The Ins and Outs of Digital Infrastructure Investing


In this edition of Not Your Fathers Data Center we speak with Head of Data Center Banking for Barclays, Irtiaz Ahmad, about the nitty-gritty of digital infrastructure investing.

Announcer: Welcome to Not Your Father’s Data Center Podcast, brought to you by Compass Datacenters. we build for what’s next. Now here’s your host, Raymond Hawkins.

Raymond Hawkins: Welcome to another edition of Not Your Father’s Data Center. I am Raymond Hawkins, chief revenue officer at Compass Datacenters, your host today. We are recording still as the planet is dealing with a pandemic. Vaccine’s rolling out, but still the world is different than it was this time last year. And today we are joined by Barclays head of global data center banking, Irtiaz Ahmad. And Irtiaz, I want to make sure I pronounce your name right. Irtiaz, welcome and thank you for joining us.

Irtiaz Ahmad: Hey Raymond, it’s a pleasure to be on your show. And you got that name spot on, so thanks for doing that.

Raymond Hawkins: All right. I’m one for one. It’s only downhill from here. Irtiaz, we’re super grateful to have you talk with us. We have lots of folks that come talk about the technology side of our business, whether it’s networking or cooling, or how we handle technology in the data hall. For us, we’d love today for you to help us understand how does all this stuff get paid for?

Raymond Hawkins: But before we get into, how does all of this get financed and funded? We’d love to hear a little bit about you. So with that, open mic. Would love to hear where you’re from, how you got in the business, where you went to school, who your baseball and football teams are, who you’ll be pulling for on Super Bowl Sunday. You’ve got a chance to be on record now for your Super Bowl pick. It’ll be in the can so we can know whether you’re right or wrong. So you have the mic. Tell us a little bit about yourself.

Irtiaz Ahmad: Sure, Raymond. Happy to do that. So I went to school at Georgetown, down in DC. I’ll maybe start off with that. So when the stuff started to go down early in the year, a couple of my buddies just start shooting me texts with the view that, « Hey, look, we thought college was crazy. This is just a whole nother craziness. » My personal background is that I’ve spent about 15 years focused on the broader digital infrastructure industry, both as an advisor as well as an investor, but also as an operator. And I have some funny stories there to share. I started off at Bear Stearns right before the financial crisis, in their tech media telecom group, summer of 2007. And then onto Citigroup for a couple of years. And I was at a firm called Waller Capital.

Raymond Hawkins: Hold on, hold on, hold on. You started at Bear Stearns in the summer of ’07?

Irtiaz Ahmad: I did. I did.

Raymond Hawkins: That’s some auspicious timing.

Irtiaz Ahmad: I know, exactly.

Raymond Hawkins: Wow.

Irtiaz Ahmad: I’ve got a funny story for you. There was a corporate event at Bear Stearns that they had, one of those summer holiday parties where it was a firm mandate for everybody to take a black car home individually from a boat cruise. [crosstalk 00:02:58]

Raymond Hawkins: Yeah, liability’s perspective.

Irtiaz Ahmad: Yeah. It was just the full nine yards. Yeah, it was just incredible. So it was a bit of a fall from glory.

Raymond Hawkins: I’d say things have changed quickly in Bear Stearns fortunes. And I’m not going to remember the exact timing, but ’08, ’09, that business disappears, right? How long did that run? If you got there in summer of ’07, you weren’t 24 months from the business disappearing, were you?

Irtiaz Ahmad: I was gone. I was just there for the summer. And the business disappeared in March of 2008.

Raymond Hawkins: Yeah. That’s what I thought. Okay.

Irtiaz Ahmad: By the time it came back around, I was already lining myself up. The semblance of normalcy started to break down, I’d say even that summer, towards the tail end of that summer. You could hear some of the alarm bells start to go off.

Raymond Hawkins: Fascinating.

Irtiaz Ahmad: Yeah, so I ended up [crosstalk 00:03:49]

Raymond Hawkins: Summer interns in ’07 had to take black cars home, to nine months later, the business has gone. Wow.

Irtiaz Ahmad: It’s a whole nother world. You come back around for air and there’s no caviar waiting at the end of your night.

Raymond Hawkins: Wow. Okay. So Bear Stearns in ’07. Sorry, I’m slowing you down a little. Where next?

Irtiaz Ahmad: No, no. Bear Stearns has a lot of fun stories, I’ll tell you that. I moved on to Citigroup in the New York office in vogue of the times, 2008, ’09, ’10, ’11. But a lot of my time essentially cleaning up some of the mess that had been created over the past few years before then, some of the large take privates, very large acquisitions that had run into trouble. The likes of Clear Channel and Charter, iHeart, you can talk about radio, cleaning up the messes of that and helping structure those businesses, clean up the balance sheets, start thinking about what’s next for them in terms of creating value for those assets.

Irtiaz Ahmad: And I was there for about three years. There was a lot of cleanup work, and I think I had my fill with it, which is why I wanted to do something a little bit different after that. You can only spend so much time doing cleaning up, restructuring type work.

Raymond Hawkins: Understood. Yeah. All right. So you spend three years restructuring and cleaning up at Citi, and then next stop is where?

Irtiaz Ahmad: The next step was to a firm called Waller Capital Partner’s, again in New York, a merchant bank focused on the digital infrastructure industry. Funny, you use the words digital infrastructure, communications infrastructure, IT infrastructure. Back then, a decade plus ago, we used to not use those terms as much. And it was a cable focus, broadband focus. What we started to see right then and there, some of the green shoots of fiber. I remember selling a bunch of businesses to [inaudible 00:05:48] when I was there, a couple of these fiber to home plays. I’d done a data center thing here and there. It started to peak my interest.

Irtiaz Ahmad: Growing up, I’ve always been interested in internet. I was one of those kids that was on these bulletin boards and usenets, and basically an all around, totally cool kid in high school.

Raymond Hawkins: Yeah, yeah. Definitely the kids that were on the bulletin boards in high school, everyone wanted to hang out with.

Irtiaz Ahmad: Yeah, exactly.

Raymond Hawkins: I know the group. I got ya.

Irtiaz Ahmad: Exactly, exactly. So I was there for about four years. Had a lovely time, did a tremendous amount of activity. This is right after the recession, so the pickup in volume was pretty spectacular. And a lot of this was growth oriented. And it wasn’t so much with cleaning up the dark messes of the yonder years. This was more, how do we think about onwards and upwards? So, that was a lot of fun.

Irtiaz Ahmad: And the funny story I said about being an operator, part of my time there for about, I don’t know, like six to nine months, I spent basically on a secondment to a rural broadband company in Minnesota in the winter months of 2013.

Raymond Hawkins: Oh man.

Irtiaz Ahmad: Yeah, exactly.

Raymond Hawkins: Minnesota is lovely in January and February. Highs in the negative digits.

Irtiaz Ahmad: Funny story, this is like Northern Minnesota as well. So I get off the long, several hour drive to the company. Get off, get a rental car. And silly me, I’ve never driven on ice before, so thinking the best thing I could do is get as big of a car. Basically I asked him for the biggest car I can get. They ended up giving me an Audi A8. I don’t know why. It’s not like I paid anything extra. They did, and this thing is like a tank. It’s so long. And if you’ve ever driven out snow, this thing is basically like skateboarding in snow. So snow and ice, my first trip out was a harrowing experience. It was terrifying, but I made it.

Raymond Hawkins: Irtiaz, I’ve got to tell you. So I worked for a company in Minneapolis for eight years, and that was their headquarters. And we would go every year in January and have our sales kickoff in Minneapolis, in January. And for eight years, the high out of all eight years was minus one, was the warmest temperature it got. Hardy people live in Minnesota. I’ll just say it that way.

Irtiaz Ahmad: Yeah. In your first time there, and you talk to the team and the team says, « What are you doing without gloves? You’re going to lose all circulation in your fingers in the next two minutes. » And they’re counting down. They’re like, « You need to get inside now. You will not have fingers. »

Raymond Hawkins: I’ve got another good Minnesota story. So I live in Atlanta. I fly up for my last interview with the organization. I fly up there at the end of April. Well, at the end of April in Atlanta, it’s been warm for two months. And I land in shorts and a golf shirt to head to my hotel to get dressed for the interview and it’s snowing outside, which I just couldn’t comprehend snow in April. So, that’s one of my aha Minnesota moments.

Raymond Hawkins: And then, and then my other one is just like you described, getting in and go driving North. One of our kickoffs, they decided to do a team building exercise. We went ice fishing. My exposure to ice fishing was the Grumpy Old Men, the movie and thinking, Oh, that’s cute and it looks fun. So, we pull up to this little shack on the side of a Lake and you check in, you’re almost like you’re checking in for a motel. And it’s minus nine outside, Irtiaz.

Raymond Hawkins: And the guy comes up, and he’s counting everybody in the car to make sure everybody paid. And he goes, « Okay. » He goes, « Hey, I need y’all to roll all the windows down and then follow our guide car out to your shack on the ice. » And I, of course, the guy from Atlanta said, « Hey, why are we rolling the windows down? It’s minus nine outside. » And he said, « Well, in case the vehicle goes through the ice, we don’t want the windows to short, so you can’t swim back to the surface. »

Irtiaz Ahmad: Dear Lord.

Raymond Hawkins: And I said, « You know, if there’s a 1% chance we’re going through the ice, I think I’m going to stay right here for the night. I don’t need to go on out to the ice fishing hut. »

Irtiaz Ahmad: [crosstalk 00:09:53].

Raymond Hawkins: Unbelievable stuff. All right. That’s our Minnesota sidetrack, sorry, everybody. But cold is the message.

Irtiaz Ahmad: Great people thought. Really warm people. Really warm people, very cold.

Raymond Hawkins: Very cold. So you help operate a business in Minnesota. Was it fiber to the home? What were you guys doing out there?

Irtiaz Ahmad: It was a fiber to the home. It was a small, I wouldn’t call it a startup, but gotten some subsidies. And what I was basically helping them was to organize the financials, thinking about what the strategy should be going forward, and basically think about bringing in new investors to grow the business. This is like 10 years ago at that point, close to it. And we’d started to see the need for digital infrastructure, connectivity to people’s homes that’s truly based on fiber instead of some mixture between coax or the old DSL lines, because the traffic patterns right around that time were starting to pick up when a lot of the apps start to really come out, 2010, ’11, ’12. A lot of these newer digital content platforms starting to kick up, streaming becoming more of a commonplace thing that people were doing.

Irtiaz Ahmad: Yeah. It was just a really interesting time to be there leading the charge. It’s a much bigger company now.

Raymond Hawkins: So, is it still an ongoing concern today?

Irtiaz Ahmad: It’s more today about how do you grow the business? How do you expand? It’s cleaned up, and it’s ready to go and develop itself to be a much larger player in the region at this point. So all honky-dory there.

Raymond Hawkins: All right. So after you help the operator in Minnesota, what’s the next stop for you?

Irtiaz Ahmad: Next stop was coming back to New York and warming myself up, losing the [crosstalk 00:11:37].

Raymond Hawkins: Yeah. Here, here.

Irtiaz Ahmad: But New York wasn’t that much warmer. But I ended up joining Barclays around that time, around 2014. Again, focused primarily on the digital infrastructure space and digital infrastructure, encompassing everything from data centers, cloud, fiber, towers, small cells, DAS. We didn’t really know or think about the word at that time, but these days it encompasses the word edge as well. And frankly, that’s a really key part of it all. But that’s my focus. I lead basically our coverage of data centers, cloud and edge infrastructure, banking across North America, Europe, Asia-Pac and Africa.

Irtiaz Ahmad: We’ve got a pretty global coverage footprint around the world. And just the nature of what I cover is just so global, particularly in the world that we live in, with Zoom and WebEx and all the other platforms where it’s very easy to lose track of your time, basically on these platforms at all hours of the day.

Raymond Hawkins: Here, here.

Irtiaz Ahmad: So that’s me.

Raymond Hawkins: All right. Well, we appreciate the intro. That is super good to hear a little bit. So I just want to wrap that up. So it sounds like you would consider New York home. Is that a home base? You’ve been there a while now.

Irtiaz Ahmad: That’s right. I moved outside of the core city, outside of Manhattan a couple of years ago. I live at Brooklyn, which is sometimes I’ll walk around pre-COVID. And I feel like this is too cool for guy like me. I don’t quite have the carpenters get up, and the very cool facial hair that a lot of the kids walking around here do.

Raymond Hawkins: Yeah, yeah. No, I get it. Brooklyn’s a hip place. I can only visit. They wouldn’t let me hang out there.

Irtiaz Ahmad: Yeah. I feel that way sometimes too.

Raymond Hawkins: You raise an issue that if you don’t mind, I’d like to dig into just a little bit. You talked about when you said, hey, remember back in your Waller days, we didn’t use terms like digital infrastructure that we use today. And you talked about it was a lot about cabling and broadband, and those kinds of things. And I think you raise a great point that raises a larger issue anyway, is that how we got here, how we got to the world in a global pandemic, being able to stay connected, communicate, and effectively conduct business. We didn’t get here overnight and we didn’t get here by accident.

Raymond Hawkins: And that infrastructure, kind of going all the way back to the late eighties and early nineties that started getting laid for how we connect people’s homes and people’s businesses, and connect the network. That’s been going on for a while. And in your fiber to the home business and, and your early days, that was all the foundation for what we do today. Isn’t that an accurate description, Irtiaz? How do you feel about all of that, how it all came together?

Irtiaz Ahmad: Well, Raymond, I think you actually might be a couple of decades off. But I think you’re spot on. I would actually argue that you can actually trace it back to even the telecom routes that started-

Raymond Hawkins: Yeah. I think you’re right.

Irtiaz Ahmad: The early 1900s, right?

Raymond Hawkins: Yeah. Here, here.

Irtiaz Ahmad: Think back to some of the transatlantic routes, back to when-

Raymond Hawkins: Yeah. The first sub sea cable. Yeah, you’re absolutely right. That’s right. That’s the foundation. Yeah.

Irtiaz Ahmad: That’s the foundation and it’s all right through. You go to a telecom hub, like 60 Hudson in New York, or 101 8th, or any of those sites around the US and around the world that are truly these epicenters of where the telecom providers started to interconnect. That was then replicated, I don’t know, 30, 40 years ago by the fiber providers. And then more recently over the last 10 to 15 years, you started to see those build links or those physical hubs where these cable providers and fiber providers all started to intersect, essentially be the early formation of interconnection data centers.

Irtiaz Ahmad: It’s basically people start to say, hey, look, if you’re connecting wires here, maybe why don’t I store my data here? That’s probably going to be the best place for me to send that left and right. And then kind of moving that traffic around. A lot of these things just kind of evolved organically. And this was pre-cloud really.

Raymond Hawkins: Yeah. Here, here.

Irtiaz Ahmad: This was pre-cloud. It was pre-[inaudible 00:16:08].

Raymond Hawkins: Yeah. I do think when people think about, like you just flat out said, we didn’t use the word digital infrastructure just a decade ago. We were talking about cable and broadband, ad we were talking about wireless, but even then it was a much simpler solution and much less a capable solution 11 years ago, 12 years ago. To me, just fascinating how I heard somebody say back in the summer that we’ve seen three years of digital transformation in three months, and how the pandemic has just accelerated so many businesses going, hey, I don’t necessarily have to walk in a building and see all the people in my office to transact business. We can do this virtually. And how that infrastructure to support that has been being built for decades. And to your point, literally all the way back to if we go to the very first telecom connection, a hundred years.

Raymond Hawkins: But I guess how this ties back to Barclays and what we’d like to talk about is, that doesn’t happen on its own, right? That infrastructure investment, that capital comes from somewhere. And how does Barclays look at that? How does it analyze it? How does it choose what businesses to be in? I think that’s the fascinating part that most of us in the data center business, we look at, you talked about 60 Hud center, those kinds of assets, Surmac, that’s a legendary sort of building. But someone had to buy it. Someone had to provide the capital. Someone had to provide the capital to develop it.

Raymond Hawkins: How does that part of the business side… We talk about interconnection and megawatts, and absorption, and leasing rates and Northern Virginia, and the flap in Europe. We talk about all those things, but I don’t think there’s much conversation around how does this all get funded? How does this all get financed? And we’d love your insight and expertise to share, how do the capital markets look at our business? How has it transformed in the 10 or 11 years you’ve been in it? And how do you see it changing, moving forward?

Irtiaz Ahmad: Yeah. No, it’s an excellent question, Raymond. I think we need to go back a little bit in time to think about how it all started. So data standards in particular, into what they are today, didn’t really quite start off from this technology oriented infrastructure as we just already talked about. They started off back as a service, as a hosting service essentially, late nineties for people who basically host a little bit of maybe their websites in an outsourced environment. That’s really what the outsource data center world looked like. Thinking back to the days of Exodus, post Exodus, some of the other more hosting type environments.

Raymond Hawkins: Right.

Irtiaz Ahmad: Those were, at that time, looked at as more technology or technology services, assets, not so much as these hearty, hard asset data centers or infrastructure categories. You had a couple of these assets start to then take a little bit of a different flavor. The likes of Digital Realty kind of spawning out around the world. I think about cloud [inaudible 00:19:10] global switch, starting to form. And those take more of a real estate vein. And then you had Equinix starting off more of its connectivity centric pieces around, hey, you want to be in these core interconnection hubs and build a thesis around ecosystems and connected data.

Irtiaz Ahmad: So to answer your question, you really have to look back in time as to how they were all funded back then. roughly speaking, I’ll say there are a couple of categories about 10, 15 years ago. You basically looked at them as technology, or you looked at them as real estate. And those were the two lens’ from an investors perspective that people came into it. There’s a third bucket that people looked at, which was communications. And that was more the likes of Equinix and some of the other more conductivity oriented players around the world.

Irtiaz Ahmad: It hadn’t quite all converged. A couple of forces happened that led to that convergence. Around, I’d say 10 years ago when [inaudible 00:20:08] and the cloud started to really come up, you had essentially an acceleration of the need to outsource. Enterprises, which typically have had their data centers in house started to figure out, well, maybe the cloud’s not so bad. Maybe I need to think about moving some of my data out there, or maybe it’s to a outsourced colo environment.

Irtiaz Ahmad: And as that evolved, you had an environment where new providers started to come off these smaller platforms that were experiencing a tremendous amount of growth both from enterprises, small, medium sized businesses, across the US globally. And that led to a lot of private equity funds thinking, hey, look, data centers’ a nice asset class, growing really nicely. They’ve got three to five year type contracts. Still kind of a hodgepodge between folks looking at it from technology communications or real estate type of investor mindset, but playing into that thesis from a traditional private equity investor.

Irtiaz Ahmad: It started to evolve a little bit further about five years ago. And I think that’s one of the current iteration of at least equity investors, equity capital sits today, which is about five years ago. And I remember very clearly working with some of the infrastructure funds. They were starting to evaluate this space around that time. There was a view that maybe this is not just tech. Maybe it’s just not comm. Maybe it’s not just real estate. Maybe it’s like all three of those things plus a fourth category, infrastructure. We talked a little bit earlier, dozens of years, a hundred years even. It takes a long time for some of these things to build and curate.

Irtiaz Ahmad: And really today, if you think about what has really kept us going over the past 12 months at this point almost, it’s not the highway. It’s not the [inaudible 00:22:03]. It’s the fact that we’ve got these fiber gateways connecting us all that allows us to talk and do business, see our family and friends. And really that infrastructure investor mindset started to take hold around the 2016 type of timeframe. And that led, over the course of the last four years, to a tremendous uptake in activity and an inflow of equity capital to back expansions across multiple asset categories within the data center universe. All the way from, hey, here’s a single tenant triple net, more real estate, hard asset real estate type data center, to more of a hybrid managed hosting, managed services, a co-location type data center.

Irtiaz Ahmad: And then finally, to the likes of more of a pure hyperscale, I’m going to do a 15 year type of lease to basically house an Amazon data center. And once you park your assets here, I’m going to walk away essentially on a very light touch operational basis. So all these different categories of models led to a proliferation of equity capital from infrastructure funds, pension funds, sovereign wealth funds, who raised a half a billion dollars a couple of years ago from Mubadala, which is a sovereign wealth fund based out of Abu Dhabi for a business here in the US called Cologix, owned by Stonepeak.

Irtiaz Ahmad: And I think it’s very indicative of the type of capital that’s now currently in the space. And you really have a diversity of equity investors today that you didn’t have in the past. And I think it’s appropriate. I think it allows multiple types of business models to operate efficiently. I think you’ve got the traditional private equity guys who are a little less involved, but they’re looking at international opportunities. You’ve got the infrastructure bonds who are looking at a lot of the hard asset, longer term contracts. And then finally, you’ve got some of the pensions and sovereign wealth funds who are looking for a more passive, a steady state, risk adjusted type of business profile.

Irtiaz Ahmad: That’s that on the equity side. On the debt side, there’s been a lot of evolution as well. Used to be primarily smaller operators, or even for the large public in the form of, hey, you’ve got one or two of these investment [inaudible 00:24:29] data centers. [inaudible 00:24:30] Realty and Globals, which were the two big ones and still are. But you’ve got a couple more now, primarily funded with syndicated debt, so banks like ourselves can go out and raise capital from institutional investors, the likes of Fidelity and BlackRock and others. We’ve put some on our own balance sheet and lend that out.

Irtiaz Ahmad: It’s evolved a little bit in the last few years to a new category of funding, for particularly the hard asset, longer term tenor contract data centers, which is the advent of securitizations. Securitizations used to be a play more so in the tower space 10, 15 years ago. But over the last three, four years, we’ve been able to manifest that more into the data center space. And what that’s really allowed is to allow an incredibly robust leverage profile with a very, very attractive, low single digit cost of capital in investment grade rating, which gives a lot of fuel to the operators that are able to put that structure in to go expand broadly, as well as be able to be competitive with their lease pricing. And then ultimately drive home returns that are appealing to the shareholders.

Irtiaz Ahmad: So long winded answer, but the industry has gone through quite a few pieces of evolution here to get to where we are. So hopefully, I don’t know if that answers your question or not?

Raymond Hawkins: No, that was super good. I’m going to add a few more clarifying, but that was excellent. Love getting both the equity and the debt side, and also the historical perspective. Irtiaz, I think you said something there at the very beginning that I think is super important. We, as a global community have managed to stay connected, not because of the traditional infrastructure plays. I think it is highlighted that technology is indeed infrastructure, right? Because to your point, we’re not getting on boats. We’re not getting in on trains. We’re not flying anywhere. We’re doing very little driving on the highway. So all the traditional, or not all, but many of the traditional infrastructure assets, airports, seaports, and those kinds of things are limited in activity, certainly from moving people back and forth.

Raymond Hawkins: And so we stayed connected through the infrastructure of the 21st century, this digital infrastructure, this technology infrastructure. And I think that feeds into, hey, now as infrastructure funds think about investing, that this just galvanizes the notion that yes, digital infrastructure is global infrastructure. It is. It serves as important, if not more important a connecting function to mankind that a port or a railway or a highway would serve. I think that the way you described it has crystallized that for me. We are in the infrastructure business and it is allowed us to stay connected the last year.

Irtiaz Ahmad: No, that’s absolutely right. And look, we talked a little bit about the private investors, but that equity. But what’s worth noting as well is that on the public side, it’s very clear the public investor appreciates the logic of what you just said, Raymond, which is that, yes, the cloud is very attracted. Yes. There’s a lot of credibly high growth software type plays that have experienced a large run-up in their share prices in the last year through the COVID crisis. People realized, well, look, what do you need to stay connected? You need Zoom. What do you need to work out? You need Peloton.

Irtiaz Ahmad: But you need to house the gears that function that, that make all these things fuel in like a physical box somewhere. You still need to house it somewhere, and that’s obviously had a big impact on the data center stocks over the course of 2020. And I’d say in the last few years, there’s been a growing appreciation amongst the public investor base as to the value of data centers. But given a lot of these were more [inaudible 00:28:37] oriented, it was more from, hey look, I’m an investor that invests into multi family homes, into hospital, real estate, into shopping malls. And guess what? Data centers are a little bit higher growth than all of this, so this is how I’d allocate it. That was kind of the overarching thesis.

Raymond Hawkins: Yeah. Sort of, I’m already a real estate investor and this is another part of my real estate portfolio. More that than I want to be in the digital infrastructure business. Yeah. I think that’s a good point, absolutely.

Irtiaz Ahmad: That’s exactly right, Raymond. That’s exactly right. And that started to change a little bit with more mainstream appreciation of data centers the last, say 12 to, I think it started a little bit before COVID to be honest. But I think during COVID, it really caught. One of the easy ways to foresee that is there’s been a lot more ETFs that have been created to track the data center space. Just generally speaking, it’s not just the institutional investors that you see talking about it in the public realm when we see press reports about data centers now. It’s also coming a little bit more mainstream now to folks who understand, well, data centers are a key asset class. I think about, well, I want to invest in high growth software or high growth cloud, gaming and then data centers as well.

Irtiaz Ahmad: The next one, which we’re just starting to pick up, and I mentioned earlier is around the edge. That’s the new buzzy word that’s starting to get some mainstream traction.

Raymond Hawkins: Yeah. It’s interesting, Irtiaz. I get occasionally asked what we do by friends that aren’t in this business, and try to explain the business. And at the end of the day, you touched on earlier, we’re just in the warehouse business. But we warehouse ones and zeros. There are warehouses that carry food and cars and other goods. We’re the warehouse business, but we just warehouse data. And I’m grateful that I’m in an industry that the goods that we store are doubling every year, and that’s an exciting place to be. And I think that it’s only accelerating. Digitization only continues to expand. And getting to be in a business that has to provide a home for that is a great place to be. I think it’s as about a pure bullish play as you can get on, are you bullish on digital transformation? Are you bullish on technology continuing to grow? Which I am. And you’re starting to another path with the edge, right?

Raymond Hawkins: Clearly the edge, as 5G becomes a real thing and the amount of bandwidth that we can get out and into an individual’s hand, it’s going to change what we do there. And we’re going to have to move where compute goes. 30 years in the compute business, we’ve moved compute around. We’ve consolidated compute. You talked about service bureaus and people that you got services from two or three decades ago. And then we distribute the compute out to individual enterprises, and then we pull it back in and then we push it back out. I think the edge is another transformation of distributing compute out to where that bandwidth and that demand and that user is going to be, and it’s going to transform the infrastructure business, but transform it only in the number of locations of warehouses. The data proliferation is going to continue.

Irtiaz Ahmad: That’s right, Raymond. That’s right. And I think it’s going to be really interesting over the next few years as we start to figure out what is the edge? What does it mean? Just similar to how about a decade ago we had that discovery process with the cloud. It’s what is the cloud? How does the cloud work? And then perhaps the most important thing, what could we do with the cloud? And it’s similar to how we saw kids in their parents’ basements, in their dorms meeting apps that leverage the benefits of the cloud springing up about a decade ago. It’s going to be really interesting. And it’ll probably mimic somewhat of that same kind of app develop and curve in terms of how the use cases for the edge start to emerge in the next few years as we kind of go down the road of 5G becoming more mainstream and having some platforms ready to go to support those applications.

Raymond Hawkins: Yeah. I, for one, Irtiaz, I’m excited to see things that neither you or I can think about today that are going to be a thing. When my children who are in their twenties ask me, when they were middle-aged adolescents, they would say, « Dad, at what age can I have a cell phone? » And their ask was that, « Dad, what age did you get a cell phone? » And I told them, « Well, I got a cell phone at 21. » And they’re like, « Oh, my. Your parents must have been horrible? » And I’m like, « No, sweetheart. That’s when cell phones actually became available to the public. Dad was already in his twenties. » They can’t even imagine a world where there wasn’t cell phones.

Raymond Hawkins: And I think that the things they’re going to see, and the things that they’re going to… TikTok. Let’s go back seven or eight years ago. Did anybody think that there’d be an app where we watched eight second or 10 second videos of each other, just take over the world from an entertainment perspective? YouTube. There’s so many applications that I’m laughing about not getting a cell phone until my twenties. I think there’s going to be things done that are going to change the technology experience and change what we do and change how we view technology, and where we consume technology that we can’t even think of today powered by this distribution of compute power and the edge, which you’re talking about.

Irtiaz Ahmad: It’s spot on. I like to think of data centers, you use the word warehouses. I like to think of data centers as essentially data factories. They’re the factories of our current world, right?

Raymond Hawkins: The plant and equipment of the data infrastructure world. That’s a great way. That’s better than warehouse. That’s better. Yeah.

Irtiaz Ahmad: Well [inaudible 00:34:22]. In my mind, because you’re not just warehousing the data, you’re also processing it and then shipping out the goods.

Raymond Hawkins: So Irtiaz, there’s nothing better than having your mind changed. I’ve used the warehouse analogy for several years. And you’re the first person that said, « Raymond, it’s not warehouse. It’s really manufacturing. » And that’s better. I think plant and equipment or manufacturing, because you’re right. Stuff gets processed. Stuff gets changed. Stuff gets modified. We’re not just a passive, the digital infrastructure business, the data center business, it isn’t. That’s a better way to think about it. I like that. I like having my mind changed. Good stuff. Yeah. It takes guys from Georgetown to do that, guys with economics degrees. I can only read books about economics. I can’t get my arms around it.

Irtiaz Ahmad: I think it’s probably the 10,000 hours of Zoom calls that we’ve had over the past 12 months. I don’t know if I can even lay credit to it. It may have been somebody who I was speaking with somewhere around the world, who knows, that quoted it and just stuck in my head.

Raymond Hawkins: Yeah. No, it’s good. I like it. I like the whole factory or plant equipment part. That’s really good. Irtiaz, really grateful to have you join us. I appreciate you spending a little time with us. I will tell you once the listeners get to know people, I’d love to have people come back. I can think of two other subjects that we could have entirely different calls on. If you’re willing to entertain, join us in the future. I would love for you to talk about SPACs. They get a lot of publicity today, whatever Barclays is willing to let you talk about. I think for me personally, that would be a fascinating subject. How we wind it back into the data center business, I’m not sure.

Raymond Hawkins: And then I would definitely with a friend of mine having a degree in economics, I’d love to have the Keynesian versus the Austrian economics conversation. And we could do a series of podcasts on that. So things to think about for future dates with us, if you’re willing to join us again.

Irtiaz Ahmad: More than happy to, Raymond. And thanks for having me on. To be honest, I thought you were going to ask me about SPACs on this particular one. So I did prep a little bit for that one, but save it for the next session.

Raymond Hawkins: There you have it. I think in the business, they call those teasers. Listen again in the future as the Barclay’s head of global data centers explained SPACs. You can’t miss that one. So Irtiaz, thanks bud for joining us. I appreciate it.