Complex Systems with Patrick McKenzie (patio11)

Patrick McKenzie
  • 4.9 (151)
  • Investing
  • Updated Weekly

We live in a world where our civilization and daily lives depend upon institutions, infrastructure, and technological substrates that are _complicated_ but not _unknowable_. Join Patrick McKenzie (patio11) as he discusses how decisions, technology, culture, and incentives shape our finance, technology, government, and more, with the people who built (and build) those Complex Systems.

  1. 17h ago

    What you're actually getting paid in, with Leila Clark

    In this episode, Patrick McKenzie (patio11) is joined by Leila Clark, founder of Stardrift and formerly a software engineer at Jane Street, to discuss her essay "What Are You Getting Paid In?"  They cover how a Jane Street manager staffed the firm's least lucrative corner by paying people in culture, why Ken Griffin is worth roughly fifty Taylor Swifts, and how a longtime Google product manager quietly ends up with Grammy-winner money. The conversation ranges from academia's brutal tournament structure and YC as a script to founderdom to the one currency Taylor Swift holds that Ken Griffin's $50 billion buys only awkwardly: a restaurant reservation anywhere in New York. –Full transcript available here: https://www.complexsystemspodcast.com/what-youre-actually-getting-paid-in-with-leila-clark/ –Presenting Sponsors: Mercury, Chainguard & MongoDB  Complex Systems is presented by Mercury—radically better banking for founders. Mercury's new feature Command brings an LLM directly into your banking interface, so checking balances, finding invoices, or sending a wire is as easy as asking. Apply online in minutes at https://mercury.com/. If attackers are using AI to weaponize code faster than any team can review it, your scanners won't save you. Chainguard builds libraries and container images from source, verified all the way down, with near-zero CVEs and zero malware. Build safely at https://www.chainguard.dev/. What's the point of building faster with AI if your database can't keep up? MongoDB's native data model mirrors the language LLMs already speak. Ship at the speed of AI while staying ACID compliant at Fortune 500 scale. Start building at https://mongodb.com/ai. – Links: What are you getting paid in: https://www.approachwithalacrity.com/p/what-are-you-getting-paid-in –Timestamps:(00:00) Intro(01:23) What are you getting paid in?(03:16) Scripts, teacher figures, and hitting capitalism(08:18) The academia trap(11:08) Paying people in culture: Jane Street's back office(14:03) Ken Griffin vs. Taylor Swift(16:53) Learning about finance by osmosis (or not)(20:44) Sponsors: Mercury | Chainguard(23:46) Musician money vs. Google money(30:03) Keeping up with the Joneses and the meritocratic ladder(33:12) YC as a script to founderdom(36:19) What entrepreneurship pays you in(39:12) Gratitude, culture, and quirky preferences(40:11) Sponsor: MongoDB(43:48) Does winning this script look like winning to you?(48:29) Don't end the week with nothing(51:06) Fame and living in bubbles(56:57) Restaurant reservations as a currency(1:02:57) Where to find Leila(01:03:35) Wrap

    What you're actually getting paid in, with Leila Clark

  2. Jul 16

    What LLMs can and can't do for writers, with Clara Collier of Asterisk Magazine

    Patrick McKenzie is joined by returning guest Clara Collier, editor-in-chief of Asterisk Magazine, to discuss how working writers and reporters actually use LLMs. Patrick walks through the machinery behind his recent SPLC reporting, including "parallel construction" with LLMs: when sources can't go on the record, models can surface public confirmation of the same facts in unguarded podcast interviews, press releases, and prepared remarks. They also cover why the best smoking gun sat unnoticed on the coalition's own Twitter account, the David O. Selznick theory of the corporate memo, and where hardball politics in a democracy ends and crimes begin. –Full transcript available here: https://www.complexsystemspodcast.com/llms-and-writers-with-clara-collier-of-asterisk-magazine/ –Presenting Sponsors: Mercury, MongoDB & Chainguard Complex Systems is presented by Mercury—radically better banking for founders. Mercury's new feature Command brings an LLM directly into your banking interface, so checking balances, finding invoices, or sending a wire is as easy as asking. Apply online in minutes at https://mercury.com/.  What's the point of building faster with AI if your database can't keep up? MongoDB's native data model mirrors the language LLMs already speak. Ship at the speed of AI while staying ACID compliant at Fortune 500 scale. Start building at https://mongodb.com/ai. If attackers are using AI to weaponize code faster than any team can review it, your scanners won't save you. Chainguard builds libraries and container images from source, verified all the way down, with near-zero CVEs and zero malware. Build safely at https://www.chainguard.dev/.  – Links: Complex Systems on YouTube: https://www.youtube.com/@patio11podcast Asterisk Magazine: https://asteriskmag.com/ – Timestamps: (00:00) Preview (00:51) Intro (01:16) How legacy media feels about LLMs (05:02) Writing as thinking: why the byline matters (08:51) LLMs as feedback partners and simulated readers (12:39) The future of the corporate memo (15:58) Sponsor: Mercury | MongoDB (18:30) Memos, de-skilling, and thinking on paper (20:02) David O. Selznick's memos and the MrBeast production doc (23:28) Can models introspect on their own work? (30:06) Sponsor: Chainguard (31:27) The SPLC investigation (37:07) Chains of evidence and protecting sources (45:20) Parallel construction with LLMs (49:41) Mining podcasts for unguarded admissions (59:35) Deepen your strengths, don't just patch weaknesses (1:03:34) The smoking gun the LLM missed (1:04:48) Hardball politics versus crimes (1:10:48) Why a payments newsletter reported a political story (1:16:19) Reporting stories that will be weaponized (1:20:24) The tech right and internal company politics (1:23:44) Debanking discourse and drawing distinctions (1:30:21) Hate speech, social sanctions, and owning decisions (1:34:51) Wrap

    What LLMs can and can't do for writers, with Clara Collier of Asterisk Magazine

  3. Jul 9

    YouTube economics now, with Justin Kuiper

    In this episode of Complex Systems, Patrick McKenzie (patio11) is joined by Justin Kuiper, a longtime writer for MatPat's Game Theory family of channels and now creator of Proof Positive, to discuss the microeconomics of YouTube. They break down how creators actually get paid — from $3–$20 CPMs and the leaky funnel where a million views yields perhaps 50,000 actual ad views, to sponsor reads, Super Chats, and MrBeast selling chocolate bars as his own advertiser of last resort. Along the way, they explore how a successful channel becomes a firm that absorbs specialist labor from less successful peers, why the algorithm gives every upload a trial by attention, and what parasocial spending has in common with Mark Twain's speaking circuit. –Full transcript available here: https://www.complexsystemspodcast.com/justin-kuiper-youtube/ –Presenting Sponsors: Mercury, Chainguard & MongoDB  Complex Systems is presented by Mercury—radically better banking for founders. Mercury's new feature Command brings an LLM directly into your banking interface, so checking balances, finding invoices, or sending a wire is as easy as asking. Apply online in minutes at https://mercury.com/.  If attackers are using AI to weaponize code faster than any team can review it, your scanners won't save you. Chainguard builds libraries and container images from source, verified all the way down, with near-zero CVEs and zero malware. Build safely at https://www.chainguard.dev/.  What's the point of building faster with AI if your database can't keep up? MongoDB's native data model mirrors the language LLMs already speak. Ship at the speed of AI while staying ACID compliant at Fortune 500 scale. Start building at https://mongodb.com/ai. – Links: Proof Positive on YouTube: https://www.youtube.com/channel/UCns_C7cPAguFSv2YdltaOsg – Timestamps: (00:00) Preview (00:45) How creators make money on YouTube (04:06) CPMs and the international ad market (06:36) From solo creator to firm: working for MatPat (09:28) Sponsors: Mercury | Chainguard (12:30) From solo creator to firm: working for MatPat (cont’d) (13:49) YouTube as a farm league for other industries (17:15) Why now is the best time to start: discovery and universal basic attention (20:47) Power users and how recommendations work (24:23) Brand safety, rabbit holes, and the money laundering short (27:38) Fads, timing, and the day-two piece (35:52) The production function: scripts, shot lists, and editing labor (42:14) The aesthetics of authenticity (46:58) Sponsor: MongoDB (47:47) Why more people should make videos (53:52) Content marketing, sponsor reads, and remnant inventory (01:00:24) Chocolate bars, paint sets, and creator products (01:05:00) Parasocial relationships and the market in status (01:16:43) Where to find Justin: Proof Positive(01:18:58) Wrap

    YouTube economics now, with Justin Kuiper

  4. Jul 2

    The structural footprint of a bank run

    Patrick McKenzie (patio11) reads his 2023 essay "Deposit Franchises as Natural Hedges," written seven weeks into that year's banking crisis, making the case that deposit franchises are a natural hedge against interest rate risk (one regional banks were quietly encouraged to sell off by loading up on agency MBS). He walks through why "sweat and smiles" deposits were assumed to be sticky enough to fund long-duration assets, why that assumption broke down for retail and sophisticated depositors alike once rates rose, and how the resulting losses moved through bank balance sheets. Patrick closes with two years of hindsight: what the essay got right and wrong about how bad it would get. –Full transcript available here: https://www.complexsystemspodcast.com/deposit-franchises/ –Presenting Sponsors: Mercury, MongoDB & Chainguard Complex Systems is presented by Mercury—radically better banking for founders. Mercury's new feature Command brings an LLM directly into your banking interface, so checking balances, finding invoices, or sending a wire is as easy as asking. Apply online in minutes at https://mercury.com/.  What's the point of building faster with AI if your database can't keep up? MongoDB's native data model mirrors the language LLMs already speak. Ship at the speed of AI while staying ACID compliant at Fortune 500 scale. Start building at https://mongodb.com/ai. If attackers are using AI to weaponize code faster than any team can review it, your scanners won't save you. Chainguard builds libraries and container images from source, verified all the way down, with near-zero CVEs and zero malware. Build safely at https://www.chainguard.dev/.  – Links: Deposit franchises as natural hedges: https://www.bitsaboutmoney.com/archive/deposit-franchises-as-natural-hedges/ – Timestamps: (00:00) Intro(03:48) Natural hedges(07:38) Deposit franchises as an asset(10:53) The value of a deposit franchise increases with interest rates(11:30) A brief aside about deposit beta(14:58) Sponsors: Mercury | MongoDB(17:30) A brief aside about deposit beta(18:05) The deposit franchise as a hedge(21:52) Regional banks were instructed to load up on agency MBS(25:09) Why did the hedge bust?(29:42) Sponsor: Chainguard(31:03) Further bad news: the problem is bigger than MBS(34:01) It is no longer February(34:51) “Why didn’t the hedger hedge?!”(35:37) So what do we do now?(37:59) Postscript(39:45) Wrap

    The structural footprint of a bank run

  5. Jun 25

    Forty ways to pay for coffee in Japan

    Patrick McKenzie (patio11) reads his 2021 essay "Payments in Japan," tracing how Japanese consumers navigate a landscape with dozens of competing payment methods at once: credit cards, electronic money, QR-code super apps, convenience-store cash vouchers, and bank transfers. Along the way he covers the JFTC's campaign to force credit card networks to disclose interchange rates, how Rakuten and 7-Eleven each bought a bank to solve a payments problem blocking their core business, why PayPay's subsidized 2018 launch let it run away with the QR code market, and why konbini payments remain popular despite a user experience frozen in the late 1990s. –Full transcript available here: https://www.complexsystemspodcast.com/japanpayments/ –Presenting Sponsors: Mercury & MongoDB Complex Systems is presented by Mercury—radically better banking for founders. Mercury's new feature Command brings an LLM directly into your banking interface, so checking balances, finding invoices, or sending a wire is as easy as asking. Apply online in minutes at https://mercury.com/.  What's the point of building faster with AI if your database can't keep up? MongoDB's native data model mirrors the language LLMs already speak. Ship at the speed of AI while staying ACID compliant at Fortune 500 scale. Start building at https://mongodb.com/ai. – Links: Payments in Japan: https://www.bitsaboutmoney.com/archive/payments-in-japan/ An Introduction to Japanese Society: https://www.amazon.co.jp/Introduction-Japanese-Society-Yoshio-Sugimoto/dp/1107626676/  Use transit cards on your iPhone or Apple Watch in Japan: https://support.apple.com/en-us/120474  –Timestamps:(00:00) Intro(02:44) Credit cards(10:40) Payment method heterogeneity(12:57) Cash(14:57) Sponsors: Mercury + MongoDB(17:29) Cash (cont’d)(19:58) Electronic money systems(22:13) App-based payments(28:27) Convenience store payments(31:27) Bank transfers(34:03) Ambitions thwarted(34:30) Wrap

    Forty ways to pay for coffee in Japan

  6. Jun 18

    The factory behind your home loan

    Patrick McKenzie reads from his 2022 Bits About Money essay on mortgages, making the case that a mortgage is best understood as a manufactured product, not a simple loan between a bank and a customer. He walks through the assembly line behind every home loan, the loan officer and back-office staff who build the 700-page document. Then he traces the supply chain it gets sold into, where GSEs insure against non-payment risk, servicers buy the right to collect monthly checks, and pension funds and other private capital end up holding the economic exposure, because they want it more than banks do.–Full transcript available here: https://www.complexsystemspodcast.com/mortgages/ –Presenting Sponsors: Mercury & Granola  Complex Systems is presented by Mercury—radically better banking for founders. Mercury offers the best wire experience anywhere: fast, reliable, and free for domestic U.S. wires, so you can stay focused on growing your business. Apply online in minutes at mercury.com. If meetings consistently leave you with hazy action items and lost context, Granola handles the transcription so you can actually participate and gives you searchable notes afterward. Try it free at granola.ai/complexsystems with code COMPLEXSYSTEMS – Links: Mortgages are a manufactured product: https://www.bitsaboutmoney.com/archive/mortgages-are-a-manufactured-product/ The 30-Year Mortgage is an Intrinsically Toxic Product: https://byrnehobart.medium.com/the-30-year-mortgage-is-an-intrinsically-toxic-product-200c901746a Michael Lewis’ The Big Short: https://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0393338827 – Timestamps: (00:00) Intro (02:26) Mortgages are a manufactured product (04:19) Who manufactures mortgages? (07:08) Who buys mortgages? (07:42) The risk of non-payment (10:08) Sponsor: Mercury | Granola (14:35) The risk of failing to service a mortgage correctly (17:51) Every other risk you could imagine, of which there are many (24:04) Scratching the tip of the iceberg (25:10) More about flow meters (26:24) Wrap

    The factory behind your home loan

  7. Jun 4

    How brokerage transfers actually work

    Patrick McKenzie reads from his 2024 Bits About Money essay on ACATS, the Automated Customer Account Transfer Service that governs how Americans move investment accounts between brokerages, then updates it with regulatory developments (and industry infighting) from early 2026. The essay covers why a system underpinning trillions of dollars in assets was deliberately designed to skip verifying whether transfers are actually authorized, what the three-business-day shot clock means in practice, and how a bad actor armed with a stolen identity and a mobile app can drain someone's retirement account before they notice it's gone. (Good news, though: they’ll almost certainly get it back. Bad news: quite stressful, and it often isn’t obvious when staring at the zero that this is a recoverable condition.) –Full transcript available here: https://www.complexsystemspodcast.com/acats/ –Presenting Sponsors: Mercury & Granola  If you have more interesting hobbies than managing your money, Mercury Personal is built for you. It allows you to automate movement between accounts—allocating paychecks and tax prep the moment they hit—with a sensible permissions model for partners or accountants. It works the way tech people expect banking to work. Go to mercury.com/personal to experience banking built by the same folks Patrick trusts for his business. If meetings consistently leave you with hazy action items and lost context, Granola handles the transcription so you can actually participate and gives you searchable notes afterward. Try it free at granola.ai/complexsystems with code COMPLEXSYSTEMS – Links: Guys what is wrong with ACATS: https://www.bitsaboutmoney.com/archive/how-acats-transfers-work/ – Timestamps:(00:00) Intro(01:49) A brief digression into self-regulatory organizations(03:04) FINRA regulates asset transfers between brokerages(04:54) How does one transfer securities account assets?(06:52) What does an ACATS request actually entail?(09:44) Brokerages frequently do not verify incoming ACATS requests(15:28) Recent developments in ACATS fraud(19:13) Should I be terrified, Patrick?(20:07) Sponsors: Mercury | Granola(23:17) Should I be terrified, Patrick? (cont’d)(24:46) Another fun wonky control(28:29) A final ACATS story(29:58) Regulatory updates: FINRA 26-02(32:34) Comment letters from the industry(43:20) Outro

    How brokerage transfers actually work

  8. May 14

    Wrong numbers and why they survive, with Aaron Brown

    Patrick McKenzie (patio11) is joined by Aaron Brown, author of Wrong Number, to examine why institutions that produce bad statistics face so few consequences for doing so. They trace the pattern from Aaron's 1975 summer job, where two credentialed experts confidently produced opposite conclusions about whether American tractors ran on diesel or gasoline, through decades of case studies involving the NTSB, COVID-era research, and the eviction moratorium. Along the way they discuss why financial markets are unusually good at error-correction, why "wanna bet?" functions as a tax on b******t, and what it means that every senior economist Aaron told about the tractor problem simply laughed and topped it with a worse story. –Full transcript available here: https://www.complexsystemspodcast.com/aaron-brown/ –Presenting Sponsors: Mercury & Granola Complex Systems is presented by Mercury—radically better banking for founders. Mercury offers the best wire experience anywhere: fast, reliable, and free for domestic U.S. wires, so you can stay focused on growing your business. Apply online in minutes at mercury.com. If meetings consistently leave you with hazy action items and lost context, Granola handles the transcription so you can actually participate and gives you searchable notes afterward. Try it free at granola.ai/complexsystems with code COMPLEXSYSTEMS – Links: Wrong Number (book): https://www.amazon.com/Wrong-Number-Blizzard-Quantitative-Disinformation/dp/1394379781 Wrong Number with Aaron Brown (video series): https://www.youtube.com/playlist?list=PLBuns9Evn1w_SLGfUY5i__wzUF5f8e7ec –Timestamps: (00:00) Intro(01:12) The agricultural demand curve discrepancy(04:06) Why experts prioritize teaching over learning(05:17) Institutional indifference to error(06:26) The brand halo of high-status institutions(08:34) Lessons from COVID-era decision making(10:19) Financial statements versus scientific rigor(14:53) Sponsors: Mercury | Granola(18:19) The difficulty of auditing and replicating research(22:12) The CDC eviction moratorium and its justification(23:34) The NTSB curbside carrier safety study(26:41) Conspiracy versus incompetence in data manipulation(30:05) Error correction in financial markets(32:52) The culture of the advantage gambler versus the academic(35:28) Betting as a tax on b******t(38:44) Using market pricing to evaluate risks(41:04) The track record of scary predictions(43:34) Environmental success stories and technological optimism(48:21) Energy efficiency and the path to global wealth(54:10) Wrap and where to find Wrong Number

    Wrong numbers and why they survive, with Aaron Brown
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We live in a world where our civilization and daily lives depend upon institutions, infrastructure, and technological substrates that are _complicated_ but not _unknowable_. Join Patrick McKenzie (patio11) as he discusses how decisions, technology, culture, and incentives shape our finance, technology, government, and more, with the people who built (and build) those Complex Systems.

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