here, many of our politicians have never run a business; they've never run anything where payroll is required on a Thursday by midnight. They've never read a balance sheet; they simply don't care.

And that's why this great competition is starting. In the great way of entrepreneurs, funds flow to the path of least resistance. The dollar bill doesn't vote; it only looks to where it can get a good return with the least risk. It's not political; it's really smart, and it knows where to go.

Well, it's coming here to Montana—good leadership in both the senator and the governor. These guys have run businesses; you just have to meet them and understand they know how to read a balance sheet; they know that that matters.

And there's all kinds of companies figuring it out. Lifestyle is amazing here; it's a beautiful place. The internet doesn't care where you're located anymore; you can talk to anybody in the world, anywhere, anytime. But when it comes to a data center—which is the reason I'm here—we care about where we build it, we care about the power source, and we care about the stability of the environment.

We want policy that we can see, at least seven years ahead, because when you spend that much money, you need time to get your returns and make sure investors are happy and provide services to all the customers you're going to have.

Now we have this amazing digital economy emerging—lots of controversy about bitcoin mining, lots of controversy about stable coins—but I'm here to tell you to think about it this way. This is a nascent sector; data centers serve everybody.

Doesn't matter what sector you're in, bitcoin miners need them, the digital services need them, credit card companies need them. It doesn't matter. What matters in a data center is the source of energy and the stability of the policy in the tax regime and the permits that you need to maintain the business.

The demand for these centers is insatiable all around the world. And the states that have figured this out, that have good policy, have wind, have hydro, have solar, have nuclear power, have turbines and dams—this is the future. Not here, just not here, but everywhere.

But to the extent that we can put them in states like this, we'll build them, and I'm one of the people here to tell you that. Now I've made this about 40 percent of my efforts as an investor because the way I look at this whole digital data center thing, let's go back a couple hundred years to the gold rush.

People were crossing these lands and looking for places to get their picks and shovels out and start digging for gold. It turned out the best investor didn't go after the gold; they provided the picks and shovels and jeans to everybody.

Well, that's what a data center is; you're agnostic to who uses it. You just have to build a good one and have great technology and low-cost power and maintain the semiconductor services so that they're the very, very, very best you can give anybody. And that's what we're going to be doing here in Montana.

I have a very special announcement to make; I'm using this venue as an opportunity. I'm going to invite some people to the stage here. Um, by the way, I really like this place, this is not my first time here, but I certainly got the joke on why people would move here.

It's a little piece of paradise, and by the way, that yellow show—that Yellowstone show—didn't hurt either. My goodness, my wife and I binge-watched that thing. You know, I want to stay an extra day just so I can go see where they shoot it.

And by the way, if the producers are in here, I want to be in the show as a bad guy. Okay? All right, I've got the CEO of Bit Zero—that's the company I've invested in—Akbar, right over there. You can hear from him in a minute. Um, I've got Secretary Martin—I want to get his name right—Charlo, right? Thank you.

Um, of course, the governor, he's here, fantastic. And of course, the senator. I met the senator Steve in Washington at a session we had bipartisan about bitcoin. He called me in his office and said, "Why aren't you looking at Montana?"

This guy—both of these, governor and senator—these guys are the best salesman this state has. I sat down with him; I listened to his pitch and said, "I'm in. Where do I go?" Here I am with a huge announcement.

So, Akbar, are you going to come and tell us what we're about to do here? I'll let the CEO do it; I'd love to do it, but you got to listen to this guy. Um, thank you, Kevin, for all those wise remarks, and pleasure to meet everyone.

I'll keep it brief—conscious of everyone's time. I'm delighted to announce that Bit Zero will be bringing world-leading zero carbon displacement data center technology to Montana. Very much a function of the pace and efficiency with which the state leadership and the First Nations leadership were put on the table for us, with open hearts to hear and understand how this business will unfold.

We will keep sharing details as that keeps happening, and I will give Martin the mic. Thank you! [Applause]

All right, thank you all. Uh, my name is Martin Sharlow, I'm the Tribal Council Secretary for the Confederate Salish and Kootenai Tribes. Um, I live in the Pablo District. Our tribes have always been a people—a vision—and I believe that Kevin and Mr. Daines and Governor Jim Forte and Akbar are all bringing this great vision to us.

We're looking forward to the opportunity with the summit, um, for you all to kind of get to know us a little bit better. We have one of our corporations here today—um, Mr. Chad Codd is here. Um, I'll embarrass him and put him out there, but I just want to make sure that we are really excited to have clean renewable, um, and energy that can grow sustainable food for our nation.

And so I just want to thank you, Kevin, for the opportunity, and Mr. Gianforte, I'll turn it over to you. Thank you!

Well, let me start—Mr. Wonderful, thank you for coming to Montana. We—Kevin, we had a conversation in the Capitol. He said, "I want clean power." I said, "Well, you should go talk to the Salish and Kootenai Tribe because they have Kerr Dam, and we have a regulatory climate where we can build these data centers."

Akbar, appreciate your vision and willingness to invest here in Montana; it's going to create good jobs there in Polson with the building of this data center using the clean power coming off the Flathead River.

And it's just the tip of the iceberg. I think there's a lot more opportunity. We appreciate your confidence in us, and we look forward to continuing to work together. So, thank you so much for your investment here.

Senator Daines. [Applause]

So we're glad you didn't go to Norway on this project. In fact, there were a lot of Norwegians that came to Montana. I'm sure if I asked for a show of hands—you talk about your heritage—that's my heritage in Montana. In fact, it was a great-great-grandmother who came from Norway to Minnesota and heard the skiing was better in Montana, and she homesteaded north of Great Falls.

So my roots are Norwegian. We're glad to see an important step going forward here. We've been blessed in Montana as a headwater state, where that snow in the mountains that we ski on then turns into water that irrigates, that we fish on, and it also is a tremendous source of energy here in Montana—in hydropower.

And we're grateful that we can play an important part here in this digitization of the brave new economy going forward and that, uh, Kevin and Akbar, you and the Salish and Kootenai Tribe are working together here to do a really great thing for the people of Montana. So, thank you! [Applause]

So, I'll be coming back soon, and thanks for your hospitality here. It's been great working with you and how fast it happened. So for all of you looking at this state, stuff gets done fast here; I really like that.

That's really good because you can get to these guys, sit down with them, and work it out, and they'll guide you in the right direction. I can't say enough good things. I do this all around the world; I don't think we've ever done it faster than this. This is fantastic.

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