State Farm’s AI Reckoning

Summary

WSJ Tech News Briefing

Episode: State Farm’s AI Reckoning

Date: July 10, 2026
Host: Imani Moise
Guests: Christopher Mims (WSJ columnist), Jean Eaglesham (WSJ insurance reporter)

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Overview

This episode explores two major tech stories with broad implications for industry and consumers:

1. Hidden Water Consumption of Data Centers: WSJ’s Christopher Mims explains why reported environmental numbers from tech companies may not reflect their true impact, particularly water usage tied to AI and data centers.
2. State Farm’s AI Overhaul: Reporter Jean Eaglesham details State Farm’s sweeping, controversial move to integrate AI across its business model, revealing deep resistance among agents and customers who are concerned about the loss of human touch and operational hiccups.

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1. The Real Water Footprint of Data Centers

Key Points & Insights

• Data Centers’ Stated vs. Actual Water Use
  • Tech companies generally report only “direct” water consumption, omitting the massive, often much larger “indirect” usage required to generate power for their sites.

    "There's another type of water their data centers are using, and this can be 10 times as much water as they're directly using...the water required to generate the power."
    — Christopher Mims [01:48]

• Indirect Water Usage Matters
  • Indirect water is drawing fresh scrutiny as data-hungry AI drives a boom in building new infrastructure, often in already water-stressed regions.

    “With the exception of Meta, companies...don't report it...many data centers are being placed in areas that are already water stressed.”
    — Christopher Mims [02:24]

• Sustainability Offsets: Not the Full Story
  • Companies tout “water restoration projects” but these typically only balance out direct usage, not the water used at power plants fueling the servers.

    "They're going to put back a gallon of water for every gallon that they directly use in their data centers. But again, this doesn't account for indirect water use."
    — Christopher Mims [02:59]

• Location Matters
  • Placing data centers in arid areas and sourcing electricity from local, water-intensive plants strains already limited supplies.

    “If you are drawing water from the Colorado river and the desert southwest, there's only so much water available.”
    — Christopher Mims [03:48]

• Challenge of Comprehensive Measurement
  • No standardized way exists to account for total (direct + indirect) water use, as each center’s impact varies by geography, energy mix, and other factors.

    “The challenging part is every single one of these is different... It would have to be calculated individually for every single data center.”
    — Christopher Mims [04:20]

• Consumer Takeaway
  • If a data center is proposed locally, residents should question not just water cooling but also where the power comes from, as true impact could be vastly understated.

    "The actual all in water use of that data center could be 10 or 20 times greater than what is reported."
    — Christopher Mims [04:58]

Notable Moment

• Big Takeaway:

  “If you live in a water stressed area and somebody proposes building a data center...the next question should be great, where does the power for that data center come from?"
  — Christopher Mims [04:58]

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[06:44] State Farm’s AI Reckoning

What Happened

• Surprise at the Vegas Convention
  • Thousands of State Farm agents, expecting a congratulatory event, instead faced sweeping changes: a new contract, health/benefit changes, updated pay structures, new sales targets, and, notably, heavy AI integration.

    "Backlash from both agents and customers was immediate."
    — Imani Moise [06:44]

• What’s Changing
  • Decades-old, agent-driven sales model is shifting to more AI-driven tools and increased online self-service for customers.

    "State Farm has for decades had this pretty old fashioned business model...they're using AI to transform really how you can buy insurance."
    — Jean Eaglesham [07:29]

Agents’ Reaction

• Shock and Betrayal
  • Agents, classified as independent contractors but locked to selling only State Farm products, felt blindsided and described feelings of betrayal and broken trust.

    "Agents have been stunned by this...words we hear again and again are betrayal, broken trust. They feel blindsided by it."
    — Jean Eaglesham [08:11]

  • Many feel offered a take-it-or-leave-it deal with inadequate buyout payouts for those quitting.
  • Internal memos show State Farm is now in “listening mode” but remains set on its new direction.

    "State Farm says it's in listening mode...but it says the general direction it's set on, it's going to continue with this."
    — Jean Eaglesham [08:11]

The Tech Hurdle

• “Great Insurance Company, Horrible Tech Company”
  • Agents report early problems: AI tools built atop old systems can provide inaccurate customer info. Example: The new “Household Story” tool sometimes offers wrong policyholder data.

    "One of them said it's a great insurance company, it's a horrible tech company."
    — Jean Eaglesham [09:23]

  • Chatbots and virtual assistants frustrate agents; sometimes answers are outdated (e.g., Super Bowl winners’ data is two years old).
  • Agents want useful, functional AI, not just new tools for the sake of modernization.
• Pay Cuts and Uncertainty
  • Resistance is compounded by dissatisfaction over pay model changes tied to the tech overhaul.

Customers’ Perspective

• Overwhelmingly Anti-Chatbot
  • Thousands of customer responses after the WSJ’s story show that people hate insurers’ existing automated systems and crave real human contact.

    "People hate being stuck on these automated answering systems. They don't like the tech...they want to deal with people."
    — Jean Eaglesham [10:53]

Societal Context

• Reluctant Acceptance of AI
  • Most people accept AI is inevitable, but fear the loss of real relationships and nuanced human touch in customer service.

    "A lot of people are really worried about how AI is upending life, how it's automating so many things, how it's impacting relationships."
    — Jean Eaglesham [11:23]

Light-Hearted Moment

• Is Jake from State Farm Safe?
  • The company’s mascot (and human actor) remains part of the brand despite the AI push. He even made an appearance at the convention, “a lot of happy selfies.”

    "Jake from State Farm I think will still be there...they're going to try and keep that. Jake is still going to be there. Whether we get an A.I. Jake, we'll wait and see."
    — Jean Eaglesham [11:59]

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Timestamps for Key Segments

| Segment | Time | |---------------------------------------|----------| | Data Centers’ Hidden Water Footprint | 00:19–05:36 | | AI Overhaul at State Farm Begins | 06:44–12:21 | | Agents’ Reaction & Tech Struggles | 08:11–10:40 | | Customers’ Feedback | 10:45–11:16 | | Societal Attitudes Toward AI | 11:16–11:51 | | "Jake from State Farm" Discussion | 11:54–12:21 |

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Notable Quotes

• Christopher Mims [01:48]:
  “There's another type of water their data centers are using, and this can be 10 times as much water as they're directly using...the water required to generate the power.”
• Jean Eaglesham [08:11]:
  “Agents have been stunned by this...words we hear again and again are betrayal, broken trust. They feel blindsided by it.”
• Jean Eaglesham [09:23]:
  “One of them said it's a great insurance company, it's a horrible tech company.”
• Jean Eaglesham [10:53]:
  “People hate being stuck on these automated answering systems. They don't like the tech...they want to deal with people.”
• Jean Eaglesham [11:23]:
  “A lot of people are really worried about how AI is upending life, how it's automating so many things, how it's impacting relationships.”
• Jean Eaglesham [11:59]:
  “Jake from State Farm I think will still be there... Whether we get an A.I. Jake, we'll wait and see.”

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Takeaways

• Environmental claims in tech must be scrutinized for hidden impacts—particularly indirect water usage.
• State Farm’s move to AI has triggered a fierce backlash from both employees and customers, highlighting the enduring value of personal relationships in service industries.
• Despite the corporate drive toward AI, the desire for genuine human interaction remains central for most people.
• Even as companies automate, brand mascots like “Jake from State Farm” symbolize the irreplaceable human touch that customers crave.

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Transcript

[Rami Rahim]

This episode is sponsored by hpe. Today's networks must evolve from simply providing connectivity to harnessing AI to deliver exceptional connected experiences. At the break, HPE's Rami Rahim shares how self driving networks can make that happen.

[Imani Moise]

Welcome to Tech News briefing. It's Friday, July 10th. I'm Imani Moiz for the Wall Street Journal. Tech giants have long highlighted efforts to reduce their environmental footprint, but many companies are using far more water than they report. We're breaking down why you can't always take a sustainability report at face value, and why tracking how much water data centers actually consume isn't as straightforward as it may seem. Then is Jake from State Farm gonna be replaced with a chatbot? We'll explain how the century old insurance giant is reinventing itself for the AI era and why the changes are sparking backlash. But first, AI is driving one of the biggest infrastructure buildouts in history, estimated to cost $1 trillion for this year. And last, as communities weigh whether to welcome new facilities, measuring their environmental impact is becoming increasingly complicated, particularly when it comes to water. Water consumption is projected to grow rapidly in the coming years, and there's no law that requires companies to report the full scope of their water use. So annual sustainability reports often don't paint a complete picture. WSJ columnist Christopher Mims joins me now to explain why the math doesn't always add up and what you should know if you live in a water stressed area. So large tech companies report how much water they use in their annual sustainability reports, but you found that those figures don't tell the whole story. Why is that?

[Christopher Mims]

Large tech companies only report what's called direct water consumption. What they're not reporting is that there's another type of water their data centers are using, and this can be 10 times as much water as they're directly using in the data centers. And that is the water required to generate the power for these data centers. And it's a big deal because so many of these data centers, especially the new ones, are powered by fossil fuels, which requires quite a lot of water.

[Imani Moise]

So why is indirect water usage getting more attention now?

[Christopher Mims]

Companies have been kind of trying to, I wouldn't say hide it, but they don't report it. With the exception of Meta. One reason indirect water use is starting to get more attention now is that many data centers are being placed in areas that are already water stressed. And frequently the power, because being used by these data centers is being generated by power plants that aren't too far away or may also be in water

[Imani Moise]

stressed areas and some companies say they're offsetting their water consumption with other sustainability initiatives. How does that work?

[Christopher Mims]

So a lot of companies are claiming that through so called water restoration projects, which could be anything, maybe they restore a wetland in order to retain more water, or they're paying to stop leaks in a municipal water system, that they are offsetting the water that they use directly in a given community. And so they're claiming that by 2030, Google talks about this, Amazon talks about this, they're going to put back a gallon of water for every gallon that they directly use in their data centers. But again, this doesn't account for indirect water use at the power plants powering these data centers.

[Imani Moise]

So how does the location of a data center affect water consumption?

[Christopher Mims]

When a data center is in a water stressed area and when it is drawing power from a water stressed area, it can draw down local supplies of water because water is regional. Right? I mean water travels. But ultimately if you are drawing water from the Colorado river and the desert southwest, there's only so much water available.

[Imani Moise]

Are there efforts to standardize water use or consumption reporting? It seems like there's a lot of different ways that this can be measured.

[Christopher Mims]

There are a lot of different ways to measure. But what we don't have a handle on yet is how do you look at the sort of oil all in water consumption of a given data center in a given location. The challenging part is every single one of these is different. The location it's in is different, the climate it's in is different, the mix of power going into it is different. So it's a big job. It would have to be calculated individually for every single data center. And of course it depends on the weather, it depends on the time of day.

[Imani Moise]

So Christopher, what's the big takeaway here?

[Christopher Mims]

If you live in a water stressed area and somebody proposes building a data center in that area and they say, hey, don't worry, we're going to limit the amount of water it uses, the next question should be great. Where does the power for that data center come from? Because if it means that, let's say a coal fired power plant that otherwise be retired is going to stay online is if it means a bunch of new natural gas generation, which is often the case, the actual all in water use of that data center could be 10 or 20 times greater than what is reported.

[Imani Moise]

That was WSJ columnist Christopher Mims. A quick reminder that we want to hear from you. Have you seen an AI generated post that you thought was real? Shoot us an email to tnbusj.com or leave us a voicemail at 212-416-2236. That's 212-416-2236. Or if you're a listener on Spotify, leave us a comment. Coming up, State Farm is stepping into the AI era, but it's having a hard time selling the strategy to its agents and customers. That's after the break.

[Rami Rahim]

Here's Rami Rahim Hpe, executive vice president, president and General manager of networking.

A self driving network is a network that essentially configures itself. And what used to take months, maybe up to a year to deploy can now take weeks, if not days. A network that optimizes itself and very importantly, a network that heals itself.

[Imani Moise]

Thousands of State Farm agents gathered in Las Vegas last month expecting a celebration. Then right at the end of the convention, they got unexpected news that an AI overhaul was about to fundamentally change their jobs and their benefits. State Farm CEO announced a new contract, enacts health benefits and outlined a new compensation deal, sales targets and the addition of AI to the sales process. Backlash from both agents and customers was immediate. And that's raising bigger questions about how Companies can embrace AI without losing the human touch. WSJ's insurance reporter Jean Eaglesham is here to unpack the fallout. What does this AI overhaul look like in practice? Why is it such a big shift in State Farm's business model?

[Jean Eaglesham]

State Farm has for decades had this pretty old fashioned business model where you have a sales office in pretty much every town, sometimes several of them, and people go there, they buy insurance, they get to know their local agent. What the company is now saying in a competitive pressure is it needs to respond to the fact that customers want to do more themselves. They want to be able to buy things online. They want faster, more efficient service. So they're using AI to transform really how you can buy insurance, to give the agents new tools to try and modernize the whole process.

[Imani Moise]

How did agents react to that plan?

[Jean Eaglesham]

Agents have been stunned by this. We've heard from scores of agents and words we hear again and again are betrayal, broken trust. They feel blindsided by it. So agents, they're in a curious position with State Farm. They only sell its products, but they're independent contractors. But they thought that the benefits they had, they thought those are effectively guaranteed. And suddenly State Farm has said no, that's all ending. We're forcing you onto new terms. And it's a kind of take it or leave it deal. And there will be a payoff for those who choose to quit. But agents were saying the amount, the payoff is just not that high. They feel it was poorly communicated. What we've seen from internal State Farm documents now is State Farm says it's in listening mode. It is talking to agents, it's reconsidering some elements of the package, but it says the general direction it's set on, it's going to continue with this. It says the changes that are being made are necessary to effectively future proof the company.

[Imani Moise]

A lot of the agents aren't convinced that State Farm's AI is ready for prime time. What kinds of problems are they running into?

[Jean Eaglesham]

One of them said it's a great insurance company, it's a horrible tech company. And a lot of big insurers are like this. They have old systems, they're layering new tech on top of software that maybe dates back decades. And the new AI tools, what they've seen so far, there are some glitches with it. So, for example, one of State Farm's biggest new products is something called Household Story that gives a snapshot of every customer's household, who the people are, what their financial position is, what their needs are. And agents who've tried it out say, in some cases was inaccurate information from the date you became a policyholder, for example. And we've also heard at the moment, State Farmers, an AI assistant for agents, and one of them asked who won the last super bowl, and the answer they got was from 2024, broadly from agentshood, is that people want to be able to use the advantages of AI to do things faster, more efficiently, more effectively. They want the new tools, they're keen to use them. It's just this question mark. And this issue for all these big companies really is how do you make sure you roll it out in a way that's very effective and make sure these tools actually work? And one of the headaches of State Farm right now is they need the agents to help with that.

[Rami Rahim]

And.

[Jean Eaglesham]

But at the same time, a lot of the agents are up in arms about the changes to their pay.

[Imani Moise]

You heard from over 1,000 readers after your story came out. Many of them were State Farm customers. What do they think about the changes?

[Jean Eaglesham]

What came clear from the responses is that the technology the insurers have right now, particularly chatbots, are driving people crazy. We heard again and again, people hate being stuck on these automated answering systems. They don't like the tech that the insurers have at the moment on their website. Broadly, they want to deal with people, they want to be able to reach a person.

[Imani Moise]

Do you think the response your article received says something broader about where we are as a society when it comes to AI adoption?

[Jean Eaglesham]

A lot of people are really worried about how AI is upending life, how it's automating so many things, how it's impacting relationships. So most of the responses said they accept this was inevitable. They know it's coming, but it doesn't mean they like it. And I think people really want to keep human relationships where they can. And that desire is not necessarily being reflected in what executives at a lot of big companies are doing.

[Imani Moise]

Okay, I have one last very silly question for you.

[Jean Eaglesham]

I always like this.

[Imani Moise]

What about Jake from State Farm? Is he going to be okay through all this?

[Jean Eaglesham]

Jake from State Farm I think will still be there. He was at the convention. The actor playing Jake was there a lot of happy selfies with him with agents. So I think State Farm is saying they're going to keep the human element in this. They recognize it's important that is still key to their sales model. So they're going to try and keep that. Jake is still going to be there. Whether we get an A.I. jake, we'll wait and see.

[Imani Moise]

That was WSJ reporter Gene Eaglesham. And that's it for Tech News Briefing. If you're a listener on Spotify, be sure to leave us a comment. Today's show was produced by Julie Chang. I'm your host Imani Moise. Additional support this week from Danny Lewis, Jessica Fenton and Michael Lavall wrote our theme music. Our supervising producer is Katie Ferguson. Our development producer is Aisha Al Muslim. And Chris Sinsley is a deputy editor of audio for the Wall Street Journal. We'll be back later this morning with TNB Tech Minute. Thanks for listening.

[Rami Rahim]

Here again is HPE's Rami Rahim to explain why it's critical for modern enterprises to use AI powered self driving network.

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