00:36:19 · Molly O'Shea
[00:36:19] S1: Yeah, I'm thinking a little bit more specifically, whether it's private equity AI powered roll ups, whether they're applying AI to their roll up strategy and their companies and then their portfolios, whether it's real estate and some real estate funds and managers have shifted their commercial focuses to data centers entirely and just going after data centers. But I just had Hanan Hopi from ExoWatt on, and he was really clear because he's right on the ground. He's providing I think ExoWatt is an a 16 portfolio company, separate. But they are providing energy, renewable energy, sustainable solar powered energy to data centers, hyperscalers. And what he's seeing on the ground is a lot of these announced data center projects are not happening. Wouldn't say a lot, I won't be dramatic there, but how are you seeing this within your portfolios? I know that there could be a blanket statement there, but I'm just really
00:37:20 · Michel Del Buono
[00:37:20] S0: curious No, if you so I think it's really early days. A lot of private equity companies have operational teams that go in and help companies. I think they're only starting to use AI at this point, so I think it's very early still. The hope is obviously that you can AI, it really allows you to do is develop sort of customized software very cheaply, effectively, right? Simplify processes, automate them, turn them into natural language. All those things should have huge benefits for a private equity backed company that's trying to get more efficient. But I'd say and I'm making gross generalizations, I'm sure there are exceptions but most PE firms have yet to sort of fully and it's a new technology, so have yet to fully build that into all their operational improvements. And so I think the firms that are successful at that will really be able to improve the profitability of their underlying companies, so it should be a huge benefit. And I think the benefits will accrue to those who really embrace this, you know, but large organizations are slow to move. They have their processes, their formulas, their things that they've done successfully in the past. And so, you know, people just sort of abandon all that and immediately jump to a new thing. That's on sort of like improving the performance of your private assets. The data center is an entirely sort of different question, which is, can we actually build these things in time? Can we come in on budget? Is there power available for these things? And that's more difficult. That's, again, look at the details. Some of them happen to have power for whatever reason. They're on a brownfield site that already had power and they just sort of hook up a new building to it. Others don't have the power. Some have contracts with hyperscalers, others don't. So it's very difficult, again, to just say, it's like saying I want a BDC, it's like saying I want data center. Look at what you're doing. Now, the beauty of the recent tax changes is that for a taxable investor, you have accelerated depreciation on data centers. So you can depreciate 100% of your CapEx immediately and get a huge tax benefit. So there's some tailwinds to the sector because of the sort of tax code.
00:39:36 · Molly O'Shea, Michel Del Buono
[00:39:36] S1: Speaking of taxes, again, I'm curious. Do anyone like have you seen anyone go to Portugal or there's a lot of little tax havens around the world, whether they move themselves there or [00:39:51] S0: part They're of making part of their not little, they're big moves. So a lot of people are acquiring second passports, Or they're moving to countries that have special exemptions for foreigners. So The UK used to have this. They've really cut back on it to some degree. Italy has implemented a new one that was almost in response to what's going on in London. So a lot of these countries have sort of a flat tax. You pay 100,000 or $200,000 a year, and then that's it for ten years, twenty years, whatever it might be. So there's that route. And then there's the citizenship route. Like, I want to have a second passport just in case. So many countries have these kinds of programs. So you see a lot of people taking advantage of that for sure.
00:39:51 · Michel Del Buono, Molly O'Shea
[00:39:51] S0: part They're of making part of their not little, they're big moves. So a lot of people are acquiring second passports, Or they're moving to countries that have special exemptions for foreigners. So The UK used to have this. They've really cut back on it to some degree. Italy has implemented a new one that was almost in response to what's going on in London. So a lot of these countries have sort of a flat tax. You pay 100,000 or $200,000 a year, and then that's it for ten years, twenty years, whatever it might be. So there's that route. And then there's the citizenship route. Like, I want to have a second passport just in case. So many countries have these kinds of programs. So you see a lot of people taking advantage of that for sure. [00:40:35] S1: We talked about the wealth tax a little bit in the last episode. Something that has happened recently in New York is they are trying to implement the pied a terre tax for people that have a second home. And so similar to bringing up Chamath last time, Chamath brought this up on All In where he was talking about how people purchasing second homes in London, or they just need to store their wealth somewhere so they buy a piece of property. In London, it's hollowed out certain neighborhoods because no one's actually living there. All of the joy of a neighborhood and having community and people around is gone and it's now empty homes. And so now in New York, well, I don't like what that guy's doing. But in terms of New York with the Pied a Terre tax, what do you think the implications of that are going to be?
00:41:31 · Michel Del Buono
[00:41:31] S0: Well, there's a lot of things to unpack here. Wealth tax, where people decide to live. Let me throw out a few things. Okay. So first, there have been some people that left California and moved to other states, and they've come back, and this is a personal decision. But when you asked them why you came back, said, Yeah, saving 10% tax is nice and all, but my community was here. So these are very deeply personal things. I don't think you can sort of make a blanket statement, oh, well, saved 10%, therefore everyone's going to move here. So the same thing with this Pietaer tax or whatever wealth tax you may implement. People have to make a trade off in their head. Do I like living in New York enough to pay some sort of tax or not? In some places, Vancouver and Canada had this problem too, or problem issue, so if homes were not rented, they started taxing them quite heavily to sort of make sure there was a supply of rents. So you've seen these responses everywhere, but the fact of the matter is there are a lot of people with wealth, they have preferences, and when you have wealth, obviously you can do what you want. It's just a question, do you wanna pay or not? So I don't think that these small things you see are gonna massively change. It's a different story if it was outright banned, but I can't imagine that happening. Not in a democratic country. You can ban people from buying places. I suppose anything's possible. So I don't think it's gonna In London though, when they sort of got rid of the expat sort of benefits, and 100% of your wealth could come under the 40% inheritance tax they have in The UK, that caused a problem because the entire balance sheet of someone's life or worth would be affected. Whereas when you're taxing an individual asset, that's just a piece of your wealth. So it's a different discussion.
00:43:24 · Molly O'Shea, Michel Del Buono
[00:43:24] S1: Yeah, a lot of people are moving to Milan or Monaco or Dubai. [00:43:29] S0: So the question is, you want to live in Dubai to save 10% tax? And that is a personal question. If you have billions of dollars, 10% is hundreds of millions. So there's that element too. Tell me when you move to Dubai. [00:43:47] S1: I'm not going to be moving [00:43:48] S0: to No,