Complex Systems with Patrick McKenzie (patio11)

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.

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Full transcript available here: www.complexsystemspodcast.com/property-assessment-lars-doucet/

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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 

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Links:

Lars’ book: https://www.landisabigdeal.com/

Lars’ blog: https://www.fortressofdoors.com/ 

Bits about Money: https://www.bitsaboutmoney.com/ 

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Twitter

@larsiusprime

@patio11

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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.

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Full transcript available here: https://www.complexsystemspodcast.com/fraud-choice-patrick-mckenzie

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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 

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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

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Twitter:
@patio11

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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.

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Full transcript available here: https://www.complexsystemspodcast.com/ai-poker-max-chiswick/

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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 

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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/

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Twitter:
@chisness
@patio11

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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 

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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.

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Full transcript available here: https://www.complexsystemspodcast.com/episodes/boom-busts-and-long-term-progress-with-byrne-hobart-2/

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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 

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Links:

• Order Byrne Hobart’s book Boom: Bubbles and the End of Stagnation on Stripe Press / Bookshop / Amazon here: https://press.stripe.com/boom
• The Diff https://diff.substack.com
• Capital Gains  https://capitalgains.thediff.co/
• The Reckoning by David Halberstam: https://www.amazon.com/Reckoning-David-Halberstam/dp/0380721473
• Austin Vernon on Fracking, Complex Systems Podcast: https://open.spotify.com/episode/0YDV1XyjUCM2RtuTcBGYH9?si=CDrPD3nNSP-MUV60qffglg

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Twitter:
@byrnehobart
@patio11

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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.

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Full transcript available here: https://complexsystemspodcast.com/money-movement-erik-torenberg

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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 

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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/

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Twitter:
@patio11

@eriktorenberg

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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.

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Full transcript available here: https://www.complexsystemspodcast.com/episodes/drug-development-ross-rheingans-yoo/ 

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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 

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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/ 

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Twitter:
@patio11
@_rossry

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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

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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.

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Full transcript available here: https://www.complexsystemspodcast.com/defrauding-government-jetson-leder-luis

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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 

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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=3906395
• Paper: Is Fraud Contagious by John M Griffin https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4599654
• Paper: 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/B0B8644ZGY
• Podcast: Jennifer Pahlka on Ezra Klein
  https://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

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Twitter:
@patio11

@jetson_econ

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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

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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.

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Full transcript available here: https://www.complexsystemspodcast.com/episodes/real-estate-moses-kagan/

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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 

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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/0684856360

Bits About Money: https://www.bitsaboutmoney.com/
Jim McKenzie on Complex Systems: https://open.spotify.com/episode/6ocJirzGTStuf0K9ITM21X

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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.

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Full transcript available here: https://www.complexsystemspodcast.com/episodes/tech-media-erik-torenberg

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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-9f91f66018d7
Kelsey Piper on Complex Systems https://open.spotify.com/episode/33rHTZVowaq76tCTaKJfRB 

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Twitter:
@patio11
@eriktorenberg

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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

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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.

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Full transcript available here: https://www.complexsystemspodcast.com/episodes/the-hundred-year-old-telegram-worth-5-million-with-jim-mckenzie-2/

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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/

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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

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Complex Systems is part of the Turpentine podcast network. Turpentine also has a social network for top founders and execs: https://www.turpentinenetwork.com/