Behind the scenes of our new scenario, Southwest Silicon

Danny Crichton:

Hey, it's Danny Crichton and this is the Riskgaming Podcast by Lux Capital. Today I'm really, really excited for this episode because it's one of my favorite topics, which is the launch of a new risk gaming scenario. Today we have on the program Ian Curtiss, the designer of Southwest Silicon, our latest risk gaming scenario, and this one is focused on water security, economic development, industrial policy, semiconductors in the state of Arizona. Ian, welcome to the show.

Ian Curtiss:

Thanks, Danny. It's great to be back here and so stoked that we're getting this out.

Danny Crichton:

So your last game focused on the Chinese electric vehicle markets, that one was called Powering Up. The new game now, again, focused on Arizona, all these new chip fabs coming in and I mean the context for this is obviously the Biden administration passed the Chips and Science Act, provided 55 billion dollars of subsidization for the chips industry. Those loans and grants were sent out to TSMC, Intel, Samsung and others. Many of those tabs are actually coming together in different parts of the country.

We go to DC, a lot of people are interested in this and the growth, jobs, economic development, etc. One of the angles that I think has been undercover in which you focus on in this game is water security. In Arizona, it is a desert. Chip fabs are some of the greatest Guzzlers of H2O anywhere in the world. The Colorado River has had historic lows. There's this very serious drought that's affecting residential neighborhoods. And so you created this game essentially to capture what you were seeing in your own basically hometown of Phoenix. Tell us a little bit about your story here, how you came to learn more about this industry and what you brought from your own personal experiences into the game.

Ian Curtiss:

Yeah, so I'm calling in from Phoenix, Arizona. I will note we're having a potentially record low number of days below a hundred degrees. It's been a lovely summer. My wife and I just a few days ago we were like, "I think we could eat dinner outside," in July. That's unheard of at this time year. So yeah, Phoenix is in the middle of desert, surprise, it's a shocker to everybody. And it's this incredible place where when I moved here as a kid, I was like, "Oh, it's the desert. Nothing should be here. This is a miserable place. Why does anybody live here?" And there's a miracle to this place because of the water that is brought here from the Colorado River. It's this incredible feat of humanity that we can move water across the world in such a ways that we do.

As you said, the water guzzlers of chips are rapidly expanding here in the valley and there's this ongoing bubbling conversation around water in the valley. Where is water going to come from in the future? It's this fascinating blend of angst and endless hope and faith that resides here in the valley. And so there's this angst about the water, but then there's this endless belief in humanity's ability to find more water. It's like, "No, we can figure this out. We've got this." And so there's all sorts of wonderful books and stories about all this stuff. Cadillac Desert was written some, well, gosh, I think 40 years ago now, if I'm not mistaken, was the first edition. And it's this wonderful book that goes into the history of the American West and where all these dams and aqueducts and farmland all came from, which is not to dive too much into American bureaucratic history too early in a podcast, which is a dangerous thing to do I believe.

But essentially there was the Bureau of Land Reclamation, it all started kind of FDR days and they said, "Let's start building dams and aqueducts to get water to the American West," because it was underpopulated compared to the east. And so over the course of many decades, pretty much all the dams by the BLR were built in the American West. And one of those, of course being Hoover Dam amongst others on the Colorado River. And all this led to water being able to create Phoenix, Arizona.

When you're in Phoenix today, you're in a desert. There's such rapid growth of suburbia. It's urban sprawl on steroids times 10. And now there's this incredible combination of all the chip fabs that are coming into town. There's been presence here for a while, Intel, Motorola and so forth that have been here for a long time and it's growing so fast, obviously now with TSMC. And TSMC is building the largest investment in American history building its fabs out in Arizona, including the most recent update was it's promised that 30% of its three nanometers technology will be produced in Arizona at some point in the future. We're reaching this interesting point where what happens? Foes this boil over, or dry up rather? And where do we go to from here? And so that was really why I wanted to make this game is let's dive in.

Danny Crichton:

Well, I think when you think about the context, so you have this tension between there's a lot of farming that goes on in Arizona that's been historic, in some cases over a hundred years, a lot of the local water politics in the state, not unlike California and the movie Chinatown, there's this very aggressive politics around farms and families that have been here for generations. And then you have these two new green shoots for the city, which is, and in the valley, one is residential growth, as you were saying with suburban sprawl. You have hundreds of thousands of people moving into the region all across Arizona, New Mexico, South California who are looking for warmer temperatures trying to escape the New England, granted we're just as hot these days as it is down there, in fact, we're probably even more balmy than you are. And then we have these TSMC and semiconductor plants, each of which use millions of gallons of water potentially each day.

And so you have this kind of unique tension between old industry, new industry, old population, new populations coming in and this tension, you call it angst or sort of an ennui, but you have this trade-off tension, which I think makes a great risk gaming scenario between how do we balance growth versus stability? How do we manage dynamism versus a set of static, keep everything the same? And I think that's where Southwest Silicon does a really, really great job. And specifically, maybe you could talk a little bit about how the stakeholders work within the game because I think that's one of the key dynamics for a lot of folks who play it that makes it unique within our little library of risk gaming scenarios.

Ian Curtiss:

So as I was talking about industrial policy, it's so local and the core of industrial policy is you end up creating winners and losers. There's always people who inevitably want something more than others, that's politics. And so when you start throwing federal money around or government money around, and when you start getting such huge investments into an area like a chip fab, it can make or break a community. It literally changes the daily lives of people around that have this investment.

And so the stakeholders, to your point, they are kind of a series of NPCs that I put into the game and it's a way that the eight to nine people who sit around the table playing the game, they get to watch the state of Arizona change based on the decisions that they're making. And so some of these stakeholders are farmers, a good number of them represent farmers across the state. A good many of them represent just normal businesses every day. Some are existing chip fabs in the valley. And what players are doing, me as a player, as I'm playing the game is I am getting data feedback at the end of every scene about what my stakeholders want and I'm trying to calculate not only the opinions of the people around the table as I negotiate with them about what I should do in the game, but I'm also having to keep in mind these NPCs that still have an opinion on the matter at hand, much like real political life. They might not be at the table, but they still might have an impact on the outcome.

Danny Crichton:

Well, I think one of the things that we added into this game is Arizona is one of the most congested battleground states in the country. People are contesting it very aggressively, both Republicans and Democrats. You have a split legislature, you have a split state-level offices, congressional delegation. And so one of the things we didn't try to include in this game is that sort of factional dynamic of you have farmers who are Republican, you have farmers who are Democrat, you have new business owners who are on both sides. And it's not always easy when you have several dozen stakeholders to build up a coalition of people who all support you or who do not. You take one action, they don't necessarily line up perfectly with each of those adjectives and characterizations, and that creates a much more dynamic and I think rich game that comes out of Southwest Silicon compared to a lot of our others. So I'm really excited for people to try the stakeholder model.

And then I think the big question for me though is when you think about the takeaways from the game, obviously the best way to learn how the game works and how all the roles are is to actually play it, and we will eventually post all this stuff on the internet if Webflow ever starts functioning again, but as of now, it is not and so we cannot post things, but we will do so shortly. But I'm curious, when you think about takeaways, when you go to DC, people are focused on industrial policy and growth and are we securing the supply chain around civic inductors? They're not really thinking about water or some of the local politics that actually exist in where these massive, massive factories and fabs are going, what do you think are some of the key takeaways you want people to experience after playing the game?

Ian Curtiss:

Well, first and foremost obviously is water as a topic. The factoid that I love to drop is the most recent time that state forces, a state deployed troops against another state was in the 20th century over the Colorado Dam, was Arizona sent troops to the Colorado River to try to stop the state of California from building a dam that Arizona had not yet agreed to. And so water is this incredibly poignant, critical asset that people need to survive, but people are literally willing to deploy forces to protect it. It's such an extreme thing.

Beyond that though then is this winner's and loser's point and how when you see the news about water drought and you see this person's going to win from water, this person's going to lose from water, there's plenty of water for data centers, there's not enough water for data centers, chip fabs are using all the water. You have to get more detailed and granular into the local realities of water and understanding where the water comes from and understanding who's going to get the water and who's not.

Because it is a commodity, it can be bought and sold and so economics is going to inevitably be the decider of this outcome. When somebody says there's not enough water, that's an assumption of, you're right, there's not enough water for everybody to have everything that they want, but there is enough water for certain things to be chosen over other things. I will pay more for water than you will, therefore, I get to water my plants more than you do.

And so society is going to be choosing these things because of not only laws of economics, taxing and so forth, but the infrastructure required to get water where it needs to go. And this gets back to the original thing that I said about the BLR, the Bureau of Land Reclamation is there's all these little water districts across the American West with localized water prices, and sometimes they're significantly cheaper in one district than they are in another, even though they might be one mile away, but because 40 years ago or 60, 70 years ago when the dams and aqueducts were built, one was far more expensive to build an aqueduct for than maybe another one was.

So 70 years later, here we are when neither of these water districts are very economically productive ways to use this water, and now there's a chip fab that wants to come into Arizona, so where's that water going to come from? What this game talks about is how people are going to have to wrestle with making these decisions of, do we want farmers to have water? Do we want chip fabs to have water? Do we want houses to have water? And if it's not the farmers in Arizona, then where's American going to produce its lettuce, for example, it's iceberg lettuce, which is famous for coming from-

Danny Crichton:

There are a lot of icebergs coming from Arizona.

That's right.

Ian Curtiss:

A shocking detail. And so it bleeds into all these other fascinating conversations around agriculture, security, future of farmers, farming culture.

Danny Crichton:

When I think about the takeaway is, we're trying to complicate the picture a little bit. We're not trying to complicate it so much that people are so lost, but we're trying to take something that has been very simple and one-dimensional, usually around economic growth. We're trying to add in a lot of other factors that people aren't necessarily aware of that are taking advantage of your local knowledge in Phoenix, and then include a lens on US politics and specifically the balance between local affairs versus federal affairs, ballots and economic growth versus how much ecologically do you want to protect resources here? There's a little bit of a plot twist that shows up at the game that also shows just the individual versus collective goals of different groups of people and how sometimes even if you're a politician or a CEO, your personal motivations can oftentimes become incompatible with the organization or the leadership that you're undertaking and all that becomes very interesting.

And so I think it's a great example of risk gaming at its finest. It brings together a lot of different trade-offs that people are not necessarily considering. So I think it's very mind-expanding, and I'm looking forward to everyone to play it. But I think beyond the game itself, we just played this game in London. You and I just traveled over the pond to play with some British bureaucrats and some locals there. Were there any surprises from that group? Because everyone was local to London. I think some people knew where Arizona was, but most did not. And there were a bunch of other questions, but was there any sort of takeaways you had from playing it internationally versus with a more local audience so far?

Ian Curtiss:

Well, first off, I have to defend my home state of Arizona, and so they did know where Arizona was, they just didn't know where all of our cities were.

Danny Crichton:

I'm not sure I know where any of your cities are now. I've been to the Sky Harbor airport, which is a good brand. I like that.

Ian Curtiss:

Yeah, the game in London was great fun because, well, first of all, again, it's like the same tune in this case, it's so local. Brits just know water to fall from the sky everywhere they go, and that leads to so many assumptions about how your society would function and about the role of infrastructure and about the role of localized economic policies and the decision points that local leaders would have. When we taught them this game, did the briefing, or the pre-briefing of the game, we quickly realized of like, "Oh, you guys aren't used to mayors making these sorts of decisions." And like, "Oh, you're not used to this being an issue that a mayor could buy or sell water with local businesses," because in England it's just far more available. You just plug yourself in and the waters there. It's a lot more direct system. The dependency on the river system, the Thames is of course critical for Britain's economy, but it doesn't play quite the same role as the Colorado River does for the American Southwest. And so these things were fascinating.

From a gameplay position. Then what was really fun was watching, as with any culture when we go around the world and play these games as well as industries, was how different people play the game differently. For one, our British friends had a blast stepping into American roles, and some of them were like, "Oh, well, if I'm going to be an American, I'll be American." And they leaned all in into kind of the role-playing aspect of it.

I'll say the last thing though was their perspective on the chip development process. And again, as an American, we just take for granted that chips are an American designed thing, and it's an affect of daily life, it's just what we do. The players in London, so much of the content wasn't as naturally just part of daily life for them, and so that was the other interesting thing was catching them up to speed about some of these assumptions about the chip fab investments, what that means, the laws, the process for a CHIPS act to be expanded, which is one of the potentialities of the game. And so getting our friends from across the pond to wrestle with these things was a blast.

Danny Crichton:

Going back to the comment about Britain and water, I mean, yes, it's very wet, it's very soggy. When you go to Arizona, one of the most memorable statistics from Cadillac Desert is if you look at average rainfall annually east of the Mississippi River, it's about 20 inches a year. West of the Mississippi, it's two inches a year. You have the plains and a very, very high elevation, places like Wyoming, Colorado, which are basically getting no water whatsoever, Arizona's very similar. And then we do include this in the game as well, you have this balance between rainwater that goes in, seeps in under the ground, into the groundwater table. It takes a very, very long time to replenish. This is a huge challenge in Arizona.

And then there are those who are getting the local markets, water markets. In those cases, sometimes that's very reliable because of the Colorado River, the rights are very good and very senior in other cases, they're very, very low. And so my memory of doing this was people just had no concept of legal rights to water and how complicated water economics is. I don't want to say it's like a textbook, I also don't know if it's super interesting to folks, but it was very interesting to me of realizing my whole vision is a bottle of water shows up in front of me and it's magic or water comes out of a tap and you just don't realize it's not one integrated system anywhere in the United States. It's very, very local. The entire history of the US was expansion towards the West, and in order to fund that, it was basically investors who basically got to privately invest and build their own canals, aqueducts, and flooded the plains, so to speak. In so doing, they got the rights of these waters in perpetuity.

Now we see this crisis where the Colorado River is running dry. Earlier this year, we had the first crisis, and US-Mexico relations is the first time I believe in decades that we're not actually going to deliver enough Colorado River water to Mexico under our treaty from a hundred years ago. Sheinbaum, the president there is obviously very annoyed by this as part of the ongoing trade tensions between the two countries.

But this river kind of owns the entire west, and without that, tens and tens of millions of people, we're talking everything from Phoenix all the way over to South California, so LA, San Diego, everyone is taking advantage of this both in the upper basin states and the lower basin states. And without sort of figuring out a long-term sustainable solution, you're sort of stuck with what you got and it's very, very harrowing.

I want to go a little bit more broad though. So I mean, obviously we played with a couple of different groups. We beta tested with a lot of folks. We've been designing and producing it. We've got booklets here now, so it's all kind of come together, but there's water issues going on all over the place. So as we record this, we just had a tsunami that hit Asia Pacific, so it went all the way from Kamchatka, had a massive surge of water going all across. Flights at SFO were canceled all the way across the Pacific.

But the big story that I think is the most interesting over the last week or two came from China, a place that you lived in for a very long period of time. Last week, the premier Li Qiang announced the construction of a new dam in the Tibetan Plateau up to at least at the current cost, $170 billion. That's with a B. I was joking beforehand with our producer, Chris Gates, that this would be roughly the cost of a high-speed rail in California. All things considered at least between the Gilroy and Baggersfield route, but this is the largest dam ever built in the world, projected to potentially produce as much as three to 4% of China's GDP. It would produce enough electricity to power all of Britain as a whole. And the scale of this is just unbelievable to me. And it reminds me of obviously the Hoover Dam, the Central Arizona project, which built all of these canals throughout the early-1900s, the same thing in California with Mulholland, the water director in LA who managed to make LA a city in the early 1900s, famously chronicled in Chinatown, the movie.

What was your take on this? Because you had spent six years in Beijing, obviously very, very connected there and still doing a lot of work. Were you surprised by this announcement and the scale?

Ian Curtiss:

What was so fascinating about the announcement to me was A, obviously, well, it's like it's China being China, right? Incredible projects, incredible mobilization of capital to create these massive infrastructure projects. And a quick Chinese history thing. I mean, there's theories about that's core to the Chinese identity is these government centralized projects protecting the people from drought and then flooding along the Yangtze River and Yellow River and so forth. And these are critical to the Chinese identity and the concept of a strong central power, yada, yada, yada.

And so you see this play out here in Tibet, and then now there's this massive project. The first thing that I thought of when I saw that was like, "Oh yeah, that's right." Because I remember in my master's degree that I did at [inaudible 00:20:13], the theory of the degree was it was all foreign students who could study international relations in China freely, except you just had a really hard time getting a meeting with your professor if you wanted to write about certain topics.

And one of my classmates wanted to write about the Tibetan Valley river system, and the flows into India, flows down hill into China as well, and the Chinese/Indian relations of that, and his professor just wouldn't meet with them. He was eventually strongly recommended to not talk about that. And here we are now, whatever, 12 years later.

And the second point of that that came up for me was a huge impactful moment in my time in China was, in that degree, was we had a course on non-traditional security and water security was one of the issues that we talked about. We had a section all about water security. There was ag security, there was biosecurity, all these topics that at the time our foreign students in the classroom thought it was just like Chinese communist paranoia. Like, "Oh no, that's not something to... You're just being paranoid. The market will take care of this if you would just get out of the way."

Well, here we are, whatever many years later, and what is the US government talking about every day? All of these non-traditional security topics. And so all that to say is my first reaction is wherever we're at in these topics as a society and as a government, the Chinese government has been thinking about these for at least a decade longer in far more depth and nuance. That's a whole IR kind of conversation, international relations, whatever, strategic competition conversation. But regarding water specifically, the other thing that's interesting about this game and the development in Tibet is a huge part of the PRC's expansion to Tibet and Xinjiang as well and so forth, and during my, so I keep bringing up this degree of mine that I did 15 years ago, whatever was the openly talked about applying American government methodologies in the Chinese West and South regarding Native American tribes and American Indians, and the strategies that the US government did. China's not doing any worse.

So this game, South of Silicon, very interestingly enough, has a Native American tribe in it. That's one of the roles that people can play. And one of the things that are playing out today in the US, essentially a series of legal debates and court cases as well as now a federal law that might pass to allow water to be transferred back to the tribes who were forced to move to all these western arid regions, and particularly along Northern Arizona, there's a number of tribes along the north of Arizona because they're along the water, they should have really good water rights. And so essentially to oversimplify, the American government owes them a lot of water. And so there's all this legal process that's going on now of water returning to the tribes of the American West, and that has huge implications for water security. And so you see that, if you put that in terms of Chinese perspectives of water security, and they're preemptively thinking about it, they already figured this out and now they're building the dam.

Danny Crichton:

I think it's so interesting is, this systematic model for creating water security, defending it, I was just writing about rivers in the Riskgaming newsletter a few weeks ago based on In Praise of Rivers by James Scott, and he talks about the Yangtze and the Yellow Rivers in China. They move dramatically throughout the years, in some cases, as much as hundreds of miles because as they go towards the ocean, they're going over very, very slow gradient planes where even a slight shift in the trajectory early on means that river is going to emerge into the Pacific in some cases, again, hundreds of miles away. And there's amazing depictions of how much rivers meander, how much they change over time. And so there's a real need all the way back to, I think it's like the sixth century, this massive canal that connected to the two rivers together was one of the defining early... I mean, everyone's heard of the Great Wall, but we've never heard of the Great Canal. These massive water projects become really crucial.

And then you come over to the US and then you realize, I mean, I'm looking at this now, the character we have in Southwest Silicon is the Gila River Indian community, and just this week there's an update from the Ninth Circuit Appeals Court re-judicating some of the legal rights over water between farmers and the Native American tribe. This is a live issue in the US and it's not determined by engineers, it's not determined by needs, it's not determined by economics, it is literally in some cases, decades and decades long legal precedents going back and forth up the courts, down the courts that's determining who gets water when.

And so it's one of those open questions of, is this a good allocation mechanism? Is this fair? Is this what we're trying to do? The game is trying to explore that because obviously there's all this economic pressure on the state to grow and to do different things with different industries, but I just think the dichotomy is between this legal culture of these rights and obligations and you get the right in perpetuity even when there's no water, you actually, because there's a drought, I mean at some point there's not necessarily enough for everyone given the rights that are in progress versus the sort of mentality of, "Look, we can reshape the world, we can reshape the land and deliver what we need at exactly the right time."

I don't know. The connection between the two is just really fascinating, particularly since your last game was on Powering Up and China's the electric vehicle markets obviously highly related to this entire environmental model and movement in China, and now we're hitting over here. I just think the connection is fascinating.

Ian Curtiss:

Gosh, I could go on this obviously for far too long, but one thing that happens in the game is the tribe ends up having a shocking amount of power in the game because they have rights to a lot of water. This is very much like reality today. This is not at all a crazy thing, this is very much real today. And the reason of it is there is a river called the Gila River that goes through Arizona, and a hundred years ago, give or take, American white settlers came into the region, they farmed up, they dammed the river, and they cut off all the water that was actually flowing to the Gila River Nation and caused all sorts of damage to the tribe. Obviously, their livelihood was pretty much taken away from them, and then now whatever we are, years later, they get all the water rights back to them that they should have had all along. And so here they are now with this incredible negotiation power. What a generational change in terms of just if you were just a fly that could live 150 years, what a story you'd get to watch.

Danny Crichton:

Well, look, Ian, this has been a great conversation. We will post Southwest Silicon onto the website, when Webflow is functioning again, we'll get all those materials out here hopefully in the next few weeks. But otherwise, Ian Curtiss, our Riskgaming designer and consultant, thank you so much for joining us.

Ian Curtiss:

Thank you, Danny. Can't wait to tackle the next one.

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