Complex Systems with Patrick McKenzie (patio11)

In this episode, Patrick McKenzie (patio11) challenges a recent Atlantic article claiming that low-income cardholders subsidize credit card rewards through high interest payments. Drawing from his Bits About Money essay Anatomy of a credit card rewards program, Patrick explains that rewards are primarily funded by interchange fees paid by merchants, not by interest charges.To the extent those interchange is passed along to customers, it falls mostly on rich customers, because rich customers spend more. They spend more in interchange than they earn in rewards. Issuing banks and researchers who have looked at the data mostly agree here.Patrick also breaks down the credit card rewards game, showing how banks strategically design card offerings for different market segments and explains the portfolio mathematics that disprove the cross-subsidization narrative. –Full transcript available here: www.complexsystemspodcast.com/credit-card-rewards-interchange/–Sponsor:  VantaVanta automates security compliance and builds trust, helping companies streamline ISO, SOC 2, and AI framework certifications. Learn more at https://vanta.com/complex–Recommended in this episode:Bits about money: Anatomy of credit card rewards programs https://www.bitsaboutmoney.com/archive/anatomy-of-credit-card-rewards-programs/The Atlantic: There Are Two Kinds of Credit Cards by Annie Lowrey https://www.theatlantic.com/ideas/archive/2025/03/credit-card-racket/682075/ Complex Systems episode with Gary Leff https://open.spotify.com/episode/1QqFw5hlHKRrjRUTVLfKRV?si=hNwbnyrmQiqHe9ziAnGCpQ Complex Systems episode with Dave Guarino https://open.spotify.com/episode/0UlTIRosmjtvpcdHQ7t2tK?si=i8LYGS-iSfOoGsVmMFYWjA –Timestamps:(00:31) A recent Atlantic article's false thesis(09:35) Rebating interchange to earn share of wallet(14:48) Sponsor: Vanta(16:56) Why isn’t every card a rewards card?(27:56) The complexity spectrum of rewards products(29:55) A fun rabbit hole about credit card acceptance(33:53) Back to more complicated cases(45:45) Further refinements in cat and mouse games(51:24) Giving the customer more choices more frequently(58:10) More directions to go in(01:01:54) Patrick’s counterproposal

Patrick McKenzie (patio11) is joined by Gary Leff, the author of "View from the Wing", to discuss the economic systems behind airlines and loyalty programs. They discuss how airlines manage to stay profitable despite razor-thin margins, the economics of frequent flyer programs, and why these programs often generate more value than the airlines themselves. The conversation explores why many irrational airline policies reflect deeper economic realities and competitive constraints that shape flying today.–Full transcript available here: www.complexsystemspodcast.com/gary-leff-frequent-flier-programs/–Sponsor: VantaVanta automates security compliance and builds trust, helping companies streamline ISO, SOC 2, and AI framework certifications. Learn more at https://vanta.com/complex–Recommended in this episode:View From The Wing https://viewfromthewing.com/Bits About Money: How credit cards make money https://www.bitsaboutmoney.com/archive/how-credit-cards-make-money/–Twitter:@patio11@garyleff–Timestamps:(00:00) Intro(01:10) History of airline loyalty programs(04:36) The economics of airline loyalty programs(08:01) Parallels and differences with hotel loyalty programs(14:01) Tax implications and legal considerations(19:50) Sponsor: Vanta(21:08) Tax implications and legal considerations (part 2)(34:02) Credit card reward programs(46:56) The David Dao incident and its impact on airline policies(47:29) Airline compensation strategies and Delta’s unique approach(49:08) The economics of airline miles and accounting practices(53:15) Airline debt and the role of frequent flyer programs(55:21) The impact of airline policies on customer loyalty(01:08:11) The value of partner miles and airline alliances(01:13:11) Creative ways to earn miles and exploit promotions(01:20:05) The infamous coin promotion and other mileage hacks(01:30:39) Wrap

Patrick McKenzie (patio11) is joined by Lars Doucet and Greg Miller, co-founders who have just launched the Center for Land Economics, to discuss improving property taxation in the US. They explore how shifting taxes from buildings to land could transform development patterns, why California's property tax caps coincide with its housing crisis, and how the fundamental trade-off between assessment accuracy and consistency creates winners and losers. The conversation also covers the posting-to-policy pipeline, their work developing open-source tools to improve assessment equity, and techniques citizens can use to influence their local assessment office.  –Full transcript available here: www.complexsystemspodcast.com/tax-the-dirt-with-lars-doucet-greg-miller/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Recommended in this episode:Center for Land Economics: https://landeconomics.org/Game of Rent by Lars Doucet: https://gameofrent.com/ Progress & Poverty: https://progressandpoverty.substack.com/ Mass Appraisal for the Masses: https://progressandpoverty.substack.com/p/mass-appraisal-for-the-masses-the Lars Doucet on Complex Systems: https://www.complexsystemspodcast.com/episodes/property-assessment-lars-doucet/Dave Kasten on Complex Systems: https://www.complexsystemspodcast.com/episodes/tech-government-dave-kasten/ –Twitter:@patio11@larsiusprime–TIMESTAMPS:(00:00) Intro(00:45) Center for land economics(04:01) Property tax basics(05:31) Challenges in property valuation(10:22) Impact of Proposition 13 in California(12:28) Anti-market property tax policies(14:43) Housing crisis and land value(15:46) Sponsors: Safebase(17:17) Housing crisis and land value (Part 2)(27:49) Urban development incentives(29:17) Tokyo's urban planning success(39:23) The abundance movement in housing(40:07) Innovative housing policies(41:24) Government bureaucracy and policy making(49:56) Mass appraisals and property tax fairness(01:00:02) Technological advances in property assessment(01:06:16) Empowering local governments and citizens(01:16:02) Wrap

Patrick McKenzie (patio11) explains the standard procedure for large withdrawals in bank branches, with particular focus on the viral story published in The Cut about a woman who withdrew $50,000 cash from a bank and handed it to scammers. Certain minor details in the article set off a year-long investigation where he identified the exact physical location of the bank branch in question, researched the context for the transaction using public records, and obtained new details through FOIA requests. His investigation reveals an underlying narrative that accounts for what actually happened, and provides a worked example for fact-checking in journalism. –Full transcript available here: www.complexsystemspodcast.com/two-americas-one-50k-withdrawal/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Recommended in this episode:Two Americas, one bank, and $50,000 cash https://www.bitsaboutmoney.com/archive/two-americas-one-bank-branch/ The Cut, The Day I Put $50,000 in a Shoe Box and Handed It to a Stranger https://www.thecut.com/article/amazon-scam-call-ftc-arrest-warrants.htmlKelsey Piper on Complex Systems https://open.spotify.com/episode/33rHTZVowaq76tCTaKJfRBJim McKenzie on Complex Systems https://open.spotify.com/episode/6ocJirzGTStuf0K9ITM21X–Timestamps: (00:55) Suppose you ask a bank to withdraw $50,000 in cash(07:55) Style magazines sometimes publish hard-hitting journalism(12:36) Reaching out to Vox Media(17:09) Sources of doubt(17:55) Sponsor: Safebase(22:30) The physical reality of bank branches(25:53) In which we became acquainted with brisk walks across Brooklyn(34:42) New York’s Finest foil FOIL for a time

Patrick McKenzie (patio11) is joined by Azeem Azhar, writer of the Exponential View newsletter, to discuss the massive data center buildout powering AI and its implications for our energy infrastructure. The conversation covers the physical limitations of modern datacenters, the challenges of electricity generation, the societal ripples from historical largescale infrastructure investments like railways and telecommunications, and the future of energy including solar, nuclear and geothermal power. Through their discussion, Patrick and Azeem explain why our mental models for both computing and energy systems need to be updated.–Full transcript available here: www.complexsystemspodcast.com/ai-llm-data-center-power-economics/–Sponsors:  Safebase | CheckReady to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast Check is the leading payroll infrastructure provider and pioneer of embedded payroll. Check makes it easy for any SaaS platform to build a payroll business, and already powers 60+ popular platforms. Head to checkhq.com/complex and tell them patio11 sent you.–Recommended in this episode:Azeem’s newsletter: https://www.exponentialview.co/ Azeem Azhar’s guest essay: The 19th-Century Technology That Threatens A.I. https://www.nytimes.com/2024/12/28/opinion/ai-electricity-power-plants.htmlElectric Twin: https://www.electrictwin.com/ Video of Elon Musk’s Colossus https://www.youtube.com/watch?v=Tw696JVSxJQ Complex Systems with Travis Dauwalter on the electrical grid: https://open.spotify.com/episode/5JY8e84sEXmHFlc8IR2kRb?si=35ymIC0UQ5SKdV8rrBcgIw Complex Systems with Austin Vernon on fracking: https://open.spotify.com/episode/0YDV1XyjUCM2RtuTcBGYH9?si=YshjUXPEQBiScNxrNaI-Gw Complex Systems with Casey Handmer on direct capture of CO2 to turn into hydrocarbon: https://open.spotify.com/episode/0GHegWgLSubYxvATmbWhQu?si=xNYBjn0ZTX2IT_pAZ5Ozsg –Twitter:@azeem@patio11–Timestamps:(00:00) Intro (00:27) The power economics of data centers(01:12) Historical infrastructure rollouts(04:58) The telecoms bubble (06:22) Unprecedented enterprise spend on AI capabilities(11:12) Let's have your LLM talk to my LLM(16:44) Is there a saturation point?(19:25) Sponsors: Safebase | Check(21:55) What’s in a data center?(24:52) The challenges of data centers(29:40) Geographical considerations for data centers(36:53) Energy consumption and future needs(40:48) Challenges in building transmission lines(41:35) The solar power learning curve(43:51) Small modular nuclear reactors(51:26) Geothermal energy and fracking(01:01:34) The future of AI and energy systems(01:12:57) Wrap

In this episode, Patrick McKenzie (@patio11) responds to a recent request by a crypto unicorn founder / bank CEO to retract his essay Debanking (and debunking?). Come for the note about editorial standards and independence, stay for the diss track. –Full transcript available here: https://www.complexsystemspodcast.com/editorial-standards-and-independence/–Sponsors:  Safebase | CheckReady to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast Check is the leading payroll infrastructure provider and pioneer of embedded payroll. Check makes it easy for any SaaS platform to build a payroll business, and already powers 60+ popular platforms. Head to checkhq.com/complex and tell them patio11 sent you.–Recommended in this episode:Debanking (and debunking?): https://www.bitsaboutmoney.com/archive/debanking-and-debunking/CEO: Retract your debanking article? Me: No. https://www.kalzumeus.com/2025/02/10/retraction-request-denied/Geekiest rap single in history https://suno.com/song/c5ac7441-4a0b-4e5e-9c85-480e3ba63fc1 –Twitter:@patio11–Timestamps:(00:00) Intro (03:04) Musical interlude(04:56) Return to commentary(06:35) You can’t please everyone(08:06) The bar for retraction is high(10:07) Our review of the retraction request(10:37) “A few areas were incorrect or misleading”(16:12) “Lots of omission of key facts”(18:57) “Missing the point about what we mean by debunking”(20:40) Sponsors: Safebase | Check(25:00) Our response to McCauley’s testimony(28:24) McCauley’s concluding remarks and our response(30:21) Bank CEOs do not often ask writers for retractions(34:20) Some context regarding custodial banks(40:50) Returning to our regularly scheduled programming

In this episode, Patrick McKenzie (@patio11) is joined by Zeke Faux, investigative reporter at Bloomberg and author of Number Go Up, to discuss stablecoins and crypto fraud. They dive into Tether's controversial history, the senate’s emerging GENIUS act, and how crypto enables various types of financial crime. The conversation explores how Tether went from a “quilted collection of red flags” to becoming crypto's dominant stablecoin, its noteworthy relationship with Sam Bankman-Fried's FTX, and its current political maneuvering. They also discuss the societal value of financial regulation versus laissez-faire approaches to consumer protection.–Full transcript available here: www.complexsystemspodcast.com/zeke-faux-stablecoins-tether/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Recommended in this episode:Number Go Up: https://zekefaux.com/Anyone Seen Tether’s Billions? Zeke Faux, Bloomberg Businessweek: https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether Patrick’s review of Number Go Up: https://www.bitsaboutmoney.com/archive/a-review-of-number-go-up-on-crypto-shenanigans/ Doesn't Matter, That's Reg E: https://suno.com/song/173bbd67-92f7-4868-930f-efeca4b373c0–Twitter:@zekefaux@patio11–Timestamps:(00:00) Intro(00:45) The GENIUS act of 2025(02:28) Tether's audit controversy(05:49) The origins and impact of Tether(08:17) Investigative reporting and red flags(12:58) Tether's shady business practices(19:23) Tether meets SBF(21:40) Sponsor: Check(22:51) New anecdotes in the Number Go Up paperback(28:53) The role of stable coins in crime(38:20) The importance of AML and KYC rules(44:21) Financial privacy(45:18) Sam Bankman-Fried's conference in the Bahamas(47:14) Loot NFTs(49:34) Axie Infinity: a case study(52:30) Crypto's real-world consequences(58:15) Regulation and financial safety(01:05:40) Stablecoin bill and ownership limits(01:06:50) Political realignment and crypto(01:14:40) Citizen journalists and the crypto-skeptic community(01:20:36) The abilities and limitations of institutional journalists(01:26:00) Wrap

Patrick McKenzie (@patio11) is joined by Travis Dauwalter, energy enthusiast (and PhD), to explain the systems we often take for granted behind the US electrical grid. The conversation covers how the grid maintains perfect supply-demand balance in real-time, the challenges of integrating renewable energy sources, and why America actually has three separate interconnected grids. Patrick and Travis weave through the economics of power generation, transmission line physics, and how data centers are reshaping energy markets. (Also, in a bit of a surprise, Patrick defends the honor of Bitcoin miners.)–Full transcript available here: complexsystemspodcast.com/electricity-grids-travis-dauwalter/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Utility Dive: https://www.utilitydive.com/ The Bitter Lesson by Rich Sutton: https://www.cs.utexas.edu/~eunsol/courses/data/bitter_lesson.pdf Austin Vernon on Fracking: https://open.spotify.com/episode/0YDV1XyjUCM2RtuTcBGYH9Casey Handmer on Solar Economics: https://open.spotify.com/episode/0GHegWgLSubYxvATmbWhQu –Twitter:@TravisDauwalter@patio11Travis’ LinkedIn: https://www.linkedin.com/in/travisdauwalter/ –Timestamps: (00:00) Intro(00:28) Understanding the energy grid(02:22) The complexity of supply and demand(05:43) Regional differences in energy grids(08:16) Seasonal and daily energy demand(11:22) Renewable energy and storage solutions(17:17) Sponsor: Check(18:29) Renewable energy and storage solutions (continued)(24:07) Demand response and time of use rates(34:08) Bitcoin mining and energy economics(39:29) Exploring behind the meter arrangements(40:44) Transmission line challenges and innovations(45:51) Dynamic line rating and grid efficiency(50:58) Data centers and energy demand(58:33) Interconnection queue and grid security(01:03:38) Understanding the US grid structure(01:09:46) Wrap

In today’s episode Patrick McKenzie (@patio11) examines a Chicago casino investment, first of its kind within the city limits. Patrick reads from his Bits About Money essay (published January 2025) with additional commentary based on recent developments. The discussion reveals how municipal politics, grievances about national and local economic history, and creative financing intersect for ‘a very Chicago gamble.’ –Full transcript available here: www.complexsystemspodcast.com/the-landmines-buried-in-the-fine-print-of-chicagos-new-casino-deal/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Bits About Money: https://www.bitsaboutmoney.com/archive/chicago-casino-investment-offering/ The Story of Vaccinate CA: https://worksinprogress.co/issue/the-story-of-vaccinateca/ The Conservative Investor: https://www.patreon.com/theconservativeincomeinvestor Complex Systems interview with Jim McKenzie: https://open.spotify.com/episode/6ocJirzGTStuf0K9ITM21X?si=7HA0RhEOS8GFsA1MlY-EVw–Twitter:@patio11–Timestamps: (00:00) Intro(01:43) Chicago has wanted a casino for a long time(04:55) The stock offering(10:29) Chicago’s peculiar definition of minority(14:04) Sponsors: Vanta | Check(16:26) Reading a complex corporate structure(20:29) Is this valuation a gift to investors?(23:20) Capital stack arbitrage(30:04) The casino will not distribute profits, per se(32:45) Tax consequences of this offering(38:34) In conclusion

Patrick McKenzie (@patio11) revisits his March 2023 essay that explained the dynamics of bank runs and system stress during the banking crisis one month prior. With data from a newly released Federal Reserve paper, he analyzes the true scope of the banking stress - including revelations that 22 banks experienced severe deposit outflows, far more than publicly known at the time. While officials blamed social media for bank runs, data shows institutional players, not retail depositors, drove the events. –Full transcript available here: www.complexsystemspodcast.com/banking-crisis-two-years-later/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Bits About Money: https://www.bitsaboutmoney.com/archive/banking-in-very-uncertain-times/Federal Reserve Report: Tracing Bank Runs in Real Time https://www.newyorkfed.org/research/staff_reports/sr1104.html Byrne Hobart’s blog The Diff: https://www.thediff.co/ Matt Levine’s blog Money Stuff: https://www.bloomberg.com/account/newsletters/money-stuff –Twitter:@patio11–Timestamps: (00:00) Revisiting the March 2023 essay(01:47) The Fed's study(11:21) Why are banks failing?(14:41) A useful heuristic from bond math(18:05) Sponsors: Vanta | Check(21:00) Maturity transformation(29:54) Sponsor: GiveWell(30:42) Liquidity problems are the proximate cause of bank failures(33:43) Trying to forestall a banking crisis(40:16) Deposit insurance expansion(47:12) Deposit insurance has some legacy issues(52:04) What would happen if my bank were to go into receivership this weekend?(59:46) What should users of the banking system do?(01:04:09) Parting thoughts(01:05:08) Footnote

In this episode, Patrick McKenzie (@patio11) unpacks his 24k word essay Debanking (and Debunking?) originally published on Bits about Money. He discusses the contours of recent debanking claims made by the crypto community, notably Marc Andreessen, Nic Carter, and explains how banking actually works as infrastructure rather than conspiracy.  The conversation moves from Operation Chokepoint's documented history to current claims about coordinated action against certain industries, while highlighting how banking access challenges disproportionately affect those who are "relatively less resourced, relatively less educated."–Full transcript available here: www.complexsystemspodcast.com/debanking-patrick-mckenzie/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Debanking (and Debunking?) https://www.bitsaboutmoney.com/archive/debanking-and-debunking/ a16z's Debanking explainer: https://a16zcrypto.com/posts/article/debanking-explained/–Twitter:@patio11@eriktorenberg–Timestamps:(00:00) Intro(00:19) Marc Andreessen's debanking claims(01:02) Understanding debanking and its implications(02:18) Crypto enthusiasts' perspective(07:43) Operation Chokepoint: A historical context(18:09) Sponsors: Vanta | Check(20:23) Operation Chokepoint 2.0: The present day(22:12) The fall of Silvergate Bank(29:55) Crypto advocates and Silvergate Bank(30:45) Sponsor: GiveWell(31:43) Understanding bank account closures(32:35) Bodegas and money services businesses(36:38) Crypto companies and credit risk(47:24) Debanking and its broader implications(49:24) Political ramifications and free speech(59:27) Wrap–Complex Systems is part of the Turpentine podcast network.

In this special episode, Patrick McKenzie (@patio11) and his EA/producer Sammy Cottrell examine the production function behind Complex Systems, from studio logistics to transcript annotation and guest selection. They reflect on their most memorable episodes while discussing the podcast's core mission of making complex systems more legible and ensuring valuable content remains freely available on the internet. The conversation explores the subjective best episodes from 2024, plans for the year ahead, and how LLMs might transform both the systems they study and how we write about them.–Full transcript available here: https://www.complexsystemspodcast.com/2024-year-in-review-sammy-cottrell/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Ricki Heicklen on Complex Systems: https://open.spotify.com/episode/11kEUYRn4gXZGju232hzcgCasey Handmer on Complex Systems: https://open.spotify.com/episode/0GHegWgLSubYxvATmbWhQuDan Davies on Complex Systems: https://open.spotify.com/episode/5QKxzgumJXSQuaWCmYAoM9Zvi Mowshowitz on Complex Systems: https://open.spotify.com/episode/4itdtJFLCpLQNd2g1zTtdDRoss Rheingans-Yoo on Complex Systems: https://open.spotify.com/episode/4GiO0KYqxJNCIdltCyhN6mPatrick’s talk at Manifest 2024 (Manifold): https://www.youtube.com/watch?v=vfiiXq_bE1c Article mentioned - ‘50K in a Shoebox’: https://www.thecut.com/article/amazon-scam-call-ftc-arrest-warrants.htmlCopenhagen theory of culpability: https://laneless.substack.com/p/the-copenhagen-interpretation-of-ethics –Twitter:@patio11@haththerescuer–Timestamps:(01:04) Introducing Sammy(01:37) The offscreen symphony behind Complex Systems(07:19) Production supply chain and transcript philosophy(08:40) LLMs of choice(15:11) Sponsors: Vanta | Check(21:21) Favorite episodes(25:49) Sponsor: GiveWell(27:15) Beyoncé(28:47) More subjectively favorite episodes(32:34) Thesis of Complex Systems(34:07) Canon in operations research(40:51) Sabbatical mode(48:52) Bits about Money and other writing in 2024(51:22) On paywalls and not implementing them(54:29) LLM plans for 2025–Complex Systems is part of the Turpentine podcast network.

In this episode, Yatharth (@askyatharth), a graduate student and software engineer, turns the tables to interview Patrick McKenzie (@patio11) about cultural codes, writing, and AI. Patrick shares how his early experiences fighting credit report errors and navigating cross-cultural business environments led to his distinctive approach to understanding and writing about institutional systems. The conversation spans from Patrick's methodical exploration of banking infrastructure to his predictions about LLMs, weaving in personal stories about dating, parenthood, and bridging American and Japanese cultures along the way.–Full transcript available here: www.complexsystemspodcast.com/outside-view-yatharth/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Yatharth’s writing https://itsyatharth.substack.com/Rules for Radicals by Saul Alinsky https://en.wikipedia.org/wiki/Rules_for_Radicals Dave Kasten on Complex Systems https://open.spotify.com/episode/66SSmxK2Kpyef7WUxXxS6w?si=5EZYfZ7gThG8WV7hSs1aFQLars Doucet on Complex Systems https://open.spotify.com/episode/2XQjSGCfW6XIu1AFB4oZeR?si=n3C28PymT6m7pPqFb2NE8QBits about Money: https://www.bitsaboutmoney.com/ –Twitter:@askyatharth@patio11–Timestamps: (00:00) Intro(01:30) Patrick's early interest in credit cards(03:53) Navigating financial challenges(05:10) Becoming a financial advisor(10:35) Cultural and educational insights(18:57) Sponsor: Check(22:14) Personal stories and reflections(25:48) Parenting and cultural integration(33:26) Writing and storytelling journey(37:35) Translating financial systems for a new audience(39:08) The role of AI in writing and style transfer(40:46) The concept of alpha in writing(44:48) Legal advice and AI's role(52:12) The impact of AI on bureaucratic systems(01:04:22) Reflections on government software and policy(01:13:49) Sabbatical insights and future interests(01:18:52) Wrap– Help shape our show by taking our quick listener survey at https://bit.ly/TurpentinePulse.

In this episode, Patrick McKenzie (patio11) is joined by Joshua Morrison, the CEO of advocacy non-profit 1Day Sooner. They discuss what worked and what didn't in Operation Warp Speed's unprecedented push to develop COVID-19 vaccines. The conversation then turns to the future of pandemic preparedness, particularly the promising (and underappreciated) clean air technology. Throughout, Joshua and Patrick illuminate how institutional design choices, political incentives, and technical constraints shape our ability to respond to public health challenges.–Full transcript available here: www.complexsystemspodcast.com/warp-speed-joshua-morrison/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:1Day Sooner: https://www.1daysooner.org/Patrick’s Complex Systems interview with Ross Rheingans-Yoo: https://open.spotify.com/episode/4GiO0KYqxJNCIdltCyhN6m Patrick's Complex Systems interview with Dave Kasten about building VaccinateCA https://open.spotify.com/episode/66SSmxK2Kpyef7WUxXxS6w?si=VsSJMkktQiSGxtn9bFoOWATakeda's licensing deal with Moderna: https://www.takeda.com/newsroom/newsreleases/2021/takeda-announces-approval-of-modernas-covid-19-vaccine-in-japan/Bits about Money: https://www.bitsaboutmoney.com/ –Twitter:@joshcmorrison@patio11–Timestamps:(00:00) Intro(00:56) The role of challenge studies in vaccine development(09:24) Understanding vaccine platforms(18:33) Sponsor: Givewell | Check(19:46) Regulatory system insights and future improvements(20:41) Lessons for our regulatory system(29:55) First doses first debate(37:35) The surprising nature of COVID-19(39:30) Vaccine hesitancy and public communication(42:08) Political influence on vaccine distribution(58:28) Indoor air quality and disease prevention(01:06:52) Future of public health initiatives(01:12:27) Wrap

In this episode, Patrick McKenzie (patio11) and Lars Doucet, the author of Land is a Big Deal, discuss how cities determine your property's value and collect taxes. They explore how assessment offices juggle political pressures, statistical models, and technological tools while trying to maintain equity across millions of properties. They also cover why assessment offices are separate from tax collectors, how property value protests actually work, and why your neighbor's house might be assessed differently than yours.–Full transcript available here: www.complexsystemspodcast.com/property-assessment-lars-doucet/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Lars’ book: https://www.landisabigdeal.com/Lars’ blog: https://www.fortressofdoors.com/ Bits about Money: https://www.bitsaboutmoney.com/ –Twitter@larsiusprime@patio11–Timestamps(00:00) Introduction(00:23) How property taxes work (Texas Example)(02:45) The political art of avoiding tax rate blame(05:53) Sources of real estate data(08:08) Historical property assessment(11:04) Statutory guidance vs. Actual practice on market value assessment(14:25) Tax rate strategy and sandbagging(15:17) Assessed value vs market value(16:16) Assessment caps and Prop 13 (18:22) Sponsor: GiveWell | Check(20:27) Data collection in the field(22:54) Data collection methods(25:08) Property valuation: Beyond location and correlative factors(26:52) Depreciation of buildings(27:37) Orthodox view of depreciation(30:53) Real estate cultural differences(33:59) Urban redevelopment and land value(36:59) Small business realities and perceptions(46:19) Property tax protests(50:45) Predictive protests(52:19) Accuracy vs equity testing(58:50) Cook county assessor's office(1:01:11) Lars's background(1:05:38) What is GIS?(1:09:52) Wrap

In this episode, Patrick McKenzie (patio11) offers a reading of his viral essay, "The optimal amount of fraud is non-zero" with extensive live commentary. Patrick examines payment systems, benefits programs, and pandemic-era policies, to uncover how businesses and governments often intentionally accept some level of fraud as a cost of doing business. Reducing fraud to zero would require such restrictive verification that it would severely hamper legitimate commerce and social programs. Using examples from credit card processing to PPP loans, Patrick illustrates how different industries calibrate their tolerance for fraud based on their margins, mission, and societal role.–Full transcript available here: https://www.complexsystemspodcast.com/fraud-choice-patrick-mckenzie–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Bits about Money, "The optimal amount of fraud is non-zero" https://www.bitsaboutmoney.com/archive/optimal-amount-of-fraud/Bits about Money, "The fraud supply chain" https://www.bitsaboutmoney.com/archive/the-fraud-supply-chain/ Dan Davies on Complex Systems https://open.spotify.com/episode/5QKxzgumJXSQuaWCmYAoM9?si=AWkgvWEBSymrQNqpehg5tQ–Twitter:@patio11-Timestamps:(00:00) Intro (00:32) Origins of the essay and Dan Davies' influence(02:16) Fraud is a policy choice(04:56) The unique nature of fraud enforcement (07:54) Who pays for payment fraud?(12:55) Fraud as a necessary business expense(21:13) Sponsors: GiveWell & Check(27:43) Credit reports(29:19) Anti fraud loops used in online commerce(35:38) Different business tolerances for fraud(37:20) High vs low margin fraud strategies(41:40) Fraud in Benefit Systems and Pandemic Programs(43:29) Taxes(45:38) Fraud as an intended component(51:55) Wrap

Patrick McKenzie (patio11) is joined by Max Chiswick, a former professional poker player turned AI educator, to explore how poker intersects with decision making. They discuss how the online poker boom created unprecedented opportunities to study decision-making at scale and how computational advances have transformed both the game's theory and practice. They dig into how poker serves as a laboratory for studying decision-making under uncertainty, pattern recognition, and opponent modeling, while also examining the sometimes problematic incentives that emerge in both online gambling and AI development.–Full transcript available here: https://www.complexsystemspodcast.com/ai-poker-max-chiswick/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Max's website: https://maxchiswick.com/Max's startup for AI and Game Strategy: https://overbet.ai/The Expected Value Foundation & poker camp course: https://expectedvalue.org/Patrick's Bits about Money: https://www.bitsaboutmoney.com/–Twitter:@chisness@patio11-Timestamps:(00:00) Intro(00:26) Max's background and journey into poker(03:45) The credit card rewards game tangent(06:12) Why poker matters: reasoning and decision-making(07:49) The problem areas in the poker AI space(09:38) Poker as an assistive technology for reasoning(10:59) Online poker history(16:14) Understanding multitabling(21:14) Casino economics and gambling regulation(22:55) Sponsor: Check(26:32) PokerStars VIP program and professional incentives(29:47) Playing a million hands in a month(37:26) AI poker history and counterfactual regret minimization(43:35) Poker complexity(45:01) The impact of solvers on modern poker(45:52) Understanding poker game theory and decision trees(49:26) Recent developments in poker AI education(50:27) Teaching programmers to build poker bots(53:05) Wrap –Complex Systems is part of the Turpentine podcast network, the network behind Econ 102 with Noah Smith, The Riff with Byrne Hobart, and Turpentine VC. Turpentine also has a social network for top tech founders: https://www.turpentinenetwork.com/

By popular demand, Patrick McKenzie (patio11) is joined by Byrne Hobart for a 3rd conversation to discuss Byrne’s book "Boom: Bubbles and the End of Stagnation." They explore how periods of irrational market enthusiasm often create lasting value despite their painful endings. Using examples from the 1990s fiber optic boom that enabled modern streaming to today’s AI investment surge, they examine how even when investment manias end badly, they frequently pull forward crucial technological development that benefits society long-term. Byrne and Patrick weave through historical cases like Bell Labs to present day examples in crypto and energy infrastructure, revealing hidden cycles where speculative excess can drive genuine innovation.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/boom-busts-and-long-term-progress-with-byrne-hobart-2/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Order Byrne Hobart’s book Boom: Bubbles and the End of Stagnation on Stripe Press / Bookshop / Amazon here: https://press.stripe.com/boomThe Diff https://diff.substack.comCapital Gains  https://capitalgains.thediff.co/The Reckoning by David Halberstam: https://www.amazon.com/Reckoning-David-Halberstam/dp/0380721473Austin Vernon on Fracking, Complex Systems Podcast: https://open.spotify.com/episode/0YDV1XyjUCM2RtuTcBGYH9?si=CDrPD3nNSP-MUV60qffglg–Twitter:@byrnehobart@patio11-Timestamps:(00:00) Intro(00:25) Discussing the book: Boom, Bubbles, and the End of Stagnation(01:08) Economic growth and productivity(04:42) Technological advancements and corporate R&D(07:31) The role of government and private sector(13:42) Sponsor: Check(14:57) Economic history and industrial evolution(20:12) Japanese industrial planning and efficiency(27:16) The dot-com boom and fiber optic investment(31:21) Bondholders vs. equity investors: A comparative analysis(32:32) Google’s strategic fiber investments(32:56) The evolution of online video and YouTube’s rise(35:22) The dot-com bubble and its aftermath(44:06) The housing bubble(49:39) Financial manias and reflexivity(52:23) The SaaS ecosystem and startup growth(54:58) Stripe and the evolution of online payments(01:00:22) Crypto(01:04:58) The value of currency and crypto(01:06:36) Exchange tokens and financial models(01:08:55) Crypto’s impact on financial systems(01:10:41) The evolution of banking technology(01:13:18) Crypto regulations and financial freedom(01:17:28) Smart contracts and financial innovation(01:26:47) The role of AI in technological advancements(01:29:18) The future of energy: Geothermal and fracking(01:41:39) The journey of writing ‘Boom’(01:42:57) Wrap

In this episode, Patrick McKenzie (patio11) is joined by Erik Torenberg, the founder of Turpentine, to discuss the fundamentals of money movement and banking systems. Patrick breaks down how banks facilitate transfers through correspondent accounts and clearinghouses, explaining the evolution from physical check movement to digitization. They cover the gold standard's history, and then dig into stablecoins and their implications for the future of finance.–Full transcript available here: https://complexsystemspodcast.com/money-movement-erik-torenberg–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Bits about Money - Bank Transfers https://www.bitsaboutmoney.com/archive/bank-transfers-as-a-payment-method/Bits about Money - Stablecoins https://www.bitsaboutmoney.com/archive/stablecoin-mechanisms-and-use-cases/–Twitter:@patio11@eriktorenberg-Timestamps:(00:00) Intro(00:49) What is money?(02:39) How money moves(06:00) Banking and correspondent accounts(07:59) Clearing houses and payment systems(12:09) The gold standard and fractional reserve banking(18:15) Introduction to stablecoins(19:38) Sponsor: Check(21:31) Stablecoin models and issues(27:30) Crypto skepticism and innovations(30:53) Regulatory arbitrage and future of money(36:36) Wrap

In this episode, Patrick McKenzie (patio11) is joined by Ross Rheingans-Yoo to discuss drug development and clinical trials. Ross breaks down how drugs progress from academic research through FDA approval, the challenging economics, and the many systemic inefficiencies in the current approval process. Patrick and Ross discuss historical cases like the thalidomide crisis that shaped FDA policy, the evolution of accelerated approvals during the AIDS epidemic, and lessons from COVID-19 trials. Ross shares his current work rescuing abandoned promising drugs from bankruptcy.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/drug-development-ross-rheingans-yoo/ –Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Ross' newsletter: https://essays.soletta.vc Ross' blog post on drug development costs: https://blog.rossry.net/100x/Ross' blog post on lessons from thalidomide https://blog.rossry.net/thalidomide/ –Twitter:@patio11@_rossry–Timestamps:(00:00) Intro(02:28) Ross’ career transition to drug development(03:12) The drug development process(06:22) Clinical trials and FDA approval(11:48) Challenges in clinical trials(14:50) Case study: COVID-19 trials(18:00) Sponsors: Manifold Markets | Check(19:55) Pharmaceutical economics(38:13) Rare diseases and regulatory strategies(45:18) Advanced market commitments explained(45:54) Operation warp speed and its impact(47:45) How to get accelerated approvals(52:49) The thalidomide tragedy and its legacy(01:03:17) Modern regulatory challenges and patient advocacy(01:07:14) Reviving abandoned drugs(01:12:06) Innovative approaches to drug trials(01:24:26) The future of pharmaceutical development(01:26:34) Wrap–Complex Systems is part of the Turpentine podcast network. Turpentine also has a social network for top founders and execs: https://www.turpentinenetwork.com/

In this episode, Patrick McKenzie (patio11) is joined by economist and fraud researcher Professor Jetson Luis-Leder to examine the systemic issues underlying government program fraud. Jetson and Patrick discuss healthcare fraud cases, including hospice eligibility manipulation and ambulance transport schemes, and other fraud practices against unemployment and the PPP program. The discussion reveals how institutional constraints, technological limitations, and policy design choices create opportunities for both beneficial and harmful rule violations. They also analyze the ROI of fraud prevention measures, the effectiveness of whistleblower incentives, and how bureaucratic systems can be redesigned to prevent abuse.–Full transcript available here: https://www.complexsystemspodcast.com/defrauding-government-jetson-leder-luis–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Jetson's website: https://sites.bu.edu/jetson/ Paper: Ambulance Taxis by Jetson Leder-Luis Ambulance Taxis: The Impact of Regulation and Litigation on Health Care Fraud Paper: Did FinTech Lenders Facilitate PPP Fraud by John M Griffin, Samuel Kruger, Prateek Mahajan https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3906395Paper: Is Fraud Contagious by John M Griffin https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4599654Paper: Unemployment Insurance Fraud in the Debit Card Market by Jetson Leder-Luis with Umang Khetan, Yunrong Zhou and Jialan Wang  https://www.nber.org/papers/w32527 Book: Recoding America by Jennifer Pahlka https://www.amazon.com/Recoding-America-Government-Failing-Digital-ebook/dp/B0B8644ZGYPodcast: Jennifer Pahlka on Ezra Kleinhttps://open.spotify.com/episode/2VPErCIG1pbcnYFBojrKcG Podcast: Dave Guarino on Odd Lots https://open.spotify.com/episode/43HI3NuxZGsl13U365xZxa Bits About Money https://www.bitsaboutmoney.com/Related Complex Systems episodes: Dan Davies and Dave Guarino's episodes–Twitter:@patio11@jetson_econ–Timestamps:(00:00) Intro(02:04) Overview of Medicare/Medicaid(02:41) Estimated $50-100B fraud losses(03:31) Taxonomy of healthcare fraud(08:04) Hospice fraud; potentially saved money(16:33) A $10 billion asterisk: ambulances for dialysis patients(21:30) Sponsors: Work OS | Check(24:45) Complexities of fraud detection and prevention(39:02) Pandemic fraud (41:34) Findings on PPP loans fraud(48:19) Supply chain of fraud(52:06) Policy and enforcement challenges(01:08:32) Whistleblower programs (01:14:54) Final thoughts–Complex Systems is part of the Turpentine podcast network. Turpentine also has a social network for top founders and execs: https://www.turpentinenetwork.com/

In this episode, Patrick McKenzie (patio11) is joined by Moses Kagan, co-founder of Adaptive Realty, ReSeed, and Reconvene. Their deep dive into real estate investing and property management covers the different classes of apartment buildings, the challenges of property management, and the complexities of financing structures in the industry. They examine how the internet has transformed capital raising, the significance of cap rates, the effects of supply and demand on property values, and a comparison of the real estate markets in different major cities. The episode is in many ways a follow up to Patrick’s conversation with Jim McKenzie and offers a window into the opaque world of real estate investment.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/real-estate-moses-kagan/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Moses Kagan's blog: https://kagansblog.com/Reconvene Conference: https://www.reconvene.com/Seth Godin’s book Permission Marketing: https://www.amazon.com/Permission-Marketing-Strangers-Friends-Customers/dp/0684856360Bits About Money: https://www.bitsaboutmoney.com/Jim McKenzie on Complex Systems: https://open.spotify.com/episode/6ocJirzGTStuf0K9ITM21X–Timestamps:(00:00) Intro(00:25) Understanding the stigma of the maligned landlord(04:07) Landlord spectrum: from mom-and-pops to institutional players(05:29) Inside Adaptive Realty(06:13) Owner vs. property manager(07:34) Challenges and complexities of property management(15:00) Capital stacks and loans(18:17) Sponsor: Check(26:25) The role of banks and underwriting in real estate(40:28) Federal subsidies and small scale landlords(44:26) Understanding commercial real estate classes(46:20) Challenges of Class C assets(47:13) Explaining cap rates(52:20) Raising equity for real estate deals(54:16) The syndication process(56:30) The role of brokers and execution risk(01:00:52) Legal structures and documentation(01:10:52) The power of networking and reputation(01:23:14) The impact of supply and demand on rents(01:28:03) Wrap

In this episode, Patrick McKenzie (patio11) and Erik Torenberg, investor and the media entrepreneur behind Turpentine, explore the evolving relationship between tech journalism and the industry it covers. They discuss how fictional portrayals of industries greatly inform how jobseekers understand those industries, and how the industries understand themselves. They cover the vacuum in quality tech reporting, the emergence of independent media companies, and industry heavyweights with massive followings. Patrick also brings up the phenomenon of Twitter/Slack crossovers, where coordinated social media action is used to influence internal company policies and public narratives. They examine how this dynamic, combined with economic pressures and ideological motivations, has led to increased groupthink in tech journalism. Expanding on themes covered in Kelsey Piper’s episode of Complex Systems, this conversation makes more legible the important ways media affects tech, even though tech is arguably a more sophisticated industry – and why there is a need to move beyond simplistic narratives of "holding power accountable" to provide nuanced, informative coverage that helps people understand tech’s impact on society.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/tech-media-erik-torenberg–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Bits About Money, “Fiction and Finance” https://www.bitsaboutmoney.com/archive/fiction-about-finance/Byrne Hobart’s essay on The Social Network https://byrnehobart.medium.com/the-social-network-was-the-most-important-movie-of-all-time-9f91f66018d7Kelsey Piper on Complex Systems https://open.spotify.com/episode/33rHTZVowaq76tCTaKJfRB –Twitter:@patio11@eriktorenberg–Timestamps:(00:00) Intro(00:27) Fiction and Finance: The power of narrative(01:41) The Social Network's impact on career choices(03:34) Cultural perceptions and entrepreneurship(06:04) Media influence and tech industry perception(11:01) The role of tech journalism(14:15) Social media's impact on journalism(19:39) Sponsors: WorkOS | Check(21:54) The intersection of media and tech(39:22) Public intellectualism in tech(57:40) Wrap–Complex Systems is part of the Turpentine podcast network. Turpentine also has a social network for top founders and execs: https://www.turpentinenetwork.com/

Patrick McKenzie (patio11) is joined by his father, Jim McKenzie, for an intimate and in depth exploration of commercial real estate development. They unravel the complex web of relationships, regulations, and often absurd situations that shape our built environment. From the intricacies of curb cuts and driveway permits to the art of navigating local politics and lobbyists, the conversation offers a rare glimpse into the hidden mechanisms of urban development. Jim shares the highlights from his career like transforming day-old bread stores into bank branches, dealing with Chicago's infamous aldermen, and spelunking in archives to find century-old telegrams with enforceable contractual implications.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/the-hundred-year-old-telegram-worth-5-million-with-jim-mckenzie-2/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Bits About Money: https://www.bitsaboutmoney.com/archive/why-is-that-bank-branch-there/–Timestamps:(00:00) Intro(00:27) Understanding real estate development with Jim(03:13) The great rail lease story(20:02) How real estate ownership is conducted(25:58) Real estate acquisition strategies(28:39) Sponsor: Check(29:41) Banks and location(34:25) Day-old bread: an opportunity(38:45) The Walgreens development dilemma(40:22) Strategic offers and unusual numbers(42:25) The power of personal relationships(46:37) Navigating real estate offers and execution quality(52:51) The LaSalle Bank acquisition and its impact(54:39) The 2008 quadruple whammy(58:39) The West Town shopping center opportunity(01:01:44) The complexities of real estate deals(01:14:24) The 2008 financial crisis and its ripple effects(01:15:36) The energy industry resurgence post-Ukraine incursion(01:16:07) Navigating utility easements and real estate(01:21:43) The complexities of curb cuts and driveway permits(01:23:46) Chicago's political landscape and real estate development(01:32:37) Lobbying and political influence in development(01:51:58) Wrap–Complex Systems is part of the Turpentine podcast network. Turpentine also has a social network for top founders and execs: https://www.turpentinenetwork.com/

Patrick McKenzie (patio11) is joined again by Byrne Hobart, writer of The Diff, for a follow up conversation about “whales” – and so much more – across the gaming, aviation, software, hospitality and fast food industries. Patrick and Byrne also discuss their writing process, knowledge management, and how they use AI tools.–Full transcript available here: www.complexsystemspodcast.com/byrne-hobart-whales-miscellany–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:The Diff thediff.coCapital Gains capitalgains.thediff.coByrne Hobart’s book Boom: Bubbles and the End of StagnationKongregate Presentation: Video (https://www.youtube.com/watch?v=P7SDByLlCHw) Slides (https://blog.kongregate.com/dont-call-them-whales-f2p-spenders-and-virtual-value/)–Twitter:@patio11@byrnehobart–Timestamps:(00:00) Intro(00:45) Economics of video game currencies (02:56) Pricing strategies in mobile gaming (05:08) Monetization skew towards high-end players (08:08) VIP systems and casino host analogy (11:08) Whale behavior in casual games (15:03) Hyper-consuming outliers in other industries(19:09) Sponsors: WorkOS | Check(21:25) Hobbies and opportunity costs (23:01) Custom software for tech billionaires (26:30) Evolution of website development (29:55) Restaurant websites and delivery apps (40:17) McDonald's take rates(44:59) Restaurant groups(53:34) Tech company cafeterias and employee benefits (57:57) Google's business model and economic feedback loops (1:00:57) Early Google investment anecdote (1:02:16) Writing as a memory aid (1:04:46) Using ChatGPT for memory assistance (1:10:30) LLMs as writing and coding aids (1:13:34) Children's interaction with ChatGPT (1:18:11) Arguing with LLMs and using them for research (1:03:00) Wrap–Complex Systems is part of the Turpentine podcast network. Turpentine also has a social network for top founders and execs: https://www.turpentinenetwork.com/

In this episode of Complex Systems, Patrick McKenzie (aka @Patio11) is joined by Dave Guarino, a software engineer and policy wonk. They explore the complexities and challenges of public programs, focusing on SNAP aka CalFresh in California, where Dave was the founding engineer and then director. They discuss how society’s complex preferences become policy, driving obviously bad UXes (like 200+ questions for an application) for structural reasons. Patrick and Dave debate structural issues within government agencies that lead to these inefficiencies, the lack of user-centric design, misaligned incentives, a “cavernous gap” in feedback loops, and surprisingly simple ways anyone can influence public policy and improve government systems.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/government-software-dave-guarino/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Dave Guarino's newsletter: https://daveguarino.substack.com/Dan Davies episode of Complex Systems: https://open.spotify.com/show/3Mos4VE3figVXleHDqfXOH–Twitter:@patio11@allafarce–Timestamps:(00:00) Intro(01:03) Complexity of naming government programs(03:45) How policy decisions are made(07:19) Why SNAP applications are so complex(14:17) Why no one stops overly complex applications(18:44) Political economy of different benefit programs(24:56) Sponsor: Check | WorkOS(26:13) Limited visibility into user experience(29:24) Lack of application completion rate tracking(35:27) Starting where you are(43:44) Challenges of modernizing legacy systems(48:35) Broken feedback loops in government(53:01) Tech's understanding of service design(57:07) Issues with improper payments methodology(1:04:45) Effective ways to influence policy(1:09:43) Increasing agency in government agencies(1:14:56) Getting niche policy ideas into circulation(1:18:04) Importance of frontline knowledge and user feedback(1:21:33) Improving government services(1:22:06) Wrap–Complex Systems is part of the Turpentine podcast network. Turpentine also has a social network for top founders and execs: https://www.turpentinenetwork.com/

In this episode of Complex System, the tables are turned and media entrepreneur/investor Erik Torenberg interviews Patrick McKenzie (patio11) about the intricacies of the financial system, focusing on banking, money laundering, and regulatory compliance. They discuss several of Patrick’s essays from Bits About Money. Patrick discusses the three stages of money laundering - placement, layering, and integration - and how the financial system has been deputized to act as law enforcement. The conversation touches on the unintended consequences of strict regulations, including their impact on economic growth and financial inclusion.–Full transcript available here: https://www.complexsystemspodcast.com/true-crime-banking-edition–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Seeing Like a Bank https://www.bitsaboutmoney.com/archive/seeing-like-a-bank/KYC and AMI: https://www.bitsaboutmoney.com/archive/kyc-and-aml-beyond-the-acronyms/Money Laundering and AML Compliance: https://www.bitsaboutmoney.com/archive/money-laundering-and-aml-compliance/Turpentine Media: www.turpentine.coTurpentine network for Tech Founders & Execs: www.turpentinenetwork.co–Twitter:@patio11@eriktorenberg–Timestamps:(00:00) Intro(00:33) Seeing like big tech(06:31) AI, centralization, and information processing(09:23) Crypto vs AI: Thiel's perspective(10:30) Seeing like a bank: ledgers and customer service(19:57) Future of banking customer service(22:27) Societal goals vs banking efficiency(28:58) Sponsors: WorkOS | Check(31:15) Understanding KYC and AML(35:16) Money laundering explained(42:28) Financial system as law enforcement(51:41) Ideal changes in the financial system(52:34) Wrap–Complex Systems is part of the Turpentine podcast network.

In this episode, Patrick McKenzie (patio11) is joined by Dave Kasten, to discuss their experiences building VaccinateCA, a charitable effort that collected, collated, and distributed vaccine distribution information during the COVID-19 pandemic. (If you Googled for the vaccine, the search results likely came from VaccinateCA’s data.) They cover the challenges of rapidly scaling a volunteer-driven organization, the lessons learned about public health infrastructure, the intricacies of interfacing with government bureaucracy, and reasons to be cautiously optimistic about tech/government collaboration.Expanding on a theme from recent episodes (see: Casey Handmer), Dave and Patrick cover the stark differences between government and tech sector’s approach to problem-solving. They offer insights into the often-misunderstood world of government operations, the individuals who make it function, and the "scar tissue" of regulations that can both protect and hinder progress.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/tech-government-dave-kasten/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:The Story of VaccinateCA, Works in Progress https://worksinprogress.co/issue/the-story-of-vaccinateca/https://davekasten.substack.com/ https://www.bitsaboutmoney.com/ Complex Systems episode ft. Kelsey Piper (Spotify): https://open.spotify.com/episode/33rHTZVowaq76tCTaKJfRB –Twitter:@patio11@David_Kasten–Timestamps:(00:00) Intro(00:23) Dave Kasten’s unique career path(01:37) The beginning of VaccinateCA(03:09) Early challenges and volunteer efforts(07:24) Volunteer coordination and call center operations(10:55) Navigating policies and procedures(14:33) Navigating policies and prioritization(21:00) Adapting to volunteer feedback(22:50) Sponsors: WorkOS | Check(25:07) Public reception and media involvement(35:40) Government and institutional responses(45:59) Differences between tech and government approaches(47:52) Challenges in pandemic information dissemination(49:10) Accuracy and information systems(53:43) Government and agile development(56:51) Bureaucratic constraints and historical practices(01:08:55) Government workforce and technological challenges(01:22:34) The importance of policy engagement(01:33:42) Wrap–Complex Systems is part of the Turpentine podcast network.

Patrick McKenzie (patio11) is joined by Austin Vernon, a petroleum engineer, to discuss the technology and economics of fracking. Austin explains the evolution of drilling technology, the financial ecosystem supporting the oil industry – including the unique "doctor and lawyer money" funding model – and the complex interplay of mineral rights laws and state/local politics in the United States. Patrick and Austin also discuss the cross-pollination of technologies between fracking and emerging fields like geothermal energy extraction.–Full transcript available here: www.complexsystemspodcast.com/fracking-austin-vernon/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Austin Vernon's Blog: https://austinvernon.site/–Twitter:@patio11@Vernon3Austin–Timestamps:(00:00) Intro(01:38) Fracking technology and horizontal drilling(05:12) The history and development of fracking techniques(12:26) Communication methods in drilling operations, including mud pulse technology(15:50) The economics of drilling operations(17:28) Scale and cost comparisons between different types of drilling projects(19:30) Safety considerations in onshore vs offshore drilling(20:50) Sponsors: WorkOS | Check(24:04) Discussion of small-scale "mom and pop" oil operations(27:13) The impact of oil drilling  on local economies(31:45) The lifecycle of fracked wells and their long-term production(36:15)  Financing in the oil and gas industry(39:19)  Unique aspects of US mineral rights laws and leasing practices(42:38) The process of setting up and funding new drilling operations(52:55) Environmental concerns and groundwater protection measures in fracking(56:40) The physical footprint of drilling operations(59:12) Learning curves in fracking and geothermal energy extraction(59:56) Diamond drill bits are not quite forever(01:03:59) Where fracking goes from here–Complex Systems is part of the Turpentine podcast network.

In this episode, Patrick McKenzie (patio11) is joined by Dan Davies, author of Lying for Money, and The Unaccountability Machine. They discuss how cybernetics–the study of control and communication in complex systems–applies to modern organizations and decision-making. Dan and Patrick discuss how organizations change as they grow, financial fraud and its relevance to systems design, and the process of writing nonfiction books. The conversation touches on pathologies like what happens when organizations insulate decisionmakers from communications channels to on-the-ground reality.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/dan-davies-organizations-fraud/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Dan Davies, Lying for Money Dan Davies, The Unaccountability Machine: Why Big Systems Make Terrible Decisions — and How the World Lost Its MindDan Davies Substack: https://backofmind.substack.com/James Gleick, The InformationMalcolm K. Sparrow,  License to Steal: How Fraud Bleeds America's Health Care System –Twitter:@patio11@dsquareddigest–Timestamps:(00:00) Intro(00:26) The Unaccountability Machine(01:38) History and fundamentals of cybernetics(08:10) Operations research and its evolution(12:08) Theory of the Firm, revisited(15:21) Monopolizing math for fun and profit(18:38) Sponsor: Check(19:50) Role of black boxes in systems(25:11) AI and the future of system management(30:02) Accountability sinks and organizational issues(38:44) Optimism about future of organizational design(43:45) Empowering employees: the CEO’s open door policy(46:31) Lying for Money(51:57) Psychology of fraudsters(01:02:52) Fraudogenic environments(01:09:49) Journey of becoming a published author(01:18:13) Effective ways to sell books(01:22:33) Wrap–Complex Systems is part of the Turpentine podcast network.

Patrick McKenzie (patio11) is joined by Casey Handmer, rocket scientist turned CEO of Terraform Industries. Casey discusses the rapid advancements in solar power, the bureaucratic challenges of NASA, the incomprehensible success of SpaceX, and the evolving energy landscape. Casey touches on his experiences at JPL revealing how the organization’s fear of waste and rigid processes often stifle innovation and efficiency.The conversation then shifts to Terraform Industries' mission to create synthetic natural gas from sunlight and air, potentially revolutionizing the energy sector. The conversation dives into the complexities of large-scale systems, from space exploration to renewable energy, offering insights into how innovation and smart policy can shape a more sustainable and prosperous future.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/solar-economics/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Terraform Industries: https://terraformindustries.com/SpaceX: https://www.spacex.com/JPL: https://www.jpl.nasa.gov/Book: The Alchemy of Air: https://www.goodreads.com/book/show/3269091-the-alchemy-of-air–Twitter:@patio11@CJHandmer-Timestamps:(00:00) Intro(00:25) Casey’s startup: Terraform Industries(00:48) The rise of solar power(02:19) Solar power vs. traditional energy sources(05:18) Economic and industrial impacts of solar(09:02) Challenges in aviation and energy(19:39) The role of policy in clean energy(22:30) Sponsor: Check(23:41) Casey’s experience at NASA and JPL(34:17) SpaceX, Elon Musk and the US private space actors(44:05) Solving problems and workplace politics(45:10) Spreadsheets create their own reality, film at eleven(48:35) Organizational challenges at NASA(49:40) Challenges of innovation in bureaucracies(51:07) The role of NASA and government in innovation(55:25) The housing theory of everything(58:36) Empowering employees for success(01:02:41) Terraform Industries’ vision(01:07:28) The future of energy and carbon neutrality(01:10:52) The importance of hydrocarbons in aviation(01:15:47) Challenges with hydrogen as a fuel(01:18:21) Development of synthetic fertilizers(01:21:54) Environmental considerations on industrial progress(01:22:55) Wrap

In this episode, Patrick McKenzie (patio11) is joined by Zvi Mowshowitz (TheZvi) to discuss his wide-ranging career as a professional Magic: The Gathering player, sports gambler, equities trader, public intellectual on the covid-19 epidemic, and AI-focused journalist. They go into depth on how trading happens in less formal markets with lessons that resonate in more formal markets. They also explore the fallacies of rational decision-making in large organizations, the significance of obsession and practice in achieving excellence, and exchange predictions on AI.–Full transcript available here: https://www.complexsystemspodcast.com/betting-trading-zvi-mowshowitz/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:https://thezvi.wordpress.com/https://www.bitsaboutmoney.com/–Twitter:@patio11@TheZvi–Timestamps:(00:00) Intro(00:16) Meet Zvi Mowshowitz(04:11) Trading and Magic: The Gathering(07:24) Professional sports gambling(11:58) Navigating the sportsbook market(22:33) Sponsor: Check(23:48) Financial markets vs. sports betting(34:02) Covid-19 early predictions (43:21) Covid-19 policy failures and blame(49:52) Vaccine rollout chaos (01:01:11) The importance of scaling effective strategies(01:14:46) AI predictions(01:23:58) Wrap–Complex Systems is part of the Turpentine podcast network. Learn more: Turpentine.co

In this episode, Patrick McKenzie (patio11) is joined by Stephen Grugett, a co-founder of Manifold, to discuss prediction markets. They cover how prediction markets work, their efficiency in aggregating information, and why they serve as a minority report against prevailing narratives. They cover past controversies, potential risks, and the philosophical value of prediction markets.–Full transcript available here: https://www.complexsystemspodcast.com/prediction-markets-stephen-grugett/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:Manifold https://manifold.markets/ Bits About Money https://www.bitsaboutmoney.com/–Twitter:@patio11@ManifoldMarkets–Timestamps:(00:00) Intro(00:26) Understanding prediction markets(02:15) Manifold's calibration and performance(06:48) The role of bots in prediction markets(10:52) User-created markets and community practices(15:49) Forecasting, and superforecasters(18:26) Crafting good markets on Manifold(23:07) Sponsor: Check(24:20) Evolution of Manifold's loan system(26:13) Market participation and capital efficiency(27:57) The LK-99 superconductor markets on Manifold(28:57) Social aspects of market participation(32:31) Building Manifold and user growth trajectory(34:57) Innovative use cases for prediction markets(38:52) Prediction market vs. traditional market(42:22) Play money markets with real cash prizes(46:14) Historical and regulatory context of prediction markets(49:32) The importance of market optics(50:44) Wrap–Complex Systems is part of the Turpentine podcast network.

Patrick McKenzie (patio11) is joined by Kelsey Piper, a journalist for Vox’s Future Perfect. Kelsey recently reported on equity irregularities at OpenAI in May of 2024, leading to an improvement of their policies in this area. We discuss the social function of equity in the technology industry, why the tech industry and reporters have had a frosty relationship the last several years, and more.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/reporting-tech-kelsey-piper/–Sponsors:  Safebase Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:https://www.vox.com/future-perfect/351132/openai-vested-equity-nda-sam-altman-documents-employeeshttps://www.vox.com/authors/kelsey-piper https://www.bitsaboutmoney.com/–Twitter:@patio11@KelseyTuoc–Timestamps:(00:00) Intro(00:28) Kelsey Piper's journey into tech journalism(01:34) Early reporting (03:16) How Kelsey covers OpenAI(05:27) Understanding equity in the tech industry(11:29) Tender offers and employee equity(20:00) Dangerous Professional: employee edition(28:46) The frosty relationship between tech and media(35:44) Editorial policies and tech reporting(37:28) Media relations in the modern tech industry(38:35) Historical media practices and PR strategies(40:48) Challenges in modern journalism(44:48) VaccinateCA(56:12) Reflections on Effective Altruism and ethics(01:03:52) The role of Twitter in modern coordination(01:05:40) Final thoughts–Complex Systems is part of the Turpentine podcast network.

Patrick McKenzie (patio11) is joined by Byrne Hobart to discuss Byrne’s vantage point as writer of The Diff, a tech and finance newsletter. Byrne explains the toxicity of the 30-year mortgage, the dynamics of the finance newsletter ecosystem, how rationalist epistemics can be applied to hedge funds, and the joy of learning about an industry from scratch.–Full transcript here: https://www.complexsystemspodcast.com/episodes/writing-history-byrne-hobart/ –Sponsors:  SafebaseReady to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:The Diff https://www.thediff.co/Capital Gains https://capitalgains.thediff.co/ Pre-order Byrne Hobart’s book Boom: Bubbles and the End of Stagnation https://www.amazon.com/Boom-Bubbles-Stagnation-Byrne-Hobart/dp/1953953476 Bits About Money https://www.bitsaboutmoney.com/Byrne's podcast The Riff: https://podcasts.apple.com/id1716646486Referenced:The Railway Mania of 1860 Paper by Andrew Odlyzko https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4006745 Seeing Like a State by James C. Scott https://www.amazon.com/Seeing-Like-State-Certain-Condition/dp/0300078153The Dead Pledge by Judge Earl Glock https://www.amazon.com/Dead-Pledge-Mortgage-1913-1939-Capitalism/dp/0231192533The Oral History of Travel’s Greatest Acquisition Bookings.com https://skift.com/oral-history-of-booking-acquisition–Twitter:@patio11@byrnehobart–Timestamps:(00:00) Intro(00:25) The 30-year mortgage is an intrinsically toxic product(04:46) Young households are the socially optimal holders of equities risk(10:19) The structure of private equity returns(14:18) Sponsor: Check(15:32) Meta-analysis of the finance newsletter space(19:54) Byrne’s aspirations for The Diff(25:01) The origins of names(27:19) The epistemics of a hedge fund(34:26) Venture capital vs hedge funds(38:13) Understanding scrapers(41:20) How to learn about an industry from scratch(45:37) The business of online travel agencies(49:21) Wrap–Complex Systems is part of the Turpentine podcast network.

Patrick McKenzie (patio11) and Ricki Heicklen discuss Ricki’s innovative approaches to teaching trading. Trading is traditionally taught only by practitioners, to practitioners. The curricula that trading firms use are not published externally, to avoid empowering competitors. Ricki explains how she teaches trade mechanics, how markets and traders react to new information, and the security mindset necessary for trading, including protecting sensitive information and avoiding signaling strategies inadvertently.–Full transcript available here: https://www.complexsystemspodcast.com/episodes/teaching-trading-ricki-heicklen/–Sponsors:  SafebaseReady to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast –Links:https://rickiheicklen.com/https://bayesshammai.substack.com/https://www.bitsaboutmoney.com/–Twitter:@patio11@tradegal_–Timestamps:(00:00) Intro(00:58) Ricki’s background in trading(01:07) Teaching trading: pedagogical approaches(03:47) Challenges in learning trading(07:08) The importance of adverse selection(08:02) Crowdfunding and market dynamics(11:49) Understanding order books(19:53) Sponsor: Check(21:07) Liquidity and market microstructure(27:48) Teaching trading through practical examples(35:14) Reacting to new market information(36:47) Understanding order cancellations(41:29) Order types and other oddities(56:00) Introduction to arbitrage(01:05:00) Teaching position sizing and risk management(01:10:05) Thoughts on quant trading(01:12:44) Trading simulations and mental models(01:13:08) Simulated insider trading exercise(01:20:18) Security mindset in trading(01:24:41) Information leakage in trading firms(01:38:17) Final thoughts–Complex Systems is part of the Turpentine podcast network.

Vincent Woo interviewed me about my somewhat quirky career history.Highlights:* 5 million words and counting of written output* some minor regrets around two small software businesses* Starfighter and what tech still doesn't get about hiring well* revised thoughts on tech equity* the quirky nature of microcelebrity and being a public intellectual