It is late, and you are asking a machine a question.

And the answer arrives streaming in, word by word, onto the dark glass in your hand, as if someone on the other end were typing fast and thinking of your question.

No one is typing. What’s arriving is a procession of ‘tokens,’ little fragments of language, a word or a few letters of one, each flashing into place. Pick any token. This one. Or maybe this.

This essay is about that one.

Because that little token, one of trillions born today, is the visible tip of one of the largest and strangest structures human beings have ever built. Its showing up on your screen is the final stop of a journey that runs backward through light and glass and sand, down into vibrating electrons, and out across half a continent to rivers, wind, and splitting atoms. It shows up effortlessly. It’s likely the most elaborate thing you never noticed. A pinnacle of infrastructure, the stuff that is most successful when it can be ignored. When it can be taken for granted.

The glass

Start where you are: the screen you just tapped on. The token is not printed, nor projected. It is made of light itself, manufactured on the spot. Under the glass lies a grid of millions of microscopic lamps. Each pixel a trio of them, red, green, and blue, and each lamp an organic light-emitting diode: a stack of carbon-based films a few hundred nanometers deep, a thousandth the thickness of a sheet of paper. Behind every lamp waits its own transistor, a private switch. When instructed, the switch opens and current flows in. Electrons pour in from one side, and from the other side “holes,” absences of electrons, rising to meet them. Where an electron falls into a hole, the encounter ends in a photon. The light is created, particle by particle, exactly where you see it.

Your token is a constellation of a few thousand of these lamps switched on in the shape of glyphs—strokes hinted and anti-aliased, curves smoothed by fractions of a subpixel, drawn by rendering code that is the result of years of collaboration between typographers and engineers. Sixty times a second, sometimes a hundred and twenty, every lamp on the screen is told again how bright to be.

The information

The token reached your phone as a burst of structure: an integer, chosen from a vocabulary of roughly a hundred thousand fragments of human language, wrapped into bytes, wrapped into an encrypted stream, wrapped into packets, each packet stamped with addresses and checksums to route it to its final destination. It crossed the last few meters of its journey as radio waves, a shaped trembling of the electromagnetic field, or just light that your eyes aren’t able to see.

Go through the air, and those packets are in your router in copper and then you hit the glass. The main journey happened inside optical fiber: strands of silica thinner than a human hair, drawn from pure glass. Down each strand travels infrared laser light, folded inward by total internal reflection. The light dims a bit as it goes, so every eighty kilometers or so it passes through a length of fiber laced with erbium atoms, which, when pumped with energy, hand the signal fresh photons in perfect imitation of the ones fading. The message is amplified, the same wave made strong again, able to travel across continents and under oceans, through hair thin fibers inside garden-hose sized cables lying in the abyssal dark crossing across the globe.

In glass, light travels at about two hundred thousand kilometers per second — a third slower than in vacuum, and still fast enough that your token crossed the country in the time it takes a hummingbird to beat its wings twice.

The birth

Trace the packet far enough and you come to its origin. A building with no windows, humming in some county chosen for its cheap land and heavy power lines. Inside, in aisles and aisles of racks, is where the token was born.

Here is what it took. Your conversation lives in the machine as a field of numbers: each prior token expanded into a vector with thousands of dimensions. To produce one new token, this field is passed through the model: dozens of layers, and in each layer the new token’s vector turns and attends to every token that came before it, asking each one, in effect, what do you mean to me now? — the question posed as a dot product, the answer returned as a weighted blend. Between the layers, matrices vast as city grids multiply through the signal. By the end, the machine has performed on the order of a trillion arithmetic operations. For one token. Then it does it all again for the next.

The model’s weights the distilled valuable residue of its training, hundreds of gigabytes of numbers, cannot live inside the processor; they live in stacks of memory dies bonded millimeters away, connected by thousands of microscopic vias, and for the token to be computed those weights must stream through the chip, terabytes per second pouring across a gap the width of a fingernail.

And it is chosen. At the end of the cascade the model holds a probability for every token it knows — a hundred thousand candidate futures, weighted. One is drawn. The word you read was, until that instant, only the likeliest ghost among many.

The sand

The chip that did this is a slab of silicon the size of a matchbook, holding tens of billions of transistors. Each transistor is a gate whose critical features are a few nanometers across, just a few dozen silicon atoms laid side by side. These gates can not be seen with visible light; its waves are too wide to resolve them. So to print them, humans built the most extreme light source in industry: machines that fire a laser at falling droplets of molten tin, fifty thousand droplets a second, each one flashed into a plasma hotter than the surface of the sun, and each flash surrendering a puff of extreme ultraviolet light — a wavelength of 13.5 nanometers — which is caught by mirrors polished so smooth that if one were scaled to the size of a country its tallest bump would stand less than a millimeter high. That light draws the circuits, layer over layer, hundreds of steps, in fabs where the air is thousands of times cleaner than a hospital operating room and workers move in clean, space like, suits.

Your token passed through those gates. Every arithmetic operation in its trillion was a handful of electrons permitted or refused, billions of times a second, by structures assembled at the scale of atoms — begun, all of it, as quartz sand.

The power

And what powers the gates? The electrons in the wires barely move. In a conductor carrying direct current, an individual electron drifts slower than honey creeps down a jar, less than a millimeter per second, and under alternating current it does not even travel; it trembles in place, shivering back and forth sixty times a second, a distance smaller than the width of a hair. What moves is the field—the electromagnetic wave that surges around and through the wires at nearly the speed of light. The power that computed your token was a vibration, passed through a lattice of trembling electrons like a stadium wave through a crowd where nobody actually walks away from their seat.

The intensity of that trembling was stepped down to reach the chip, from transmission lines carrying hundreds of thousands of volts, through substation transformers humming their sixty-cycle hymn, down and down through the building, until at the socket of the processor it arrives as something absurdly humble: about one direct current volt, delivered in floods of current, regulated to within whispers, because the atomic gates it feeds are delicate.

The turning

Follow the voltage backward, out through the substation, up the transmission towers striding across valleys, and you arrive at the grid itself: the largest single machine ever constructed. Across an interconnection spanning half a continent, every generator turns in lockstep: thousands of rotors, some of them fifty tons of forged steel, all spinning in phase, sixty revolutions a second of electrical angle, so tightly synchronized that they behave as one rotating body moving together. Somewhere a turbine hall roars with steam raised by splitting uranium atoms. Somewhere a blade three hundred feet long leans into the wind. Somewhere sunlight that left the sun eight minutes ago strikes a panel of doped silicon (the chip’s country cousin) and is converted, without a single moving part, into the same synchronized trembling. And somewhere gas burns: sunlight too, but ancient—the bodies of plankton and trees that lived and sank a hundred million years ago, giving back their stored summer so that a machine can finish a sentence.

Your token cost, in the end, a few joules at most, the energy of an apple falling from a high shelf. But those joules were carved from rivers, atoms, wind, and buried eons, and delivered across hundreds of miles at light speed, precisely as they were needed.

The people

None of it knows it is a system. The lineworker splicing conductors from a helicopter; the cable-ship crew dropping fiber into the sea; the fab technician; the typographer fretting over the tail of a y; the researchers who coaxed a mountain of arithmetic into something that can hold up its end of a conversation. None of them were thinking of your token. Each solved their own impossible problem and passed the result along, mostly uncredited, mostly unseen, across decades and continents. The token under your glass is what their work looks like when it all lands at once.

So: one little token. A constellation of brief lamps on a sheet of glass. Behind it, a laser in a droplet of tin, a wave in a crowd of trembling electrons, powering trillions of mathematical calculations, uranium coming apart in the dark, and a hundred thousand ghosts of what might have been said—all of it converging, in under a second, on the space between two words.

And then the next one arrives, and the next, streaming down your screen like a stream down a hill.

And perhaps you have already guessed it.

This essay came to you the same way. With a little human help and careful editing—the machine you have been reading about has been describing itself to you, one choice at a time. While your eye crossed this sentence, a rotor somewhere leaned into its load vibrating some electrons just so to power the chip to do the math to send the results through strands of glass to command the lamps under your glass.

It is not done. It is doing it now —

one little token, and the next, and the next.

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This essay was a collaboration between us and all of the infrastructure that it takes to render a token on your screen. If you love the magic of infrastructure as much as we do you may enjoy the Stepchange Show.

Listen to the Stepchange Show on Apple Podcasts, Spotify, YouTube, or wherever you listen to podcasts. Primary show page: stepchange.show/grid

The grid powers everything around you. And it is in crisis. We cannot build AI, decarbonize our economy, or deliver affordable electricity if we don’t rebuild. And yet, the largest machine humankind has ever made is a miracle.

For nearly a century, electricity got cheaper every decade and the grid became so reliable that we stopped thinking about it altogether. This machine was not designed; it accumulated through a century and a half of decisions with unforeseen consequences. And now we are demanding that this aging, fragmented system grow faster than it has in generations.

To understand the struggle and opportunity of this moment, we have to understand how the grid came to be. It is an epic story of inventors and electrocutions, of a man who brought power to the masses and then lost everything, of an America that built massive new industries to win wars, of regulatory ambition and regulatory failure, of catastrophic blackouts, and of a trillion-dollar energy transition we are living through right now.

Plug in for the story of the grid. This is the fourth episode of the Stepchange Show where we explore the technologies and systems that have transformed human civilization.

Read the full transcript and research notes.

Presented by Crusoe:

Crusoe is the vertically integrated AI company, with over 3 gigawatts of AI data center infrastructure built. Crusoe Industries manufactures everything from custom server systems to industrial controls — and is opening that capability to customers who want to build data centers faster. Get in touch: crusoe.ai/stepchange

The Stepchange Show is a production of Stepchange Ventures. Hosted by Ben Shwab Eidelson and Anay Shah. We would love to hear from you at hi@stepchange.show.

Hello Stepchange Listeners,

Charge up your AirPods, because we’re in final production on the epic story of the grid. We’ll email as soon as it goes live.

We wanted to let you know that we’ll be heading to SF Climate Week for a live event! The grid is at its most consequential moment in a century — demand is surging, infrastructure is aging, and consumers are struggling to pay their bills. We'll be walking through 140 years of grid history, from Niagara Falls to the AI data center boom, with friend and energy storyteller extraordinaire Nat Bullard (co-founder of Halcyon, former BloombergNEF Chief Content Officer).

If you’re interested in joining, please RSVP here: The Past, Present, and Future of The Grid with Stepchange feat. Nat Bullard

​Due to space limitations, we won’t be able to let in everyone, but would love for some listeners to join.

Welcome to the third episode of the Stepchange Show—where we explore the technologies and systems that have transformed human civilization.

Every time you stream a movie, send a text message, scroll a feed, or chat with your favorite AI, you’re touching an invisible, physical empire. We call it the cloud, but it isn’t in the sky. It is astonishingly physical—alive in over 12,000 buildings around the world, consuming almost five percent of U.S. electricity, and running through cables laid across the ocean floor.

This is the story of data centers. From the humming punch-card rooms of the 1930s to the Cold War projects that accidentally birthed the internet, and onward to the gigawatt-scale AI factories of today, data centers have quietly become the industrial engine of our era. Six companies—NVIDIA, Microsoft, Apple, Alphabet, Amazon, and Meta—now dominate global markets in part because they command this infrastructure, just as railroads, steel, and oil once defined the fortunes of the last century.

Data centers are the machines behind the modern world. They shape commerce, media, communication, and now artificial intelligence, and raise profound questions about energy, water, and climate.

Join us as we uncover the physical reality of our digital world.

Four main parts:
Part I — Early Mainframes and the Birth of the Internet - 00:00:00
Part II — The Utility of the Cloud and the Hyperscalers - 01:16:13
Part III — The COVID Acceleration + AI Frenzy - 02:32:48
Part IV — Themes & Reflections - 03:40:10

Chapter times:
00:00:00 - The Invisible Empire of Data Centers
00:03:11 - IBM Punch Cards: The First Nerve Center
00:17:12 - SAGE: Connecting the Mainframes
00:27:27 - The APARNET: The Cold War Births the Internet
00:49:15 - The .Com Boom: The World Gets Wired
01:16:13 - AWS: The Utility of the Cloud
01:36:25 - Google: Warehouse Scale Computers
01:58:28 - Microsoft: From Software to Services
02:18:19 - Facebook: Sharing the Blueprints
02:32:48 - COVID: Five Years of Growth in 18 Months
02:45:53 - AI: The Dawn of the AI Age, Powered by NVIDIA
02:53:46 - Power & Water: The Gigawatt Problem
03:10:48 - Chips & Data: The New Cold War
03:19:18 - Climate: The Emissions of Data Centers
03:33:43 - Present Day Scale: Compute, Storage, and Communication
03:40:10 - Themes: Our Takeaways and Reflections

Thank you for joining us for the third episode of Stepchange. Don’t forget to subscribe.

Hosted by Ben Shwab Eidelson and Anay Shah. We would love to hear from you at hi@stepchange.show.

Sources

Full sources list

Key Books

• Where Wizards Stay Up Late: The Origins of the Internet — Katie Hafner & Matthew Lyon

• Tubes: A Journey to the Center of the Internet — Andrew Blum (Amazon)

• The Big Switch: Rewiring the World, from Edison to Google — Nicholas Carr

• The Greatest Capitalist Who Ever Lived: Tom Watson Jr. and the Epic Story of How IBM Created the Digital Age — Ralph Watson McElvenny & Marc Wortman

• The Datacenter as a Computer: Designing Warehouse-Scale Machines (3rd ed.) — Luiz Barroso, Urs Hölzle & Parthasarathy Ranganathan

• Data Centers: Edges of a Wired Nation — (catalog link: Lars Müller Publishers / “Cloud”)

Interviews

• Nat Bullard

• Brian Janous

• Christian Belady

• Peter Gross

• Sean James

• Jon Koomey

• Byron Rakitzis

• Ben Gilbert

Transcript

This was autogenerated and edited with LLMs. Please be aware that there may be mistakes or typos.

Ben Shwab Eidelson (00:00:00): All right, Anay. Well, kids are in school.

Anay Shah (00:00:04): Kids are in school. We survived the summer. I love how back to school kind of feels like the beginning of a new year.

Ben Shwab Eidelson (00:00:11): It does. I always thought this time of year was the actual new year.

Anay Shah (00:00:16): I like that.

Ben Shwab Eidelson (00:00:28): Welcome to the third episode of the Step Change Show. We're here to cover the stories of human progress. We want to understand the technologies, systems, and infrastructure that shape our world. I'm Ben Eidelson, a co-founder of Step Change Ventures, a fund that invests in the companies that are accelerating today's biggest step changes. I'm based up in Seattle, Washington.

Anay Shah (00:00:46): And I'm Anay Shah, fellow co-founder of Step Change Ventures, based in Los Angeles, California. Today we're going to be telling the story of the hyperscale-up of a recent infrastructure: the story of data centers. Every time you stream a movie, send a text message, call a car to pick you up, or talk to what feels like a fully formed computational consciousness, you are touching an invisible physical empire. We call it the cloud, but it isn't in the sky. It lives somewhere very, very real.

Ben Shwab Eidelson (00:01:20): It lives in nearly 12,000 buildings worldwide, consuming almost 5% of electricity in the U.S. It also lives inside these garden-hose-sized cables that are laid across the darkest parts of the ocean floor. Today we are going to tell the story of this invisible infrastructure—a story that begins in the humming and clattering punch card rooms of the early 1900s, winds through the Cold War projects that accidentally birthed the internet, and leads to the gigawatt-scale AI factories the size of Lower Manhattan that are being built today.

Anay Shah (00:01:50): The U.S. stock market is worth around $60 trillion, made up of over 4,000 companies. But there are just six companies at the top—Nvidia, Microsoft, Apple, Alphabet, Amazon, and Meta—that make up 30% of that market. They are today's railroads, steel, and oil companies, building the modern industrial engine of our time.

Ben Shwab Eidelson (00:02:12): This is the story of data centers. But before we do, just one quick note: We have all of the research links and notes for this episode up at StepChangeShow. And if you are listening to this and you think of a friend or colleague who might enjoy it, please send it over their way. All of this is a new endeavor for us, and we appreciate it getting into the hands—or rather ears—of folks who may dig it. All right, so data centers.

Anay Shah (00:02:36): So Ben, I was recently reading an article saying these new technologies are saving work for everyone nowadays. Pretty soon we'll have nothing to do at all.

Ben Shwab Eidelson (00:02:44): That's right. I think they were saying that we have some new electronic brain that's going to make most workers obsolete.

Anay Shah (00:02:49): Right. But the CEO behind one of these technologies quickly countered, saying that it was a way to save time, not replace jobs. He said it was a small tool to help great minds benefit mankind.

Ben Shwab Eidelson (00:03:00): Was this the CEO of Anthropic, OpenAI, or maybe Google?

Anay Shah (00:03:04): You might think so, but no. This was Thomas J. Watson Sr., the original leader of IBM.

Ben Shwab Eidelson (00:03:11): So, IBM, the computational powerhouse of the last century. Long before we had the Googles, Amazons, Metas, and Microsofts, there was Big Blue IBM. And long before IBM ever built an electronic computer, they were doing computation of a different sort.

Anay Shah (00:03:32): And if you walked into a large company back in the 1930s, you might find yourself in one of their windowless rooms, humming and clattering like a small factory. There'd be long rows of metal cabinets, whirring gears, and clerks feeding stacks of stiff paper cards into these behemoth machines. Each card was a sliver of information: an employee's hours, an invoice, maybe a customer's address. But together, they formed the first centralized nerve center for corporate data.

Ben Shwab Eidelson (00:04:05): And I think that's why we argue that those rooms, with those cards of information being processed on these devices that were doing computing, are the first real data centers.

Anay Shah (00:04:17): That machine has quite an interesting history, born to solve a government problem: the problem of the U.S. census.

Ben Shwab Eidelson (00:04:26): It's wild. The 1880 census data was collected in 1880, and it took seven years before it was tabulated. They realized it just was not working at human computation scale anymore.

Anay Shah (00:04:37): And so one man, Herman Hollerith, had an invention to solve this.

Ben Shwab Eidelson (00:04:42): He observed the way railroad conductors checked tickets, noting that these were papers with punched-out holes that ultimately stored and represented information. If you could build a machine that could count the number of punch holes, you could then do computation at scale without needing humans to count markdowns on a form.

Anay Shah (00:05:05): That's right. These cards stored information, and then you could have machines compute off of them. The 1890 census was the machine's first big break. Even with a population 25% larger than the decade before, it was completed in two years instead of more than seven years, and it came $5 million under budget. That's not something a new technology could typically achieve for a government. So, fast forward to Watson. He sees the punch card machine and understands what it can do. By the mid-1920s, he's convinced.

Ben Shwab Eidelson (00:05:37): So by 1924, he rebranded the company International Business Machines.

Anay Shah (00:05:42): A much more fitting name than CTR.

Ben Shwab Eidelson (00:05:47): Computing-Tabulating-Recording Company.

Anay Shah (00:05:50): "There is no limit for this tabulating business," he told his executives in 1927. He doubled down, selling off all the other less promising lines of business and pouring the company's resources into the tabulating division. They designed a proprietary 80-column IBM card that only worked on IBM machines, which became the IBM card—a sort of early-days lock-in where customers who wanted to use the machines had to buy the cards.

Ben Shwab Eidelson (00:06:22): Everyone obsesses over the Gillette razor blade business model, but the IBM card was not only how you did the computation, but it also stored information and became your record-keeping method inside businesses running on these IBM machines.

Anay Shah (00:06:35): Once you put invoices, time cards, and all of that information onto the IBM card, you're not migrating it off.

Ben Shwab Eidelson (00:06:41): It's on a piece of paper.

Anay Shah (00:06:42): Yeah, that's right. So now you've produced a very steady stream of revenue alongside selling the tabulator machine. The timing for this was perfect. This is the late '20s, early '30s. The New Deal brought in a massive government focus around record-keeping. In 1935, the Social Security Administration signed a contract with IBM, requiring millions of their cards and machines to process benefits and print checks. One of their New York plants was soon printing 10 million cards per day.

Ben Shwab Eidelson (00:07:14): It's amazing.

Anay Shah (00:07:15): And within a couple decades, most large companies had punch card rooms. They had various machines they used to sort, tabulate, and store financial information, payroll information, employee information, customer information—everything you could think of. In order to manage that, they'd hire clerks and technical specialists to operate and maintain it.

Ben Shwab Eidelson (00:07:36): It's easy to take for granted, but this was the first time a company, its accounting, and its invoicing could be calculated at this scale. Think about what was going on in this era: companies were starting to scale in new ways. More global trade was also starting to happen. Thomas Watson Sr. ended up very interested in diplomacy, traveling around the world trying to preach that commerce across borders would create peace. Unfortunately, this backfired. He did a lot of commerce with Germany in the lead-up to the Holocaust, and there are many stories around IBM's computational power being used to help Germans with record-keeping. Ultimately, this product was foundational to so much of the scale of this era, including the scale of war. Every time there was a war or a big government project, regardless of which country was fighting, they needed IBM machines to do calculations.

Anay Shah (00:08:34): This was the way to process and store information.

Ben Shwab Eidelson (00:08:38): But it was all still cards and mechanical switches, ultimately.

Anay Shah (00:08:42): And rooms full of paper.

Ben Shwab Eidelson (00:08:44): Rooms of paper. So everyone was running on punch cards. What was this thing? What was this room? What should we call it?

Anay Shah (00:08:50): This is where we're going to put our stake in the ground and say the earliest data centers came out of the IBM punch card data center. The easiest way to understand it is: it's a physical space or a collection of facilities designed to house and operate an organization's data and computing infrastructure. You can think of it as primarily storing information, computing information, and over time, connecting and allowing for the communication of information. At its basic core, a data center in the evolution we're going to talk about from the mid-1900s to the present day is the physical space around storage, computing, and connectivity.

Ben Shwab Eidelson (00:09:33): At this moment, IBM was already a growing company of import, right? Doing global international business. By 1945, they had around 25,000 employees and annual revenue of approximately $140 million. But something was about to change, and that was also coming out of the war. World War II was this big moment of government investment in R&D. One of the things they often found themselves doing was calculating artillery firing tables, which took into account the wind speed, weather, and all these different factors to figure out where they should shoot artillery. There were teams of human computers, clerks who were doing mechanical calculation to figure things out. But that was a bottleneck. So the army funded a team at the University of Pennsylvania to build the first real electronic computer, a machine that could crank through those calculations an order of magnitude faster. That became the Electronic Numerical Integrator and Computer, also known as ENIAC.

Anay Shah (00:10:33): This was all about math. It was focused on calculating numbers and producing mathematical results that would help them, in this case, be more efficient in war planning.

Ben Shwab Eidelson (00:10:44): Yeah, I mean, they didn't have the...

Anay Shah (00:10:45): TI-83 or the games that go on it.

Ben Shwab Eidelson (00:10:48): It, or the games that go on it. They didn't have Tetris. So they needed a calculator that could go faster than the people who were a bottleneck at this point. The ENIAC had no mechanical parts that slowed its operation. It took up nearly a 2,000-square-foot room, but it did operate over 1,000 times faster than any previous computational device. It could execute 5,000 additions per second. At this time, IBM, with its commercial product—the quickest punch card machine—could complete just four additions a second. So it wasn't an order of magnitude faster; it was three orders of magnitude faster.

Anay Shah (00:11:25): Four additions per second to 5,000 additions per second. This seems like something mathematicians and CEOs privy to this would think, "Oh, I can see the future." But no. A distinguished Harvard mathematician dismissed the idea as foolishness, saying there would be no big market for computers. He believed that the country would need maybe half a dozen, mainly for military and scientific research. Our friend Thomas J. Watson Sr. said general-purpose computers had nothing whatsoever to do with IBM or IBM's mainline of equipment and profitability.

Ben Shwab Eidelson (00:11:59): But Watson's stubbornness to stay wedded to the past was only matched and maybe outdone by his son's stubbornness to push the company forward.

Anay Shah (00:12:09): Runs in the family, but takes a different shape.

Ben Shwab Eidelson (00:12:12): This is a father-and-son story for the ages. Thomas Watson Jr. eventually fought in the war, came back, and was ready to take his seat as a leader inside IBM. He viewed electronics as the future of the company, and this became the intergenerational battle for the control of IBM. Thomas Watson Jr. saw that there was a future for the company in electronics and wanted to push it that way.

Anay Shah (00:12:38): There's some interesting parent-child psychology where you can see him completely frustrated and angry that his father's not going to jump on what he thinks is very clearly the future.

Ben Shwab Eidelson (00:12:50): IBM did do a wartime project with Harvard mathematician Howard Aiken that was a kind of hybrid electromechanical vacuum-tube machine. They followed that with their first machine that they really wanted to demonstrate to the public after the war. This was called the Selective Sequence Electronic Calculator (SSEC). This was in 1948. They showed that in a Madison Avenue showroom, right in the middle of Manhattan, so that people could walk by and see this thing computing.

Anay Shah (00:13:20): And to see this thing, these machines were still the size of rooms.

---

Ben Shwab Eidelson (00:13:25): And it was fast, not by today's standards, but by those days, it was very fast. It didn't have any memory in the sense that we were used to computers today having memory, but it had this punched paper tape as a form of storage. Despite Thomas Watson Sr. not liking this as the new business, he didn't mind the company getting some PR points for it. They'd send reporters down to watch the machine do computation. This is the moment when the press said, "Pretty soon no one's going to have a job to do as a result of this electronic brain."

Anay Shah (00:13:54): The electronic brain that would displace workers. And so, in 1951, IBM's longtime customer, the U.S. Census Bureau, went with Univac instead of IBM tabulators for its next census. Thomas Watson Jr. recalls this moment, saying, "My God, Univac is smart enough to start taking all the civilian business away!" This is really what shakes IBM to once again reinvent itself.

Ben Shwab Eidelson (00:14:22): You go back to 1880, 1890. This whole invention was for the census problem. And that problem gets harder: more people, more things you want to know about people, and more factors you want to track. And so, that is actually a perfect test bed for computation at this time. Here comes the ENIAC team, now commercialized with Univac, and that wakes IBM right up.

Anay Shah (00:14:41): And this company's been growing, right? IBM, in 1940, was doing about $45 million in revenue with 12,000 employees. And a decade later, they're doing $250 million in revenue with 30,000 employees. And if you're betting the company on a new direction, things could go south for a lot of people. It's a big responsibility for Watson Jr.

Ben Shwab Eidelson (00:15:02): And they pushed forward. And so, out of these early computer experiments, they finally built their first commercial product, which was the IBM 701 Electronic Data Processing Machine. This is the first real machine where they thought, "Hey, we're going to build more than one of these, and we're going to sell some of them. We're actually going to try and make this into a business, not just a research project."

Anay Shah (00:15:20): And as we'll see with some of the companies closer to the present day, they had an installed base of customers; they had a sales machine. And so, they started this business line, and within five years, they had 85% of the computer market.

Ben Shwab Eidelson (00:15:34): That's right. So, that team that invented the first vacuum tube computer in the ENIAC and then the Univac, they got outrun by the better commercial go-to-market sales machine that, if you remember, IBM was founded with. So, who was buying these things, and how many did they sell?

Well, the 701 was still a pretty bespoke product. They sold 19. These were going to National Labs, the Weather Bureau, and a lot of aerospace firms that were doing a lot of calculations. And the whole business model was actually not around buying these machines; it was an extension of the tabulating business model that IBM had always had, where they wanted you to lease the machine, rent it, and buy punch cards.

Anay Shah (00:16:08): We got hardware as a service.

Ben Shwab Eidelson (00:16:10): Exactly. It was a beautiful business model. The era of the '50s for IBM was going from this research-centered product to what I'd consider their Model T. So, in this era, they built the first disk drive. They started using tape in addition to punch cards. They wrote Fortran, which is the first real kind of modern programming language where you could write words, and it would get translated into computer instructions by the end of the decade.

In 1959, they launched the IBM 1401, which was available to thousands of companies. And they ended up selling around 12,000 of those machines. They exited the decade with a real...

Anay Shah (00:16:45): computing business, and they're dominating the market.

Ben Shwab Eidelson (00:16:48): So, that first machine shipped 19 systems. They had another machine that shipped 123. After that, they had the first transistorized Model T. The 1401 crossed over 10,000 units. From 1950 to 1962, IBM's revenue rose tenfold, from $260 million to $2.6 billion. And their headcount went from 30,000 employees to almost 130,000 employees. Woo!

Anay Shah (00:17:12): And so, what else is happening right now? We're in the 1950s; World War II has ended. The Cold War is getting colder. And we find that the Soviet Union's long-range nuclear-armed bombers are able to cross the Arctic and reach American cities in a matter of hours. So, this makes the decision window to detect and intercept down to two minutes.

Ben Shwab Eidelson (00:17:36): It's easy to forget, but the Cold War was primarily a technological arms race. Who's going to get there faster if something's going down? If the Soviet Union launches these bombers, how quickly can we respond, know about it, and then respond? And our Air Force and our defense systems were not designed for that speed.

Anay Shah (00:17:53): Yeah, every threat forced a technology upgrade, forced our government to respond, to invest. We had a laboratory project at MIT that, in 1951, could process live radar data in real time, proving that automation could close this gap that we were seeing in national security.

The challenge was: how do you take this radar research prototype and turn it into a 24/7 machine that can operate at government scale? And this is a moment that became the largest computing project to date.

Ben Shwab Eidelson (00:18:23): Thomas Watson Jr. saw this, and he knew that they needed to win this contract. IBM actually had a policy of essentially making only 1% profit on any defense work, which they kept throughout this. But they said this would push them to the future.

And so, the contract awarded in 1954 became one of the largest contracts ever, worth more than $500 million in 1950s dollars. Around $5.5 billion in today's dollars. And so, how did it work? What did it do at full deployment when they got there in the 1960s?

It was a network that spanned 27 different centers, where each center had a pair of special IBM computers designed for this. In case one of them was being serviced or down, the other one would become primary. So they built redundancy into the network. And the scale was unprecedented.

In total, it was 56 computers. These were acre-sized floors, with multi-megawatt power draw to these systems. And they were connected—connected over early modems. This was the moment that really drove the production of the modem, where you could actually have data sent over telephone lines. And so, they would lease special lines between these centers.

Anay Shah (00:19:32): And these centers have characteristics that we're going to talk about more. You have redundancy built into this; you have building-level scale; you've got multiple facilities networked together. These end up being a lot of the same characteristics that drive data center growth and evolution decades later.

Ben Shwab Eidelson (00:19:52): That's right. And I feel like there's the scale of it, but I think the connectivity of this system is the difference. You have storage; you have compute, which was happening; but now you had connection and communication, because you want this center over here to respond to information that was computed over there. And so, this moment in history—the SAGE system, I think—is the first real time that machines were communicating with each other. Pretty big moment.

Anay Shah (00:20:17): So, once we're able to do this in government, it's going to catch the eyes of other industries.

Ben Shwab Eidelson (00:20:23): The airlines had seen the SAGE project take off, and they were sitting there with a new problem on their hands. This was the '60s. Air flight was booming, and the way that reservations got processed was absolutely insane. You would call your travel agent; your travel agent would call the airline; and the airline would have to run clerks around, pulling cards out to book a seat. Supposedly it took up to 90 minutes.

Anay Shah (00:20:49): Well, you had to figure out who had the middle seat in Row 17.

Ben Shwab Eidelson (00:20:52): Who had the middle seat, exactly.

Anay Shah (00:20:54): How were you going to figure that out without looking up the card?

Ben Shwab Eidelson (00:20:56): As American Airlines scaled to a real operational scale, it started to break down. So, they reached out to IBM, and they kicked off this project that would be known as Sabre. It was essentially a commercial version of the SAGE system. Two IBM mainframes were purpose-built, and would be connected over phone lines. Those systems would house the source of truth around the reservations.

And there would be terminals. These weren't terminals with screens; these were terminals with paper where you'd still have a travel agent, but they would be querying over the terminal what seats were available. And things would be booked automatically. So, it would go from 90 minutes to seconds at a terminal. And it removed the clerk in the middle. This set the stage for e-commerce. This was the first time, I think, you were buying something over a computer.

Anay Shah (00:21:44): You had 90 minutes to do a reservation, now down to seconds. And this scaled American Airlines operations by the mid-'60s to be able to do a full 40,000 reservations per day.

Ben Shwab Eidelson (00:21:55): Insane. This system continues to this day to be part of the backbone of airline booking. It's quite an amazing foundational moment where commerce is happening between data centers.

And so, they were running airlines; they were doing these major government projects. Businesses were now buying the 1401 machine off the shelves. But there was a different problem. Entering the mid-'60s, all of these mainframes had their own accessories. There was no compatibility. So, in 1964, they launched the System/360. And that turned this chaotic, messy, ad hoc world of different mainframe models into a platform. It was essentially one architecture; you could choose how powerful you wanted...

Anay Shah (00:22:38): it to be, buy your base package, and then feature it up based on what you need.

Ben Shwab Eidelson (00:22:42): That's right. And so, for facility planners, they could now plan a room and a facility, and then be able to scale up the machine as needed. I believe roughly $5 billion of investment in R&D was spent in this era.

Anay Shah (00:22:55): Another "bet the company" moment.

Ben Shwab Eidelson (00:22:57): And it worked. They were shipping thousands per month of these devices in the '60s. And so, if you zoom out and look across the '50s and '60s, as we talked about earlier. From the '50s to '62, they scaled to $2.6 billion. By 1970, they were doing $7.5 billion in annual revenue and had a team of 270,000 employees.

Anay Shah (00:23:19): In today's dollars, that's $62 billion in revenue.

Ben Shwab Eidelson (00:23:23): And the market noticed. IBM was king at that moment. In 1970, IBM accounted for 6.8% of the total U.S. stock market. It almost feels like an unprecedented thing to say that today Nvidia is currently 7% of the U.S. stock market.

Anay Shah (00:23:44): These mainframes became part of the zeitgeist. They became part of a cultural milieu because they were often nicknamed "the glass houses." You'd have the mainframes and their operators in an enclosed room. And as we mentioned before, you'd have windows and glass walls around it because you wanted to show off how automated your systems were, how advanced your company was.

There was a recognition that these "glass houses"—these mainframes—were powering the billions of dollars of revenue from their enterprise customers. And so, the security, the operational control, the climate control, and cleanliness... It was all part of this cultural moment where mainframes and these early data centers became a meaningful part of how our society and economy ran.

Ben Shwab Eidelson (00:24:34): If any company was using it effectively, they had more demand for use than they had supply for the computer. And so, oftentimes, people would be sitting there waiting for their information to come back, for their computation to run. Sometimes it would be a day or longer, so the utilization was pretty high. But there was this long interactive latency problem.

And an invention that echoes through in multiple ways to this day changed the fundamental way that computing was thought of: from this single-threaded "I'm only working on one problem at once" to "No." The job is to make sure my hardware is as utilized as possible. As a machine, I don't care whether or not it's the same problem from the same person. I just need to be calculating.

Anay Shah (00:25:20): I need to be operating all the time to utilize my capacity. It can be for this problem; it can be for that problem. You can slot them in and out; it doesn't matter.

Ben Shwab Eidelson (00:25:29): That's right. And so, a team at MIT in the early '60s developed what was called CTSS, the Compatible Time-Sharing System, and turned it onto the campus in 1963. And so, students could sit there with electric typewriters and interact with this machine, multiple users at the same time, and feel like they had control over the computer.

Anay Shah (00:25:52): It felt like it was your own.

Ben Shwab Eidelson (00:25:53): And this was a huge moment. This was the first time there were logins, users, files, and instant feedback. And so, it was revelatory to be there in the mid-'60s, experiencing that after the idea of a computer was just this operated thing by someone else.

Anay Shah (00:26:09): That's right. You had to queue up, get in line, hand over your data to the operators—the specialists—who would then go and do their thing, and you would sit and wait. Now you're interacting. It's you and the computer.

Ben Shwab Eidelson (00:26:22): And the way this worked was that you didn't obviously have monopoly control over the computer. The computer was switching what problem it was working on, depending on what free cycles it had. The human perception is, "Oh, how can a computer do that?" Well, the computer is operating at a much faster frequency than we're able to realize. Even if it's something as simple as responding to a keystroke, there are plenty of milliseconds in between my keystroke and your keystroke for the computer to respond and then switch back to the other problem.

And as we'll see later in this story, this notion of intelligently slicing up the hardware and utilizing it becomes the backbone of everything in how the cloud and data centers are architected today. And it started with this timesharing innovation.

Well, we had these mainframes that had taken over the business world, and timesharing. So, multiple people could be on a campus connected to that mainframe, feeling like they had their own computer. They were still fully disconnected from anyone else in the world. They were still islands onto themselves. So yes, now on this island, multiple people could be there, but it's not like you could go visit the next-door island. What are we missing?

Anay Shah (00:27:27): It's something we take quite for granted. Many people in different places, but working on the same system at the same time. Now remember, we are in the late 1950s, in the Cold War, and Eisenhower wanted to ensure that the U.S. would not be blindsided by a technological surprise.

Ben Shwab Eidelson (00:27:47): There's this particular moment right when everyone looked up in the sky and for the first time, a man-made thing was floating in space, and that's Sputnik. The fact that the Russians beat us to the skies with Sputnik kicked off, I think, a level of panic from a geopolitical standpoint that's hard to connect to today.

Anay Shah (00:28:07): And so, after the panic of Sputnik, Eisenhower created the Advanced Research Projects Agency, or ARPA. And in those years, ARPA was pouring money into space, into missiles, into computing. And we wanted to ensure, in this nuclear-armed world, that weapons could not destroy a centralized command system. And so, the network itself needed to be decentralized.

This need to ensure reliability combined with a slightly more mundane problem that Bob Taylor faced when he was at his office in the Pentagon: he was working at three terminals. He had one machine connected to MIT, another connected to UC Berkeley, and a third for a different research system altogether. And he could talk to any of them, but never at the same time. So he was rolling his chair back and forth, and he's quoted saying, "We ought to find a way to connect all of these different machines." He told his boss. After a 20-minute meeting, Taylor walked out with a million-dollar budget and a simple mandate: to make it happen.

Ben Shwab Eidelson (00:29:10): And we won't go into every moment and step because the ARPANET itself is quite a story. But I think a couple of innovations set the stage for the Internet in a really important way. One is the concept of packet switching.

If you think about a phone line, AT&T built its whole business on this idea: you're going to connect a phone call between two people, and there's going to be a circuit that connects those two phones together. This is called circuit switching. But there's this crazy idea: if you want that resilient system so that if one node goes out, the next thing doesn't go out, you need to route things around in different ways and not be dependent on the one route you have.

So, you need to have more of a spiderweb-like network to say, "Well, from here to here, there are actually five, or ideally 50 or 5,000, ways to get between those two points." And to do that, you need a flexible communication system. And so, the idea is to break up information into packets—little pieces of mail that would get sent from one node to another. Different packets could even take different routes, but on the other side, someone would reassemble them into the message.

Anay Shah (00:30:15): It's the same singular message, broken up into many, many different pieces and routed through many, many different pathways.

Ben Shwab Eidelson (00:30:24): It's funny, I hadn't thought about this until we connected to the timesharing story, but it's actually about better utilization of the network. In a circuit-switched mode, you have this direct line; you and I have a direct line together, and you have a direct line to someone else. That line is usually empty. It's pretty hard to fully utilize and build out the circuit-switched thing because the phone call ends, and you think, "Okay, now it's just sitting there unused."

In packet switching, packets are finding their way through this wild world. So, a lot of skepticism obviously came from AT&T, which said, "If you want to have two computers talk to each other, we'll build the phone lines, and you can run them." But a crack team that had kind of spun out of MIT—this company, Bolt, Baranek and Newman—latched onto this packet switching model and ran forward.

And the core thing that they needed to build was what was called the Interface Message Processor, or IMP. This was ultimately the router that would sit in front of the host machine. Universities like MIT and Berkeley would have these mainframes. But to connect those machines together, there would need to be these nodes that would sit in front of them and be able to build this network. And so, BBN used a Honeywell minicomputer that was fridge-sized, cost about $80,000, and built the logic around packet switching and rolled this out. There were a lot of engineering heroics that went into getting the first machine ready. But then it was time.

Anay Shah (00:31:47): Almost 55 years ago, a small group of grad students gathered at UCLA to wait for the machine to be rolled off the truck, champagne in hand, and were able to celebrate the arrival of the first IMP. The second one was delivered to Stanford weeks later. And the prophetic first message, as the story goes, was meant to be "login," right? You now have users that can log in, but after inputting the first two letters, it crashed. And so, the first message was simply "lo," "lo."

Ben Shwab Eidelson (00:32:19): So close to "lol." And, of course, what is a network with two connections? Pretty limited. But then they rolled out UC Santa Barbara and the University of Utah, and then they were just rolling out new IMPs to the large universities, month over month.

Anay Shah (00:32:34): And these became nodes—almost a new node every month. And then every new node that came on the network amplified the value. Because now it's not just bidirectional communication; it's multilateral communication.

Ben Shwab Eidelson (00:32:47): So, they were building all this logic to do the resilient routing, to do the discovery of devices, and everything that you needed to do that. And of course, the original pitch was, "Hey, we've funded as a government all these expensive computers at all these research universities. Let's drive utilization." Maybe one team has a special program for doing something; another team has a special program for doing something. Let's let the departments connect.

Anay Shah (00:33:07): One unexpected application really bubbled to the top that the researchers discovered. Quick, asynchronous messages were often more valuable than logging into someone else's system to run the code. And in 1972, ARPA's Bob Kahn said, "Everyone really uses this thing for electronic mail." And the network's purpose had quietly shifted from sharing machines to connecting people in the form of email.

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Ben Shwab Eidelson (00:33:36): It's wild how as soon as you have enough connectivity, it's always the killer app. The killer app is always people communicating at a distance.

Anay Shah (00:33:45): That's right. People wanting to do what we are biologically programmed to do, which is connect with other humans. And as sophisticated as these machines were, it was the simple act of asynchronous communication that became the killer app.

Ben Shwab Eidelson (00:34:02): And more people wanted it. There were new ways to connect within your local network over these terminals, so then you could connect into the broader network. It was no longer just about wanting access to a terminal to access the machine on your campus; it was about wanting a terminal so you could email your friends at the other campus.

Sounds like an early social network that we'll get to later. And so the expansion continued. By 1972, there were 29 nodes. By 1975, over 50.

Anay Shah (00:34:27): And some of these connections weren't just from university to university. We were now leaping oceans. It was clumsy, but we were able to go over the Atlantic Ocean from a node in Virginia to the one in Cornwall, England.

Ben Shwab Eidelson (00:34:41): There was some story where they came back from some conference in England and someone had left their electric shaver behind.

Anay Shah (00:34:47): It was the middle of the night, so in England it was 3 o'clock in the morning. But he knew that his colleague was a workaholic, so he sent off a message at 3 o'clock in the morning, England time, to see if this person was awake. And he was. He saw that he was logged on and he's like, "Hey, did I leave my electric razor there?"

Ben Shwab Eidelson (00:35:01): "Can you get my razor, please?" And it all worked. It was phenomenal.

So, by the early 1980s, other research networks started to pop up in the US and elsewhere. People were like, "Oh, this ARPANET thing is pretty cool. We're going to build our own." There was DECnet, there was an IBM Net, there were various nets that companies and other research groups started to stand up.

They had a new challenge: "We want to talk to everyone on any of these networks, and how are we going to do that?" And these IMPs were not designed for that. They had presumed there was only one network they were trying to build out.

And so Vint Cerf and Bob Kahn, who were involved in ARPANET, figured out what they needed to build was a common language to figure out addressing: where to send a packet of mail. And then also, the control protocol for sending information, to make sure duplicate packets weren't sent.

And so this became TCP/IP: TCP for the Transmission Control Protocol, and IP for the Internet Protocol. You can think of IP as solving the addressing problem. You might be familiar with your IP address, which then communicates through routers what you're looking for, and who you're trying to get the packet to. And then TCP is the reliable way that a packet gets acknowledged. "Hey, this little chunk of information has arrived." It's like certified mail.

Anay Shah (00:36:16): Like signing for my package. I have an address, so the package knows where to go. And then I signed for it.

Ben Shwab Eidelson (00:36:21): "And I don't need you to send me the package again, because I got it." And so this combination became the backbone for connecting all of these networks together, and ultimately the backbone for the next stage of not the ARPANET, but the Internet – a network of networks.

In 1983, they took every ARPANET host and said they needed to move to TCP/IP. That switch, on January 1, 1983, became the framework for the modern-day internet: many networks, all speaking the same language, able to connect.

Anay Shah (00:36:54): And that's where we have the advent of the .com, .edu, and .gov, because we now had standard protocols for multiple nets to communicate together.

Ben Shwab Eidelson (00:37:06): 20.3.1.72 doesn't have the same ring as pets.com.

Anay Shah (00:37:11): Pets.com, an important one, but we're not quite there yet. No, but by the mid-1980s, as Ben mentioned, there were multiple nets now connected. And ARPANET itself was showing its age. By 1990, it became apparent that the ARPANET needed to be decommissioned. But the work it had done, the ideas of decentralized networking, packet switching, and open protocols had firmly taken root. Research institutions and large organizations had firmly established how to exchange messages.

Ben Shwab Eidelson (00:37:41): So they were able to send files back and forth, maybe send each other's research papers and data sets. But this was not a thing with a web browser yet. We needed a structure around documents. And so Tim Berners-Lee, a researcher at CERN in Switzerland, proposed the document structure that would become the application-layer infrastructure of the World Wide Web.

Anay Shah (00:38:01): And so the network that started off as a Cold War research project in response to looking up at the sky and seeing the Russians launch Sputnik, had now become the public and commercial Internet – an open highway for data, and the foundation upon which we would build the modern data center economy.

Ben Shwab Eidelson (00:38:18): So we now have this expanding network, but the computing on this network was still this terminal-based interaction between a terminal and a mainframe that then connected to the network, or a terminal and a minicomputer which connected to the network.

And I think it's worth saying a bit more about minicomputers, which were both what became that IMP device and also a primary source of connection. These were not something that you'd buy for your house. They still were the cost of maybe a car when they first came out, but they were much more accessible than a big IBM mainframe, a room-sized computer.

And so the company, Digital Equipment Corporation, or DEC, launched the first minicomputers in the mid-60s. A lot of what innovated on the minicomputer was software like Unix, C programming, and sockets, and all these foundational innovations that would later echo through to today. But there was room for a computer that a normal person could buy.

Anay Shah (00:39:11): On one fateful day, January 1975, the cover of Popular Electronics magazine showcased the Altair 8800, a machine you could buy at home for $439, or $1,500 souped up, to run your own code. And there were a few hobbyists that went to the newsstand and picked up this magazine. Two in particular saw the cover and decided to do something about it.

Ben Shwab Eidelson (00:39:42): And so Bill Gates and Paul Allen, famously, when they were at Lakeside High School in Seattle, they had access to a computer and a terminal, and they would spend hours and hours programming. But that's different than having one in your own house that you can play with.

And so when they saw this come out, it was immediately clear that this was a moment when computing had gotten cheap enough that a normal person could afford their own personal computer, or PC.

Anay Shah (00:40:06): And you could see that if the first one was released at $450, it was only a matter of time before that would become accessible to more and more people.

Ben Shwab Eidelson (00:40:16): Microsoft formed immediately to sell a BASIC compiler for this device. The Apple II launched in 1977, which kicked off the PC wave for many folks, and it paired with VisiCalc in 1979.

So, all of a sudden, you had a killer app – a spreadsheet – that wasn't just for home use, but now had a corporate function, driving the purchase of these PCs. And so someone could model a budget without needing to connect to the mainframe down the hall.

Anay Shah (00:40:43): I can stay at my desk and run my finance operations.

Ben Shwab Eidelson (00:40:47): That's right. And IBM, while not the first here, was actually pretty quick to realize there was a problem for them. Right. If everyone is doing all the computation on their desk, they're not going to need the mainframe down the hall anymore. The glass house had been shattered.

So they kicked off a skunkworks project. It was actually pretty amazing. They isolated it outside of the New York region, down in Boca Raton. They said this team would use off-the-shelf parts to design an IBM PC.

In 1981, they built and launched the IBM PC, and they licensed MS-DOS from Microsoft, which had been founded six years earlier, as the core operating system. They thought hardware was the business, but time would show them to be incorrect.

A bunch of IBM-compatible devices, including Compaq and others, flooded the market through the 80s. So prices fell. Hardware became a commodity, and Microsoft, with DOS and then Windows, became the Wintel duopoly that ultimately took the mindshare and market from IBM.

Anay Shah (00:42:00): That's amazing. You got Lotus 1-2-3 dominating spreadsheets. You've got WordPerfect. I remember using that for word processing. And then Microsoft comes along and says, "I'm going to bundle all this into Office" and really took the cake.

So productivity was through the roof, and we were able to do more personally than we could ever do before. And the way we collaborated? It was that magic floppy disk. We were able to hand that back and forth and keep on rolling.

Ben Shwab Eidelson (00:42:21): And that's great, right? Until it's not.

Anay Shah (00:42:24): Until it's not.

Ben Shwab Eidelson (00:42:25): You want to work with someone across a big building? You're going to run them a floppy disk? And what if they have a different version? It's a mess. I think the "personal" in personal computing started to become a hindrance here. So we needed to connect these devices as well.

Enter the invention of Ethernet and IBM's Token Ring, which wired the floors and connected these PCs into a corporate network. And a new set of companies emerged. Novell, building NetWare, actually turned a server into a hub for shared disks and printers.

You had a PC on your desk, and if there was a printer room and you wanted to print, you'd have a different computer. That was a specialized PC that we'd call a server, connected to that printer or to shared storage. Now we were able to access files and print over a network. A whole company, Novell – which at some point was actually the second-largest software manufacturer after Microsoft –

Anay Shah (00:43:23): Wow.

Ben Shwab Eidelson (00:43:23): was booming in this era. Microsoft, doing what they do very well, responded by building a network-connected operating system – eventually Windows NT and other services – so that you could do it all within Microsoft's ecosystem.

Anay Shah (00:43:37): So throughout our conversations, a lot of the OGs in this industry pointed to this moment as the introduction of the client-server era. What does that mean?

Ben Shwab Eidelson (00:43:46): It means an application was really split in two. You had your computer sitting there on your desk running as the client and accessing a central database or a server in the back room. A bunch of technologies came up to support this, from Unix servers to ERP systems to Windows NT.

But now, all of a sudden, you would think about an application as networked from design, where you'd have local client software that could use the best capabilities of the local PC, connected to the server. Not across the world, but the server in the server room, on site.

Anay Shah (00:44:20): What was that server down the hall or in the other room or across the world?

Ben Shwab Eidelson (00:44:25): Most notably, this was the era when the architecture of the personal computer was adopted. This included the x86 (Intel-based) architecture or the Sun workstation architecture. Increasingly, those would become the servers that could run these applications. This was a notable shift, again, from the IBM mainframe era.

It got to the point where someone selling your company an application would sell you an appliance, which was really a package of the software and the hardware together. So you ended up with a sprawl of different appliances that were being managed, all serving different functions, all written with their own bespoke software and operating systems. So, while the functionality was amazing, people became very inefficient.

Anay Shah (00:45:10): Up until this point, there was a culture and an ethos among data processing professionals that put conservation as the highest ethical principle. To waste a CPU cycle or a byte of memory was embarrassing.

Ben Shwab Eidelson (00:45:23): I think part of it was that they had gotten cheap enough; these servers, which would have been $10,000 a month to rent just 10 or 15 years prior, had now gotten cheap enough. And it wasn't unreasonable to have them sitting there idle at the same time.

In a macro sense, this inefficiency later created the space and value for the evolution of time-sharing into virtualization, where we asked, "Why can't we run these applications on one box? Why do they all need their own box sitting there waiting for a command?"

Anay Shah (00:45:49): That's right. If a box was not being maximally utilized by a single client, share the box.

Ben Shwab Eidelson (00:45:56): We will do a whole episode on how that came to be. But this was still an era of deep innovation, particularly concerning redundancy. You had RAID arrays, which provided redundant storage, and backup tape libraries that were off-site, because you still had these massive points of failure.

Your company server, which might be your system of record for your customers, was sitting there in the closet. I heard from someone who ran some of it at REI at one point that they had a flood near their headquarters, and they were like, "Well, the website's going to go down, we're going to lose all this business." So this model was not designed for scale and redundancy in a major way.

So, to make this moment concrete – of just how computing power and connectivity was starting to shift – let's talk about a deeply innovative retail company that, no, is not Amazon. We're talking about the OGs of major retail and scale. It's Walmart.

Anay Shah (00:46:50): That's right. So, you're at the register at your neighborhood Walmart location: you scan the toothpaste, the barcode beeps. Within seconds, a satellite dish behind the store sends that transaction to the sky and over to Bentonville, Arkansas, where they're hosting their mainframe computer to record the sale.

A few minutes later, a massive data warehouse would update how many tubes of toothpaste you had just bought. Then, perhaps before the end of the day, Procter & Gamble's factory would receive an update that they needed to make more toothpaste.

This was the cutting edge of retail in the late 80s, and Walmart made a massive decision to take this a step further, truly driving innovation across the retail industry. They invested $24 million to build their own private satellite network linking all Walmart stores to headquarters. This was fairly unprecedented at the time, right?

Ben Shwab Eidelson (00:47:43): It was the largest private satellite network.

Anay Shah (00:47:46): That had been built, and it created a unified, real-time machine. So any single event that happened within the Walmart ecosystem rode on this private network, enabling them to mine their data in a way that was unheard of before.

By mining their sales data – which could now be collected in real time across all Walmart stores over their private satellite network – they discovered that when hurricanes approached, the sale of Pop-Tarts increased 7x over their normal rate.

Having spent a summer working in Bentonville, Arkansas, I can tell you this is deep in their DNA. They are constantly looking at signals like this. Specifically, they discovered that it was the Strawberry Pop-Tart that was most in demand before a storm. This led to the legendary insight of meteorologists predicting a severe weather event, and Walmart stocking their affected stores with pallets of Strawberry Pop-Tarts.

Ben Shwab Eidelson (00:48:43): It makes me wonder if the reverse is possible. It's like, instead of checking the weather, you go to Walmart to see if the Strawberry Pop-Tarts are there, because it's such a reliable system. Like, I know that they're watching the weather, but I mean, there's some crazy innovation here.

Both the satellite link, and then Walmart, supposedly, was the owner of the first commercial 1-terabyte enterprise data warehouse they built with a company called Teradata. They were just maniacal about making sure all the sales and customer data flowed into one place. By 2001, just nine years later, that one-terabyte warehouse had grown to 70 terabytes.

Anay Shah (00:49:14): Wow.

Ben Shwab Eidelson (00:49:15): Right. So this was just an explosion of connectivity inside the enterprise, even while there was the personal computer. Some people had fun with their computers at home. I remember playing on an IBM XT as a kid, and some early programming and early games. It was not like most people had a real personal use case. We're still talking about a corporate-centered world.

So we talked about the rise of PCs and the growing client-server LAN inside a company. We talked about these data centers; we talked about Walmart's satellite network. But what was happening now, going into the early 90s, with this whole ARPANET/NSFNET Internet thing? What was happening outside the office?

Anay Shah (00:49:55): Yeah, and perhaps what was happening under the ground.

Ben Shwab Eidelson (00:49:58): So the first network that was available to all these researchers was the evolution of this into the NSFNET. It became the de facto US internet backbone.

Anay Shah (00:50:07): This network was connecting 2,000 computers in 1986 and expanded to over 2 million by 1993.

Ben Shwab Eidelson (00:50:15): It was no longer just researchers who wanted to do stuff with it. So, the design and topology was a high-speed national backbone that had, at this point, gone to a T3 line (at 45 Mbps) that connected a small number of regional networks. So, kind of like a central hub-and-spoke model. These regional networks would then connect to universities, labs, and nonprofits. But this was not designed for commercial scale.

Anay Shah (00:50:39): In fact, it was prohibited, according to their terms of use, to have commercial traffic running on that backbone. It was specifically designed for research, education, and government data.

Ben Shwab Eidelson (00:50:50): So, I think some private commercial network could happen inside just a regional hub, but not across that whole big backbone. So you did not have the beginnings of what could be a commercial internet. If two regional networks – say, New York and Philadelphia – wanted to connect, they had to flow back up to that NSFNET backbone. There was no neutral point where they could connect and exchange.

So this was the moment when commercial ISPs and telcos started to see, "Okay, this internet thing is interesting, this packet-switched model." People wanted to do new things with this. Maybe it was trying to get out of the lab into commercial use. How were we going to connect? What were we going to do?

Anay Shah (00:51:29): In 1992, a group of network providers were sitting in Virginia, drinking a beer, and decided to connect their networks outside of Tysons Corner. This specific group of engineers was from Metropolitan Fiber Systems, the local telco. They chose Tysons Corner outside of Washington D.C. because there was a dense network of defense contractors and early providers, which were heavy users of the current internet.

They famously set up in a repurposed parking garage to become the de facto on-ramp for new ISPs. When you think about an important hub, you wouldn't typically think of a parking garage, but it was the right place at the right time. It turned into what was called Metropolitan Area Exchange East – East Coast. So MAE-East is what formed. And if you connected into MAE-East, that meant you had the internet at your doorstep.

Ben Shwab Eidelson (00:52:27): This became the hub for the internet. If someone sent an email from London to Paris, it most likely went through MAE-East.

Anay Shah (00:52:35): Within a couple of years, roughly half the world's internet packets were flowing across the MAE-East parking garage.

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Ben Shwab Eidelson (00:52:43): And I think this is something we'll see again and again, which is that the Internet forms around hubs. It's not always obvious why that became the hub specifically, other than it did first. And there's just this gravitational pull of connectivity. This wasn't new to the Internet; this was something that we saw with telcos. There's this concept called carrier hotels. You're in a city like New York, and you had two different carriers that were trying to connect with each other, right? Think Sprint and AT&T. Instead of having to connect all throughout the city in multiple spots, they would all show up in a neutral zone called a carrier hotel and build their connectivity infrastructure there.

Anay Shah (00:53:21): You'd be able to tap into each other's long-haul routes, their local fiber routes, without having to build their own intercity footprints individually.

Ben Shwab Eidelson (00:53:31): And so May east was the first sort of flavor of this, where they would all come in and connect. Ultimately, a device — think a switch — that is connecting. Okay, you're coming in, plugging in your ISP traffic; here I'm plugging in mine. Now users across our ISPs can connect, and it's just one big switch room. The problem is, the Internet is scaling, and you don't necessarily want to all be bottlenecked on one switch. It's not the most secure thing. And if you're, I don't know, eventually building a video streaming service or you make a deal between two ISPs, you don't necessarily want everyone else to be in on that deal. And so you saw the evolution of this model to a different model that became known as MeetMe rooms. These are neutral physical rooms where an ISP or someone trying to hook into an ISP can provide their boxes and their connectivity, and then those two can connect directly.

Anay Shah (00:54:20): So, a bring-your-own-box method. Instead of everyone connecting through the existing box, you BYO your box for the deal you want to do in the private MeetMe room.

Ben Shwab Eidelson (00:54:30): That's right. Something sounds funny about BYO to the private MeetMe room, but we're talking about ISPs connecting for data.

Anay Shah (00:54:38): The farthest thing from a non-platonic conversation as you could be.

Ben Shwab Eidelson (00:54:44): And so, sure enough, this all worked. The NSF kind of officially sanctioned this method and designated these NAP points — Network Access Points. The first one, May east. They designated Sprint to run a NAP in New Jersey near the transatlantic cable landing points, one in Chicago, and one in San Francisco. Then they eventually added Mae west in San Jose.

Anay Shah (00:55:06): And these MeetMe room models started to take off. The carrier hotels, you had One Wilshire, a large building on the west side of Los Angeles, which were law offices, and gave way to a single floor that could host hundreds of carrier routers and thousands of cross-connects, eventually making it one of the most valuable space per square foot on the entire West Coast.

Ben Shwab Eidelson (00:55:29): It's so funny. It's like this ugly building or just relatively nondescript architecture, and you're like, "What's going on in there?" Law offices make sense. And now this is where the West Coast Internet is coming through.

Anay Shah (00:55:40): That's right. And we'll talk a little bit later about undersea cables, but they come in and want to find their shortest path to One Wilshire.

Ben Shwab Eidelson (00:55:48): And the business model was pretty genius for this. These telco hotels, these MeetMe rooms, ultimately provided power, cooling, and cross-connect, and they would charge rent. The dot-com boom to come would boost this model to new heights.

Anay Shah (00:56:03): And it provided an elastic infrastructure that Internet companies in the dot-com boom and after could leverage, including, as we'll see soon, hyperscalers, where you could flexibly increase and decrease your capacity because they were specialized in providing all the necessary infrastructure to host the connectivity.

Ben Shwab Eidelson (00:56:25): So all of this infrastructure being set up to commercialize the Internet, to provide a scalable backbone, to enable the private market of ISPs and telcos and others to invest in making the Internet faster. And we now have the World Wide Web. The NSF has actually funded a little project called Mosaic, which is the first user-friendly web browser. We have personal computing. Enter the mid-90s and the dot-com boom.

Anay Shah (00:56:53): Let's boom!

Ben Shwab Eidelson (00:56:54): The ISPs are ready to build the network. All we need are the users.

Anay Shah (00:57:00): And boy, are they coming! In May of 1995, Bill Gates writes the famous Internet tidal wave memo: "The Internet is the single most important development to come along since the IBM PC." And it was that same year that Netscape went public. Why was Netscape so significant, Ben?

Ben Shwab Eidelson (00:57:21): I think it's significant for two reasons. One is it kicked off the accessibility of the Internet. It turned the Internet from this network for researchers to share files to this browser that you could download, install, and access the web, opening all of that up. And then it was that from a product perspective. But that also captured the economic perspective and interest: "Is there a thing here? Is there a new industry, a boom that you can make your millions or billions off of?" Its journey from founding to IPO in such a short cycle kicked off a mania.

Anay Shah (00:57:56): It kicked off another mania in the business world, which was: having barely any revenue or profits, you could hit a multi-billion dollar valuation, which is what they did. And the web exploded. You had 23,000 websites in 1995 to over 10 million by the year 2000. Global users climbed to over 350 million. Nasdaq tripled in two years. If you put a dot-com at the end of your name, just kind of like you put 'AI' at the end of your name today, you could raise millions on an idea and a slide deck. And in 1999 alone, you had more than 400 Internet companies going public, pulling in $40 billion. What a liquid IPO market that we could only dream of!

Ben Shwab Eidelson (00:58:40): Today Microsoft hits all-time highs in the stock market. The energy was manic, right? Founders in their 20s would become paper millionaires overnight. Engineers were hopping jobs for stock options. This is the rise of the Aeron chair, the foosball tables, and the new economy where the rules of things like revenue no longer apply to business.

Anay Shah (00:58:59): But it wasn't just applications; it was infrastructure as well. Carriers spent half a trillion dollars on fiber and wireless. You had these colocation companies expanding at breakneck speed. This company called Exodus Communications was the world's largest web hosting provider at the time, providing server colocation. Its revenue went from 12 million in 1997 to 250 million two years later. It peaked at a $32 billion market cap three years after that. It was laying the infrastructure in the ground and building the applications above it in a period of unprecedented growth.

Ben Shwab Eidelson (00:59:37): And so to launch a startup, you had to build a site, a service, and a database. You needed money way ahead of time to buy the servers to stick in the colo box.

Anay Shah (00:59:48): Wait, so you're saying, in order for me to launch a web business, I had to buy hardware?

Ben Shwab Eidelson (00:59:53): Exactly. You had to take most of your venture capital dollars and spend it on servers even before you knew if anyone wanted to go to your website to begin with.

Anay Shah (01:00:02): So you couldn't test your idea out, you couldn't A/B test, you couldn't do a landing page that drew in a...

Ben Shwab Eidelson (01:00:07): waitlist, couldn't do any of that.

Anay Shah (01:00:09): Wow, what a different world!

Ben Shwab Eidelson (01:00:11): So all these new servers are trying to run on the new backbones that are being laid to power this boom. The traffic still at this point met at only a handful of public exchange points. Networks are plugged into these shared boxes at places like May east that we just talked about. That can only scale for so long.

Anay Shah (01:00:30): You'd start to hit choke points, and May east, one of the earliest network access points, became one of those major choke points.

Ben Shwab Eidelson (01:00:38): We needed different models for companies, ISPs, non-ISPs, to connect. You had DEC kicking off Palo Alto with the Palo Alto Internet Exchange, a non-telco neutral spot. Then you had the founding of Equinix where they took that model and scaled it with their first site in Ashburn, Virginia.

Anay Shah (01:00:59): Ashburn is the Wall Street for data centers. In 1999, Equinix launches their first data center under this new model in Ashburn, Virginia, right next to May east, the choke point. But the original network access point isn't.

Ben Shwab Eidelson (01:01:13): This, near D.C.? I've never been there. Have you been to Loudoun?

Anay Shah (01:01:16): I grew up right outside of D.C. on the other side of the river. Loudoun county is on the Virginia side. It's rural farmland. It's past Dulles Airport. There's really nothing there. But it's proximal to a large East Coast population, the undersea cables and May East. And you actually had AOL choose Loudoun county in the mid-90s to set up a huge dial-up campus. So they laid fresh fiber and drew even more carriers into the region. And May east had grown so large it outgrew the parking garage it was in. So the Exchange relocated to Ashburn. So you've got this unassuming farmland outside of Dulles Airport. And it was really catalyzed by a couple things. Outside of AOL pioneering the new site, it was policy-led. So Loudoun county ruled that data centers could be treated like ordinary office parks. They eliminated all these special use hearings and provided incredible tax breaks over time to attract data centers into this network. Coupled with that, Dominion Energy, seeing what was coming ahead, offered some of the lowest industrial rates to string high-voltage lines to this empty land to bring power and fiber together to create the new data center model which Equinix pioneered in Ashburn and became the largest Internet hub on planet Earth.

Ben Shwab Eidelson (01:02:42): So it's the combination of perhaps for a moment, cheap land (not so much anymore), fiber and connectivity, cheap and accessible power, and favorable policy. One interesting policy story that I heard on this: Apple was looking for where to put a new site in the late 2000s, 2009. Apple's obviously building more services, needing more storage, and building more data centers. So they run a process, and it turns out that North Carolina gives them a better deal. So Virginia fights back and in reaction passes major tax breaks to say that if you're building a data center, basically if you're building anything more than $150 million of investment, you're going to employ more than 50 people — no tax.

Anay Shah (01:03:22): You, of course, are. If you're building a data center, of course.

Ben Shwab Eidelson (01:03:24): Of course. Yeah, you can't build a data center for $150 million.

Anay Shah (01:03:27): Local policy, as you mentioned, is so important. Federal policy actually played a big role here. In 1996, we passed the Telecommunications Act. And one of the main things it did was force the incumbent telcos — which were regional monopolies from the AT&T breakup — to lease their physical network (their copper pairs, their fiber) to their competitors. So prior to this, a data center was a private enterprise tied to a single carrier because the carriers only used their own fiber. Now it enabled carrier-neutral sites. So you could become a tenant of a data center and choose from multiple fibers provided into that building. And it opened up an explosion of choice for tenants and for this carrier-neutral model.

Ben Shwab Eidelson (01:04:11): And so this is a flywheel of a deregulation environment to build this because once they have the tax incentives in, it becomes a major source of economic prosperity for the region. Now, we'll fast forward later on in the story to today, and maybe hitting some of the first real pushback.

Anay Shah (01:04:27): And similar to Frankfurt, Amsterdam, London, Tokyo, the biggest hubs are where you can find cables and carriers and connect the most networks with the least amount of friction possible. And it's this flywheel that continues to make Ashburn the largest home of data centers in the U.S. And what a time!

Ben Shwab Eidelson (01:04:47): In the first six months of 1995, Internet traffic was doubling every 100 days. The telcos were convinced that you couldn't overbuild. You just needed all the fiber you could put down.

Anay Shah (01:04:56): WorldCom and these other telcos, they just poured billions into this. And the idea of overbuilding — not possible, particularly in this Internet boom, right? But by 2000, how much of that installed fiber was actually being used?

Ben Shwab Eidelson (01:05:11): It was only about 3% — 3% was lit up. So they just laid down fiber, the shards of glass that were just sitting there empty.

Anay Shah (01:05:19): So to give you a sense of the amount of fiber miles laid during this period, you could go around the circumference of the Earth 5,000 times.

Ben Shwab Eidelson (01:05:27): Wow. So this was all over land, right? But how would you connect to Europe?

Anay Shah (01:05:31): Ah, and that overbuild, you're right, was not just limited to land. Nearly all intercontinental Internet traffic rides on undersea cables, which I'd kind of heard of, but I didn't really have a full appreciation for the fact that bundles of glass threads are wound into a garden hose structure and laid down on the ocean floor all over the world. So imagine a planet stitched together with hair-thin strands of glass tucked into an armored hose and laid across the darkest parts of the ocean. That's the undersea cable system, and it's the real physical Internet that connects the continents. So 99% of international data still rides on these cables, not satellites. That's racing pulses of light through fibers thinner than the human hair.

Ben Shwab Eidelson (01:06:23): The story arguably starts way back in the 1850s, when we had the first telegraph cables crossing the Atlantic. They brought those across steamships and landed the first link in 1866, able to send news for the first time across the ocean.

Anay Shah (01:06:38): So instead of weeks, you could get the news in minutes.

Ben Shwab Eidelson (01:06:41): Yeah, you're not sending the news via ship, you're sending it via electrons.

Anay Shah (01:06:44): Amazing!

Ben Shwab Eidelson (01:06:45): Fast forward to 1988, and we land the first transatlantic fiber-optic cable. It runs between the U.S., the U.K., and France, and it kicks off this new era of cross-continental capacity. By the late 90s, as this boom was happening, you can imagine the funding routes going into wiring all of this up.

Anay Shah (01:07:07): You lay all this cable down with specialized cable ships that survey the seabed, unspool the cable, and then near shore they bury it underneath to protect it from anchors and storms, and then raise it up through some nondescript concrete box. This garden hose has optical repeaters that boost the light every 50-100 km, so you can sprint thousands of miles without fading. Then you get to land, and these concrete bunkers have the cable hop up into terrestrial fiber and then run straight to your One Wilshire or any of your nearby hubs that then connect you onward.

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Ben Shwab Eidelson (01:07:44): What a wild thing. You have a garden hose-shaped thing moving all this data. What do we actually mean? Well, modern cable, as an example, one laid in 2018, can move 250 terabits per second. To conceptualize that, you can send 6,000 HD movies in one second, or about 20% of global internet traffic can go in one garden hose.

How is this working? Well, at the beginning of using fiber optics, you would shine a laser down and blink your zeros and ones. But we've moved from doing that with one wavelength to doing what's called wavelength division multiplexing. That's a fancy way of saying we use the rainbow; we're using multiple. Usually, it's around 80 to 120 different colors that can go down the same cable at the same time. The other thing is we've added more fibers. So instead of there being a pair of fibers, we now have up to 12 to 16 pairs of fibers. And then the last thing is called coherent optics. This is a way of modulating the amplitude of the light. So instead of it just being on and off, you can actually have multiple steps. All of this adds up to today, probably 250-300 terabits maximum capacity in one hose.

There are hundreds of hoses around the world. And I think the other thing that's really cool about this is the thing that was laid was the glass. We keep increasing the capacity of the glass because the glass is the glass—resilient infrastructure. It's kind of like railroads. It's like we're still using the tracks.

Anay Shah (01:09:07): From long ago, even if the engine gets upgraded. And just like we've been talking about with this network effect, when you bring more networks in, it increases the value and the speed. And so that's a big reason why Ashburn, as we talked about, hardened. Once hundreds of carriers and thousands of cross-connects land into a single place, moving it is impossible. And so if you need to reach Europe fast from the East Coast, you're going to colocate where the undersea cable is already coming. You've got New York, New Jersey, Virginia, tying to Cornwall, England, and to Marseille. You've got the Red Sea and the Mediterranean corridor connecting into Djibouti as a critical touch point. You've got Miami as a key touch point into Latin America. Japan, Singapore, Hong Kong, Taiwan are key corridors into Asia Pacific. Mombasa and Lagos now light up Africa's East Coast. Hundreds of cables have converged that have connected the entire world. And this then forms the network of data centers that we have built and will continue to build through this story.

Ben Shwab Eidelson (01:10:16): And so the boom continues, right?

Anay Shah (01:10:19): No, there was something like the bust to that boom.

Ben Shwab Eidelson (01:10:23): That's right. And by 2001, everything collapsed. Advertising folded, startups folded. Exodus, that we talked about earlier, filed for bankruptcy, had nearly $6 billion in debt. PSINet, one of the largest ISPs, had already collapsed. So, was this the death of the internet and the death of the value of all of this fiber that was laid? Clearly not. It was the death of a particular moment and an overbuild and a bubble. But in fact, the actual infrastructure that was built out would prove immensely valuable as services that mattered matured and business models matured. In other words, I'd say the application layer of this era died, but the infrastructure lived on and would eventually thrive.

Anay Shah (01:11:03): So the dot-com tide went out. But the overbuilt assets were exactly what we needed for the next chapter. And it included infrastructure that we can't live without. The carrier hotels, the fiber, the data centers, the glass in the ocean didn't disappear. It just changed owners, and there was a fire sale, right? Assets were being sold at a fraction of the cost. A few key actors survived, and a few new ones stepped in.

Equinix survived the crash. They doubled down on the real asset that they had, which was interconnection. That neutral meet-me room turned into a marketplace where competitors paid you to be neighbors because the value was in the speed, the reliability, and the flexibility that these carrier hotels provided. Meanwhile, private equity swoops in, as they will in every bust cycle, and reframes the category. So, one in particular buys a couple dozen distressed facilities around the world, turns it into a vehicle called Digital Realty Trust, takes it public as the first pure-play data center REIT, and treats compute space like real estate. These weren't high-tech moonshot assets they were buying. They're bringing patient capital in to standardize the shell, finance it cheaply, and get long leases, which becomes a blueprint for the next two decades of data center buildouts.

Ben Shwab Eidelson (01:12:30): In addition to the sobering economic environment of 2001 from the bust, there was also September 11. These financial institutions were still operating in this moment, having their key servers trading information connectivity with banks in their offices or right near their offices. So when 9/11 happened, the Verizon 140 West Street Central Office, one of the largest telecom hubs in the city, was blasted with debris, and dust flooded the equipment rooms. Tens of thousands of voice and data circuits were knocked offline immediately. Most of those circuits were powering exactly that: brokerages, market data providers, the trading floors, low-latency connectivity to the stock exchange and clearinghouses. So imagine the market is just disconnected now in a flash. And this cascaded. Engineers worked night and day to bring things back online.

I was looking into Morgan Stanley's experience. They saw their whole trading system go down. They had a disaster recovery site in New Jersey, but they didn't have the same level of connectivity and data feeds. So it took them a few days. They ran new fiber through building basements, patched hubs into another telco hub that was still operating to restore capacity so they could trade when the stock exchange opened on September 17th. And I think coming out of this, there was a whole reshaping of the data center world to think about resiliency in a new way. I think it showed the physicality in the city of this connectivity right in this moment, where you could take for granted that you could take action on data over there, whether a trade or market data.

Anay Shah (01:14:07): And it wasn't enough to have redundancy on another floor in the same neighborhood.

Ben Shwab Eidelson (01:14:12): Right.

Anay Shah (01:14:12): We had to start thinking about an infrastructure build-out in different locations with different networks, facilities, and routes to really build true resilience and switch over to the point where now, if a data center goes down, there's automatic rerouting, and we don't see those same blips, although it happens from time to time.

Ben Shwab Eidelson (01:14:31): This early 2000s phase is a real maturing and growing up of the entire industry to realize that these servers and data centers are holding important financial data and need to be treated as such. But meanwhile, in consumer land, there's a glimmer of light, and it's a big one. This is the era that we move from that squeaky, squealy phone modem to broadband.

Anay Shah (01:14:55): I remember touring for colleges, and some had Ethernet across the campus, and others didn't.

Ben Shwab Eidelson (01:15:01): I feel like getting broadband to our house was a radically different experience. It was like a different internet.

Anay Shah (01:15:08): The image didn't load from top to bottom.

Ben Shwab Eidelson (01:15:10): Bottom, it would just fly through. And so this is when BitTorrent starts soaring. This is when Skype launches in 2003, and you can actually make VoIP calls.

Anay Shah (01:15:18): Oh, Napster was possible.

Ben Shwab Eidelson (01:15:20): World of Warcraft launches in 2004. I remember that, taking the college campus by storm. Early web video products started to come out.

Anay Shah (01:15:28): By 2005, you had a billion people online, about 16% of the planet.

Ben Shwab Eidelson (01:15:35): So all those folks prognosticating with excitement in the late '90s were not wrong. They were just off by five or six years. And so there's also the advent of CDNs. So Akamai's footprint exploded to provide more and more storage and replication and caching at the edge.

Anay Shah (01:15:52): And so what exactly does this mean?

Ben Shwab Eidelson (01:15:55): It means at the places where your ISP is connecting, if someone's downloading an image—let's say you load the New York Times on your computer, and someone else does on their computer down the street—you don't both need to go all the way back to the New York Times home server for access to that photo. It's now been cached on a nearby CDN that's directly hooked up to your ISP.

Anay Shah (01:16:13): So in the early to mid-2000s, you have the consumer coming back. Applications are flourishing. The internet is becoming a part of the fabric of society. And there are a handful of companies that survived the bust and captured this moment unlike any other. They not only built incredibly large consumer and enterprise businesses, but they actually became critical infrastructure companies that helped build the modern data center world. That is what we're seeing booming today.

The place we're going to start with is the best place to buy books: Amazon.com. So whatever book you wanted to...

Ben Shwab Eidelson (01:16:50): Find, from A to Z. In July 1995, Amazon launches. By '97, they IPO, and by '98, they are no longer just a bookstore. They're on their path to becoming the Everything Store. Now, it was not initially Bezos's and Amazon's intention to become the infrastructure provider of the world. But this high-growth moment of the late '90s set the stage for what they would need to build, not just for themselves, but for everybody. In those early days, they were running expensive, quote, unquote, reliable servers from the likes of DEC. Extremely expensive products—high-margin servers. Now, the problem is Amazon was not a high-margin business. They're trying to go for scale. They're selling things at whatever the cost was to pass through. They are a retailer trying to be the lowest-margin retailer out there. The cheapest way to get your book delivered to your doorstep.

Anay Shah (01:17:45): So, running a retail business, they're always...

Ben Shwab Eidelson (01:17:48): Tight on cash, so spending it on servers stopped making sense. So by 2000, they were spending so much on infrastructure they were worried this was going to bankrupt them. And so they kicked off a big project to rewrite all of Amazon.com onto Linux and to run it on much cheaper HP servers.

Anay Shah (01:18:05): And this is when Amazon was famously a huge monolithic codebase. Every new category they launched, they had to work across their entire codebase. And it became this hairball.

Ben Shwab Eidelson (01:18:17): By, I think, around 2002, Bezos had had enough of that, and he issued the famous API mandate that internally every team had to expose functionality through hardened, documented service interfaces designed not just to be used by internal teams, but eventually potentially externalizable.

Anay Shah (01:18:33): Classic Bezos. There are no exceptions. Every team must communicate through these interfaces. There were no backdoors, no direct threads, no direct linking. It didn't matter what that technology did. It would, without exception, be designed from the ground up to communicate externally to other teams.

Ben Shwab Eidelson (01:18:52): And if you didn't do this, what would happen?

Anay Shah (01:18:54): If you didn't do this, you were canned. So, in this moment of reboot, it seems like the question that the company's leaders are asking themselves is: How are we able to scale our business like a software business and not like a furniture business? What if compute could scale with demand? And if we can do this for ourselves, why not rent it to the rest of the world? They were on the precipice of not just a technical breakthrough, but a business model breakthrough. Because for decades, running an online business meant these multi-year leases, these expensive servers, and over-provisioning to handle peak demand. And Amazon would go on to flip this on its head and fundamentally change internet businesses by saying you can rent a server by the hour and pay for only what you use.

Ben Shwab Eidelson (01:19:47): It is both deeply innovative at the time and also funny because we've had decades—a century—of doing this with our electricity bills in our own houses or water bills, right? This is utilities, utilities. You've always just paid for what you use. But what it continually enables is the driving down of cost and better utilization of centralized infrastructure. And Amazon had just lived through this painful period of having to rewrite their software and change their server architecture. And I think it was two things. One is: we never want to go through this again. A. B. No one should have to go through this again. And C, if we start to build the infrastructure for the world, that's going to accrue to our costs and our benefit. And there's going to be a flywheel here, just like any scale economies provider ever experiences. The bigger we get, the better.

Anay Shah (01:20:39): That's right. And that utilization is such a key point. So, what happens in March of 2006?

Ben Shwab Eidelson (01:20:44): Amazon launches the first real AWS service: S3, or Simple Storage Service.

Anay Shah (01:20:51): What does this Simple Storage Service do for me as a small internet business?

Ben Shwab Eidelson (01:20:56): It lets anyone put a blob of data on this non-physical disk and access it anywhere in the world. And that sounds simple in the name, but it was shockingly hard to put a blob—whether that was a megabyte, a gigabyte, or a terabyte of data—out there and have everyone around the world be able to access it quickly. Amazon abstracted everything away so that you could do that and just pay a monthly fee. You didn't have to build a server and plug in a hard disk and build another one that copied the data over and all these other things. It just gave you what you need as a developer.

Anay Shah (01:21:32): So this enabled me to store information.

Ben Shwab Eidelson (01:21:35): Correct.

Anay Shah (01:21:35): A few months later, what did they do?

Ben Shwab Eidelson (01:21:37): They launched the Elastic Compute Cloud, also known as EC2.

Anay Shah (01:21:41): So I can store, and now you're telling me I can compute. How does this work?

Ben Shwab Eidelson (01:21:45): You can compute. And so what EC2 essentially was the ability to spin up computers—servers, as you saw fit. Now, what they were actually letting you spin up is what's called a virtual machine, where you can say, "I want to run Linux," or "I want to run Windows," or "I want to run some SQL Server OS," and I would have this virtual machine where I could deploy that, run it, and run whatever code I need to. And if I need a second machine, I push a button and get a second machine. If I need a third machine, a third machine. And I pay by the hour, by the machine, only for what I'm using.

Anay Shah (01:22:16): This is outstanding. So I'm building a business, and I think I'm going to grow fast, but I don't know what traffic I'm going to get next month or in six months. And so I just raised a bunch of VC money. Now you're telling me I don't have to buy these expensive HP and Sun servers, and as I grow, I can just rent more compute and rent more space?

Ben Shwab Eidelson (01:22:37): Yeah, not just that, but I think the activation energy here was brought way down. Before there was the challenge of getting a server and getting space and all that. But in this model, now you just put down your corporate card, and you're off and running with the foundational building blocks that you need.

Anay Shah (01:22:51): This is the Cambrian explosion for startups.

Ben Shwab Eidelson (01:22:53): Key to this is the utilization point. So many startups had bought servers that then never hit full utilization, or we talked about all these appliances sitting in the backroom closet not hitting full utilization. What enabled Amazon to drive utilization? It was the fact that, yes, they gave you a quote-unquote "server" to run your operating system on. They did not give you a server; in reality, they gave you a virtual machine. Not a machine, a virtual machine.

Well, what is a virtual machine? A virtual machine is the flavor of the concept of a machine. And this goes back to a company, VMware, that was founded in 1998 by Diane Green and Mendel Rosenblum. Seid and I got to take operating systems in college from Mendel. And then Diane, as we get to later in the story, was running Google Cloud around the time I was leaving Google. So, legends in this field and in this industry. What VMware did is they made it possible to take a normal computer—whether it was a server or a PC, for that matter—and run virtual machines on that computer.

And why that's typically hard is a computer is usually made to run one operating system at a time, and that operating system is managing applications and making sure that the computer doesn't crash. Well, if all of a sudden you have multiple machines running on a computer at a time and one does something that you can consider kind of unsafe—right?—that would stall out the machine or do something that they weren't supposed to do, that could break the whole model. But VMware's first product enabled an unchanged Windows and Linux to run side by side on the same x86 box. This accelerated to even more interesting use cases. So you can actually hot-swap VMs on machines at the same time. Let me give you a concrete example here. Let's say you're playing a game on a PC. It was as though all of a sudden, in the snap of a half-second, that game moved to another machine mid-frame. So this was actually designed to be able to hot-swap a virtual machine from one server to the next.

Anay Shah (01:24:55): So it didn't matter that you didn't actually have your own server, because your virtual machine could float around as needed. So let's say that you have a hard drive crash. Well, you could have a snapshot running in the background and you could flip over to that one in real time. And so this notion of a virtual machine becomes the backbone for both the utilization point, because one physical server can be used to actually host multiple virtual machines, and a lot of the redundancy and fallback designs.

Ben Shwab Eidelson (01:25:24): And VMware wasn't the only one to do this. Eventually there was the open-source Xen project. That is what Amazon and AWS first used. This kind of thread becomes better and better over time as all the hyperscalers have figured out how to maximally virtualize everything that they do.

Anay Shah (01:25:38): And so now, rather than me trying to run my pets.com and ensure that my product is getting to my customer and my website is doing everything... And then when it crashes, me having to stop everything, file the ticket, and pause business to fix the crash—that's just abstracted out to the specialists, to a business that is designed to solve this problem for me. And all I get then is continuous production, continuous service.

Ben Shwab Eidelson (01:26:08): And it gets cheaper for you every year.

Anay Shah (01:26:10): It gets cheaper.

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Ben Shwab Eidelson (01:26:11): The cost of S3 and EC2 has just gotten cheaper and cheaper and cheaper. It's an amazing business. And for many others, as we'll get into the story, building these data centers and the utility business is not their high-margin business. But for Amazon, this business has margins, which makes it a high-margin business compared to their retail business.

Anay Shah (01:26:30): It's almost like if I were an airline spending all this time trying to figure out how to book a reservation, and then you gave me a program that could do it for me. I can now focus on serving the customer and serving more customers faster, and it explodes.

Ben Shwab Eidelson (01:26:45): Right. If you look at S3 in 2007, there were 10 billion items stored in S3. By 2009, that was about 64 billion. And by last year, 400 trillion items were stored in S3.

Anay Shah (01:26:58): That's a really big number.

Ben Shwab Eidelson (01:27:00): It's a very big number. It's a lot of items. This powers the startup ecosystem and industry. Let's go back in time. So, what was driving the growth of all these numbers?

Anay Shah (01:27:11): We're in Hackathon City. We're having happy hours with engineers and folks with ideas coming together. Now, if you have an idea, you can drop a credit card down, and you don't need to negotiate and buy hardware. No invoices, no contract, no sales calls. You're up and running within hours. AWS very brilliantly saw this as a pathway for short-term and long-term growth. In the short term, they can get a bunch of early-stage startups using their compute, and that's not going to amount to a lot of money. But some of them are going to grow, and they're going to be built on AWS. So they actually had a business model of giving out free credits at these happy hours, at these hackathons, to make AWS the default infrastructure platform to build a new company.

Ben Shwab Eidelson (01:28:03): I think it feeds through from that go-to-market to their product design. Their product design was deeply unopinionated about what you were going to do. It was to make it easy for you to get a server to go do what you want to do with it. Here's storage, as simple as it can be. These are the simplest Lego blocks you can build on. And so simple, in fact, that people then built what feels like the same business on top of them. Ever heard of Dropbox? Dropbox is just an S3 application for this whole early period.

Anay Shah (01:28:31): It's storage.

Ben Shwab Eidelson (01:28:32): It's storage. Let's make it easy for syncing files from your computer to this new cloud thing, backing them up, syncing them, and sharing them with other people. Dropbox and S3 are intimately linked, and Dropbox is built to do exactly that. It wasn't until 2015 that they were like, "Okay, we should probably look at the cost of this." They eventually moved off of AWS to their own servers because all they are is the storage layer. So that's a rare case where it made sense.

Anay Shah (01:28:59): That's all they are. They're still getting $11.99 a month for me.

Ben Shwab Eidelson (01:29:01): That's right. Good lock-in. The Dropbox AWS story is a classic one, but there's probably no better partnership to exemplify this time than the one that Netflix had with AWS.

Anay Shah (01:29:14): Their ability to scale with these companies is really something to behold. In 2008, Netflix was still primarily a DVD-by-mail company. For those of us that remember, it had launched a streaming service as a side feature. The leadership knew that there was something here. But in August of 2008, Netflix suffered a major database corruption in its primary data center. For three days, it disrupted their DVD shipping and their streaming ability. It stopped their business. This was a huge wake-up call. The recovery was very painful for Netflix. They realized that their on-prem, vertically scaled systems were too fragile, and they couldn't recover quickly enough from major failures. The leadership decided they needed architecture that was designed to be more fault-tolerant, elastic, and globally available, because they had aspirations of being able to stream their future business all over the world. They concluded that they needed to focus on their core business. Building this out in-house was slow and costly. So Netflix actually became AWS's first marquee, all-in, public reference of a customer that scales. This proved to be vital. By 2015, Netflix was delivering billions of hours of content annually, almost entirely over AWS and their own CDN.

Ben Shwab Eidelson (01:30:33): They were running thousands of EC2 instances and had all of their videos, the canonical system of record, in S3 — like the actual videos that we are watching now. They did at some point realize that it was so important for them to own the latency and cost of that last mile of delivery—that edge. This is a perfect example of a use case for CDNs. They launched in 2012 what they call OpenConnect and the Open Connect appliances. This means that they would go into those "meet-me rooms" that we had talked about before and drop a Netflix peering box that would directly connect to your local ISP, and they would do this for free. Right? The ISP just says, "Hey, we have a lot of people trying to access Netflix. Let's make it better, faster, and cheaper."

Anay Shah (01:31:17): It's a win-win.

Ben Shwab Eidelson (01:31:18): It's a win-win. They cut out the CDN that they were using at the time. Netflix saves money. Customers are happier. Everyone gets their videos faster. This way, when someone on the ISP accesses the newest popular movie, it's already close to them. Amazon doesn't actually even — they barely get hit in that moment. It's obviously running what's called the control plane for Netflix.

Anay Shah (01:31:38): Yeah, because if I have to wait three or four seconds for that preview to load, I might not watch that show.

Ben Shwab Eidelson (01:31:43): You might churn. This is what powers streaming to this day. The same model is what enables others to enable streaming at scale. All of this — this whole Netflix case study — is the perfect flywheel and customer to show that AWS can scale with you, scale in a really challenging environment, be resilient, and power global reach. Netflix was not just a U.S. company at this point.

Anay Shah (01:32:05): Yeah. For anyone that saw AWS and the cloud as a concept — as risky, unable to scale, or not enterprise-ready — Netflix helped debunk that for chief information officers around the world.

Ben Shwab Eidelson (01:32:22): They would just do whatever it took. I can't remember the exact story — I think this is from the Acquired episode — where Amazon would allow you to ask them to roll in a big truck, slurp up all your data into hard drives, then they'd bring it to their data center to plug in and dump all your data into your AWS instance. So, they figured out what was needed to close the enterprise customers. It's just amazing that someone known for selling books was able to so quickly build the brand around how to do this new, private, secure utility thing at scale.

Anay Shah (01:32:54): So AWS continued to rethink what data centers are used for and how to build them out to serve the customer. Rather than having one mega-facility per market, they introduced the concept of Availability Zones, which became clusters of independent data centers within a region — each on separate power lines, each on separate fiber paths, linked with millisecond private connections. This Availability Zone concept and clustering was yet another piece of the data center evolution that AWS contributed to the ecosystem.

Ben Shwab Eidelson (01:33:29): I feel like this notion of U.S. East and U.S. West — this is how people think about their servers now — is this abstracted notion of an Availability Zone.

Anay Shah (01:33:39): AWS continued to do this globally, and this actually became a blueprint for hyperscale.

Ben Shwab Eidelson (01:33:44): To end the Amazon story here for now, I think it would not be wrong to credit them with really kicking off the utility-scale cloud story, right? And getting so many things right: giving developers the simple building blocks they could use; going after cost, reliability, and redundancy; making sure to build the right guardrails for virtualization so that they could actually do this efficiently and build for the long term, using the same APIs internally so that it created a flywheel for them to move faster and bring those cost benefits back to the core business. It propelled them so far ahead in this business; they are still the leader to this day in the core cloud infrastructure product.

Anay Shah (01:34:28): As a result, as we've been talking about, the data center is simple at its core, right? It's a facility with storage, compute, and connectivity. What AWS does is take the data center and enable it to build an economy on top of it.

Ben Shwab Eidelson (01:34:46): To frame it another way, it used to be that if you wanted lights in your house — if you wanted electricity in your house to power those lights — you would put a dynamo to burn coal underneath your house, right? And if you wanted a website on the internet, you would buy a server and plug it into your home ISP. That is insane to us today. "What do you mean? You're going to power my house with electricity from underneath my house, right?" Instead, I'm going to hook up this shared infrastructure with all of my neighbors, and we're going to centralize our demand and build the cheapest, biggest infrastructure we can to generate the power. That's the same thing happening here for the first time. This is the introduction of the concept of the cloud, right? People have had the internet where they're interacting with publicly visible websites. Private enterprises have servers, but the idea that you have your own storage over there in a Dropbox folder, or you as a developer could build whatever you wanted and access this floating blob of data — that's to you — invisible where specifically it is, but it's out there. That was, I think, the conceptual notion of the cloud. I've come to somewhat dislike the phrase because it feeds into the invisibility of the infrastructure, right? It says, "It is nowhere. Your photos are nowhere, your storage is nowhere."

Anay Shah (01:36:07): That's so far from the truth.

Ben Shwab Eidelson (01:36:09): It is somewhere.

Anay Shah (01:36:10): It is in multiple locations.

Ben Shwab Eidelson (01:36:12): In fact, the cloud is almost the design antithesis of the glass room. The glass room where you want to show off, "This is where it is. This is where the compute is happening."

Anay Shah (01:36:22): It is only happening here; it is happening right now.

Ben Shwab Eidelson (01:36:25): But it served a good purpose in explaining this notion of migrating to this unknown location, and has remained pretty sticky, I think. So, while Amazon was out there selling books, a little startup out of Stanford was helping you organize and access the information on the growing World Wide Web.

Anay Shah (01:36:44): Google was founded in 1998, and shortly after, it was handling about 10,000 search queries per day. By the end of 2006, it was processing the same number of searches every second. Google acquired YouTube in 2006, a year after its founding, and at the time, it was already one of the fastest-growing websites in the world with 100 million video views per day.

Ben Shwab Eidelson (01:37:07): I remember folks having their first webmail-based accounts, like a Hotmail account. They'd have 2 to 4 megabytes. Well, Google notoriously on April 1, 2004, announced and launched Gmail as an invite-only service that had a full gigabyte of storage.

Anay Shah (01:37:22): I remember you could get access if you referred in.

Ben Shwab Eidelson (01:37:25): If you referred in, or they started going on eBay for like $150, it was a hot ticket. By 2010, Gmail had over 150 million users. And of course, with more gigabytes of.

Anay Shah (01:37:36): Storage available, it was amazing. It was from the very beginning the front door to the internet. But it was also going to need to be an infrastructure company.

Ben Shwab Eidelson (01:37:46): So, you go back to 1999, a year into Google's life, and an engineer named Urs is being shown around as part of his recruitment by Larry Page, the CEO and founder. Urs says you couldn't really set foot in the first Google cage because it was so tiny. The cage was 7ft by 4ft with 30 PCs arranged on the shelves, providing the world with more Google than it could handle. Our direct neighbor was eBay. A bit further away was a giant cage housing Deck machines and AltaVista. All of this was hosted at Exodus in Santa Clara, one of those colo locations that we talked about earlier.

Anay Shah (01:38:21): So, Google was competing with AltaVista and all those others at the time. It was powering part of Stanford Search.

Ben Shwab Eidelson (01:38:28): That's right.

Anay Shah (01:38:29): And running off of 30 PCs.

Ben Shwab Eidelson (01:38:32): Running off of 30 PCs in this colo center, it cost Google about $1,400 per month per Mbps of data. So they had to purchase 2 Mbps. At the time, 1 Mbps was about a million queries per day. From the beginning, Google looked at its servers and infrastructure differently. It was never interested in taking the tried-and-true path of buying the Sun or even HP boxes.

Anay Shah (01:38:56): One of the most memorable stories of this time that explains this is the infamous corkboard. So, in the early days, Google engineers literally mounted motherboards on corkboard. They had $15 box fans pushing air across. They had zip ties holding it together. In a traditional IT philosophy, this is heresy. But the idea was that if a part doesn't add reliability at fleet scale, strip it away.

Ben Shwab Eidelson (01:39:24): This all set in motion an ethos of questioning the assumptions and, ultimately, deep, deep vertical integration of their infrastructure. Some might argue that that was Google's superpower, and still remains so to this day. Apple's piling all of that thinking into making the perfect iPhone; Google's doing it to their data centers.

Anay Shah (01:39:43): So Google had a number of innovations that came from this early time. One was around how to do power backup. So, the standard was to spend for a facility-wide big battery. Well, by 2000, Google was questioning this model and seeing the waste in the large battery. So they actually put little batteries on each server. Again, they were accepting that one might go down, but that was okay as long as the whole fleet was reliable. The key to all of this working was moving reliability up the stack into the software layer. Google was not using off-the-shelf file systems and off-the-shelf software.

Ben Shwab Eidelson (01:40:22): They built everything here themselves. They assumed that hard drives would break, so they built the Google File System. This was around 2001-2002. So, this is a distributed file system that would take files, chunk them up, and spread them across three different servers no matter what. So you could always have resiliency. Also, this would make accessing a search index much faster. In 2003, they built Borg, a cluster manager, which ultimately was all about managing where jobs were running on which servers and machines. And it really was an extension of the virtualization and predates Kubernetes, which we'll talk about a little bit later. So, these were all the software components, but they were also questioning many of the physical constraints that people had looked at with servers. Most notably, they did some of the first experiments in "hot aisle, cold aisle" airflow containment. Traditionally, data centers were just a bunch of hot computers in a room, and they would blast cold air into the room. So you'd have to keep the room as cold as possible, often uncomfortably cold. There was no real thought about getting the hot air out of the room. Over time, it became accepted wisdom that you should point servers in one direction, get the hot air out of the room, and encourage that to happen. Google realized that the more you took that to an extreme, the better. So they would heat up and isolate the hot aisle from the cold aisle because then you could actually extract the hot air more efficiently and not mix it back into the cold. So, what we mean by cold aisle and hot aisle is that cold air needs to blow across those exposed chips and motherboards that would extract the heat off of the server into the hot aisle, and then the hot air from the hot aisle would need to be extracted out of the room. Google became a leader in designing the best airflow there.

Anay Shah (01:42:05): This is a concept that continued for years. You also think about the traditional data center and this idea of assuming something's going to fail and building around that. Whereas in a colo facility, or when you're renting out these cages, every server had to work because it was a different company utilizing it. Not only that, 20 years ago you had specialty cleaning crews that were moving around the data center, and they would sweep up the room and then analyze the contaminants they had just swept up to understand how to continue to optimize the cleanliness and space around it. The idea of laying in a corkboard and a zip tie around it, and assuming something would fail, really takes the data center concept that existed then and completely flips it on its head and, as we'll see, drives better performance.

Ben Shwab Eidelson (01:42:59): All of this comes together when they build their own first scaled, homegrown data center.

Anay Shah (01:43:05): I love this idea: Don't think of a data center the way we've been defining it, as a room packed with servers, power, and connectivity. Think of it as a warehouse-scale computer. Urs wanted us to think of it not as many machines, but as one machine.

Ben Shwab Eidelson (01:43:22): So, you think about the components of a computer, right? The storage, the memory, the compute. Urs saw what they were building out over time in their data centers and realized that they were just building a large computer that happened to be the shape of the warehouse.

Anay Shah (01:43:38): Yeah. If you accept this premise, then you stop trying to make each server perfect, but you start thinking about making the fleet reliable, and you design entirely differently. So, this is about 2004. You have a wild man named Chris Sacca. So, before he was a famed investor, he was apparently a young, sloppily dressed individual walking around rural Oregon looking for "shovel-ready" enterprise zones where he could find some tax breaks. He was walking around asking for such astronomical quantities of power that, allegedly, a nearby town suspected him as a terrorist and called the Department of Homeland Security. But this was just what he was looking for. The Dalles, Oregon, had a site for him: 30 acres next to a decommissioned aluminum smelter that once drew enough power to power the needs of a small city. Sacca was ecstatic. He said it was visionary. This little town with no tax revenues had figured out that if you want to transform an economy from manufacturing to information, you've got to pull fiber. So Google went on to build out The Dalles, Oregon, and bring all of their innovation to bear to increase the performance of this data center. So, what that meant was low-cost, steady hydropower from the Columbia River; the Bonneville Corridor, providing high-voltage transmission; a cool, dry climate that lets you run a cooling process most of the year that's very economical; long-haul fiber that traces the river's edge; and a town that was hungry for a new tenant. This all came together to launch Google's first warehouse-scale computer to drive down unit economics, improve the performance of a data center, and therefore the unit economics of the entire fleet.

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Ben Shwab Eidelson (01:45:35): And I would argue this is potentially the first built-from-the-ground-up, hyperscale data center. They're building to solve their problems, but their problems are at this point scaling so rapidly that they're thinking about how to optimize all these things, tuned with software, tuned with virtualization, and so this is the new blueprint for the future. That is still how we're generally designing data centers today.

Anay Shah (01:46:01): They had a head start in thinking about infrastructure from the get-go, making it part of their DNA. It's not as if the other companies were standing still; they were building concurrently. This was a race, and they had to do it quietly. Google was the first to get operational in 2006. They quickly replicated this elsewhere in North Carolina and then in Finland, testing different climates to optimize. This included using seawater, hot aisle containment, and other ways to optimize cooling and performance.

Ben Shwab Eidelson (01:46:32): Yeah, there were other areas they kept pushing on, like the power supply system. Normally, each server you think about plugging into the wall converts AC to DC and then steps down DC for all the various components. Google instead realized that if they could just have a higher voltage DC current coming into the rack, they could then convert once cleanly and do it as late as possible. With that higher voltage, you'd have less loss, and you'd get efficiency gains across the whole path. So, at the scale Google was building servers, they could optimize every single part of the stack.

Anay Shah (01:47:07): They later announced this 48-volt DC in 2016, publicly revealing double-digit efficiency gains that the world could then incorporate into data center design. Now, we've talked quite a bit about performance and efficiency, and there's good reason for that. Many data center companies were hemorrhaging money on power. The impact on the bottom line was significant enough that it needed focus. We had the distinct pleasure of talking to one of the OGs in data centers, Christian Belady. He told us this fantastic story of bringing the metric for power efficiency to the industry.

Ben Shwab Eidelson (01:47:55): It's called PUE, or Power Usage Effectiveness. This is a simple ratio of the total energy consumed by a data center, divided by the actual IT equipment you're trying to power. Right? So, it very easily spits out the overhead in running your data center. If it's two, that means twice as much energy is used for overhead than for the actual servers. And how did this metric come to be? Such a simple, beautiful metric.

Anay Shah (01:48:21): Christian Belady was working at HP in the late 90s, and HP had a customer in Japan called NTT Docomo. Christian had been in the industry for so long that he had formulated enough standards through HP and the industry to come up with 10 best practices. He took these 10 best practices to Docomo, and they said, "Yes, this is great, we're going to implement all of this!" He replied, "Fantastic, come back in three months and we'll do a review." So he goes back to Japan, and they had printed out everything, with big stacks of paper on the desk. Everyone was in a suit and tie in a hot room when they told him, "Mr. Belady, we've done everything you said. Here are all of our reports, and nothing's changed. The servers are all still the same."

Ben Shwab Eidelson (01:49:07): "It's even hotter in the hot aisle, and no one wants to go back there. So it doesn't seem like it's any better."

Anay Shah (01:49:12): "That's right. We're still hot when we go in there. We don't think this is working. We're going to go back to the way we were doing it."

Ben Shwab Eidelson (01:49:18): And it drives Christian nuts. The whole point was that you actually want the hot aisle to be hotter and the cool aisle to be cooler. That separation is what drives the efficiency. You don't want the air to mix. He knew in his bones, "No, you're running in a more efficient way. You have to see that."

Anay Shah (01:49:35): NTT couldn't see the change or measure the efficiency gains of the hot aisle/cool aisle containment or the other recommendations that Christian was making. So he invented this incredibly elegant metric and kept it internal to HP. They continued to implement it in HP for six years until his good friend Chris Malone suggested he publish a paper and present it at Ken Brill's Uptime Institute in 2006.

Ben Shwab Eidelson (01:50:02): At the Uptime Institute, they presented the paper and kicked off a new organization called The Green Grid to publish PUE and other metrics. The team included Christian Belady, Paul Perez, Bruce Shaw, and Larry Vertel. These folks later became CTOs of Dell and led big teams at AMD. They thought it was just going to be an internal "here's the thing we tried" kind of paper. It hit the industry like a storm because the PUE race was now on, and Google wanted to win. Many enterprises had PUE numbers around 2, meaning twice as much power went to lights, cooling, and everything else compared to the amount of power that actually ran the IT hardware. Google pushed it down to 1.1, meaning only 10% of the power was not directly used to power the computers.

Anay Shah (01:50:50): Their internal teams took hold of this and ran with it. They used this rethinking of the data center from the ground up as one computer system, with software being the reliability layer, not the hardware. This, along with innovative geographic placement, drove performance and PUE. It's come to a point where it essentially can't be optimized past one.

Ben Shwab Eidelson (01:51:16): Before we get too far ahead of ourselves, let's talk about what it is to go to one of these data center campuses.

Anay Shah (01:51:23): You're driving up into vast open space where you suddenly see massive buildings growing out of the ground. From the sky, it maybe looks like a distribution center. You can see some steam flowing out from the building. But as you drive into this campus...

Ben Shwab Eidelson (01:51:42): You start noticing: "Why would there be so much power infrastructure if this is just a warehouse?" Because you're seeing big battery packs, extra turbines, or generators.

Anay Shah (01:51:52): The other thing you'll notice is that security is everywhere. You'll have to pass through a series of checkpoints as you get to the front desk. Maybe they're powering Netflix, but they're also powering Pentagon operations. They have an enterprise obligation, so security is paramount. So, once you're approved, you manage to get through multiple layers of gates.

Ben Shwab Eidelson (01:52:14): And then there's a moment—the moment of big reveal—when you walk in, and it finally hits you: the rows and rows and rows of machines that just go on further than...

Anay Shah (01:52:24): The eye can see. These facilities are bigger than a football field, and they're lined with racks of blinking lights and machines. You're hearing this constant whir, and you're noticing the temperature. When you walk in, it might be fairly comfortable.

Ben Shwab Eidelson (01:52:42): I think 80 degrees is average in a Google data center today. What did it used to be like?

Anay Shah (01:52:47): You had to keep these machines cool, and the best way to do that was to chill the room. So it was frigid; the entire room was blasting with AC.

Ben Shwab Eidelson (01:52:57): Back in the 80s, you'd just wear a thick sweater all the time. Now they can comfortably hover around 80. That's because of the really good containment they did of hot and cold aisles. Now you've taken in the machines, adjusted to the noise, and they've given you earplugs to get comfortable. You look up and start to see the infrastructure coming in, powering these servers and connecting them. Google famously had bright-colored wires and marked where the plumbing was. But it wasn't always like this. If you go back to the 80s, I think it was quite different.

Anay Shah (01:53:27): You're now building right on the floor. But one of the ways to cool the data center decades ago was to raise the platform. So you'd actually look down and see that you're walking on panels above a hidden space where cold air was being pushed through.

Ben Shwab Eidelson (01:53:41): Per the trend of everything we've talked about, with Google driving the evolution, the question was: "What is the cheapest way to most efficiently do the thing we're doing?" And it stopped being those raised floors over time. Hopefully, that gives you a little taste of what it's like to walk into one of these. There is a nice Google podcast called 'Where the Internet Lives' that really gives a nice tour of exactly this.

Anay Shah (01:54:00): It's a Google and Latitude Media production where you can actually hear the sounds as they record inside the data center. So the whir is very palpable.

Ben Shwab Eidelson (01:54:12): Google's investments continue to grow. They continue to vertically integrate, deeper and deeper. They go to their own sites, start buying up their own fiber. They took advantage of some of that dark fiber that we mentioned earlier, snapping a lot of it up. All of this is a capacity strategy. Ultimately, they want to have the capacity redundancy to drive their own cost down. While, mind you, they're building the highest-margin, best business in the world in the form of search and ads. So that whole flywheel allowed them to continue to invest in this infrastructure. Google had explosive demand, as they were the web company here. They had explosive internal use driving the value of the vertical integration. But the whole industry saw what was going on with AWS after its launch. And Google was one of many companies that realized they had some assets to put toward that, too. So they put together a team that launched App Engine in 2008. It let you run apps on Google's infrastructure, but was very opinionated about the app. It only supported Python with a particular framework. So it was quite different than Amazon's basic building block EC2 approach. It wasn't until 2013 that Google launched a general-purpose virtual machine capability. As a result of this approach, as well as Google's lack of enterprise sales and marketing motion, it took quite a while for their cloud program to get running. Things started to shift in 2014-2015. Google went public about its containerization strategy. If you recall our discussion of virtualization: you don't actually need to package up the whole operating system. You don't really care that it's running Windows or Linux. You actually generally just want to run the application. Containers are really a way to do that at the application level. This continued even further more recently with the idea of serverless functions.

Anay Shah (01:55:59): So Google in 2014-2015 took the world by storm by open-sourcing Kubernetes and the Google Kubernetes Engine. It very quickly became the default way for programmers to use containers and migrate away from virtual machines. Now, they still didn't have an enterprise sales and partnerships muscle. But Ben, you were there at this time, right?

Ben Shwab Eidelson (01:56:18): That's right. That's when they brought in Diane Greene, who we previously talked about as the founder of VMware, to help build that muscle. By 2018, their cloud share was 7%, AWS was 34%, and Azure was 15%. So they were a distant third. Following through to 2019, a new leader came in who has been the leader since, and he has made big pushes, growing massively. Their cloud business is now a $13 billion business, growing 32% net-net. You look at Google's story, and it's interesting. They've always been technically ahead, especially internally. They've always had amazing dogfooders—meaning people inside using their infrastructure. The problem was they did not know how to sell to this customer. They were not really a developer platform, especially to the enterprise. This is a market Amazon had cracked, so they really had to learn new skills despite having the best tech in the entire ecosystem. The other story is that Google's vertical integration sometimes went too far. They figured out the best way to do this for themselves, but sometimes that led to blind spots in what someone not in the Google ecosystem might need. So, the idea that every developer was going to build a new Python framework that Google released was a little self-serving when it turned out engineers might just want maximum flexibility, which Amazon deeply understood.

Anay Shah (01:57:33): And it all starts with giving the industry an entirely new way of thinking about it: Treat the data center as a single, evolving machine. Build the hardware to suit the software that will survive its own failures. Put the buildings in thermodynamically optimal and grid-optimal locations, and publish your math. Showcase your performance and your PUE so that everyone can have FOMO and try to play catch-up. So, Google was spending billions on land, buildings, and hardware, designing its own infrastructure and overturning the data center world by building software to bind it all. Which forced the entire industry to meet hyperscalers like Google on its own terms. Competition was heating up. It wasn't just Amazon and Google. There were even more household names quietly transforming themselves.

Ben Shwab Eidelson (01:58:28): By the mid-2000s, Microsoft was unquestionably the software king. Windows was powering 90% of desktops. Office was licensed to print money. But things were changing. Broadband penetration was climbing. We started to see the emergence of connected phones—BBM and BlackBerrys and things like that at the time. And internet-native companies. They saw Google and Amazon building, climbing, and proving that you didn't need to buy software on a CD to run interesting computing applications. Remember, the cloud, as we've been talking about, isn't just about backend developers. Applications themselves were starting to move—not just their backend, but the front end to the browser as well.

Anay Shah (01:59:10): Right, on the browser. You remember, Salesforce was leading the charge here. They launched with this idea of "no software, all in the browser." By 2005, they were doing nearly $200...

Ben Shwab Eidelson (01:59:20): Million in revenue and capturing the mindshare, proving that this could be the future—not just of consumer applications, but also a business product like a CRM.

Anay Shah (01:59:31): CRM enterprise B2B software.

Ben Shwab Eidelson (01:59:34): So you're there, sitting at Microsoft. That is your greatest fear: that you're not going to be part of the application and operating system of the future. That is your whole business. At this point, it's not like Microsoft didn't run any web services. Ten years prior, Gates had sent his memo of the "Internet Tidal Wave." They had invested; they bought and scaled Hotmail; they had MSN; they had Xbox Live. But these were all self-contained services. They hadn't yet thought about how to expose an infrastructure to others to build on. They loved building operating systems that would ultimately run on others' infrastructure. They had built one of the best businesses in history doing this. They would write this code once, print as many CDs as they could, and it was this amazing, high-margin business. They didn't have to go buy other people's hardware.

Anay Shah (02:00:16): They'd print the CDs, they'd print the money. This idea of infrastructure as a service was radical. Inside Redmond, Washington, the pivot for Microsoft was framed as nothing less than existential.

Ben Shwab Eidelson (02:00:28): As is often the case in a company motion like this, it's about people and talent. So they bought a company, Groove Networks, that brought in the famous Ray Ozzie, who had previously led the development of Lotus Notes. They brought him into Microsoft and made him co-CTO of the company. This was so existentially important. Think about what Meta's doing today to staff up talent. It was *that* important at the time. The cloud was the existential thing. "We need the leader of the cloud, Ray Ozzie, to come in and lead the way through this charge."

Anay Shah (02:00:58): "If we're going to bet everything we've built on this pivot, we're going to bring in the best talent."

Ben Shwab Eidelson (02:01:03): So they bought the company, put them in charge, and this was a 5,000-word manifesto about what the future of Microsoft needed to be. It's worth reading the whole thing, and we'll link to it in the show notes. But Anay, would you read that key section that really stood out?

Anay Shah (02:01:17): In Ray's memo, he says: "'Computing and communications technologies have dramatically and progressively improved to enable the viability of a services-based model. The ubiquity of broadband and wireless networking has changed the nature of how people interact, and they're increasingly drawn towards the simplicity of services and service-enabled software that just works.'"

Ben Shwab Eidelson (02:01:40): He ends that section by saying: "'Businesses are increasingly considering what services-based economics of scale might do to help them reduce infrastructure costs, or deploy solutions as needed and on a subscription basis.'"

Anay Shah (02:01:54): "'—just give people the end result that they want and demystify everything that's happening.'"

Ben Shwab Eidelson (02:02:00): That's right. And he ends with: "We must respond quickly and decisively." For a company of Microsoft's scale and history, that was really trying to be a...

Anay Shah (02:02:09): Wake-up call. And didn't Gates and Ballmer kind of give Ray Ozzie a blank slate, like, "You're the leader here. Help us understand where the future is"?

Ben Shwab Eidelson (02:02:17): Not just that, they let him carve out and run this separate from the Microsoft Server and Tools business, which had built Windows Server and SQL Server—which would have been the obvious place to try these things. But they knew that this was bigger than an evolution from what they were doing in their previous software business. This was a transformation: a fundamentally different product, a different business model, and a different go-to-market motion. So when everything had to change like that, it was very hard for the leader of the incumbent thing to keep going. Let's make this concrete. What does this mean for a server or a data center? Microsoft had Windows Server and SQL Server. When we talked about those server rooms that a company would run, they would very often be running Microsoft software. This was the IT sale they had perfected by this point. You would sell the Windows Server license, it would be Active Directory, it would be running Exchange and Outlook for your email, and it would be running your calendar and all these things inside your company's network. It'd be running Windows on their PCs.

Anay Shah (02:03:15): So it's this beautifully connected thing. And this is saying, "No, no, no, we've got to move that server from your bottom line CapEx as a company into OpEx in our data centers." This is a transformational move from what you're providing at the end of the day—from just software that's going to run on someone else's computer—to actual services.

Ben Shwab Eidelson (02:03:32): Ray Ozzie goes for it. He staffs up a team they call Project Red Dog. They bring in Dave Cutler, who had previously led Windows NT and is a legendary programmer, to help lead the architecture of this new project.

Anay Shah (02:03:46): So they're putting together this cloud strategy that is revamping Microsoft internally, and at the same time, ramping up direct competition to the front door of the Internet: Google. They evolved an old MSN Search product into what then became Live Search and eventually Bing, as we know it, in 2009. This was a moment that kind of rippled across the industry, especially for Google's dominance.

Ben Shwab Eidelson (02:04:12): I was at Microsoft at this time.

Anay Shah (02:04:13): Oh, yeah.

Ben Shwab Eidelson (02:04:14): I joined Microsoft out of college in 2008 and was there in this moment: they had Windows Live Search. They briefly called it Live Search, then came this big rebrand to Bing. Microsoft was willing to spend a lot on this repositioning, on this marketing—so much so that they gave Yahoo a very sweet deal to power Yahoo's search and ads and gain some infrastructure market share.

Anay Shah (02:04:35): This catapulted them into getting up to 20% share, which is no small feat in an exploding market that Google has been dominating.

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Ben Shwab Eidelson (02:04:45): It's important to remember that doing search well and search ads well is a really hard scale problem that essentially only one other company had cracked, and that was Google. To respond quickly with an active, updated index of the internet, and to do this auction for the right ad unit—all of these things that you have to build—is what propelled Google to build their vertically integrated servers. And Microsoft was now putting themselves in the position of having to solve those same really hard technical problems, in addition.

Anay Shah (02:05:12): To those really hard technical problems, we saw with Google that in order to effectively run this search business, you have to have a lot of compute power behind you. You now have to get into the data center business and build out infrastructure that is your own to drive down the cost and drive up performance. We mentioned Christian Bellady previously. He was at HP in 2007, gets a recruiting call from Microsoft, and his initial reaction is, "What the hell's a mechanical engineer going to do at Microsoft?" Because Microsoft is known as the software company, and so he turns them down a couple times.

After the third call, he decides to go up for an interview, enjoys the process, gets an offer, but doesn't think much of it. And I believe he's at his parents' house when he suddenly gets an email from Bill G. (Bill@microsoft.com) explaining why he should accept the job offer. And Bill essentially says, "Everything's going to the cloud. We're investing for the cloud business, and we need to build out this new infrastructure as core to the future of Microsoft."

Ben Shwab Eidelson (02:06:24): This seems like a wacky idea to go there, but Bill G emailing me? Like, you're there with your parents, and you've got to give this a go. Let's pack our things, move to the Seattle area, and join Microsoft. And so at this point, he starts there, and Microsoft had just finished building their first real, more integrated data center build-out. This is in Quincy, Washington, in Eastern Washington, a 13-megawatt build. And he walks in there, and everyone's looking around, and the first thought they have is, "We're going to get fired because there's no way we're going to fill this thing with servers." There's just no way that we have the demand.

Anay Shah (02:07:00): And this was their first massive-scale, purpose-built cloud data center campus. This was Microsoft entering the infrastructure business.

Ben Shwab Eidelson (02:07:11): And similar to what we saw with Google at The Dalles, a lot of the same things that attracted them to Quincy were power from the same Columbia River. They're getting cheap 1.9-cent per kilowatt-hour power at the time to power this. And the climate was that dry, cool climate that allowed them to be really economical with using outside air cooling for much of the year. They had multiple fiber routes. It's in Washington, so they could connect their Redmond headquarters directly to Quincy.

Anay Shah (02:07:34): The environment, the fiber, the power—it all comes together. And they, like Google, knew they had to work with the local community and the local government. And so they actually worked with the City of Quincy to build a Quincy water reuse system to treat and recirculate the cooling water to reduce the dependence on the local community.

Ben Shwab Eidelson (02:07:53): They built Quincy. They have it up and running. He's worried they're not going to fill it, but they kept going. Azure ends up launching in 2008, which we'll talk about in a moment. But I think it's very easy for a big company that's bet a lot of resources building something internally to think that they have an idea of what demand is going to look like. But they overbuilt in Chicago. Then they had it mothballed, they tried to sell it, and then nine months later, they were so happy. They didn't sell it because they needed the space.

Anay Shah (02:08:16): It was hilarious. They tried to sell it to the government.

Ben Shwab Eidelson (02:08:18): So, what's going on there, and what's happening, is they're launching this project, 'Red Dog,' which would become known as Microsoft Azure. And it's hard to predict the scale of the utilization of infrastructure as you launch it. So let's go back to October 2008—the big reveal. This is Microsoft's big annual Professional Developers Conference, and Microsoft unveils not Microsoft Azure at the time, but Windows Azure.

Anay Shah (02:08:46): And this wasn't just Windows running somewhere else. It's a platform for developers to build and host applications on Microsoft infrastructure, paying only for what they used. Rent some storage and compute, pay for what you use.

Ben Shwab Eidelson (02:09:00): And the key thing that you mentioned is, it was designed for those Windows developers. So it used all the familiar tools: the .NET Framework and Visual Studio and all these things. And it made it easy for you to take your work that you'd done over there that would run on Windows Server right inside of your office, and take that same code and shift it to run on Microsoft servers. What a powerful integration and move! It kind of split the thread between AWS, which gave these really basic building blocks—S3 and EC2—of this unopinionated 'run your own operating system, bring your own full thing, and we'll just make it work' approach.

Anay Shah (02:09:35): Right. They were agnostic to what you were doing on top of it and how you were doing it.

Ben Shwab Eidelson (02:09:37): Exactly. To Google App Engine, which was overly specific and cute about it, in a way Microsoft was almost more Google's approach, but it was the same code and the same thing that a developer had already used. And so they had this massive developer ecosystem and integrators, and this whole kind of motion around it.

Anay Shah (02:09:54): It wasn't just easy for the developer community; this is Microsoft that has an enterprise sales engine. They've got a go-to-market motion. They have the finance department that knows how the sales team is going to operate and how to budget for it. And so they're bringing this world-class distribution and, most importantly, the trust from this massive customer base to bear with Azure. And the adoption is extremely rapid because people are already embedded in the ecosystem, and here you are coming with an improved product, and the enterprise base adopts it very seamlessly. Yeah.

Ben Shwab Eidelson (02:10:28): And it's not the story that Amazon has to make for the first time, which is, "Hey, come build your thing with us in the cloud," and introduce this. This is four or five years later, and it's sitting there like, "How do we think about the cloud?" We don't have an agreement with Amazon; that's not an existing vendor relationship. Whereas with Microsoft, you're like, "This is the agreement we have, this is the IT relationship we have, this is the full trust." If you're telling us this is how we can move to the cloud in a seamless, secure, safe way that's going to integrate with Active Directory and Outlook, and I just don't have to run the machines in my closet anymore? Sign me up.

Ironically, I think some of the people they had the hardest time signing up were the engineers and product managers in Redmond, Washington. We were actually talking with Ben Gilbert of Acquired about this, and he at the time (this was 2012, 2013) was working on the web version of Microsoft Word. So Microsoft is finally going to compete head-to-head with Google Docs on product and ship a version of Word that you can use via your browser. And of course, the desire was for everyone to use Azure. Did they? Absolutely not. They said, "No. This is the custom server we need. We need this. Many of them can scale this big, and we had to do some custom JavaScript rendering, all this stuff." We want our own servers, probably still in Quincy, but we're not using the Azure APIs and layers.

Anay Shah (02:11:43): So the own employees are demanding all this heterogeneity, resulting in a wide variety of server SKUs.

Ben Shwab Eidelson (02:11:52): Amazon, for context, building out AWS, I think had something like 20 different types of machines that were running AWS. Google, in their whole build-out, standardized on this vertically integrated, commodity-built server design. And so they would just keep it down to a handful of machine types. So supposedly at Microsoft, there were dozens and dozens of different SKUs that Microsoft was maintaining. So instead of calling this a server farm, someone called it a server zoo. You just think about where they're coming from in the evolution of all these different web services and different teams building their own thing. It's a whole different world. And around this time, I think energy starts to become an interesting layer as well.

Anay Shah (02:12:31): So similar to Christian getting recruited in 2007, thinking, 'What the hell am I going to do at Microsoft?' he then goes out to recruit an energy expert. Brian Janes. In 2011, Microsoft saw the need for an energy person to be in-house.

Ben Shwab Eidelson (02:12:47): I'd say Microsoft saw the need, but I think Brian was confused.

Anay Shah (02:12:51): Brian was like, 'I do energy, you don't need an energy person.' And his thought was, 'This is a dead-end job.' Being an energy person at a software company doesn't make sense because what they're trying to do is all about land, it's all about fiber. Energy's a distant third or lower down the list in the priority of how you think about scaling this type of infrastructure.

Ben Shwab Eidelson (02:13:10): Yeah, I think at this time, for context, utilities were happy you'd show up with your 10 Quincy, 13-megawatt data center, and utilities are like, 'Sure, great, sign up!'

Anay Shah (02:13:20): Yeah, generally power demand is relatively flat. There's excess power available, and they're happy to sign you up and increase their profits because it's not going to drive any new infrastructure needs on their end yet.

Ben Shwab Eidelson (02:13:34): And how things change! This is 2011, 2012. Fast forward a little more than a decade to where we are now, and we'll get there.

Anay Shah (02:13:43): But Brian took the job and ended up building a phenomenal team. And within a few years, his team was actually the decision-maker of where they were going to build out Microsoft infrastructure. And so it's a lead-in to us actually starting to care about where our energy is coming from and the whole complexity around where you're sourcing and doing these clean energy build-outs that Brian's team was leading.

Ben Shwab Eidelson (02:14:03): The team thought it was a real kind of planning challenge, right? And so they're bringing this up to leadership around, 'Hey, we need a lot of money to invest now to build this out.'

Anay Shah (02:14:12): They're doing their annual budgets, they're projecting years in advance, they're getting into their mid-year review.

Ben Shwab Eidelson (02:14:19): Microsoft's in this weird transitional phase. They have Bing that they're still growing; they have other services. Xbox is booming, Azure is still early innings. So it's not the dominant use of their internal server build-out, but it's a lot of different teams to juggle and predict. And so this forecasting challenge is a real one. You bring this to leadership, and what are you there to say?

Anay Shah (02:14:38): And you've talked to all the business groups to figure out what they're thinking, and you go to Ballmer with your prepared notes, and within a few sentences you get interrupted, and Steve Ballmer's like, 'Ah, the business groups don't know what they need. Let me tell you how to do this.'"

Ben Shwab Eidelson (02:14:52): And he says, "Give me the Excel sheet. You just draw a straight line from how growth has been going the last few years, and you just project it out, and you just build the data centers that that line shows you to do."

Anay Shah (02:15:04): Just a straight line from here to 2020. The business groups, they don't know what the plan is.

Ben Shwab Eidelson (02:15:08): There's actually a lot of wisdom to what Ballmer's saying because you realize that every team is trying to be excited about what they're building and Azure is going to have all this demand, but no one really knows—especially more than 12, maybe 18 months out. So how can you plan if you're building long-term, multi-year build-outs for what anyone's going to need?

Anay Shah (02:15:28): This moment of growth? It was quite difficult. And Janes' team found that he was consistently under-forecasting. But he did go back many, many years later, and he was kind of curious: how accurate were his forecasts compared to the straight line in 2020?

Ben Shwab Eidelson (02:15:43): He looked back, and Ballmer was off by how much?

Anay Shah (02:15:46): 5%.

Ben Shwab Eidelson (02:15:47): 5%. So they should have just followed the line. So sure enough, Microsoft keeps at it, and the power team at Microsoft—the data center team at Microsoft—becomes one of the biggest builders in this industry. They shift from leasing square footages to megawatt-based deals, as they become a major, major hyperscaler.

Anay Shah (02:16:08): There's a big learning journey for them, right, because they were a software company, and they had to grow very quickly into an infrastructure company. It was not an easy pivot to make, and they had to do that globally. The Microsoft team had the blessing of this entrenched enterprise customer base that was very loyal, very profitable, and very global. And so their go-to-market strategy was actually to follow their customers. And that meant that within a few years of launching Azure, they were getting calls from customers in Frankfurt, in Amsterdam, in Singapore. If their German multinational had data sovereignty questions, Microsoft would go and stand up capacity in the region.

And so by 2015, they had announced over 20 regions, which was actually more than Amazon at this time. Each anchored on an interconnection-rich metro and typically supported by entering with colocation facilities—perhaps the Digital Realties of the world—before moving on to dedicated Microsoft campuses once they built up enough critical demand. But this go-to-market strategy forced them to innovate and expand all over the globe, and it drove massive results quite quickly.

Ben Shwab Eidelson (02:17:33): And to that point, you fast forward to today, and Microsoft's business is in significant part the Azure business. Azure is a core growth driver. It's now 75 billion of revenue a year and growing 40% year-over-year. And so this company that was 'the software company' ('we write software, we sell software, those are our core platforms, those are our products, that's what we do') is no longer just a software company; they are, in large part, a data center company. So we've gone through AWS, Google and GCP, Microsoft and Azure. But there was another company that many thought for many, many years was just a toy. Let's talk about Facebook.

Anay Shah (02:18:16): The Facebook, the Facebook.

Ben Shwab Eidelson (02:18:19): In February 2004, Facebook's running out of a single server in Zuckerberg's dorm room at Harvard University. Early days caused crashes. In fact, many of his earlier products, including FaceMash, the 'hot or not' for Harvard campus, melted down the servers in the Kirkland House, and the IT department at Harvard was not pleased. But then it becomes a real company, right?

Anay Shah (02:18:40): And they start expanding to other campuses, and you've got different schools putting on different servers in different data centers.

Ben Shwab Eidelson (02:18:49): In a way that I think creates automatic resiliency because if the server crashed for, whatever, Penn, it's not going to bring down Harvard.

Anay Shah (02:18:56): And this isn't their concern, right? They're building this viral, game-changing platform that is exploding, probably beyond their expectations. And new campuses are signing up. So they're not really concerned about the infrastructure, but it's just growing organically. By the time they launch News Feed, you've got hundreds of millions of people refreshing this site, uploading photos by the billions, opening up Messenger just as a reflex of the thumb.

Ben Shwab Eidelson (02:19:23): And the company's spending all this money; they raised VC dollars and they're not happy spending all this money on fancy servers and colo cages.

Anay Shah (02:19:29): And so they're realizing, 'Why is everyone making so much money on us?' There's got to be a better way to do this. And there are two broad ways that they go about this. One is similar to what we've seen with Amazon, Google, and Microsoft, which is the thought that, 'Hey, we can do this better, cheaper if we build our own custom data center.' And so their first purpose-built facility was announced on January 10th and began operations in 2011 in Prineville, Oregon. And they soon followed with North Carolina, Sweden, and Iowa, and expanded rapidly. But Prineville was, just like all the others, quite intentional and quite strategic.

Ben Shwab Eidelson (02:20:09): Yeah. And so similarly, in this kind of Northwest region, you had cheap power, you had a dry, cool climate, and you had Oregon's incentives starting to come into play where they offered long property tax abatements on any improvements they made. All of this combined to make a great site for their first 'Lighthouse' data center. And if you look at the numbers of server growth, if you go back just to 2008, they had 10,000 servers; in 2009, 30,000 servers. Supposedly by 2010, when they are really kicking off and building the Prineville project, they have around 60,000 servers. They're trying to figure out how to scale up.

Anay Shah (02:20:42): And so they decide to engineer the building and the servers together. This very purpose-built facility. And just like the others, they realized that they can beat industry standards. And so they very famously and publicly came out with this first purpose-built facility with a very aggressive target of a 1.15 PUE. Industry average is 1.5. Historically, they were north of 2, and they were able to report 38% less energy, 25% lower cost against prior facilities. And do you think they ended up beating their PUE?

Ben Shwab Eidelson (02:21:15): No way.

Anay Shah (02:21:16): Smoked it: 1.07.

Ben Shwab Eidelson (02:21:20): So that means that only 7% of the energy going to run the data center went to anything other than powering the IT equipment. That is phenomenal.

Anay Shah (02:21:30): Amazing.

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Ben Shwab Eidelson (02:21:30): Did they keep this to themselves, how they did this? I think this is what sets Facebook's approach apart.

Anay Shah (02:21:38): This first part they needed to do, and they executed extremely well. But the second thing they did was far more revolutionary. In a very secretive world of data center development where each hyperscaler kept their builds to themselves, in April of 2011, Facebook open sourced their blueprints. They announced the Open Compute Project.

Ben Shwab Eidelson (02:22:01): It's hard to overstate how radically different an approach this was. This is an industry that kept the design of the servers in the data centers extremely secretive. They viewed that as core IP, differentiation, and notions of security. Google would publish papers, especially on things like PUE, and be visible about metrics that they wanted to highlight. But they famously didn't let anyone into their data centers until this really changed the game.

Anay Shah (02:22:29): Their motivation is pretty interesting. They look around at all the other big data center companies and they're seeing all the margins that are being made. They're like, 'Well, wait a minute, if we publish our blueprints and we get everyone else to buy in and publish theirs, that means we can drive down the costs by standardizing what we're building.'

Ben Shwab Eidelson (02:22:50): Ultimately, what they want is for their suppliers to be in increased competition. The best way to do that is not to make one deal with one supplier, but to say, 'Hey, suppliers, this is what we need, this is what we like. You make this, we'll buy it as long as it's the cheapest one out there.'

Anay Shah (02:23:04): Yeah, it flips the power dynamic. Now, instead of the vendors and suppliers dictating what the specs are and having multiple different specs for multiple different customers, they're able to standardize it and say, 'You're going to respond to the Open Compute Project standards.'

Ben Shwab Eidelson (02:23:17): And it was directionally aligned with all the innovation that we saw at Google. There's actually a big parallel echo here, right? Google built all of these in-house software orchestration tools that we talked about that made the data center reliable. Facebook grew up in that open-source world and benefited from that, and was able to build on top of that.

So it's not surprising that they're the ones to look at the hardware design and say, 'Why is this any different? We don't want to be the sole developers of this part of our infrastructure.' It actually benefits us to have other developers and the ecosystem in part because — and this really gets to a business model motivation — we're not trying to sell that innovation. We're not trying to sell anything to another business other than ads on our feed. The better and the cheaper this infrastructure is, the better our business margins are going to be.

Anay Shah (02:24:05): Yeah, we want to take this cost item and reduce it, so we can put more of our budget, more of our focus, onto the core business. They're looking at it and they're like, 'Well, the industry is using a 19-inch rack because that's what the telcos did.' 'Well, that's not suiting what we needed. There's no reason for the 19-inch rack. It was just a legacy element.' So Facebook decides to do it differently. They widen it to 21 inches and publish that to make it more efficient and fit their needs better.

Ben Shwab Eidelson (02:24:33): It's this funny thing how companies are open strategically, so it's important to be clear-eyed about what they're open about and what they're not. Would Facebook publish publicly the exact way that their News Feed ranking works? No. But that's very different than this infrastructure layer that benefits them when the ecosystem adopts it.

I think one thing that's amazing about it is how much the industry rallied around it and started to join it. OCP ripples across the industry. Microsoft starts bringing their designs into it. Google contributes big improvements, like we talked about, their 48-volt design. Telcos and everyone joins this, and it has the intended desired flywheel effect.

Anay Shah (02:25:12): It did normalize the idea of transparency, and this was right around the time where companies like Google at first were publishing their PUE. So, this notion that we can be transparent with our results as a way to drive the industry forward, bring down costs, and make this whole part of the business easier for everyone, spurred more competition.

Ben Shwab Eidelson (02:25:33): This kicked off the sustainability race among these four hyperscalers. I would say this started all the way back in 2007 when Google announced that they would achieve operational carbon neutrality.

Anay Shah (02:25:43): Each of the companies followed, and they were serious. Right? Microsoft committed to carbon-neutral operations in 2012. It drove site selection, their power purchase agreements, and how they negotiated and determined who they were going to work with and their relationship with their utilities.

Ben Shwab Eidelson (02:26:01): And it just accelerates. Amazon kicks off the Climate Pledge to get net-zero by 2040. You have zero-waste goals. Microsoft announced water-positive by 2030 in 2020. Google catches up with a similar announcement a year later. So you just have this era of accelerating commitments and goals.

I think it's good to ask, why is this? Does it just feel good? Having worked at some of these companies, I do genuinely think the leadership wants the company to have a positive environmental impact, and it is the economically right thing to do as well. These goals of efficiency lead to your data centers, which are a growing item of operational scale, costing you less and less.

The other thing this does is catalyze different renewable buying and procurement habits, right? These teams, like the one led by Brian Janis at Microsoft, become energy-buying procurement machines. They're looking to help accelerate that next solar project, that next wind project, to then be able to buy — via what's called a virtual power purchase agreement — the accounting for the clean electrons. Google pushes this even one step further to say, 'Hey, we want to buy electrons that are generated at the same time that our data center is using electrons.' So we want this notion of 24/7 carbon-free electricity. This really pushes the clean energy ecosystem forward, I think, in a material way.

If we look at these three commercial cloud businesses of AWS, GCP, and Azure, they are behemoths, as we said. Azure hit $75 billion last year, GCP surpassed $50 billion, and AWS was on a run rate of $111 billion for that business. You total that up, that's $236 billion a year spent only on the direct cloud infrastructure businesses.

Anay Shah (02:27:51): Let's put this in perspective. That's $236 billion across these three companies spent on the infrastructure. US consumers spend $500 billion annually on electricity. So we're talking about half the spend of all residential electricity across this country.

Ben Shwab Eidelson (02:28:10): So I think it is safe to say that we have now entered the utility era of computing. It just so happens that the utilities are Amazon, Microsoft, and Google. Meanwhile, Meta, first of all, doesn't want to buy power from those three utilities. They also use so much themselves that they want to build their own and have no interest in selling access to it. They just need their own data centers to run everything that they're doing in-house at such an immense scale.

So we end the 2010s with a very mature cloud, right? I think it's almost in the background. People don't even need to talk about and explain the cloud anymore. It's like, 'Of course, this is how you're going to start and run your company.' The functionality is all grown up. All of the companies are now running containerized Kubernetes things. Your services are portable. Yes, they have their functional differences and their sales differences, but they're all kind of mature and stable, multi-region. All of this stuff going on.

Anay Shah (02:29:04): Nobody asks, 'Do you have a cloud strategy anymore?' It just is the way business is done.

Ben Shwab Eidelson (02:29:08): You also have the new startups that have built out the missing pieces. You have the Snowflakes of the world that are helping build more specialized databases. You have Datadog helping you with orchestration — real significant public-scale businesses that have built the missing components of the cloud moment.

Anay Shah (02:29:23): And the feeling right now is one of maturity of the cloud infrastructure, maturity of a new large-scale data center build-out, and at the same time, a huge pressure to continue to build. There is a global race; it is fierce, it is competitive, and it has many, many more players than just these hyperscalers. To give you a sense, Microsoft scaled from 35 regions to 75 regions over the period of a couple of years. So they were adding an entire region a month. This is data center region build-outs. Deal size was ballooning at the same time. A decade ago, a large lease might have been 5 megawatts. You fast forward to the end of the 2010s, and every one of the hyperscalers is reserving 100-megawatt campuses. So, a 20x growth in the size of the data center over this decade.

Ben Shwab Eidelson (02:30:21): These two big points fit. The whole idea that the cloud now can be taken for granted and invisible is because of these scaled, global build-outs. You don't get to do that if the thing isn't just working as usage is exploding across the entire industry.

Anay Shah (02:30:35): The industry has matured around private equity money coming in. You've got developers treating this as a real estate asset class, and they're stockpiling land, pre-building substations ahead of demand because they know what the hyperscaler or the next large company is going to need, and they're going to snap up that capacity. So this build-out is fierce on land.

Ben Shwab Eidelson (02:30:56): Not only is it fierce on land, it's fierce in the seas. It's not enough just to have your own servers and your own buildings and your own power infrastructure. You need confidence that you can stay connected. The best way to have confidence is to put your own cables underwater. So instead of just renting capacity, which of course they continue to do, Microsoft, Meta, Google, and others start financing and building their own undersea network. This way, they can control end-to-end.

You think about Google's vertical integration: it starts with the box, it goes to the rack, then it goes to the building, then it goes to the campus, then it goes to the wires that connect the campus. That's how you get confidence in what you're building. This leads to improved economics and improved performance.

Anay Shah (02:31:38): And performance continues to drive forward. But by the end of the 2010s, PUE had plateaued around an incredible 1.1. Only 10% of the power being used in this facility is not directly for the server and IT equipment. So, as we talked about in the sustainability race, the bragging rights had shifted. The marketing teams had moved off of PUE, and now they're talking about carbon intensity (CUE). Now we're talking about water intensity (WUE), and the holy grail metric here is who is launching 24/7 real-time renewable-powered data centers. Everyone's putting out their climate pledges, building into their plans, and driving the entire renewable energy and PPA world forward through this genuine focus on carbon intensity.

Ben Shwab Eidelson (02:32:28): Intensity. The cloud by 2020 was doing what it needed to do. So we now had this scaled, mature global technology for storing things, computing things, connecting all of us, streaming content, and powering video calls. Why might that be helpful as we go into 2020?

Anay Shah (02:32:48): Well, Ben, we're now upon everyone's favorite moment in recent history: the dark days of the COVID pandemic — a time where we all had to stay at home and a time where society, systems, public health, everything was stretched to the max. The same actually goes for our data center infrastructure. While the 2010s saw fast, consistent growth of cloud computing, COVID compressed five years of adoption into about 18 months with everyone at home. Video calls, gaming, online collaboration, telehealth, e-commerce, SaaS — everything surged all at once. We all remember the endless video calls, but let's put that into perspective a little bit.

Ben Shwab Eidelson (02:33:35): Going into this era, Zoom had something like 10 million folks as daily meeting participants. Fast forward to March 2020: they hit 200 million in four months. One month later, 300 million. So, just explosive growth. Google Meet similarly saw 3 million new users per day in April. Peak usage was up 30x since January, and gaming was exploding. They're at home, looking for entertainment, so Steam is shattering records.

Anay Shah (02:34:03): Netflix and YouTube famously had to throttle down the network speed to lower resolutions to avoid essentially breaking the Internet.

Ben Shwab Eidelson (02:34:11): I was at Stripe at the time, and to the e-commerce point, it was just this explosive moment where, sure, you saw some businesses, perhaps in travel in particular, struggle and go under. But the majority of Stripe's users were exploding. Everyone was ordering stuff online. Instacart and DoorDash were booming. It's easy to say five years of growth in 18 months. What does it actually feel like when you're working on the infrastructure? It feels like everything is breaking, and you're trying to make sure no one in the outside world feels it. We managed to accomplish that, and I'm very proud of that. The API stayed up, and payments were processed even as they scaled rapidly.

Anay Shah (02:34:45): Another company in the crosshairs that seized the day was obviously Zoom. They had to scale infrastructure from 10 million to 300 million users in months. They added servers in colocation metros, they used AWS, they used Azure, and they expanded aggressively on Oracle Cloud Infrastructure. They were just doing everything they could to ensure that those video calls didn't have delays.

Ben Shwab Eidelson (02:35:09): Under the hood, the way Zoom works, you can think of it split into two: the Zoom Control Plane, which was making sure that it would respond to your logins and understand what you are as a participant in a meeting. But then you actually had the video feed, and that would have these meeting zones where Zoom would make sure to connect you to the closest meeting zone in a carrier-dense building. So it's kind of very similar to the CDN networks that we talked about earlier with Netflix, but it had this dual, bi-directional nature to it. They were in a race to add more of these peering machines in those telco hotels that we talked about earlier.

Anay Shah (02:35:41): And Zoom became proof that the cloud's elastic promise was real. In the greatest stress test of its time, capacity could materialize as fast as humanity demanded it. This was the moment. We were in an era of exploding demand, and there are a few key themes that affect the data center world in this moment. One of them is famously known as ZIRP. On March 15, 2020, the U.S. Federal Reserve cut its target rate to the range of 0 to 25 basis points. What does that mean in the infrastructure world? That basically lowers the hurdle rate for your risk for speculative builds. So now campuses and shells can be built out way ahead of leases being signed because the carrying cost of that infrastructure was so low, because your cost of capital is so low.

Ben Shwab Eidelson (02:36:33): You're buying a house. This was the time when your interest rate on the mortgage was as low as possible, so you could buy more house. Well, if you are a company trying to build data centers, it's the same story. You can buy more data centers. Your same amount of principal is going to go much further in building out more.

Anay Shah (02:36:50): As a company in this infrastructure environment, you can take more risk.

Ben Shwab Eidelson (02:36:54): The hyperscalers took advantage of this and started pouring money into building new data centers. But so did Blackstone. In 2021, Blackstone purchased QTS Realty Trust, one of the largest data center builders in the industry, for $10 billion.

Anay Shah (02:37:07): There's so much capital floating around, and the beauty of the data center asset class was that it had started to look very predictable. It was looking like utility-style returns. Everyone's investing in the REITs and the infrastructure debt. This is fantastic for the counties that were building this out, namely Loudoun County, which we've talked about before. Right? Their budgets were suffering in the COVID era, but because they're Data Center Alley, they saw their server equipment tax go past $400 million annually, and that prevented them from needing to raise property taxes to fill their budget gaps.

Ben Shwab Eidelson (02:37:46): I think at some point their vacancy was below 1% in all of this. So there's just so much demand for space, colocation, interconnection. Everything is just flying off the shelves.

Anay Shah (02:37:56): Another major theme here is what is defining the build-out. What you find now is that it starts to grow the panic around the urgency for electrical supply. It was both the amount of supply of power that you want, as well as the time to power, because there is this capital looking to go to work. The question was actually, 'How soon can you get me the power?'

Ben Shwab Eidelson (02:38:23): This is new, right? The scale of the data centers earlier — these 5, 10, 15-megawatt data centers — didn't necessitate a big conversation with the utility. We're now talking into the 50 to 100-megawatt builds, and this changes the dynamic with suppliers. We had folks in Ireland saying for the first time, 'We're going to pass regulation that says the utility can block a data center from coming in because it's too much load.'

Anay Shah (02:38:47): You can't just walk up to a utility and plug in for 100 megawatts. For the first time, grid capacity and planning was a throttling factor in how fast data infrastructure could grow.

Ben Shwab Eidelson (02:39:01): The era from 2010 to 2018-2019, which was this big shift to the cloud that we talked about, was one of increased efficiency in these systems that ended up balancing out the increase in demand and capacity. So there's actually relatively flat power-use growth despite there being so much growth. While there was more demand, it was a steady increase, and the efficiency jumps could go in concert with the growth jumps.

Anay Shah (02:39:30): So you buy a new phone, you buy a new computer — most of it's all the same, except you just get more processing power because of Moore's Law. That brought about these efficiency gains. We were building a lot of new data centers and compute, but total energy consumption of data centers actually remained relatively flat throughout this period. It was largely due to a few factors. One is that we moved into the...

Ben Shwab Eidelson (02:39:54): ...cloud, and everything we talked about earlier with utilization can then come into play, right?

Anay Shah (02:39:59): Exactly. One study found that the cloud is 93% more efficient than running your compute power on-premises because you have less wasted assets combined with everything we talked about with PUE and driving down that efficiency.

Ben Shwab Eidelson (02:40:14): Well, now all of a sudden you had COVID plus ZIRP, where you're not waiting to get more efficient; you're just trying to build more and more.

Anay Shah (02:40:22): We'd also kind of run out of that low-hanging fruit, right? PUE is at 1.1.

Ben Shwab Eidelson (02:40:28): So if you look at the big four that we talked about before — Amazon, Microsoft, Google, and Meta — between 2017 and 2021, in those four years, they doubled their energy use to 72 terawatt-hours in 2021.

Anay Shah (02:40:40): So much greater demand, combined with a loss of the PUE benefits and the cloud efficiency, means we're in a new paradigm of power usage, and the industry is having to reckon with that.

Ben Shwab Eidelson (02:40:52): It's pretty amazing that we had such a flat period for how much growth that we just talked through. I mean, the whole scale-up of the cloud led to growing usage, while the efficiency gains were so significant. We've run out of those tricks. Right?

Anay Shah (02:41:05): Right.

Ben Shwab Eidelson (02:41:06): The hot and cold aisles are contained. We've virtualized everything; we've containerized everything. We need to come up with some new tricks. I hold out some optimism that necessity is the mother of invention, and we'll figure out some new tricks because we'll have to.

Anay Shah (02:41:18): We have to.

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Ben Shwab Eidelson (02:41:20): That being said, there is an extreme way that a new power user is showing up in this era. Let's talk about the crypto miners for a bit.

Anay Shah (02:41:29): Let's talk a little bit about crypto because it's not just a hobby, but actually ends up being a competitive buyer in the data center infrastructure build-out.

Ben Shwab Eidelson (02:41:40): By 2022, 100 to 150 terawatt hours. So that's almost 50% of what the rest of the data centers are consuming now going to crypto mining. Go back to 2009, Bitcoin launches, and it's pretty much just a dark corners of the internet thing, right? Someone mining on a PC in their bedroom.

Then, finally, folks figure if you buy GPUs off the shelf, you can go faster, and people start even designing custom ASICs that are designed to do nothing but mine Bitcoin and other coins. By the mid-2010s, mines had become significant power loads, and folks had started to build these out wherever they could find cheap electricity.

Anay Shah (02:42:14): And while the technology behind crypto was interesting from a business perspective, it was less of an IT business and more of a power arbitrage business, because it was all based on how efficiently you could mine and where you're doing it.

Ben Shwab Eidelson (02:42:29): Hard math computation as many times as you can. This is purely solving problems using power. And this is very, very different than everything we've said about data centers before. This is just compute as cheaply as possible.

Anay Shah (02:42:43): And this really comes to a collision point in the real world where you had markets like Iceland and Eastern Washington where Bitcoin miners were outbidding these cloud providers for the cheap hydro and the power that was available.

Ben Shwab Eidelson (02:42:57): Then the crypto industry starts to realize that there's power that's not useful to others. Let's look for ways and places to put crypto mining that you couldn't even put a data center or a normal industrial load.

You're in an oil field and you're flaring excess gas. What if you put a turbine there, burn that, and power a crypto mine? This is how Crusoe, which later became one of the premier AI data center build-outs, got started finding that cheap power source. And so, it's interesting how many of these power-related innovations came from the crypto moment.

Anay Shah (02:43:27): Then, crypto loads were different. They were large, but they were fairly mobile. So that was an advantage in terms of where and how quickly they could place. But it also meant that policy could step in and shape the industry fairly quickly.

Ben Shwab Eidelson (02:43:39): By 2021, most crypto mining was happening in China. There was the cheapest power. It was close to where the hardware was being manufactured. But in 2021, China cracked down. There was no more crypto mining. So all the miners fled to Texas, to Kazakhstan, to Canada. And so, by early 2022, the US share of crypto miners was back up to almost 40%. This is up from 3 to 4% in 2020.

Anay Shah (02:44:03): What started out as a hobby and took over the fintech world and financial infrastructure forced real estate, power, and the compute industry to wrestle with how to connect very large, very flexible loads to stressed grids. And what innovations can be born out of trying to wrestle with that.

On that point, crypto as an industry didn't care much about its footprint. But the rest of the industry, and the data center industry in particular, continued to be very focused on the carbon intensity of their operations. Now, these hyperscalers were tracking their carbon footprints with extreme precision.

Ben Shwab Eidelson (02:44:40): By 2020, Amazon became the world's largest buyer of renewable energy. It's a scale thing. Amazon signed the climate pledge. And for Amazon to hit net zero, they didn't just have to decarbonize their data centers and offices; they had fulfillment centers and travel of unprecedented scale, delivering all the packages.

Anay Shah (02:44:59): And this is beyond just the quote-unquote "right thing to do." As we've talked about, oftentimes the cheapest, most economical way to get new load onto the grid and scale is through renewable power. And in a zero-interest-rate environment, it actually makes these PPAs more and more attractive, and it lowers the hurdle rate. So, a wind project that might otherwise have been too expensive in this environment is profitable and able to be signed on to a Microsoft new build-out.

Ben Shwab Eidelson (02:45:30): It's hard to appreciate the flywheel of more demand for the data center services driving data center build-out, which can be funded by a zero-interest-rate environment, which then all drives all the renewable energy build-out, which is similarly funded by the zero-interest-rate environment. You just had an infrastructure build flywheel running that set us all up for what might come next.

Anay Shah (02:45:53): It was an extremely timely moment in the evolution of data centers and actually served as a dress rehearsal for the unprecedented scale that we are going to see in the AI boom. This moment during COVID, with cheap capital flooding the system, was driving a massive new build-out. Power was starting to become a much more limiting reagent in the development of our infrastructure, and there was a breaking down of our global supply chains which was feeding this build-out. All this happened at this moment, right before a massive boom.

So, now we've spoken about the companies building the big infrastructure, the big servers powering our life, and we have a $4 trillion elephant in the room that I think it's time to introduce.

Ben Shwab Eidelson (02:46:40): It's now time to talk about Nvidia. Nvidia started as a company that was trying to figure out how to make gaming run faster on computers. So, they made gaming chips. They did this for years and years and years. And I remember them recruiting many a student out of the Stanford EE department to go work on gaming chips.

Anay Shah (02:46:59): They were very much tied to the gaming industry. Their growth was correlated to it.

Ben Shwab Eidelson (02:47:05): But it turns out the same thing that you're doing in a game — which is doing a bunch of math to figure out how to render a pixel on a screen — is what you sometimes need to do complex science: a bunch of tough math problems at once. And if you're going to build a cryptocurrency, what are you doing? As we said earlier: a bunch of tough math problems at once.

Anay Shah (02:47:21): A lot of compute, matrix multiplication at...

Ben Shwab Eidelson (02:47:24): Scale, to such an extent that their stock price starts to get tied to what's going on in crypto mining.

Anay Shah (02:47:29): First, they had been tied to the game industry; now they became even more correlated to crypto. And then, in 2018, you have the crypto winter. That fall in the crypto industry dragged Nvidia's stock down 17% in one day.

Ben Shwab Eidelson (02:47:45): Over that period, they got cut in half.

Anay Shah (02:47:47): And so, enter COVID, and you hit a crypto boom-bust cycle. But machine learning algorithms are spitting out more and more recommendations to us as we're sitting on YouTube and Netflix and Instagram. And you know what powers a recommendation model? An Nvidia GPU. And so, growth of these training models takes off.

Ben Shwab Eidelson (02:48:08): And you can see it as a line item, right? In their earnings, they have this carve-out for what they call their data center business, which is really the growth of this business. You see 60% growth.

Anay Shah (02:48:18): This hit nearly $4 billion in just a quarter. And this consisted mostly of their A100 chips. They were selling thousands of these.

Ben Shwab Eidelson (02:48:26): Right. And so, these A100 chips became the backbone of the early era of training models. So, in 2020, Microsoft announced the next stage of their partnership with OpenAI. They committed to buying 10,000 or more of these A100 chips to build a special data center, a special supercomputer for OpenAI to continue developing their models. And remember, at this time, OpenAI was not really a household name; it was...

Anay Shah (02:48:47): ...a research project, right?

Ben Shwab Eidelson (02:48:48): Yeah, I mean, that's right. It was a leading, well-funded AI lab with this deep collaboration with Microsoft, building models that were available via API. And in the same year, they published a paper that really demonstrated something that they had discovered and what they call their scaling laws, showing that the bigger the compute and the larger the data set you threw at the problem, the better the model. And Google was discovering very much the same thing: the more chips, the better the model.

Anay Shah (02:49:15): How convenient. The more chips, the better the model.

Ben Shwab Eidelson (02:49:18): Music to Jensen's ears, I think.

Anay Shah (02:49:21): Indeed. And so, in 2022, right as the crypto crash was coming, OpenAI released a new model, GPT-3.5. It was a huge upgrade from GPT-3, and they had built it in their new Microsoft data center. And they were thinking about new ways to show to the world the value of what they've been able to build.

Ben Shwab Eidelson (02:49:41): Are you saying not everyone wants to use an API sandbox to understand how good a model is?

Anay Shah (02:49:45): Right now it's a little bit hard to access, but maybe if you put a simple box as a UI and create a little chat feature on the GPT, it'd be a...

Ben Shwab Eidelson (02:49:59): Nice demo at least, right?

Anay Shah (02:50:00): Right. Few people might be interested, so they decided to put out this chat function. On November 30, 2022, ChatGPT launched. In five days, they had a million users. This was far and away beyond the team's expectations, as well as their capacity planning. According to Sam Altman, they expected an order of magnitude less interest by January 2023. ChatGPT has become the fastest-growing consumer software application in history. So, after getting a million users in five days, they crossed 100 million users in just two months.

Ben Shwab Eidelson (02:50:41): By this last summer, ChatGPT's website was among the top five most visited sites in the world, right after Instagram. So there was real consumer and enterprise pull. The world had been waiting for AI to be a thing for a very long time, but this was the moment where everyone said, "Okay, this is it. This is the time."

Anay Shah (02:50:59): It ended up with over a billion prompts a day. People were loving this thing.

Ben Shwab Eidelson (02:51:02): And everyone knew, to make it better, we just needed more chips. Why is Jensen so delighted? Where are we now?

Anay Shah (02:51:09): Three years later, more chips, better models, right? Three years ago, in 2022, Nvidia's data center revenue was growing rapidly: $4 billion in revenue that quarter. Last quarter, their data center revenue was a staggering $39 billion. That's it growing nearly 10x from what it was in three years.

Ben Shwab Eidelson (02:51:30): To add $36 billion in quarterly revenue in three years, it's unprecedented.

Anay Shah (02:51:37): This is powered by this discovery of the scaling laws.

Ben Shwab Eidelson (02:51:41): And the timing of their product launch could not have been better. They had the A100. That was essentially for training — scaling your training. But they launched the H100 in 2022. That was designed for this moment. It was the rocket boost of a chip. It added new special math modes tailored for transformers. It added more high-speed memory. As a result, it slashed training time and made inference faster.

Anay Shah (02:52:07): And these H100s are flying off the shelf, from selling a million and a half in 2023 to over 2 million in 2024. And the big players, having learned from past years of the cloud boom and the COVID demand boom, are ordering these in the hundreds of thousands.

Ben Shwab Eidelson (02:52:23): These things are not cheap. Each chip is like a car, right? $40,000 apiece, supposedly. You couldn't buy one chip at a time.

Anay Shah (02:52:32): No. Why would you sell one car at a time when you can put them in boxes?

Ben Shwab Eidelson (02:52:35): They really sold in two models, right? There are training boxes and inference boxes. The training box is an 8-GPU box with a CPU in the middle. They're hardwired with this NVLink connection. What's really interesting about this is it's all about making it effectively one big GPU. It's all about creating this really high-bandwidth connection between these GPUs. Because when you're training, that's what you want. In NVLink, if anyone's ever built a computer, you would have what's called a PCI connection in a motherboard. The way your Nvidia graphics card would plug into your computer was using PCI. It felt like a really fast connection. But it's not fast enough for this. So Nvidia invented NVLink. It's up to 15 times faster than that connection. So these eight GPUs can communicate extremely quickly. One training box is about $500K to buy. Then they also launched these inference boxes. And so, this is two GPUs coupled with a bunch of memory. To be clear, inference is when you're asking ChatGPT a question and it's responding. That process of responding is inference. You want a lot of memory to be able to understand all the content in that response. These boxes were designed with a lot of fast memory, connected to be able to share context across the model.

Anay Shah (02:53:46): Now, selling these GPUs in a box actually has a physical space implication, right? So you've heard us talk about the racks and racks in the data center as far as the eye can see. These racks have slots for servers, and those servers have a traditional power consumption. But when you put in a specialized server, it starts to change the power consumption of that rack and therefore of the square footage and of the data center. So let's unpack, just for a moment, what's happening at the rack level when AI arrives.

Ben Shwab Eidelson (02:54:16): Historically, one rack would be maybe 400 watts. So you'd build a rack with 20 to 30 of these servers. You'd have some networking equipment. So, somewhere around 5 to 10 kilowatts of power going to a rack — that's like 10 hair dryers running at the same time, to give you a sense. Now, these GPU boxes arrived — those eight-GPU training boxes. Each of those is up to 10 kilowatts by itself. So it's the same power consumption and heat as the whole rack was. But you could now pack a rack physically with four to eight of those boxes. So, all of a sudden, you're an order of magnitude up in power consumption, up to 90 kilowatts in a rack. This has a bunch of implications, not just for power, but also for cooling. An inference box is somewhere in between; so a whole rack, maybe, is up to 40 kilowatts.

Anay Shah (02:55:01): One of the things driving this power conversation we've been having is, again, not only the size of these data centers, but now the density of power required within these data centers. This is what makes an AI-driven data center so much different from a traditional data center.

Ben Shwab Eidelson (02:55:21): Just 20 of these training racks in a pod is one megawatt of power. That's on the order of a small, 800-person town powering electricity. So, if you get 200 of these racks, you get to an 8,000-person neighborhood very quickly. You get to a gigawatt of Seattle-scale power.

Anay Shah (02:55:41): As you pack these GPUs that have higher power density, they run hotter, and you can't let them run hotter. So now, how you cool your GPUs and your racks needs to evolve.

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Ben Shwab Eidelson (02:55:55): The problem is, air can only move heat so quickly. And if you were trying to do that, even with the inference racks, you would need leaf blower-level fans to move the air out. And so you need to start bringing more cooling down to the rack level.

So the first thing that you can look at is retrofitting the racks with what's called rear door heat exchangers. This puts some water cooling directly alongside the rack so that when air is moving over those hot chips, some of that air, instead of just going straight into the hot aisle, can get extracted via some tubes of water running inside the rack. That is a nice convenient half-step because you don't have to change how you're actually cooling the overall system.

The next jump is the jump to direct chip liquid cooling. This is where you mount cold plates directly on your chips and you run water right near the chip to actually extract the heat away, instead of expecting air and heat sinks to do it. And so, increasingly, especially with the most powerful GPUs—and to be clear, each generation of GPUs gets more powerful and therefore has more heat to remove—we are moving to a water-cooled world.

Anay Shah (02:57:03): We've crossed the threshold of physics where air can cool this amount of heat being emitted at this level of density from the racks. And so now it is a liquid-cooling world. Now, at the end of the day, you've got to move the heat from inside to outside. But it's very environment-dependent. In the right climates, you can expel it outside. And that's why we saw some of these data centers looking at Finland and Oregon and certain geographies that enable that to happen. And this consumes very little water. But in other climates, you have large evaporated water cooling towers. This is where the problem of the water impact on the local community starts to come into play.

Ben Shwab Eidelson (02:57:45): Fundamentally, what we're trying to do is we're removing heat through that phase change, right? You're evaporating water; that's a massive transfer of heat. These towers increase the surface area of the water. Water evaporates out. It looks like steam going up from these cooling towers. And it's a very effective and efficient way to cool things down. But it can use up your water.

Anay Shah (02:58:03): And so you end up with this energy-water trade-off in certain environments. And that becomes a big planning focus not only for data centers that are working with their local community, but also those that are power-constrained and built by companies that care about carbon intensity. One study Google did in 2022 found that water-cooled data centers use about 10% less energy, which means they emit about 10% less carbon emissions than many of the air-cooled data centers. Now, the problem is, you can't do this as easily in water-stressed areas.

Ben Shwab Eidelson (02:58:38): So there's essentially this knob you can dial up and down. To be clear, it's possible to build data centers that don't use any water, but they're going to use more electricity to run an air conditioner in your house. You're not using a bunch of water, but you're taking a ton of energy. And so I would argue if we care about water, the best thing we can do is have clean electricity to make this an easier trade-off to make.

Anay Shah (02:59:00): So if you zoom out and look at water, globally, data centers consume over 550 billion liters of water annually, which is a big number. To put that into context, a single 100-megawatt data center can consume 2 million liters a day, or the amount equivalent to 6,500 U.S. households per day, both direct and indirect water usage. So this is a very big, real, and current issue for data centers in terms of where they site their data center, how they get permitted, and the ongoing operations.

Ben Shwab Eidelson (02:59:35): The local question is hyper-important. Some reporting that The New York Times did about the situation in Georgia where, supposedly, when Meta broke ground on their billion-dollar data center build-out, water taps in some residents nearby went dry. And there's some back and forth around whether or not you can prove direct causality. Still working out whether or not that is actually the case, caused by that data center. But it is known to be true that that data center is using about 10% of the county's total water and it's driving water prices in the region to go up.

Anay Shah (03:00:06): So now let's dive into what is the largest constraint to data center build-outs today, and that is power. We've talked about the evolution of power moving up the decision stack. From the early 2010s through the COVID era, and now in the AI era, power is really the limiting reagent.

Ben Shwab Eidelson (03:00:30): The image in my mind is: we have the largest, most complex machine that humankind has built in the power grid that has brought us such evolution in how we live our life. And it is colliding with the new, complex, most interesting machine of the data center. And this collision and the force of it that we're living through right now is defining this period.

Anay Shah (03:00:53): And it is no small collision. It is a function of two things, right? It's a function of speed and a function of scale. So, as we've seen, there is an absolute arms race on compute, because the faster you can get compute online, the better your models are, the more revenue you're going to make. And timing matters a lot here because a model trained in 2025 can become obsolete by 2027. So if you have a two-year delay in getting your data center online because of the power grid, it becomes a dealbreaker. It has to happen now, coupled with the scale of these data centers. And so, as we talked about, a typical data center started as 5 to 10 megawatts. Then, just a few years ago, we were in the 50 to 100 megawatts. And now this year we're starting to see gigawatt-scale announcements. Now, to be clear, these are campuses that make up a gigawatt. There are multiple facilities, but they are still being built out cohesively and will put a strain on the grid and the local community at a gigawatt scale. Now, to put a gigawatt in perspective.

Ben Shwab Eidelson (03:02:00): This is the scale of a city's power consumption, right? Maybe a Pittsburgh or Cleveland. And Google's data center electricity use doubled over four years and was up to 30 million megawatt-hours in 2024 from 14 and a half million megawatt-hours in 2020. To put that all into perspective, that's about 3 million U.S. homes, or around three-quarters of a percent of all U.S. electricity consumption.

Anay Shah (03:02:22): Which checks out, right? If data centers are currently about 4% of U.S. electricity use, I guess it makes sense that Google's about a fifth of that.

Ben Shwab Eidelson (03:02:31): And it's worth pausing there for a second to talk about that 4% electricity use. When I hear that number, it actually seems shockingly small. For all of the discussion of data centers and electricity, it's like, okay, it's 4%. Let's say it goes to 8%. Compared to industry, compared to cooling and heating buildings. It all feels small. So why might this be such an issue of conflict?

Anay Shah (03:02:54): It's a great question. It might have to do with the fact that it's misleading to think about it in terms of total national electricity use, because a data center has a localized and concentrated impact, right? You're not spreading this load across multiple utilities. And not only is it localized and concentrated, it's localized and concentrated in similar areas. Because, as we've been talking about, the network effect of the value of a data center being positioned near the undersea cables and near other network points is where you get a lot of performance gains. And so you end up concentrating yourself in Virginia, in California, in Texas. There's just basically 10 states where you're seeing new data centers come online. And so there's a tremendous impact at a local level—at the electricity prices for that community, that county, and in that state—but not necessarily at a national level.

Ben Shwab Eidelson (03:03:52): We talk gigawatt scale. That is all about these large training clusters. When we're talking about inference—which is, hey, ChatGPT, processing your response—you actually probably want that spread out, right? You want that closer to the edge, and that's where you need it close to the interconnect, because you want it to not have latency when interacting with the user and their data.

Anay Shah (03:04:10): So let's talk a little bit about why you need a gigawatt data center or a 5-gigawatt data center to do the best training possible.

Ben Shwab Eidelson (03:04:17): You don't really want to think about it as one GPU or a rack of GPUs or a building of GPUs. You want, as much as possible, the whole data center to act together. Because the way that a transformer actually trains is that it makes guesses about what should come next, and then it compares that to reality, and then it tunes the weights across it. And you're doing that collectively across the whole model. And to do that, you need all of the computers working on the problem to be able to communicate quickly. Otherwise, the whole thing is training slowly. The faster those exchanges can happen, the better. And so you want the connectivity between chips to be as fast as possible. You want the connectivity between boxes of chips to be as fast as possible. And so it does not work if all of a sudden half of your computers are on the East Coast and half are on the West Coast, because the speed of light across the country is going to slow you down by multiple orders of magnitude than within one campus, within one center. And that's why Meta wants to build a 5-gigawatt campus because that's going to get them the biggest training model possible.

Anay Shah (03:05:21): There's also an interesting nuance here where training models hit higher load factors than an inference model.

Ben Shwab Eidelson (03:05:30): And in a typical data center, you're trying to run this all at once and you're utilizing ideally all your expensive chips. And so all of that leads to a higher utilization and more power and more compute.

Anay Shah (03:05:43): So we talked about the speed. More time to power is time to revenue. We've talked about the scale, now going from 100 megawatts to gigawatts. So this creates an objective function when we're thinking about the power constraint on data center growth. And that ends up being: how do we secure large 24/7 power where you need it, when you need it, quickly and ideally as clean as possible? Should be easy, right?

Ben Shwab Eidelson (03:06:13): Oh, wait. Not to mention there are supply chain bottlenecks in transformers, bottlenecks in gas turbines, and bottlenecks—

Anay Shah (03:06:20): In labor and in specialty skills.

Ben Shwab Eidelson (03:06:22): We don't have the most up-to-date, freshest grid with transmission lines. So this gets into a very tense moment and an area that arguably breeds innovation.

Anay Shah (03:06:33): So the reality is, getting affordable power that is 24/7, quickly and cleanly, is going to be very rare. That Goldilocks situation doesn't really exist today. And so we're going to have to compromise on at least one of those variables. Now you've got a few different options to get these data centers online, right? You can either hook it up to the grid and use power that already exists. You can build new generation of power that's off the grid and power that data center, do some sort of hybrid in between, and over the long term, we can build out large new generation like nuclear, geothermal, and others.

Ben Shwab Eidelson (03:07:14): Watching this closely, there are both a lot of moments of concern, right, because we're at times doing things like keeping a coal plant running longer than we might have otherwise. But there are also a lot of interesting moments of innovation. A lot of growth in storage to help supplement what's going on and smooth out power generation, and co-locating these in new hybrid ways.

Anay Shah (03:07:34): And there's a tension that's largely dictated by timing, right? There's a near-term pain that local communities are facing when you bring a data center online and potentially increase electricity prices. But there's also cause for optimism because you've got well-funded companies who have an interest in long-term sustainable power. And the fact of the matter is, the most affordable, long-term sustainable power we have is going to be clean and renewable. And so this moment actually offers an opportunity for us to accelerate a lot of new clean build on the grid and reshape our electricity infrastructure.

Ben Shwab Eidelson (03:08:10): I think, at the end of the day, there's also a big issue of incentives. These hyperscalers, they want to build these models. Now, many of them are used to mostly still building their businesses on software-based timescales. And the reality is, despite all the discussion of the utilities and electricity, for them, it's a bottleneck. The actual cost of energy for them to build the biggest models is like 2 to 6%. It is all in the people and the hardware. It is all in the chips and the humans. And so for them, it's all, as you said earlier, this speed to getting out there. And that's not how our system is set up. That's not how our incentive structures are set up, right?

Anay Shah (03:08:51): That's right, because the utility supplying that power operates on an entirely different paradigm. In a typical electric utility, power delivered in 2027 is valued at the same amount as power delivered in 2030. Utilities don't differentiate those products, but for the customer—a Google or Meta—there's a massive difference for their business. They need power today.

Ben Shwab Eidelson (03:09:17): How much more would they pay if they could get power now versus three years from now?

Anay Shah (03:09:21): And how much could we unlock in terms of investment into our utilities if they could take advantage of the fact that companies are willing to pay a lot more today than in two years?

Ben Shwab Eidelson (03:09:31): Brian Janis calls this the Watt-bit spread. It's the economic arbitrage between an available Watt and the ability to turn that into a bit. Reality is, the speed of regulatory change in utility tariff pricing—which is a fancy way of saying how quickly the utility can change anything about their economics—is slow. And so despite there being an obvious market demand structure, it's not going to change in the next 12 months the way that utilities price their product.

Anay Shah (03:10:03): Utilities are public goods, right? They power our lives and our schools and our hospitals. And so for good reason, they are regulated. But because they are regulated, they take time to change. And moreover, we have a federated system. We have some 3,000 different utilities across the United States. And so making that change across this country, or even in the 10 states where data centers are getting built out, will take a lot of time.

Ben Shwab Eidelson (03:10:27): Power has become the dominant question of: where can you build your data center? Because you can't go do it without that. But it didn't remove the fact that the other questions still remain. For example, you need people to go build a data center; you need a lot of electricians; you need all the components and the supply chain and the things to build the transformers to step down the power.

Anay Shah (03:10:48): Based on how we've been talking about this, you might think that data centers are almost entirely a U.S. story. And while the U.S. is the dominant builder of data centers, there is actually a global story here and global infrastructure being built out, and a strong need for sovereignty for other nations. So in order to help understand what's going on here, let's go back in time a little bit to understand the drama that's setting in globally.

Ben Shwab Eidelson (03:11:19): I think it's worth looking at just fairly recently. In 2018, Europe passed GDPR, and that set this world baseline for privacy. Thank you. All the cookie pop-ups, but also really tight controls on where EU data sits and what happens if you have EU resident data outside of the EU. And so this is really, I think, a reaction to where people are storing data about our citizens. And so there are controls about what happens if you're holding or transferring data outside of the EU.

Anay Shah (03:11:51): In 2018, the U.S. passed the CLOUD Act, which essentially lets U.S. authorities lawfully demand data from U.S. providers, even if that data sits on servers outside of—

Ben Shwab Eidelson (03:12:03): the U.S. And so the net effect is if you're working with EU data at scale, you start to need to have servers and hard drives in the EU. And this becomes, I think, almost another lock-in that the big cloud providers start to have because they go and build the infrastructure to do that.

Anay Shah (03:12:19): And we saw this in the Microsoft story, right? A big part of their early scaling was following their enterprise customers globally and needing to build out data centers in Germany as one of the primary cases.

Ben Shwab Eidelson (03:12:31): And so if the EU-U.S. looks like a little tiff drama, I think it's time to move to the major geopolitical data center drama, which some have—

Anay Shah (03:12:41): deemed the new Cold War. And there's a book called *The Chips War*, which centers around this notion of the U.S. and now China in a fight over everything.

Ben Shwab Eidelson (03:12:57): But centered on this technology, right? So, I mean, let's go back to 2012, which I think really kicked off this last decade. Fifteen years of animosity here. The House Intelligence Committee report warned U.S. carriers away from using Huawei and ZTE equipment, saying that we shouldn't use this in any sensitive government system. Now that, of course, starts to spiral outside of just government use.

Anay Shah (03:13:21): That was first with the carriers. Beijing responded on a different front: the data front. So in 2017, China's Cybersecurity Law, followed by other laws, pushed data localization and tighter state control. And so the U.S. companies had to respond by localizing operations, which essentially means AWS, Apple, Azure: they either had to sell off to Chinese partners or find a Chinese government-linked company to be a partner.

Ben Shwab Eidelson (03:13:49): That's right. So it's not just that those companies' hard disks and servers had to be in China, but they actually had to be owned and operated by a Chinese company. And so then the U.S. reacted even further. They barred all federal agencies from buying or using equipment from a long list of covered Chinese vendors. And they barred the FCC from approving any new authorizations from Huawei, ZTE, and others. So this just ramped up further and further.

Anay Shah (03:14:14): This brewing war was not just limited to land, but also involves our friends, the undersea cables.

Ben Shwab Eidelson (03:14:21): Right.

Anay Shah (03:14:21): And so in 2016, Google and Facebook partnered with a Hong Kong-based company to build the Pacific Light Cable Network, a massive 12,000-kilometer undersea cable linking Los Angeles to Hong Kong, Taiwan, and the Philippines. Part of that global network of undersea cables we were talking about earlier. Seems like a great idea. What could go wrong?

Ben Shwab Eidelson (03:14:44): And fast forward four years later, to 2020. U.S. national security officials say, "We don't know about this Hong Kong landing point anymore." We think that's going to be a vehicle for Beijing to have surveillance across this important backbone of the internet. And so the FCC ultimately blocked that route. And so now the cable hits Taiwan and the Philippines, and those are lit up. But the Hong Kong branch that's been laid, I believe, is just lying dark.

Anay Shah (03:15:10): So I'm sitting here in Los Angeles without that cable to Hong Kong. Now, moving back to land and to chips. The battle continues. And so in 2022, the Commerce Department rolls out these sweeping controls on advanced AI chips and fab tools. And so, remember, this is the moment where we've gone through a COVID boom. We're seeing an uptake in usage from crypto and streaming. And now AI, and the Commerce Department tightens these controls again in 2023 and again in 2024.

Ben Shwab Eidelson (03:15:43): And this feels very active, right? I mean, literally every quarter of Nvidia's earnings, there are discussions of this. A few weeks ago, the U.S. opened a channel that said Nvidia could ship certain chips that are dialed back, like the H20. But they have to give the U.S. government a 15% cut of the revenue. It's a pretty unprecedented pay-to-export arrangement, like a lot of things that are unprecedented that are going on. But if you zoom out, it raises some good geopolitical strategic questions on how we want to engage, right?

Anay Shah (03:16:11): Yeah. It's foundational to the new economy that's being built on this advanced compute power. And it remains to be seen how this plays out. It may backfire. Right. China is not terribly keen on being dependent on U.S. production, so they are infusing massive amounts of capital in their chip sector. It's still a step behind Nvidia in terms of raw performance and software ecosystem dominance. But given China's resources, you have to assume that that gap is going to narrow and narrow quickly.

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Ben Shwab Eidelson (03:16:46): There's a reason China wanted domestic energy. They want to have their own domestic production of silicon here, and so they've invested heavily and they're catching up. Some estimates are that they're 60 to 70% of Nvidia performance; it depends on what they're doing. But they're investing out of a $50 billion fund to improve chip development.

Even more so, they're passing policy that says data centers need to source at least 50% of their chips domestically. So they're making sure to really stand up not just the supply side of the market, but also simultaneously the demand side of the market.

Anay Shah (03:17:17): The story is less about whether Chinese chips can equal Nvidia's top-end designs and more about how quickly that's going to happen given the demand and the capital that they're putting in. So in short, at the moment, the US is still ahead, but the China chip ecosystem is accelerating rapidly. Their backlog of demand for Nvidia chips, which is being withheld, is going to matter less and less over time.

Ben Shwab Eidelson (03:17:43): The other dynamic that you have geopolitically is governments are seeing the AI data center boom as an important future part of their economy. A deal that exemplifies this is the Emirates deal with OpenAI around this UAE Stargate buildout, a one-gigawatt AI cluster in Abu Dhabi, and all the ecosystem players from Oracle to Nvidia to Cisco to SoftBank coming in to finance this and collaborating on the buildout. I think it just raises a lot of interesting questions: What about the location of a data center matters to a government?

Anay Shah (03:18:16): And the map is stark. If you look at where AI data centers are located today, only 32 nations have them, and most of them are in the Northern Hemisphere. You have large swaths of Latin America and Africa as fully dark. Governments are deeply, deeply concerned because they are wondering that if you continue to rent compute power from faraway data centers, you remain at the whims and you remain vulnerable to foreign entities and foreign companies, and you aren't able to support domestic enterprise or domestic scientific research or academia with the same level of control.

So this idea of compute sovereignty is top of mind for a lot of people, and a lot of emerging markets are worried that the AI era runs the risk of leaving them even further behind economically.

Ben Shwab Eidelson (03:19:09): There's almost a rough analogy to energy independence, right? Do you have it regardless of your relationship with another country? That feels like the important thread here.

Anay Shah (03:19:18): The other tricky dimension here, which if you talk a little bit about, is the actual impact on the climate, which gets a lot of attention these days, rightly so. There are a few questions that continue to come up, and one that Ben, maybe your mom has asked you, I know mine has, is if a ChatGPT query is bad for the climate. If I care about the climate, should I really be using AI? And we have some data on that.

Ben Shwab Eidelson (03:19:44): There's been some reporting on this, and I think it's an area that's become a pretty hot-button issue for folks. There's been, I think, some people even shaming others for using these tools because of the climate impact. So it's worth looking at the latest numbers. Google actually just put out a publicly readable paper on Gemini where they go down to the details on the energy consumption and the carbon intensity of that energy.

The median Gemini text prompt, which for all intents and purposes I think could be viewed as fairly equivalent to a Claude or a ChatGPT or a Copilot prompt, uses 0.24 watt-hours of energy and emits 0.03 grams of carbon dioxide equivalent and consumes 0.26 milliliters or about five drops of water. Those are figures that are substantially lower than what the public estimates have been. For some kind of sense of scale, that per-prompt energy impact is about the same as watching your TV for less than nine seconds. Why do we think the public reporting might be so far off?

Anay Shah (03:20:40): There have been a lot of improvements over time, and so it's important to kind of ground ourselves in this moment. We know, through that same report, that the AI systems that we're using are becoming more efficient. There's constant innovation in the software and the hardware to drive more efficiency. So over 12 months, the energy of a standard Gemini text prompt dropped by 33-fold.

Ben Shwab Eidelson (03:21:04): Wow.

Anay Shah (03:21:05): A 33x improvement in the energy consumption. Even more so, from a total carbon footprint per se, we have 44x, all while delivering higher quality responses. So we are moving in a world where the efficiency gains are continuing, and this question of "is your query bad for the climate?" is fairly insignificant. Hannah Ritchie from Our World in Data has independently corroborated this fact. It's an interesting cocktail conversation, but largely misses the forest from the trees.

Ben Shwab Eidelson (03:21:37): I think the pressure is good positive pressure because one individual query you should not feel bad about. But the pressure for all of these companies to monitor this and drive these numbers down and get these efficiency improvements is a fantastic thing. That's right. And to drive the deployment of clean energy so that the carbon intensity of the energy drives down is a good flywheel to keep pressure on.

Anay Shah (03:21:56): Indeed. So, Mom, keep asking a question because Google will then continue to improve.

Ben Shwab Eidelson (03:22:00): I think there's another area that's been under-discussed.

Anay Shah (03:22:03): You don't hear a lot of discussion on the actual carbon intensity of building these very large pieces of infrastructure, pieces of real estate. That's called embodied carbon. So what is the embodied carbon impact of the steel, the cement, the energy used to build a shell and stand up the facility in and of itself?

Ben Shwab Eidelson (03:22:27): Thankfully, Google did another report on this and shared that in their analysis. Running an AI data center, the operational emissions, which really means the energy going into running the data center ongoing, is going to be about 70 to 90% of the total emissions. Manufacturing emissions, which is really the manufacturer of the server components, the memory, the flash storage, the GPUs, is going to be around 25%. And then the data center construction, so this is the steel and cement and the logistics around that, are around 5%.

So this is all to say, I think when you look at this, we should probably be paying a bit more attention to the manufacturing of the components and make sure that we're looking at the LCAs for solid-state disk drives and GPUs and making sure we're taking that into account. But the attention's probably correctly centered on the electricity.

Anay Shah (03:23:14): And on this point of focusing in on the manufacturing, the procurement muscle of one of these companies that are building this out is actually a very big leverage. So when Microsoft requires its suppliers to use 100% carbon-free energy by 2030, it will pull their suppliers, all the fab building and the motherboard building and the assemblers. It's moving everyone down the supply chain — it's called Scope 3 emissions — into a cleaner world, which has tremendous power.

Ben Shwab Eidelson (03:23:43): I think the other thing that's interesting is some of the circularity conversations are starting to happen. So I was at a talk where the Microsoft CSO was talking about how they recently launched, I think it was just in April of this year, a circularity program where they would take the rare earth material in the hard disk drives that they're using in the data centers, and they have a new way to recycle those while disposing of the data. That yields a 90% recovery of those rare earth materials, which also helps stand up a US supply chain around rare earth materials, which we don't really have today, which is pretty phenomenal.

Anay Shah (03:24:13): Yeah. Tremendous. And it's going to be a growing discussion over the coming years as we mine for more and more of these critical minerals and the geopolitical control over who has those minerals.

Ben Shwab Eidelson (03:24:25): All right, so given all of that operational load, is the main contributor to greenhouse gases something like 70% or more of the emissions? How should we think about the scale of that from a meta-climate perspective?

Anay Shah (03:24:38): So when we talk about operations, remember we're talking about the energy consumption and not the materials that go into building the data center. Recent studies show that data centers account for about 4% of total U.S. electricity consumption. And with more than half of that electricity derived from fossil fuels, that means that data centers generate more than 105 million tons of CO2 every year.

Ben Shwab Eidelson (03:25:04): Until reading the study, I didn't realize that data centers' carbon intensity is actually higher than average, exceeding the U.S. average by 48%.

Anay Shah (03:25:12): The big point here is how grid-dependent that impact is. If these data centers are located on a dirtier grid, let's say a coal-heavy grid in the Mid-Atlantic region of Virginia, then it's going to have a very different climate profile than a data center that's in Eastern Washington that's entirely powered by hydro. So when we talk about 105 million tons of CO2, how should we think about that?

Ben Shwab Eidelson (03:25:36): A few comparisons to help think about the scale of 105 million tons of CO2 emissions. One is you look at US aviation emissions: this is about half of that. Another would be looking at enteric methane, which is a fancy way of saying cow burps, is around 178 million tons. So that means data centers are about 60% of the equivalent of that. Or all US passenger vehicles are 1,000 million tons, or a gigaton. And so data centers are about 10% of that today.

Now, if you look globally, this goes up by approximately a factor of three, as do the rest of these things. So overall, data centers are not insignificant. They're worth tracking on the map here, but quite fractional compared to passenger vehicles, big emitters like livestock, and a third to a half of something like global aviation. The interesting thing, I think, what makes this a hot topic, is not just the current scale, but the projections, right? If all of a sudden we double on our current grid in the US, then now we're caught up to the emissions of aviation in the U.S. And if you keep going from that and you keep the trend line up, you could imagine data centers becoming a fairly dominant story in emissions.

Anay Shah (03:26:50): The other leg of the stool in this conversation is how it's affecting the local communities that these data centers are being placed in. One of the themes that we've found come out through this is the impact of these data centers are concentrated and they are disproportionately felt by the environment, the ecology, and the people that immediately surround it. We metaphorically went to Memphis, where XAI is building a very large data center on the banks of the Mississippi, 15 minutes from downtown. And there, Elon is commissioning a 200,000 GPU unit data center. There's been a significant backlash from the Memphis community for good reason.

Ben Shwab Eidelson (03:27:37): I think a lot of it centers on how are we going to provide power to that? Because the utility said that they can provide XAI power for about 50 megawatts of load, but XAI wants triple that amount. That's a lot of GPUs, and 50 megawatts isn't going to cut it. So they brought in gas turbines — 35 turbines — which could theoretically power 420 megawatts.

The problem with that — I mean, it's good they're solving their power problem — but the other problem with that is these are highly polluting gas turbines. So they have the potential to emit a couple thousand tons of smog-forming nitrous oxides each year. For context, that's more than the smog caused by the Memphis airport. So it's like you're adding another airport of smog to the region.

Anay Shah (03:28:18): And this impact is not continuous, right, because these data centers ebb and flow in terms of how much power they are consuming. So it's important to look at these peak moments. We found public satellite data from NASA and the European Space Agency that shows that, on average, nitrogen dioxide concentration increased by 3% when comparing for a year before in this area. But in the times of peak consumption, we're talking about a 79% increase in nitrogen dioxide concentration from pre-XAI levels in that area. So you can imagine it's like sitting in a traffic jam, and those moments have outsized impact on the community at that moment in time.

Ben Shwab Eidelson (03:29:00): Yeah. And so there's been a lot of pushback from this pollution and health risk standpoint. It's hitting South Memphis neighborhoods that already have elevated asthma and cancer rates from past industrial waste. This temporary electricity generation infrastructure isn't going to sustain in the long term. So all of this is kind of a case study in both the local impacts and also the time-to-power issue.

Anay Shah (03:29:24): And this notion of time to power, essentially what it means is there is enough demand to get these data centers online quickly. The companies are willing to pay more and more. So when you have that kind of economic pressure, the community resistance sometimes can only go so far. As we're seeing in this case, XAI, despite the pressures, is currently building out a second location a few miles away, which will be double the size.

Ben Shwab Eidelson (03:29:50): Of the first: half a million of these GPUs.

Anay Shah (03:29:53): I mean, just insane. That's the current moment we're living in.

Ben Shwab Eidelson (03:29:59): So far we've been trying to keep it focused on what has been built more than what is proposed. But I think it's worth taking an extreme view on some of what's coming. Meta has announced their big long-term project, their big training center, the Hyperion project, located in Richland Parish, Louisiana. It's a $10 billion buildout, online by 2030. They'll have a few steps in between. The goal is for this to be a five-gigawatt canvas covering over 2,000 acres.

Anay Shah (03:30:28): What is 2,000 acres?

Ben Shwab Eidelson (03:30:29): Yeah. So a different way to visualize this is this data center is about the size of Lower Manhattan. It is at a scale that is kind of unfathomable, right? That we're going to build buildings of that scale in a few years here to power such a new technology.

Anay Shah (03:30:48): That Louisiana project is a great example of what we are living, the step-change function that we are living through right now. This is the biggest tech infrastructure project since either the 1960s, the dawn of the computer age, or even the 1880s, the heyday of the railroad period.

Ben Shwab Eidelson (03:31:09): I think Nvidia is on pace to capture the highest share of market-wide capital spending since IBM peaked in their percentage of that in 1969. And so a lot of comparisons are being made to other past booms like the Gilded Age or the telco buildout.

Anay Shah (03:31:25): And when you mentioned booms, obviously you end up thinking about busts, right? So we talked about the telecom boom of the 1990s, which contributed to the dot-com crash and a bust on fiber. You also look back at the 1870s and the huge railroad boom that led to a crash, and both of these pose the question of, like, did we overbuild? Are we outrunning our demand? In both of those cases, it's not that the CapEx spenders were wrong; they were just early. We saw this vividly in the fiber overbuild.

Ben Shwab Eidelson (03:32:00): Right.

Anay Shah (03:32:01): By the year 2000, we were only using 3% of the fiber we had laid. But it was absolutely necessary to power the next couple decades. And that's what it looks like for AI is that there may be an overbuild in this moment, but the foundational nature of this technology suggests that it's going to get utilized.

Ben Shwab Eidelson (03:32:20): Yeah, I think there's such a rush here because the potential AI market creates this economic imperative to go and plug in as many GPUs as quickly as possible, and that will build the largest and smartest AI model, which will create a moat. I think there's an interesting question here, though, of what is the infrastructure? Because yes, we still use the railroad tracks and we still use the fiber, but remember that all the companies that were building the fiber and the ones that were on top of that, it was too early for them to capture that value.

But what's in part different about this boom is how it's being funded now. Yes, there are VC dollars and other dollars going into it, but at least historically, and if you look at the major capital expense, it is these big companies we've spent the episode talking about — it is Amazon, Microsoft, Google buying from Nvidia. And they're using the fact that their business models have thrown off billions and billions of dollars every quarter to then go buy the chips and build this out. So there's a real kind of concentration in some of the buildout of the infrastructure.

Anay Shah (03:33:20): Those previous boom-busts financed by the banks end up drawing in the rest of the economy. And while there are some private credit actors and venture capitalist actors, because it's largely financed by free cash flow of these private companies, a bust hurts them, which will drag down the stock market, but is hopefully insulating the rest of the capital providers that are not involved.

Ben Shwab Eidelson (03:33:43): There is supposedly now more private credit starting to come in to fund this, and that could create linkages to other parts of the system. We will see how that plays out. We've talked about the story of data centers up until present day. Let's zoom out for a second and talk about just where we are today from a sense of scale.

Anay Shah (03:34:04): Let's start with the most basic question: How many data centers exist today? There are globally approximately 11,800 data centers worldwide. Now, of course, the counting of this gets nuanced when you think about the closets that still exist with servers as they did back in the day. But by and large, we're talking about independent construction. And the US is by far the largest with over 5,000 data centers, followed by Germany, the UK, China, and Canada.

Ben Shwab Eidelson (03:34:33): So the US has almost half the data centers. Wow.

Anay Shah (03:34:36): Yeah, heavy concentration in the U.S. Obviously other countries are catching up. China is building very quickly. So this begs the question of who owns all of these 11,000 data centers and who's spending these hundreds of billions of dollars. And you can kind of think of it in four broad categories. That's representative of the US but also it fits globally.

And so the first category are our friends, the colocation centers, the ones we've talked about: Equinix, Digital Realty, and others. There are about a dozen of these that are building 10 to 100 megawatt blocks in the US and around the world. The second category are the hyperscalers: the Facebooks, Amazons, Microsofts; you can add in Apple, Oracle in there. They account for almost half of global data center capacity, and they're the lion's share of new growth. But importantly, you still have thousands of private server rooms in banks and retail facilities and public institutions that are out there. So while large in count, they're relatively smaller in capacity, but today still make up about 35%. And finally, you've got legacy telcos that are still owning and operating data centers.

Now the interesting thing about this is the trend, right? You're seeing enterprise and public sector data centers trending down, and new build increasingly going to hyperscalers and these purpose-built colocation facilities.

Ben Shwab Eidelson (03:35:54): So how much actual physical real estate space are all of these data centers taking up? This is like anything that gets into this level of detail. It can be hard to pull exact numbers, but one reasonable estimate is that maybe there's one and a half billion square feet globally in data center buildout. For context, if you took an average median US home of around 2,200 square feet, that's around 730,000 of those homes of square footage, or 28,000 football fields.

Anay Shah (03:36:20): Importantly, including end zones.

Ben Shwab Eidelson (03:36:24): That feels like a big number. But for some comparison to some other infrastructure in our life: If you just took the U.S. interstate system, so this is, you know, I-5, I-90, the big interstates, just the asphalt of those interstates is 10 times the square footage. So let's talk about power.

Anay Shah (03:36:40): Remember the impact of data centers on power: it's quite localized and concentrated to its physical location. But let's talk about it in a sense of scale. We mentioned that in the US it's about 4.5% of total electricity. That's roughly 17 million households' annual use. How can I conceive of that power?

Ben Shwab Eidelson (03:36:59): Yeah, I think if you look at the electricity consumption of the city of New York, it's about three New Yorks to power all the data centers in the US. Or if you look at all data centers globally, it's about equivalent to the power consumption of the United Kingdom. If you look at other comparable industries, it's pretty close to the power consumption of the chemical industry or the primary metals industry. This is extracting iron ore and smelting aluminum.

Anay Shah (03:37:26): Similarly, on the water question, there's a tremendous amount of nuance in how to aggregate total water consumption. But let's just do the average of the average. Let's take direct water for cooling, indirect water from the power generated for the plant, and get a sense of how much water this is using US data.

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Ben Shwab Eidelson (03:37:45): Centers together consume about 250 million gallons of water per day. That's about a quarter of what the city of New York uses.

Anay Shah (03:37:53): So we've talked about the space, the data centers, how many of them, who owns them, how is it being powered and cooled? What's actually inside of them?

Let's think about the scale of the compute power. It's actually a little bit difficult to figure out what humanity's overall compute power is, but let's just say there are about 50 to 100 million servers globally.

Ben Shwab Eidelson (03:38:13): Yeah. And so, I think the best way to get at this was to go back to the electricity usage numbers and then look at how much compute power we get per unit of electricity. What's surprising here is that if you run the numbers, we've grown humanity's compute power around 40x over the last decade, but have only grown power consumption about two and a half times because we've gotten more efficient.

And if you look at that new compute power that's come online, only around 10% of data centers are AI-focused today. Of course, that's a growing percentage.

Anay Shah (03:38:45): So compute power is one part of what the data center is doing. Let's give a sense of the scale on storage.

Ben Shwab Eidelson (03:38:51): Yeah. So in the last decade, we've 3x to 4x total installed storage capacity to around 15 zettabytes.

Anay Shah (03:38:57): And so we're speaking to a friend of the show, Byron, who made me understand the modern marvel of hard drives. So imagine the head of the hard drive is scaled up to the size of a Boeing 747.

It's flying at 560 miles an hour, and it is about the thickness of one piece of paper above a football field. That hard drive head is reading and writing to every single blade of grass moving at 560 miles an hour.

Ben Shwab Eidelson (03:39:27): That is absolutely insane. And so we have all these hard drives and all this compute. Now they're connected via these submarine cables. How many of those do we have?

Anay Shah (03:39:34): We have approximately 600 active submarine cables that are powering 99% of international usage on the internet.

Ben Shwab Eidelson (03:39:45): So in total, we're about 100 times the global bandwidth that we were a decade ago. And we've seen internet bandwidth continue to grow 25% year over year.

Anay Shah (03:39:53): And so these numbers are today's snapshot.

Now, there are a lot of projections out there of where growth is going to go over the next five years. It can get fairly outlandish, but suffice to say, growth is continuing to accelerate now and in the years to come.

Ben Shwab Eidelson (03:40:10): All right, well, we talked about Byron's plane reading and writing blades of grass. Now it's time to land our plane.

Anay, let's do the themes. What did you realize bubbled up for you over the course of this research and conversation?

Anay Shah (03:40:24): It's been a journey. I did not know a lot coming in and have learned way more about the ins and outs of data centers than I ever imagined. A few big things will continue to stick with me.

One of the first books we read is called *Tubes*, and it's this nonfiction, nerdy detective story to discover where this thing called the internet lives. It turns out the cloud is quite physical, but even more interesting, it's strangely concentrated. The internet has almost infinite edges, but it's got a shockingly small number of centers and has been built in this hub-and-spoke structure.

And so for me, that starts with May East, right? Ashburn, Virginia, home to 13% of global data capacity and has once carried north of 30% of the world's internet traffic. That is the undisputed capital of the internet.

Ben Shwab Eidelson (03:41:25): And it's so wild that that became the hub just by being the hub. There's just this center of gravity that spiraled on itself, a black hole of data center investment, almost by accident, right? Yeah.

Anay Shah (03:41:38): The internet's structure is based on this mesh connectivity of global cities on coastal shores. It's Virginia, New York, D.C., London, Paris, Amsterdam, Tokyo, Seoul, Lagos, all connected by these 600 undersea cables that are literally powering the world's economy.

And so I think about data centers that started off occupying closets, growing to whole floors, then buildings, then warehouses. And I start to think of the cloud as a building, as a factory, where a bit comes in, gets massaged, gets put together in the right way, and then it gets sent out to its destination, and it really brings the internet home.

Ben Shwab Eidelson (03:42:21): For me, this connects to one of my reflections, which is threaded through the invisibility of this infrastructure and what makes data centers and the connecting internet almost the perfect abstracted infrastructure. And what I mean by that is you can access them, you can use them, you can get all of the power of them without ever seeing them or touching them.

Now, with us living in a mostly wirelessly blanketed internet ourselves, you have access to all of these warehouses and all these buildings via all these undersea cables. And if you're an engineer developing software, you can deploy to all these regions around the world and never actually look at a CPU or a hard drive in your life.

It is, I think, the best-abstracted physical infrastructure that humanity has built. It is physical, it is silicon, it is electricity, it is fiber. There is no real magic. It is all physics.

But the only infrastructure I can think of in humanity that is as well abstracted is maybe money, but money is actually not physical anymore. In the same way, this actually is still doing physical work. And that struck me.

Anay Shah (03:43:34): It does. It feels very rare to have global infrastructure that is defining our life and how the world operates, to be so.

Ben Shwab Eidelson (03:43:44): Invisible, and so frequently in our life. Even though it is invisible, our entire day is mediated by this infrastructure. But if your entire day is spent on the train, you're very aware of where the tracks are, and you can see them, and you're on the train. That's the engine, right?

Anay Shah (03:44:01): Even fire, we probably used it selectively throughout the day. The railroads, we got on and off. The car, we got in and out of. Electricity, we turned the lights on and off. This is a modern marvel that we're only not using when we sleep. And even then, it's doing stuff for us.

Ben Shwab Eidelson (03:44:20): It's tracking my sleep. I'm wearing a ring that's tracking my sleep, sending bits to Oura's servers.

Yeah, as you were saying that, it's like you're getting on and off a train. You're kind of turning electricity on and off in a transactional moment. This is almost more like you're living in it, right? You're living in this infrastructure, but we never see it.

Anay Shah (03:44:44): I just had a flash of *Ready Player One*.

Ben Shwab Eidelson (03:44:46): Yes.

Anay Shah (03:44:47): Putting on the full suit and immersing myself in another reality. We're close, when you think about it this way.

Ben Shwab Eidelson (03:44:54): I think that's right. I think this gets to one of my other realizations when comparing this to other physical infrastructure, which is, despite it being truly physical—buildings and silicon and electricity—we are upgrading it continuously and rapidly. Part of that is because of Moore's Law. Part of that is because of the improvement of the hardware and our techniques for cooling and all of these things.

But I feel that with most other infrastructure, you get to, "Okay, this is a reasonably good way to build a train track. Now we need to go build more of it," or, "This is a reasonably good way to transport electricity. So now we're going to build more transmission."

And certainly you get a little bit better at transmission, but we don't just get a little bit better here. We're getting 40x better. In the last decade, which was off the previous decade, it's gotten much better.

So it's this weird thing where, yes, it's infrastructure, but it is changing what it is. We're getting at such an order of magnitude scale so quickly. And I can't think of other analogies to that. Maybe the first 20, 30 years of electricity felt like this, but this feels... something feels even more drastic here because what is being delivered is not commoditized exactly the same way as electricity.

Anay Shah (03:46:02): That sense of movement that you're describing reminds me of another one of my takeaways, which is where I'm feeling stuck. And that's on the question of power. To me, it's easy to think about the complexities of why the power problem is so hard to solve, and yet the answers are right in front of us.

The problem is huge, right? Data centers are pulling more and more electricity from the grid.

The problem is hard because the grid is strained, the turbines and transformers are backlogged, and we don't really have utilities that are built to capture the incentive structures to value what hyperscalers are willing to pay today.

And it's going to take years to reform the grid to actually meet the needs. And at the same time, the fastest, cheapest energy is available today. It's solar, storage, putting renewable energy online quickly and cheaply. That is already accounting for 90% of new capacity going on the grid.

Despite every effort from our current administration to execute an ideological war on clean power and claim that we're in some national energy emergency, and yet deny the grid affordable electrons being placed on it.

So if we can just get out of our own way, we can put a lot of power on the grid fairly quickly. The other side of that story is the way we're building data centers: accounting for 24/7 peak load.

And there's a famous study that circulated earlier this year from Duke University that suggested that if we can limit grid-facing power of data centers by just 1% a year—90 hours out of the entire year—we can unlock 100 gigawatts of load. We can unlock the equivalent of two nuclear fleets on the US energy grid.

Ben Shwab Eidelson (03:47:54): Right. You saw Google do some recent announcements where they're collaborating with some of the utility providers to do exactly that. There are new startups that we see all the time that are building businesses around that concept.

This connects really closely to my major takeaway on the power story, which is that limitations drive innovation, especially when they come up against a legacy incumbent system—something that generally works, and reasonably well. Which for all of our general disgruntledness about utilities in our life, it is phenomenal that the electricity works most of the time as well as it does.

And it has not gotten a kick in the behind in a long time in terms of needing to try and evolve. There have been decades of people talking about a smarter grid, but nothing's forced the need like the AI data center competition and the geopolitical competition with China, which drives innovation across the stack.

It's exactly what you're saying in terms of driving the next cheap, clean electron on the grid in the forms of renewable energy. But it's also pushing us on transmission and permitting, and it's also pushing us inside the data center to think even further about AI models.

And we've invested in companies that improve the efficiency of actually running and training the model.

Anay Shah (03:49:12): That's right.

Ben Shwab Eidelson (03:49:12): And so up and down this whole stack, a point we found again from talking to people and from research, these types of crunches drive efficiency innovation and the evolution of the grid.

Anay Shah (03:49:24): And arguably, according to folks who have been in this for decades, we've been fairly lazy on innovation.

It's been a lot of low-hanging fruit. And so this type of forcing function can drive step-change improvements in something as complicated as our national grid.

Ben Shwab Eidelson (03:49:41): So to me, all of that points to long-term optimism: first, in solving the problems, but second, in solving them in a way that leads to more clean energy deployment. However, it also means needing to recognize and not dismiss the near-term local impacts for both power and water in these environments.

Anay Shah (03:50:01): I love that point because as we talked through these stories, that theme kept recurring of how it is different when you think about the problem locally than when you think about the problem nationally. And I think that's really important for people to understand as this is more and more headline news.

Ben Shwab Eidelson (03:50:16): My personal takeaway is less and less anxiety about that next incremental Gemini Query, ChatGPT, Anthropic use case or storing a video, and a greater desire to have more awareness locally within a given county that's struggling with air quality or water shortages.

Because that's where activism needs to center within communities in the moment, rather than trying to slow the valuable uses and progress that we're all building toward.

Anay Shah (03:50:45): Absolutely. This point on communities and geography and where things are located brings up another takeaway that's close to my heart as a former international politics major and someone who spent 20 years living and working across emerging markets. And that's the geopolitical implications of the moment we're living through right now.

And so we talked a little bit about this, but to me, it really crystallizes into a twofold idea: One is the notion that we're living through this chip war, right? That microchips have replaced oil as one of the world's most critical resources and it's a key determinant of economic and military power.

And we're in a new Cold War. This time, it's largely with China. As Americans, we don't want a country like China accessing our data or having superior performance over us.

And so we're actively preventing US companies from selling chips to China. But it's not so straightforward, right? Because you think of, "Okay, Nvidia as an American company, we can prevent that."

But Nvidia is the architect of the chips, right? The manufacturer of over 90% of the world's advanced chips is a Taiwanese company, TSMC, and they're the ones actually constructing it.

So this geopolitical tension has various layers to it, but the notion that we're living through a new Cold War and the chip is the center of that story is quite striking.

Ben Shwab Eidelson (03:52:07): I think in the long term, or mid to long term, this type of technology is a genie that can't be put back into the bottle. China, in particular, is hyper-aware of what they want to domestically build for themselves here and actually is in a great position from a supply chain perspective to pull that off.

Even if they're a couple years behind. You've seen them spin up AI labs, spin up their own domestic chip manufacturing, and do impressive jobs.

And you can say, "Well, 18 months ahead," but what is that in the scale of this foundational technology?

Anay Shah (03:52:40): Yeah, 18 months is a blink of an eye.

Ben Shwab Eidelson (03:52:42): I lean again toward long-term optimism that this competition creates good incentives for us to rethink our fundamental constraints, which are mostly on the clean energy deployment side.

One big thing China has going for it that we don't have is its ability to grow generation of clean energy much, much faster than we do in the US. Again, because of their solar panel supply chain, their battery supply chain.

Anay Shah (03:53:07): Their government structure, their ability to build, is unmatched.

Ben Shwab Eidelson (03:53:11): And so this is giving a lot of our structures a kick to rethink what's slowing us down. If this is so existentially important to stay at least on par, if not ahead on.

Anay Shah (03:53:22): I agree strongly. In this notion of the chip war, I think it's interesting. In this moment, I think over the medium to long term, it's less.

So here's where I don't share as much optimism: the AI boom and data center build-out that's potentially creating a new digital divide, exacerbating global inequality on yet another dimension.

So we've talked about how US hyperscalers run almost 50% of data center compute. The U.S., China, and the European Union host more than half of all powerful data centers.

What does that mean for the billions of other people living around the world?

And what is the implication for a country that is renting compute power from a faraway data center? It's potentially higher costs, slower connection speeds, and compliance to different laws.

But more importantly, as we unpack this—as we're trying to wrestle with this idea—it's this question of having a critical national security and economic infrastructure input owned, operated, and housed outside of your control.

Ben Shwab Eidelson (03:54:28): The techno-optimist in me is just screaming to refute this, and I'll tell you why. And I think we can study the internet as an example. This feeds into, I think, another meta theme for us, which is that these companies are the modern-day utilities, but they're actually the opposite in a way of the governing structure of an electricity utility, which is hyper-localized and granted local monopoly.

These are global utilities. They're providing much more non-commodity functionality, everything down to a bespoke AI model that they're training, down to more commodity storage.

And the business model of a utility is to, as we've seen again and again, provide more as cheaply as possible to as many customers as possible.

And you've seen the biggest internet companies grow by incentivizing and subsidizing free services to more and more people. And that has led to a lot of the world getting connected that was not connected just 10 years ago.

There's reason to be cynical about what Google and Meta are doing, trying to get more of the world connected. Don't they just want more customers?

Obviously, yes, they want more customers. But in doing so, a lot more of the world has access to the internet than ever before, and information and knowledge.

And I think that's where I fall on the side of optimism: that there's nothing more that OpenAI wants than more people having access to OpenAI.

Now, that to me goes to the individual human level, which is very different than how a nation-state or the government in control of a nation-state might feel about it.

But I lean on the individual human in a global context, and what powers I want them and their children to have in the decades to come.

And that's where I get a source of optimism.

Anay Shah (03:56:07): I mean, it's true. Sixty-six-plus percent of the world's population is now connected to the internet, and that number is increasing.

I like the optimism. I wonder if the nature of this technology, particularly AI compute power, functions differently than access to the internet, access to electricity, and access to other similar infrastructures—having that controlled by private equity and public companies that have very specific incentive structures.

Ben Shwab Eidelson (03:56:39): I think there's a big thing that you just hit on for me, which is my optimism doesn't really account for the hosting government of hyperscalers. And so it's not just that these are companies, but they're American companies.

If they're American companies, they exist a little bit at the pleasure of the American government.

And that means that another country's access to them exists at the pleasure of the American government.

And that, I think, gets to a more complex nuance, and to me, it just drives value to the idea of more global models and more global competition, even if it's not hosted within a given country, so that it's not just one or two governments that have control over these technologies.

Anay Shah (03:57:22): More models trained on different languages, of course, and different speech patterns. And so, how this unregulated utility—as we're talking about, this new digital utility, this new critical infrastructure that society will increasingly depend on—will continue to be seen as a public good and delivered to more and more people as that...

You know, they say hindsight is 20/20, but there's something even more interesting about creating a historical narrative to something like data centers.

And it's the marvel of the narrative process, this story, that starts to make so much sense of how one thing came after another.

So you start off with IBM and Watson's journey and the introduction of the punch card that is storing data, and then the machines that start to compute off that storage, and that grows and evolves.

And you've got the Cold War introducing the need for connecting networks, and suddenly you've got compute and storage power. Network connections bring that together, and that continues to evolve.

And then you get the explosion of the '90s. And in this time, first slightly accidental and then more purposeful infrastructure starts to get built in very important nodes, and the fiber boom happens.

I think I'll now always associate the late '90s with the overbuild of fiber and this notion that by the time the dot-com bust happened, we only used 3% of the fiber that we built. It's wild.

And yet that was exactly what we needed to go through the run-up of the 2000s and the growth of consumer and enterprise internet, mobile, and streaming, and then eventually the cloud.

Ben Shwab Eidelson (03:59:10): And then you had crypto creating this market for the AI chips before we had the models. Cycles of building ahead of the curve, there being some bust, but then there being this new utilization of those fundamental building blocks.

Anay Shah (03:59:22): Absolutely. And these brilliant people located within very important companies that took the lead to build what is now foundational infrastructure for the world.

Ben Shwab Eidelson (03:59:34): And then there's another dance that's happening—in where storage and compute lives for the average consumer or average business—where you go from it being all on the mainframe.

Then it moves eventually to the PC. And you feel so powerful with your PC, but you have no collaboration, no backup, no redundancy.

Then it moves back to the server room.

Then in the mobile era, your connection is really slow. Early days, you think about the first iPhone: it was a really slow edge connection.

So your phone actually had to do most of the stuff on the phone.

But now we live in this world where the connection's back, fat, and happy.

And so we do everything now on the server except for rendering the UI on the phone. And so this dance—of where both compute and storage happens, mediated by the communication bandwidth—is a really interesting dance that I see played out in the story.

Anay Shah (04:00:26): That dance then drove the cloud boom of the 2010s and the maturing of enterprise cloud and infrastructure, where now you're able to do everything you want at higher and higher utilization in the cloud.

And all of that build-out, and that fine-tuning and optimization, allowed us to enter March of 2020—the dark days of the beginning of the pandemic—and switch over from in-person to online from the perspective of the internet, largely without much of a hiccup.

Ben Shwab Eidelson (04:01:04): Yeah, going to slightly lower resolution Netflix videos for a month. I think we handled it pretty well from a technology infrastructure perspective.

Anay Shah (04:01:13): Correct. And how that just so happened to juice the infrastructure even more, to lay the foundation for GPUs to finally be utilized for what was growing in the background: machine learning and large language model training.

And then November of 2022, putting a chatbot on top of a model, and the AI boom and the infrastructure that was laid to capture that moment, and the cash coffers of the hyperscalers that were ready to meet that moment, are now propelling the greatest technological infrastructure build-out in human history. What a story.

Ben Shwab Eidelson (04:01:59): Yeah. Do you think it's an overbuild?

Anay Shah (04:02:02): There are things that I worry about in this world, as we noted from the geopolitical situation, but once I strap in, the optimist in me takes over.

So I am fully convinced that we will utilize every photon, electron, and square footage. I hope that this is the opportunity where we collectively can seize the moment to get more clean, firm power online, more affordable power online, and where we can use technology and renewable power to reduce the depletion of water resources in critical areas.

The opportunity to build a newly-skilled workforce to build out this new infrastructure. The opportunity to modernize our aging grid, our transmission lines, the way we do siting and permitting, the way we do environmental review processes, the way utilities are incentivized to meet demand.

The opportunity to spur local economic development in communities all over the country, and in the world. The opportunity to have large enterprises build out infrastructure that will be a net benefit to the consumer where they're locating their assets.

And I think it's really important for us to be mindful of the cost of moving so quickly and not thinking through the implications of water, power, climate, communities, and global equity.

And my real hope is that when you have this much capital and this much demand coming on to reshape a foundational technological infrastructure, we come out the other end with an ability to—as one of our new friends that we interviewed said—build these assets as ecologically invisible as possible.

I think we have the opportunity to do that. And when we come out the other end having done that, I think our children's generation will look more kindly on us.

---

Ben Shwab Eidelson (04:04:04): I think so, yeah. My big takeaway is that, of all the things we might study on this show, this one feels like the major piece of infrastructure that we're living in the middle of the step change. We are in the sharp part of the curve that's going up.

This level of capital investment and build-out is what it looked like if you were to put yourself back into the initial build-out of the electricity grid or the railroad system, but further compressed. What's so interesting about that is you get to experience personally how quickly you adapt to amazing infrastructure and power—how quickly we've adapted, I think, to having the latest large language models at our fingertips.

Now I have Claude Code, and I'm a few weeks into using that. I have what feels like new powers, but I'm kind of getting used to it again. We lived through most of this story and have vivid memories. Like, I remember Blockbuster, and I remember when Netflix was a DVD rental service. That was because it was too expensive to move streaming video at that scale, and now it's blindingly cheap.

The business model changes; the products completely change. We are living through this cycle of infrastructure iteration and evolution at a pace that's rapidly changing what we can do with it. I don't know when we'll again get to the upper step of that curve, but we are living in the step change, and I'm just trying to relish that experience.

Anay Shah (04:05:35): The rocket ship is in takeoff, feeling some G-forces. That's right.

Ben Shwab Eidelson (04:05:39): But you get used to it, don't you?

Anay Shah (04:05:41): Very quickly. Shockingly fast. I mean, even since we launched the fund two years ago to now, our workflows have changed dramatically.

Ben Shwab Eidelson (04:05:53): That's right.

Anay Shah (04:05:54): Despite the fact that you and I continue to look at each other 12 hours a day in the same screen. Yeah, yeah. The normalization of humans is astounding. And then you start thinking about our kids and how they're growing up in...

Ben Shwab Eidelson (04:06:06): This moment: speaking to ChatGPT, Santa Claus if they want, or making a game. My four-year-old programmed a game that runs in JavaScript by telling Claude what he wanted.

Anay Shah (04:06:18): Amazing.

Ben Shwab Eidelson (04:06:20): It is wild, wild times.

Anay Shah (04:06:22): We are living through a step change moment. Thanks for listening. Hopefully you're that much more informed about the invisible infrastructure that's not so invisible in powering the modern world.

Ben Shwab Eidelson (04:06:39): You know how you got this podcast into your ears? It's amazing. That's right.

Anay Shah (04:06:43): If you enjoyed this and have friends or colleagues that you think may find the story of data centers valuable, please send it their way.

Ben Shwab Eidelson (04:06:51): And please make sure you're subscribed to Step Change in your podcast player of choice so you find out when our next episode comes out, which at this current pace will be at least once more this year, I hope. And sign up for emails from us at StepChange Show. Podcast ratings make a huge difference to help people discover this, so we always appreciate them and love hearing from listeners. Shoot us an email anytime. It'll bounce from your data centers to ours over at hi StepChange Show.

Anay Shah (04:07:20): At Step Change, we invest in early-stage companies accelerating energy abundance and building critical infrastructure. So if you're a founder working on software to help make all of this work, from data center management to efficiency to power generation, reach out to us. We'd love to check, chat, and learn more.

And last but not least, we talked to a number of folks in the data center and cloud worlds who have helped us tremendously with this research. Deep appreciation and gratitude to Christian Baledi, Peter Gross, Brian Janis, Sean James, Byron...

Ben Shwab Eidelson (04:07:52): Rakitsas, Brandon Middaugh, Nat Bullard, John Kumi. And a thank you to Ben Gilbert and David Rosenthal for all of their Acquired episodes on AWS, Microsoft, Google, and Nvidia. And a big thank you to Nick Petrie, our editor, and to our wives, Shiva and Ana, for hearing us talk about data centers for the last six months. And, all right, until next time, thank you, Sam.

Welcome to the second episode of Stepchange—where we explore the technologies and systems that have transformed human civilization.

In Part II of our coal saga, we witness how this ancient rock evolved from household hearths to the invisible force powering the modern world. The 20th century would see coal take on its most consequential role yet—as the foundation of electrical grids that would light cities, power industry, and ultimately reshape geopolitics.

We journey through coal's central role in America's Gilded Age monopolies, the brutal labor battles that defined generations of miners' lives, and the critical part it played in two world wars. We'll see how coal fueled China and India's economic miracles even as it began to fade in the West, and how these competing trajectories continue to shape our climate future.

Coal remains the single largest source of electricity globally and our greatest contributor to climate-impacting emissions. Its story isn't just history—it's the backdrop against which our energy transition must unfold.

Thank you for joining us for the second episode of Stepchange. Don’t forget to subscribe. Share your thoughts by emailing us at hi@stepchange.show.

Hosts: Ben Shwab Eidelson and Anay Shah

Referenced & Recommendations:

• Coal: Part I

• Our World in Data

• Abundance by Ezra Klein and Derek Thompson

• Climate Papa with Travis McCoy and David Roberts

• Deli Boys

Links

Key Technical Concepts

• Commutator (electric)

• Dynamo

• Faraday’s law of induction

• Feynman Lectures on Physics – Volume II Table of Contents

• Feynman Lectures on Physics – Chapter 16: The Motion of Electrons in Metals

Power Generation & Infrastructure

• Pearl Street Station

• Fisk Generating Station

• Charles Algernon Parsons

• Kang bed-stove

Labor, Politics & Social History

• Black Friday (1921)

• 1926 United Kingdom general strike

• Bevin Boys

• John L. Lewis

• IG Farben

Coal Industry Incidents & Case Studies

• Kaiping Mines

• Martin County coal slurry spill

• Death in UK coal – Our World in Data

• Blankenship trial: King Coal vs. West Virginia

• Murray Energy bankruptcy

• Coal 2024 – IEA

• Reinvigorating America’s “Beautiful, Clean Coal” Industry – The White House

• The turbulent history of coal – Drax

Energy Data & Long-Term Trends

• United States electricity history in four charts

• Use of coal

• Coal production – CEIC Data (China)

• Coal and gas – Speed & Scale OKRs

• Fossil fuels – Our World in Data

• CO₂ and greenhouse gas emissions – Our World in Data

• Coal consumption by country (TWh) – Our World in Data

Global Context & Infrastructure

• Five-year plans of the Soviet Union

• The Trans-Siberian Railroad

• Seattle Gas Works

Videos

• “Dynamo vs Generator” – YouTube

• “Electric Generator Working Principle” – YouTube

• “The Turbulent History of Coal” – YouTube

• “CO₂ Emissions and Climate Change” – YouTube

• Air Pollution Over Beijing – The Guardian

• China coal & the 2022 Olympics – NPR

• Nick van Osdol on coal transitions – X/Twitter

Transcript

This was autogenerated and edited with LLMs. Please be aware that there may be mistakes or typos.

Ben Shwab Eidelson 00:00:00

All right. And I. Well, coal, part two. Did you think this was going to be easier than part one? Harder. What'd you think?

Anay Shah 00:00:07

You know, I came into this thinking that as you get closer to the present day, it becomes harder and harder to wrap your head around everything that impacts something as important as coal. And it turns out my fears were true.

Ben Shwab Eidelson 00:00:24

You were completely spot on. I had the false optimism. I was like, oh, we have the outline kind of done from last time. We have some of the story in. It's just going to be like a little few pieces. Ah, there you were right. The Coal story was just getting started. All right, well, welcome to the second episode of the Step Change podcast. This is a podcast covering the stories of human progress. We're here to understand the technologies, systems and infrastructure that shapes our world. And I'm Ben Adelson. I'm a co founder of Step Change Ventures, a fund that invests in the companies that are accelerating today's biggest step changes. And I'm based up in Seattle, Washington.

Anay Shah 00:01:09

And I'm Anay Shah, fellow co founder of Step Change Ventures and based in Los Angeles, California.

Ben Shwab Eidelson 00:01:16

In part one, if you haven't already listened, we started in the Carboniferous period, when dense forests and swamps would evolve to become today's coal. We move forward through to Britain, where coal was being used as a wood replacement. The real inflection point came later in the 1700s, when coal demanded and then powered the rise of the steam engine that would take over the world and help us take this black rock from under the ground and turn it into mechanical power to move trains, pump water and power factories that enabled the explosive industrial growth of cities like Manchester and Birmingham and eventually spread to the United States, which ended up having huge coal deposits where it drove industrialization through the mid-1800s, which helped propel the north to victory in the Civil War and led to the railroads of the game, Monopoly. Now, where we ended, part one. In the late 1800s, coal was powering factories, locomotives, and homes, as well as the struggles between labor and power. This set the stage for more growth, conflict, and the consequences of the 20th century. And so if you haven't listened to that, we welcome you to go back and listen to part one. Or if you feel like that was a sufficient summary, here we are. Let's jump into part two.

Anay Shah 00:02:25

That was a good trip down memory lane. And here we are for Act 2. And coal becomes something even bigger. The beating heart of America's rise, the spark behind the birth of electricity, the bloodline of global warfare, and eventually the Fuel that powered the rise of China and India into modern industrial giants. This is a story of invention and empire, of labor uprisings and naval arms races, and of how coal didn't just light our homes. It shaped the very architecture of global power. And even as its visibility and seeming relevance faded in the west, its influence has never really gone away. And it is true right up until today.

Ben Shwab Eidelson 00:03:10

You know, to put a finer point on that evolution, in part one, we covered certainly less than 10% of the total coal that humanity has used, and by some numbers, less than 3%. So today, let's do the other 97% of the coal story.

Anay Shah 00:03:25

The other 97%. And before we jump in, a few call outs for listeners. This is a very new show, so it makes a huge difference for you to subscribe and rate so the various algorithms pick up what we're putting down.

Ben Shwab Eidelson 00:03:39

And also, we love hearing from folks, so send us a note anytime to hitepchange show. It'll go to both of us, whether that's with feedback on the episode or ideas for what you want us to cover next. And also at Stepchange show, you'll find a much fuller set of episode notes, including all of the sources we use for our research. With that, let's jump.

Anay Shah 00:03:57

In the late 1800s into the early 1900s was this period of incredible change. We've got two big related stories to set up this period of king coal. The first is a scale up story of building the American infrastructure, the expansion of railroad and steel, and a few actors that made this all happen. The second story is a story of invention and social change. Welcome to the stage. Electricity. The movement of coal from home to invisible force that foreshadows coal for the next hundred years.

Ben Shwab Eidelson 00:04:32

And very importantly, it's also the chance I get to really do some physics nerdy now. So I'm excited for that.

Anay Shah 00:04:36

Applied physics. 20 years later, it's time coming back. And so to begin, I'm going to quote Barbara Fries. Coal didn't just fuel the engines of industry. It fueled an era of unprecedented expansion. It powered the trains that unified a continent, the factories that built its cities, and the lights that illuminated its nights. It was not merely a resource, it was the beating heart of America's industrial might. But as we'll see, what coal was doing was moving through the key channels of the economy. And so perhaps it was the blood running through the arteries of America. Pick your favorite image.

Ben Shwab Eidelson 00:05:12

I like the blood one. The blood one's good.

Anay Shah 00:05:14

Yeah. So while the story of the first industrial revolution was One driven by steam power, textiles, and iron. The story of America's second industrial revolution is roughly 1870 to 1920, and this period of unprecedented technological, industrial, and economic expansion. It was in this period that coal's dominance becomes inextricably embedded into the foundations of the American engine. And to tell the story of what drove this change, we're going to focus on two titans born within a couple years of each other, who went on to change the face of America by creating the largest business empires in history and making coal indispensable in the process. The first is a household name of a one Mr. J.P. morgan. Everybody, take out your Chase Sapphire reserves. J.P. morgan, born in 1837 as the heir of two of New England's most distinguished families. He was educated in Boston, Switzerland, and Germany. He was groomed by his father for a career in international finance. And at the young age of 20, Morgan went to London to work at his father's bank before moving back to his permanent home in New York City. And the context of this time, the late 19th century economy, was wildly unstable. There were frequent bankruptcies. There was cutthroat competition in railroad, steel and utilities. And Morgan the banker saw this instability as inefficiency and dangerous for business. So his solution was consolidation. He wanted to merge competing companies, eliminate wasteful competition and install professional management. And he understood that railroads, steel, and electricity were the critical enablers of industrial growth. He thought that if he could control these industries, he could control the arteries of the economy.

Ben Shwab Eidelson 00:06:59

It's like the ultimate toll road. Investor and builder and financier, Right? Finding these points in the economy where the blood is flowing through, where humanity is growing and just owning either a piece or the whole thing, we'll see again and again.

Anay Shah 00:07:14

And there was no other road to take. You had to take that toll road.

Ben Shwab Eidelson 00:07:17

Yeah.

Anay Shah 00:07:17

So Morgan's financial empire was built on this strategic vision of infrastructure. His insight was that control over transportation was the key to controlling entire industries. And so coal entered his planning because coal was essential fuel that powered everything from the locomotives to the steel mills. So by controlling the railroads, he was the main middleman for all the rest of the coal's needs, while also controlling a major end use of coal in the railroads themselves. So the mid-1800s, the railroad industry's in chaos. There's hundreds of small competing railroads, many of them poorly run and deeply in debt. There was different track gauges, varying rail widths that made the regional systems incompatible. Morgan believed that if you could rationalize the system and stabilize the entire transportation network, you could dominate the trade routes for the key industries, coal, steel, and manufacturing. So he wanted to turn the railroads, and did turn the railroads into reliable, predictable revenue machines to feed the rest of the economy. And so his early funding came from his European investors, through his exposure, through his father in London. And he used the Morgan name to kind of Access Capital.

Ben Shwab Eidelson 00:08:26

European LPs. He had European LPs.

Anay Shah 00:08:28

Exactly. He made his first fortune for those European LPs. This is. This is amazing. He made his first fortune through government war contracts during the Civil War, where he actually bought rifles for $3.50 and then sold them to the government for $22, despite the fact that he knew they were defective. Years later, he partnered with one of the richest banking families in America and catapulted his own access to capital that went beyond his father. But this is where he began. And so his first deal was 1879, saving the Albany and Susquehanna Railroad. It was a small but strategic railroad that was actually caught in a battle between a Jay Gould and a one Mr. Vanderbilt. And so Morgan stepped in as the mediator. He secured a deal and he saved the railroad. And this started his relationship with the Vanderbilt family, which controlled the New York Central Railroad.

Ben Shwab Eidelson 00:09:19

I feel like this is Morgan's pattern too, that we'll see. Like, he. He finds this moment of crisis or conflict, often between war and sides, comes in as mediator and somehow ends up owner.

Anay Shah 00:09:29

Amazing, this gift of stepping in and then. And then taking over. And so his money helped finance the expansions, ensuring the railroads had the capital to survive financial crises that were to come through the late 1800s. Once securing the Albany and Susquehannahe railroad for Vanderbilt and leveraging the control that Vanderbilt had over the New York Central Railroad, he helped finance future expansions and then ensured that these railroads had the capital to survive financial crisis, which none of the competition had.

Ben Shwab Eidelson 00:09:57

And this is the same thing we saw in part one, if we go back to the story of the Reading Railroad was Franklin Gowen had consolidated, in a questionable legal maneuver, consolidated the railroad and the coal mines. They had gotten to the point of owning massive anthracite coal fields in Pennsylvania. If you remember, anthracite was the premium coal of the 19th century, powering most of the Eastern Seaboard's energy. And in the 1890s, the reading was financially unstable. Franklin Gowden had overswung and was on the verge of bankruptcy. Again, Morgan saw opportunity, so he swooped in, saved the railroad. And in that case, then he would no longer just own the railroad, he would own these deep coal reserves. And this deep control over coal prices. The real thing that Franklin Gowen had done that Morgan appreciated was the idea that if you control the transportation network, you actually control pricing. Because if someone wants to go around you, they can't because you're the actual means of moving their product. Morgan was then able to eliminate competition by continuing to merge more and more of the smaller coal hauling railroads into the dominant players and restructured the Reading Railroad, placed allies on the boards and eventually turned that into the major coal empire, combo rail plus coal empire. And so at this point, railroads were in the prime position. You could say that at this point, JP Morgan was sitting on top of the entire vertical stack of coal, its transportation network, and the delivery and pricing mechanisms around that. I don't know if that was sufficient. That's only one product.

Anay Shah 00:11:29

No, we're just getting to the 1900s and Morgan sitting on top of this empire. He's got access to coal. He's using that coal to power his railroads. He's eliminating competition. He controlled these massive transportation networks that ran on coal and transported coal and served as the backbone of the industry and economy that was being built around this time. Just to give a sense of it, all of the fixing and buying of the railroads helped expand America's rail network from about 53,000 miles in 1870 to 250,000 miles by 1915. So just in a short 45 years, we 5x the railroad network, with Morgan sitting on top of most of that expansion. And so in addition to railroads and homes that are being heated by coal, what else uses a ton of coal?

Ben Shwab Eidelson 00:12:17

We talked about this. I think it's the process of what we're building everything from. It's iron and eventually steel.

Anay Shah 00:12:25

That's right. So steel. Steel production required coke, which is a form of processed coal, to smelt the iron ore. And the railroads were the largest consumers of steel. So enter the king of steel, another household name, Mr. Andrew Carnegie. So Andrew Carnegie is famous for the Carnegie Steel Company, which was the largest steel producer in the world. He got there through his own journey. Born in Scotland in 1835. Born into poverty, he emigrated to Pittsburgh in 1848. And he started, as perhaps luck would have it, as a telegraph operator working in the railroad industry. So in his early 20s, Carnegie saw that most rails were built on iron. It was expensive and it was brittle. They wore out quickly under the heavy loads, and it limited their ability to expand. And so he started investing in iron mills because he saw an opportunity. By 1870, Carnegie left the railroad business and was all in on investing in iron. And he was searching for a way to make steel which was this kind of bespoke luxury product, make it more affordable, because he knew that the railroads desperately needed it. And in 1856, across the pond, Mr. Henry Bessemer had developed a process to mass produce steel cheaply.

Ben Shwab Eidelson 00:13:41

Let's zoom out for a second. What is the difference between iron and steel? Like, how do you go from iron to steel? Iron usually has more carbon and more impurities that need to be removed. And the carbon needs to be kind of finely controlled to create this more flexible structure that is steel. So steel is fundamentally iron with impurities removed and just the right amount of carbon to give it that strength and tactile bendability that steel has, whereas iron is more brittle. And so the traditional way at the time was to melt down the pig iron in a process that would often take on the order of a day to get a small batch. And so the Bessemer process was really the big unlocked of the first scaled way to do this. And so the key to the Bessemer process is what's called the Bessemer converter. It's this large pear shaped vessel that's lined with lime and allows you to melt down a large amount of the pig iron. And then the key is to blast air through this molten iron. And what's happening when you blast air, air has oxygen in it. And the oxygen is then taking out the impurities. Cause a lot of the impurities would be things like silicon, sulfur, phosphorus, all of these can form oxides. And so you blast the oxygen through the molted iron and form these oxides to actually take the impurities out. And then they would be able to add in or adjust the carbon content to create steel. And just to give a sense of the impact of this process, it now took 10 to 20 minutes to do the thing that would take a full day to produce three to five tons of iron. And so this led to an order of magnitude drop. Literally. You know, one day something is $50 for amount of steel and it's now $5. Huge jump.

Anay Shah 00:15:24

Another non paradox of the Javons paradox.

Ben Shwab Eidelson 00:15:27

Yes. Guess what? Turns out more people wanted to use steel after it got much cheaper.

Anay Shah 00:15:33

The problem was no one believed Bessemer. He presented his findings to the British Iron and Steel Makers Society and he was dismissed as a fraud.

Ben Shwab Eidelson 00:15:41

People don't believe those 10x improvements.

Anay Shah 00:15:43

10X improvement. And nobody believed him. So Carnegie heard rumors and I'm. How do you, how does one hear rumors in the 1900s, I don't know. But Carnegie heard rumors about Bessemer's new process and he decided to go see it for himself. So he went over there and he watched as molten iron was transformed into steel in minutes. 10 to 20 minutes. Faster and cheaper than anything he'd ever seen. And other American businessmen had also visited, but no one acted. Carnegie, visionary, saw a revolution waiting to happen. And so before Carnegie, steel was too expensive. It was a luxury metal. It was mainly used for tools and swords. Carnegie returned to the US he founded the Edgar Thompson Steelworks in Pittsburgh, and he designed it specifically around the Bessemer process. His overarching strategy was to control every step of steel production, from the raw materials to the finished product. So steel production in the late 19th century relied heavily on coal, especially for coke, which was used to blast the furnaces. Owning the coal mines ensured Carnegie steel mills had a steady supply of the high quality fuel it needed without having to pay the middlemen or be subject to large price fluctuations. And Carnegie had previous experience in the railroads, which required the steel rails and consumed large amounts of coal. So owning coal mines allowed him to both control the supply for his steel mills and and his railroads. So he bought up coal mines to supply coke. He secured contracts with railroads to guarantee demand for his steel rails. And in 1873, when the US economy crash, many investors backed out of industrial projects. Carnegie doubled down, pouring his entire fortune into this new plant. His competitors called him insane for investing in steel during a recession. But in a mere two years, his plant was working. And within a decade, iron rails were completely replaced by steel. And so Carnegie realized the railroads were charging too much to transport materials. And so he built a private railroad network to move the iron and coal directly to his steel mills. This cut transportation costs in half, giving Carnegie a huge price advantage.

Ben Shwab Eidelson 00:17:43

That's fascinating. So back to JP Morgan or others have this monopoly on the railroads. And instead of playing their game, he was like, you know what, I'm just going to go around. I'm not going to use your LLM model. I'm going to build my own.

Anay Shah 00:17:57

And he could do that because in 1880, Carnegie Steel was the dominant producer of steel in America. His steel was used for railroads, for skyscrapers, for bridges, for ships. It was fueling the second industrial revolution. In 1890, he was the largest steel producer in the world. He produced over half of America's steel. One of his steel mills alone produced more than the entire United Kingdom could produce.

Ben Shwab Eidelson 00:18:22

If you remember back to, I think 100 years prior was when Britain was the workshop of the world. And now fast forward to this point in time and an American industrialist has built one mill that has become the steel producing mill of the world. Like what a wild fact.

Anay Shah 00:18:37

All in the short amount of time from discovering the Bessemer process to a couple decades later producing it at mass scale. So at this point, Morgan and Carnegie were rivals. And Carnegie was well known for his stubborn independence. Morgan financed Carnegie's competitors, but Carnegie kept lowering prices and killing the competition. And by 1900, Carnegie was still on top. And Morgan realized there was no way to beat him. He dominated steel. And so the only way was to buy him out. So as legend has it, Carnegie was on vacation off the coast of Georgia at the Jekyll Island Club, which was an exclusive retreat for the ultra rich, the Jackson Hole of the time. And so Morgan sent his right hand man, Charles Schwab, not the same Charles Schwab, to meet Carnegie and just float an idea to him. So Schwab met Carnegie over dinner and his pitch was simple. The steel industry was getting too competitive. A single giant company could set prices, stabilize profits and dominate the entire industry. If Carnegie was willing to sell, Morgan would pay him anything he wanted. So Carnegie took out the napkin and the pen, scribbled a number on and slid it across the table. The price? He wrote $480 million. Which in today's dollars is about 14 billion. Morgan's response? Congratulations Mr. Carnegie, you're now the richest man in the world. So as legend would have it, the entire deal was finalized on a napkin in a single night.

Ben Shwab Eidelson 00:20:05

It was a wild deal. And there wasn't, I think, much in the way of M and A regulation at the time. So, so this could just happen.

Anay Shah 00:20:12

Stubborn rich industrialists who just wanted to control more because they thought they had a better vision of the future.

Ben Shwab Eidelson 00:20:17

Yeah.

Anay Shah 00:20:18

And so in 1901, he forms the United States Steel Corporation. U.S. steel, the first company in history to be worth more than a billion dollars. Which was incidentally bigger than the entire US federal budget at the time. And so in this process, Morgan didn't just buy Castile, he bought the coal, iron and railroads that went along with Carnegie's vertically integrated model. And so US Steel goes on to become the largest producer in the world. It relies on the coal from Morgan's mines, It relies on Morgan's railroads. It set the precedent for a corporate monopoly, which eventually led to antitrust regulation. That had to be introduced for some.

Ben Shwab Eidelson 00:20:55

Context on this because I think we're not used to steel being exciting. Maybe the analogy is Nvidia Today, it's like this is the key input into the world at this moment. For much of the 20th century, US steel was both the world's largest steel producer and the world's largest corporation, because steel was the growing important input into the world at this time.

Anay Shah 00:21:19

It's hard to imagine, but we'll borrow some imagery from the new release of. Of abundance. If you went to sleep in 1875, the tallest building in Manhattan was a church. You wake up 30 years later in 1905, and you've got the skyline studded with towering steel skeletons called skyscrapers, right? And so this is the turning point of why coal became the engine of the industrial America. Without cheap steel, there was no railroad expansion. There were no skyscrapers, There were no manufacturing at industrial scale. All of this was powered by coal. And Morgan Carney were two among a few who really controlled the entire industry and drove it forward.

Ben Shwab Eidelson 00:21:58

And JP Morgan, I mean, at this point, he was so in control of these arteries and the blood and all of the pieces that he essentially became the U.S. bank, right? So two different crises happened. There was the 1895 gold crisis, when the U.S. which at the time had a gold standard, was struggling to have enough gold to keep the standard. And so he swooped in, brought in capital, and loaned gold to the United States in order to keep the gold standard. And then again in 1907, there was a stock deal that went south and basically a run on a number of trusts and banks. So it was on the precipice of an economic collapse. Morgan again stepped in and injected massive loans to stop these bank runs to say, hey, these banks are going to be solvent. They're going to be okay. The New York Stock Exchange was about to collapse at this moment, and he injected $25 million. And so he was essentially the lender of last resort across the entire industrial economy. And ultimately, after looking at this 1907 collapse, there was enough political willpower to say, we can't let this happen. At least we shouldn't depend on the.

Anay Shah 00:22:56

The guy who's too big to fail.

Ben Shwab Eidelson 00:22:58

Yeah, the guy who's too big to fail. So let's set up the Federal Reserve and. Which kicked off in 1913. So just a wild thing to think about the scale of capital collected in one person's banking entities.

Anay Shah 00:23:10

Amazing.

Ben Shwab Eidelson 00:23:11

All right, well, we covered steel, we covered trains, we covered coal, we covered industrial capital. But that's not the biggest change, I would argue, that happened in that going to sleep in 1875 and waking up in 1905 there's more, there's more. You went to sleep in 1895 and like the way that you experienced light and heat and transportation was largely the way it was for decades prior. The other big thing that came is this was the first era of electricity and all of the invention that surrounded it. Now, this is not going to be our episode on the grid. I suspect and hope and cannot wait for the two to three part series on the development of the grid. But we do have to dip our toes into it because the expansion of electricity and coal is an intertwined marriage, especially in this era. And as you'll see over the next hundred years of history, electricity became the dominant user of coal. So let's go to the beginnings of when that started. Prior to this time, there was a lot of experimentation with trying to control and understand and use electricity. But think of it as research at this time. Right. So around 1800, there's an Italian scientist named Alessandro Volta who figured out how to make an early battery. These were called voltaic piles. And yes, that's where volts as a unit has come from. Mr. Volta. I kind of wish we called them Voltas. That'd be funny. And for a good 70 to 80 years following this, almost all electrical experiments were powered by these primitive batteries. These were useful as scientific tools to run experiments. They could do things like electrolysis and do a bunch of great lab experiments, but they had very limited current and power and would lose most of their energy internally. So you couldn't actually do anything really commercial with this early technology.

Anay Shah 00:25:07

It's amazing to think about this in today's moment where battery storage is scaling exponentially at utility scale. As a society, we're on the brink of unlocking how much energy you actually can store internally.

Ben Shwab Eidelson 00:25:22

That's right. I mean, maybe the good analogy for this time and batteries as we're talking through it is you know, maybe like quantum computing or something. It's like we've been doing experiments for 20 years. We have some stuff, you can technically use it, but the normal person is not using electricity at all. And the normal person is not hitting some quantum computing server call today.

Anay Shah 00:25:40

That's right.

Ben Shwab Eidelson 00:25:41

Well, the big game changer was finding a way to turn a big energy source into electricity. There was no bigger energy source than coal. And so how is it that we're going to turn this rock of energy into electricity? Well, we figured out how to turn this rock into steam, right? You just heat it up, you boil some water, you got steam. And we figured out how to turn the steam into motion. That was Watt, that was Newcomen before that. And we figured out how to turn that motion into rotary motion. So we know how to move something. But how do you turn moving something into electricity, into current that you can use? Now I get to put on the physics nerd hat. So we're going to 1830s. Michael Faraday demonstrated a new principle of electromagnetism which showed that a current and a wire could generate a magnetic field. And the opposite is also true. If there's a change in magnetic field near a wire, you can generate a current. And the way to think about this is, think about it almost like inertia. Like, the wire, like a loop of wire, isn't comfortable with the magnetic field moving around it and changing, so it actually creates a current to go the opposite direction of the changing magnetic field to kind of push back against it. That's the best way to give a physical intuition of this. You get to the bottom out of like, well, why? Well, why? Well, why? It's kind of like saying, like, well, why gravity? This is getting to one of the foundational fundamental laws of physics that govern the universe. That is, well, why? Well, we don't know. It's what happens. And asking about further why just gets like, it's a law of physics. And so once you do this, you have figured out that if you can change a magnetic field around a wire, you can generate electricity. And you can change a magnetic field, literally by moving a magnet through it. Or you can hold a magnet steady and you can spin a coil of wire inside the magnet. And that would effectively, for the wire's experience, say, hey, the magnetic field's changing inside of my loop. So I'm going to generate a current to resist this. This is the foundational thing that enables any electricity to become motion and any motion to become electricity. This is how an EV motor works. This is how the microphone we're speaking into works. This is how early telephone works. It is all the same principle, which is, let's say you're talking at the end of a telephone, you're moving this diaphragm that's changing the magnetic field inside of a wire. That's transmitting across distances. And then on the earpiece side, it's doing the opposite. And this is the same thing. A generator on one end is a motor on the other end.

Anay Shah 00:28:21

So everything has to do with a change of magnetic field and the response of the current and the wires.

Ben Shwab Eidelson 00:28:27

That's right. So that's the physics that was discovered in the 1830s through 1860s, but now we have to figure out how to use it to go from physics to engineering. And how can you use that at some scale? And so when this physics was discovered by Faraday, he made it public and he was asked, well, what is the use of it? And he said, what is the use? Well, what is the use of a newborn baby? Which is. Yes, what is the use of a law of physics that we now understand? And, boy, would that baby grow up to be the way our world runs.

Anay Shah 00:29:05

That was one good baby.

Ben Shwab Eidelson 00:29:06

All right, so let's visualize how to make use of this. So let's take a magnet and let's spin a coil of wire inside of it. Current will flow through that wire, but the way that the wire is spinning, you're going to end up with current that actually switches sides because the change in magnetic field, it goes high and then goes low, and then the direction flips when the wire flips, Right? So you end up with a sine wave coming out of current of the wire, also known as alternating current. Well, at the time, they wanted something called direct current, or dc. And so what they would do is try and figure out a way to only get half of the sine waves, only get the upper part right. To get this pulsating DC current, they would make this connection, this kind of brushless connection. At the ends of that, they would flip the direction so that it would only connect on the opposite side. And so you'd end up with this pulse of the upper part of the wave and the upper part of the wave and the upper part of the wave, so you can use it as DC current.

Anay Shah 00:30:01

And the goal was that DC current.

Ben Shwab Eidelson 00:30:03

Is potentially more stable, more stable and more intuitively usable for a bunch of the devices. The DC current was like what the voltaic piles put out. So any of the experiments, anything was used to working with the steady voltage. We'll get into later how the world evolved. But a device that would take this rotating coil, turn it into current in this way is called a dynamo. The coal powered dynamo becomes the first real scaled way to make electricity. It took 35 years from Faraday's initial demonstration to launch a practical dynamo. So by the early 1870s, there was a Belgian engineer who had figured out how to actually make this thing in a way where it would actually work in some scale. Then all of a sudden, you had the ability to turn coal into steam, steam into motion, and motion into DC power. And so you could do things with it. What did people want to do with it? Well, the first Thing was actually lighting. Lighting was an expensive concern of the time and especially public lighting. You think we're going to jump directly to Edison, but no. There's another type of lighting that was actually ramped up faster and earlier called arc lamps. And this is where you would take a material, usually carbon electrodes, bring them close to each other and drive the voltage up. When it got high enough, there'd be a spark and the air would ionize and the electrodes would heat up and there'd be an intense white, pulsing light. And so this was the first way that there was public electric lighting. They lit up the streets in Paris on some of the main avenues this way. And on one hand it was kind of fancy. On the other hand, supposedly the light is like terribly white and bright and uncomfortable and pulsing. Some visitor of Paris said this is a magnificent illumination. And someone else says the light in Paris is horrible, unearthly, obnoxious to the human eye. A lamp for a nightmare. Such a light as this should only shine on murders and public crime or along the corridors of a lunatic asylum. To look at it only once is to fall in love with gas. And by that he means coal gas, which gives a warm domestic radiance.

Anay Shah 00:32:04

So coal gas is going to be used as light.

Ben Shwab Eidelson 00:32:07

That's right. In this era there was really two primary sources of lighting. There was, you're either burning something, this was think candles, whale oil and then a growing booming business at the time, kerosene. Our friends at Standard Oil, those were the things that you bring to you in a jug and manage the supplies of. So very useful, especially in rural or non connected context. But coal gas, also known as just town gas or gas was piped from a gasworks where you'd heat up coal into coke and the byproduct would be this gas that you could burn. This gas would be this combination of hydrogen and methane and a bunch of other particulates and sulfur and whatnot. And so that was how especially growing urban areas were lit. Every like little township and city would have its own little gasworks of the ones that I'm most familiar with and some people texted me about after. Part one is Seattle Gasworks Park.

Anay Shah 00:33:04

Gasworks Park. I used to live like four minutes from Gasworks park dug into this.

Ben Shwab Eidelson 00:33:08

And The Seattle Gaslight Company built this coal gasification plant that was running from 1906 to 1956. So not that long ago it shut down, became a public park in 1975 that we can now enjoy. But the coal was sourced from the east side, right From Renton. And I think there's a coal mine in Newcastle area, so not far from here. And it supplied neighborhoods all around, right? So coal gas. There's these old train tracks actually, you know, near the parking lot of Gasworks Park. That's where the coal would come in on the train, come into gasworks, they'd heat it up, they turn it into coal gas and they pipe it from there out to Wallingford, Fremont, Capitol Hill, right to power coal gas light and all these houses. At its height it supplied gas as far south as Kent and as far north as Mokoltia. We don't have to get into just the other area of geography, but those are pretty far away. Those are like 45 minute drive from, from, from Seattle. The same thing was actually happening in San Francisco. San Francisco had a coal gas lights that began in 1854, the San Francisco Gas Company. So in this case the plants were actually located on the water, well known by this point. Water is the other way to transport coal. So coal would come into the Marina district and Fisherman's Wharf, it'd be shipped sometimes by eastern US Mines and come in and they take the coal, gasify it and pipe it through to the houses, right? They have that, the old remnants of the coal gas lighting and ran until we were able to swap all this stuff out for natural gas and electricity lighting. And so at the time, a fancy house in New York City, a developing part of Seattle, San Francisco, the downtown streets of London all had these coal gas lamps. And that worked, but it was messy. I mean you have to light it and turn it off. And so it was quite a hassle to live and work with coal gas. And so as soon as you had electricity and arc lamps, it became an exciting thing for the public. But let's remember that you don't want this bright eye straining light in your house. Like it's a very different environment for lighting. And so there was a well accepted view that if someone could figure out how to make a nice light in your house, that would be quite a market for electricity.

Anay Shah 00:35:07

We've got market pull for the product, but the product is not delivering what the customers really want.

Ben Shwab Eidelson 00:35:12

That's right. I mean people want to see past dark. Now we introduce our friend Thomas Edison. He had been working for a long time to try and crack this problem and he had invented other things prior to working on lighting. But the key is that he built out this lab called the Menlo Park Lab, not to be confused with Menlo Park, California. This is Menlo Park New Jersey. And he just stocked it with everything they needed to try and figure this out. And so it was just pure persistence and perspiration. And so in 1879, they figured out a carbonized bamboo, I believe, as the key element that would actually work and be able to run more than a couple hours and burn out inside a bulb. And thousands of people would come to visit the lab to see this miracle of incandescence, this nice glow that almost felt like what you're used to seeing from a candle or coal gas. But driven by electricity was magic. Well, guess who financed this lab and these experiments.

Anay Shah 00:36:09

That's right. Our good friend JP Morgan comes back into the mix. And this guy, he loves the coolest thing on the market, right? And so you're 1880s, there's about 50 million Americans, and Morgan is running around to this high society of old white men with money. And they're good, they're happy with what they've got. They want to keep dominating their monopolies. But Morgan was different. He really liked the new thing. He wanted to find that new temper of the times. And he admired men like Edison who were bold and ambitious and hardworking and confident. And so late one spring, Morgan comes back from a long European tour and he had all these issues piling up from his railroads and his steel. And he actually puts all his business concerns aside and announces to Edison what would be a fairly audacious decision. Morgan, this prominent individual, says he's going to personally showcase the advantages of Edison's pioneering incandescent light bulb in his own Madison Avenue brownstone, in the middle of a top to bottom renovation. So Morgan's Italian mansion would become the first private residence in New York to be illuminated solely by electricity. It wasn't a really easy feat, but it was remarkable.

Ben Shwab Eidelson 00:37:24

You didn't just call up your utility, you just say like, hey, Seattle city light, I need a drop from the utility pole.

Anay Shah 00:37:29

Flip the switch. Well, as all good startups have it, everything's made of toothpick and bubble gums. And in this case, the manual operator. In the background behind the perceived automation was a generator, had to be run by an expert engineer. And so that person would come to the house at 3:00pm and got the steam going. And anytime after 4:00 on a winter's afternoon, the lights could be turned on. And then the man would go home at 11pm after the lights were turned.

Ben Shwab Eidelson 00:37:52

Off, just to make sure this is well understood. To add lighting to his house, they had to add one of these dynamos at the house that was going to burn coal to generate the electricity. So it's like run by a local generator. And so that had to be managed. So there was like someone shoveling coal in, operating this dynamo. And they'd come at when it started to get dark to turn on the lights and then they'd go home. And supposedly some of the times they went home, they didn't know that people were still over and he was still entertaining people. So the lights would just go off because the power just turned off because.

Anay Shah 00:38:25

The power man went home.

Ben Shwab Eidelson 00:38:26

The power man went home. The coal shoveler. It's also interesting because we'll talk a lot about how utilities evolve, but this is distributed energy. There was no transmission lines and substations and all of this. This was just generating the energy at his house and then using it locally.

Anay Shah 00:38:44

Single point source, locally sourced. Yeah.

Ben Shwab Eidelson 00:38:48

Well, Edison, of course, doesn't just want to electrify house by house by house. He came into this with the vision of I want to electrify and light the entire city. So the light bulb was just the beginning. He wanted a delivery system that would distribute power and electricity at scale. Now there was at this time some electricity use across New York City. But it was these weird localized deals. There'd be rat's nest of wires to have a dynamo in one space and there'd be a wire running into a factory or for some kind of transit thing. And it was all this above ground mess. And some company would go out of business and they'd leave their wires dangling. And Edison looked at all this and was like, this is not how it can be. We need to build this into the infrastructure of the city. He wanted to build this underground network. They almost modeled after subways, these tubes that would house these copper lines distributed around. And they built the first power station on Pearl street and turned it on. September 4, 1882. This is the first commercial power plant in the world sitting there down in lower Manhattan. And of course, it burned coal to generate steam, of course ran these dynamos to produce the electricity that are operating on the principles of Faraday's law and electromagnetism. And that generated enough electricity for about 400 lights across 85 customers in a small section of New York. But those are the first folks to really have a utility of sorts powering their lights. It expanded and within a couple years they were serving 500 customers with 10,000 lamps. And they set up the Edison Electric Illuminating Company of New York and continued to grow and grow. And they powered the New York Times office building and of course, JP Morgan's offices downtown. And it was a modest start, but a significant one.

Anay Shah 00:40:38

I mean, they didn't have to do any marketing because their product was glowing. I mean, imagine this lower part of Manhattan just glowing at night. And it's a story that tells itself.

Ben Shwab Eidelson 00:40:50

And the newspaper reporters, I mean, there you are, the New York Times office is lit up and you're like, what better thing to write about? And so they wrote, the sight of electricity lit streets is as though a soft moonlight had fallen over the city, but brighter, purer and more perfect. They love this light. And Edison was not a humble guy. He loved people calling him the genius and the inventor and all this stuff. And he saw himself as a force of history. And so he declared, we will make electricity so cheap that only the rich will burn candles. And he was very correct. Candles are now the bougie way to get some light on a dark night.

Anay Shah 00:41:26

That's right.

Ben Shwab Eidelson 00:41:27

You know, this, as you can imagine, didn't do well for the gas companies, the coal gas companies at the time, they plunged in value, their stock prices dropped. And the British Parliament wanted to reassure the gas investors and said, we're going to look at Edison's claims. And they said, Edison's wild dreams might be good enough for our transatlantic friends, but they are unworthy of the attention of a practical or scientific man. And that neither Mr. Edison nor anyone else can override the well known laws of nature. Which is to say, because Edison was starting to talk about other uses of electricity at the time. And so they pushed back. They said the idea that the same wire that brings you light will also bring you power and heat. There's no difficulty in seeing that more is promised that can possibly be delivered and that the talk of cooking food by heat derived from electricity is absurd.

Anay Shah 00:42:10

But Edison had, he had a vision, right? And he wanted to keep a grip on the entire system and he wanted to create a vertical monopoly. The building of the power plants, the laying of the wires, the supplying of the light bulbs. And, and his thought was to make money by selling the current, same way a gas company makes their money selling the gas. But JP Morgan is kind of in his own world of building a business. He had a different idea. Instead of creating the commodity of electricity, Morgan wanted to structure the electricity business around the machinery that makes the power. To Morgan, it was easier to build and sell a widget at profit than it was to get involved in this complicated business of creating and managing electricity. And so these two visionaries had slightly different approaches for how to go forward and where the greatest profit and impact would come from.

Ben Shwab Eidelson 00:42:59

As you're saying this, I wonder if Morgan thought of himself as a B2B investor and as he wanted to build a B2C company. Edison's like, I'm imagining the house and them cooking food using my electricity. I want to own the light bulbs that go into the house all the way through to the generating of that electricity at the power plant. And Morgan's sitting there like, let's just own some toll in the stack. And that's probably sufficient. Now as you can imagine, everyone's walking on seeing this. Edison's not the only one going after this market. This is now a hot market that everyone's excited about. And so there was an alternative approach, but Edison was a believer in direct current DC to do everything and thought it was safer and thought it was better and simpler. There's an alternative approach led by Westinghouse and eventually Nikola Tesla and some other folks called Thomson and Houston company that was proposing to use alternating current as the mechanism for transporting and using electricity. This led to the war of the currents, which we'll get into down the line in a future episode. But think of it as like taking the Android versus iPhone or Mac versus PC debate and dialing it up to 1000 right in terms of the intensity. And it was in the newspapers and fought in the public square. In the end though, AC won as it was simply the better technology, it was the better way to do the thing that they were trying to do. And America's eventually coal powered electric grid was built around alternating current ac. JP Morgan, as we talked about, isn't one to mine conflict.

Anay Shah 00:44:28

He wants to be right in there. There's an opportunity. You've got ac, you've got dc, you've got competing approaches, you've got Edison, you've got Nikola Tesla and Westinghouse. So what does J.P. morgan do?

Ben Shwab Eidelson 00:44:39

So when some someone's on the ropes, he swoops in and buys the boxing match, you know. And so he took Edison's General Electric company and merged it with Thompson Houston, which was one of the leading AC companies at the time, in 1892. And that became a little known company called General Electric or ge, which would go on to build so many important products. And at some point in the year 2000, it was the most valuable company valued at $600 billion market cap. And so just in this era of like a decade, J.P. morgan has financed U.S. steel, which was the biggest company of the time. General Electric, which was the biggest company a hundred years later.

Anay Shah 00:45:18

He had financed the government, he had financed railroad consolidation.

Ben Shwab Eidelson 00:45:22

Legend, what a moment in time. And so as demand grew for electricity, there was a desire for just more reliable and a larger scale system. And the first issue here, the amount of coal you use to power all of this electricity and power all these lights, started to become an issue. And if we go back to the Watt steam engine, which is the fundamental design, powering these generators got to something around a 10% efficiency. That's leaving a lot on the table. That means only 1 out of 10 bits of the heat energy coming off the coal is making its way out into the electric grid. And not just that, but those steam engines were a lot to maintain. So one of Edison's business partners had heard about an English engineer named Charles Parsons who had invented a new way to turn coal into motion. And that is using a turbine. And a turbine is a radical simplification of the piston driven steam engine technology. So instead of having belts and crankshafts and pulleys, you just have a fan. And if you have high pressure steam, you can push it through the fan and the fan spins. And if you can get a fan to spin, you can connect them into the fan and then you have spinning motion. And that elegant design ultimately led to the most efficient way to turn steam, and therefore coal, or any heat source into motion. And is the fundamental way that we still do that today. And of course it led to the way that, you know, we've propelled planes and other turbines in the world. And you know, you can think of this moment as almost as foundational, I think, as Watt's evolution. But Parsons is not one of those names that's as well known.

Anay Shah 00:47:00

Not at all. And what, we'll get a little bit more into this when we, when we walk through a coal plant later on. But this, this is the, the fundamental step, change function in efficiency in a new way to burn coal to produce electricity.

Ben Shwab Eidelson 00:47:14

And so, you know, effective turbines are 30% efficient. So you get a 3x improvement in, you know, translating the energy into useful motion, which that could then be turned into useful electricity.

Anay Shah 00:47:25

That's right. And so we made it more efficient. So are we going to use more of it or less of it?

Ben Shwab Eidelson 00:47:29

I think we might use more of it. I don't know. It's paradoxical, wouldn't you say?

Anay Shah 00:47:33

Jevons paradox. We've now mentioned Jevons paradox a couple of times here. So let's take a little aside. William Stanley Jevin, who described this presumably counterintuitive phenomenon Where a tech advancement that increases the efficiency of resources would paradoxically lead to the increased consumption of that resource rather than the decreased consumption of the resource. So I think that the conventional wisdom was if you make something more efficient, you'll use less of it, when in reality what happens in many times is you increase the efficiency and use more of it. And Jevin was mentioning this in reference to the steam engine. He observed that steam engines became more efficient and coal consumption increased rather than decreased as we've been talking about, because it was lower cost to use the steam engines that led to wider use cases. And we're seeing this again now with the turbines, and we'll see it over and over again as just kind of the story of coal. As you find more efficient ways to burn coal, to mine coal, to transport coal, you just use more coal.

Ben Shwab Eidelson 00:48:30

Yeah. So Edison, once they figured out that these turbines worked, they wanted one and they wanted to build it into their business. And so Edison and his right hand man, a guy by the name of Samuel Insull, contracted with their old AC nemesis, who at that point was running General electric. Because Edison kind of stepped away from General Electric, he's like, okay, the AC guys are taking it over, but then they're like, hey, you know what, can you actually help us build one of these turbine things? And they said that they would share on the cost if it ended up being a failure. Well, 17 months later, they had their first steam turbine driven power plant on Fisk street in Chicago. And it was unlike anyone had seen before. It looked like this giant jet engine pointed towards the sky. Right. It would spin this huge fan blade and generate consistent electricity. And the other thing that's cool about these things is they're actually like quite easy to control and dial in the RPMs that are spinning, which becomes important because the spinning RPMs controls ultimately the power output. And so over time, as you build out the grid, you need these things to sync up. And so this fine tuned control becomes a really important feature.

Anay Shah 00:49:32

Yeah, perhaps not easy, but controllable.

Ben Shwab Eidelson 00:49:34

That's right. And so this first station produced twice as much power as any steam engine ever built.

Anay Shah 00:49:42

Wow. This is tremendous. I mean, the triumph of a large coal fired turbine is a real win for the people. Right. Because if you're producing this at twice as much power and you're doing it more efficiently, then it's going to become cheaper. So at this period, the average price that Americans paid for electric power fell from four and a half dollars per kilowatt hour in 1892 to just 62 cents in 1927 to 47 cents in 1937. So over this period of about 40 odd years, you went from four and a half dollars to under 50 cents. And as price fell, consumption grew. Because guess what? Electricity is very interesting and there's a lot of use cases. And this continued, right? So from the 1920s through the 1970s, the demand for electricity doubled every decade because there was just such a pent up need for this. I mean, we continue to invent new ways to use it. And in the early 1910s and 20s, power stations are expanding rapidly. The idea of the interconnected grid where electricity can be moved across long distances from coal plants to cities, became a reality and formed the modern grid that we're talking about.

Ben Shwab Eidelson 00:50:57

I mean, this was seeded by Edison's view that we should have power plants and distribute it and not have to generate all this stuff with local generators or dynamos or turbines. But it was really executed by this guy, Samuel Insull that we mentioned. I think he's best considered the godfather of the utility in a way. So he started with this plant in Chicago, but built out this Midwest network. And at one point over an eighth of America's energy was generated by power plants and utilities that he controlled. And his key belief was essentially like scale is everything. And so he was much more interested in having a thousand customers that paid less than 100 customers that paid more. I think he's like the basis Amazon thinking of the time, right? It's like, let's bring down costs, let's run this thing at cost, let's get everyone hooked. And that is the right position to be in. He is the one that came up with essentially the idea of the public utility commissions that would grant these monopolies because again, it was kind of against this inefficiency of, hey, let's have seven people trying to sell you power to your house. It was no, let's have this one scaled player. And maybe there's a different one over there, maybe I'll own that one also, but there'll be a different entity and design this thing as a utility that is scaled. It worked because the economics of building bigger power plants ended up being the more efficient plants of the time. And so once you've built a plant, you want to run it at full capacity and increase that capacity as you go. A good analogy is like an airplane or a data center, you want to use it and operate it as much as you can to amortize that initial expensive build out. And it turns out that the input of coal was not the primary cost of operating this. It was building the plant. And so you really just want to run it and sell as much as you can to get people hooked. That was the major unlock.

Anay Shah 00:52:50

And it's this nice kind of symbiotic relationship between the best way to run this business is to amortize the cost over. Over running it. And the vision is around. It's called a utility for a reason, right? Like it's become a public necessity, it's become a public good. And so you want to expand the use of it as much as possible, because that's the vision you have for. For society.

Ben Shwab Eidelson 00:53:12

That's right. In 1905, less than 10% of homes in America were wired. By the late 1920s, 75% were. Right. So this is a rapid, rapid point of people really getting electricity to their house for the first time. This also led. You know, Samuel Insull pushed heavily for standardization, right? He wanted this expansive grid, so he pushed heavily for standard voltages for transmission so that things and equipment being able to interoperate. And this all led to ultimately more efficiency in the system and the ability for that expansion. Now, the flip side of that is once that's built out, there's less and less incentive for adaptation. You've built out this big centralized infrastructure that you want to fully utilize and expand upon. That's the opposite of distributed energy closer to where it's consumed in the distribution networks. If you ever could move back to local generation, it erodes that rationale for this monopoly model, which echoes forward to some of the battles you see today. In the end, I would say that coal power plants are the embodiment of centralized control and monopoly power.

Anay Shah 00:54:19

And so what all this did was it made electricity no longer a luxury, no longer just limited to J.P. morgan's house. That could run from 4 to 11pm but cities could stay awake after dark, and factories could run up to 24 hours a day, seven days a week. Supercharging industrial production. Right? And remember, manufacturing boom is happening. Street lights reduced crime. Urban life became safer for people. The electric streetcar was introduced and expanded cities into suburbs. And at home, electricity was a revolution in convenience. Right? You have the electric washing machine that was introduced in the 1910s, saving hours of work every day. You had refrigerators that made food storage safer, and they replaced the old icebox. You had radios that connected people into the world in real time, which was unthinkable. The gossip and the hearing about things from hundreds of thousands of miles away was unthinkable. Decades before, what was behind this? It was coal, right. By 1920, 75% of America's electricity was generated by coal fired power plants. The scale was just enormous. And to keep up with this demand, coal production tripled since Edison's first plan. By the 1920s, America was burning so much coal for electricity that if you stacked coal trains end to end, it would stretch from New York to San Francisco and back every day. That's how much coal we used. Every day. Day.

Ben Shwab Eidelson 00:55:42

Every day. They're burning them. Wow. And they're just getting started.

Anay Shah 00:55:46

We're just getting started.

Ben Shwab Eidelson 00:55:48

I mean it's amazing. We're just talking about 30 years for electricity back to like that. What an explosive thing. From a transformation perspective, right? We think about how long these other time horizons were and I think something so much more in people's lives, right? You walk around a city, you see it. It's the amazing kind of foreshadowing, I think, of electricity being the dominant way that people experience coal versus the coal itself.

Anay Shah 00:56:14

That's right. And these are the 30 years we have spent the most time on in this episode because it is just that important, that transformative.

Ben Shwab Eidelson 00:56:21

Well, you know, America wasn't the only country undergoing this energy revolution.

Anay Shah 00:56:26

Wait, America's not the only country.

Ben Shwab Eidelson 00:56:27

Not the only country. Not the only country in the world. Europe was electrifying as well. And so Britain was already of course dominant in coal. And you know, the steam turbine was invented there by Parsons and others. And so very quickly Britain expanded its electrical infrastructure as well and followed. I kind of think of the US and Britain as going through an osmotic process with technology. They're sharing people, they're sharing ideas. People are traveling back and forth between the two. The Soviet Union was also kicked off a bunch of massive electrification projects. In short, wherever there was coal, there was power. The energy race wasn't just about technology, it was about geopolitical dominance. Right. A country with abundant coal and grid could produce more, could move faster and could out compete its rivals.

Anay Shah 00:57:10

Geopolitical dominance early 1900s something tells me that coal is going to play a big role here because if you were designing the perfect energy source for the early 20th century, you'd want it to be abundant, reliable and powerful enough to fuel massive machines of modern industry. And it was coal. Coal wasn't just the foundation of industry though. It was also, as we'll soon learn, the foundation of war. 1914. Everyone remembers this as the beginning of World War I, but let's pretend that we're in our kids elementary school class. We want to just do a little bit of a 101 on World War I, because, let's be honest, we all remember Franz Ferdinand. Something happened to him. But, but I don't, I don't know if all of us retained what happened so very quickly. Early 20th century Europe was dominated by great empires that were increasingly in competition. You had the British Empire, which was the world's superpower, ruling over vast colonies and global trade. You had Germany, that was a rising industrial and military force eager to challenge Britain. You had France, that was still powerful even though it had just lost the Franco Prussian War to Germany. You had the Austria and Hungary and Ottoman empires that had been around for a long time. They were declining, but they were still trying to hold their influence. And then you had Russia over in the East. It was an enormous empire with ambitions into Eastern Europe and the Balkans. And in the background you had this massive militarization of empires, including a naval arm race. And so you had this complex web of alliances that actually, ironically, it increased the chance of war because if, if one country in the alliance was pulled into conflict, it was going to pull the others in. You have imperialism and global competition for colonies and resources. That combined with ethnic nationalism on the European continent. It's just this tinderbox. It is, it's a tinderbox. And then June 28, 1914, Archduke Franz Ferdinand, the heir to the Austro Hungarian throne. Dude, get capped. He got got. And the tangle webbed alliances pulled the entire region into the deadliest war to date. Now, why was it so deadly? Well, the First World War was the first truly industrial war. Armies weren't just fighting in the trenches, although they're doing a lot of that. They were fighting in factories and in shipyards and along the railway lines. It was the steel for artillery, the movement of troops, the battleships that controlled the seas, all ran on coal. If a country had coal, it could fight. If it didn't, its war machine was slow and could not compete.

Ben Shwab Eidelson 00:59:52

I mean, let's turn to the UK. Right. In 1913, there are over a million men working in the mines. That year, they had extracted 292 million tons of coal, about a third of which they were exporting overseas, coincidentally. We'll get into this later, but this is the peak of British coal. This is the most they were ever extracting leading into World War I. The British government knew that coal was going to be essential. And so they actually, even though they had so much, they started to restrict supplies and they would say that it was unpatriotic to hoard coal. They were worried about coal shortages. And going into the winter in 1914, they started to restrict street lamps usage and dim lights to use less coal. Gas and the coal Q the line to go pick up coal became a thing. There's a story of a young woman running around. She was staying in a house with her elderly mother. She said, my mother was old and ill. Our house, large and old fashioned, with a huge kitchen range, no other apparatus for cooking or obtaining hot water. Right. It was a fully coal dependent house that we had talked about in part one. Then coming a day when my mother was worse and we had no coal. And so I drove around London in a cab with a laundry basket begging just for a few lumps for this friend and that. Right. Coal was domestic life at the time. And so just to set some context on the scale of the British Empire at this time, you know, by 1913, the British Empire held sway over 412 million people. That's almost a quarter of the entire world population was under the British Empire.

Anay Shah 01:01:16

Dang, they're winning that colonialism thing.

Ben Shwab Eidelson 01:01:19

They certainly did. By 1920, they also had 25% of the Earth's total land mass. The phrase the sun never sets on the British Empire, it was a true statement. And the scale of people. The small island had conquered a quarter of the world. Largely driven by everything we've spoken about this last century of coal. This period leading up to the war was called a sort of Pax Britannica, right? A British peace period from the century, from 1815 to 1914, because the British Empire was so large and powerful that it led to relative peace. But going into the war, Britain was in a unique situation when it came to coal.

Anay Shah 01:01:57

They were just this luck of geography that has really comes to bear here. They have this massive empire. The British Isles were rich in high quality coal. So anthracite, which it burned hotter and cleaner than other types of coal. The wealth anthracite was especially valuable for the naval use. It gave Britain a serious advantage, which already had the most powerful navy in the world because they could stay at sea longer, they could operate more efficiently, they could maintain these global trade routes. And so within weeks of war breaking out in 1914, the Royal Navy of Britain set up a blockade around Germany, cutting off not just food and raw materials, but Germany was importing its coal and so it cut off its critical imports. And Britain's advantage wasn't just about having the coal, as we can see, it was about having the global infrastructure to distribute it and control the lanes that it Flowed. This is the era of coaling stations. So naval vessels would refuel at outposts spread all over the world. And because of Britain's vast empire, they had this incredible network of stations in Gibraltar and Malta and Singapore and South Africa and the Falkland Islands and Vancouver. Their warships could travel vast distances without worrying about running out of fuel because they had a coaling station that they controlled and they could stop at to refuel.

Ben Shwab Eidelson 01:03:16

I mean, let's put a finer point on this. Like we're Talking about over 100 years ago, the British took Welsh coal, which you had already said, you know, kind of was. Was this magic coal for the navy, right? It was packed more energy and because of the other side, it was less smoky, right, which is important for stealth and visibility and warfare. And they'd taken this Welsh coal and distributed it around the entire globe. Vancouver is 14,000 miles away. And they'd put coal in all of these strategic locations so that they could move their navy around, which was purely coal powered. By this time. There was a small war that broke out before the full World War I. There's a 1904, 1905 war between Russia and Japan. And Britain was. Was allied with Japan at the time. And so they blocked the Russians from accessing the Suez Canal to. To get to the Japanese. A Russian general said, you know, our comings, our goings, our voyage and even our success depend entirely on coal. Coal had developed into an idol to which we sacrificed strength, health and comfort. We thought only in terms of coal, which had become a sort of black veil, hiding all else, as if the business of the squadron had been not to fight, but simply to get to Japan, right? Coal was transportation. Transportation was war. And like, it was the foundational thing. And the British just had a lock on the entire infrastructure is just a.

Anay Shah 01:04:32

Logistical game changer, right? If a German warship set out across the Atlantic, it had to bring massive coal with it, which displaced the space that it had on the ship for weapons and supplies and people and food. And it had to go and find neutral ports willing to sell them fuel, whereas Britain could actively prevent them from happening through blockades and diplomacy. And Germany had very few overseas coaling stations. So when, when war broke out in, in 1914, German warships that were stationed abroad were basically stranded because they had either set out to sail, they'd risk running out of fuel or they'd have to bring so much of it that it would be so inefficient to carry that much on board that it limited its range and effectiveness. While Britain controlled the lanes, it controlled the coaling stations and it had the Allies to control how far that they and others could go on this very naval dominated war.

Ben Shwab Eidelson 01:05:26

Just to get into the naval point of this, it wasn't just that they had the coal infrastructure, but it's that they had built ships that were fundamentally more technologically advanced by virtue of being a coal driven industry and society. Right prior to the war, from 1898 to 1912, there was this fight between this kind of shadow, almost like a cold war between Germany and the British Empire on building a fleet. The German army looked over at the Royal Navy and kind of had jealousy, had naval jealousy syndrome. And so they set out to build the Imperial German Navy to compete with the British Royal Navy. And the British had a bit of a secret weapon. Let's go back to the best way to spin a thing using coal is not the old steam engine technology that everyone had access to now it is the steam driven turbine.

Anay Shah 01:06:13

The turbine.

Ben Shwab Eidelson 01:06:14

So that same Charles Parsons over there in the UK spun up a little company and built a prototype, an experimental ship, a hundred foot ship called the Turbina.

Anay Shah 01:06:25

Maybe if he named it the Parsons, we'd know who he was.

Ben Shwab Eidelson 01:06:28

We shouldn't call them like turbines, we should call them Parsons.

Anay Shah 01:06:30

That's right.

Ben Shwab Eidelson 01:06:31

And you know, instead of like making a bunch of fuss while he's building this thing and prototyping it, he waited for this moment. There was going to be a Royal Navy celebration in 1897 of Queen Victoria's Diamond Jubilee. And it was this big demonstration of the strength of the Royal Navy. There are 165 of their top warships. Turns out the Queen was sick, but the Prince of Wales, who's taking her role in this celebration, is watching over the entire Royal Navy move through this passage. Well, as soon as the Royal Yacht had taken him on his tour between the Royal ships, this boat burst on the scene and it sped through the entire Royal Navy of cruisers and destroyers. They tried to catch it and they couldn't. It was faster than any ship that it ever existed. Right. And they didn't even know it was there. The times had said the patrol boats which attempted to check her adventurous and lawless proceedings were distance in a twinkling. So for context, the Turbina could move at 39 miles per hour and the fastest ships in the Royal Navy moved at 31 mph.

Anay Shah 01:07:32

Talk about a mic drop product launch.

Ben Shwab Eidelson 01:07:35

Oh yeah. And so of course that's a way to get the attention of, of your customer, right? I mean, this is, this is the defense Contractor selling, selling to the army and you're like, yeah, don't you want some of these? And they certainly did. And so they very quickly built destroyers built on this technology, the most famous of which was the first turbine powered battleship, the Dreadnought, which was built in 1906 and was driven entirely by these turbine engines. And the Dreadnought was I think of as like the first glomeration of all of these coal driven technologies at once. It would burn a thousand tons of coal per day when operating at full speed. And it made other ships essentially obsolete.

Anay Shah 01:08:16

Right.

Ben Shwab Eidelson 01:08:16

It had these large guns that were mounted with kind of consistent large caliber and long range firepower. So it could shoot much further than any ship. It was all these turbines driving more efficient use of the coal. And it essentially revolutionized naval warfare. It carried almost 3,000 tons of coal. So it burned a lot of coal, but it carried three days worse, which, which meant if you think about the path of the battleship, it always had to be able to move to one of these coaling stations that you were just talking about earlier every couple days. Exactly.

Anay Shah 01:08:45

And, and let's just put these, this tonnage in into reference. So a thousand tons of coal is about a fully loaded freight train of coal that they were using every day.

Ben Shwab Eidelson 01:08:55

I mean, a ton is like the weight of a small passenger car. So imagine having burning a thousand car weights worth of coal a day. It's wild.

Anay Shah 01:09:03

And this tonnage, this doesn't move itself. Right. Coal logistics is a nightmare. Warships had huge crews of stokers who were men whose sole job was to shovel coal into the massive boilers all day long to power it. And in these long voyages they needed to stop and refuel and keep stoking. And the operation of stopping and refueling could take several hours, which leaves them vulnerable to attacks. And so they have to be more and more efficient. So the naval battle that shaped so much of World War I comes down to a lot of just like logistics and the reality of managing coal and managing where the coal is coming from, how it's being burned, where and where you're going to get the next coal.

Ben Shwab Eidelson 01:09:43

It was a war of refueling in that context. Right. Which is wild. So Germany was not quite in the same powerful position when it comes to coal. But it wasn't not in a position. Right. It was already the third global largest coal producer after the US and uk. And what they did have going for them, although it wasn't the navy, was a more advanced chemical industry. German scientists had built a company, basf, built originally for chemical dyes and explosives. But BASF was taking coal, making coke, which produces the coke and coal gas and produces coal tar. Right. And coal tar is this substance of kind of all these other hydrocarbons, benzene, a hydrocarbon called tooling. And tooling is a key input into tnt. And so the Germans became kind of the most advanced, I would say, at the time, I think, of turning coal into weapons. The other big thing that they invented leading into the war was the Haber Bosch process. So, you know, the Allied powers had access to large sodium nitrate deposits in Chile, and those had become interesting because they had been fertilizer. And we're going to do. Don't get me going on fertilizer. We'll do that one day. But at the time, it was mostly relevant because sodium nitrate is a key input into making bombs. While the Germans wanted to figure out how to do that without. They couldn't get access to these isles off the coast of Chile. And so they had built this process called the Haber Bosch process, demonstrated in 1909, started to scale up leading into the war. And coal was the key input into that process and key power driver into the process. And so the Germans really leaned on these synthetic chemical processes to drive part of their war machine. But of course, that took a lot of coal, and Germany didn't have nearly the coal supplies that its enemies did.

Anay Shah 01:11:33

That's right. So here we are. World War I, 1917. The war has been going on for a couple of years now, and Germany's in serious trouble. Their own coal supply is struggling to meet the demand. And the blockade that the British have put on is making things worse. And the German military is actually having to make strategic wartime decisions based on coal. So coal shortages meant that German railways, which ran on coal, couldn't operate efficiently. And so that was leading to supply delays on the front lines. And even when Germany could mine coal, they couldn't transport it fast enough. And so soldiers waited longer for food, for ammunition, for reinforcements, and it was weakening German's ability to sustain its offensive. The factories were struggling to meet war production quotas. Steel mills and munition plants that have been running at full capacity were now rationing power. Meanwhile, in the background, civilian hardship is growing. Right. And so coal is not only running the war effort, but it's also keeping civilians alive. And Germany entered what's called the Turnip Winter in 1916, 1917, one of the coldest winters at that time. And the coal shortages meant that millions of Germans couldn't heat their homes. And so you have this Confluence of impact across the war front, the supply side and back home, that's all being constrained because of their lack of access to coal.

Ben Shwab Eidelson 01:12:52

Little side fact on this, this is the time when daylight savings was first introduced. The Germans were trying to find a way to reduce the consumption of coal, which was again being used to light homes and heat buildings and all this stuff. They said, well, if there's some daylight earlier, let's shift when we're getting the factories going to match that, let's not use lights, you know, after hours, let's not allow folks to take elevators if they can take the stairs and find all these things. And so Germany introduced daylight savings time. During this time, it actually was adopted by their enemies for the same exact reasons everyone's trying to ration coal. It got undone, it got redone through various wars, all based on energy supply and energy usage.

Anay Shah 01:13:29

That's right. In the US we were facing an acute fuel shortage during the war and coal production started to soar to meet wartime demand. And the growth of coal had. There's always been this background on smoke abatement and the issue with health. And the federal government actually came out and said, war means smoke, we just have to deal with it. And coal production is going to rise. And so enter the final stages of war. The war is dragging on in 1918, and Germany's industrial workforce, particularly the coal miners, farthest end upstream on the supply chain. Here they reach a breaking point. They're working long hours, terrible conditions, they're getting less and less pay. And by late 1918, all of their families back home are suffering through these cold winters and food shortages. And so strikes break out across the country. And this is a total disaster for the German war effort. Without coal, the factories shut down. Without coal, the trains stop running. Without coal, the troops can't get their weapons or food. The country simply could not sustain the war any longer. And by November 1918, the economy's on the brink of collapse, people are in open revolt and Germany agrees to an armistice. The war ended not just as a result of the battles fought on the front lines, but also because of the German war effort had run out of fuel, figuratively and literally. And even after the war ended, coal remained a political weapon. Right. And so as part of the Treaty of Versailles of 1919, Germany was forced to give up. I remember reading you study about the Treaty of Versailles so many times throughout school. Never really realized. Germany was forced to give up a coal rich basin to France and hand over coal deliveries to Belgium and Italy. And this ensured that Germany would no longer have access to as readily available energy resources to rebuild its military anytime soon. Now, we do see that, of course, Germany goes on to rebuild its military, but this was one of the efforts to slow it down. Coal was at the center of this conflict, and we'll see that coal plays a different role as we move forward into the next big conflict.

Ben Shwab Eidelson 01:15:27

So after the war, there'd been this heads down mentality of we're going to do what we need to do to get through the war to supply the war machine and all of this. But as an eye teed up, the German miners had already become a kind of tip of the spear of frustration, while the same thing rippled across the UK and into the US and so in the UK there was, right prior to the war, the Miners Federation of Great Britain, which was kind of the core representation of coal miners unions, had actually founded and kind of evolved into the Labor Party in 1906. And remember, coal peaked in production in 1913, leading into the war. But as is the case, when you're digging for something, digging deeper, it only gets harder. And sometimes there's these technological unlocks, right, like the steam engine to pump water out to make it easier to get to coal. But sometimes there's not and it's just physically, geologically harder. And so essentially getting to coal got harder and harder, which meant it got more expensive. And when that it would happen, there's this consistent pattern of the mine owners taking it out on the miners and driving wages down always. And so the miners thought there was a political solution here, right? The Labor Party was starting to gain little bits and pieces of power. They thought the solution would be, well, let's nationalize the people. The public should control the mines. Didn't happen then. But this kicked into motion and excitement for that idea. Meanwhile, the Russian Revolution kicked off in 1917. They disposed the Tsar and the socialist powers were taking over the country and taking over the levers of power. Kicked off, if you remember, in part one, by Marx's writing, funded by the industrialization of Manchester. But seeing that happen started to electrify across Europe the labor movements and powers. And so each time mining got tougher, wages were driven down, unions would be outraged, there'd be strikes, right? And some of these strikes bubbled to the state of violence. One of them, the Prime Minister, panicked, called up 80,000 special police, called it in a state of emergency. They set up machine guns around the coal mines. Oh, gosh, put it in the hands of the military. And so that was in 1921, they locked the gates and told miners they had to agree to the pay cuts or lose their jobs. And it was this sort of pattern again and again and again. And generally what would happen is there'd be little bits of progress, but typically the mine owners got their way and the miners would take the pay cut and go back to work because they had a family to feed. So in 1926, the first general strike ever in British history kicks off where over one and a half million striked across the country. And of course, as the usual things, the miners refused to have their pays cut. The government kind of sides on the side of the owners and tries to maintain services. And there's dispatching of warships and soldiers in the London parks. And Churchill's kind of at the center of this. There's a propaganda newspaper he's putting out on one side. And they're claiming that the revolutionaries want the Buckingham palace to be taken over by the Soviets. And it's all kind of the flaring. But at the end of the day, the same pattern essentially emerges and eventually there's crumbling support and the general strike fails.

Anay Shah 01:18:43

I mean, you can't imagine that 1.5 million people coordinated across a nine day. Like you can't imagine a better effort that still fails.

Ben Shwab Eidelson 01:18:51

That's right. You know, I think what it did do though, is it set the stage for more public support. And the way that the public ends up supporting is giving the Labor Party, which emerged from the miners unions and all of this, I'd say, more and more power, which leads into an eventual move towards nationalization post World War II. Now go back to the US and essentially a very similar chaos is brewing. We had the United Mine Workers of America, which since the beginning, every time they tried to unionize anyone in the coal mines in West Virginia, a hard stance was taken. These were coal mines where everyone lived in company housing, and if anyone unionized, they'd be fired immediately and they'd have to move out to the tent colonies. Well, in 1920, the United Mine Workers president, John Lewis, went in to try and unstick this, and he gave these fiery speeches and he teamed up with Mother Jones again, who at this point was 83 years old. And she said to all the workers, she could come up to the head of the creek and call out for all the men that want to be let out of slavery, follow me. Thousands and thousands of men joined. At that moment, 3,000 from Mingo county joined and were immediately fired.

Anay Shah 01:20:05

They were spending all day under terrible working conditions, low wages, and as we can tell oppressive control by the coal companies. And any effort to unionize was met with this fierce resistance from the coal operators, who they went to the extent of employing private security forces and colluding with local law enforcement to suppress workers. In August 7, 1920, a rally was held where miners read their demands and no progress was made. And seven days later, 13,000 miners gathered ready to fight. Fighting erupted on August 25, and by the 29th, it was a war zone. They were fighting a strong private army to the point where private planes were hired to drop homemade bombs on the miners, which is a combination of the poison gas and explosives left over from World War I, dropped in several locations. I mean, imagine dropping bombs on your own employees. We think of today's angry, slack messages and a bad one on one with your boss, and back then it's a bomb being dropped. But this got so bad that on September 2, President Harding had to intervene. He sent federal troops in to quell the uprising. And the miners, many of whom are World War I vets, were reluctant to fight against these federal troops that were sent in because they were also World War I vets. And so this contributed to the end of the battle. In the end, this battle of Blair Mountain that had erupted was the largest in U.S. history since the American Civil War. Again didn't succeed, but served as this rallying call, this moment that marks just how upset and to the end of their rope these coal miners were across the country.

Ben Shwab Eidelson 01:21:38

It's wild to read these stories of truly going to war against your employer. And I think part of it is framing it as an employer is probably a misframe. This is the time. I read an Upton book a few months ago called King Coal, which is a fiction novel, but about the time. And it really paints a good picture of what the experience of coal mining families. It felt more like. This is your landowner, your landlord, your political system. The level of ownership and vertical integration of kind of your life in the coal mine was such that this isn't a job. It's more like the enslavement relationship that we had talked about in the past.

Anay Shah 01:22:16

Yeah, our feudal system or indentured servitude.

Ben Shwab Eidelson 01:22:19

That's right. And so you're taking up arms against a system of which you have no other. There was no legal justice system at all at play in these coal mine towns. But the reverse is wild, right? To kind of build a responsive army that's going to drop bombs on your employees and your miners, which do the fundamental work that you need, shows kind of the attitude. But the battle at the end of the day was an overwhelming victory for the coal industry owners. Same as what was on the uk. The United Mine Workers of America plummeted in membership from more than 50,000 minors to 10,000 over the next several years. And it didn't really recover until the post Great Depression New Deal era re expansion of the union. It took over a decade before they finally unionized anyone in West Virginia.

Anay Shah 01:23:01

So we're in this interwar period and we're seeing these labor uprisings. And you mentioned the other seminal story of the time, the big shakeup of the global economy about 96 years ago, which was the Great Depression of 1929. It sent shockwaves through every sector of the economy. And coal emulated what happened to the rest of the economy? Because it was the backbone of industry. It had been fueling 80% of US energy needs, including the factories, the railroads, the steel mills and the homes, as we all now know. But when the Depression hit, factories shut down and cut production for all of Those outputs by 50% in just three years. Railroad freight plummeted by 43%. Steel production dropped by 60%. Households cut back on heating needs. So every one of these aspects reduced the need for coal. And so as the economy crashed, so did coal, relatively speaking, right? Coal production dropped by 40% just from 1929 to 1932. And the backdrop of this, the human element, 300,000 plus miners lost their jobs. And for those that maintain their jobs, their wages were cut by over 30%. And there's one oral history of a miner that kind of notes, we'd go down into the mines knowing there might not be work tomorrow or next week. You could feel it in the air. Coal wasn't king anymore. So by 1931, the coal miner had become the symbol of industrial despair. And when this hits the coal towns, they kind of dissipate. So schools shut down, stores go bankrupt. All the basic services disappear, right? This, this rippling effect across a coal town. And so, you know, the coal industry had already been struggling with price issues and a bit of overproduction because of the introduction of a competitor fuel called oil, which we'll touch on. And you saw diesel engines starting to replace steam engines on the railroads. And electricity consumption is growing steadily, but utilities are kind of diversifying into some hydropower maybe turning to oil. There's kind of the beginnings of this happening in the background. And then the Depression hitched and it pushes the coal industry into a full blown crisis. So think of the Depression not as the end of coal. But as the beginning of the end of cold's entire dominance over the American.

Ben Shwab Eidelson 01:25:22

Economy, right, Coming out of the Depression, a bunch of building out happens that includes the full, complete electrification of America. It also includes these wide scale, right? I think the Hoover Dam, these movies, massive hydro projects that make the experience for an individual in America consuming coal to really only be electricity. It only drives demand for coal as electricity demand drives. But it's not coal that people are buying. They're buying cold fruit in their fridge, they're buying light. And it just so happens that coal is the best way to do that at the moment, which puts coal in a long term precarious position. The other thing that we just hit on is Roosevelt's 1933 New Deal brings back into center a form of labor power, right? And so there's this resurgence of the United Mine Workers, and that same man, John Lewis, is now at the union's helm. And it was now once again the strongest union in the nation. So John Lewis is quite a figure. He broke a couple of years later with the American Federation of Labor to launch the Congress of Industrial Organizations. And so what's happening there is the AFL was more the craftsmanship trade, and the CIO I think of as more the big industrial trade. And he put the United Mine Workers at the core of the cio. And now we have this spike in labor and union power. Folks across industries started to join the CIO by the millions. And never in history was the labor movement as powerful as it was at this time. Lewis would fill stadiums with cheering supporters wherever he went. He was viewed as a hero. He was viewed as the nation's most powerful person after FDR. But as we'll get into, with World War II on the horizon, what he did and how he navigated the war changed all of that. First of all, he started to sour on FDR and the New Deal. Supposedly he wanted to join the president's ticket in 1940 on the Democratic ticket and was rejected. And supposedly that maybe pushed him against Roosevelt and to become more supportive of the Republican leadership. But on election day, a lot of the members of course, supported Roosevelt. And so he resigned as president of the CIO and only went on to continue leading the United Mine Workers of America. And so during the war, perhaps because of this TIF, in 1943, he led a half a million coal miners on strike for better wages. Not a reasonable thing to lead him on a strike for better wages, but this is in the middle of war. He shut down the steel industry for two Weeks at the height of the war. They need the steel to build tanks and ships and all the things.

Anay Shah 01:27:55

This, I hope, was a very calculated and strategic decision that paid off.

Ben Shwab Eidelson 01:28:00

Oh, yeah, of course. I mean, you could just imagine the public backlash. There's this cover of Time magazine that shows his face looking like a volcano that's erupting. He was just viewed as this angry person. So by 1949, he was viewed as one of the nation's most hated public figures. For leading coal miners on strike during the war, the one place he remained very popular was the oil industry. They loved him. They said that with every coal strike, more of the US energy market went to oil. And so by the end, kind of post war, his whole power and the power of the unions, of his union.

Anay Shah 01:28:34

Kind of spiraled down, crumbled.

Ben Shwab Eidelson 01:28:36

Yeah, but we kind of skipped over it. What was going on with coal in the war?

Anay Shah 01:28:40

Well, here we go now, you're mentally following along and we had approached the mid-1940s and center stage is fascism. And you're thinking back to World War I and how we make this point that coal was like the oxygen of the war. Maybe an odd analogy, but you remember coal was the central player for World War I. For World War II, it was a backdrop player much more backstage. And the reason for that is multifold. But it still powered a lot of the war effort. Right. Industrial production, rail transport, steel manufacturing. It no longer was the primary fuel for mobility and combat. Here you have World War I, it's much more of a static naval war. Coal was the dominant naval fuel. World War I was very much trench warfare. And so you had coal powering those logistics and the railroads and supplying the troops. The war was much less Mechanized. World War II, it was fast, it was oil driven, it was mechanized, it was fought in the skies with tanks and jeeps. And it was enabled by this new, amazing, sexy fuel called oil.

Ben Shwab Eidelson 01:29:44

Germany didn't have nearly the oil supplies as the US and some of its other enemies and the Soviet Union. And so once again, they turned to their chemical industry to try and figure out what to do. And one of the key things that sustained the war effort was that they turned coal into oil through a process called coal liquefaction. And so that was actually pretty key for their strategy to be able to mitigate resource shortages during the war. And During World War II, most navies had transitioned to oil powered chips that gave them greater speed and range. It was easier to refuel. You didn't have to do the the same shoveling of Coal that you mentioned, less smoke. So is it stealthy? So while coal was not the central player, it was this key input for Germany to try and maintain resources.

Anay Shah 01:30:30

That's right. So think of coal in World War II as still critical on the home front, powering industry, rails and homes, just not that dominant, driving the military tactics and the actual supply lines, and therefore not the top strategic variable that drove the story of the war like it did in World War I.

Ben Shwab Eidelson 01:30:47

Meanwhile, in the Soviet Union, which was the key other side of the war, coal was similarly crucial to their industrialization. And in the Donbass region, which was under Ukraine, there's the major coal producing area. As well as in eastern Siberia, there's another big coal basin called the Kuznetsk Basin as a major source. Very random aside, my wife's great grandfather lived in Nova Kuznetsk from the 1960s for a decade, helping work in supplying the coal industry there. My wife was born in the Soviet Union. So when I was sharing with my father in law some of these stories, he's like, oh, well, we have a connection there.

Anay Shah 01:31:23

He's like, let me tell you about life in Siberia during this period.

Ben Shwab Eidelson 01:31:27

Yes. And so the Trans Siberian Railway was built, right. To connect the rich mineral resources of Siberia to the western Soviet Union. And ultimately, if you imagine the war playing out, you had energy coming from Siberia into the western part of Russia to ultimately fight up against the German army, heavy use of coal to power this industrialization that led into their might in World War II. And you know, the UK made a miscalculation on coal. They thought they had enough coal and enough people at the time going into the war. So they drafted a bunch of the younger coal miners and sent them to fight right in the war. They needed soldiers.

Anay Shah 01:32:03

Oh, this is gutsy drawing on your bench, that's fueling your economy to send them on the front lines.

Ben Shwab Eidelson 01:32:10

You know what they quickly realized? Oh, we need that coal, so what are we going to do? So then they had the genius idea of doing the opposite. So they said, you know what we should do? Let's take of our drafts into the war. Let's take one out of every 10 and send them into the mines.

Anay Shah 01:32:23

Just randomly send people into the mines?

Ben Shwab Eidelson 01:32:25

Yeah, I mean, they literally pulled names out of a hat to decide who would go into the mines. And this was the scheme of this Minister Bevan. And so these were called Bevan's Boys. There's a whole kind of story about them. But it's a system that turned out to be both wasteful and deeply unpopular, right? Because the people in the mining community were like, why did you send my kids out to war? And the people whose kids had studied to do something else and were now in war were like, why are you sending me down in the mines? It never worked out. Unfortunately, the Bevans boys were also mistreated. They were often mistakenly viewed as deserters. Sometimes they were locked up and thought that they were deserting when they actually this was like the job that they were assigned in the war. And during this time, with all this effort, productivity in the mines continued to ultimately decline. So in 1939, pre war, a little over 700,000 miners had dug out 230 million tons of coal. By 1945, about 700,000 miners only dug out 174 million tons. And so it was not the brightest of moments for coal mining in the uk. The war ends. And within weeks of ending the war, Britain elected a very labor government and had a new minister who was committed to the idea finally of nationalizing the mines. And this new labor government had bold, bold ambitions. They believed that the government should control the bank of England, the steel industry, the hospitals, electricity generation, gas supply, road and rail networks and all town and country planning. This is a very pro government labor movement. And this Ernest Bevan of Bevan's Boys was one day standing at the urinal next to the editor from the Sunday Times and said, this is at Giles the socialist dream. The means of production in the hands of the people. And so they formed the National Coal Board, which was to be the entity that would take control of the mines on behalf of the government. And so in 1946 they paid the landowners £81 million, or about $4 billion in today's values for compensation of coal left in the ground. You can tell it wasn't like the boominess of industry, $4 billion for all the coal mines in the UK. So on New Year's Day 1947, it officially changed hands and the National Coal Board was now running 1,000 mines. They're also the owner of 140,000 houses, 85 brickworks and pipes, all the infrastructure around coal farms and offices and schools and everything else. And they had great ambitions, but it did not go as planned. They continued essentially to have the conflict between the miners unions and the National Coal Board. And the industry continued to decline ultimately because it was harder and harder to get coal. And so by the time the government flipped, there wasn't even an attempt to denationalize it. In 1955, long term coal was simply in decline. In the UK we don't do sponsors for this show, but there is occasionally organizations or material of interest that we want to point listeners to. And I think it would be remiss for not spending a moment to call out the amazing work of the folks at Our World in Data.

Anay Shah 01:35:34

In this episode, you'll find us citing a lot of data on global coal use over time emissions, what's happening in different countries. And that would not be possible without the incredible work of Our world. And data, we just lost ourselves searching through the repositories that they've built up and have so brilliantly laid out that we could consume and understand exactly what we want to do within seconds or minutes that would have otherwise taken us hours or days.

Ben Shwab Eidelson 01:36:10

Yeah. So how do we get the perspective for the amount of emissions of a given country and how much of that was coal and what's the electricity mix in that country and how do we grow food and how does that work? And we've mostly spent our time, I think, on the energy, electricity and fuel use, but that's just like 1/5, I think, of what they do. They also do one corner of what they do. That's right. Education and poverty and economics and development. It's going to be the underpinnings for a lot of this show fundamentally, and a lot of the data we look at.

Anay Shah 01:36:40

One thing that's amazing as I reflect on our process, is we used our world in data to understand what the narrative or thesis point was. We didn't go in seeking a piece of data in our world netter, we actually went in with a question and we were able to search and let the data tell us what the answer was to how electricity or how emissions or how this country was faring. And so it truly was a source where you can go with questions and have data answer them for you. Yeah.

Ben Shwab Eidelson 01:37:11

So if you haven't Already, go to ourworldanddata.org, poke around, lose yourself. If you're a fan of this show and enjoying this, you're probably someone that could spend a few hours just exploring all the amazing content they have there.

Anay Shah 01:37:25

And thank you to Hannah Ritchie and the team. Your newsletters are also fantastic, so sign up for those.

Ben Shwab Eidelson 01:37:36

All right, so we ended talking about the war and this industrial coal driven war on the industrial base, this oil driven war on the transportation base. Post war though, what is going on with the role that coal is starting to play back at home?

Anay Shah 01:37:50

That's the big story. Right. So coal went through this journey of being direct Residential heat to powering railroads and ships, industrial manufacturing, to then becoming the fuel for power plants. So if you recall, we went from 10% electrified to 75% in the 1920s to now we're in a post war area where 90 plus percent of America has been, has been electrified. And in 1945, coal accounts for approximately 50% of total energy use. And the dominant use of coal outside of transportation and industry is electricity generation. We felt what it's like to burn coal in our house, and we can see what it's like to burn it in a train engine. But what's coal's role as we're flipping on the switch and what's happening back there? Well, we thought it'd be fun to take a quick journey into a coal plant and make sure we understand how things work. Because from this point on post World War II onwards, the story in the west is a story of a coal being used in coal plants. And we watched all these amazing YouTube videos that we wish we could reenact here, but we're going to turn it into words. Let's imagine coal arrives into the plant in these massive train loads. We're talking hundreds of tons in each car, and a single large plant can burn through an entire train's worth of coal in a day. So school is coming in continuously on these train loads. It gets unloaded onto a conveyor belt. Now, these conveyor belts are moving coal at 4,000 tons per hour. Wow. We talked about what a ton is. One ton is the weight of a small compact car or a large adult cow. And 4,000 tons an hour is being moved on these conveyor belts. From here it goes to pulverizers, where giant steel rollers crush the coal into fine dust. Think of like talcum powder fineness. Now, why would you want to crush this coal? Well, fine coal burns hotter and more efficiently than chunky coal. And so these pulverizers are grinding coal at 250 tons per hour into powder. So now you've got this pulverized coal. And now we're going to convert chemical energy, which is the carbon in the coal from the plants of 400 million years ago, into thermal energy. So the powdered coal is blown into a massive furnace, mixing it with air, and it ignites into this raging inferno. And we're talking temperatures inside of 2500 degrees Fahrenheit. And whenever I mention some temperature, my son asks, well, is that hotter than lava? I can finally say, yes, that is hotter than lava.

Ben Shwab Eidelson 01:40:32

Yeah, I was reading a description of this and it's a 200 foot plus high fireball. It's kind of in shape in this place and they concern themselves with keeping this fireball blazing. And I was just imagining 200ft. It's like a 15 to 20 story building height size sphere of fire that they're just maintaining. People talk about opening these things up and feeling like they're kind of staring at the sun. I mean, obviously they're not staring at the sun, the sun's much, much hotter. But like the feeling that you're like close with this kind of awe inspiring force, I think that's just an amazing thing to visualize given that it's completely human made via this process.

Anay Shah 01:41:07

Right. And it's not this beautiful like kind of calm, gentle ball of fire. It's like raging, it's rage, it's chaotic, it's swirling ocean of fire devouring coal and releasing incredible amount of heat energy. So this superheated air is absorbed into a network of pipes that surround the furnace. And these pipes are filled with water. And these water pipes, boilers are as tall as a 35 story building. Right. And so you've got these boilers that are heating the water to over 500 degrees Celsius inside the pipes and turning the water into steam. Now we're talking superheated, very high pressure steam building up inside a boiler. It's about 200 times the atmospheric pressure that we feel on Earth. So imagine a giant pressure cooker, except this one is the size of a skyscraper and generates enough force to move a 200 ton turbine. And so now we're taking thermal energy and turning it into mechanical energy. This high pressure steam is released into the turbine. It's rotating this machine. Think of multiple blades of a jet engine that are rotating. The steam expands and pushes on the blades and it causes the turbine to spin at 3000rpms revolutions per minute. And so a single large turbine is as long as a school bus and it weighs hundreds of tons and it's spinning at 3,000 revolutions.

Ben Shwab Eidelson 01:42:33

Imagine, imagine a school bus exactly at.

Anay Shah 01:42:38

The precision of a watch. It's so large and it's, it's so precise at the same time.

Ben Shwab Eidelson 01:42:44

Wow.

Anay Shah 01:42:45

Now this motion is what drives the generator, converting mechanical energy into electricity.

Ben Shwab Eidelson 01:42:51

Thanks, Faraday.

Anay Shah 01:42:52

Anchor back to Ben's Physics 101. And so you've got this spinning turbine, spinning school bus at 3,000 rotations a minute, connected to a generator where massive electromagnet is spinning inside thousands of copper wires, copper coils of wire. And so this movement then creates an electric current. At 20,000 volts, which is then stepped up to be ready for grid transmission at 275,000 volts. And so once the steam has done its job of moving the turbine and the turbine has moved the generator, so the magnet and the copper coils have moved and created electricity, now it must be cooled back into water and reused. And so now you've got these cooling towers which are the big images that you see when you drive by a coal plant. It's these huge 400 foot cooling towers releasing plumes of steam, not smoke steam into the sky. A typical 500 megawatt plant consumes water for cooling towers, equivalent to filling an Olympic sized pool every 90 minutes. And so that's what's happening inside these massive, massive structures.

Ben Shwab Eidelson 01:43:55

One thing I didn't appreciate is that getting a coal plant of that size, turning it on and off is actually quite hard because this kind of amount of rotational mass in turbines and so on one hand that's actually very good for grid stability. It's not like they're going to fluctuate that much. And they have obviously deep controls on how much steam to release any given time to keep the rate of spinning correct. On the other hand, it's not like you can toggle them on and off. You could disconnect a switch. And so it's an interesting way in which there's literal physical inertia to the grid that is providing that stable power.

Anay Shah 01:44:30

Which plays into what you're using for baseload and what you're using for peaker load that then affects electricity prices and everything else downstream. Absolutely. The byproduct of this is not just the steam that would be great. But as we know, coal is incredibly emitted. So you've got fly ash and bottom ash, that's non burnable material left behind that gets collected and stored. You've got sulfur dioxide, nitrous dioxides, and all these chemicals that are being released and filtered out using scrubbers. And then of course, you've got carbon dioxide. Coal is, has contributed the most to the situation we find ourselves in today.

Ben Shwab Eidelson 01:45:04

Maybe this is a good time to talk a little about the sulfur dioxide. Sulfur dioxide, you know, cause acid rain, Right. So for a long time, sulfur was the primary kind of issue around coal mines that was discussed causing, you know, hazy skies and then it would rain. And the reaction in rain would cause acid rain, which would cause lakes to become these clear, beautiful lakes where nothing could live. There's a realization, I think, from burning coal in the early times in Britain, there are parts of Sweden, where people with light hair, their hair would start to turn green. And they linked it all back to the sulfur emissions from coal. So since kind of early 90s, acid rain disappeared from public view because they figured out how to cut sulfur out of the coal process so much. Either that was via scrubbers, which I think you just mentioned, which is the idea that you actually have a chemical reaction to catch the sulfur dioxide in the plant and you actually fill these insane large trash bags filled with a solidified capture of sulfur dioxide. Or you find low sulfur coal, of which the whole eastern US is higher sulfur coal. But Wyoming, the younger coal, happens to be lower sulfur coal. And so that creates a future boom in those regions.

Anay Shah 01:46:18

Indeed. We'll take a trip to Wyoming later on.

Ben Shwab Eidelson 01:46:20

We will.

Anay Shah 01:46:21

And so these coal plants, an average 500 megawatt coal plant that's producing all of this power, steam, sulfur dioxide, carbon dioxide, it's used all over America. Each plant can power half a million homes, 24, 7, 365. And as, as Ben mentioned, we're not turning these things on and off. So it's just, it's running that baseload power. And to give you a sense, these plants are operating early plants are operating about a 33% efficiency. So 2/3 of the energy created is wasted as heat in these talking 1950s, 1960s period. So that's the journey into the coal plant. Feel free to YouTube search vivid images and videos of what the raging kind.

Ben Shwab Eidelson 01:47:00

Of want to go to one if we, if we, if we get an opportunity. The last one in Washington, the Centralia coal plant, I think is only around for like another. Oh yeah, is it for months maybe I don't to be able to make a day trip out of it sometime.

Anay Shah 01:47:12

And so that coal plant is powering America. And so, you know, think Pre World War II, 1920s railroads consumed about 90% of all coal that was mined in the US and steamships were powered by coal and homes had coal furnaces. Fast forward to post electrification. And coal is now powering electricity of the 1940s, 50s and 60s. And the important point to remember as we go into this next chapter of American history is that coal's relative share of U.S. energy use and electricity production falls. In 1945, coal accounted for 50% of total U.S. energy use. And by 1965, it had dropped to 18% of total energy use. Wow.

Ben Shwab Eidelson 01:48:00

So are we burning less coal?

Anay Shah 01:48:01

We're not burning less coal. That's the rub here. What we're doing is we're burning more coal. But you have new fuels coming in. Oil is starting to fuel transportation and heating. Natural gas is growing to fuel industrial processes and heating.

Ben Shwab Eidelson 01:48:16

This is the 50s and 60s when per capita energy consumption is just exploding. And that means more coal, but also more all this other energy.

Anay Shah 01:48:23

Exactly. So in the context, we're just talking about coal plants. Coal fired power plants in 1945 were supplying 70% of electricity. And by 1965 it's dropped to 50% of of electricity. And so to this point, there was a relative decline in how much coal was being used in energy and electricity. But coal Production grew by 40% from 500 million tons to 700 million tons.

Ben Shwab Eidelson 01:48:48

Oh wow. And I think it continued to grow until 2007 when we finally hit peak coal production consumption in the US So. So it was by no means a time period of dropping. Now along the way, as we've said, its relevance and central ness to the energy mix had certainly kind of waxed and waned. What was the main thing it was up against?

Anay Shah 01:49:09

Well, we'll see this theme play out again in the 2000s, but you have other forces that move very quickly towards cheaper fuel. So during this period, both natural gas and oil were cheap compared to coal, which contributed to their rapid adoption across transportation, electricity and heating. So for natural gas, it was a bit unusual. Natural gas prices were actually regulated under a natural gas act of 1938 that kept those prices artificially low through federal controls. But alongside that, you had this rapid expansion of gas pipelines after World War II. And so now you make gas much more accessible and adoption into heating and electricity grows simultaneously. Crude oil prices are fairly stable at this time. We've got a fairly abundant supply of oil. US is still a major oil producer and largely self sufficient. And so in the 1950s, the average price of crude was about $2.77, which translates to about $33 a barrel versus today. Crude oil price is about $70 a barrel. So they're less than half the price. And diesel starts to replace coal in locomotives, which eliminates coal from transportation. There's a whole nother episode we need to do on oil. We'll only mention it a little bit more during the energy crisis, but suffice to say that we'll leave the 1960s US with coal enduring as a producer of US electricity relatively lower than its peak dominance pre World War II, but absolutely still growing in terms of how much tons are being produced and used.

Ben Shwab Eidelson 01:50:46

Yeah, so we've gone us, uk, Germany, Russia, we've talked about Europe and all this stuff. Well, it's time we go to China.

Anay Shah 01:50:58

We knew we had to get there sometime.

Ben Shwab Eidelson 01:51:00

It is time. It's time to get to, you know, arguably the point of this whole thing. And so if you remember in part one, we talked about early in China, when Marco Polo visited China, there were all kinds of ways in which China was ahead in using coal to produce iron and drive heating across their early cities. And what happened during the 1800s is foreigners essentially were able to come in after the Opium War 1842 and exploit China's resources. And so they developed coal dependent industries in treaty ports like Shanghai in order to kind of run Western operations that needed coal. There's a counter movement led by Li Hongsheng in the 1860s called the self Strengthening Movement. And this was a goal of kind of like trying to build up some domestic industry, some domestic strength. And so he led this project to develop the Kaiping Mines. And there's a lot of cultural resistance domestically to actually mining. The view of a sort was to focus on agriculture as the way of development and not mining. But Lee was able to get through that and developed in secret also a locomotive in 1882 called the Chinese rocket, modeled after the Stevenson rocket back in the UK that we had spent a lot of time on last time around. But he hit financial struggles. And so the Kaiping mines sought British support and a company came in and in fact a young Herbert Hoover played a key role in maneuvering to place the mine under British control, which actually had the opposite goal of this whole goal of self strengthening. Well, it's not self strengthening for the Chinese if the British are controlling this whole exemplary mine. Right. And so that was viewed as a big betrayal to have this lack of sovereignty and this view of internal weakness to have foreign takeover. By the early 20th century, industrialization had started to become synonymous with exploitation. There's this real anti industrialization, anti Western movement. And that started to fuel this national movement. This disillusionment started to lay the foundation for a counterforce, some might say a revolution.

Anay Shah 01:53:01

A revolution indeed. And we're going to introduce ourselves to another household name which has a fun personal coal link himself, and that is Mr. Mao Zedong. The first national congress of the Chinese Communist Party happened in 1921 in Shanghai. One of the outcomes of this congress is that party members decided to target groups of industrial workers and set up schools and classes and provide free education and instruction on socialist values. So you've got a young Mao Zedong leaving this conference in Shanghai and returning to his hometown and then continuing to travel a little Bit further through Jiangxi Province, looking for ways to help and organize workers. And he travels to a town which has a fairly large coal mine and a developed railroad employing about 10,000 workers. And he just so happens to have a distant relative to stay there with whom he supervises the mine operations. This relative introduces him to some of the miners, and he strikes up a rapport with them. Mao gains their interest, in part by asking if they'd attend school if it were free. At this time, there's only one school for children of managers. It's kind of a privileged access. These workers are excited by the prospect. The Workers Club begins to recruit more and more railroad workers and coal miners into this organization. So Mal leaves and he kind of keeps up developments from afar and intervenes occasionally until later the next year, he actually instructs his school leader to call for a strike. And the strike lasts for five days, asking for higher wages, better treatment, and fundamental dignity. And it was successful. The small coal strike was actually successful.

Ben Shwab Eidelson 01:54:38

Wow.

Anay Shah 01:54:39

Yeah. These striking coal miners, they got everything they asked for. There was an orderly work stoppage.

Ben Shwab Eidelson 01:54:44

This is the opposite of what was going on in the uk. We just talked about it. The guns come out, the workers don't get anything. Which may be echoes to how things unfolded so differently politically over the next.

Anay Shah 01:54:55

That's right. In the US it led to the temporary downfall of the United Mine Workers. And here it was hailed as one of the first major victories of the Chinese Communist Party and became a model for how they wanted to progress. As the Cultural Revolution starts, there's a lot of propaganda, and there's one of more famous posters that has Mao walking around in these long, flowing blue scholarly robes, striding over mountains as he's organizing cold miners. The birth of Mao as an organizing leader is very intimately tied to the strike that he led with the coal miners and the relationship that he had with coal. So a lot happens over the next 25 years that's really less relevant to the coal story. But broadly speaking, just know that there was rising nationalism and frustration with foreign control that led the CCP to gain power in rural populations. A civil war breaks out throughout the 1930s and 40s. It overlaps with World War II, which had Japan and China fighting the Japanese take over northeastern China and begin ruling it as a colony.

Ben Shwab Eidelson 01:55:57

And they called it Manchuria at the time.

Anay Shah 01:56:00

Exactly. Northeast China called Manchuria. Now, the Japanese went to Manchuria primarily for the resources, particularly coal, to fuel their industrialization. And they actually set up more mines and railroads and developed industries such that Even after the devastation of World War II and the Civil war that breaks out between the Communists and the Nationalists, Northeastern China remains one of the most industrialized parts of China. Coming out of all of this, wow. And so fast forward. The Nationalist Party flees to Taiwan. The Communist Party takes over in 1949, led by Mao Zedong. And the Chinese Communist Party begins their first of many five year plans to plan the economy.

Ben Shwab Eidelson 01:56:41

Yes, I mean, if you look at their movement inspired by the Bolsheviks, I think they also looked at industrialization and were inspired by Soviet projects there as well. They use Soviet funds and expertise to help build up industry and try and figure out how to educate alongside socialist ideals in science and engineering and coal mining. And so most of the investment flows that area of northeast China where the coal mines and industry were already developed. But then Mao kicks off the great leap forward in the summer of 1958.

Anay Shah 01:57:13

The biggest, most ambitious experiment in human mobilization history.

Ben Shwab Eidelson 01:57:18

Experiment is a key word there. The goal was really an industrial goal. It said, we want to surpass Great Britain's production levels. We want to tap our vast population and turn it into the most productive population possible. We want to essentially outdo the Industrial Revolution, set quite the stage.

Anay Shah 01:57:38

Interestingly enough, this desire to outdo the Industrial Revolution came at a very different strategic decision. Rather than centralizing manufacturing and building industrial bases, the CCP decided to go in the opposite direction and create communes that were designed to be self sufficient. They had as many different kinds of production as possible, decentralized across all of China.

Ben Shwab Eidelson 01:58:06

And coal of course, is at the center of that production. Right. So remember, we're not too far from what is industrialization, what's the ability to build steel and have electricity and all these things. So the question is, how could you turn this agricultural rural population into people who are making steel? And that's basically what they asked them to do, to dig in their backyard, find coal and set up a steel furnace in their backyard. Which led to crazy things. You have these brick furnaces on these communes that they're trying to make steel. And I mean, yeah, maybe if you're competing with steel from 150 years ago, it might be a relevant approach. But when you're trying to actually make viable steel and you're kind of asking the entire population to come in and produce this, it simply didn't work. To put numbers on this. As many as 100 million Chinese, which is at the time twice the entire population of Great Britain were working to produce steel, tending an estimated 1 to 2 million of these little backyard Furnaces, some of them built in a few hours. And so by the end of 1958, some hundred thousand coal pits were in operation where 20 million peasants were mining coal. Absolutely astronomically insane numbers. And it didn't work. The steel that was produced was called cattle droppings. And you can still, you go around these old schoolyards today and there's little chunks of, and hunks of steel that were never used for anything. They just ended up being junk metal. And you know, in the end of this, Mao later admittedly that he had failed to predict how it wouldn't work and it would overload the rail system and was just not the way for this type of good to be produced. I think they were coming off of this agricultural production, which actually you do want to do in this decentralized land way, and trying to apply it to coal and steel, which either has geographic centralization due to where the coal seams are, or the benefits of actually scale. The whole point of the Bessemer process and these improved processes over time are these ones of central scale.

Anay Shah 02:00:04

That's right. Unfortunately for the CCP and for the Great Leap Forward, there was no debate to Mao's decision because he held such incredible sway and power. This is kind of how the Great Leap Forward and the Cultural Revolution played out at the most cursory level, without going into too much detail.

Ben Shwab Eidelson 02:00:22

And the worst part about this is not the waste of energy and the waste of even human labor. It's the fact that when all these people went to go dig and try and make steel, they weren't doing something else, which is what they were doing before, which was largely farming. And so the farms are left unstaffed, they're making steel, and there ends up being mass, mass food shortages. And so the Great Leap Forward is linked to an estimated 30 to 55 million deaths, making it the policy that contributed to the most human death ever. A lot of lessons learned from that. And coming out of that, China was suffering also still from a long term energy crisis. All this attempted coal mining and effort didn't actually produce much coal that they could use to heat their homes or cook food. The average peasant had 20% less energy than minimum daily requirements at the time. There was too little food to cook even one meal a day. And so this started to create, I think, the context for which the next incoming government would be open to some foreign technology to help them be able to get more energy out of the ground. And so they undid these policies and began shifting the industry back to the coal regions. Of the north, where there were in fact coal seams. They moved workers to the coal so that they could actually be successful and began closing some of these tens of thousands of inefficient mines. By the time there was the fourth five year plan, which I think was 1971 to 1975, you can start to see just the steady march upward of successful extraction of coal. And so they had targeted 400 million tons of coal at the time and they hit the number plus like 10%. I mean it was wild to see this growth.

Anay Shah 02:02:04

They overshot their stretch goal.

Ben Shwab Eidelson 02:02:06

That's right, they overshot the OKR. And so for context, at this point in the mid-70s, they're about halfway US coal production consumption levels, obviously with a much larger population, but nonetheless they're making year over year progress in energy and food and everything else.

Anay Shah 02:02:20

This is the period where they start to catch up incredibly quickly.

Ben Shwab Eidelson 02:02:23

That's right, it's more and more of this. And so Deng Xiaoping is who followed Mao and he was much more nuanced in kind of accepting Western technology and collaboration. And so during the time between 1977 and 1997, that 20 year stretch, per capita income quadrupled and they started to allow various moments of open market sale of coal and energy and agriculture. And so his economic reforms really unlocked the next boom in coal mining. There was actually an emergence still of small scale mines in the 80s and many of these were not particularly safe and, or well run, but they were successful, they contributed a lot to national output. So they leveraged large, large labor populations to get coal out and started to really power the boom of the 80s. And you just had this flywheel, right, a massive domestic energy demand. The shift continued through the 80s and by, I think the year is 1983, 1984, China passes the US for the number one user of coal.

Anay Shah 02:03:29

What a catch up.

Ben Shwab Eidelson 02:03:30

This boom just continued. And electricity plants are being built to power manufacturing and on and on. And Xiaoping continues to urge coal companies to merge into larger and larger, larger enterprises. And it starts to echo corporate structure wise what we've seen in the west, you know, where you have these large utilities, large coal mining companies, large powerful folks that start to control prices and improve profitability. And so the market really does start to mature. And so by the year 2000, China is the consumer of 30% of the coal in the world. And that's 30% more coal than the second biggest user at the time, which is in the US. This is far and away the last time that any country is anywhere near China's usage right after this point, the divergence between the US or anywhere else in the world and China just splinters.

Anay Shah 02:04:21

If you're imagining an S curve, China does exactly that. Through the 60s and 70s and 80s, it's kind of climbing that curve and it just takes off. We'll see the escape velocity point in 2002, 2003, but already by the 80s and 90s, they're the world's leader dominant.

Ben Shwab Eidelson 02:04:40

Meanwhile, in the 70s, some other energy wobblings are happening around the world.

Anay Shah 02:04:45

That's right. So back in the US in the 1970s, coal is no longer the dominant energy source that it had been in the early 20th century. Oil and natural gas had replaced coal for home heating and transportation, and it was starting to gain ground on power generation. Many assumed that coal's best days were behind. This is the beginning of the end of coal. Then comes the 1973 energy crisis, which changed everything once again. The energy crisis exposed America's dependence on foreign oil and forced the country to reconsider its energy strategy and think about energy national security. What was the energy Crisis? Very quickly, October 1973, a coalition of the Arab oil producing states, OPEC, imposes an oil embargo on the United States and other Western nations in retaliation for the US support of Israel during the Yom Kippur war. And the OPEC nations coordinate a series of steep oil production cuts and massive price hikes. So almost overnight, oil prices quadruple from $3 a barrel to $12 a barrel. And what does this mean? This means gas stations run out of fuel. People are waiting in line for hours, sometimes just find gas gone. And at this point, the US is importing over 35% of its energy needs. So electricity prices soar and many power plants that had switched from coal to oil and natural gas over the previous two decades have a bit of a reckoning. And there's this realization that America needs to reduce its dependence on foreign oil, which is a very familiar policy position across both parties for the last number of decades.

Ben Shwab Eidelson 02:06:27

Yeah, I feel like until you really sit with this, you realize prior to this, I don't think that was a deep concept. Right. There was just the market consideration of, well, we should use the energy that is cheapest for us to use to do the thing we're trying to do, somewhat absent any other strategic considerations. And I feel like we've grown up our entire life in this era of this other consideration of, you know, national security risk or, you know, foreign energy independence or whatever, however you want to frame it.

Anay Shah 02:06:57

That's right. And war is fought for for oil and fuel and energy needs. And so this is coal's comeback and it's ready. Coal is still abundant, it's cheap. And coal fired power plants are a technology that we understand the alternatives around nuclear are still developing. And so in 1973, President Nixon announces Project Independence, a plan to eliminate U.S. dependence on foreign energy. And coal is at the center of this plan. So the government starts to push utilities to switch back from oil to coal for electricity generation. New coal mines start to get open. New coal fired power plants are expanded. And this is the first major reversal in a multi decade long decline of coal. And so between 1973 and 1980, US coal production surges by 40% as utilities transition back to coal.

Ben Shwab Eidelson 02:07:48

It's wild. For all these other reasons we'll get into. Coal is the inferior fuel technically to oil and gas. Like imagine, you know, being on coal and be like, now you got to go back to wood.

Anay Shah 02:07:57

Like it's less efficient, it's harder to transport.

Ben Shwab Eidelson 02:08:00

That's right, right.

Anay Shah 02:08:00

But by the late 1970s, early 80s, coal is back, baby. It's in full force and it's powering over 50% of US electricity again. Now another parallel factor to the energy crisis, which really kind of cements coal's resurgence to bring it back over 50% of energy production is the meltdown of Three Mile Island. So a few years later from the energy crisis, 1979, there was a partial meltdown at Three Mile island, which is a nuclear power plant in Pennsylvania. Now no one died, but it was deemed the worst accident in US commercial nuclear power history. Before that accident, nuclear power was seen as this future of clean, reliable energy. It was really kind of penetrated the American consciousness and American policy. But the accident happened and it really set off anti nuclear safety concerns amongst the general public. And it led to a ton of new regulations for the nuclear industry. And so this really accelerated the slowdown of building new reactors. The accident didn't initiate the demise of the nuclear power industry, but it did kind of halt its growth, which had been on a rapid pace.

Ben Shwab Eidelson 02:09:09

Little fun fact like if you're not following the news, Microsoft now has an agreement to restart the nuclear power plant in three miles.

Anay Shah 02:09:15

That's right.

Ben Shwab Eidelson 02:09:16

Trying to get it back in service by 2028 because there's some data centers that need power.

Anay Shah 02:09:21

And so with nuclear sidelined, utilities lean even more heavily on coal to meet this growing electricity demand. So you've got this confluence of factors to bring back coal as the dominant energy source in the country and enable it to be continuously burned until it hits another shock in the 2000s. Now, one final interesting storyline that has benefited coal is what we're talking about around national energy policy. Right before 1973, Western governments saw energy, and especially oil as an economic issue. Right? Buy what's cheap and available. And after the energy crisis, it became clear that energy supply was a strategic vulnerability of Western nations. And so for the first time, energy supply is used deliberately as a geopolitical weapon, not just as a commodity issue. With OPEC's decisions and the effects of this ripple across the world to all oil importing nations like the US in Europe and Japan. As a result, countries start to diversify their energy resources. We introduced the Strategic Petroleum Reserve for the first time. We established the International Energy Agency to coordinate response amongst industrialized nations. And it's just, it's this different way we think about energy. It's a global political and public consciousness shift. And overall this, these series of crises kind of breathe new life into coal, especially in, in countries like the US and Australia, as a domestic reliable alternative to imported oil.

Ben Shwab Eidelson 02:10:51

And let us not forget, we by divine mandate or by the, the randomness of continents, we have a lot of coal in this country. And there was an explosion of realization in particular that we have a lot of coal in the western coal fields, right in Wyoming. The Wyoming Secretary of State back in 1902 said, Coal, Wyoming has enough to run the forges of Vulcan, weld every tie that binds, drive every wheel and change the North Pole into a tropical region or to smelt all hell.

Anay Shah 02:11:22

Wow.

Ben Shwab Eidelson 02:11:22

Depends on your time horizons. The climate change is kind of correct. But this area in the west, in Wyoming's coal field called the Powder River Basin, is immense. And it quickly becomes over the following years, by the mid-2000s, it's 40% of all coal burned in America, or about 400 million tons a year, is mined in the Powder River Basin. Now, one thing that's unique is what's going on as well is the technological shift in how we mine. We've spent a lot of time talking about digging these deep mine shafts underground, fighting the water to get the water out, bringing the coal up, and how kids were sent down to bring the coal up. And all of the ways that we thought about coal mining, well, that's only the way you have to do it if you want to dig for coal. The other thing we can do is move mountains, literally move mountains, right? And so that is what's known as strip mining or mountaintop removal, where basically the behavior shifted to instead really start moving the dirt away and exposing the coal. And, you know, in mountaintop removal mining, what you're often doing is you're setting off explosives to loosen the top of the mountain and then you're pushing the dirt away. At one point, 70% of the two and a half million tons of industrial explosives that are detonated in America each year is used for mountaintop removal. There was a point when Russian scientists were picking up suspicious tremors on their seismographs that are there to detect earthquakes. And they call the United States and say, are you testing nuclear weapons in Wyoming? And they said, no, we're just mining for coal because there's so much explosive energy to move dirt around. And so this becomes a lot more effective. Mining actually gets a lot safer because you're no longer sending people underground. You're just driving these big trucks. There's this image of the dirty coal miner. Well, people could work on these Wyoming mines and they would just hop in a, in a fancy large excavator and in their clean clothes and drive it around all day, pushing tons and tons of dirt around, and then the next vehicle would come in and scoop up the coal and ship it out. You wouldn't get a speck of coal dust on you. Yeah.

Anay Shah 02:13:30

It reminds me of the interview on John Oliver's coal episode where the coal miner is talking about how with mechanization and strip mining, 12 to 14 workers can basically complete an entire mountaintop removal project.

Ben Shwab Eidelson 02:13:43

It's wild. And so the scale of this is immense. I think probably the biggest machines that we've made, transportation machines that we've made, are probably, I think, the ones that are used in strip mining.

Anay Shah 02:13:54

I can't imagine anything bigger.

Ben Shwab Eidelson 02:13:55

Yeah, these are these trucks with the wheels where it's, you know, a person is like a third the height of the wheel type vehicles. The other side of this is that the local environmental and ecological impacts are immense. You're literally chopping down mountains. And yes, a law was passed that you're supposed to fix the mountain after you're done and replenish it, which functionally means they would spray this seed on it and kind of be done with it. And so there's story after story of beautiful regions of the Appalachians and otherwise that are just decimated through this type of coal mining. It's been a war ground for conservation activists for a long time. In fact, there was a big issue where they would push the waste into valleys and they would cause these massive floods and so under a conservative administration, the deputy secretary for the U.S. department of the Interior, who of course was a former coal industry lobbyist, was able to get debris from mountaintop removal reclassified from waste to acceptable fill, which meant even if it was leaching acids and heavy metals and polluting the streams, it.

Anay Shah 02:15:05

Was just acceptable fill, just the cost of doing business.

Ben Shwab Eidelson 02:15:09

Pretty horrifying practices, but very effective. And so you see, this powers the coal boom into the 2000s and powers the growth of railroads that are moving the coal. As we've long established, railroads love coal. It's this high volume, low hassle business. There's not people getting on and off. There's no food you got to transport around. It's just moving coal back and forth from the mine to the power plant, from the mine to the power plant. And the power plants are just voraciously, endlessly hungry. The mines in the US are just increasingly efficient, scraping the mountains away and getting down to the coal.

Anay Shah 02:15:43

That's right. That's right. So you've got different denominators in terms of how you measure. Pick your favorite one. But according to certain estimated recoverable reserves based on 2022 production, the US has over 420 years of coal.

Ben Shwab Eidelson 02:15:57

Right. And this has been a bit of a talking point of the coal industry.

Anay Shah 02:16:01

That's right.

Ben Shwab Eidelson 02:16:01

Back to the setup of this time period. Right. There's this desire coal to be viewed as the most domestic of sources. You can't take it from us. It's down on our ground. It's there by our divine right, and it's our most secure source of energy. That would hold up if there weren't other domestic sources that we'll get into.

Anay Shah 02:16:17

That's right. And it would hold up if there weren't externalities to burning coal that actually have consequence to economic life, public health and our planet.

Ben Shwab Eidelson 02:16:26

That's right. And to that point, kind of going through this time period of coal use expansion in the US in the late 80s, the EPA starts kind of looking towards issues of coal smoke. We already talked about acid rain. But the other issue is just the actual particulate pollutant, which is PM10, which is the 10 micron, and then eventually PM2.5, which is the smaller and smaller particulates that actually cause issues. And people starting to study this started to try and raise the alarm bell, saying that we see more people, again this late 80s, dying of particulate air pollution that are dying of age. So there's a set of people kind of within the EPA trying to draw attention to this, trying to draw regulation to it. Of course, immense pushback and very little does get done to actually regulate the smaller and smaller particulate. And the biggest problem with all of this is that the finer and finer the particulate is, the more of a health crisis it causes and the less measurable it is and the harder it is to enforce. A fairly challenging issue to ever take on.

Anay Shah 02:17:20

But we had greater understanding across the political spectrum that this was an issue to take on, right?

Ben Shwab Eidelson 02:17:28

That's right. And same goes with climate. Going into the 80s, the drumbeat of concern about global warming was growing. And it was actually like a fairly bipartisan issue at the time. And so you had Bush senior campaigning. He was asked about, well, what are you going to do about global warming and the greenhouse gas effect? And Bush said, those who think we are powerless to do anything about the greenhouse gas effect, forget about the White House effect. As President, I intend to do something about it. This was Bush Senior.

Anay Shah 02:18:01

Amazing. Too bad he didn't follow through.

Ben Shwab Eidelson 02:18:03

Did not follow through. And so the 90s become the ground zero for the campaign, essentially the disinformation campaign against global warming. And so in 1991, 35% of respondents said they worry a great deal about global warming. By the end of 1997, it had dropped to nearly 20%. And so public concern about global warming shrank over the 90s. And so there's just positive progress by the coal industry largely in driving the conversation away. Of course, some of the largest coal companies in the US were very much behind this and very much behind kind of a philosophy around this. So the largest coal company at the time was called Peabody Energy, the world's largest coal company. And in the early 90s, one of the senior execs was pushing the narrative that increasing levels of carbon dioxide would lead to a greener, more productive world. Right. This is plant food. It's going to make it, the plant, more green. In fact, he said, fossil fuels are quite literally a gift from God. It is easy to conclude under a preordained plan that coal and oil lay in wait for exploration by humans to permit our creation of an environment on Earth conducive to the spectacular success of our species. Why would the world have so much coal if we aren't meant to burn it?

Anay Shah 02:19:19

Effective talking points.

Ben Shwab Eidelson 02:19:20

It worked. And another well known coal operator, our friend Bob Murray in 1998, he's not.

Anay Shah 02:19:26

Really a friend, he's just an eccentric guy who's all over YouTube talking about coal.

Ben Shwab Eidelson 02:19:30

Yeah, if you want to see some crazy coal exec stuff, search Bob Murray, he's ground zero prolific. Oh man. I mean there's a John Oliver episode where he spends a good third of it on Bob Murray. Highly recommend watching. We'll link to it in the show notes of just how this man operates. But the US was starting to look at the Kyoto protocols and negotiating those. And so this is when Murray and Peabody basically said, oh, the US is going to lose 3.2% of GDP if we actually implement the Kyoto Protocol. And Peabody Energy again said 19% of GDP would be at risk in 2010 if we actually tried to regulate out coal from our power plant emissions. And so this whole era you also then have the Bush Cheney administration coming in. And Cheney is a big friend of the fossil fuel industry across the board. It just sets the stage for a coal bonanza, or some call it the coal rush of 2005-2007. And so the boom was on. Peabody Energy goes public under the stock ticker. BTU stands for British Thermal Units. It was not just the biggest coal company in the world at this point, it was also the richest. You start to see some of the Execs cash out 2005, 2006, and there's this perverse incentive because there's this background tone that hey, regulation. I mean obviously Bush Cheney wasn't going to regulate you, but it might be around the corner. And so in that model there's this incentive to try and build out as quickly as you can, as many power plants as you can, because once you build them out, they're, they're very locked in, right? They're powering the grid. In order to turn them off, you have to raise electricity prices. So you're now in this motion of large coal infrastructure. And so coal was definitely the king of the grid. There are over 1000 coal fired power plants providing power, over half of the electricity generation. In the year 2000, the average American consumed 20 pounds of coal a day for context. So it was just an immense part of our energy budget.

Anay Shah 02:21:30

This backdrop of Bob Murray just mouthing off as coal is still king is perfect for the other storylines that are actually running through the US economy during this coal rush. So at this moment around 2005, you've got more than 120 new coal plants representing $100 billion of new investment and another 150 under plan to be constructed. These are billion dollar plus projects.

Ben Shwab Eidelson 02:22:01

Coal's just flying hot at this moment. Feels like nothing could stop it now. Not everyone was excited about us building more coal plants in the US with everything we Understood.

Anay Shah 02:22:13

That's right. And so now you've got a couple unlikely forces that are going to hit King Coal with a one, two punch and send it staggering backwards. The first is the resistance. This movement known as Beyond Coal, led by the Sierra Club, made up of local activists, national environmental groups, lawyers, scientists, community organizers. And so we're Talking about early 2000, the same time as this coal rush is happening. And King Coal is looking real strong. You've got this movement within the grassroots networks that a coalescence around the understanding that this amount of carbon being admitted from these new coal plants will continue for decades and decades to come, and it is simply unacceptable.

Ben Shwab Eidelson 02:22:57

Right.

Anay Shah 02:22:57

And so you've got the 2000s, and climate change is becoming much more understood. And it galvanized this, this resistance movement. And so environmental groups that previously had worked on other issues, conservation, air quality, water quality, they started to collaborate and bind together to stop the coal rush. And they were helped by foundations that understood the scale of the threat and created a real coordinated response. It's fascinating. They operated this hyperlocal strategy like think nationally, fight locally as their operating principle. Every coal plant that was proposed was treated as this local fight. And they brought together a diverse array of weaponry, coordinated legal action using the Clean Air Act. And there were strategic partnerships between conservationists, faith groups, public health organizers. You've got a changing of the narrative around health impacts and the economic downsides. You've got a divestment movement led by groups like 350.org to pressure universities and pension funds to pull money out of coal. You've got this full range of voices coming forward, including a grassroots uprising called Appalachia Rising, which brought Appalachian residents to the national stage. Minors, families, students who spoke out about the devastating impacts of coal mining on their community. And at the time, it was not an overstatement to say that this was the most successful climate campaign in US History.

Ben Shwab Eidelson 02:24:19

Yeah, I mean, you build one of these plants, they're going to be operating for 20, 30 plus years, burning tons and tons of coal. I think it was very wise of this movement to realize that you have to stop them before they go up, the same way that the industry is realizing we have to build them before the regulation comes in. And so this plays into an interesting difference between regulation and activism and how this activism was able to use, you know, past tools to slow things down.

Anay Shah 02:24:43

That's right. And so to give you a sense of their success, by the end of the 2010s, over 200 proposed coal plants had been defeated or canceled. Wow. And the Movement had contributed to the retirement of another 350 existing coal plants. To the surprise of many, this activist resistance want 4/5 of proposed coal plants were blocked or canceled. And it set this trend around talking about the closure of coal plants rather than the opening of new coal plants.

Ben Shwab Eidelson 02:25:14

Right. And you would think that this would be then the stage for which we could actually like push big climate regulation.

Anay Shah 02:25:20

Oh, you would think, right?

Ben Shwab Eidelson 02:25:21

You would think. But I think, you know, we were coming out of, you know, Al Gore and inconvenient truth is 2000, 2006, 2007, there's a big IPCC report that says global warming is now unequivocal. So you get into 2008, two dozen states had already passed renewable energy standards to push utilities forward. And so there was a climate bill known as the Waxman Markey Bill that passed a floor vote in 2009. And of course, Bob Murray, Peabody Energy, everyone's pushing against this. This is when you get a lot of public talking points against how this is going to hurt consumers, how this is going to make electricity more expensive. Well, the great financial crisis was not the political moment then to do anything that could even be perceived as hurting consumer prices. It required short term economic stop the bleeding action, not long term fix the climate action. So it didn't end up passing. So regulation wasn't going to stop coal, what could?

Anay Shah 02:26:17

So the resistance had a big impact. If the resistance was the jab, now you've got the hook, the body shots and the uppercut that comes from the market. Right. And so enter the world of fracking and cheap natural gas. This is the other major storyline of the early 2000s that is going to send coal staggering backwards. So in 2005 Congress passes the Energy Policy act with a so called Halliburton loophole that exempted fracking from parts of the Safe Drinking Water act and reduced regulatory barriers.

Ben Shwab Eidelson 02:26:51

Wait, so we say that you need to make sure that water is safe to drink. Unless, unless you're trying to get gas out, then it's okay.

Anay Shah 02:26:57

Then it's not waste, it's just fill. Right?

Ben Shwab Eidelson 02:27:00

Oh my God.

Anay Shah 02:27:01

And then from 2006 to 2008 you get the production of fracking on multiple shales that start to see some benefits. So this, the technology of, of fracking starts to produce natural gas. Prices had been high and so it makes the shale projects more attractive.

Ben Shwab Eidelson 02:27:17

Right.

Anay Shah 02:27:17

If they can crack this, then there's, there's, there's a lot of economic value here. And so in 2008, just to give you context, Gas production from fracking shale formations hits a tipping point. Right? So before this, shale was about 5% of U.S. national gas. By 2015, it was over 50% of U.S. natural gas. Right. So the shale gas boom unlocked this massive set of reserves of cheap, cleaner burning natural gas. And so, okay, let's talk about what is fracking? Just a little. A little sidebar here. Fracking is short for hydraulic fracturing, which is a drilling technique that allows a producer to extract more natural gas from deep underground shale rock formations. So you drill one to two miles underground into rock layers. You inject high pressure mix of water, sand, and chemicals to start cracking the rock, and it releases trapped natural gas, which then flows to the surface. And so before fracking, these deep shale gas reserves were known, but they were inaccessible. They were economically unviable. But with this technology and where the energy markets were, the ability to unlock this just created a boom town. And so what happened? Natural gas prices fall by over 55% between 2007 and 2012, just due to hydraulic fracking and horizontal drilling. And this makes gas more economical than coal. Right. So utilities begin switching from coal to gas, not for environmental reasons, but for economic reasons. Natural gas prices plummet, undercutting coal's cost advantage. And in 2015, natural gas surpasses coal as the leading source of electricity in the United States.

Ben Shwab Eidelson 02:29:08

Wow. I mean, all this happened so 10 years ago. Like, 10 years ago, this happened. 10 years ago, coal was the leading source of electricity in the United States and gas took over. This is all so recent.

Anay Shah 02:29:19

That's right. So in 2008, coal was 50% of electricity and gas was 21%. And then seven years later, they were 30.

Ben Shwab Eidelson 02:29:28

30.

Anay Shah 02:29:29

And natural gas takes over.

Ben Shwab Eidelson 02:29:30

Wow.

Anay Shah 02:29:31

This is the uppercut that just sends King Coal stumbling down. Right. In 2007, there were still over 150 proposed new coal plants at various stages. And by 2012, that number dropped from 150 to 15. Now the utilities are pushing these combined cycle gas plants, which are twice as efficient as coal and can be built in almost half the time. We should acknowledge that wind generation is also surging here. And later on, we'll see solar. And so there's state level renewable energy policy and declining costs that do put renewables on the map, but it pales in comparison to the impact of gas.

Ben Shwab Eidelson 02:30:12

Yeah, one thing I was trying to understand is, like, what makes gas physically, potentially a better fuel? Right.

Anay Shah 02:30:20

Were you interested as a physics nerd out?

Ben Shwab Eidelson 02:30:23

Yeah, I just had to do another physics nerd out. I think there's the mining side. Right. Perhaps we've started to get to some of the easier to mine coal, even with strip mining, as it gets harder and harder and harder and more expensive to mine and gas. Maybe this fracking technology makes it faster to get energy out of the ground. But why is it more energy dense? What's going on here? And it turns out it is. So even if you'd have a piece of anthracite coal, which is the most energy dense chunk of coal, it's essentially a brick of carbon. And you light the carbon on fire, what are you doing? You're, you're combusting carbon with oxygen and you're getting CO2 and energy. Like you pretty much directly go from carbon anthracite to carbon dioxide and energy. Now, on the flip side, when you're combusting gas, gas is really mostly methane. That's the main thing you're combusting. And methane is CH4. And so the dominant reaction, yes, there is a, in the CH4, there's a C that you're combusting, it's going to become a carbon dioxide. But there's also this H4, these four hydrogens. And so a lot of the combustive energy is actually from the hydrogen. So it's actually a light atom that gives you a lot of energy and ultimately as well, less carbon emissions per unit energy. And so if you look at the CO2 emissions per gigajoule of fuel, you end up with natural gas being almost half the emissions to get to the same amount of energy. And then it's also about twice as dense. That is a big benefit, not to mention the physical kind of practical attributes of transportation.

Anay Shah 02:31:54

You can't put coal through a pipeline.

Ben Shwab Eidelson 02:31:55

That's right. Now you can turn to coal gas, which basically gives you the methane and then you have the coke. So you still do some of that, but like largely to be able to drill down, have this fuel that you can just pipe around and put on tankers and all these other things and is twice the density and is half the emissions. You're like, oh, this is really a better fuel. While we're talking about emissions, we should call out, there's a big issue with methane being released in the atmosphere unburned as CH4. It is deeply problematic, I believe about 25x the greenhouse gas factor as carbon dioxide. But if you're actually burning it, it's a much better thing to burn.

Anay Shah 02:32:32

That's right.

Ben Shwab Eidelson 02:32:33

I was just going to say one more thing on this because I keep calling it natural gas, which always Bothers me internally because it sounds like a marketing tactic to call it natural gas, but it's actually called natural gas in contrast to coal gas, which makes me feel better about it. If you remember, we had the town gas, we had coal gas. The reason we call it natural gas is because it was not manufactured out of coal. It was just the thing that we find naturally occurring, but it makes it sound local, organically produced, whatever. I'd rather just call it nothing, but so be it.

Anay Shah 02:33:02

I mean, it has both that connotation and, as you mentioned, it's half the emissions. And so, you know, it is worth noting that we found a University of Colorado study that showed that the decrease in coal burning from 2007, 2013, this period that we're talking about where coal plants were being shut down and. And new coal was being driven down and natural gases booming through the roof. During this period, carbon dioxide emissions dropped by 500 million tons annually, which is the equivalent of taking about 100 million cars off the road each year.

Ben Shwab Eidelson 02:33:33

Wow.

Anay Shah 02:33:34

And so this doesn't speak to the methane leaks, which are very potent, but this study found that 90% of coal's decline came from cheaper gas and wind energy. That combination then drove the equivalent of taking 100 million cars off the road. So there. It's not a total benefit, it's not renewable energy, but it did have this net benefit during this period.

Ben Shwab Eidelson 02:33:57

That's right. And so, I mean, this economic factor tips coal into decline in the US because now we have, I mean, not just for all these physical properties and economic factors, but it's the ultimate domestic resource. So it also has all the energy independence factors that we want as well. And so other than the coal industry trying to grasp for life, there's no reason for it. But speaking of the coal industry grasping for life, I think it's time to talk a little bit about the story of the coal towns. And those are something that can't easily transition as these fuels transition. And so coal towns are based where there's coal. Power plants are often based near where there's coal or easy transportation to coal, neither of those things move easily based on other resources or other jobs or other economies. And so I think we've seen over time this dream that because you have these rich resources underground, the people that are going to live above it are going to have their lives enriched.

Anay Shah 02:34:52

It would only make sense.

Ben Shwab Eidelson 02:34:54

It would only make sense. Right.

Anay Shah 02:34:55

The luck of geography. Either you move to that town or you're born and around that town, you live above this incredible resource. That's going to produce tremendous wealth and abundance. It would only make sense that, that it would make you and your families all that much more affluent and stable. Right?

Ben Shwab Eidelson 02:35:13

That's right. And instead the opposite has happened. Right. West Virginia, I think most epitomizes this in the US because it has the longest history here. West Virginia joined the Union in 1863 and many West Virginians believe that its abundance of resources would make them all rich 150 years later. 13 billions of tons mined, and it is one of the most struggling places in the United States to live by virtually any measure, whether it's educational achievement, employment rate, income level, health outcomes. And so there's this epidemic of decline in the Appalachians. This gets into the fundamental question of how to think about underground resource extraction and development. How is it that coal that's been the basis for so much prosperity and progress in America has left behind such a trail of human and environmental suffering and wreckage where it's been mined?

Anay Shah 02:36:06

And it's not just job loss. Right. You're talking about higher obesity levels, higher rates of cancer, some of the lowest literacy rates in the entire US that is on par with countries that don't have the benefits of a national education infrastructure. It's a human tragedy of epic proportion.

Ben Shwab Eidelson 02:36:27

Yeah. And I think there's this governor of Pennsylvania who said in a 95 interview, George Leader. There's something about the extractive industries that somehow exploitation seems to be the only word that applies. They don't seem to care about the hospitals or the churches or the community buildings or even the infrastructure unless it directly affects them. They just never did anything to help the community. This idea that a lot of these resource based industries also have this yo yo effect where when there's a boom, there's investment in the infrastructure, obviously in order to enable people to live there. But then as soon as there's a retraction, this is what we saw in the UK too. Wages are cut, jobs are cut, mines are closed, there's no stable infrastructure to build out. And there's also this hyper concentration effect which leaves people really dependent. And so then there's this like you push back against us as a union, we'll just shut down your mind and then you can't feed your family. Right. And there's not another alternative here because it's not like manufacturing where there could be a different factory next door.

Anay Shah 02:37:23

Right. This is part of this curse is that these economies don't diversify resource spaces because they have this abundance underneath them that they expect to benefit Them.

Ben Shwab Eidelson 02:37:34

That's right. And so as coal has declined in the US I think this is the lingering story of what do we do as a society to zoom out at this moment in time in the U.S. coal's still generating electricity. I think we're down to about 15% of our electricity. And I think it's mostly in probably the Midwest and some of the east in our lifetime. For anyone listening, there's been points when coal's been 50, 60% of our electricity usage and many people listening have probably charged their phones or run their computers or turn on their lights and used coal. It's increasingly unlikely and more and more likely that more of that's gas, solar and wind powered. Let's talk about the arc of history though. In the uk, so much of the coal story and the first wave of industrialization centered there. As we talked about in the lead up to World War I, coal peaked in 1913 at 292 million tons a year. And the transition to oil and gas happened in the 70s as opposed to the mid 2000s. And so coal started to lose political favor much, much earlier. You had the 1952 black fog in London that killed over 4,000 people in a week. And that started to really wake people up to this coal driven life that was really driven by some of the big power plants in London. Politicians even of the labor government, which remember was the miners original government, published a fuel policy in the late 60s that started shutting down coal mines. The combination of the increasingly tough economics of mining as well as the concerns around pollution, started to put in motion a slow, consistent decline over the years. Now the other big thing that hit is remember the energy crisis that you talked about. And I was also hitting globally, right?

Anay Shah 02:39:20

That's right.

Ben Shwab Eidelson 02:39:20

And there was already an early discovery of oil and gas in the North Sea. But there's a big push as a result of the pricing to do deeper exploration there. It didn't seem as expensive or as insane to do this ocean based exploration offshore oil field as it once had. Once you realize this need for domestic energy ownership, once that was developed further, it made the transition to gas even faster. And so you just had this steady decline. And simultaneously you had the coal miner unions trying to consistently strike and push back against their own government, the National Coal Board, which owned the coal mines as this nationalized entity. And finally Margaret Thatcher came into power as prime minister in 1979. She absolutely loathed this labor driven public ownership model. And so she started to put in motion preparations to kick the power out of the Coal miners hands. In 1985 a big strike was kicked off and she was prepared, she had stocked coal, was able to ride out the strike, didn't have to give in to any demands and the mines continued to close. In 1984 there are 187,000 miners. This is off of a high of I think 1.2 or 1.3 million miners in the UK in 1913. By 2018 there are 590 miners. The mines were basically all closed. So coal mine had been in decline for 100 years before the last mine was closed. And Britain never reached those record highs again. But in 2013 coal was still, it was still the largest single part of UK's source of electricity. So the mines that were still running in 2013 were still a growing concern. But then you just started to see this political shift and by 2015 more electricity was produced by wind and solar than from coal. By 2017, the UK did not need to burn any coal for a 24 hour period to power society. Two years later, in 2019, Britain announced that it survived for 125 hours without using electricity from coal. Followed soon after by the news that carbon emissions were the lowest that they had been since 1888. Just thinking about the arc, it just goes through this rise in industrialization and then this transition off of coal that's just this crazy story and perfect curve. And Britain in 1913 still was using more coal per capita than anyone else has gotten even close to in history. Right? Something like, I think 50 pounds per person per day of coal consumption.

Anay Shah 02:41:46

It's a hopeful note, right, because The, I mean, 100 years ago the British Empire is at peak. You know, the sun will never set and it is entirely powered by coal and it Hits Peak in 1913 as you mentioned. But then through a variety of different forces, including the end of the empire and an introduction of other fuel sources, it is able to wane itself off of this massive dependency.

Ben Shwab Eidelson 02:42:13

That's right. But who knows if other nations will follow the same path? I mean the US is not too far behind, it seems, with largely fracking as the punch down. But some other things are going on.

Anay Shah 02:42:24

Well, we know a couple nations that are not on that trajectory. And so while the decline of coal in the US and the UK is reasonably spectacular, let's not get too excited about the death of coal because we've got to really separate the relative decline in the US and UK with the absolute consumption globally. The largest electricity source in the world is still coal by a lot. Right? Globally, coal powers over 35% of electricity. Natural gas is 22% and then hydro at 14 and everything else is under 10. And this is largely driven by China, India, US, Russia, Australia, Germany, Japan and a few other countries. You know, an emerging argument, particularly this in this new book called An All Consuming History of Energy, is that at a global level, rather than there being a sequence of an energy transition, we go from wood replaced by coal replaced by oil replaced by nuclear replaced by renewables is what you actually see in the data. And the way history plays out is an accumulation and an agglomeration of energy sources. So collectively, we end up mobilizing more and more energy from an increasingly diverse array of sources. And so energy transitions are not these uniform, ubiquitous kind of global things. They might happen in a region such as the decline of king coal in the US or the uk, but they are very quickly overshadowed by other regions. And when you look at the story globally, there's not been more coal being burned than there is today because of Asia.

Ben Shwab Eidelson 02:44:08

Yeah. So let's go back to China. I mean, when we last left off, China was in the steady beat of industrialization. And in the 80s it passed the US as the primary coal user. But they were still kind of close, still kind of neck and neck while China was just getting started. In the decade ahead, 2000 to 2012, China's coal production more than tripled. So it was 3x the US at that time and rising from one and a half billion tons to over 3.6 billion tons a year and accounting for over half of global coal consumption by the end of that period.

Anay Shah 02:44:41

So the story of coal in the 2000s is the story of China.

Ben Shwab Eidelson 02:44:45

That's right. And you know, what's going on here? What is driving that growth? Well, a few things. First of all, I mean, China joined the World trade organization, the WTO in 2001. And that's when it became deeply integrated into the world's supply chains. So then China becomes, you know, this primary exporter around the world. Chinese firms are climbing up the value chain and innovating in cross manufacturing, either building vehicles themselves or parts of vehicles, consumer electronics, building materials, steel, et cetera. I mean, put differently, like, I think this is the era when China took its position as the workshop of the world. Right. You saw that in the uk, you saw that torch kind of pass the US and now you see that torch pass to China. And what powers the workshop of the world in each of those three cases? It's always coal. Right. And so coal is powering the growth of all of the inputs that are going into all of this. Right. So it's the growth of steel, cement manufacturing, coking coal to bank the steel and all the infrastructure around that, from rail to buildings to house people, to heating for those buildings, to everything around that. And so just to understand the pace of this, there's during these peak years, one new coal plant gone online per week. And the pattern became much more efficient than it was before. Really specific coal rich provinces mined the coal, while coastal cities consumed the electricity. And the government really consolidated the sector. And so by 2012, large scale mechanized mining was, was now common, especially in Inner Mongolia and the Shaanxi provinces. There's still in more rural homes, direct coal heating going on as well. So this big consumption wasn't just what we saw in the US in 2012. It wasn't just going to large power plants, it was going there and still to power, often home cooking, home heating. And then in cities there's often centralized district heating that was all coal powered with large boilers. Now this is also the era kind of leading up to this when pollution reached crisis levels. Many might remember kind of the lead up to the Beijing Olympics, it was like, how is this going to happen? Beijing was on everyone's mind as the most polluted city to visit. You'd see these skies that are just haze filled. They got through the Olympics. But I think that was this turning point in environmental awareness and this awareness that you needed to address this. And so in 2012, President Xi Jinping assumes power in the fall of 2012. And one of his biggest pillars, I think it was one of his big five national development goals was to make China an ecological civilization, which is really, I think, mostly about pollution, which is really mostly about the burning of coal and how to control air pollution as a result. And they've done by most accounts a pretty phenomenal job. And again, the key there wasn't burning less coal. China burned more coal last year than they were burning in 2007, 2008, by a large margin. It was really about figuring out where to burn the coal or how to evolve the power plants to deal with the particulate matter and deal with the sulfur. And so you can look at before and after pictures of Beijing that are five or six years apart, and some of them show you can barely see anything versus these clear skies. There's a framework that a friend of the show Ryan pointed us to called Kuznets curves and this environmental Kuznets curve, the idea being that people want their economy to rise, they want their incomes to Rise. They want their standard of living to rise. And that usually comes at the cost of air quality and pollution and sometimes water quality. And then they get to a point where actually they'd rather other things stay steady because the quality of life is declining as a result of pollution. If you want to read up on some of the economic theories behind the idea of why 2012, well, it's like, well, maybe enough people had a high enough quality of life that they're living in Beijing and they're saying, you know, what is really going to make my life more livable is the ability to walk outside without an N95 filtering the air.

Anay Shah 02:48:38

This idea that around the Olympics and after you go outside and you couldn't see across the street because of the pollution, it became all that more real to me living through the LA fires earlier this year, where it's not simply that, oh, it's an inconvenience, I can't see to go to work or where I'm going. But you're actually worried about your kids developing asthma and newborn babies. You don't know what kind of particulate matter effects have on their brain development. And it becomes extreme, extremely visceral and extremely kind of present all day, every day, as this probably your number one source of fear and worry. You can really see that Kuznets curve tipping when you hit these unprecedented levels of emissions and coal smoke and pollution in the air.

Ben Shwab Eidelson 02:49:25

Yeah, I think that's spot on. Like, I feel like when I've been in fire seasons in the past, you like, you feel caged in, you feel trapped by it. Right. Because you feel stuck inside where you can control air quality, which is not.

Anay Shah 02:49:37

And you would pay a lot of money to relieve yourself of that caged feeling.

Ben Shwab Eidelson 02:49:41

That's right. And so it was quite a time of massive growth and transition. And if you fast forward over the next decade, China could just continue to grow in coal use. Now, meanwhile, China's also becoming very rapidly the leader, per your prior point and I, about just more energy. They're just using more and more energy and so the coal's not being turned off, they're just adding in more solar, more wind and more other sources. And I think this also gets to China being not unlike the US and saying, hey, we want energy independence. Yeah, we'll maybe take some of that natural gas export, but do we want to be dependent on Russia? Do we want to be dependent on ships from the Western world delivering US energy coming out of COVID Actually, China suffered a major energy crisis and had to deal with some rolling blackouts because demand swung back. Obviously all kind of manufacturing came back and they weren't quite prepared. Why did this happen? Well, China was trying to grow their economy and so they need more energy. They're trying to promote renewable energy and hit their goals to decarbonize their economy by 2060. And they're trying to maintain energy security all at once. That's a lot of balancing act. But they've made a lot of progress moving off of coal. Around three quarters of homes have switched with subsidies from coal heating to, you know, either solar electric or natural gas or geothermal. More energy is provided by renewables. But China notably does not have major sources of oil or gas the way that the US does, which explains why China is still building major coal plants today.

Anay Shah 02:51:12

And to your renewables point, I mean, those of us that are working in this industry that you're constantly reminded by the fact that China installs more solar every year than the rest of the world combined. Right. They are able, through their manufacturing prowess, their top down central planning and just the sheer demand for power, they're able to increase adoption. And yet it's hard to make a dent in the demand for coal and coal production that China continues to have.

Ben Shwab Eidelson 02:51:41

Yeah, there's this framing that Ryan shared with us which I really like the language on, which is, you know, we call it in the US it's renewable energy or, or green energy or clean energy. China, you know what they call it there, apparently just new energy, new energy, which I really like. It's just like this is the new energy. It's better for all the reasons that new things tend to be better.

Anay Shah 02:51:59

It's so smart. Right. Take all the qualifiers and descriptions out of it. And it is simply, it's the newer form of energy. We, we had wood, we moved to coal, then we replaced coal with, with oil in certain states, replaced oil and coal with natural gas in certain situations, and now we replace it with a new form of energy.

Ben Shwab Eidelson 02:52:17

This is the new energy. Yeah, I like that.

Anay Shah 02:52:20

Coal is and would continue to be such a dominant story for China. We're not going to get into too much forecasting in this episode because that is left for the analysts that are spending much more time thinking about this than we are. But one of the things that's interesting when you just try and understand coal today in China is that they're still building new coal plants even though the coal plants that they're running are increasingly less profitable, even though the capacity factor of their coal plants is falling. Capacity factor means how Often they're running at maximum power, even though China's having to offer capacity payments to keep the power plants online because you can't turn them on and off as we were talking about. And it's providing these coal plants with a source of income. They're not that used to. And so you're seeing reasons why coal is necessary. But is it increasingly difficult to compete on a market basis with the other forms of energy? You may see coal start to take on the role of peaker plants because China hasn't really embraced gas in the way that the US and others have. And so China wants flexibility, they want energy security, they're going to have base power and peaker plants, they're going to have distributed, renewable energy. And so coal remains. I mean, you look at the charts and it's just off the charts, quite literally. But you're starting to see reasons why this may not continue at the same pace, largely driven by, once again, economics.

Ben Shwab Eidelson 02:53:49

We will one day do an episode on solar, but like, you put a panel out once and it just keeps going. You don't have to bring the coal to it, you don't have to bring the gas to it, it just goes. As they build out more and more of that infrastructure, they can shift more and more of their load. There has a lot of powerful factors.

Anay Shah 02:54:04

Now, before we leave Asia and return back home to wrap up with a snapshot of where we are in the world today, we really can't leave without making one more stop into a country whose growth is inseparable from coal, and that is India. Now, before we land in New Delhi, Ben, you know this story. It's near and dear to my heart. I have been passionate about the climate crisis for many, many years. I learned in the late 2000s that over 450 million people in India still lived without access to electricity. That shocked me and I ended up moving to India in 2009 to join an early stage startup called Delight to bring clean, affordable light and power to villages that lacked electricity. And I've got so many stories that I won't share here, but very briefly, India's relationship with coal is both as a massive producer and a consumer. So India gained independence from Britain in 1947 and it faced a challenge of how to modernize and industrialize beyond just the interests of their colonial power. And the theme of geological luck rears its fateful head again. Here. India was sitting on massive coal deposits of their own. And so began the mining, transporting, burning and transmitting story that we've seen elsewhere. And like in other places, India started out with highly labor intensive small scale mines and very limited technology. And among the many industries that India nationalized in the 1970s was coal, creating Coal India Ltd. Which incidentally is now the largest coal producing company in the world. So while the US and China shifted to large scale open pit mining, which was safer, cheaper and more mechanized, India's coal industry remained more dangerous, more manual. Through the 80s, coal production skyrocketed. Powered steel, cement and the decentralized, nascent grid that was being formed. But India's tipping point was 1991 when it began to liberalize its economy and manufacturing infrastructure. And then later tech drove doubling of electricity demand over the course of the 90s. And so India's population crosses a billion in the year 2000. And India was the second largest coal producer after China with coal powering 70% of India's electricity. So you've got an electricity demand that's doubling.

Ben Shwab Eidelson 02:56:30

Wow.

Anay Shah 02:56:30

India's coal production providing 70% of that doubling demand. So think of India as on the coal journey, a little late to the game, but rapidly industrializing. And today now the second largest producer in the world, the second largest consumer in the world, but still having to import coal to meet its insatiable demand. And so India now consumes more coal than Europe and North America combined, but it has no signs of slowing down. Right. The estimates coming out of the research institutes there are that they've got endless reserves and despite consuming a billion tons a year, they're on track to grow to about a billion and a half tons of consumption by the end of this decade.

Ben Shwab Eidelson 02:57:13

Wow question. My mind is like the ARC compared to China. That's right, like how will that play out?

Anay Shah 02:57:19

And will anyone follow the UK story?

Ben Shwab Eidelson 02:57:21

That's right. Fundamentally it'll be a question of economics. Well, let's, we're getting into it. We're ready to go for analysis. I think we're ready to go to the story. So let's just, let's just zoom out real quick and talk about the scale of, of coal over time and summary of where we are now. Globally, I think we hit on most of this already. But just as a rewind, the US solar and wind now produce more power for electricity than coal. Coal continues on the decline in the us it's out of the UK and largely, increasingly out of the rest of Western Europe. Meanwhile, we have the story that we just had with China and India and the rise of coal in Asia. But globally, as a result of that rise, coal is still the largest single fuel source. For electricity today. And it is also the largest source of carbon emissions by humanity today. Right. The one thing we did today, whatever day you're listening to this, unless you're listening to this many years in the future, which you could be. But if you're listening to it in 2025, most likely the thing that humanity did today that had the most emissions was probably how much coal we ripped out of the ground and burned. Which is wild, wild to think about this, how long this story has been going on.

Anay Shah 02:58:27

So if you were to put it in a scale of total emissions from humanity, where does coal sit?

Ben Shwab Eidelson 02:58:33

Coal is the largest source. It's a little over a third of all the emissions from humanity. Coal has emitted around 835 billion tons of carbon dioxide. Oil, all the oil humanity's burned is closer to 630 billion tons. Gas, 270 billion. The only thing that gets to a comparable scale is all the land use changes that humanity has driven. Right. All the cutting and burning of forests, the kind of removal of carbon sequestration from that, which is arguably kind of a different motion. So coal is by far the dominant. We talk about fossil fuel emissions. I mean, it's coal and oil, but coal is the king, one third of.

Anay Shah 02:59:11

All emissions for all of humanity.

Ben Shwab Eidelson 02:59:13

And there's a pretty linear correlation between emissions and warming. So you can kind of directly map coal emissions over the course of humanity to a half a degree. Celsius of warming.

Anay Shah 02:59:24

Put half a degree of warming in context to total warming we've experienced since. Since industrialized time.

Ben Shwab Eidelson 02:59:29

Yeah, we're at 1.2 to 1.3 degrees warming right now. Right. Since pre industrialization. And so when we talk about coal's responsibility here, it is significant. Yeah, I guess that doesn't surprise me when I look back and how much we talk about coal. But I think what really surprises me is how much of that happened in my lifetime. Like I thought, yeah, it's going to be the dirty times in London and all stuff like all that stuff from part one that was like maybe 3% of these emissions, over half of the emissions are since the mid-90s.

Anay Shah 03:00:00

Right.

Ben Shwab Eidelson 03:00:01

This all happened. This is all still happening.

Anay Shah 03:00:02

Right. In the context of all the awareness that we have about coal emissions. This is when it's been happening more than ever.

Ben Shwab Eidelson 03:00:11

Right. Let's go to themes. I think we're ready. I think we're ready to get into themes. Let's do it. We've now been in coal zone for six to nine months in various ways. But deeply on this stuff in the last two months. Anaya, what have you realized? What's one thing?

Anay Shah 03:00:28

So much good stuff in here, but I think one meta theme that really came through today for me is very simply the role that coal has played in history of nations. And so from the accidental discoveries of coal that that led to the British Empire and the first industrial revolution to the discoveries of coal that led to the second industrial revolution in the US with steel and rail later in the century, this steady role of coal in China and India, that's just gone absolutely vertical in the last 20 years. The correlation between where coal reserves are and where industrialization and development has happened seems non coincidental.

Ben Shwab Eidelson 03:01:18

Right. You have the us, uk, Germany in one era of time and then you have China and then India and the Soviet Union. We're talking about the global powers and coal as the driving force behind their power throughout history that kind of like compounds over time and then it's, you.

Anay Shah 03:01:35

Know, you go from national history to international history. And I just did not fully appreciate its role in shaping World War I and its role it had to do in fueling the home front during World War II. And then this kind of the geopolitical nature of energy and how coal became this where you can retreat to if you want to have energy security and energy independence and the US we're the Saudi Arabia of coal and how that has played out through the last 50 years.

Ben Shwab Eidelson 03:02:08

Yeah, I think one for me is on that same theme is just the. I don't know if I quite had digested the intertwined nature between the rise of the grid and electricity and kind of the shaping of electricity markets and the rise of coal as the driving input that shaped all of that, how they were part and parcel of the same era and time. And my mind jumps to analogies. It's like you couldn't be working on an AI startup without the build out of Nvidia's. It's all part of the same stack in a way. And so you needed this kind of fungible energy source at scale to do a bunch of things, but electricity being one of them and then the unlocks of that and then the driving from that to these big central power stations and how intimately connected all of that is. We didn't talk about hydropower here, which is the other element, but was so geographically connected, constrained and limited as a resource you don't have, you know, you can't just like move hydropower around without a lot of transmission lines and transmission losses and all this other stuff. But so the fact that that story was as intertwined as it was, I.

Anay Shah 03:03:17

Think coupled with that is, you know, we spend a part of our day jobs looking at technologies that can fuel the energy transition and adoption of decarbonized technologies and renewables and. And through that we have to deal with the peculiarities of utilities and grid infrastructure and the ISOs and how it's all formed. And all of that kind of has roots in the fact that the grid was formed with coal.

Ben Shwab Eidelson 03:03:47

Oh man, the grid series is going to be fun and wild and educational.

Anay Shah 03:03:52

I mean, another one on this similar zoom out theme is I just love this notion of a story arc. And coal is one that moved from relative dominance to absolute growth in the west and now in Asia. It is both relative dominance and absolute growth again.

Ben Shwab Eidelson 03:04:13

Right. Somewhat off of that. I mean, I think about the point you made around there's just the addition of more energy over time. Right. And you know, how it plays out differently in different places. But that's kind of the macro trend. The driving element that this whole episode echoes code for me was something that we hit on in the first part, but I think really kind of played out through fracking and otherwise. Just that the long term winner and big scale movements are all economically driven. To me, it's just like a recurring kind of drilling and tattooing of that lesson on my forehead, which is when we want to eventually move off humanity off of fossil fuels, it's going to happen when the economics are better. And that's not to say there's not a huge role to play for activists and regulation to set the stage to lead ahead there, to slow down the building of the plant. That's kind of transitionary, but actually problematic and all that. But the actual results when we look back in the longer timescale is going to be because we unlocked a cheaper way to do the thing that humans want to do. And that's what really permanently impacted coal markets.

Anay Shah 03:05:26

Right. And the role of activism and policy and regulation can be to accelerate our journey to where the market forces can take over essentially. How do you make fossil fuels more and more expensive? To accelerate the adoption of new energy.

Ben Shwab Eidelson 03:05:45

Yeah. Or make new energy cheaper.

Anay Shah 03:05:47

Or make new energy cheaper. Both, right? Like both.

Ben Shwab Eidelson 03:05:50

Yeah. Right, yeah, exactly related to the economics point, which kind of feels like almost a law of nature. It's obviously not. It's a law of human functioning. I was thinking about how the physics of coal doesn't care about politics and labor battles and all this stuff. The reality is it's an amazing fuel in some dimensions and a really problematic Fuel in other dimensions, meaning hard to use for certain things, really good for other things. And that just is what it is. And despite political swings and the Labor Party taking power and nationalizing the mines and whatever, it didn't end up mattering because ultimately the coal got harder to get at and it became less economical. That's what's going to ultimately lead to again, this long term outcome. So it kind of dovetails with the economics point of feels like there's just a reality to, yeah, you know, moving gas is actually easier. Fracking gas became even easier. And that's just like the thing that then drives forward the development.

Anay Shah 03:06:44

Right, Similar point. And so our job is to accelerate that journey. How do we not have to endure another century of China and India burning astronomical amounts of coal in order to arrive at the other side where they're able to power their grid and economy through new forms of power generation?

Ben Shwab Eidelson 03:07:05

Yeah.

Anay Shah 03:07:06

One last one on this economics and development point which brings it even closer to home is the story of the cold town that we ended on. And we've been bringing that back very intentionally since the first episode of what's happening to Minors at a human level and what's happening to communities. I don't think I fully thought about Appalachia as a victim of the resource curse in the same way I do now. Right. So the resource curse is the paradox where you've rich in natural resources like oil gas or coal or diamonds, and you often experience slower economic growth, more corruption and weaker institutional development than countries or communities that have fewer resources. And this paradox has been studied and it is repeated itself time and time again across Latin America, Africa, Asia and within North America. And this, this paradox of plenty in Appalachia, right, you had no diversification of the economy. You had this wealth resource that is just extracted and taken away. And with it the profits are extracted and taken away. It's just a simple fact of humanity and our capitalist system that fossil fuel industries do not have great incentive to invest in building out infrastructure and education and public health resources in those communities. They are more interested in extracting and retreating. And it gets muddled with coal mafias and political alliances or bloated state owned industries all fueled by corruption because you've got this resource.

Ben Shwab Eidelson 03:08:49

Countless stories of the leaders of Murray Energy and Peabody Energy doing horrific things to their communities and kind of dangling people along. And all of this is true. And the same thing happens internationally across decades. Something is kind of foundational about basing a society on resource extraction that even when it's modeled different ways. Even when you nationalize the minds, even when it's the Chinese Communist Party running it, even when it's fully capitalist in the US no matter what way you shape it, it kind of comes back to the nature of the value chain. I think of the hard work of getting these commodities out of the ground, then the various middle stages before they get to consumers and kind of the dehumanizing distance between the end consumer. What do I think of as the least human thing that I do in my life is probably turn on the light switch. I'm not ever thinking when I flip the light switch on about who is getting me the electricity of the light bulb and the people that are. I do happen to know. But. But I don't regularly think about the humans involved in delivering the fuel on the other side. In my case it's hydro, but let's say it was coal. How often are we going to think through that? Now you compare that with going to the local farmer's market and buying the thing from the person whose farm it is. It's the opposite experience. And I think that's progress, I think that's infrastructure, I think that's working. But when you think about the people at the center of those places of extraction, we have to take the lessons we've learned and try to undo it. And I mean there's maybe a couple good examples. I think Norway has done a good job supposedly one with oil development where they've put aside a lot of the flywheel of capital. They also counterintuitively, despite being an oil rich country, are very anti oil consumption. And so that's perhaps created some healthy disincentive to diversify. But it's pretty limited data points indeed to this point I think there's something very interesting about. There's the resource extraction, but there's also the centralization of the grid and utilities and big power plants. When we think about distributed energy generation and storage and kind of potential new ways in which that's going to happen in a much more decentralized way, it's quite interesting. There's no longer a thing to dig for. There's mining that will continue to happen to get resources to build things including solar panels and aluminum cans and everything else. But once it's deployed, it doesn't need to be fed this feedstock anymore. And that's fascinating to think about how it shifts what this looks like.

Anay Shah 03:11:21

It doesn't need to be fed the input and it doesn't just distribute the generation of energy, it distributes the power Political, societal power.

Ben Shwab Eidelson 03:11:31

That's right.

Anay Shah 03:11:31

What's interesting about distributed energy is that it actually decentralizes the power structure and puts it back in the consumer's hands. And you can actually then work to have a leverage against the centralized monopolistic grid infrastructure that may not have the same incentives that consumers do.

Ben Shwab Eidelson 03:11:51

That's right. What else we got?

Anay Shah 03:11:53

I mean, on this point you've done a few sections on labor and just how coal has been inextricably linked to the growth and journey and story of organized labor, which is such a fascinating result of how the system has continued to perpetuate human rights abuses against workers.

Ben Shwab Eidelson 03:12:16

Yeah. And I think because coal mining was always so central to powering the economy and simultaneously being perhaps the hardest work, especially underground mining is such an extremely powerful case study, and a case study in these characters that then maybe misstepped going on strike during a war or otherwise, that led to ultimate backlash. I was also to ask, you hit me for the first time in our recording that there's a deep parallel to what happened in China. But instead of it being the fringe thing against the government, it became in large part like the government. Right. Which is kind of obvious. That is the taking the seeds of socialism which came from helping labor and saying, well, no, let's start with all of it being government owned and go from there. It played out differently. Until it didn't. Ultimately, everyone arrived at the same thing. Big coal mines, big power plants, some steady state of worker, rough treatment, but maybe minimum bar now, the ride to get there was very different and for other reasons, perhaps slightly independent from coal mining, like Mao's Great Leap Forward was atrocious outcomes. But it's interesting viewing that through the same lens. I don't quite have the strong synthesis other than miners ultimately never being get the upper hand. I think in all of history, a.

Anay Shah 03:13:38

Microcosm of the resource curse. Right. The miners who are doing the work day in, day out, they are not party to where the value is created in the supply chain.

Ben Shwab Eidelson 03:13:48

That's right.

Anay Shah 03:13:49

I think we're going on record to say that the Jevons paradox is not actually a paradox.

Ben Shwab Eidelson 03:13:53

No, not at all. When things that people want to consume get. Get cheaper, they will consume more of them. It's only a paradox in the context of something that you have fixed consumption desires for. It would be a paradox if you cut, I only have desire to eat so many donuts. And if you brought me infinite boxes of donuts, if I just keep eating more, that'd be surprising. But if you showed up with faster Internet or you showed up with more books on coal. I'm going to consume them all. Infinite desire. And coal is energy that, as we've gone through is. Can become heat, can cook your food, can become electricity, which can be used for everything from charging your iPhone to running the Roman bathhouse. Yeah, we want more comfort and more, you know, electricity and more abundance. We're nowhere near, I think, the limits of human capacity to use energy.

Anay Shah 03:14:50

If someone were to do a podcast in a few hundred years, they might see us as, like, just beginning that S curve of energy use.

Ben Shwab Eidelson 03:14:57

Yeah. I mean, if you do the math on how much energy hits the earth from the sun, we've captured very little of it. So there's a lot of energy just hitting the earth every day. We don't have to dig for it. Yeah. I mean, maybe on that note, to me, I'm left with just the raw scale of coal. Yes, King Coal is well named. The health and environmental impacts are immense. The energy released over history is immense. The number of people involved, the timescale from the Roman era to now, it is still relevant. It is still charging phones today. And the emissions story is, in part, a good chunk of it is just the coal story. That's right, yeah. I'm just left with the scale of that and the recentness of it and how relevant it still is to the functioning of humanity today.

Anay Shah 03:15:47

It is such a relevant piece of human history on all the dimensions that you mentioned today. It is no exception. We do what we do in our small way to combat the changing climate. In large part because of coal.

Ben Shwab Eidelson 03:16:04

That's right.

Anay Shah 03:16:05

And this next future generation's quality of life is going to continue to be impacted based on the amount of coal that we're burning this planet.

Ben Shwab Eidelson 03:16:14

We have plenty of work to do.

Anay Shah 03:16:17

Thank you, King Coal, for keeping us employed. I wish you didn't.

Ben Shwab Eidelson 03:16:21

Is that a wrap on coal? Are we done that is coal.

Anay Shah 03:16:24

The human history, the economic history, the planetary history.

Ben Shwab Eidelson 03:16:29

Coal has lived in my head for a long time. I'm ready to start learning about something else. I think. I think there'll be episodes where we want to keep going. It's hard to stop after. I think I'm ready to start learning about something else. This was a tour through human history. This was amazing. Thanks for being on the journey.

Anay Shah 03:16:44

Thank you all. So outside of coal, Ben, what have you been consuming and burning and transmitting?

Ben Shwab Eidelson 03:16:56

Ezra Klein's book Abundance recently came out. And so when I needed a break to go to sleep and I didn't want to think more about coal. I switched to abundance, which isn't entirely disconnected but is a nice thing. And I'm thinking about housing policy and permit reform. I'm a big Ezra Klein fan and find it nice to read his book.

Anay Shah 03:17:12

Absolutely. I've enjoyed reading the Abundance reviews and analysis and the synthesis of abundance liberalism pit against the anti corporate populism. It's one of the first times, I think, at least in our little worlds, where like the liberal's dirty laundry is kind of being aired out in the open and we're here to confront it in order to bring about change. That is certainly a book of the season for nerds and wonks.

Ben Shwab Eidelson 03:17:40

Yeah, I think otherwise somehow, just like this season, I've had a collision of podcast projects and so for those that don't know, I have this other podcast project called climatepop and recently did a fun interview with someone who's involved in our Step change fund, Travis McCoy, who's the director of Product for Climate Google, and that was a really fun conversation. And then recently did a live show with David Roberts of Volt that was part climate and energy and part just his political rants. And he's been reporting on climate and energy for over 20 years and so just has a lot of interesting viewpoints and context to share. Those were fun, excellent episodes.

Anay Shah 03:18:18

Yeah, listen after you listen to coal.

Ben Shwab Eidelson 03:18:20

Oh, odd one. I mean, White Lotus Season three Stressful. The music's always stressful, but that's looking.

Anay Shah 03:18:27

Forward to starting at the other one. Our friend stars in Deli Boys on Hulu. She is a mafia boss and this is Deli as a New Deli Boys. So that's going to be fun. Now that coal is recorded and the coal books are closed, we can watch.

Ben Shwab Eidelson 03:18:41

A little TV until the next topic consumes us. Well, just to end with some calls to action, if you enjoyed this, please make sure to subscribe in your podcast player of choice. Ratings also make a big difference and find us and follow us on whatever social medias you enjoy. We love hearing from folks and also most importantly, if you enjoyed it, please send to a friend who might enjoy learning this deep history of coal alongside us. We will let you know when the next episode of Something comes out. It will not be about coal. It probably will not be an energy source, but we won't share more than that. And lastly, want to thank a couple folks who helped with just giving us background, context and research. One is Johnston Sutter and another is Ryan Briscolia. Ryan helped us really wrap our heads around China's whole complex story and Johnson help us understand the more modern US Era of coal. So we appreciate you both for spending time with us. All right, until next time.

Anay Shah 03:19:36

Thank you.

Ben Shwab Eidelson 03:19:36

Bye.

From the steam engine to semiconductors, from railways to refrigeration, history is marked by technological leaps that rippled through society, reshaping not just our capabilities but our very way of life. These are step changes—profound transformations that mark clear befores and afters in human history.

But progress isn't simple. Each leap forward brings both breakthroughs and breakdowns, winners and losers, intended and unintended consequences. Through deep research, expert interviews, and storytelling, we examine these pivotal technologies from multiple angles:

• Their technical evolution and scientific foundations

• The visionaries, laborers, and communities that brought them to life

• Their far-reaching impacts on society, economics, and the environment

• The complex legacies they leave behind

Your hosts are Ben Shwab Eidelson and Anay Shah. They spend their days investing in today’s step changes with a venture fund, Stepchange.vc.

New episodes release every couple of months. Subscribe at Stepchange.show to receive them directly in your inbox, along with additional content exploring the themes and stories behind each episode.

Want to share thoughts or suggest a topic? Email us at hi@stepchange.show

Over 1200 listeners! We had no idea that many people would want to spend 3 hours learning about coal and find us in the first 7 days since launch.

In the long term we think it’s important that we all learn from the stories of infrastructure and progress. More than the number of listeners we’ve been deeply touched by the impact we’ve heard from listeners:

It’s the content I didn’t know I was craving. It’s a part of the story that I feel like a lot of founders (myself included) don’t always take the time to understand. I’m getting more conviction that we really need to work on macro go to market strategy for a majority of our transition goals. I think a key part of that macro strategy comes from understanding why things are the way they are and the strategy that got the current infrastructure entrenched the way it is.

Honestly got me pumped up today. I’m on my second go of listening to it. I think this is gonna be a really great onramp for some strong founders. It feels like a much more historical and scientific approach instead of climate change/doom and gloom/times running out.

Hearing that the episode was not only educational, but was also motivating listeners to work on infrastructure, validates our biggest hopes for creating this show.

A few calls to action: if you haven’t already, please subscribe to the show on your preferred platform: Apple, Spotify, and YouTube. Ratings and reviews make a huge difference in helping others discover a new show and are appreciated if you enjoyed Part I. And most importantly, please send the show to friends who you think might enjoy it so that they can be caught up before Part II is released!

And thank you to from who reached out and asked if he could do a behind the scenes Substack Live with us about how the podcast came to be. Recording should be playable above or on YouTube:

-Ben & Anay

hi@stepchange.show

As a teaser for Part II we recommend Nat Bullard’s amazing annual deck on the state of decarbonization. Particularly slides 16-19 tell us just where we are in the long story of coal. 2024 was a record year for human coal consumption, which was the largest source of emissions. The story of this rise in recent years centers on the decline of the West’s coal dependence and the rapid rise of China’s and India’s:

Welcome to the debut episode of Stepchange—a podcast telling the stories of human progress. We unpack the technologies, systems, and infrastructure that shape our world.

Coal is the story of a step change—a transformation so profound that it reshaped the course of human history. The rise of coal reshaped economies, societies, and the very way we live. It became the foundation of the Industrial Revolution and powered a new era of progress, but this leap forward came at a tremendous cost.

Coal’s story begins with ancient plants that captured sunlight and locked away carbon over millennia. These deposits, buried deep in the Earth, would one day drive empires and fuel industries that transformed the world. Yet, behind this transformation lies a complex and often difficult legacy.

Even as coal has faded from the forefront of our energy landscape, its fingerprints remain everywhere. The technologies it spawned, from steam engines and the rail to industrial manufacturing, continue to underpin our modern world. At the same time, coal’s legacy is inseparable from many of the challenges we face today, from labor abuse and environmental degradation to global climate change.

In this debut episode, we explore the first chapter of coal's story, from its early discovery and use through the dawn of the 20th century.

Thank you for joining us for the first episode of Stepchange. Don’t forget to subscribe and share your thoughts by emailing us at hi@stepchange.show.

Hosts: Ben Shwab Eidelson and Anay Shah

Timestamps

00:00:00 - Welcome to Stepchange
00:03:37 - The Birth of Coal
00:09:39 - Coal's Early History
00:17:01 - Britain's Coal Transformation
00:25:49 - Reshaping Home & Hearth
00:34:49 - The Iron & Coke Revolution
00:44:28 - The Steam Engine Breakthrough
01:03:37 - The Railway Revolution
01:19:50 - The Rise of Industrial Cities
01:38:57 - Life in the Mines
01:54:37 - Coal Comes to America
02:24:11 - Themes & Reflections

Closing reading & listening recommendations:

• Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World

• Brian Cox

• Google’s quantum chip Willow announcement

• The Singularity Is Nearer: When We Merge with AI

• Quantum Country: A free introduction to quantum computing and quantum mechanics

• Never Enough: From Barista to Billionaire

• Meditations for Mortals

Episode sources:

Key books

1. Freese, Barbara. Coal: A Human History

2. Goodman, Ruth. The Domestic Revolution: How the Introduction of Coal into Victorian Homes Changed Everything

3. Paxman, Jeremy. Black Gold: The History of How Coal Made Britain

4. Sinclair, Upton. King Coal:a Novel (fiction)

Interviews

Barbara Freese, 12/12/24

Johnston Suter, 1/6/24

Key Links

Geological History

• The Carboniferous Period

• Earth's Historical Timeline Visualization

• Coal-Bearing Areas of the United States

• USGS: Coal Resources and Historical Production

• Coal Mining in Ancient China

• Coal Mining Regions

Industrial Development

• British Population Growth (1100-Present)

• The Industrial Revolution

• Evolution of Steam Power

  • History of the Steam Engine

  • Newcomen Atmospheric Engine

• Key Industrial Figures

  • Abraham Darby I

  • James Watt

  • Matthew Boulton

  • John Wilkinson

  • Franklin B. Gowen

  • The Lunar Society of Birmingham

  • The Grand Allies

  • George Stephenson

Social Impact and Labor History

• Friedrich Engels

• Coal Mining Labor Practices and "Hurrying"

• Lord Ashley and Labor Reform

• The Great Smog of London (1952)

• The Centralia Mine Fire

• Pennsylvania Anthracite Mining History

Modern Context

• Global Coal Consumption Trends

• Emissions by Fuel Type

Full transcript

This was autogenerated and edited with LLMs. Please be aware that there may be mistakes or typos.

Ben Shwab Eidelson 00:00:00

All right, Anay. Happy 2025.

Anay Shah 00:00:03

Happy New Year. Ben.

Ben Shwab Eidelson 00:00:05

How were your holidays?

Anay Shah 00:00:06

Lots of Christmas songs, the fireplace crackling, and lots of questions about Santa. And he knows when you've been good or bad. And my son asked, well, what. What happens when you're bad? And I was like, I guess you get a lump of coal in your stocking. And he's like, well, why do you get coal? And I'm like, well, let me tell you about coal.

Ben Shwab Eidelson 00:00:25

Five hours later, he's asleep. It's a good question, like, why is coal a punishing g give?

Anay Shah 00:00:32

It's this, this gift of energy and.

Ben Shwab Eidelson 00:00:35

Heat and light and industrialization and abundance and capitalism. Oh, all right, well, let's get into it.

Anay Shah 00:00:53

All right. Welcome to the first episode of the Step Change Podcast. This podcast covers the stories of human progress and we're here to understand the technologies, systems and infrastructure that shape our world.

Ben Shwab Eidelson 00:01:07

I'm Ben Idolson. I'm a co founder of Step Change Ventures, a fund that invests in the companies that are accelerating today's biggest step changes. And I'm based in Seattle, Washington.

Anay Shah 00:01:16

And I'm Anaya Shah, also a co founder of Step Change Ventures and based in Los Angeles, California. And so here we are with the pilot episode of the Step Change podcast. So, Ben, tell me more about why you wanted to do this.

Ben Shwab Eidelson 00:01:31

At this moment in time, we are in the middle of upgrading so much of our world. And that's what we do in our day jobs, is helping upgrade that world faster. You know, studying history provides us the best potential resource to motivate and study what works and what didn't. I'm a very avid listener and fan of another podcast called Acquired, which is a show that expertly tells the stories of companies. And Ben and David, I think, really pioneered and defined a format that they call a conversational audiobook. It really tries to bottom out the core story of a company and everything about it. As I've moved to work on on climate and infrastructure and think about these problems full time, I've been hungry for that same historical understanding for the major systems that run our world, whether that be coal or steel or fertilizer. From energy sources to the major transportation unlocks to the grid that powers much of our life. How did all of this come to be? What was the human effort that went into it and no one was doing it. And I was, I was on a walk with Ben Gilbert, talking about the lack of long form content, going deep into some of these topics, and he turned to me and said, you should Just go do it. Very excited to finally give this a go.

Anay Shah 00:02:33

Perhaps due to either a overabundance of excitement on our part or a total underestimating of the task at hand, we have inadvertently walked in to the mother of all upgrades, didn't we?

Ben Shwab Eidelson 00:02:46

Yeah. Or a combination of the two. Both underestimated the story of Cole and maybe overly excited to just dive in head first. So today is episode one. And if you haven't gardened by this point, we're here to talk about coal. And before we get into it, we have to thank one person in particular, Barbara Fries. She wrote in 2003 and published a book, A Human History, which has really become the backbone for our story today and the background for a lot of our research. And second, she generously spent some time with us unpacking some of the nuances of her view on the long story of coalition and some of her reflections over the last 20 years since publishing the book. So thank you to Barbara, and if you're following along and want to understand all the episode sources and all of the research that went into this Head to Stepchange show, and we have links out to everything there. All right, well, let's get into it. Let's get into Cole.

Anay Shah 00:03:37

So it's a fitting beginning. Cole is the story of a step change, a transformation so profound that that it reshaped the course of human history. And in this episode, we'll explore how coal was the foundation of the Industrial revolution and therefore the foundation of the modern world. But this step forward came at a high cost. It had profound impacts on society, on the environment, and on the individuals living around mines, working in mines and powering this transformation. Along the way, we'll uncover how ancient plants locked away the carbon that powered entire empires. How coal mining set in motion century long conflicts between labor and power, and how the race for coal laid the groundwork for both modern industry and the revolutions that reshaped nations. We may think that coal is just a part of history, but in preparing for this, we came to realize that coal and the technologies that spawned as a result of it are truly the foundations of the world we live in today. And also the foundations of many of the problems of our modern world as we see it today.

Ben Shwab Eidelson 00:04:49

I was trying to zoom out and look at where we are today. The world used more coal in 2023 than any year in human history. It is primarily used for electricity generation, but it's also the primary input into steel and cement. So just this morning I was thinking about how many objects I touched that in some way used coal. And so we might think of this as a relic of history and we'll spend most of our time on the historical story. But the relevance of this echoes to today. And the combustion of coal today is the largest single source of CO2 emissions. And so we're not by any means just operating in the realm of history.

Anay Shah 00:05:27

There is very little in our world today that was not shaped by the discovery of abundant coal and the profound implications we had in putting it to use and creating the modern world. It's interesting because I think of our generation tend to think of oil as the primary energy source narrative. But all roads begin with coal.

Ben Shwab Eidelson 00:05:51

Where did coal begin? So let's get in our time machines and we don't go back to pre industrialization London. We have to go back much further. We're going to go back around 400 million years. The Earth was in a pretty different state then. Continents were in different locations then. There weren't mammals, there hadn't even yet been dinosaurs.

Anay Shah 00:06:10

Right?

Ben Shwab Eidelson 00:06:10

We're talking before the dinosaurs. I was telling my 7 year old about this last night and she leaned in and was like, is this a true story? And it is. At this time there were dragonfly with 3ft long wingspans. Dragonflies were larger than many birds. There were millipedes that were as tall as us. This is a wild time on planet Earth. This was around the time that seeds first began to evolve. The first reptiles and amphibians were coming out of the water. A lot of these changes in plant and animal life were driven by growing photosynthesis. So what was going on with oxygen then?

Anay Shah 00:06:47

So you think about today's atmosphere is about 20% oxygen, oxygen concentration and it's been stable at around 20, 21% for hundreds of years. But this wild world of the Carboniferous period 400 million years ago was largely due to some of the highest oxygen oxygen concentrations history at 35%. And so this level of oxygen drove the explosion of growth of these massive plants and early sources of life that, that existed in almost a way that we can't believe. It's right for your daughter to, to wonder if this is a fictional story because it's a land that looks very different from today. And as I mentioned, this is Pangea time. So this is when all the continents were more closely linked and where water was actually covering a lot of today's landmass.

Ben Shwab Eidelson 00:07:43

Well, one thing you mentioned was this was called the Carboniferous time. And, and I actually just think that's like a funny echo of how we think about this, right? This was like a 100 million year period when all these animals evolved, all these massive changes happened on planet Earth, and yet we name it Carboniferous, which literally means coal bearing in Latin. So we look back at this time and the fundamental thing that we care about as a human species to name this moment on planet Earth, is that it's the time that gave us coal. Well, a lot happened, but yes, it is the time that gave us coal. And what happened was that massive plants were growing, right? Ferns with 30 foot wide trunks. And those plants were growing in this really swampy period. And so the plants would die, break down in the water and begin to form what's called peat. Of note, the locations where this was most active, the swampiest kind of largest plant growing areas, were all around the equator. It was the more tropical environment. Now it's confusing to us because if you think about it, you're like, where does coal exist today? What are the big centers of coal? We'll get into Newcastle, England. You could think about in the US all the coal minings in Pennsylvania and in Wyoming and Inner Mongolia and China, and all these regions you don't think of as being tropical regions. But it's that point that you said earlier that the continents were in a different configuration then. And I found this amazing tool where you can go back in time. It's like a 3D view of the Earth. You can put in your hometown, you can put in all these locations and scrub back. And these are all the tropical regions, like Newcastle, England was in the tropics 253 million years ago, which is amazing. And so those were these swampy areas, these massive forests. And plant matter would grow and then decompose, but not decompose on land. In these swamps, it would start to decompose in water.

Anay Shah 00:09:39

And this is important because plants are holding the carbon. And so these plants would fall, and here, you know, they'd fall on land in our normal life and they would decompose and release some of that carbon. But when it falls into the swamp, the nature of it falling underwater means it can't decompose. And so the carbon doesn't get released. And then over literally 100 million years or more, more water, more plants, more water, more plants, more mass compresses these plants down and the carbon stays trapped and compressed and compressed and compressed.

Ben Shwab Eidelson 00:10:15

And the first thing it forms is what's called pete. So in those first thousands of years of compression, it kind of, it, you know, it's not that it doesn't Decompose at all. Is that it? The carbon's not fully released. Right. The bacterias and fungi can't fully digest it. Well, you know, what is peat? The best image I kind of have in my head around is it almost is like coffee grounds. It's like this very absorbent, dark, very brown material that, as you compress, becomes this very rich soil. And it turns out, like peat is still a concern of interest. Today, there are 1.5 million square miles of what's called peatland, which are the millennia of peat that's formed, and that's actually one of the largest carbon sinks today. 550 gigatons of soil carbon is in that peat land. This episode is not about peat, but it's an important stepping stone. Peat became a fuel used by people over time because you could directly chop peat up and burn it. And this is particularly popular in Scotland. You know, today when people go and say, oh, they really want to go buy an earthy Scotch and really like that flavor profile is because we're still burning peat to make those earthy flavors when you're brewing that earthy Scotch.

Anay Shah 00:11:27

So love me a peaty Scotch.

Ben Shwab Eidelson 00:11:29

I don't know if I've ever really sought the peatiest Scotch, but I think if we get through the whole episode today, we should end the day. It's still early morning right now, but maybe by the end of the day we'll have a. We'll be ready for a peaty Scotch. So the layers keep, Keep coming. There's more and more compression over millions of years. And what happens with the compression? Well, first of all, the water is squeezed out. The other volatile gases are squeezed out. So carbon dioxide, squeezed out, hydrogen, anything else that's essentially not carbon starts to get squeezed out of the peat and eventually it starts to become various layers and stages of coal.

Anay Shah 00:12:04

So there's going to be some terms around coal that you'll hear throughout, because there's different types of coal that have different properties and burn differently and have different energy sources. And it all starts with this process of compression hundreds of millions of years ago. So tell us a little bit about the names of the different types of coal.

Ben Shwab Eidelson 00:12:20

Yeah, so, I mean, fundamentally, I almost think of it as a. Yes, we have these distinct types, but they're really on a spectrum. Right. You really have, like, Pete on one of the spectrum and anthracite on the other end of the spectrum. Anthracite is like a shiny rock that is in the 95 to 100% carbon. It's this almost crystalline structure in between on the pd, you go peat, then you go lignite, you go sub bituminous, bituminous, then anthracite. And so when you think about the kind of more porous coal rock in your mind and most of the coal that's still actually burned today, now for electricity, you're probably thinking like a bituminous coal. We'll get into the important roles that anthracite did play. But each of these different types of coal has different properties in terms of how it's burned, where it comes from. And as you can imagine, the anthracite, the most compressed, actually only forms when there's that mountain range that's built on top of it. So when you get into the Appalachians and you get into that moment when the continents collided and really, really deeply compressed coal down, that's when you get that crystalline structure. But in the Midwest, that never happened. And so you have these coal fields that are still that bituminous or sub bituminous coal.

Anay Shah 00:13:26

All right, so let's jump back into our time machine and push the button for 399 million years forward and bring us to closer to present day. We'll take a whirlwind tour through the last couple thousand years. But there's been coal used across early human civilizations that. Right?

Ben Shwab Eidelson 00:13:46

Yeah. There's what we know and what we don't know. Right. If you just burn a piece of coal, there's not necessarily deep record of it. So we're going off of what archaeologists have been able to discern over time. And so I suspect we'll even find earlier uses than this. But through that time machine, a bunch of evolution happened. The continents drifted. Some hairy apes eventually evolved into Homo sapiens. And some of those Homo sapiens, they figured out to burn wood. And that was a great way to stay warm and cook food and do all these things. But in some regions, they found these dark rocks, and turns out that those could burn well too. And so the furthest record I could find was that what is now the Czech Republic, there's some kind of carbon dating that you can see that a settlement was using coal as early as 25,000 BC. So we're talking 27,000 years ago from now. In China, there's indication of some surface mining and some scaled household use. 5,000 years ago, 3,500 B.C. in Greece, we start to see more written record. Right. We see record in around 370 BC to using coal for metal working. People talk about a stone that burns like charcoal. You're starting to understand that okay, this is starting to be used in some industrial sense. And some of the early metal uses, we know that the Aztecs use it as a fuel, and for some jewelry, they'd cut down the black stone and make beautiful objects out of it. And then in Britain, we know that in the kind of Roman era in Britain, it was being used as a fuel and being used to heat public baths, heating villas, and even sometimes smelting iron. Again, it was. It was never at the scale that we'll get to later in the story, but when the Romans did leave Britain, around 400 AD, there kind of was a slowdown in any coal use until the 12th century, when it picked up again. Probably the most interesting early use that's underappreciated was what was happening in China. We have Marco Polo, which some people just think of a fun game to play in the pool. But actually the game is named after this Italian explorer who left Italy, went to China for 17 years in the late 13th century. So this is around 1271 to 1295. And he brought back to Europe from that trip documentation of what he was observing in China. And it shocked many in Europe to understand this. And China was way ahead at that time. And a lot of that was powered by what he was seeing in their use of coal. And so he wrote directly that a kind of black stone existing in beds in the mountains, which they dig out and burn like firewood. If you supply the fire with them at night and see that they're well kindled, you'll find them still alight in the morning, and they make such capital fuel that no other is used throughout the country. And so he saw in China, again In the late 1200s, this use of coal, which he had never really seen before back in Italy. And he's like, what is this magic stone that they're using that could burn through the whole night? Part of that use was probably driven by already the beginnings in some of those regions of firewood scarcity, which will be a pattern that we'll see again and again, which is people turn to coal for the basic heating and cooking when firewood supplies go down. And so that was already happening again in China. And we also see that China is probably the largest iron producer at this time in history. And so this is this era when China was just way ahead of anyone in the West.

Anay Shah 00:17:01

And we'll get into a little bit about why iron and coal are brother and sister later in this episode. But China has, as you noted, had been using coal and even making iron long before it took hold as a cornerstone of the European empires.

Ben Shwab Eidelson 00:17:18

And in this time period in the UK it started to pick up again. And I think in particular what we see in London, the beginning of coal is a specialty fuel. It was not being used yet in people's homes. They didn't really use it to cook or anything like that. It was really being used almost by certain small businesses. It was brewers, blacksmiths and lime burners. And lime burners are making materials for construction of homes and buildings. Maybe there was some light trade, it seemed like into mainland Europe in this era from the uk, but it was very light and very kind of specialized use.

Anay Shah 00:17:50

So we'll continue in this time machine and come forward to where we're going to spend a lot of this story. And that's in the islands of the United Kingdom or Britain. And this story focuses on Britain because it is the first nation to be fundamentally changed by coal. Britain led the world in coal production for centuries and largely as a result triggered the Industrial revolution, created the industrial society and created more wealth and power than was previously imaginable. There's a notion when you look into the history and read some of these direct accounts of coal taking on this transcendental, divine, almost supernatural quality, it was, the thought was that it was divinely placed so man could realize their fullest potential. It was there to help rise up civilization and our souls themselves. It was a tool to enable us to control our physical world and even God's desire to use coal to elevate humanity. And in some records, in Eurocentric historical records, it was given to the Anglo Saxon man to dominate the world. Right? And so British coal was kind of a divine intervention and it allowed Britain and Europe and much of the world to escape poverty of pre industrial society faster than ever imaginable. And it's truly one of the more magnificent stories of transformation in recent human history. And in order to get to those moments and some of those key inputs, we'll go back to the days of the Magna Carta and then come right into the 16, 17 and 1800s.

Ben Shwab Eidelson 00:19:50

Yeah, let's do it. Before that though, man, I just have to acknowledge our self justification rewriting of history. It's like calling a hundred million year period on Earth the coal bearing period. Just how self centered we are as a species. And in particular that Eurocentric rewriting of history to say, oh well, this was God's work so that we can rise up and then echo forward to today when we're like no, no, please don't burn coal at all. These Other places, because that was our divine right, not yours. Right. Anyways, there's a lot to unpack there, there. But yes, as you said, let's zoom back. The Magna carta happened in 1215, this reaction against extreme royal power. And as part of that, essentially as an appendix to the Magna Carta, a document called the Forest Charter was sealed in 1217. And what the Forest Charter did was it started to give landowners their rights back to say, hey, it is not just the Crown that owns the trees and the peat and whatever else could be on this land. Actually, as a landowner, you own the stuff on your land. And coal fell into that category, even though it wasn't a big concern at the moment. Now, what was interesting is not all land was owned by private landowners. It turns out that what will become the central important coal region of our story right now is the area around Newcastle was actually owned by the Church, the Roman Catholic Church, and they controlled the digging, the production, the output. Now, they tended to outsource that, as you imagine, but it was them as the property holders and they would have serfs on the land doing the labor. I think it's just a wild fact to me that bishops, monks and nuns were the coal barons of the time.

Anay Shah 00:21:25

The Church once again exerting its power and having divine right over what will become such an important input into society.

Ben Shwab Eidelson 00:21:34

That's right. And so we start to get the sense that there was in London pretty massive or growing use of coal again in those specialty industries in the late 1200s. Even in 1285, we start to hear about a commission that set up in London to deal with coal smoke, which becomes a repeated pattern, people concerned about the air. And at the time, this type of coal was actually called sea coal because all of it, especially into London, was coming via sea from Newcastle versus what we know as charcoal, which is actually what happens when you take wood and you burn it without oxygen. That's how you actually produce charcoal, which was probably just called coal at the time. What was then sea coal became the dominant thing. We swapped the names and said, let's call that coal and the wood produced thing charcoal. But charcoal was actually in this era, a pretty important fuel and was used in a lot of these same industries and then got displaced. And the reason for that displacement, of course, was growing issues around firewood. In this era, the forest near cities, the forests all around London in the 1300s were being chopped down either for direct use as firewood for building and timber, or for making charcoal to then, to then run these specialty industries. As you look at maps, you just see the forest regions just getting pushed further and further out from the cities, which then made firewood more and more expensive and more laborious to transport in. And so all of a sudden, there's stories of people transporting firewood for miles and miles to get it to London. And that would have continued and probably coal would have picked up pretty quickly then, if that were the case. But something else actually happened around then.

Anay Shah 00:23:05

Yeah, we think of the rolling British hills. The English countryside is always there. But actually it was because we needed to massively clear the wood, as we have done so many other times in history.

Ben Shwab Eidelson 00:23:17

It was all forests.

Anay Shah 00:23:18

Yeah, it's all forests. And as you mentioned, that wood clearing and movement would have continued at that same pace. But then the bubonic plague hit, or the Black Death hit Europe. It actually originated in Central Asia and traveled into Europe. And there were multiple breakouts of the plague. The one in the mid-1300s lasted for four years and killed one in three Europeans, or 25 million people. It killed up to 200 million people globally, although the numbers and the records are obviously very hard to come by. But throughout these multiple breakouts, the population of England was more than halved. It was. We had 6 million people in the mid-1300s and declined to less than 3 million people in 1400. And London's population itself went from 100,000, this large city at the time, to down to less than 25,000 in one generation. The scale of the decimation of human life was unprecedented. The plague was actually. It was so deadly, within less than five days, 80% of people who are infected would be dead. It was absolutely brutal.

Ben Shwab Eidelson 00:24:22

Cannot imagine a city being cut in, halved, or even more. Right. London is a growing, kind of booming city. 100,000 was a big city at the time, to then be cut by three quarters, either for people fleeing and dying. From a percentage basis, one of the biggest tragedies for the human species. Now, the flip side is all those forests and lands that were cut down for those species, this was a boom time. No longer were people in high demand, and so the forests could grow back. And there's this big kind of second wave of regrowth of forests. They grew back. And this, of course, started to reduce the pressure on wood and fuel as a source. The population didn't really recover for almost 100 years. And so really, it's not until the 1500s that the waves of the plague is really behind London and the population growth has picked up. But during this time, we should remember The Catholic Church still owns these mines, and the Church was willing to invest in some things, but better mining technology and figuring out how to build deeper mines and expand was not quite their forte. Had the land stayed owned by the Catholic Church, it's very possible that coal would have never really had the big uptake in the following centuries. It just was one of those knife points of history. But it so happened that this was the era of King Henry VIII, 1527. He got frustrated in his marriage to Catherine.

Anay Shah 00:25:43

Ah, the marriage, frustrations, changing the course of history yet again.

Ben Shwab Eidelson 00:25:49

And, you know, the main complaint, there might have been others, but his main complaint was that she was not producing a male heir for him. And so he wanted to separate. And so he went to the Pope and said, I'd like an annulment for my marriage so I can. I can move on and marry someone else and have a male heir. And the Pope denied his request. And so this set in course King Henry's famous break with Rome. And over the following years, he basically kicked the Church out and said, that land is no longer your land. That land is our land. This is pretty wild because at the time, the Church was actually like, from an economic perspective, quite a bit wealthier than the Crown. Right. The Church owned a fifth of the nation's land and wealth, and I think it was something like maybe three times the economic holdings of the Crown. But the King was the king. So he managed to kick them out and dissolve the monasteries and passed a ruling with Parliament that said the property is no longer theirs.

Anay Shah 00:26:47

Just like that, the King takes the land.

Ben Shwab Eidelson 00:26:50

And if we look back at this time, early 1500s, something on the order of 10,000 to 15,000 tons of coal were heading to London each year for specialist trades. Again, still not widespread adoption. What does 10,000 tons of coal look like or feel like at that scale? 10,000 tons of coal is enough power to power maybe 3,000 US homes today. Could power a small little suburb. From a volume perspective, a ton of coal was kind of like filling up the back of a pickup truck. So if you took your Rivian R1T and filled up the back with coal, which would be quite an image, or your cybertruck for those that are Cybertruck fans. Imagine 10,000 of those heading from Newcastle down to London in a year, which kind of sounds like a lot, but on the other hand, that's just about 30 a day. And so if you're like, okay, major city London that has all this production going on, 30 trucks of coal to power all of that and pretty limited firewood. There's not a lot of fuel going to the city. And so as the population began to grow, this, this firewood problem came back. We, we chopped down all those forests that regrew and actually became a pretty active political concern. The, the Mayor of London, there's these records of him, he would do a daily standup at the wharves and put pressure on the merchants who were bringing the wood in, Particularly concerned that the poor weren't going to have wood. Right. This was a climate where you needed heating or you would often freeze to death or have major concerns. And so there are laws passed that would try and keep the price of wood down. Wood was being shipped from up to 50 miles away, which would grow the price. And then, of course, it became a defense concern. The navy got quite concerned they weren't going to be able to build ships. And so they just passed more and more laws around restricting the use of wood and trying to keep prices under control. But it was like there was no real plan in sight. And all those same industries that were starting to use coal were also still using wood. Right? Just the London breweries supposedly were burning 20,000 wagon loads of wood each year. And so it just became a huge concern.

Anay Shah 00:28:43

The English love their crackling fires. I love this image of the Mayor of London coming to the wharves every day and standing over the woods. But as you mentioned, it's. It was all of life, a wood shortage at that time, akin to like a gas shortage today. It would become the dominant conversation topic with anyone you met. And it was both this national security threat as well as an individual threat, particularly because this time in Europe was going through what's called the Little Ice Age. And it was the coldest period in history since the previous Ice age. And wood was used to heat homes, to cook food. It literally kept people alive. And so if wood prices went up or there was a wood shortage, there was a crisis and people needed alternatives. Enter coal.

Ben Shwab Eidelson 00:29:29

This is the step change, the beginning of that curve where coal went from just being used by these specialty industries to starting to dominate domestic life. And so by 1581, a pretty dramatic rise was underway. We went from that 10,000, maybe 15,000 tons of coal a year up to doubling almost 30,000 tons of coal into London. And then by the end of the decade, another doubling and onward and onward, until over the course of that century, we're up to nearly 500,000 tons of coal. And so this was this dramatic shift. That's more than 20x growth over that Century, or to put that on more like per person basis, it went from about a quarter a ton per capita at the beginning of this period to. To 3/4 of ton per capita, while that same population was also growing by a factor of two. And so it really shifted as the central kind of fuel in life in London.

Anay Shah 00:30:23

Yeah. And as we'll hear later, it's central metaphorically and central in your home, sitting in the middle of your home. But another per capita kind of perspective, as coal became more and more dominant, it would consume anywhere from 10 to 50% of a household income because again, it was heating and it was food. And so when prices roll or there was hiccups in the coal supply chain, the population would come to the brink of violence, there would be fuel famines because of rising prices. And, and this pollution was, as mentioned, like kind of an in and out concern. But it was hardly as important as dying of cold, which was the risk when you didn't have the coal and you no longer had the wood that they normally loved.

Ben Shwab Eidelson 00:31:09

That's right. I mean, there's this repeated pattern of kind of complaints about coal smoke. And yet people will not ever sacrifice their needs for energy over air quality. I mean, is the pattern again and again, whether that's at the kind of city government level or just in people's homes? One question you start to ask is like, why didn't this happen sooner given the wood shortages in the 1500s? And it turns out actually using coal was like people's lives were not set up for this. They needed new technology, they needed to actually upgrade their homes in some way to use coal. You know, you can't just take coal and throw it into a pile and light it. And all of a sudden it's just like firewood. Right. Wood had this great. People were used to it. They knew how to store it, they knew how to cook with it. They had the right cooking instruments. Right. They had pots and pans that really worked the temperature of wood. I ended up reading this whole book about cooking and wood versus coal, and there's this discussion about how people could control the fire and create fire from different zones. And the recipes that were really designed around wood cooking and the brass pots at the time and tin pots at the time were really designed for those kind of controllable fires. Well, all of a sudden you had coal, which was, first of all, getting it lit was not a given. You actually needed this, this grate that would raise coal off, up the ground. So you surround it with more air to get the coal lit and get it moving. And then the smoke that came out off of coal was quite different. When people were burning wood in their homes, typically and historically it would just be in the middle of the home and it would heat the home. It'd be where you cook and the smoke would just rise up through the fairly porous roof and. And you actually didn't really need to design your home around smoke control. Cause it was just a way that your house was already, your home was already working and he had to be a little smoky if you stood up. And you certainly wouldn't build a second floor on top of that cuz the smoke had to rise up. But it turns out that being on ground level was cozy and comfortable. And your bed would just, you kind of sleep on the floor, you'd sit on the floor and that was all reasonable. Well, all of a sudden you're burning coal and two issues. One is you need more air coming through. Two is the coal smoke was different. It wouldn't just go up and out, it would kind of sit at height, level. And so this is when you started to see chimneys actually become a thing. And there's this massive wave of renovation inside of London where 1550s, 1560s London, a couple chimneys here and there. By the end of the century, chimneys are commonplace. And that's really connected to this fuel switch. Now just to emphasize the like the draft issue a little bit more. When you have a chimney, you're losing a lot of heat and it's really not that effective for firewood if you're trying to be efficient. But with coal, okay, they make that sacrifice. But you would need, you would. It would cause this big kind of floor level draft that would come through the house as you used a chimney to burn your coal. And that makes the floor no longer a cozy, comfy place. And so all of a sudden people actually started. This is when furniture with legs became.

Anay Shah 00:34:14

A thing because it was wild.

Ben Shwab Eidelson 00:34:17

You wanted to sit off the ground, you wanted to sleep off the ground because it was very cold on the ground. And so it's just this like connected shift in domestic life that changed the shape of homes where you had a chimney. Now all of a sudden you could have a second floor, some little like nook on. And then all of a sudden you're no longer sleeping on the ground, you need beds. And then you gotta cook with a different type of pan that can actually work with the coal heat and not break. And so yeah, I don't know, it just struck me with the transition in one's home through this period.

Anay Shah 00:34:49

It was quite an upheaval to go through this change. And the English in particular had this love of the crackling fire. And who can blame them, right? My son this morning actually said, hey, Papa, when I come home from school, can you start the fire and put on the Christmas music? And it's like, absolutely. We love the crackling fire. But it really, it changed so much of just daily, daily life. And another part that you've mentioned that you've gone deep on, but it actually has this really interesting kind of engineering and an economic and societal impact, is how it changed cooking. And so the switch from wood to coal changed how you heated your home and changed how you cook your food. And you would really, I would never really think that the story would unfold so dramatically in terms of how you cook what you used to cook your food. And so what, how does this unfold from just changing how you're going to heat up your chicken to transforming society?

Ben Shwab Eidelson 00:35:58

I guess fuel switches, at least consumer fuel switches maybe often are fought hardest in the kitchen. I think there's a reason why the stove battle maybe is the pinnacle today. And this is back to our opening of the show where looking through these upgrades, this is not the first time in history we've changed how we cook our food. Going to induction stoves, it turns out there's been long fought battles and transitions over time. And I think this one from wood to cole was one of the bigger ones because the nature of a coal fire was that it burned a lot hotter and it burned with much higher sulfurous fumes. And so the brass and copper pots that were popular at the time that a family owned as like some of their only metal possessions wouldn't last long over a coal fire. It actually crack and break. There was some wrought iron. Wrought iron is when you hand pound to make iron. Again, that was made using generally charcoal, but it was still very light and thin. And so what you wanted was that thick. Today you think of that kind of like cast iron, that thick iron pot to cook it with. And that was being made at the time generally actually with charcoal. And charcoal needed a lot of wood. And so you're stuck, you're like, we're burning coal. We need cast iron to use it in most effective way. But to make the cast iron, we're using charcoal, which is going to require the wood. And so there's a bit of a, of kind of a stuck point there. In fact, Britain was actually just not great at making iron at the time because it didn't have a lot of trees. And so it was actually importing most of the iron from places like Sweden that were deeply wooded. And so iron was not just a core competency because it was so linked.

Anay Shah 00:37:38

You couldn't make it in mass yet. Right. Iron was made in very small quantities, in very small batches because it was made through this process of burning the wood. And so it's, it's quite expensive. And changing the composition of iron was, was not something that was readily known how to do, as you mentioned.

Ben Shwab Eidelson 00:37:55

And so I think now it's time to introduce one of our first real direct human protagonists in the story, the inventor, Abraham Darby. This is a guy who was born in 1678 to a Quaker family and he worked in a malt mill maker in Birmingham. Malt mills were used to, to crush the grains for distilleries. And so he stayed in metal manufacturing for the rest of his life. He set up when he was 21, he set up his own shop to make brass and copper. And the British at that time, again, they were making this stuff, but they also weren't that good at making brass. They actually were just not an advanced European. They were a second tier European power at this time. They had not really unlocked anything and they were short on wood and they were a small island that still ultimately recovering from the plague. And so he actually took a trip to the Netherlands and kind of did some industrial espionage. And so in 1704 he went over there and he's like, you know, the Dutch are the best at making this stuff. How are they doing this? And he figured out that they using this technique, using dry sand to make these cast iron molds and that would result in those really beautiful smooth pots. And so he studied that and understood that's how they were, they were making it. And that also is this moment. He got really deeply interested in cast iron over brass. And so he came back and in 1707 was issued the patent for that method in the UK. And it turns out most of his investors in the original brass and copper business were not happy about this. What are you doing messing around with cast iron? We thought you have a good thing going. We don't really know how to make this stuff. And so most of them pulled out of the business because they wanted to focus on the original business. He wanted to keep going. And so he set up the first scaled furnace in a town called maybe appropriately Coal Brookdale. That was the first not just to use this cast iron method, but perhaps even most importantly was the first to use what's called coke, to smelt iron.

Anay Shah 00:39:51

So coke is simply coal that's baked to remove the impurities. And it's this solid, carbon rich material that you derive from the coal and you remove a lot of the tar and impurities.

Ben Shwab Eidelson 00:40:05

The best analogy, it's like you're charcoaling coal. The same thing we did with wood where we baked it and then it turned into charcoal, which is this kind of harder, carbon rich material. If you do that, the coal, it's only that supercharged. The right type of coal is a little bit softer and it softens and then re hardens in a more porous structure. And the key things about that is you've removed the impurities, right? So you've removed a lot of the kind of gases and volatile, the water and the other things in it and made it a higher, more carbon dense fuel, number one. Number two is it's porous, which we mentioned is that actually helps it get hotter and light better because air can flow through the coke as an, as a kind of a natural byproduct of its structure. And then also it's actually stronger. You can stack stuff on top of it. And so these elements really unlock coke as the fundamental fuel going forward for iron, eventually steel, and then in the long term, still used today because it's of its special properties of being the kind of strongest carbon source thing that can get the hottest in these environments to get concretely into iron making with coke, which is I think a really important piece to understand. What is a blast furnace? Like what? Like what? How do you actually make iron? First, like, people are mining iron ore, and iron ore is rock with iron particles within it, right? And those iron particles are often like iron and oxygen in different configurations. They're locked into the rock and minerals. And so what you're trying to do is get the pure iron out to then a metal that you can work with. And so you put these iron ore rocks into a really hot environment and you need to stack it and stack it with the fuel and allow the gases to flow through the fuel. And you actually need the carbon monoxide to flow through to react with the iron ore to strip away the oxygen. So carbon monoxide would flow through, react with the, you know, iron oxygen molecules and strip the oxygen off so that you'd have this pure iron that would be extracted from the iron ore drip down. And then you could actually take it out and work with it. And you would take it out in these, it's called these, you know, this molten iron inglets. And the way it kind of drip out and you, and you pull these out, it looked like a central channel with these little lines lined up and it looks like little piglets suckling on a pig. And so that's why that's called pig iron. If you ever hear about pig iron, that is that pure kind of molten iron extracted from this iron ore blast furnace process.

Anay Shah 00:42:39

That's wild. So you've got a couple of things here. You've got coke, which is coal that's baked to remove the impurities that allowed Darby to make kind of iron in larger batches. Right. And you've got this iron process you're mentioning is very energy intensive and so it's done in small quantities. And what, what it sounds like the unlock for Darby is where, where you now you can finally make iron at larger and larger batches. And so you can bring down the price, you can increase the scale.

Ben Shwab Eidelson 00:43:17

That's right. And you know, it really does take like we're talking about, you know, from a timeline perspective this, this all is happening with, with Darby figuring this out kind of in the early 1700s, right. 1710, he's, he's set up this first blast furnace and really pioneering the use of coke for iron. But that doesn't mean the rest of, you know, the iron production had, had kind of tipped over. And if you look like at a, at a timeline perspective of this, you know, in 1720 there's something like 20,000 tons total of cast iron produced with charcoal and only 400 tons produced with coke. So it took a long time. It wasn't really until, you know, like the later end of that century, kind of 1770, 1780, that Coke became the dominant way of doing this, which is a pattern that we see in any of these new technologies. This is the innovative new thing to do that he had just discovered, just patented. Just figure it out. But it ends up being this massive unlock to scale which iron, the basis of steel, is the basis of everything we're going to go forward and talk about. You don't have the steam engine without this. You don't have locomotives, you don't have railways.

Anay Shah 00:44:28

This is the crazy story of coal and what it unlocks, right. Not to beat an iron pan further, but you've got this switch from wood to coal in the home and you've got pots and pans that aren't useful to, to, to use on the coal. And so you move from charcoal to coke. And then this key innovation that ends up sparking the Industrial revolution is the cooking pots and the Ability to now have an invention to cast iron in stronger shapes that are more coke produced. And this cooking evolution, it turns out it was just what our next protagonist needed for his steam engine parts. And then it's what George Stephenson needed for his iron rails and what architects needed for their construction. And so this unlock that you're mentioning around iron, that comes back through to cooking, which is just through the transformation of what we were using to cook our foods, is this kind of theme that you see with coal over and over again of how it just is able to unlock step change functions of different quality of life throughout a society.

Ben Shwab Eidelson 00:45:34

Coal made this problem of your old cookware doesn't work, so you need new cookware, but you actually can't make that new cookware with charcoal because you're out of trees, which is why you're using coal. But then coal unlocked the mass production of the new cookware from these pots and pans. In his cast iron process, Darby actually got another big order, which was to help with the iron for the first ever steam engine. And this kicks off, or perhaps this is the moment we consider kicking off, what's now known as the Industrial Revolution.

Anay Shah 00:46:09

Ah, the Industrial Revolution. Much ink has been spilled on this, and it could be its own book, but it plays such an important role, not only in society, but in the story of coal, the Industrial Revolution. Think of it as the dramatic increase in production through the use of machines powered by coal. That is what the Industrial Revolution is. And, and it is. This is the time period where we talk about everything across the fabric of society changing. And so up until this point, most people lived on or close to the land that provided them food. Right. 80% of people were farmers feeding themselves and the other 20% of people that weren't farmers. Life expectancy didn't really fall below 25 and didn't really rise above 35. Formal education was very limited to the rich. As a privilege. The weapons that we had designed couldn't kill more than a couple dozen people at once. We moved at the speed of horseback. Right. For the previous 15,000 years, most of what people owned was made in the communities that they lived in. And the Industrial Revolution changed the advent of electricity, the access to the types of food we could eat, modern plumbing, sewage, medication. Nearly every aspect of life is characterized by this change in the increase of production powered by machines through the use of coal. And the theme that we're going to see time and time again is coal creating a problem and then coal solving its own problem. And so let's Go full steam ahead into perhaps one of the greatest modern inventions of mankind, the steam engine.

Ben Shwab Eidelson 00:48:08

Prior to this moment, if humans wanted something to move and wanted to move something, it was either being moved by a human or by a different animal, right? We, as you said, could ride on horseback. We could have horses or oxen pull something along. We use the animals all the time as some motive force. So we grow food to feed the animal to have them do work, or we'd grow food to feed other humans to have them do physical work. But if we wanted something to move, if we wanted water to move, we wanted material to move, we want food to move, we or our animals had to move it, right? And yes, we used combustible fuels, but really only directly. We either use them to heat our homes and heat our bodies, or heat our food. We didn't have a way to take a fuel, burn it, and then have it move something. And that is what is about to happen. And of course, as you tipped up, why now? Right? Of course, unlocking the power that is stored underground or stored in firewood even for some other physical movement seems kind of largely valuable at any point in time. So why now? Well, the why now is actually because we want more coal. The why now is, is that Even in the 1600s in Newcastle, in those early days of kind of expansion and ramp up and the domestic use of coal in London, we were digging deeper and deeper for coal. And what else is down deep? Water. And the water is in our way of getting the coal. So we got to get the water out of the mine so we can get to the coal. And we, you know, did it. Humans did everything they could do to get the water out, right? They first they would carry it out with buckets, and for centuries they would dig these amazing tunnels that are horrifying to think about to drain water out of these mines. So if the mine was up enough and there was a valley you could dig a tunnel to, they would dig these tunnels that were no more than a foot and a half wide and four feet high. Some of them went for up to five miles underground to dig this little tunnel to connect up. And so they would start in the valley, they dig the tunnel up, they then break it through to the mine wall and water would come gushing down and they'd hope that they could get out of the way before the water pressure would break through in the tunnel.

Anay Shah 00:50:22

That's amazing. Digging a five mile tunnel simply to get the water out shows us how big of a problem it was. You, our appetite for Coal was increasing and we literally could not get more coal without draining the water. It was a fundamental bottleneck.

Ben Shwab Eidelson 00:50:41

That's right. There's minor inventions. People would put buckets on a chain and pull the chain up. But again a human was pulling that chain or an animal was pulling that chain. By 1700 the nation was dependent on coal and at this point mining more than five times the rest of the world. Right. Britain was at this point now the center of coal. Again still primarily for this domestic and some industrial use and still limited in what coal could get to to what wouldn't be waterlogged. Leading into this London had had formed what's known as the Royal Society. The Royal Society was this group of scientists that later were led by Isaac Newton and the who's who of the British scientific establishment. These are the people who graduate from Cambridge and Oxford and the leading theoreticians of the time. They looked to the water problem as a problem to think about. And so there are early experiments. There was Robert Boyle. You might know him for Boyle's Law, which is how the pressure and volume of a gas is consistent if held at a given temperature. He had someone working with him named Dennis Papin. In 1690s Dennis became very obsessed with steam. One of the first things he made was a steam cooker. He would demonstrate how under pressure food could be digested in a new way. And he demonstrates the first steam powered piston where you can use some steam to push a piston up. And this is the beginnings of saying hey, if we can heat up water and create steam a piston can be moved up. But it stayed in this particular experiment relatively about the theoretical demonstration. It was like his goal was to publish the paper that you could push steam up. And everyone's that's cool. Thanks for proving that you can push steam up. That's a useful contribution to our knowledge. It didn't get the water out of the mine.

Anay Shah 00:52:26

Right.

Ben Shwab Eidelson 00:52:27

It's the difference between publishing the paper and actually like executing against the problem. And left it at that and didn't take the project all that much further. The next first movement was by was a more practical device by this guy named Thomas Savory in 1698. So just another five years later. And he made a device focused on this. It was called the Miner's Friend. And it was I think of it less about. It has no moving piston or cylinder. He just figured out how to essentially create a straw, a vacuum powered straw that could start to take some water out of a mine. Right. So steam would be used to Create a vacuum in the straw and then it would draw water up and out using that vacuum. The problem with this is it was fairly depth limited, so it could only go. It could only move water about 25ft, and it required high pressure steam, which was actually very dangerous to use at the time. And so one of these exploded in 1705, just, you know, nine years after he invented it. And at that point people were like, this is not worth it. This is not, this isn't doing enough for us. Let's go back to the buckets and chains, right?

Anay Shah 00:53:36

We're desperate to get the water out, but this, this straw isn't working.

Ben Shwab Eidelson 00:53:41

And so right around this time, the time that the Royal Society was actually found founded, a young man was born, Thomas Newcomen. He was born in 1664 to a merchant family and he was essentially an ironmonger. He would make some little tools and sell them. And he worked near a coal mine making tools for mining. And he was not at all part of the scientific establishment. He would just have coal miners come through asking for tools and hearing about their problems. And so he would frequently hear about miners that were getting tired of pulling water out of the mines. And he learned, we think he learned about the miner's friend and savory had family in the same part of England where Thomas was living and working. And so he started to explore this more and became obsessed with this problem. So he teamed up with another very practical guy, a guy named John Cawley, who was a plumber, a metal worker, kind of a glass worker. So a very physical, hands on experimenter. And they just started chipping away at this. And so what Newcomen figured out is that if you take this piston design and you use steam to push the piston up, the question was, how could you pull it back down? What he would do is he'd push up the piston with steam, shoot cold water into the piston that would cause condensation of the steam and pull the piston back down. And by pull the piston down, what do we mean? We actually mean that the atmosphere would push on top of the piston. And so this became known as the first ever atmospheric steam engine. And this is the first real practical moment, I think, of unlocking stored energy and firewood or coal or whatever you want to burn, turning it into steam, turning that steam into useful locomotive force.

Anay Shah 00:55:23

The first time in human history we've used heat as a. As a force, as a power, as an energy source to move a machine.

Ben Shwab Eidelson 00:55:33

That's right.

Anay Shah 00:55:35

This is them tinkering away and Obsessing about this problem. Why were they obsessing about this problem? Because, remember, if you're in and around coal workers, the town is functionally designed around the coal mine. Coal mines are full family operations, right? You've got the children working in them, the women working in them until a certain point, and the men hauling coal. And so Newcomen and his friends are just surrounded by folks who are talking about this problem. And it seems like the most important problem to solve. And it was. And here you have it. The first time in human history we're using heat to power our machine.

Ben Shwab Eidelson 00:56:08

And I think the, like, scientific establishment was a little frustrated that they didn't get more credit to figure this out because it was what they were trying to do. But I think it took some really practical kind of living in the problem and building it and trying to just build it to solve the problem that really unlocked it, which is fascinating. And it worked in the first one was installed in a coal mine in 1712. And all of a sudden, as people found out about it, they started demanding it. In fact, in 1726, one was installed in Paris to help lift water from the Seine, and it started being used in iron ore mines in Sweden.

Anay Shah 00:56:42

Good news spreads fast when you solve something this way.

Ben Shwab Eidelson 00:56:45

People want it. So within a decade, around 100 of them were installed across Europe. Now, the problem was, despite it working, it was extremely inefficient. It only worked if you had essentially coal just coming out of the mine directly into the machine. This was such a problem that some people, some of the miners even complained, like, this thing is using up too much of my coal. But they wanted the water out, so they're kind of stuck using it.

Anay Shah 00:57:11

This is that first example of the desire for coal, the need to mine deeper meanings. They had to get more water out means they had to invent the steam engine to pump more water out. But then you needed more coal to power the steam engine to pump out more coal. And it's the problem and the solution all in one.

Ben Shwab Eidelson 00:57:30

That's right. And so what do we need? Well, I think we need the next inventor to figure out how to make this better. And so In January of 1736, in the Lowlands of Scotland, city of Greenock, to Agnes Muirhead, and the elder James Watt is born. The younger James Watt, who I suspect most of our listeners have heard of, his father was a shipwright. He owned ships, contracted ships, and some of the father's wealth that led to the young James Watt being able to be educated, likely came from his trade in slaves and slave produced goods. Greenwick at that time was a trading port and traded in sugar and cotton, dispatched ships to West Africa and enslaved people in the colonies. Young Watt appeared to be pretty strong at math and he headed to Glasgow, the major city and university, to make math instruments.

Anay Shah 00:58:22

He's not, he's also not, not your typical boy, right? As legend has it, as a teenage boy, Watt was sitting in his aunt's house one day and she accused him of just being so idle, doing nothing but watching the kettle boil for an hour. And according to a letter that was later discovered, the aunt exclaimed, I've never seen such an idle boy. Take a book or employ yourself usefully. And being the well mannered lad that James was, he didn't respond, he, he just, he thought he was doing something useful. And what he was doing was he was staring at the kettle trying to understand the power of steam. Maybe this legend was made up to further James Watt's legendary career status, but it fits in with his personality.

Ben Shwab Eidelson 00:59:09

It's a nice story. It's the apple heading Newton's head or these special moments that we want to like, encapsulate the like. Aha. At this point, he's 21. He lucked out. The University of Glasgow had gotten a gift of all these astronomical instruments and they were broken and so they needed someone to fix them. And so they didn't require the kind of credentialed apprenticeship degree to do that work. So he set up a little workshop and began working on them. Pretty importantly, I think that he was in a university doing this because he quickly became friends with a few of the professors there and this was quite a moment in Glasgow. So he paired up with the physicist and chemist Joseph Black. Black is the chemist that discovered carbon dioxide and discovered the concepts of specific heat and latent heat, which is understanding the phase transitions from things like water to steam and to ice. Pretty important that he's around these professors. Also, he became buddies with the famed economist Adam Smith. Adam Smith, you know, considered the father of capitalism and economics.

Anay Shah 01:00:08

You get Newcomen surrounded by these coal workers. You've got James Watt surrounded by chemists and physics who are discovering the transition of Heat and CO2. And then you've got Adam Smith designing the future economic structure of society. He's really steeped in formative knowledge.

Ben Shwab Eidelson 01:00:26

The right conditions were there. And so he's at this university, he's around these amazing scientists, he has the skill set of working with these mathematical instruments and kind of an entrepreneurial drive. So what does he go do? He starts a toy business, that important toy business that we're here to talk about. He did start a side toy business with 16 workers, and they made toys and musical instruments to sell to people in the city of Glasgow. But his partner, his business partner in that business died a few years into it. And at that point he was no longer interested. And so he sold the business and moved on.

Anay Shah 01:00:55

Maybe he had taken too much from Adam Smith and found the arbitrage of demand for toys being ever present, being limited.

Ben Shwab Eidelson 01:01:03

Maybe he wanted to participate in a new market, who knows? And so in 1763, the university had one of these Newcomen engines that we just talked about and asked him to fix it because he was. He was the handy guy fixing all the issues instruments on campus. And so he barely got it working. And he's like, this thing's interesting, but this can't be an efficient way to do it. And so he did some measurements and figured out that each cycle of this engine, about three quarters of the energy that was going into it, the thermal energy, was wasted. And so what was going on there? Well, he figured out that, you know, what you're doing is you're heating up this steam to drive this piston up, and then you're throwing cold water into the piston, cooling it down, drive it down, then you're heating it up again. And so, so much energy is in the heating and cooling of the. Of the piston, which isn't actually what you want the energy to be doing. You want the energy to go into rising and lowering the piston and nothing else. And you don't want it to be in this kind of temperature changing. And so he came up with a. With a concept around how to change that. And he got some capital from Joseph Black and he got to work. He had an idea ultimately, to separate the creation of the steam and the condensation of the steam out of the cycle so that the piston could stay at a constant high temperature. And that became the core innovation. Again, going from that innovation and that idea to a working thing took a lot of effort and a lot of time and a lot of capital. And so fortunately, there was a guy nearby named John Roebuck who owned an ironworks, meaning one of these facilities that's making iron and who had a coal mine nearby to supply his ironworks. And he was using a Newcomen engine at the coal mine, but he was frustrated with it. It wasn't working well enough. And he was annoyed that he was using so much coal. So he had heard about Watt's design and a deal that was maybe classic at the time. He said, I'm going to own two thirds of your idea of your invention and I'm going to assist you and give you space to work and give you the capital you need and a mine to go do it at. And so he set up a little workspace, a cottage that became known as James Watts Cottage. And he built that out and started to work. And so from there, it was a straight line. It just worked. No, it turns out that unfortunately, John Roebuck went bankrupt and had to repay some debt. And in particular, he owed twelve hundred pounds to a Matthew Bolton, who had set up a manufacturing works in a town called Birmingham. And Bolton actually knew something about Watt in his invention and was intrigued by it. And he said, you know what? Instead of finding a way to give me the twelve hundred pounds back, how about you give me that patent and you let me take this team engine from here? And at this point, John Roebuck was bankrupt and didn't have a use for it. And I spent 10 years kind of funding this thing. He's like, sure, go for it.

Anay Shah 01:03:52

Ah, amazing. What a deal.

Ben Shwab Eidelson 01:03:55

I mean, the thing wasn't working still. Was it a deal or not? It turns out Bolton's partner in his business disagreed and thought that was an insane way to spend their money to buy this patent. So he actually split off. He said, no, I'll take the payout from this. I don't want anything to do with this kind of nonsense. Bolton was running this manufactory in Birmingham. Bolton grew with the factory under his father. He became a partner in the business at 21 and was running it. And then his dad, of course, also a Matthew Bolton. You'll find a pattern of people, like naming their kids after themselves in this era. Retired and died two years later in 1759. Matthew and his wife had had three daughters in the early 1750s, but tragically, all of his daughters died and his wife Mary also passed away in the same year that his father died. So in one decade after his marriage, he had grown, taken over the family business. His father retired, his father dies. He's lost his wife, his father and his three kids along the way. Maybe oddly, maybe not for the time, he became pretty interested in his now deceased wife's sister, Ann. And so he wooed her a year later into marriage. So he and Ann went on to have two children. What do you think their names were?

Anay Shah 01:05:05

Were they Matthew and Anne?

Ben Shwab Eidelson 01:05:07

They certainly were. Creative time for baby naming. What's your name? What's your wife's name? There you go, you have a boy name and a girl name. Just keep going. So Bolton took his newly married life and capital and he leased 13 acres of land and built this Soho manufactory, this kind of industrial complex where it had 19 bays for loading, unloading things and places for clerks and managers to live. And at this time, this manufactory, they weren't in steam engines or any great industrial product, but they were making what was becoming very popular at the time, which were silver plated goods. And so he was figuring out how to scale this factory and work with metals and expand to power this factory. He did need mechanical power. And there was one other source that we haven't talked about of mechanical power at the time, which was water. And so around his factory there was a stream that flowed. And he used power from this flowing stream to run his manufactory. The problem is in summer the stream would not flow as quickly. And so he got frustrated with the fact that in the summertime his factory cannot be as productive. So we had started to hear about Watts, started to hear about this idea of a more efficient steam powered thing that could run in a factory and not just near the head of a coal mine. And so when he heard about Roebuck's debt, he swooped in, bought the 2/3 ownership of the patent. His partner thought he was crazy and left. And took him a little bit of time, but in a couple years he convinced Watt to move to Birmingham. And Watt was not, he wasn't the best business guy.

Anay Shah 01:06:43

No, this guy was an inventor. He was tinker. He was staring at the kettle trying to figure out how steam works. And there's a quote where he confessed that he would rather face a loaded cannon than settle an account or make a bargain.

Ben Shwab Eidelson 01:06:58

Bolton, on the other hand, was the opposite. I mean, he swooped in on this moment of debt. And so these two went on to become perhaps one of the most important and productive partnerships in the history of the Industrial revolution. And so he convinced Watt to move to Birmingham, live there. Now the patent itself was already six years into its 14 year life. They had this patent, but they didn't have any working steam engine. It's kind of a problem. And so Bolton was deeply connected at this moment. He had kind of a scaled business. And so he lobbied parliament and convinced them to extend the life of the patent another 15 years to 1800. So they had more incentive to go and do this work. And so they went to work. And at this point they had again the kind of the physics figured out the underpinnings of it, but there was still an open problem. They needed the piston to fit really well if it was going to sit at steam level and be effective and efficient. And there just had not been people working and kind of making accurately machined things at that time. And so they just didn't know how to do that. They didn't know who to do it. And, you know, Bolton, I find this so, so interesting. It's not just that he had created the kind of this manufacturing center for his own business and stake in Birmingham. He was driven with a small group to make Birmingham kind of a center of thought and execution, maybe a kind of a counterpoint to London and say, you know what? This is kind of this. This place of builders and people. And so there's this group, they call themselves the Lunar Society, where they would meet. They're kind of the intellectual elite.

Anay Shah 01:08:30

Yeah, you've always heard of the French salons. And during this time of philosophizing and scientists and mathematicians and professors getting together, you had these societies form in different countries. The Lunar Society. Why is it called the Lunar Society? Well, during this time, you don't have street lights, and if they're meeting at night, it's hard to get around. So the name arose because they would meet on a full moon, and the extra light of the full moon made it easier and safer for them to journey back and forth. And. And as a result, they cheerfully referred themselves as lunatics.

Ben Shwab Eidelson 01:09:06

So these lunatics would go from house to house, depending on the month. Sometimes they'd be at Matthew Bolton's Soho house as part of his complex. Erasmus Darwin is an ancestor of the famous Charles Darwin lived there and was a figurehead. It was not a formal group where they had rules and laws. It was an informal gathering that continued, but it gave this network of kind of problem solvers and connectors. These folks were writing letters to Benjamin Franklin at the time, talking about experiments on electricity. A key figure was this guy, Joseph Priestley, who was both a theologian and also a recorder of history, and would do electricity experiments. These kind of polymathic folks. Joseph Priestley ended up being an important connection because his wife Mary had a brother named John Wilkinson, also known as John the Iron Mad Wilkinson.

Anay Shah 01:09:56

And he does. He sounds like the right guy to solve this problem.

Ben Shwab Eidelson 01:09:59

If you're trying to get the best shaped piston, you got to talk to the Iron Mad Wilkinson. And it just so happened that around this time, Wilkinson had developed a brand new technique called a boring machine. It's funny, I think, about this boring company.

Anay Shah 01:10:16

That's right.

Ben Shwab Eidelson 01:10:16

But this was maybe the founding moment of this concept, which was interesting. He developed a technique first for cannons, right? Cannons. You want a nice cylinder that's really straight to shoot out a cannonball. And of course, the cannons had existed before this time, but the way that those would work is they would cast a tube, the external cylinder of the cannon, and they would try and drill a nice hole in the middle. As you imagine doing that, you don't get a nice straight hole. You get a kind of decent one, but not the best one. And so what Wilkinson figured out is instead, you take an iron block and you stick it and you spin the whole block. You can actually extract a much more kind of symmetric shape. And so you get a nice tube with a ball that fits right in it. You know what's quite similar to a cannon tube?

Anay Shah 01:11:01

The piston.

Ben Shwab Eidelson 01:11:03

Exactly. So this unlocked the piston. And so then it was time. And finally, in 1776, right as the founding fathers were signing the Declaration of Independence in America, the partnership erected two engines and one for Wilkinson and one at a mine. And both engines led to a mass wave of publicity. Now, these engines, you remember the original goal here was to take the concept of the Newcomen engine and take out the condensation unit, that it should be more efficient. Well, how much more efficient should it be? They were so confident in their design that their whole business model was, we're going to price the engine based on how much more efficient, based on the savings of coal, the cost of the input into the engine, which is actually pretty genius. This must have been Bolton's idea, right?

Anay Shah 01:11:58

This was certainly not Watts idea. But there you have that level of conviction to say, we're not going to do a rev share, we're going to. We're going to take a portion of your savings, and if you don't save anything from the efficiency of this, we're not making any money. So a complete incentive alignment here and their ability to. I mean, we were starting at a fairly low bar because as we know, this original engine was known to be highly inefficient. But they staked their name and their design on the ability to have a step change function on the efficiency of the Newcomen engine.

Ben Shwab Eidelson 01:12:32

That's right. And I think. I think their actual contracts that customers would. Would sign would give them one third savings on the fuel costs into the engine compared to the Newcomen design for the next 25 years of operation. And it turns out these things were Radically more efficient. I was trying to look at the number. I think it was something like four times the output per given, you know, amount of coal.

Anay Shah 01:12:57

Four times more efficient from this evolution of their design.

Ben Shwab Eidelson 01:13:01

And then it got even better as time went on. So at this point, just to just remind you what this thing is doing is it's moving up and down, it's using coal to drive steam, to drive this mechanism that would move something up and down. And in this case, they would use it connected to a pump down in the mine to move water and push the water out. That is great, but there's a bunch of uses. Back to Bolton's original desire wasn't really to pump water out of our mine. Bolton was trying to drive processes inside his factory that were today driven by a water wheel. Right. And that requires a different type of motion, a rotary motion. And so in 1782, so this is now six years after the first deployment of the core design, they figured out how to take that engine and give it rotary motion, which made it useful not just in pumping, but now in mills and factories. They continued to iterate on the design after this rotary and eventually got to something five times the efficiency of the Newcomen engine. This included things like have a cycle that not just pushes the piston up, but also pushes it from the other side. One thing, for a number of reasons Watt never believed in was high pressure steam. They thought that high pressure steam was going to be just too dangerous to work with. And they had a third partner that joined later, this guy William Murdoch, who wanted to build high pressure systems and even sought, I think, to go get a patent on that at some point. And they actively stopped him and discouraged him. And it almost became, reminds me of the Edison, Tesla AC versus DC debate where no, that new thing is too dangerous and it's just never going to work. And they were right for a time, of course, and then until it does work. The last fun fact that I really like about Watt is on units. We now today talk about kilowatt hours and kilowatts and watts as a measurement of power for all of this work. But funnily enough, Watt is the person who devised the term horsepower, which became the standard of when we talk about, when they talked about power at the time and the strength of an engine. And so it was defined, that was.

Anay Shah 01:15:02

The strongest power they had at the time.

Ben Shwab Eidelson 01:15:04

That's right, the horse. So the great irony of replacing his own unit with him in name, what.

Anay Shah 01:15:10

A set of marriages and business partnerships and being born in certain areas and associating yourself with the coal miners, you. And then meeting professors and all of this coming together to not only invent what changed modern society and steam engine, but also went on to propagate across the economy. So, you know, if we were to zoom out now at this moment in the late 1700s, this is when we have this big unlock. So we move from coal not just as a heating source or away from to pump out water to drive more coal mining, but to then start to drive the process of industrialization. This in turn attracts more people to adopt the steam power for their own factories, increasing the demand for coal and for iron and so on. So this very kind of this extremely strong feedback loop that then ripples across. And you had mentioned the powering of water mills. This is, this is really interesting. Previously, factories were powered by water, water moving downstream through gravity. And so water wheels were located in these diverse rural settings. And so factories came about in this very disparate network and was dramatically constrained by the power of the water. By the season that the water was.

Ben Shwab Eidelson 01:16:35

Running right, if you wanted to cut wood or mill grain, you would go where the power is.

Anay Shah 01:16:43

The water mill was, was what was generating power. The amount of production, the size of your factory, the amount of grain you could mill, was directly limited to the power of the water that you were located near. But then enter the steam engine and enter coal, and not only do factories get incredibly more efficient and get. Do they get larger as you introduce more efficient and larger steam engines, but they could now move away from the water source and they could now start to centralize. And so this changes the shape of modern life where people lived, the timing of the workday, the introduction of the school system, the way labor is organized, the way streets are made to move things, the entire process of urbanization around factory life driven by the steam engine powered by coal. And this is what propels Britain onto the global stage to become the manufacturing powerhouse. Now, at the turn of the 1800s, Britain had a good half century head start on industrialization. And it would end up holding its lead for the better part of the next century. But it wasn't entirely obvious that the small island of Britain would become the manufacturing superpower of the world. This was not a preordained. And if you were a betting person, you not necessarily would have bet on Britain at this time, Because China and India were all roughly at the same place in terms of industrial production. Britain had a few things going for it and one of the most unique game changers for it. And the advantages that it had was coal, specifically the abundant coal at surface, which made it cheaper to mine. We talk about how you had to go deeper, you had to mine more of the water out. And the abundance of coal that they were able to get through surface mining and then near surface mining with the steam engine was what enabled them to. To leapfrog ahead. Steam engines were powered by cheap coal to make mining more efficient, to keep coal cheap, which then enabled them to produce cheap iron and steel, which we'll talk about as a need to move the cheap coal, all powered by steam engines that weren't terribly efficient at the time. So Britain rises up to be this manufacturing superpower through the 1800s, and very quickly, by 1830, it's producing 4/5 of the world's coal. And by the mid-1800s, it produced more iron than the rest of the world combined. And so the big moment here, 1851, is the world's Fair in London, and Britain is hailed as the workshop of the world. And its markets and empires start to reach this global scale.

Ben Shwab Eidelson 01:19:30

It's come a long way since importing iron from Sweden, where there is enough trees for the charcoal for the iron, Where Britain's like, yeah, we don't really know how to do this stuff. But you look back, it was really about a century from Derby to then want these big unlocks that then said, no, we're now the exporter. And you hit it on exactly the movement from where is their water power to where can the steam engine be to drive the factories? And that leads to all this urbanization. But there's still a big constraint there, right, which is you need the coal and the coal.

Anay Shah 01:20:06

You need the coal.

Ben Shwab Eidelson 01:20:07

Moving coal is really interesting to think about. Like, on one hand, it's almost nature's battery stored from 300 million years before into the plant, into the coal. Now we can take it out and use it. But it's also, on the other hand, a heavy rock that you have to move. And at that time, it was really still moved by water. It's very hard to move heavy rock on land now. This is a time before roads, before diesel trucks. When you move something over land, you're pulling it via horse and carriage, and you just can't move that much. And so just like put a finer point in this, if you spent a pound on coal in Newcastle, it would cost you about £3 to ship it to London, right? So that same pound of coal would be 3 pounds to buy in London, okay, 3x markup, because transportation is on ships. It's got to go about 250 miles on the ocean. Fair. Well, if you ask someone to move it on land, that £3 would get you about 10 miles of transport from Newcastle. So if you think about Newcastle's export, it either needs to be on the shipping route to London or kind of within maybe 10 to 15 miles around. You can't really get it anywhere else with any economic sense. And so in that sense, London was lucky. And London's luck is what enabled it to be this city, Newcastle, on the water. And it just built this feedback loop of shipping as the core way in which fuel moved across the island.

Anay Shah 01:21:34

That's right. There wasn't a better way at the time to move large amounts of heavy rock than to load them onto ships and move them over water. And so this, the need to move coal drove this massive investment into shipping and into a naval fleet. And coal essentially created the British Royal Navy, this national asset that goes on to help Britain dominate the world through colonization. You have the. The private fleet in England that was built around being able to move mass amounts of coal, getting routinely called in to war because they were the abundant shipping source, the coal ships. Coal was such a critical asset that you would have armed merchant ships escorting coal ships so that you could safely get to harbor. When those working on the coal ships were called into duty. You can't refuse the call to go and help your country at war, Even though this was an incredibly dangerous time. And so these crew members were pressed into service sometimes by force, multiple times throughout English history. And so already in. In the 1600s, you had more ships that were moving coal than everything else combined. This is the birth of. Of the global empire, driven by the need to move this heavy rock that was so desperately needed in London and throughout England.

Ben Shwab Eidelson 01:23:05

And so in this time, we're Talking about around 500,000 tons of coal leaving Newcastle by sea every year to head to London. And some of that would be used. There's various ports that would take some of that coal, but it was largely still heading to London. And as we said earlier, the land transportation was just not a viable option.

Anay Shah 01:23:24

It's a little bit surprising why you can only move 10 miles on land for the same cost that you can move hundreds of miles oversea. But the land transport across Britain was notoriously muddy. And essentially what you had were these deep grooves that would be formed over decades and decades of people traveling on horseback. And it was very arduous and risky. Often the royalty would rather move on horseback than on carriages, because the carriages got so easily trapped in the mud. And so goods that were shipped overland were often sent by pack horse rather than even by carriage. It's very difficult this. The horse hooves and the wheels and the foot traffic would, over generations and generations, would turn roads into essentially deep trenches. And in the 1700s in Birmingham, there's this image of. The roads leading into Birmingham were often 12 to 14ft deep. Because of how much traffic was across them. You really couldn't move safely, efficiently or quickly. We really needed something that, that would change us. And that's.

Ben Shwab Eidelson 01:24:32

That's obviously locomotive. No, it's, it's canals. We. So we're good at moving stuff on water. We found that if you put something on a floating surface and you drag it, it actually can move. So what did they start doing? They started digging canals all over the place. And so in the kind of late 1700s, there's this big boom of canal building that allowed boats to be pulled by horses riding alongside them on a canal. Right. And so there's a guy, the Duke of Bridgewater, who's considered one of the greatest canal builders. He said every canal he builds must have coals at the heel of it, meaning coal needs to be on one end. That's the primary purpose of the canal. Everything else moving is secondary. And this was also when they started to build the first rails. Now, what do we mean by rails? What we mean is solve this kind of muddy trail problem. People would start to put down rails so that the horses and the carriages could ride along and the carriage could ride on a stable surface. So these smooth rails would often connect to canals. Right. You'd have a road, you'd have a rail on it, and that would bring maybe from the coal mine, which didn't make sense necessarily have the canal right up to it for whatever the geography of the region might be. Bring the coal down to the canal, then use the canal to transport over land.

Anay Shah 01:25:51

That's right. This network of ways to transport coal that would then enable them to build out, to be able to have commerce.

Ben Shwab Eidelson 01:26:00

And so, as you imagine, a lot of this is happening around Newcastle. Newcastle is still the coal mining center of the world at this point. And so it's all happening in that 10 mile radius. Well, about nine miles from Newcastle, there's a boy who grew up in a cottage that was facing right in front of one of these rails. He saw every day these horses and carriages carrying coal back and forth, up and down these rails. And we're now going to introduce our next protagonist, George Stephenson. He is considered the father of railways. And he was born to this very humble working class coal mining family, neither of whom knew how to read and write. And his father was the chief fireman for the local coal mine, which at that point really meant that his job was to shovel the coal into the Newcomen steam engine to pump out the water. And George became fascinated by the steam engine and how it worked. And so when he was 14, I mean, again, he wasn't in school at the time, he started working as an assistant to the fireman to his father. And turns out he had just deep, intuitive mechanical skills. By the time he was 17, he was put in charge of his own steam engine and would often repair it if anything happened. He also had a hunger for understanding how it worked, and so he wanted an education. So he for himself paid for night school at the age of 18 and learned how to read and write and do arithmetic, and was illiterate up until that point. Maybe in what echoes some of the Bolton story, George also had a lot of family tragedy before his most productive phase of life. He was married in 1802, and in 1803 his son was born. 1805, his daughter was born, but his daughter died at three weeks of age and his wife passed the next year. And so it was then him and his son. And shortly thereafter his father, who was working at still as a fireman at the steam engine, was scalded and blinded by escaping his steam. And so there he was in his mid-20s, trying to figure out how to support his baby son and his father, who had some debts. And sure enough, the Napoleonic war breaks out and he has to take whatever savings he has and pay someone to go take his place, because he has to there for his family. Oh, just awful, awful time. But he kept at his his role and started to become known as one of the most handy mechanics in the area to be able to fix all these pumping engines. And so he was promoted through the ranks. And it turns out that there was this coal mining cartel that had formed from the wealthiest coal owning families called the grand allies, by 1812, decided to put Stevenson in charge of of all the machines across all their coal mines. And they had a lot of excess capital. If they were convinced of some improvement that could be made to their operations, they had the capital to fund it. They deeply trusted Stevenson. And Stevenson started to look at this transportation problem and started to explore could they use steam engines instead of horses to move coal down the tracks.

Anay Shah 01:29:04

You grow up staring at these tracks and you see horses and carriages move on them. Transfer them to canals. And you go through decades of seeing that we're not going to stop moving this coal. There's got to be a better way.

Ben Shwab Eidelson 01:29:20

And I think a lot of it is also just like that. Perfect context and perfect conditions. Right. He had the capital provider and the customer. He was embedded with the customer. He already worked for the customer. This is kind of in house and it wasn't a brand new idea. There's a Cornishman, Richard Trevicic, who actually made the first steam locomotive called the Puffing devil back in 1801. And it worked. There was a high pressure. He used high pressure steam and had a pretty innovative design, but he wasn't in a place to put it all together with a customer. And it's not just about making a better steam engine on wheels. You needed to think through the entire thing because now you had a heavier device than the carriage. So what tracks does it go on? And who's going to build all those tracks? You actually kind of had to build the locomotive and the railway at the same time, otherwise it doesn't work.

Anay Shah 01:30:16

You need both the product and the distribution mechanism.

Ben Shwab Eidelson 01:30:19

That's right. Classic product distribution entanglement. And so Stephenson set off and designed his first locomotive in 1814 for. For hauling coal in this Killingworth mine region. And. And it worked. The first one could haul 30 tons of coal up a hill at a blistering pace at 4 mph. But it was the first that really, end to end, put everything together. It had the flanged wheel design that really was like the steel wheel touching the steel rails and to give it the traction that it needed. And he figured out a bunch of issues like you actually can't use cast iron. You need to use wrought iron that's a little bit more flexible, not as brittle for these rails. He is the person in this moment that started to design what became the standard gauge, which is now four foot eight and a half inches, that is used on every railway basically in the world today. I mean, it's like 55% of the rail that's out there today is still the standard gauge that was set into motion in this moment on 1815.

Anay Shah 01:31:17

Wow.

Ben Shwab Eidelson 01:31:18

Now, this was still kind of early days. It was like this one mine, this one little track of track of rail, this one little locomotive. Then in 1821, Parliamentary Bill passed to build the first real railway connecting Stockton and Darlington. And the original plan was to do what they've been doing this whole time, metal rails, with horses pulling coal on the metal rails. But George Stephenson got In just in time and convinced them that actually they should use a coal powered locomotive. And so he got the contract to build the rail and then he set up a company, Robert Stevenson & Co. Which was George's son Robert, to actually build the locomotive. Right. Kind of. So there's some arm's distance, no nepotism there. Well Robert has obviously grown working with his father, he was an elderly 18 years old, contracted to build the first locomotive. But he did. And by 1825 they finished the locomotive and they called it simply locomotion. And and it successfully hauled 80 tons, 9 mile distance in 2 hours and reached a maximum speed of 24 mph in one of the stretches. And this was pretty wild because this is the first time that really humans had gone that fast in a machine, right.

Anay Shah 01:32:33

Hauling heavy load. I mean it's amazing. This must have been a scene that attracted a tremendous amount of attention.

Ben Shwab Eidelson 01:32:42

I mean there are thousands that came just to watch it go. And this was the first one. They actually had carried 600 passengers on the locomotive. So it was a really big moment, right. This 1825 moment. It reminds me of the first moment they turned on the steam engine. This was a turning point in human history to actually transport ourselves via machine. But it was still what I consider pilot stage. It was really 1830 that the scaled launch happened. This was the Liverpool to Manchester railway which was the first fully locomotive driven railway that was publicly accessible. And it launched the frenzy, the railway mania to come. Stevenson, who's now 50, built the track and he convinced the owners again to just use locomotives for the whole thing and none of the horse drawn carriages. And then there was an open contest to design the best locomotive. And surprise, surprise, him and his son won the contest to provide the locomotive. So there's a full nice like lock in there that he got.

Anay Shah 01:33:43

It is, I mean this is the, the buzz of the town there. It's hard to appreciate how exciting this moment was and the quantum leap in speed and motive power that these engines represented. And even the horror that it inspired. Moving from horse drawn speed and power to steam engine was just unimaginable. And this is the beginning of the growth of railways across Europe and Asia. Much later in the US as we'll see. But it really kicked off a revolution in the way people and goods were transported.

Ben Shwab Eidelson 01:34:18

Yeah, that's right. And so this launch was an exciting moment. 400,000 people lined to the route when it launched in September of 1830. That's a lot of people, especially in the United States, a lot of People. So this was a big deal and there was all these political dignitaries and there was like a whole. There's a whole complicated issue that happened, not due to any of the technology, but maybe some of the coordination. And a pretty important member of parliament ended up getting crushed by one of the trains. And he was a very pro train supporter. So it was a little bit daunting, but the thing worked and this railway kicked off and started moving hundreds of thousands of people and lots of coal. This railway was also the first railway to have no horse round traffic permitted. It was the first to be double tracked. It was the first to use a true signaling system, the first to have a timetable and the first railway ever to move mail. So all of a sudden, yes, the motivation of this was coal mines and to move coal. But once you're moving coal and you're doing the effort of building the railway, you have this thing set up. Let's move people, let's move mail, let's move food, let's move all these other things and let's build a system around it Also. The locomotive they built for this time was called the Rocket and it kind of became the standard in Britain at the time. It's a very famous locomotive. Maybe the equivalent is like the model T of trains. It was really the first one to unlock and it took a lot of the things that was a high pressure system. Turns out Watt and Bolton were wrong and that you actually could build a high pressure system that was safe and innovated on top of the past experiments, but actually really worked effectively. So hundreds of thousands of passengers would ride on this railway. And by 1845, just 15 years after this moment, Britain had had over 2,000 miles of track. And over the 10 years beyond that, 6,000 miles of track. So this moment really kicked off over the next 15 to 30 years, just the real build out of railway in Britain.

Anay Shah 01:36:13

The difficulty of hauling coal was a huge drawback. And then the invention of locomotion and the rail and using coal, motivating the invention to haul itself coal, created a problem and it helped power the solution. And the solution had revolutionary consequences far beyond the coal industry. As we've mentioned, we now have the.

Ben Shwab Eidelson 01:36:38

Steam engine, which can give power both up and down and rotary power wherever we want it, enabled by coal, which we can now move wild distances, right? We can move coal thousands of miles across the island and we have sophisticated mining going on in Newcastle. We can pump the water out so we can get coal anywhere. We can put steam engines anywhere. We can build the first Truly industrial cities. And I think no city represents that more than the city of Manchester. So what was going on in Manchester at this time?

Anay Shah 01:37:06

Manchester started out as a quiet town and quickly became this symbol of industrialization. You had cotton shipped from slave plantations in America and coal from all the nearby mines. Just incredible interconnection. As we mentioned, the supply of coal fueled increasingly bigger steam engines, which fueled increasingly bigger factories, which needed increasingly bigger workforces, which then, because you now didn't have to be sitting near the water mill, created these increasingly bigger cities. And by the 1830s, Manchester had seven cotton mills with more than a thousand workers each. And the steam engine had created this new incentive to build, build and build bigger factories, bigger engines, bigger cities, and extract more and more out of each lump of dirty coal. And to put this. To put this colorfully, our good friend Alexis de Tocqueville visited Manchester shortly after publishing his classic analysis on America in 1835. And he described the dual nature of this unprecedented city in the words of. From this foul drain, the greatest stream of human industry flows out to fertilize the whole world. From this filthy sewer, pure gold flows. Here humanity attains its most complete development and its most brutish. Here, civilization works its miracles, and civilized man is turned back almost into a savage. It's quite this juxtaposition that we're going to continue to unpack of what coal is able to produce in terms of wealth and uplifting society, as well as how it changes the fabric of society and its darker side.

Ben Shwab Eidelson 01:38:57

You know, we now live in a time where kind of automation not entirely, but increasingly decouples human labor. This is almost a time in which, like, automation amplified human labor or accelerated human labor or created this. You know, you have to keep up with the machine. It was not like the cotton mills or the steam engines stopped human labor. It enabled you to go deeper into the mine. Right. It enabled you to produce more, not to stop producing.

Anay Shah 01:39:25

Right. You could produce more, but not without human assistance.

Ben Shwab Eidelson 01:39:29

That's right. So now the humans are then tethered to the machine. There's another quote on this, which is around the same time. It's like, while the engine runs, the people must work. Men, women, and children are yoked together with iron and steam. The animal machine, breakable in the best case, subject to a thousand sources of suffering, is chained fast to the iron machine, which knows no suffering and no weariness.

Anay Shah 01:39:55

That's right. And now you have factories running when the sunlight is not running.

Ben Shwab Eidelson 01:40:01

Right. So you have this big investment in a factory In a mill, you have all these people. The last thing you want to do is turn the thing off when it's dark. What a silly reason to stop production. And if only we had a solution to that. Well, it turns out that in the process of making our friend coke out of coal, as you heat up the coal, a gas comes off the coal. And traditionally that gas was just thrown away, it was just wasted by product. It's a byproduct. It turns out you can store that gas, pipe it through and light it. And it is in fact, at the time, a pretty good source of light. Much better than dealing with whale oil or candles, which were expensive and messy. And you're doing it anyways. It's effectively zero cost if you were going to throw this stuff away. And so coal gas light ramps up in the same time. By 1805, coal gas lights were keeping factories bright. And so in this moment in Manchester, you have the additional confluence of lighting that could keep the factory running 24, 7. And this, you know, this coal gas light becomes a major source of lighting across Britain, across later in America. This was really the first industrial scale lighting. And just like a side point on this, in a way, this was the first fuel that we treated almost like a utility because instead of needing to deliver the product kind of one by one, house to house, you would actually start to build up. It started to create the need to build up piping underneath a city to deliver coal gas light. There's various remnants of this. If you go into old houses and Victorian houses, there's kind of old coal gas lighting tubing inside of homes sometimes that you can, you can trace and track down. So in addition to being terrible labor environment because you're working, you know, at the pace of the machine, there are terrible health conditions in cities like Manchester. Right. These were dark skies. And in 1842 the government issued a report that it's an appalling fact that for of all that are born to the laboring classes in Manchester, more than 57% are dying before they attain the age of five. Right. So yes, in the long term, we think of the Industrial Revolution as this progress on human life expectancy. All these things that we were talking about in this moment is a low point of that it is driving life expectancy down in these industrial cities. And this became an issue. There's a war that broke up the Crimean War in 1854 and 42% of the urban recruits were rejected because they were not physically strong enough to join the war. In particular, there's a disease called rickets, which mostly hit infants and toddlers. And it led to these kind of bowed and stunted legs and stunted development amongst urban children. And it is horrifying. In some neighborhoods, doctors reported that basically every child they saw had signs of rickets. And so this disease became known as the English disease because it was so pervasive in these kind of coal smoke filled places. And I believe basically the fundamental cause is you're not getting any vitamin D, you're not getting any sunshine because the skies are so filled with smoke, because you're inside factories during all daylight hours. And so these are the conditions, this early wave of industrialization are just these, I mean, one would argue kind of at scale, the largest kind of accelerated divide between the owners and the labor. Right?

Anay Shah 01:43:18

Hmm, this language sounds familiar. A division between the bourgeoisie and the proletariat, the owners of capital and the labor creating the capital. What could be happening here?

Ben Shwab Eidelson 01:43:33

Well, one of the owners was actually a bit of a radical. There was a German family, the Ingalls family. And Frederick Ingalls, kind of the up and rising son of the family, was sent to Manchester to check in and learn about how their cotton mill that they partially own in Manchester is doing. And Frederick Engels, he was more interested, much more interested in the condition of labor than he was in the efficiency of running the cotton mill, much to his family's dismay. And so he wrote the condition of the working class in England in 1845 and around this time started to build this relationship with Karl Marx. And so they would be perhaps as faithful as Bolton and Watts partnership. Engels and Marx would be the foundational partnership that would underpin communism and underpin the generation of the theories there. So they collaborate and publish the communist manifesto in 1848. And Engels wealth from these cotton mills would directly finance the ability for Marx to publish his works and distribute his works over the following decades.

Anay Shah 01:44:39

After Marx's death In the late 1800s, Engels dedicated himself to preserving Marx's legacy. You mentioned this relationship was very deep. And he ended up editing and publishing Das Kapital using Marx's notes and ensuring that Marx's theories reached the broadest of audiences.

Ben Shwab Eidelson 01:44:57

And of course we're not going to spend the next hours going through the history of communism of the following hundred years. But I found this to be a moment that I didn't realize we were getting into this. There's a direct through line from coal enabling the power of the machine and the power of owners, whether that's factories or coal mines and this growing economic divide that then creates this philosophical underpinning that then leads to eventually Soviet Leninism and Stalinism and eventually the CCP and communism in China and the political underpinnings that set the stage for the central conflict of the 20th century.

Anay Shah 01:45:34

And this isn't a stretch that this is a direct through line, as you mentioned. It wouldn't have happened had we not discovered, utilized and manifested coal into the central energy source of, of the time somehow.

Ben Shwab Eidelson 01:45:51

We've spent, you know, however many hours now talking about all of this, but we have not really talked about how the coal gets out of the mine and who the people are and what they're experiencing. Now it's time to dive into a particular class of workers, the miners and their experience. I think one common thread that honestly, I think even has echoes to this day, is that coal miners were treated as social outcasts that were facing these astonishing dangers to give access to this vital, vital fuel source. But they were never really treated as equals in their society. And that divide often created a sense of camaraderie that increasingly bordered on the experience of soldiers in wartime. Right. They were in the trenches together, they faced life threatening issues together. And in moments, when necessary, they banded together in ways that had also never been seen before and kind of really catalyzed the labor movement.

Anay Shah 01:46:55

That's right. That's right. They were, on the one hand, outcasts from society, and on the other hand, they were providing the lifeblood of society and of economy. And so there was this notion, because coal had this aura of divinity to it and this aura of transcendental nature, they were the ones doing the work to uplift the society. So there was this, both this outcast and this pride. And because as we mentioned, coal mining was a family affair, so the entire family was involved in the operations of the coal mine. The men hewed the coal, the women and children hauled it to the surface. The family was treated as property. When the mine was sold, so too were the workers. The families were sold with it. This is also at a time where across the oceans we have a growing economy based on slavery. Here coal mining started with feudalism and it's, it's hard to imagine a workplace more dismal and dangerous than a 17th, 18th century coal mine. It was likely the most perilous profession at the time.

Ben Shwab Eidelson 01:48:02

That's right. And what made it so perilous? I mean, it's fair, maybe it's fairly intuitive that you're going in a deep hole and it's Dark, and that's hard. But it's not a place for human life to thrive. There are just multiple things trying to kill you at any given moment. So when it comes to the, you know, the things that ultimately often did, these were called choke damp, white damp, fire damp, and then there's floods. So choke damp was the buildup of carbon dioxide in the colon in a really dense cloud. And so sometimes miners would drop into an area and they would just fall to the ground and die. And that would be because the carbon dioxide levels were too high for them. There wasn't enough oxygen in presence. Then there's white damp. This carbon monoxide. This can be a byproduct of incomplete combustion. And oftentimes after fires or explosions, miners would face this. And so this is why carbonox in particular was why you'd often break the canary in the coal mine. You'd bring a canary down to see if they did okay, and if they were, then it was probably safe to continue. And then you have fire damp, which is the deeper you go, the more methane there is coming off the coal and off the other organic materials down there and that build up in these pockets and it would just sit there, and that's fine. But you're going to a coal mine. You need to see. It's dark and you need to see. In the 1700s, 1800s, you didn't have a flashlight.

Anay Shah 01:49:15

There's only one way to do it.

Ben Shwab Eidelson 01:49:16

There's no LED lights. You had to light a fire and bring a candle with you down. And so if you'd bring a candle into a place where there was that fire damp, it would explode. And sometimes it would create massive explosions and blow up the whole mine. So over time, there became a role of a coal mine fireman that would crawl on the floor covered in soaked rags and use a long stick with a candle to try and essentially do little explosions along the way, semi controlled explosions. It's like an insane job to, to try and reduce the risk of a larger explosion. But these large explosions were frequent and happened so often that in coal mining regions, the newspapers would like sometimes basically stop reporting them. And coal miners would say, please don't. You know, like, these causes of death were not, these were not rare events. This happened thousands of times a year that coal miners would die from these things. And then, of course, floods. We already talked about the water issues in coal mines, but oftentimes things holding back water would break and that would lead to flooding or being trapped in parts of a coal mine. And so these were Terrible, terrible ways to die in tough conditions. And even when that wasn't happening, the core labor sounds like some of the hardest labor you can imagine. You're crawling into these tight spaces and some of these coal seams where the coal is actually placed is not in a big cavern. So you'd sometimes get these weird angles trying to chip away at the coal. Your back would be scraped up from these sharp rocks and it got hot. The deeper you went down, the hotter it was. And so it was just an absolutely. And you're not doing this gain paid. Well, you're doing this gain paid, usually just enough to continue to do it. And your family would live near the coal mine in a town controlled by the coal. The coal owner oftentimes in increasingly developing sophisticated ways to kind of keep you locked in. Would you be paid in dollars that you can go, leave and use elsewhere? No, you'd often be paid in essentially credit to use within the coal town. It wasn't considered slavery directly. It was this system of entrapment around these terrible conditions that kind of set the stage. Perhaps the hardest part to think and talk about though is, is the role that children played for much of this time in coal mines.

Anay Shah 01:51:28

Yeah, you mentioned these aren't tunnels that you can move horses through, or carriages through, or wagons through. These are really small seams. And the deeper you go, the harder you're trying to search for coal, the smaller the seams. And so as a result, kids are carrying the coal back, they're holding the trap doors, they're working. And we're talking often five year olds as young as three year olds would work from before sunrise till after sunset, 12 hour shifts, never seeing the sun for six days out of seven. And there was even debates at this time of whether sunlight was necessary. And there was a lot of arguments because coal was fueling society. There's a lot of arguments being made that actually it wasn't necessary to grow up. And so you'd have multiple generations of people growing up, working underground for 12 hours a day and under the conditions of imminent death, as we mentioned.

Ben Shwab Eidelson 01:52:33

And I think that one of the things that enabled the ability for that to propagate is just what we talked about at the beginning of this. People spoke about coal miners as though they were a different species. They spoke of them as though, hey, you can't learn to be a coal miner, you have to be bred by one. It was this treatment of the family and the multi generational lock in of that that does remind me and echo a lot the language you hear around slavery, around work, and these people are linked in this intimate, direct way, which is of course absolutely absurd. And this was the way it was in Britain up through and until 1838. And so this is long after Britain there was anti slavery and trying to this proud Victorian saying, we're not for that. Meanwhile, four and five year olds are down in the coal mines all day bringing up this black rock. But what happened in 1838 was a particularly bad accident happened and a stream overflowed at a coal mine and at the deaths of 26 miners, all of which in this case were children. And so 11 girls died, 15 boys, all ages 8 to 16. And the disaster bubbled up to the Queen who at that time said, okay, what is going on here? We need an inquiry. So in 1840 a guy by the name of Lord Ashley went to the coal mines and started interviewing people and finally brought to the public's attention for the first time. I mean, if you're sitting there in London just living your life, you probably have never been to a coal mine and so brought to the attention for the first time in kind of public record what was going on there. And I think there's a couple quotes worth reading here. The first is from Sarah Gooder, age 8, who, whose job was, it's called being a trapper, which is opening and closing these trap doors to keep the ventilation of the coal. And so she says, I'm a trapper in the Gobber pit. It does not tire me, but I have to trap without a light and I'm scared. I go at four and sometimes half past three in the morning and come out at five and half past. I never go to sleep. Sometimes I sing when I have light, but not in the dark. I dare not sing then. I do not like being in the pit. I'm very sleepy when I go sometimes in the morning. Horrifying.

Anay Shah 01:54:37

And this is a situation where if you fall asleep you could die or the other children in the mine with you could die. And so you're having 5 year olds stay awake in pitch dark for 12 hours at the risk of their life.

Ben Shwab Eidelson 01:54:57

That's right. And then another testimony that was probably even more impactful to the later legislation was a 17 year old girl named Patience Kershaw, who said, my father's been dead about a year. My mother is living and has 10 children, five lads and five lasses, and all of them work in the coal mine in different roles. She says that she goes to the pit at five o'clock in the morning and Comes out at five in the evening. I get my breakfast of porridge and milk. I take my dinner with me, a cake, and I eat it as I go. I do not stop or rest any time for the purpose. I get nothing else until I get home. And she says, I hurry in the clothes I have now. And by hurry she means the job is actually pulling. Hurrying means pulling the coal out. She says I hurry in the clothes I have on now, trousers and a ragged jacket. The bald place on my head is made by thrusting, so she's using her head to push. And my legs have never swelled but my sisters did. Should I hurry for a mile and more under the ground, I hurry 11 of those a day. I wear a belt and chain to get them out. And the getters that I work for are all naked except for their caps. They pull off all their clothes. I see them at work when I go up. Sometimes they beat me. If I'm not quick enough with their hands, they strike me upon my back. The boys take liberties with me. Sometimes they pull me about. I'm the only girl in the pit. There are about 20 boys and 15 men and all of them are naked. I'd rather work in a mill than in coal pit. It was a combination of all of this. But in the Victorian era, the story of women in the coal mines, young girls in the coal mines and naked men really, I think, set the stage for this change and part of what was going on. Why were they employing a 17 year old woman? Well, it was cheaper to pay her because the men at 17 could go and actually be what's called hewers, the people chipping the coal out of the seam, which costs more than someone who's just moving coal. And so finally a law passed, the Mines and Collieries Act, 1842, outlawed the Employment of women and girls in the mine and I think set the age at 10 where no one could be employed under the age of 10.

Anay Shah 01:57:00

This sounds like a great national reckoning. But as with many good laws, the enforcement of the law is where things actually happen. And at this time, 10 years after the law was passed, there was only one mines inspector. And 20, 30 years later, an inspector candidly admits that he would not enforce the laws unless a child had died. And few inspectors even went below into the mine because they feared they'd be killed by the miners themselves. So the inspectors are not incentivized or equipped to, to actually enforce the law. And so you had this practice continue on for decades after. And we're talking into the second half of the 1800s. Well, after kind of some levels of moral reckoning in parts of our society.

Ben Shwab Eidelson 01:57:50

You know, even after this period. And there was some incentive here and there to make coal mines slightly safer, if people figured it out, and it was cheap enough to do. But the coal owners were the ultimate capitalists. We don't have great death statistics going all the way back, but Even just between 1873 and 1953 in Britain, nearly 100,000 miners were killed in mining accidents. So it was just a brutal, deadly occupation.

Anay Shah 01:58:13

And so for the children and women and men working in the mines, the families living entrapped by the coal industry, you had unprecedented levels of danger. But as we talked about in Manchester with the factories, there was actually a public health disaster that was looming. I mean, we have complaints of smoke dating back centuries when it was just being used at a small level. And now you're having a dangerous level of air quality that's affecting everyone.

Ben Shwab Eidelson 01:58:48

Yeah, let's go back to what's going on. You're burning a piece of coal on the most extreme. We talked about anthracite, which is fairly pure carbon, and that actually doesn't result in very much smoke. It is a pretty clean burning coal. Now, it releases plenty of carbon dioxide. But from a lung health perspective and of a local perspective, it's not a major issue. Most of the coal being burned, and certainly all the coal being burned in Britain at the time was not that. It was the much dirtier bituminous coal. And that has a bunch of other stuff going in. It has a lot of sulfur. So when you burn it, you get sulfur dioxides as a lot of other trace elements of mercury and arsenic and lead. And so you're burning this and you're getting small particulates and smoke that have mercury and arsenic and lead and sulfur dioxide that is creating dark skies and fog. And initially, this was mostly talked about, I think, from a cleanliness perspective of, hey, these are dirty places to visit. But then you ripple through to the health impacts, and it's a whole nother dimension going back to 1661. You have this initial writer, John Evelyn, who brought this up in the case of London. He said that the city of London resembles the suburbs of hell more than an assembly of rational creatures, and certainly not the imperial seat of our incomparable monarch. And so there's lots of talk about smut being an issue. Rain was a big issue because it would cause the soot to wash out of the air and get black on everything. One theory is that maybe that's why London became so associated with these large black umbrellas in the 1700s, because of the coal smoke and the communication combination of rain. And there's just this view that at this time, Londoners would be coughing and snuffing and barking and spitting all the time because of the air quality. Oddly, the science still was not very good then. So there's also this contradictory belief that coal would heat the air and purify it. And so there's kind of confusion. Like people thought that the College of Physicians of London published a pamphlet saying, hey, if you have certain illnesses, you should actually go and breathe air burned with coal because that purify the air. So there's really a lot of confusion on, like how that, what the health impacts are of this stuff. Wow. All of this leads to the growing sense that London is this smoky city. And still to this day, some people call it the big Smoke. As a result, occasionally, though, this would become so acute, they'd call it pea soupers. When the city would come into this dense fog, usually it would happen in the winter, the air would get cold and the coal smoke would just kind of settle in as a fog, but a fog with these particulate matter in it. And sometimes it got so dark that you couldn't see for feet in front of you. And so it stopped. The city, I mean, London at this point is a major city we talked about. I think it's where at 200, 300,000 people and all locomotion, people on foot, the whole city would just stop in its tracks. And sometimes this would go on for days at a time, these really dense, smoky fogs. And we don't have great records of death statistics here. And so, you know, we know that there's hundreds or maybe thousands of people that were attributed to this, to this period. But if you look back in time, it certainly was much, much, much larger numbers. And so we've been spending this whole time talking really about Britain. I think it's time we, we need to get on our boat and sail across the Atlantic to the shores of America. The beautiful, wooded shores of America.

Anay Shah 02:02:17

Wooded indeed. When early colonists stepped onto the land across the ocean, it was wooded to the brink of the sea. I don't think I fully appreciated just how densely wooded North America was. To the Puritans who followed, the new continent's trees would become a crucial piece of advertising, right? Because remember, the Englishmen were in love with their crackling fire. And there's one pamphlet that wrote, a poor servant here may afford to give more Wood for timber and fire as good as the world yeeds than many noblemen in England can afford to do. Here is good living for those that love good fires. You can feel the calling to this new land. And it was one of the largest stretches of woodland ever to grow on the planet. And in addition to this astonishing wealth of wood, turns out the great North American continent also held one of the world's richest coal deposits, including a coal field half the size of Europe, laying right beneath the eastern American forests. But just like we saw in Britain, when you have this wealth of wood, you use this wealth of wood. And so settlers began clearing the land, quickly burning the wood, shipping timber back to England, building log cabins and everything. Wood was wealth, and they had no need to search for coal. And so, despite us having the world's richest coal deposits, it was largely fueled by wood, much like Britain was until a fateful discovery. And then once we landed upon the coal, we would dig coal the way the forest had been cut, not just for survival and comfort and profit, but also with this larger mission of transforming the wilderness into something that transcended nature. So once again we have this divine intervention. As one theologian put it, the coal deposits had been scattered by the hand of the Creator with very judicious care as precious seed which, though buried long, was destined to spring up at last and bring forth a glorious harvest.

Ben Shwab Eidelson 02:04:33

You know, I have a feeling that theologian never went into a coal mine because, like, you know, if the Creator really wanted us to have access to this great material, he probably, he or she would have probably made it a little easier to get to and not require five year olds to go down, carry it up maybe, you know, I don't know. There you go. Call me skeptical. And so, you know, at this time, this is still a time where there's indigenous tribes and there's the French Indian war going on, the British and the French fighting. One of the areas they were fighting about was called Forks. And the British finally won Forks. And the Philadelphia newspaper wrote, quote, this valuable acquisition lay open to all his Majesty's subject, a vein of treasure which, if rightly managed, may prove richer than the mines of Mexico. They must be talking about the coal. Actually, they're talking about beaver skins. There was a raging fashion trend in Europe at the time where beaver skin hats were a valuable commodity. And so turns out there are a lot of beavers in that region. That was a good treasure outcome. Little did they know that that was actually one of the region's most valuable coal stores. And so this Area of Forks was built a fort named after the. The British prime minister at the time, William Pitt. And so the fort was called Pittsburgh. And that is the beginning. I almost think of it as what will eventually be America's Manchester. That's right.

Anay Shah 02:06:01

Born out of nothing, Pittsburgh, like Manchester, would experience this incredible growth fueled by its location. And in this case, it was located in one of the richest areas in Pennsylvania. As legend has. We hadn't really understood what the coal was beneath our feet. But there was a hunter, Nacho Allen, who was camping at night under a protective ledge of rock in the deep in the steep mountains of eastern Pennsylvania. He was. He built a campfire and fell asleep and later awoke an alarm, as he put it. The mountain was on fire, and he had built his campsite, his campfire, on an outcrop of anthracite. And this, this form of coal, because it was so hard and shiny, as we know, would be stone coal. And that would trigger the realization that not only did America have this incredible density of wood, but also the largest coal deposit in the world.

Ben Shwab Eidelson 02:07:01

Yeah. And I've never lived in Philadelphia or on the east coast even, for that matter, so I had to pull up a map to like really grapple with this. But there's literally a mountain range dividing the Appalachians and the Allegheny Range in that, that divide the anthracite region from the bituminous region. And that ends up playing a big part in the history here on the eastern side. On the Philadelphia side, you have anthracite, which is this really new to the world type of coal that, that burns cleanly, but as we'll get into, not necessarily easily. And that becomes the eastern coal. And then to the other side, the Pittsburgh side of the mountains, you have the bituminous coal. And that becomes the mass production coal, the dirty coal, the industrial power coal. It was just an interesting, like, it's worth. If you're curious and you're listening, like, pull up a map and poke around, look at Summit Hill became the first real anthracite mine. Look up Summit Hill in Philadelphia versus the coal regions in the western part of Philadelphia. The Summit Hill region of anthracite led to this mine called the Lehigh Coal Mine. And there was a tremendous number of problems trying to actually use this coal and access it. So first of all, it's not that close to Philadelphia. If you drove there today. It's, I think, in the hour and 45 minute drive from the Lehigh coal mines to Philadelphia. This was again, a time before the trains, before mass canals, but there was kind Of a river way to do it. And so multiple groups tried to build these kind of wood arcs. To float the anthracite down. The boats would break. People died. It was the wilderness. Finally, they get a couple arc boats down to philadelphia. To try and sell their anthracite. And people try and light it. And they're like, it's not lighting. This is useless. And so some of it was used as gravel for footwalks. This valuable anthracite coal. There was a quote from a customer trying to buy it, Said, if the world should take fire, the lehigh coal mine would be the safest retreat, the last place to burn. Which is very funny and speaks to the frustration and very much not true. It turns out in 1859, a fire started in that mine. And burned for 82 years straight on its own until 1941. And I was searching for information about that coal fire. And ended up reading about the centralia mine, which has been active through the 20th century. And there's a. So this is centralia, pennsylvania. There is a fire that started there in the early 60s. In 1960s, they basically had some landfill. And they were trying to get rid of some trash. And even though it wasn't legal, the city pulled it together and started a fire to burn their landfill trash. And it started this fire in the 1960s. Well, they tried to put it out. Didn't really work. They kept trying to put it out. Didn't really work. It is still burning today. And so the city of a few thousand people has been cleared out. They've been paid to relocate. There's, like, five people still living there. And there is a fire that's been burning since 1960. And supposedly there's enough fuel to burn for another 250 years in this coal mine. So, anyways, let's go back to anthracite. So in 1810, there are about 350 tons of anthracite mined. Basically, there's a group that did figure out how to actually use it. What caused increasing demand. And really desire to figure out, Even though they had all this wood, is The War of 1812 broke out against britain. And prior to the war, New York and Philadelphia Got most of their coal from britain. Britain would take coal from places like newcastle and bring it by boat or sell it in New York and in Philadelphia. And there's also some coal in Virginia. Well, during the war, the British certainly stopped selling coal to its enemy. And. And it blocked the access. Right. That the great british royal navy, we already spoke about it blocked coal from Virginia on up. And so There you are in New York City, and you need coal, and you can't get it. And so there's a little bit more desire to figure out how to use this anthracite. And so two. Two guys by the name of Joseph White and Erskine Hazard really started to scale this up and formed a company in 1822 to navigate the river. And they got permission to do it. And again, it had been failed numerous times. But the chair of the committee that gave them permission said, gentlemen, you have our permission to ruin yourselves. Because they'd seen so many failed attempts to navigate this summit river, they persisted and figured it out. By 1840, 250,000 tons of anthracite were mined and brought over to Philadelphia via the river system. Let's talk about New York a little bit. Anthracite was key to the development of New York City. And so another company was built out called the Delaware and Hudson Company, or D and H. They built a canal system, right? This is the same era as the canal era that we saw expand across Britain, but to help bring canals into the Delaware and Hudson rivers and then bring coal from Pennsylvania into New York. And that was completed in 1828. And there's a great story where this company actually offered 1.5 million shares to the public. It was such an exciting time. It's like crypto. Instead of crypto, it was building canals. They sold 1.5 million of shares to the public in an afternoon in a coffee shop in New York City.

Anay Shah 02:12:04

Dogecoin would be jealous.

Ben Shwab Eidelson 02:12:06

Dogecoin would be jealous. It was a lot of money back then. And of course, what happened in Britain happened in the US and so those trains that are good at moving coal a little bit better than canals, it was time to bring that to the US and so remember timeline 1830, we had the Liverpool line launch. And so all of a sudden, that news definitely spread over to the US.

Anay Shah 02:12:26

Canal mania was done. And so one bubble bursts and the new one begins, which is. It's the time for rail. And so the same D and H company was one of the first to attempt to use steam locomotives in the US and so they actually went and purchased one from England so they could transport coal from the mines to the canals that they were trying to build. And they tested it. It was actually too heavy. So we. We need another. We need another evolution of rail in order to make this work. And so as Ben was sharing, we have bituminous coal on one side of the mountain range and anthracite on the other. And anthracite doesn't Burn well in, in the locomotive fireboxes as they were designed. And we hadn't yet fully explored the bituminous mines outside of Pittsburgh. And so in the US Trains actually started running on wood. Even though they were moving coal, they were powered by wood. So the first few decades, Americans burned wood and we had plenty of it. Now, these wood burning trains would also commonly set the fields and forests ablaze.

Ben Shwab Eidelson 02:13:31

Right.

Anay Shah 02:13:32

It's a very wooded area. You've got these massive fires burning on locomotives going. And some said that the trains burned more wood outside the firebox than inside the firebox. And one of the worst problems was the train itself. And since many of the earlier passenger cars were roofless, they were all made of wood. And as you have it, the women traveling on this train would wear these large voluminous dresses that incidentally were also flammable. And a number of times you'd board a train powered by wood to get from one place to another, and you'd board in a dress and then you'd leave almost denuded. There was a big rush of patents to find devices that would stop the trains from igniting themselves and the surroundings of their cargo and their passengers. But as one would have it, we were trying to move coal. Coal would replace wood as the fuel of choice and ignite the railroad revolution.

Ben Shwab Eidelson 02:14:26

And so by the 1850s, there's all these trains being able to move coal around. The US Was in a great position to actually use that for iron production. They could use that anthracite directly, given that it was a high carbon content. It wasn't so much the iron industry trying to figure out what to use. It was actually more, I think, the coal miners saying that we need another industry. And so they found a technique to smelt iron from anthracite and bring that to the U.S. and so by 1849, there were 60 anthracite furnaces making iron in eastern Pennsylvania. And fast forward, why is Pennsylvania this the center of steel making in the US over time? And this will not be our episode about steel. Certainly that deserves its own place, but here we go. This is an artifact of where the fuel is. I think while we're on the topic of trains, the story of trains is a really important one to this time and does play out differently than what we saw in Britain. First of all, the impact of price of coal. Just like in Britain as transportation expanded, that had this direct impact on the cost of the fuel. The same thing happened here in 1840. It would be 3.6 times the price in Philadelphia to buy anthracite than it was if you bought it at the head of the coal pit. By 1864, 24 years later, it was down to 1.3 times. That was only 23% of the cost to transport it, versus 3 times the cost. So that transportation improvement led to a dramatic cost shift, which then of course changes the ways in which you can use the fuel. And so this makes the, arguably the railway and the operators of the railway one of the most powerful positions in really mediating the production and supply. And I think it's time to introduce some might say, our first villain, direct villain of the story, some might say hero. I guess it depends how you feel about this things. And that is a man by the name of Franklin Benjamin Gowen. He was born in 1836 in Pennsylvania, in what would is a suburb of Philadelphia. And he was born to an Irish Protestant family, A James Gowen, who owned a grocery store, and his wife Mary Miller, who was of German American descent. Kind of a classic makeup of families in Pennsylvania at the time. And he was, he was apprenticed to a dry goods merchant and coal dealer and started to get into the coal dealing business. He also had a keen interest in the law, and so he studied. As a young adult, he studied law. So he was admitted to the bar and was district attorney for a key coal county in Pennsylvania in 1862. He left that position in 64 and represented the Reading Railroad, also known as the Philadelphia Reading Railroad. There's a competing railroad called the Philadelphia Railroad. If these names start to sound familiar, it might be because you played the game Monopoly. And why does the game Monopoly deal with these railroads? Well, we're about to get into it. And so he was young at this time, but the president of the railroad, Charles Smith, started to trust him. And Charles Smith needed to go on an ocean getaway for his health. So he appointed young 33 year old Franklin Gallen to be put in charge. Now, this was just a regional carrier. It wasn't a massive railroad at the time, but it dealt with important coal routes. And there was competitors. There was the Baltimore and Ohio railroad, also known as the B and O, the Erie railroad. But the Reading was really formed for the purpose of hauling anthracite from this coal county to Philadelphia and to other points in between. Now, the miners and operators wanted control over the price of anthracite. There's this kind of feedback loop where when the price dropped in the market for anthracite, the operators would take it out on the miners. They would say, your wages drop. You get paid based on the cost that we're going to sell the coal. And so this was a constant issue for miners in disputes. And so Franklin Gowen was asked to deal with this and stabilize it. And so there was this compromise called the gallon compromise that created a sliding scale that tied wages in a more predictable way to the anthracites market prices. Sounds like a friendly guy trying to solve problems. Well, he actually indirectly often fought any miners attempts to form unions. Anytime that happened, he would raise the freight rates for any cooperator that would give into a union. So if a cooperator on the train route said, yeah, we're going to let the miners unionize, he'd say, okay, train rate is going to be higher. So he just wanted to keep unions under control.

Anay Shah 02:18:57

And so then wages fall.

Ben Shwab Eidelson 02:18:59

Exactly. And he realized what he wanted to do. Yeah, he owned the train rail. He wanted to vertically integrate. He wanted to own the coal mines. The problem was there's actually state law saying if you're moving the goods, you can't own the production of the goods. A reasonable law. To protect against this, he slipped a little law through the state legislature letting there be an exception for the reading railroad. And so even though the original charter forbade it, he made it happen. So he took out a bunch of loans and spent $40 million buying up the most productive anthracite coal mines in the region and kind of vertically integrating this business. But that wasn't enough. He wanted control of the whole pricing in the region. So he brought together a pool, also known as a cartel in 1873, of all the other big coal operators that were moving anthracite in the region. And this was not a secret backdoor deal like you can find it in the New York City papers of the day, the reporting of this pool that was set up to stabilize prices of anthracite in the region. And this starts to kick off the negative image in the world of king coal. Right. You're seeing this idea that they're playing both sides. They're controlling the price on the consumer side, and they're holding down the miners on the other side. And so the public started to sympathize with the miners. The line was that these coal cartel would with one hand, reach into the pockets of consumers and with the other, the throats of the laborers. Not a friendly image for business. In 1875, this kicked off in that same year, a large strike that lasted five months. And because of kind of the public feeling at the time, the public blamed Gowen and really kicked off this kind of negative sentiment and so hearings began, and Gowen, you know, remember before he was running the coal mine as president business, he was a prosecutor. He was in the DA's office. Right. He's not afraid of a truck trial or a hearing. And so he did something that I feel like echoes to this day. First, he made the classic case that it's in the public interest that large mining companies exist and can make better investments and improve production and stabilize these markets. That's what the public needs. That's why you need a big entity operating here.

Anay Shah 02:21:06

Classic argument.

Ben Shwab Eidelson 02:21:07

But then there's something even better he did, which is like, you know what? The miners are good people, and I don't exactly blame the unions, but there is a class of agitators amongst the anthracite miners. And this isn't just any class of agitators. This ripples back to the Irish Catholic community. There's a group that was started in the 1840s back in Ireland that has somehow swept into our happy community in Pennsylvania called the Molly Mcguires. And this group does not follow the laws. It murders people who don't do what they say, and they're actually controlling the region. And that's what we need to be concerned about. And Gowen hired a set of secret agents to infiltrate this group and create this fake report of all these wrongdoings of this group. And so following there's. There's actually a murder trial where they staged that. The Molly Mcguires were responsible for this murder. And of course, who leads the prosecution but Franklin Cowan, as he was the former DA and he's acting as special prosecutor for the state? Line in the book on this is that it would be hard to find another proceeding in American history where a single corporation, indeed a single man, had so blatantly taken over the powers of the sovereign to make this case. And this worked. The public mind started to see organized minors as terrorists and support for the union swept away, and the Molly Maguires became the enemy. And this radically pushed out the timeline for any unionization in the region.

Anay Shah 02:22:39

Wow. You have notions of fear. Be scared of this group of division. It's the Molly Maguires within the miners and divide the miners up. You have notions of otherism, where it's these Irish Catholics that have come in and infiltrated our precious company, and they are the ones that are at fault. Tactics that, as you mentioned, still ring true today in how we divide ourselves.

Ben Shwab Eidelson 02:23:04

And are shockingly effective. And so he puts that issue to rest and goes back to competing and tries to establish some competing rail lines to New York and Pittsburgh and teams up with the famous Vanderbilt to do this. It doesn't work. He overextends himself financially and the railroad was unable to pay its bills. And so they're trying to figure out what to do. And so they turn to a character who I think will ripple through many of our stories. The famous banker JP Morgan, who was brought in to reorganize the railroad. And ultimately he already held interest in many of the other eastern railroads and was getting capital from London into this. But he wanted to control the railroads and remove what he thought was wasted competition. He ultimately forced Franklin Gowen out. And looking across all this, I think at this time in history, Franklin Gowen was a name echoed similar to Andrew Carnegie or John Rockefeller. This powerful figure fighting, creating noise and centralizing power. And I just found it interesting that it's not a name that we hear today the way that we hear maybe Carnegie or Rockefeller, perhaps because of how the story ended.

Anay Shah 02:24:11

Not at all.

Ben Shwab Eidelson 02:24:13

All this coal is powering Pittsburgh to be the new Manchester. All this industrialization in the north, the beginnings of urbanization in the US Were the first real time time.

Anay Shah 02:24:22

Yeah, as we saw in, in Britain, the locus of industry shifts from small towns to urban centers as you have these larger factories powered by coal and you have wage laborers that are easily found in these more densely populated areas. And so by the end of this time, you know, in the us, While we were still a largely rural and agricultural nation, the US was producing manufactured goods that even impressed and were sought after by the British. And structure of society was quickly changing. So by the 1840s, manufacturing had risen from 17% of national output to more than 30% of national output. So we're seeing a fairly rapid shift, just like we saw in Britain, but happening a lot faster in the US towards a manufacturing superpower and dense urbanization. Now, it's important to note I mentioned the 1840s. The mid-1800s is also when a lot of upheaval was happening in our country. All of, all of this manufacturing superpower was happening in the north. This wave of industrialization powered by coal and steam, the growing network of railways built on iron, this was all happening in the north and part of the country. The south of the US had stayed plantation and agricultural focused. It was a slave driven economy and there wasn't abundant coal, nor was there a desire or need to shift out of the agrarian lifestyle. And so practically, what did this mean? This means that the northern regions became more and more economically powerful, more and more connected to the global economy, building Larger and larger industrial bases based on factories and machines that did not require slave labor, but actually had wage labor. And so they had unlocked the energy of machines powered by coal and had catapulted ahead of the south in terms of their economic viability, their ability to produce iron and machines and weapons. And this plays a fairly interesting role. Again, coal playing an interesting role in one of the most defining chapters of American history, the Civil War.

Ben Shwab Eidelson 02:26:50

Yeah. If you look at the lenses through which the Southern states wanted to secede from the Union, you can argue whether it's economic, but it's all connected. Right. Mississippi said in their declaration, our position is thoroughly identified with the institution of slavery, which is the greatest material interest of the world. So it was a belief that the institution of slavery was and will remain the greatest material interest of the world. Completely missing the fact that meanwhile, just up the road in Pennsylvania, there's the material unlock of energy that completely shifts what's going on in the world. And so, and for good reason, Mississippi didn't have access and was not utilizing that energy. And it's just the kind of this fork in the road of energy resources and fueling and industrialization leading to the conditions for which, you know, one region valuing this abhorrent behavior and another region being unlocked with all this new energy and transportation.

Anay Shah 02:27:52

Yeah. Just to put a finer point on it, the North's industrial advantage over The south was 10 times more factory production, 15 times more iron production, 32 times more firearms production, and most dramatically, a 38 to 1 advantage in coal.

Ben Shwab Eidelson 02:28:08

And the little coal that maybe the south could access was in Kentucky. The Union held West Virginia the whole time. Kentucky was a bit of a battleground because it was both a buffer state and a mineral rich one. Lincoln famously remarked, I hope to have God on my side, but I must have Kentucky. That's how important it was, I think, to keep coal out of the hands of the south in the war. There's a bunch of detailed ways in which you can look at how this played a role. From steam powered ships to weapons and firearms manufacturing, but to also just economic growth. It is without a doubt that coal played a major role in the North's power over the South. I think an image that caps off this moment is the 1876 centennial. This is Ulysses S. Grant as president. And this is this big almost world fair celebration. And there's a 14 acre room called the machinery hall where they demonstrate everything that's just like steam powered and iron powered. And so 1876 is this moment 100 years. That's why it's a centennial. Since 1776 is the US coming online in the global world stage. And we are now an industrial superpower, also the workshop of the world. We are an equal now playing at that power.

Anay Shah 02:29:23

And just to put it into context, coal consumption, as we're expanding south and expanding west post war, was doubling every decade from 1860 to 1900. And so in 1876, wood powered twice as much as coal. But by 1900, the US was producing more coal than anyone else, more than the uk, more than Germany and more than every other country. And so we, as, as has happened in other times in American history, we seized upon this and had just a rapid adoption of coal into our economy.

Ben Shwab Eidelson 02:29:59

All right, well, we've covered everything we could learn between the Carboniferous period through to 1800. And so I think we need a breather before part two.

Anay Shah 02:30:11

Now, before we go on to part two, we thought it would be useful to take a step back. We've gone through millions of years of history and we've gone deeper into the last few hundred years. So we wanted to reflect on some of the themes that we feel will stay with us long after this recording and set the stage up for part two and kind of the last 120 years of the history of coal and the history of our modern world. And so with that, we've got a handful of themes that have really stayed with us. The first one being this notion of serendipity, or how much of this coal story was unexpected and maybe even accidental. You can look to Britain, who was not destined to be a global superpower prior to the 1800s. And were it not for the luck of having abundant surface coal easily accessible, Britain may have never become the global superpower that it was.

Ben Shwab Eidelson 02:31:13

That. That geography and luck of geography between the major developing city of London and Newcastle, then you had.

Anay Shah 02:31:21

You have steam power. That. That wasn't obviously useful beyond the theoretical. And were it not for the numerous inventors and tinkerers and academics living near each other, combined with this insatiable demand for coal and then this challenge that they faced of needing to mine deeper, that confluence of factors was the perfect storm to take this invention of using heat to move a machine to become the foundation of the modern world, One.

Ben Shwab Eidelson 02:31:54

Way to think about this is accidental serendipity. Another framing in my mind is that there are so, so much rich energy accumulated underground from photosynthesis, biochemical processes that stored useful energy for our species that it. It almost is like a treasure that eventually had to be Gotten.

Anay Shah 02:32:14

Right.

Ben Shwab Eidelson 02:32:15

And so all the invention and all the kind of things that feel happenstance are. It's almost like a tree's trying to find the sunlight in the way that they grow. Humans in the story of coal will just do whatever it takes. Both human cost, health costs put to the side. If we need to invent something new, we will figure it out and keep working at it. Because it was so valuable, that store of energy. Almost like an evolutionary view towards the desire for that locked up power.

Anay Shah 02:32:41

Yeah. Another big theme, no surprise, is the power of economics and how supply and demand and the price of goods drove so much innovation. And a few examples of that from the story of coal is how just the sheer cost of fuel driving lifestyle changes. When we were talking about the cost of firewood exploding because we were deforesting the lands around London, people loved burning wood. They knew how to handle it, they knew how to cook with it, they knew how to store it. The problem was we were running out of forest and prices shot up.

Ben Shwab Eidelson 02:33:25

Yeah. I mean the cost of one fuel going up drives demand for a new fuel. Right. We see it all the time and people are switching to EVs in mass when gas prices go up and we.

Anay Shah 02:33:36

Ran through walls as humans when prices of a fuel grew. Right?

Ben Shwab Eidelson 02:33:40

That's right.

Anay Shah 02:33:41

Yeah.

Ben Shwab Eidelson 02:33:41

I think the other element of that is that became the case even when the new fuel was harder or dirtier to use. So people bringing coal into their homes for the first time, they would need a chimney, they would need to redesign their homes. It would be sooty and dirty and ruin their clothes and they'd be coughing. But they needed the energy. Right. They needed the heat. And so it's so fundamental that I think it's just a strong lesson in the value of the raw energy and the kind of things that will motivate that. Even if regulations were passed say no, you can't burn this type of coal at this time. London is the story essentially in this era of people disregarding many of those laws in order to keep burning coal.

Anay Shah 02:34:22

Yeah. Another theme you see that coal so beautifully illustrates is that once fuel and energy is affordable and accessible, then humans start to multiply the uses of that. Right. It expands beyond its initial use.

Ben Shwab Eidelson 02:34:40

That's right. We initially saw coal was this relative drop in replacement for wood in its use cases. Right. We want to cook something, we want to heat something. But eventually it got much more sophisticated and became a much better way to produce iron than the wood derived charcoal processes. Not just cheaper, but also more effective. This new fuel and energy source gets used and then it gets cheaper. And then that unlocks new behaviors. Right. And unlocks new markets. Seeing Britain go from hey, we're importing iron and because we're out of firewood to hey, we no longer need wood for most of the things we thought we needed it for. And now we're the, now we're the major iron producer of the world. Is a testament to that exact story of unlocking coal as the resource.

Anay Shah 02:35:26

We also saw the difficulty of moving coal being one of its greatest drawbacks as a fuel. And it was always a challenge was moving it out from the mines and moving it across land or across waters up until where we had locomotion and coal could move itself. And you kind of see the cost of transportation as, as a defining element of, of the story. If you remember how difficult it was to move coal over land because the streets were just muddy grooves. It led to canal mania, building canals all across Britain. And then in the 1800s came steam powered locomotion to move coal. And that led to the railroads and set off the ability to move people from the speed of horseback to the speed of trains. All driven by the extraordinary difficulty and high cost of moving coal.

Ben Shwab Eidelson 02:36:22

For a long time, in periods before the rail networks were fully built out of the shipping networks were fully built out. The primary cost of coal on the other side was the transportation cost. Right. It would often be three times the cost of the thing at the mine would be the fully transported cost of it. In the city that you wanted to consume it, you'd pay that because you ultimately wanted the good. But to go from that to then more like a 30% increase in cost once you had the full transportation networks built out is a fundamental shift how accessible the product is. I also think understanding the transportation complexity of this helps you understand how geography and markets. Why did Philadelphia become a major city in the US Why did Pittsburgh become a major city in the US Why did London become London? It is because London could consume coal from Newcastle much cheaper than other municipalities that could have formed in England. And so understanding that the economic costs associated with transportation of this energy good shaped where people now live and where businesses were built and where things could be produced.

Anay Shah 02:37:26

From the macro of changing economies and the resources we use to move goods and people across land to the very micro to how it shaped domestic life. How fuel source from wood to coal change so many subtle and not so subtle things about the way millions and millions of people lived day in and day out in their homes.

Ben Shwab Eidelson 02:37:53

Yeah. And this I think it's something that we most understand and feel as consumers right in our life of how do you know, how do we get around? And then how do we do things like heat our homes and cook our food? And these are the battlegrounds of every energy transition. And hearing the stories right now, you have people saying, you can take my gas stove for my cold, dead hands. The transition from wood to coal was wild. You potentially needed a chimney. You needed new cooking gear. Like you needed to buy your first cast iron cooktop. There's a major expense. You need to be remodeling your house to cook with this stuff.

Anay Shah 02:38:25

Your food tasted different.

Ben Shwab Eidelson 02:38:27

All of a sudden, you can no longer sleep on the floor because there's a cold draft. That was a major fuel switch. And to be fair, it didn't happen in five years. It was over the course of a century that you really saw this fuel switch. So how do we accelerate the curve of that step? Change is interesting, but this battle over the domestic life around a fuel is not a new one by any means.

Anay Shah 02:38:45

No, We've been through big, hard personal changes before, and we'll continue to go through them. And I don't think I'll ever look at the legs of a bed the same way again.

Ben Shwab Eidelson 02:38:58

Yeah, you're being lifted up from that cold draft coming through your house.

Anay Shah 02:39:03

Another theme that is so visceral and painful and poignant is the human toll. We talked a little bit about how the towns built around coal mines and the people working in the coal mines. It was a full family affair. It was all consuming. It was men, women, and children working through some of the most horrific conditions imaginable. And it spawned a extreme need for labor justice that couldn't be ignored and the birth of organized labor. And we saw the beginnings of this in part one. We'll see more of it in part two. But the human toll that enabled the fueling of the Industrial revolution is an appreciation that I think will stick with us for long after this. Yeah.

Ben Shwab Eidelson 02:39:57

And this maybe connects to. Maybe this connects to the centralization of power as well. Perhaps this is some of the most powerful concentration in history. To say you're a mine owner or you're owning the railroads that connect multiple mines to consumption. The incentives then in place to keep miners down, either economically or from union power. I certainly did not appreciate until doing this research that either directly the coal miners experience or the industrial worker experience, that kind of split bond from coal as an energy source led so directly into Marxism and labor movements that defined the 20th century in retrospect understanding how terrible the working conditions were in the mines makes sense that you that that would be one of the largest things to react against. Perhaps the only parallels I can think of are slavery and the major political and rights movements against that of saying these are some of the worst conditions we've put other humans in to do things for societal benefit and economic benefit. Digesting all the stories that we've digested over the last few months in this has made that much sharper in my mind.

Anay Shah 02:41:08

We'll close on one more slightly more optimistic note, which is just the power of human ingenuity and the incredible innovation that happens when you have networks of people living and working physically together in the same spaces. And what can happen when obsession turns into tinkering turns into a great idea. We saw that with some of the protagonists of the story. We saw that with the lunatics in the Lunar Society. We saw that in how we were able to bring about how it drove the evolution from brass to iron cookware to making the steam engine actually useful.

Ben Shwab Eidelson 02:41:56

Yeah, there's something that just takes shape in my mind as you were talking through that which is on one hand coal and its rise and its impact feel very diffuse. There is coal spread out across the world and feels unlike the stories under electricity and the light bulb and the grid that felt like there's Tesla and there's Westinghouse and there's Edison and the. There's these really central inventors. Yes, there's this diffuse energy source everywhere, but left without invention it would stay in its current lane. Yes, coal could be a drop in replacement of wood in your home. There's major innovation in these leaps and these small communities of people that feel like the modern day startups, the manufactory in Birmingham and the Lunar Society and all those things you mentioned. You need these collection of people solving these problems over decades. Perhaps the biggest example of this in my mind is the railroad. And yes, there's various attempts of this. But then seeing George Stephenson and his son unlock this complex coordination problem, it's maybe a little bit more like an Alphabet Google X Waymo project because you needed the capital, you needed the coal cartel to fund this major unlock of transportation and this new technology. You needed Alphabet to fund the moonshot that became the railway and solved all these problems. There's something really interesting about these major unlocks and how coal would have played a big role. But then it played a massive role.

Anay Shah 02:43:15

With those unlocks and coming full circle to step change and where we spend all of our waking hours, the Notion of how you had fits and starts, you had multiple startups, you had multiple people obsessed with these problems and we don't know, the countless number of folks that spent their lives tinkering and couldn't quite get it to work, couldn't quite figure out the product, the innovation, find product, market fit, get the distribution, find the capital, find the people to work with them to do it. And it was Watt and Stevenson and Darby and the protagonist that eventually had all the pieces come together. That was that startup that grew into the large enterprise value. It is very, very reminiscent. It echoes the startup landscape we see today and how many attempts we need to actually achieve this level of step change, growth in economies and society.

Ben Shwab Eidelson 02:44:10

All right, well you know, if you step back and years from now you're thinking about coal, thinking about this work, thinking about this time in history, what is your, your primary takeaway?

Anay Shah 02:44:20

Your real like, oh man, I am just floored by how coal was the driving force for the industrial revolution and how much that changed everything and it created this feedback loop of coal creating a problem and then solving its own problem. I have a new appreciation for how we have moved from an agrarian society into industrial life and the role that coal played. And for the 15,000 odd years before that, most people lived on or close to the land that produced most of their food, right. And then we had the wood shortage in Britain and people turned to coal for heating and cooking. We moved from charcoal to coke that allowed iron to be produced in larger and larger quantities. And this then drove the demand for coal, which then drove the demand to pump water out of the coal mines to get more coal, which led to the critical use case that enabled the steam powered piston to actually find its home. And then the steam engine was born to pump more coal out, to make more iron, to make more steam engines, to pump more coal out, to transport coal, to power more machines that produced more goods, that created these industrial centers, that transformed society into this industrial behemoth and increase the levels of production, the access to goods and the ability to transport them beyond previously imagined human capabilities.

Ben Shwab Eidelson 02:45:57

That's a big takeaway. Yeah, that resonates deeply. And I think the other image that I'm left with in addition to that is just the scale of human suffering that built that world along the way. In the kind of acute suffering you go into the stories of the miners and just in this time period we covered, hundreds of thousands of miners died in the most horrific ways. As you said, many of those were entire families impacted and birthed into multigenerational entrapment in doing that work. The burning of coal in this era led to particularly miserable lives in some of these cities and killed millions. Hearing about times in Manchester where half the kids had rickets. This is a dark time in this transition to this. To the progress of industrialization on one hand and then this human suffering on the other. And so I look back at all of this and everything we just talked through in the last three hours and I just see the great tension of that. That to unlock this great power that was buried underground just has this deep downside of human life and cost. I think I just sit in that tension when I now look at the infrastructure we take for granted as, wow, coal probably powered that. And to get to that coal was some suffering. And so in a way, I'm like left with gratitude for all those that put their life into building that. Not a gratitude that they wanted. I don't think this is. I don't think most of these families wanted this life, but it's the life that they had. And yes, we're talking about time periods that sound long ago, 1800s, but like the suffering continued. And we'll get into part two, like just a hundred years ago. It's not that long in the scale of history. I'm just left shaken by the stories of kids in the mines and the lives they lived that were just built around extracting this power from underground.

Anay Shah 02:47:58

Very well put. It's this profound juxtaposition on, on, on a scale that's really hard to comprehend, both from a scale of progress and a scale of suffering.

Ben Shwab Eidelson 02:48:10

Yeah, I think let's wrap part one of Cold Air. We made it from carboniferous period to 1900 in from that timescale. A relatively short three hours here and we still have plenty to cover in part two. We got world wars ahead of us. We have the rise of China and India. We have where we are today. But I think it's time we take a pause. We got more books to read before we get into that.

Anay Shah 02:48:35

That's right.

Ben Shwab Eidelson 02:48:36

Other than coal research, what have you been reading or listening to in your world?

Anay Shah 02:48:40

Oh my. Outside of this, the turn of this year, find myself in a pretty interesting headspace. I did need a fun story over the holidays and I read Billion Dollar Whale, which is a super engaging real story of the largest, one of the largest individual white collar crimes in history. Took me out into, into a different world, which is nice. Beyond that, I've got this, this really interesting confluence of. I've been consuming a lot of Brian Cox he's this British physicist who's helping me understand the quantum universe and really helping me internalize what it means to live in a multiverse, which is a thought that continues to burrow deeper into my brain and soul. And it matched up with this over break. Google announced Willow, which is their new state of the art quantum chip that dramatically increases the supercomputing powers that we have. And learning about that and what that could unlock really took me into a futuristic mindset, which led me to Ray Kurzweil's the Singularity is Nearer because we're going to merge with AI and some. I'm right now in this space of futuristic singularity super computing combined with the multiverse, and I'm not exactly sure who or where I am.

Ben Shwab Eidelson 02:49:57

Oh, that's great. I love going from coal, which feels now at this point very tangible, to the multiverse and quantum computing on that point. I want to go back through it and I started to with the Willow announcement, but if you haven't already, go to coin. Quantum country is Michael Nielsen's free book out there. That's a very cool format where you read and quizzes you along the way. It's both a great writing about quantum mechanics leading to quantum computing, but also a really interesting format to explore learning.

Anay Shah 02:50:26

Yeah, what are you consuming these days?

Ben Shwab Eidelson 02:50:28

You know, it's funny, I didn't get as much reading time as I would have preferred over the holidays, but I did need also to breather from from the Deep nonfiction. And so I read a memoir by Andrew Wilkinson, who started Metalab and then Tiny, called Never Enough From a Barista to Billionaire. I just appreciated his open book approach to talking about his journey and kind of his relationship to ambition and achievement and finances. I'm excited to see on Ezra Klein this week was Oliver Berkman, who wrote 4,000 Weeks, which is one of my favorite synthesized reflections on how to think about time. And it looks like Oliver Berkman has a new book out, so that's probably one that I will consume in between Cole Part 2 research and other things we're doing. We'll link to all of those in the show notes, so if you're curious, you can follow along.

Anay Shah 02:51:16

A big thank you for spending this time with us and going on this journey. We're deeply appreciative for making it this far and stick around for part two. Yeah.

Ben Shwab Eidelson 02:51:27

If you enjoyed this first episode of the Step Change podcast, we have a couple quick asks for you. I think the first is thank you and we'd love to hear from you, so please shoot us a note at hiepchange Show. Second, subscribe or follow in whatever podcast player you're listening in, or head to our site Stepchange show and you can subscribe to get emails directly from us. That's the best way to know that Part two is out. And lastly, and most importantly, if you know anyone who might want to nerd out on Coal with us for three hours like you just did, please send them text about the episode. We think that's the best way for folks to hear about this. I always take recommendations from friends to mean so much, so thanks for spending the time. And until part two.