Complex Systems with Patrick McKenzie (patio11)

Episoder

• How brokerage transfers actually work 04.06.2026 43min

  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
• Wrong numbers and why they survive, with Aaron Brown 14.05.2026 55min

  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 bullshit, 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 & GranolaComplex 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 bullshit(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
• Defendant, Censor, Politico, Spy 08.05.2026 1t 5min

  The improbable but true story of how non-profits operating a private intelligence agency to combat terrorism decided to interfere with campaign infrastructure in a U.S. election.This piece includes original public interest reporting, following on the previous episode on how the Southern Poverty Law Center became financial infrastructure. If you have previously read Bits about Money's reporting on this subject, note there are two major additions here: 1) direct evidence of interference in campaign infrastructure for a declared candidate in a U.S. election, which was newly developed after our original reporting and 2) responses (and lack thereof) from the non-profits at issue.–Full transcript available here: www.complexsystemspodcast.com/defendant-censor-politico-spy/–Presenting Sponsors: Mercury, Granola & MeterComplex 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 COMPLEXSYSTEMSNetworking infrastructure has a way of accumulating technical debt faster than almost anything else in IT. Meter handles the full stack (wired, wireless, and cellular) as a single integrated solution: designed, deployed, and managed end-to-end so there's only one vendor to call when something goes wrong. Visit meter.com/complexsystems to book a demo.–Links:Notes on a non-profit indicted for bank fraud (Bits about Money): https://www.bitsaboutmoney.com/archive/nonprofit-indicted-bank-fraud/ –Timestamps:(00:00) Intro(02:50) The coordinated pressure campaign, as experienced by industry(08:13) The coordinated pressure campaign, as narrated by its authors(08:36) Mid-2017: Color of Change dialogue with PayPal begins(09:27) August 11, 2017: Charlottesville Unite the Right Rally(10:58) August 21, 2017: JPMorgan Chase Foundation donates $500k to the SPLC(11:44) 2018: SPLC organizes Change the Terms, which becomes the coalition's nucleus(19:07) March 2021: Color of Change describes the meetings on a podcast(21:42) A brief interlude about causality and communications strategy(22:58) The coalition targets politicians in nonpartisan fashion(28:20) Early 2020: The SPLC describes this campaign to Congress(31:26) June 2020: Widespread protests throughout America; National Guard, Facebook deployed(35:33) July 29, 2020: Antitrust Committee hearing about market power(38:05) January 6, 2021: A riot at the Capitol(42:51) February 25, 2021: The SPLC lobbies Congress to require companies to inform on nonprofits and others to government(44:49) June 4, 2021: Facebook rescinds newsworthiness exception to multiple policies(45:22) July 2021: The Change the Terms coalition attempts nonpartisan interdiction of Trump PAC fundraising(48:16) Later in 2021: Coalition members fundraise in reliance upon this conduct(50:52) 2022 to present: The Change the Terms coalition evolves posture(52:10) January 2023: Change the Terms intervenes in its own name against a declared candidate for the presidency(53:53) A brief parable about maintaining tax-exempt status (55:30) We have invited coalition participants to comment(57:50) We received a statement from the Center for American Progress(01:02:43) No other member of the coalition offered any comment(01:03:13) The moral authority of charities is a commons
• How the SPLC became financial infrastructure 01.05.2026 51min

  Patrick McKenzie reads from his latest Bits About Money essay, walking through why bank fraud charges are a prosecutor's favorite tool, how the Bank Secrecy Act's surveillance regime is designed to force criminals into impossible tradeoffs, and why lying to a bank is one of the easiest crimes to prove. He then applies that framework to the April 2026 DOJ indictment of the Southern Poverty Law Center, tracing how a covert informant-payment scheme run through fictitious shell entities to become a near-textbook bank fraud case. Part 2 releases next week. –Full transcript available here: www.complexsystemspodcast.com/splc-financial-infrastructure/–Presenting Sponsors: Mercury, Granola, & MeterComplex 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 COMPLEXSYSTEMSNetworking infrastructure has a way of accumulating technical debt faster than almost anything else in IT. Meter handles the full stack (wired, wireless, and cellular) as a single integrated solution: designed, deployed, and managed end-to-end so there's only one vendor to call when something goes wrong. Visit meter.com/complexsystems to book a demo.–Links:Bits About Money, Notes on a non-profit indicted for bank fraud https://www.bitsaboutmoney.com/archive/nonprofit-indicted-bank-fraud/–Timestamps:(00:00) Intro(02:43) The strategic logic of bank fraud charges in white collar indictments(05:47) Some worked examples of this in white-collar prosecutions(10:49) Criminal law textbooks published on the Internet(12:22) FFIEC BSA/AML Examination Manual(19:07) A textbook prosecution of bank fraud in many respects(27:48) This written communication is a succinct confession to bank fraud.(32:27) Data products and mechanistic decisioning
• The honey badger of payments 23.04.2026 29min

  Patrick McKenzie (patio11) reads his classic Bits about Money essay on how checks shaped the entire American payments infrastructure, from the origins of ACH to why a standard US bank account is, technically, a credit product. He then examines what happened when DOGE tried, via Executive Order 14247, to eliminate federal paper check disbursements by September 2025. The carve-outs Treasury eventually had to make map almost exactly onto the essay's original argument. Checks are the honey badger of payments: the numbers keep dwindling, but the edge cases are irreducible, and the second-best pathway for reaching them doesn't really exist yet.–Full transcript available here: www.complexsystemspodcast.com/checks/–Presenting Sponsors: Mercury & GranolaComplex 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:The Long Shadow of Checks: https://www.bitsaboutmoney.com/archive/the-long-shadow-of-checks/ –Timestamps:(00:00) Intro(01:12) A brief digression for people who use functioning payment forms(02:45) Check settlement in the pre-computer era(07:28) Some funny consequences of checks underpinning everything(13:20) Money in transit(14:42) Sponsors: Mercury | Granola(17:56) Money in transit (part 2)(21:12) Deposit accounts and their discontents(23:25) The DOGE postscript(29:03) Honey Badger Jingle
• Cash received is not revenue earned 16.04.2026 33min

  Patrick McKenzie (patio11) reads his classic Bits about Money essay explaining why revenue recognition in software is more complicated than most engineers, founders, and financial reporters think. The essay covers the accounting rules behind SaaS subscriptions, the deferred revenue problem that surprised him when he sold his own companies, and the surprisingly intricate standards governing virtual goods in mobile games. He then turns to AI labs, where rapid revenue growth has prompted questions about whether the numbers mean what they seem. They mostly do, but understanding why requires knowing the difference between bookings, deferred revenue, and a minimum commit.–Full transcript available here: www.complexsystemspodcast.com/cash-received-is-not-revenue-earned/–Presenting Sponsors: Mercury & GranolaComplex 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:Accounting for SaaS and swords: https://www.bitsaboutmoney.com/archive/accounting-for-saas-and-swords/ –Timestamps:(00:00) Intro(00:56) Accounting for SaaS and swords(03:22) Why revenue recognition matters(05:49) Revenue recognition in SaaS(09:54) Revenue recognition in virtual goods(12:52) Accounting for potions(13:24) Accounting for swords(14:56) Sponsors: Mercury | Granola(18:34) Accounting for swords (cont’d)(20:49) Game mechanics as accounting optimizations(22:10) So about that goblin(23:25) Back to the real world(25:00) How this applies to AI labs(32:48) Wrap
• Your bank balance isn’t in the bank, and other alchemy 09.04.2026 48min

  Patrick McKenzie (patio11) reads his classic Bits About Money essay on why your bank deposit is not what you think it is. He explains the capital stack that makes deposits appear riskless while funding genuinely risky businesses, and why the "no questions asked" property of money took the United States roughly a hundred years to engineer.Patrick updates the essay with commentary on SVB's collapse, the Voyager collapse and emergency injunctions about the finer points of ACH plumbing, and the GENIUS Act's stablecoin interest ban. He argues that crypto keeps rediscovering the same hard truth: things that behave like deposits without being deposits eventually break. When they break, they will break other structures they have wormed into, and they will tend to have wormed into a lot, because deposits are extremely useful and are perceived to never break.–Full transcript available here: www.complexsystemspodcast.com/your-bank-balance-isnt-in-the-bank/–Presenting Sponsors: Mercury, Meter, & GranolaComplex 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.Networking infrastructure has a way of accumulating technical debt faster than almost anything else in IT. Meter handles the full stack (wired, wireless, and cellular) as a single integrated solution: designed, deployed, and managed end-to-end so there's only one vendor to call when something goes wrong. Visit meter.com/complexsystems to book a demo. 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:The alchemy of deposits: https://www.bitsaboutmoney.com/archive/the-alchemy-of-deposits/ Deposit Insurance: https://www.bitsaboutmoney.com/archive/deposit-insurance/ Gift Cards: https://www.bitsaboutmoney.com/archive/gift-card-accountability-sink/ Debanking (and Debunking?) https://www.bitsaboutmoney.com/archive/debanking-and-debunking/ –Timestamps:(00:00) Intro(00:20) Why revisit this essay now(02:03) Deposits are money(06:53) Heavily engineered structured products pretending to be simple(09:11) Credit card charge-offs as an underappreciated welfare program(10:16) Deposits as pink slime(13:08) Silicon Valley Bank and information sensitivity in the real world(19:06) Many things are quasi-deposits(20:00) Sponsors: Mercury | Meter(23:13) Many things are quasi-deposits (cont’d)(25:10) Voyager bankruptcy(32:29) How the FDIC resolves bank failures over weekends(34:49) Making the magic happen(35:13) The GENIUS Act and the stablecoin interest debate(40:31) Sponsor: Granola(47:45) Wrap
• Payroll, pins, and punch cards 02.04.2026 47min

  In this episode of Complex Systems, Patrick McKenzie riffs on why public sector payroll modernization is even more likely to fail than the typical public software procurement project. He then goes into a wider discussion about payroll providers and their role as software, payment rails, and a sink for an enduring controversy in political economy. We want robust state capacity and hate income taxes. He breaks down the history of tax withholding as a state-deputized collection mechanism and explains how providers like ADP manage a lucrative "conveyor belt" of money to earn interest on the "float". Finally, he discusses how fintech innovations like Earned Wage Access (EWA) are providing a pro-social, daily-pay alternative to predatory payday loans.–Full transcript available here: https://www.complexsystemspodcast.com/public-payroll/–Presenting Sponsors: Mercury, Meter, & GranolaComplex 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.Networking infrastructure has a way of accumulating technical debt faster than almost anything else in IT. Meter handles the full stack (wired, wireless, and cellular) as a single integrated solution: designed, deployed, and managed end-to-end so there's only one vendor to call when something goes wrong. Visit meter.com/complexsystems to book a demo. 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:Mikey Dickerson episode: https://www.complexsystemspodcast.com/episodes/fixing-government-technology-with-mikey-dickerson/ –Timestamps:(00:00) Intro(01:10) Why government payroll projects keep failing(02:08) The root cause: rules nobody can write down(05:22) Fraud in plain sight: pension spiking(10:18) The Information theory problem(11:57) Essay: “Payroll Providers, Power, Respect”(13:54) Why does payroll exist, anyway?(16:13) Enter tax withholding(18:20) An aside about tax preparation software (20:05) Sponsors: Mercury | Meter(22:54) An aside about tax preparation software (cont’d)(25:00) Withholding taxes were an operational disaster in early implementations(27:08) So what happens in payroll, anyway?(29:50) “Where is the risk transfer?”(33:43) What about those other payments?(39:01) Where is the frontier in payroll?(39:25) Sponsor: Granola(41:15) Where is the frontier in payroll? (cont’d)(45:59) Rideshare apps vs. payday loans: Byrne Hobart's insight(46:05) FinTech's net impact(47:12) Wrap
• Delve into compliance theatre 26.03.2026 57min

  Patrick McKenzie (patio11) explains how compliance regimes designed to be viral brought many more firms into the scope of frameworks like SOC 2. This created a market demand for compliance-on-the-cheap by companies like Delve. Delve has been accused in an anonymous bit of investigative journalism as engaging in Potemkin compliance.Patrick contrasts what real audits look like with what Delve allegedly delivered. He argues that selling compliance theater as compliance is fraud, not the sort of benign rule-breaking celebrated in startup culture.–Full transcript available here: https://www.complexsystemspodcast.com/delve-into-compliance-theatre/ –Presenting Sponsors: Mercury, Meter, Granola & FramerComplex 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.Networking infrastructure has a way of accumulating technical debt faster than almost anything else in IT. Meter handles the full stack (wired, wireless, and cellular) as a single integrated solution: designed, deployed, and managed end-to-end so there's only one vendor to call when something goes wrong. Visit meter.com/complexsystems to book a demo. 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 COMPLEXSYSTEMSBuilding and maintaining marketing websites shouldn’t slow down your engineers. Framer gives design and marketing teams an all-in-one platform to ship landing pages, microsites, or full site redesigns instantly—without engineering bottlenecks. Get 30% off Framer Pro at framer.com/complexsystems.–Links:Fake Compliance as a Service - Part 1: https://substack.com/home/post/p-191342187Editorial independence episode: https://www.complexsystemspodcast.com/episodes/editorial-standards-and-independence/ Dan Davies episode: https://www.complexsystemspodcast.com/episodes/dan-davies-organizations-fraud/ –Timestamps:(00:00) Intro(02:14) The taxonomy of compliance(04:11) Why compliance is viral(09:08) Defense in depth(14:19) Accountability and liability(16:05) The allegations against Delve(19:53) Sponsors: Mercury | Meter(22:41) The allegations against Delve (cont'd)(24:31) The response and evidence(29:38) Implausible patterns(38:22) Heuristics for truth(40:10) Sponsors: Granola | Framer(42:52) Heuristics for truth (cont'd)(44:28) Naughtiness vs. fraud(51:16) A voice in the startup community(53:05) Advice for the exposed(56:38) Wrap
• Understanding consumer debt collections: the underbelly of finance 19.03.2026 45min

  Patrick McKenzie (patio11) reads his classic Bits about Money essay explaining why the debt collection industry earns its “river of effluvia” metaphor. From the accounting standards that force banks to "charge off" delinquent accounts to the large CSV files that constitute the only proof of a debt's existence, he explores how the system prioritizes accounting finality over legal and factual accuracy. The conversation reveals why the single most effective way to resolve a debt is often forcing a collector to read and write paper. They can’t, operationally, and don’t see that as an impediment to making money, especially because the paper will often document their lies and crimes.–Full transcript available here: https://www.complexsystemspodcast.com/debt-collections/ –Presenting Sponsors: Mercury, Granola & FramerIf 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 COMPLEXSYSTEMSBuilding and maintaining marketing websites shouldn’t slow down your engineers. Framer gives design and marketing teams an all-in-one platform to ship landing pages, microsites, or full site redesigns instantly—without engineering bottlenecks. Get 30% off Framer Pro at framer.com/complexsystems.–Links:https://www.bitsaboutmoney.com/archive/the-waste-stream-of-consumer-finance/ –Timestamps:(00:00) Intro(05:20) The lifecycle of a defaulted debt(14:17) The debt collection industry(19:58) Sponsors: Mercury | Granola(23:36) The debt collection industry (cont’d)(25:55) The operations of a debt collection firm(34:02) What does the debt collector hope to get from a call?(36:52) Why does this continue being so broken?(39:34) Suing people with robots(40:26) Sponsor: Framer(41:43) Suing people with robots (cont’d)(44:14) What can be done about this?
• Inference engineering and the real-world deployment of LLMs, with Philip Kiely 12.03.2026 1t 23min

  Patrick McKenzie (patio11) and Philip Kiely, early employee at Baseten, discuss the inference stack: the critical layer of software and hardware that sits between a model’s weights and a user’s prompt. They cover inference engineering, how intermediate layers are evolving over a technical stack that is changing every six months, and how sophisticated organizations are actually consuming LLMs beyond just writing their questions into chatbot apps.–Full transcript available here: www.complexsystemspodcast.com/inference-engineering-with-philip-kiely/–Presenting Sponsors: Mercury, Meter, & GranolaComplex 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.Networking infrastructure has a way of accumulating technical debt faster than almost anything else in IT. Meter handles the full stack (wired, wireless, and cellular) as a single integrated solution: designed, deployed, and managed end-to-end so there's only one vendor to call when something goes wrong. Visit meter.com/complexsystems to book a demo. 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:Download Inference Engineering: https://www.baseten.com/inference-engineering/ Philip's website: https://philipkiely.com/ Stripe's Emily Sands on Complex Systems: https://www.complexsystemspodcast.com/episodes/the-past-present-and-future-of-ai-with-stripe/ Des Traynor on Complex Systems: https://www.complexsystemspodcast.com/episodes/des-traynor/  –Timestamps:(00:00) Intro(00:30) The AI deployment pipeline(03:04) Evolution of abstraction layers in engineering(05:14) Defining inference and model weights(08:45) Architecture of language and diffusion models(10:11) AI adoption in the broader economy(11:30) The shift toward agentic workflows and RL(14:55) Function calling and real-world actions(20:10) Sponsors: Mercury | Meter(22:59) Technologies for agentic tools: MCP and skills(25:32) The craft of writing a harness(29:56) Using AI for automated proofreading and tool creation(34:12) Balancing LLMs with deterministic code(37:31) Observability and chain of thought reasoning(39:31) Sponsor: Granola(41:21) Observability and chain of thought reasoning(50:45) Speculative decoding and hidden states(55:37) The value of smaller, task-specific models(59:55) Internal competencies versus buying solutions(01:09:27) Self-publishing a technical book in record time(01:23:20) Wrap
• Secrets designed to be divulged and other payment oddities 05.03.2026 25min

  Patrick McKenzie (patio11) deconstructs the "original sin" of payments: building a global financial substrate on shared secrets that were distributed promiscuously to function. He examines the multi-decade game of Whack-a-Mole played by the industry to balance the "optimal amount of fraud" against the catastrophic conversion hit of high-friction security. From the physical failure of terminal buttons to the smartphone finally solving the lifecycle problem of cryptographic tokens, Patrick explores the technical and social reasons why we’ve moved from "something you know" to the "continuity of access" provided by the device in your pocket.–Full transcript available here: www.complexsystemspodcast.com/secondary-auth/–Presenting Sponsors: Mercury & GranolaIf 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:Bits about Money: https://www.bitsaboutmoney.com/Emily Sands on Complex Systems: https://www.complexsystemspodcast.com/episodes/the-past-present-and-future-of-ai-with-stripe/ –Timestamps:(00:00) Intro(01:32) Publishing the shared secret… again(03:39) Manufacturing shared secrets at scale(07:51) Something you own, take one(10:10) Sponsors: Mercury | Granola(13:48) Something you own, take two(18:26) Something you own, take three(21:24) One other semi-successful method: positive pay(24:45) Wrap
• Understanding government procurement, with Luke Farrell 26.02.2026 1t 21min

  Patrick McKenzie (patio11) and Luke Farrell examine the structural "technical imagination" gap that prevents the US government from delivering high-fidelity digital services. They discuss why states routinely pay full price 29 times for the same buggy codebase, why failure is the default outcome, and why rooms full of government administrators cannot muster the expertise to say a two line code change should be trivial. They also discuss Luke’s work on the "means testing industrial complex,” why the government redundantly pays a private vendor to do a SQL query for information the IRS already knows, and what vendors would say about their own discontents.–Full transcript available here: http://www.complexsystemspodcast.com/understanding-government-procurement-with-luke-farrell/–Presenting Sponsors: Mercury &  FramerIf 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. Mercury is a fintech company, not an FDIC-insured bank. Banking services provided through Choice Financial Group and Column N.A., Members FDIC.Building and maintaining marketing websites shouldn’t slow down your engineers. Framer gives design and marketing teams an all-in-one platform to ship landing pages, microsites, or full site redesigns instantly—without engineering bottlenecks. Get 30% off Framer Pro at framer.com/complexsystems.–Links:Luke Farrell's Substack: https://donmoynihan.substack.com/Luke Farrell, The Means-Testing Industrial Complex: https://donmoynihan.substack.com/p/the-means-testing-industrial-complex–Timestamps:(00:00) Intro(01:52) Transitioning from Google to the US Digital Service (USDS) (05:18) How rule buildup and administrative burdens create "Kafkaesque" mazes (08:21) Using diagrams and funnels to visualize benefit denials (11:49) Software logic errors that improperly kicked children off Medicaid (18:25) Why government payroll IT costs hundreds of millions of dollars (20:02) Sponsors: Mercury and Framer(22:02) How recursive legal requirements and DOD standards inflate IT scope (26:57) Market consolidation and the lack of competition in procurement (33:47) Aligning program administrator incentives with successful service delivery (36:03) Using in-house technologists to push back on vendor change orders (39:27) Shifting from "Big Bang" contracts to iterative, agile development (53:10) The moral incoherence of asset limits (01:11:36) Insourcing electronic income verification databases (01:16:56) Building public sector competence to manage modern technical risk (01:20:08) Wrap
• APIs of evil: studying fraud as infrastructure 12.02.2026 51min

  Patrick McKenzie (patio11) reads an essay about "industrial-scale" fraud and why it should be treated as a professional business process rather than a series of isolated accidents. He explains how fraudsters leverage specialized supply chains—shared CPAs, incorporation agents, and "least attentive" banks—to loot public funds. Patrick argues that the government’s "pay-and-chase" model is fundamentally broken and suggests that simple "proof of work" functions, like a 30-second cell phone video of a workspace, could provide the visceral signal that paperwork lacks, and examines the state’s lack of "object permanence" regarding serial fraudsters and how scaled data provides the defense-side advantage needed to catch modern frauds.–Full transcript available here: www.complexsystemspodcast.com/fraud-as-infrastructure/–Presenting Sponsor: Mercury 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.Mercury is a fintech company, not an FDIC-insured bank. Banking services provided through Choice Financial Group and Column N.A., Members FDIC.–Links:Bits about Money: https://www.bitsaboutmoney.com/archive/fraud-investigation/ Dan Davies on Complex Systems: https://open.spotify.com/episode/5QKxzgumJXSQuaWCmYAoM9 Jetson Leder-Luis on Complex Systems podcast: https://open.spotify.com/episode/3NiC7x9edoxJXkNW9vRfAT Stripe’s Emily Sands on Complex Systems: https://open.spotify.com/episode/64Dyh6Gbg1lg4qUFwId0hc –Timestamps:(00:00) Intro(05:23) In which we briefly return to Minnesota(09:26) Common signals, methods, and epiphenomena of fraud(09:30) Fraudsters are playing an iterated game(11:29) The fraud supply chain is detectable(14:27) Investigators should expect to find ethnically clustered fraud(20:11) Sponsor: Mercury(21:47) High growth rate opportunities attract frauds(26:04) Fraudsters find the weakest links in the financial system(32:35) Frauds openly suborn identities(35:57) Asymmetry in attacker and defender burdens of proof(40:13) Fraudsters under-paperwork their epiphenomena(44:22) Machine learning can adaptively identify fraud(48:14) Frauds have a lifecycle(50:34) Should we care about fraud investigation, anyway
• Why check cashing businesses exist 05.02.2026 38min

  Patrick McKenzie (patio11) reads an essay about the business of check cashing, a misunderstood industry. He explains why cashing a check is actually a "new credit extension" where the bank bets on both the writer and the payee, and why profit-maximizing institutions often decline to bank individuals who represent even a "material risk" of a single bounced check. From the manual "rituals" of endorsement to the way fintechs like Ingo Money and Cash App use persistent identity to narrow the risk envelope, Patrick examines the technical and social reasons why some people pay to access their own wages, others don’t, and whether we can do anything about that.–Full transcript available here: www.complexsystemspodcast.com/check-cashing/–Presenting Sponsor: Mercury 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.Mercury is a fintech company, not an FDIC-insured bank. Banking services provided through Choice Financial Group and Column N.A., Members FDIC.–Links:Bits about Money: www.bitsaboutmoney.com/archive/the-business-of-check-cashing/ –Timestamps:(0:00) Introduction(2:15) Check cashing(2:57) An oversimplified explanation of check presentment(5:48) Depositing a check requires an extension of credit(10:47) How cashing a check works if you're not banked(12:16) A brief aside about endorsement(14:39) Many people hate check cashing and everything about it(17:06) The internal logic behind that pricing grid(19:59) Sponsor: Mercury(21:36) The internal logic behind that pricing grid (continued)(23:10) Persistent  identities as a KYC possibility(25:12) A brief discussion about class distinctions in America(30:45) Check cashing on phones(34:28) Outro
• Claude Code makes several thousand dollars in 30 minutes, with Patrick McKenzie 29.01.2026 41min

  Patrick McKenzie (patio11) walks through a coding session with Claude Code to demonstrate what the fuss is about. The business problem: recovering failed subscription payments that required coordinating APIs across Stripe, Ghost, and email providers, and the surprising experience of watching Claude read documentation, resolve dependency conflicts, and make sensible security choices. The episode offers a pedantic level of detail on why the sharpest technologists use words like “fundamentally transformed” to describe the impact of LLMs on coding.–Full annotated transcript available here: www.complexsystemspodcast.com/claude-code/–Sponsor: FramerBuilding and maintaining marketing websites shouldn’t slow down your engineers. Framer gives design and marketing teams an all-in-one platform to ship landing pages, microsites, or full site redesigns instantly—without engineering bottlenecks. Get 30% off Framer Pro at framer.com/complexsystems.–Links:Odd Lots episode with Noah Brier: https://open.spotify.com/episode/2fd3hvYmplEnQzxYZaxPg3?si=ylFxFe3HQ4uivH29uqC_rABits about Money: https://www.bitsaboutmoney.com/ –Timestamps:(00:00) Intro(02:21) All engineering work happens in a business context(03:47) Payment failures briefly taxonomized(08:25) Now follows a conversation with Claude Code(20:37) Sponsor: Framer(21:53) Conversation with Claude Code (continued)(39:07) My final thoughts on this(41:15) Wrap
• We should stop burning pharma trials’ lab notes, with Ruxandra Teslo 22.01.2026 1t 18min

  Patrick McKenzie (patio11) is joined by Ruxandra Teslo to discuss why drug development keeps getting more expensive despite revolutionary new treatment modalities from GLP-1 agonists to gene therapies. They discuss Eroom’s Law (Moore’s Law in reverse) and Ruxandra's Common Technical Document Project, which aims to build the "Stack Overflow of clinical development" by making regulatory submissions publicly accessible. This will fill a present hole in the education of researchers, lower barriers for small biotechs, and accelerate drug discovery.–Full transcript available here: https://www.complexsystemspodcast.com/ruxandra-teslo/ –Sponsor: FramerBuilding and maintaining marketing websites shouldn’t slow down your engineers. Framer gives design and marketing teams an all-in-one platform to ship landing pages, microsites, or full site redesigns instantly—without engineering bottlenecks. Get 30% off Framer Pro at framer.com/complexsystems.–Links:Eroom's Law (original paper): https://www.nature.com/articles/nrd3681Ruxandra’s writing: https://www.writingruxandrabio.com/ Ross Rheingans-Yoo on drug development: https://open.spotify.com/episode/4GiO0KYqxJNCIdltCyhN6m?si=2znQniZ3RXKuX8keNcwWtw Ben Reinhardt on science and development: https://open.spotify.com/episode/0GHegWgLSubYxvATmbWhQu?si=pVCJVITYTqaq65BiST2d0Q–Timestamps:(00:00) Intro(00:56) Challenges in biopharma productivity(03:12) Understanding clinical development(04:59) The role of basic science in drug development(07:39) Clinical development process explained(09:25) Issues in clinical trials and development(19:33) The role of information in clinical trials(20:30) Sponsor: Framer(21:42) The role of information in clinical trials (continued)(32:55) Proposed solutions for clinical development(40:31) Consultant opinions and regulatory documents(41:28) Streamlining the regulatory process(43:06) Understanding FDA interactions(45:35) Building a public library of regulatory documents(48:18) Encouraging novel approaches in biotech(50:06) Addressing risk aversion in the industry(51:52) Analyzing FDA consistency and reviewer heterogeneity(01:02:15) The importance of courage in professional growth(01:06:39) Supporting young professionals and catalyzing change(01:16:14) Wrap
• Your support rep is also trapped in this call, with Des Traynor of Intercom 15.01.2026 54min

  Patrick McKenzie (patio11) sits down with Intercom co-founder Des Traynor to examine customer support through the lens of Conway's Law, Goodhart's Law, and several decades of accumulated organizational scar tissue. They discuss how AI agents are democratizing white-glove service, why modern LLMs have retrained user expectations around “chatbots” very quickly, and the surprisingly liberating effect of talking to something that will never judge you for missing a loan payment.–Full transcript available here: www.complexsystemspodcast.com/des-traynor/–Sponsor: MongoDB Tired of database limitations and architectures that break when you scale? MongoDB is the database built for developers, by developers: ACID compliant, Enterprise-ready, and fluent in AI. Start building faster at mongodb.com/build–Timestamps:(00:00) Intro(00:29) Intercom and its evolution(00:51) Challenges in customer service systems(02:54) Scaling customer support in startups(04:53) Organizational inefficiencies and customer experience(06:53) Metrics and their impact on customer support(12:40) Human capital issues in customer support(15:53) AI's role in customer support(17:01) Future of customer support roles(20:09) Sponsor: MongoDB(20:53) Future of customer support roles (continued)(26:19) AI and customer interaction(26:55) The myth of artisanal customer support(27:45) Fin Guidance: Evolution and user behavior(29:10) Fin's impact on customer support efficiency(33:30) Expanding Fin's capabilities beyond support(42:50) AI in government and other sectors(49:20) The future of AI connectivity and integration
• The magic spell that makes banks give you your money back 08.01.2026 38min

  Patrick McKenzie (@patio11) reads his latest Bits about Money essay explaining why he “loves Regulation E more than any rational person does.” He explains how Reg E created a privately-administered legal system processing over 100 million complaints annually—dwarfing the formal U.S. court system—and why banks are now trying to avoid these obligations for Zelle's nine figure fraud problem.–Full transcript available here: www.complexsystemspodcast.com/the-magic-spell-reg-e/– Sponsors: MongoDB & FramerTired of database limitations and architectures that break when you scale? MongoDB is the database built for developers, by developers: ACID compliant, Enterprise-ready, and fluent in AI. Start building faster at mongodb.com/build Building and maintaining marketing websites shouldn’t slow down your engineers. Framer gives design and marketing teams an all-in-one platform to ship landing pages, microsites, or full site redesigns instantly—without engineering bottlenecks. Get 30% off Framer Pro at framer.com/complexsystems.–Links:Bits about Money,  One Regulation E, Two Very Different RegimesFull version of "Doesn't Matter, That's Reg E": https://suno.com/song/173bbd67-92f7-4868-930f-efeca4b373c0–Timestamps:(00:00) Introduction(02:46) These newfangled computers might steal our money(12:45) The contractual liability waterfall in card payments(20:35) Sponsors: MongoDB and Framer(22:23) The contractual liability waterfall in card payments (continued)(23:47) Enter Zelle(25:46) Zelle is an enormous fraud target(32:23) Banks may attempt to extend the Zelle precedent(35:02) Reg E encompasses almost every technology which exists and many which don't yet
• 2025 in review, with Sammy Cottrell 03.01.2026 50min

  Our annual year-in-review episode covers some recurring themes from 2025 and some behind-the-curtains discussion of running a podcast. Patrick McKenzie (patio11) sits down with producer Sammy Cottrell to discuss the most popular episodes of the year,  the impact of AI coding tools, the challenges of video podcasting, Sammy's role as a "fixer" finding guests, and much more.–Full transcript available here: www.complexsystemspodcast.com/2025-in-review-with-sammy-cottrell/–Sponsor:Framer is a design and publishing platform that collapses the toolchain between wireframes and production-ready websites. Design, iterate, and publish in one workspace. Start free at framer.com/design with code COMPLEXSYSTEMS for a free month of Framer Pro.–Timestamps:(00:00) Introduction(01:38) Launching video podcasts this year(02:52) AI ethics and risk discussions(04:29) Supporting LessWrong and LightHaven(07:24) Adventures in AI-assisted hobbies(12:38) Most popular episodes of the year(19:45) Sponsor: Framer(20:52) Popular episodes (continued)(29:06) Setting up a podcast studio at Lighthaven(32:31) Internal company podcasts(38:03) Year in review and investigative journalism(43:02) Creating Isekai(49:13) Wrap