Upzoned – Will Elon Musk's Data Centers Actually Help Memphis?
Host: Abby Newsham
Guest: Asha Mieliszko (Strong Towns Blog Editor)
Date: November 5, 2025
Main Theme:
Deep examination of Elon Musk's massive AI data center expansion in Memphis, focusing on economic promises, risks, and lessons for urban development, using the Strong Towns lens of incremental vs. “shiny object” approaches.
Episode Overview
Abby Newsham welcomes new guest Asha Mieliszko to analyze a headline-grabbing story: Elon Musk's xAI is making a multibillion-dollar bet on building two gigantic data centers ("Colossus" and “Colossus 2”) alongside a new gigawatt-scale power plant near Memphis, Tennessee. Local leaders tout these as an economic boon, while critics flag severe environmental, social, and fiscal risks. The hosts use this moment to explore deeper issues about megaprojects, economic fragility, and how cities should actually pursue prosperity.
Key Discussion Points & Insights
1. Background on the xAI Memphis Data Centers
- Elon Musk's xAI aims to catch up with AI rivals (OpenAI, etc.) and is transforming an industrial site near Graceland into a hub for massive computing and energy consumption.
- Facilities will cost tens of billions, use hundreds of thousands of Nvidia chips for Grok (xAI's chatbot), and be fed by a new power plant.
- Memphis local leaders cite xAI becoming the 2nd-largest taxpayer in the city, touting promised investments in schools, recycling, and neighborhood appearance.
- Yet backlash centers on scale (power and water consumption, pollution, rushed permitting), and doubts whether benefits flow to residents or mainly to the company.
- Musk claims data centers/AI will eventually need as much energy as "the sun or even the galaxy" ([05:40]).
Notable quote:
"Local leaders of Memphis tout this arrival as a major economic boost... but the project has also drawn environmental and community backlash." —Abby Newsham [05:00]
2. The "Pros and Cons" Trap & The Economics of Mega-Projects
- Many (including the Wall Street Journal article) frame projects in a pros-and-cons list, but this can paralyze true debate and reflects how cities frequently make decisions.
- Abby: Public officials may not grasp the scale or long-term impacts; the conversation is easily swayed if the “pros” list is just one item longer ([10:14]).
- Asha: These mega-projects are often justified as rare chances for "renaissance," but frequently overpromise.
- Data centers bring only a few hundred jobs (200–300), demand millions of gallons of water daily, and use more power than all city households combined.
Notable quote:
"All it takes in a pros and cons list is for the pros side to be one item longer. And I don't think that sets you up for a very productive discussion." —Asha Mieliszko [09:40]
- Abby: True economic value should be measured per acre; large projects can be less efficient for local prosperity than more incremental, distributed investments.
3. "Shiny Object Urbanism" vs. Incremental Development
- Asha brings in Panther Island (Fort Worth) as an example of cities chasing big, flashy projects while ignoring simpler possibilities (i.e., redeveloping surface parking downtown) ([13:26]).
- Cites a Memphis resident:
"Memphis is desperate. And this is not the first time they have been so desperate for companies. They come in and promise them the world." [16:10]
- The Bass Pro Pyramid in Memphis is another past boondoggle—massive funds spent, surrounded by parking/asphalt, consistent underperformance ([15:30]).
- Incremental approaches (like South Bend’s revitalization) are positioned as more reliable, resilient ways for cities to invest and support residents.
4. Economic Fragility, Fiscal Dependence, and Who Truly Benefits
- Abby: Memphis risks becoming dependent on a "volatile company led by a single billionaire" ([18:16]). If xAI leaves or falters, city left with unproductive infrastructure.
- Infrastructure upgrades (power, water, roads) often end up a public cost, creating “infrastructure debt traps” as seen in other U.S. megaprojects.
- Data centers’ economic impact is narrow—little local job creation (barely more than a modest Main Street), but massive policymaking influence.
Notable quote:
"A massive one time private investment doesn't guarantee long term financial strength for a city."
—Abby Newsham [18:17]
5. Deciding How to Invest: Outcomes-First Thinking
- Asha references South Bend, Indiana, which reinvented its economic development by focusing on many small improvements, not just downtown or “shiny” projects ([27:00]).
- Tim Corcoran, South Bend’s Director of Planning: advocates for “outcomes-first” thinking—identifying desired end goals for the community, and working incrementally toward them ([40:30]).
- The lesson: Rather than chase massive, top-down boons, Memphis and similar cities should support small, distributed investments where people live, creating self-sustaining wealth and resilience.
Notable quote:
"Truly, what do you want in the end? And I think Memphis has to ask itself that question."
—Asha Mieliszko [41:35]
6. Power, Politics, and Responsibility
- Over-reliance on big taxpayers gives them undue control over budgets, public priorities, and future investments.
- Corporate subsidy/rebate programs for utility infrastructure often shift the cost burden to ordinary citizens.
- The pace of the project is a concern—city, chamber, business lobby pushing a “concierge service” to rush every stage ([20:45]).
Notable quote:
“It gives them a lot of power over the basic public services that should be sustainable, but rather is being outsourced to… the whims of larger companies.” —Abby Newsham [24:34]
7. Will Data Centers Be a Lasting Good? Or Another Asset Bubble?
- Hosts question whether current data centers/AI craze will be a “bubble” or enduring. Will jobs, tax revenues, and utility commitments remain beneficial 20, 50, or 100 years out? ([32:16])
- New technologies can outpace city codes, and what is seen as a windfall today may be a burden when business models or tech shifts.
8. Is There a Better Way Forward?
- Use “outcomes-first” and Strong Towns’ incremental model:
- Identify community struggles
- Ask: “What is the next smallest thing we can do?”
- Act on it, repeat ([35:40])
- Avoid the temptation for one-shot “transformative” solutions; build prosperity through continuous, distributed effort.
Notable quote:
“…small steps…are so much more powerful…even when XAI ends up being Memphis’s biggest taxpayer…there’s all this missed opportunity—why wasn’t anything done in the last 20…30 years?”
—Asha Mieliszko [36:50]
Memorable Quotes & Timestamps
-
“[The] pitch for these projects is economic development. The language around them is centered around that. And I think that’s a good place to start.”
—Asha Mieliszko [07:20] -
“The speed is a huge part of this story…not just Musk trying to rush this through, but the Memphis Chamber…really trying to accelerate every aspect…”
—Asha Mieliszko [20:45] -
“Growth doesn’t necessarily equal wealth.”
—Abby Newsham [18:20] -
“…something of this sort in a place like Memphis, which really struggles with…poverty…people who want opportunity and feel like the city has not been adequately providing that.”
—Asha Mieliszko [21:05] -
“Downtown is just downtown. It’s not the majority of the city.”
—Asha Mieliszko [30:20]
Insights for Urbanists & Policy-Makers
- Don’t Be Seduced by “Shiny Object” Projects: Megaprojects often crowd out basic investments with more stable, reliable payoffs.
- Incremental Change Is More Resilient: Cities like South Bend have shown the lasting power of many small bets focused on real, everyday needs.
- Avoid Unbalanced Dependencies: Overreliance on a single (especially external) large taxpayer is risky and can backfire long term.
- Assess Plans with Clear Goals: Adopt “outcomes first” thinking—clarify what you really want for existing residents, then design investments to get there.
Referenced Articles & Resources
- Wall Street Journal: "Elon Musk Gambles Billions in Memphis to Catch up on AI" (Alexander Saeedi)
- Substack: “Shiny Object Urbanism” (Panther Island, Fort Worth)
- Strong Towns: Four Step Process, South Bend case study
Final Thoughts
- Rushed, unbalanced projects rarely deliver the transformative effects promised.
- The best antidote: Outcomes-focused, incrementalism—invest in what matters most across the whole community, not just easy-to-market megaprojects.
- As AI/data center development accelerates, cities must resist the urge to accept short-term gains at the expense of sustainable, locally-controlled prosperity.
[End of episode summary – Upzoned: "Will Elon Musk's Data Centers Actually Help Memphis?"]