Warsh’s Fed, Vibe Coding, Geothermal Energy, Vegas Bets Big

25:24From the business standpoint, I do think there's this opportunity where companies that have been thinking about things like reverse mentoring, where the younger folks can help the more experienced folks learn how to better use these types of tools. while the experienced folks are able to better help the younger folks understand how the industry works. If AI can write code, then what is the role of the software engineer? Osmani says today it's all about quality. If I want to build a robust engineering artifact, something that's going to last time, something I can ship to hundreds of millions of users or billions of users, there are a lot of things that it needs to factor in.

26:05And so what people in buildings like this are doing all day long are trying to make sure that the code is actually meeting that quality bar so that when we do ship something to you that happens to be using AI behind the scenes, you're actually getting what you want. That's the important thing for the users at the end of the day. They don't care if a human has been authoring it or AI has been authoring it. It doesn't help them get the job done in a reliable way. Is Vibe coding a term that's therefore used? Is it banned within teams? Absolutely not. I think that Vibe coding has a lot of value. Vibe coding is enabling people to go from idea to execution faster than ever.

26:39And it has completely changed how many teams approach prototyping. You know, so many times in the past, in Silicon Valley and lots of places, if you had an idea, you'd go through weeks or months of just discussing or debating, hey, can we afford to build this? Now you can just build it. And I think that it has a very concrete place in our language now. Now, it's just important that you understand that vibe coding a thing does not necessarily mean that you have a production ready artifact that's going to be battle hardened. In Silicon Valley, the test of AI's progress is true autonomy. To start a project in the evening and wake up in the morning to code written autonomously by an AI agent.

27:21A dream for senior software developers and perhaps a nightmare for entry-level computer engineers who would have once done that work themselves. But for us non-coding mere mortals, the moment could be ripe to do what mankind is best at, building and creating.

27:43Up next, journey to the center of the earth, or at least toward it. geothermal may be an important part of what gets us the energy we need to power all that ai

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29:39This is a story about resourcefulness. In the quest to feed AI data centers, the U.S. is looking to get more power from just about everywhere it can, from fossil fuels to wind and solar to nuclear. But it turns out that an important part of the puzzle lies beneath our feet. Our colleague Michael McKee takes us into the promising and developing world of geothermal energy. This is not a goldmine, but in an age of power-hungry data centers desperate for energy, it might be even better. So what are we looking at here? The Ormat geothermal power plant in Steamboat, where we have to generate electricity.

30:23How much electricity do you produce here? In the entire Steamboat area, we've produced between 80 to 90 megawatts. That's enough to power more than 50 ,000 homes in a small city. Ormat Technologies is one of America's largest geothermal companies, with plants throughout the Southwest, the hotbed of the country's geothermal activity. These are the heat exchangers. Daron Blachar is the company's chief executive. We operate 24-7 every day, regardless of the sun, regardless of the wind. And that's the main benefit that you get from geothermal. A steady, 24-7 electricity. Led by the hyperscaling of AI installations, electricity demand in the U.S.

31:07is projected to grow by as much as 20 percent over the next decade. Analysts say that means the country needs an all-of-the-above approach to power generation. And on the list of potential sources, geothermal stands out for being a clean source of constant or baseload power. We need baseload power, and that's the sweet spot that geothermal brings us. You don't have to worry about it if the sun's not shining, if the wind's not blowing. It allows that base load that every grid needs to operate. So far, geothermal is just a small piece of the U.S. power generation mix, producing less than 1 % of total utility-scale electricity.

31:50But demand and technology are changing the outlook. Geothermal energy is the heat of the Earth. and it's been used for millennia. Hot spring systems were used by the cavemen to cook their food. Until now, the industry has largely been confined to the rare places where hot water and permeable rock come together in underground reservoirs, like this site outside of Reno, Nevada. Now, enhanced geothermal systems, or EGS, have the potential to give nature an assist. Much of the work has been pioneered at Utah Forge, a Department of Energy-funded field lab. Joseph Moore is its principal investigator emeritus.

32:34The conventional geothermal systems, these are also called hydrothermal systems or hot spring systems, have the natural fractures that allow water to move through the rock, extract heat, and then come to the surface. enhanced geothermal systems are not associated with hot springs. These are areas where fractures don't extend to the surface and are not abundant enough to allow water to circulate in the subsurface. We have to make the fractures in order for the water to move through them. And this can be done almost anywhere in the world if we drill deep enough to reach the temperatures that we need.

33:21Typically these temperatures are in the order of 400 degrees F and higher. To do that, EGS companies are turning to the oil and gas industry, which increased production by inventing the technique of fracking. The fracking actually creates that permeability that you need to flow the water through the rock in order to harvest the heat. Cindy Taff is the CEO of Sage Geosystems, a next-gen geothermal and energy storage company. After spending 35 years at Shell, she is now using her knowledge of oil drilling to partner with ORMAT. We're going to be drilling adjacent to their conventional geothermal field and then putting our production, which will be hot water, into an existing power plant.

34:10And the reason why we're excited about that is it It expedites our ability to have a commercial project by at least a year and a half because we don't have to acquire land. We don't have to build a power plant. We don't have to have a grid interconnection. We're going to be drilling the wells later this year, if not early next year, depending on the permitting timeline. And we're going to be flipping the switch in 2027. And so this partnership is really going to open up the ability to scale commercially around the world because of ORMAT's footprint. If SAGE can provide the hot water, ORMAT will use it to generate power.

34:48We signed with them a collaboration agreement, basically allowing us, once they are successful, to use their technology and build a power plant. Joining forces with SAGE, having them bring the experience and knowledge from the oil and gas industry, combining with the geothermal that we bring, we do believe that we get a winning power plant. As the technology begins to prove itself, other private capital is moving in behind it, with next-generation geothermal attracting more than$1.5 billion since 2021. A company called Fervo now has their drill site located very closely to the forge site. They're drafting off of that new technology.

35:29It's gotten better and faster and cheaper already. And so that's how these things are working together. Now, Fervo has a 400 megawatt plant that they're building right now, which is incredible. The investments are there. And so it's going to take less subsidies because these companies don't need the subsidies. They just need the power and they need it really quickly. In Utah, Governor Spencer Cox wants to make his state an energy and business hub, with geothermal an important part of that plan. We understand the demand for energy right now. It's why in Utah I launched something called Operation Gigawatt about two years ago.

36:08We know we have to double Utah's energy production over the next few years in order to compete with the rest of the world and to make sure that our citizens have the technological advancements that are happening out there and that they have low cost. It helps Utah and Nevada that much of the land where EGS Geothermal can be developed belongs to the U.S. government. And the Bureau of Land Management is making more of that land available. Demand is running ahead of supply. Average leasing prices paid surged almost 300 percent last year. That's one of the things that we're finding out. Look, there are a lot of states who give giant subsidies away to attract businesses.

36:46We're not like that in the state of Utah. We do have some subsidies like every state. But we understand that what people really need is speed, and they need assurances that we're not going to pull the rug out from under them, that we're not changing our regulatory scheme every few months. that it's a place where it's easy to do business and deploy capital. Geothermal is also politically palatable. At the same time that Washington is opening up more land for geothermal development and continuing tax credits supporting it, it's pulling back support for wind and solar. It's one of those rare forms of energy where there's no opposition at all.

37:25The far right is opposed to wind and some solar. The left is opposed to coal and some nuclear. Finally, we have this energy source that everybody believes in, that everybody loves. We just didn't have a way to produce it at scale in enough places. And because of human ingenuity, because of this abundance mindset that we're starting to get as America again, we're getting baseload power at scale that prices are coming down because the technology is getting easier and cheaper and faster. Still, as with any source of power, there are risks that come with geothermal energy. Most important, concerns over access to water and its use.

38:09T.D. Cowan's sustainability and disruptive technology analyst Jeff Osborne covers ORMAT. Geothermal historically is out in the middle of the desert, typically in vast expanses of land and not the most accessible for water. So a big risk for investors to monitor is where's the water going to come from? And if we need an additional water source, is that available as a backup plan? And what's the cost of that? And what's the political ramifications as it relates to future permitting approvals? And so as we move into new geographies that maybe are less familiar with geothermal, thinking like a state like Texas, that the water availability in West Texas, where some of these data centers are coming in, is certainly going to be an issue.

38:56And so that's where learning comes in from some of these initial projects that are being done by the likes of Fervo and what Ormant will have with the Sage and Schlumberger partnerships. They'll be able to take some of that data and then hopefully convince, A, investors, but B, both local and state level politicians that this is something that should be approved to move forward with. Typically, things around water and grid interconnection are two of the key punch list items that investors are going to want to understand. When does it start producing a profit for investors? Once it starts, we can start scaling, which actually is very soon after this first commercial pilot.

39:40I would say we can scale in the next two or three years to 400, 500 megawatts. that's when the returns will really come for investors because as you scale of course you can drive costs down because of the efficiencies of during scaling. We have a term sheet with meta for 150 megawatts for one of their data centers. They're already in need for more power at that data center because some of the solar production has dropped out and so we've got an agreement with them. We're also working with the Department of War and they're very interested in behind the fence power that's easily defendable and because a lot of our equipment is below ground and it doesn't have a big surface footprint it will help to solve the supply demand mismatch that you currently see in the power markets.

40:32Being base load there's a huge demand. Geothermal is just a huge untapped resource. Next generation systems could be a game changer in the renewable energy industry, especially if everybody is on board. Good news is that Democrats support this now. So this used to be just a partisan issue. It was just Republicans who cared about this. Now it's a bipartisan issue. Members of Congress from both parties are pushing towards this. This is a technology that is bringing us all back to the table, bringing us all together, bringing investment at every level. And I think the future is bright for our country.

41:12Coming up, playing the odds, whether it's in a casino or in what's next to the casino, Las Vegas is reinventing itself yet again. Vegas as a whole is extremely elastic. Vegas isn't going anywhere.

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43:07This is a story about taking a chance, having a shot at wealth and success, something at the heart of what many consider the American dream, and something built into the very foundation of Las Vegas, Sin City, which for over a century has drawn visitors from all walks of life.

43:33What brings me to Vegas? Well, my husband and I were married here. We're here on a girls' barcage. We came here to party. We partied. You see, we've got pirates coming from all around the world. Beneath the bright lights and the constant buzz of the Strip, the city itself is taking a chance at reinvention as signs of slowdown in its core business start to surface. To understand the Las Vegas of today, you have to go back to where it all began. And few have followed that story like screenwriter and journalist Nick Pelleggi. After the Second World War, with the air conditioning, allowing these places to remain open 12 months a year, and aviation advancing, it changed the whole economy of going to Las Vegas.

44:22And it allowed people to begin to invest money. It was the only place in America where you could gamble legally. Every illegal bookmaker all around the country, all of whom were fully operational and had all the political and police connections they needed to operate in the open, really. They all went to Las Vegas where they were legit. It was an amazing moment. It was the start of the infamous mob era, a world Pelleggi would later chronicle in the Academy Award-nominated film Casino. Who could resist? Anywhere else in the country I was a bookie, a gambler, always looking over my shoulder, hassled by cops day and night.

45:05But here, I'm Mr. Rothstein. I'm not only legitimate, but running a casino. And that's like selling people dreams for cash. All of us have heard about the time of the mob in Las Vegas. How much of that is myth and how much of that is reality? Well, it's mostly reality. When it came time to open casinos maybe or expand casinos in Las Vegas because of air conditioning and the new aviation, where were you going to get that cash? Who was going to invest? Banks were not investing in casinos because casinos were immoral. So you couldn't go to a real bank. You couldn't go to Jamie Dimon and say, I need$200 million.

45:44So the only cash you really had came in cash from the men who had originally made their wealth in prohibition. And they were doing legitimately what they had been doing basically illegitimately. It's really a sort of slice of the free enterprise system at work. And it just kept getting bigger and bigger until it got so damn big, the government said they were making too much money. and the government legalized illegal gambling and has taken it over. And of course, not dealing with it as well as the mob guys did. From mob money to corporate capital, Las Vegas kept evolving. But now, in the age of online gambling, when a casino fits in your pocket, what's next?

46:33Fed President Mary Daly oversees the Federal Reserve's western region. The economy of Las Vegas is the kind of economy that if the U.S. sneezes, it usually gets a cold or maybe the flu. And so we're seeing some of the things that are playing out in the U.S. economy play out here in Vegas. I think that the Vegas residents are a little worried about that. But, you know, Vegas reinvents itself regularly, so they're not depressed. At the center of Las Vegas' latest reinvention is entertainment. and one of the biggest players is the Tao Group, a hospitality and entertainment company known for operating restaurants and nightclubs.

47:09Jason Strauss is the group's co-founder. You didn't start in Las Vegas? No, we started in New York City. Our first two venues was Tao Restaurant in Midtown and Marquee Nightclub, which I'm proud to say 21 years later is the longest-running nightclub in New York City history. And we have one here in Las Vegas. Why did you pick Las Vegas? Because we mostly think about Las Vegas for gambling. it? Well, back then we saw a small inkling of nightlife and the need for stylized dining. It was just starting. There was a lot of celebrity chefs back then and nightlife was maybe one or two nightclubs on the strip, but we saw a real need for it.

47:43And frankly, we were right. We hit it right on the nose. The timing was amazing. This is going back 20, 21 years. We opened with the first restaurant and nightclub combination together. We were the first really to like merge and marry those two concepts. And within the first year, we're the highest grossing restaurant in the United States. So we had a lot of success with that. Tell us about the evolution. I mean, how fast did it happen? How big has it got? Oh man, in 20 years, it's been an evolution. When I was out here, maybe two or three nightclubs. We now have 16 to 17 venues on the strip, depending on how you classify a lounge or a dayclub or a nightclub.

48:17Now there's, this is the nightclub capital of the world and the stylized dining capital of the world. Is it continuing to grow? I mean, what's been the pattern of growth just measuring by how many people you have coming? Well, yeah, it has continued to grow. We're dealing with a particular segment. We say premium segment that's really looking for experiential. I mean, this nightclub that we're in right now, Omnia, is the highest grossing nightclub in the country. And we have hit our best number every year for the last three years here at Omnia. So this is a really good indication of where things are and where it's going.

48:48When you say best number, is that both in total revenue and in revenue per customer? Gross net sales. Gross net sales. Gross net sales. And you measure also how much revenue you get per customer? Yeah, there's a price point. There's a price per head. But that differs on day of the week. You know, there's a different customer in Vegas every weekend based on convention, scheduling. So it depends on the time of year, who the talent is, sort of other factors that come into town, if there's a UFC fight in town. So all those things factor into different sort of per head numbers. A lot of the people who follow Bloomberg are concerned about business cycles.

49:25They go up and they go down. Are you vulnerable to business cycles or are you outside of business cycles? You know, I think we live in a particular demo of premium where people have disposable income for experiential. So I think we're insulated a bit. But listen, Vegas as a whole is extremely elastic. Vegas isn't going anywhere. Look at this. And now Tau is doubling down. I get it. Yeah, that's pretty nice. Making its biggest bet yet with its newest venture, Omnia Day Club, set to open later this month. 46 ,000 square feet of cabanas, daybeds, pools, and up on that platform up there is our Omnia Sky Deck.

50:08Dayclubs have become one of the biggest entertainment formats in Las Vegas. Daytime party venues that combine elements of the city's famous nightlife scene with its pool culture, featuring DJs, cabanas, and high-energy crowds. But even as Las Vegas leans further into entertainment, the signs of softening demand are hard to ignore. Visitor numbers are down 7 % in 2025, the sharpest annual decline outside the pandemic. There are reports of some softness and occupancy and things like that. How true are they? Because you monitor these things. What do you look at? It's definitely weaker than it was last year and that they have many factors that are affecting it.

50:48There's international tourism has just dropped to the United States. then you have the households who are making 50th percentile or less in household income. They're just making trade-offs. They have to. Gas prices are higher. Other goods and services are higher. And they get here and they're like, OK, I'm going to pay for this experience, this show, but maybe I'm not going to spend as much at restaurants. Maybe I'll bring food into my hotel room. And so other aspects of this are hurting a little bit. But again, Las Vegas is used to this. In a city built on volume and discretionary spending, even small pullbacks can have an outsized impact.

51:27Since the pandemic, Las Vegas unemployment has remained roughly a percentage point above the national average. As you look from your perch at the Federal Reserve at the economy of Las Vegas, what are the major component parts? What do you really pay attention to? There's gaming, obviously, and you say not so much gaming, some other things. Yeah, so I look at travel and leisure. So what are they doing in travel and entertainment? How are these different pockets doing? Then I also look at technology and not so much the coding and things, but the infrastructure. Are they attracting investments in things like data centers or they have a technical interest here?

52:02They want to build technology out because it's just a great place to put technical things. So they're working on that. Then there's all the support parts of the economy that are here to help the gaming and entertainment industry thrive. So even if you're not directly working in travel and leisure on the Strip, you're actually supporting the broader economy by doing distribution and supplies. And so their economy is really built on that. But if you ask what's the one thing they would get worried about, it's are the flights coming in, are the guests coming, because that drives a lot of their economy.

52:33The technology is something they're looking to build to, but it's not something that's driving their economy. We see a lot of development always in Las Vegas. You said it's always reinventing itself. It is always reinventing itself. Big buildings getting torn down and big buildings being built up. One of the things we've heard is that Las Vegas has been sort of advanced in minimizing the regulatory constraints, the permitting of things. And we've talked to people who say they're building things here much faster than they would in some other parts of your district, like Los Angeles or San Francisco.

53:01Absolutely. How true is that? It is true. So one of the things that we know is that there's federal laws about zoning and other things. But most of the zoning and where you can build and how you can build and what kind of light fixtures you have to have, that all comes from localities or states. And Vegas, because they need to reinvent themselves and bring these new buildings along, that's part of their attraction. They have to be faster. They have to be better. They have to be less expensive. That combination of speed, quality, and affordability sets Las Vegas apart. And Jason Strauss says it's why projects at the size and scale of Tao's new day club can happen here.

53:39Well, I don't think I need to tell you anything more. You can just look at where we are and how we are just dead center of the middle of the Strip. All the famous lights and sound that make Las Vegas Strip famous were right in the middle. And here on the Omnia Sky Deck, you're completely immersed in it. You can have food and drink. You can enjoy it any day of the week, open seven days a week. And this, we think, is going to be a really special experience. It's experiences like these that have long drawn people to Las Vegas, a city built on reinvention, risk, and the willingness to take a chance on what comes next.

54:12I think it's the most American thing we've got. Isn't it? I mean, it's kind of frontier. It has the cowboy world to it. It's got, everybody's got a shot. It's sort of like, it's America in miniature. Because so many different people go there, right? From all over the country. So it's like an America for America.

54:42That does it for us here at Wall Street Week. I'm David Weston. See you next week for more stories of capitalism.

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