In this episode, Patrick McKenzie (@patio11) is joined by Haseeb Qureshi, a managing partner at Dragonfly, a crypto-focused VC fund. They discuss the evolution of stablecoins, three key use cases, and their impact on international finance. Haseeb explains how stablecoins have grown beyond their initial association with crypto trading and illicit activities to serve legitimate economic functions globally, in ways that many Americans might not fully appreciate. Patrick and Haseeb debate the regulatory landscape, the strategic ambiguity of crypto's positioning, and whether stablecoins represent a parallel financial system that might eventually converge with traditional banking.

 –

Full transcript available here: www.complexsystemspodcast.com/taking-stablecoins-seriously-with-haseeb-qureshi/

–
Sponsor:  Safebase

Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast 

–

Recommended in this episode:

• Zeke Faux on Complex Systems https://open.spotify.com/episode/5OnSK3PuhfipMHv9htvuyb 
• Chopping Block podcast https://unchainedcrypto.com/the-chopping-block/ 
• Haseeb Qureshi’s website https://haseebq.com/about/ 

–

Timestamps:
(00:00) Intro

(00:55) Crypto industry insights and tether discussion

(02:52) Stablecoins and their economic models

(05:04) Decentralized stablecoins and their mechanisms

(07:41) VC perspective on stablecoin investments

(13:18) Regulatory challenges and lobbying in crypto

(20:36) Emerging use cases for stablecoins

(24:16) Sponsor: Safebase

(32:35) The initial response to stablecoins

(33:38) Stablecoins and national security concerns

(34:00) The shift in congressional attitude

(34:49) Stablecoins and dollar internationalization

(37:40) Retail payments in high-inflation countries

(38:41) The role of black markets

(46:13) International B2B payments

(01:02:57) The future of stablecoins

(01:05:44) Wrap

Patrick McKenzie (patio11) is joined by Emily Sands, Head of Information at Stripe, to discuss how they leverage AI to process over $1.4 trillion annually, while navigating the complex web of merchants, banks, and payment rails that facilitate online commerce. Patrick and Emily cover how Stripe’s layered stack of AI combats sophisticated card testing attacks, recovers billions in once-lost revenue through intelligent retry strategies, and enables new businesses to compete with established players through powerful network effects. They also talk about the meteoric rise of AI companies, and how agent-assisted commerce is beginning to transform online shopping through controlled financial rails.

 –

Full transcript available here:
www.complexsystemspodcast.com/the-past-present-and-future-of-ai-with-stripe/

–
Sponsor:  Vanta

Vanta automates security compliance and builds trust, helping companies streamline ISO, SOC 2, and AI framework certifications. Learn more at https://vanta.com/complex

–

Recommended in this episode:

• Stripe’s Annual Letter: https://stripe.com/annual-updates/2024 
• Stripe Sessions 2025 https://stripesessions.com/ 

–

Timestamps:

(00:00) Intro

(01:21) Stripe's role in financial infrastructure

(02:20) AI and ML at Stripe

(07:36) Understanding payment processing

(15:06) The evolution of fraud detection

(19:22) Advanced fraud detection techniques

(22:55) Sponsor: Vanta

(24:14) Advanced fraud detection techniques (part 2)

(34:53) Card testing and fraud prevention

(45:29) Adaptive acceptance and future of payments

(46:35) Optimizing payment systems with AI

(47:13) Understanding ISO messages and credit card protocols

(48:37) The importance of semantically neutral changes

(51:22) Stripe's enhanced issuer network

(56:00) Handling chargebacks and friendly fraud

(01:04:55) Personalizing the checkout experience

(01:16:44) The meteoric rise of AI startups

(01:26:05) Agent-assisted commerce

(01:32:58) Wrap

In this episode, Patrick McKenzie (patio11) challenges a recent Atlantic article claiming that low-income cardholders subsidize credit card rewards through high interest payments. Drawing from his Bits About Money essay Anatomy of a credit card rewards program, Patrick explains that rewards are primarily funded by interchange fees paid by merchants, not by interest charges.

To the extent those interchange is passed along to customers, it falls mostly on rich customers, because rich customers spend more. They spend more in interchange than they earn in rewards. Issuing banks and researchers who have looked at the data mostly agree here.

Patrick also breaks down the credit card rewards game, showing how banks strategically design card offerings for different market segments and explains the portfolio mathematics that disprove the cross-subsidization narrative.

 –

Full transcript available here:
www.complexsystemspodcast.com/credit-card-rewards-interchange/

–

Sponsor:  Vanta

Vanta automates security compliance and builds trust, helping companies streamline ISO, SOC 2, and AI framework certifications. Learn more at https://vanta.com/complex
–
Recommended in this episode:

• Bits about money: Anatomy of credit card rewards programs https://www.bitsaboutmoney.com/archive/anatomy-of-credit-card-rewards-programs/
• The Atlantic: There Are Two Kinds of Credit Cards by Annie Lowrey https://www.theatlantic.com/ideas/archive/2025/03/credit-card-racket/682075/ 
• Complex Systems episode with Gary Leff https://open.spotify.com/episode/1QqFw5hlHKRrjRUTVLfKRV?si=hNwbnyrmQiqHe9ziAnGCpQ 
• Complex Systems episode with Dave Guarino https://open.spotify.com/episode/0UlTIRosmjtvpcdHQ7t2tK?si=i8LYGS-iSfOoGsVmMFYWjA 

–
Timestamps:

(00:31) A recent Atlantic article's false thesis

(09:35) Rebating interchange to earn share of wallet

(14:48) Sponsor: Vanta

(16:56) Why isn’t every card a rewards card?

(27:56) The complexity spectrum of rewards products

(29:55) A fun rabbit hole about credit card acceptance

(33:53) Back to more complicated cases

(45:45) Further refinements in cat and mouse games

(51:24) Giving the customer more choices more frequently

(58:10) More directions to go in

(01:01:54) Patrick’s counterproposal

Patrick McKenzie (patio11) is joined by Gary Leff, the author of "View from the Wing", to discuss the economic systems behind airlines and loyalty programs. They discuss how airlines manage to stay profitable despite razor-thin margins, the economics of frequent flyer programs, and why these programs often generate more value than the airlines themselves. The conversation explores why many irrational airline policies reflect deeper economic realities and competitive constraints that shape flying today.

–

Full transcript available here: www.complexsystemspodcast.com/gary-leff-frequent-flier-programs/

–
Sponsor: Vanta

Vanta automates security compliance and builds trust, helping companies streamline ISO, SOC 2, and AI framework certifications. Learn more at https://vanta.com/complex

–

Recommended in this episode:

• View From The Wing https://viewfromthewing.com/
• Bits About Money: How credit cards make money https://www.bitsaboutmoney.com/archive/how-credit-cards-make-money/

–

Twitter:

@patio11

@garyleff
–

Timestamps:

(00:00) Intro

(01:10) History of airline loyalty programs

(04:36) The economics of airline loyalty programs

(08:01) Parallels and differences with hotel loyalty programs

(14:01) Tax implications and legal considerations

(19:50) Sponsor: Vanta

(21:08) Tax implications and legal considerations (part 2)

(34:02) Credit card reward programs

(46:56) The David Dao incident and its impact on airline policies

(47:29) Airline compensation strategies and Delta’s unique approach

(49:08) The economics of airline miles and accounting practices

(53:15) Airline debt and the role of frequent flyer programs

(55:21) The impact of airline policies on customer loyalty

(01:08:11) The value of partner miles and airline alliances

(01:13:11) Creative ways to earn miles and exploit promotions

(01:20:05) The infamous coin promotion and other mileage hacks

(01:30:39) Wrap

Patrick McKenzie (patio11) is joined by Lars Doucet and Greg Miller, co-founders who have just launched the Center for Land Economics, to discuss improving property taxation in the US. They explore how shifting taxes from buildings to land could transform development patterns, why California's property tax caps coincide with its housing crisis, and how the fundamental trade-off between assessment accuracy and consistency creates winners and losers. The conversation also covers the posting-to-policy pipeline, their work developing open-source tools to improve assessment equity, and techniques citizens can use to influence their local assessment office. 
 –

Full transcript available here:
www.complexsystemspodcast.com/tax-the-dirt-with-lars-doucet-greg-miller/

–
Sponsors:  Safebase 

Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast 
–

Recommended in this episode:

• Center for Land Economics: https://landeconomics.org/
• Game of Rent by Lars Doucet: https://gameofrent.com/ 
• Progress & Poverty: https://progressandpoverty.substack.com/ 
• Mass Appraisal for the Masses: https://progressandpoverty.substack.com/p/mass-appraisal-for-the-masses-the 
• Lars Doucet on Complex Systems: https://www.complexsystemspodcast.com/episodes/property-assessment-lars-doucet/
• Dave Kasten on Complex Systems: https://www.complexsystemspodcast.com/episodes/tech-government-dave-kasten/ 

–

Twitter:
@patio11
@larsiusprime
–

TIMESTAMPS:
(00:00) Intro

(00:45) Center for land economics

(04:01) Property tax basics

(05:31) Challenges in property valuation

(10:22) Impact of Proposition 13 in California

(12:28) Anti-market property tax policies

(14:43) Housing crisis and land value
(15:46) Sponsors: Safebase

(17:17) Housing crisis and land value (Part 2)

(27:49) Urban development incentives

(29:17) Tokyo's urban planning success

(39:23) The abundance movement in housing

(40:07) Innovative housing policies

(41:24) Government bureaucracy and policy making

(49:56) Mass appraisals and property tax fairness

(01:00:02) Technological advances in property assessment

(01:06:16) Empowering local governments and citizens

(01:16:02) Wrap

Patrick McKenzie (patio11) explains the standard procedure for large withdrawals in bank branches, with particular focus on the viral story published in The Cut about a woman who withdrew $50,000 cash from a bank and handed it to scammers. Certain minor details in the article set off a year-long investigation where he identified the exact physical location of the bank branch in question, researched the context for the transaction using public records, and obtained new details through FOIA requests. His investigation reveals an underlying narrative that accounts for what actually happened, and provides a worked example for fact-checking in journalism.
–

Full transcript available here:
www.complexsystemspodcast.com/two-americas-one-50k-withdrawal/

–
Sponsors:  Safebase 

Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast 
–
Recommended in this episode:

• Two Americas, one bank, and $50,000 cash https://www.bitsaboutmoney.com/archive/two-americas-one-bank-branch/ 
• The Cut, The Day I Put $50,000 in a Shoe Box and Handed It to a Stranger https://www.thecut.com/article/amazon-scam-call-ftc-arrest-warrants.html
• Kelsey Piper on Complex Systems https://open.spotify.com/episode/33rHTZVowaq76tCTaKJfRB
• Jim McKenzie on Complex Systems https://open.spotify.com/episode/6ocJirzGTStuf0K9ITM21X

–

Timestamps: 

(00:55) Suppose you ask a bank to withdraw $50,000 in cash

(07:55) Style magazines sometimes publish hard-hitting journalism

(12:36) Reaching out to Vox Media

(17:09) Sources of doubt
(17:55) Sponsor: Safebase

(22:30) The physical reality of bank branches

(25:53) In which we became acquainted with brisk walks across Brooklyn

(34:42) New York’s Finest foil FOIL for a time

Patrick McKenzie (patio11) is joined by Azeem Azhar, writer of the Exponential View newsletter, to discuss the massive data center buildout powering AI and its implications for our energy infrastructure. The conversation covers the physical limitations of modern datacenters, the challenges of electricity generation, the societal ripples from historical largescale infrastructure investments like railways and telecommunications, and the future of energy including solar, nuclear and geothermal power. Through their discussion, Patrick and Azeem explain why our mental models for both computing and energy systems need to be updated.
–
Full transcript available here: www.complexsystemspodcast.com/ai-llm-data-center-power-economics/

–
Sponsors:  Safebase | Check

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

Check is the leading payroll infrastructure provider and pioneer of embedded payroll. Check makes it easy for any SaaS platform to build a payroll business, and already powers 60+ popular platforms. Head to checkhq.com/complex and tell them patio11 sent you.

–

Recommended in this episode:

• Azeem’s newsletter: https://www.exponentialview.co/ 
• Azeem Azhar’s guest essay: The 19th-Century Technology That Threatens A.I. https://www.nytimes.com/2024/12/28/opinion/ai-electricity-power-plants.html
• Electric Twin: https://www.electrictwin.com/ 
• Video of Elon Musk’s Colossus https://www.youtube.com/watch?v=Tw696JVSxJQ 
• Complex Systems with Travis Dauwalter on the electrical grid: https://open.spotify.com/episode/5JY8e84sEXmHFlc8IR2kRb?si=35ymIC0UQ5SKdV8rrBcgIw 
• Complex Systems with Austin Vernon on fracking: https://open.spotify.com/episode/0YDV1XyjUCM2RtuTcBGYH9?si=YshjUXPEQBiScNxrNaI-Gw 
• Complex Systems with Casey Handmer on direct capture of CO2 to turn into hydrocarbon: https://open.spotify.com/episode/0GHegWgLSubYxvATmbWhQu?si=xNYBjn0ZTX2IT_pAZ5Ozsg 

–

Twitter:

@azeem

@patio11

–

Timestamps:

(00:00) Intro 

(00:27) The power economics of data centers

(01:12) Historical infrastructure rollouts

(04:58) The telecoms bubble 

(06:22) Unprecedented enterprise spend on AI capabilities

(11:12) Let's have your LLM talk to my LLM

(16:44) Is there a saturation point?

(19:25) Sponsors: Safebase | Check

(21:55) What’s in a data center?

(24:52) The challenges of data centers

(29:40) Geographical considerations for data centers

(36:53) Energy consumption and future needs

(40:48) Challenges in building transmission lines

(41:35) The solar power learning curve

(43:51) Small modular nuclear reactors

(51:26) Geothermal energy and fracking

(01:01:34) The future of AI and energy systems

(01:12:57) Wrap

In this episode, Patrick McKenzie (@patio11) responds to a recent request by a crypto unicorn founder / bank CEO to retract his essay Debanking (and debunking?). Come for the note about editorial standards and independence, stay for the diss track. 
–

Full transcript available here: https://www.complexsystemspodcast.com/editorial-standards-and-independence/

–
Sponsors:  Safebase | Check

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

Check is the leading payroll infrastructure provider and pioneer of embedded payroll. Check makes it easy for any SaaS platform to build a payroll business, and already powers 60+ popular platforms. Head to checkhq.com/complex and tell them patio11 sent you.

–

Recommended in this episode:

• Debanking (and debunking?): https://www.bitsaboutmoney.com/archive/debanking-and-debunking/
• CEO: Retract your debanking article? Me: No. https://www.kalzumeus.com/2025/02/10/retraction-request-denied/
• Geekiest rap single in history https://suno.com/song/c5ac7441-4a0b-4e5e-9c85-480e3ba63fc1 

–

Twitter:

@patio11

–

Timestamps:

(00:00) Intro

(03:04) Musical interlude

(04:56) Return to commentary

(06:35) You can’t please everyone

(08:06) The bar for retraction is high

(10:07) Our review of the retraction request

(10:37) “A few areas were incorrect or misleading”

(16:12) “Lots of omission of key facts”

(18:57) “Missing the point about what we mean by debunking”

(20:40) Sponsors: Safebase | Check

(25:00) Our response to McCauley’s testimony
(28:24) McCauley’s concluding remarks and our response
(30:21) Bank CEOs do not often ask writers for retractions

(34:20) Some context regarding custodial banks

(40:50) Returning to our regularly scheduled programming

In this episode, Patrick McKenzie (@patio11) is joined by Zeke Faux, investigative reporter at Bloomberg and author of Number Go Up, to discuss stablecoins and crypto fraud. They dive into Tether's controversial history, the senate’s emerging GENIUS act, and how crypto enables various types of financial crime. The conversation explores how Tether went from a “quilted collection of red flags” to becoming crypto's dominant stablecoin, its noteworthy relationship with Sam Bankman-Fried's FTX, and its current political maneuvering. They also discuss the societal value of financial regulation versus laissez-faire approaches to consumer protection.
–

Full transcript available here: www.complexsystemspodcast.com/zeke-faux-stablecoins-tether/

–
Sponsors:  Safebase 

Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast 

–

Recommended in this episode:

• Number Go Up: https://zekefaux.com/
• Anyone Seen Tether’s Billions? Zeke Faux, Bloomberg Businessweek: https://www.bloomberg.com/news/features/2021-10-07/crypto-mystery-where-s-the-69-billion-backing-the-stablecoin-tether 
• Patrick’s review of Number Go Up: https://www.bitsaboutmoney.com/archive/a-review-of-number-go-up-on-crypto-shenanigans/ 
• Doesn't Matter, That's Reg E: https://suno.com/song/173bbd67-92f7-4868-930f-efeca4b373c0

–
Twitter:
@zekefaux
@patio11
–

Timestamps:
(00:00) Intro
(00:45) The GENIUS act of 2025
(02:28) Tether's audit controversy
(05:49) The origins and impact of Tether
(08:17) Investigative reporting and red flags
(12:58) Tether's shady business practices
(19:23) Tether meets SBF
(21:40) Sponsor: Check
(22:51) New anecdotes in the Number Go Up paperback
(28:53) The role of stable coins in crime
(38:20) The importance of AML and KYC rules
(44:21) Financial privacy
(45:18) Sam Bankman-Fried's conference in the Bahamas
(47:14) Loot NFTs
(49:34) Axie Infinity: a case study
(52:30) Crypto's real-world consequences
(58:15) Regulation and financial safety
(01:05:40) Stablecoin bill and ownership limits
(01:06:50) Political realignment and crypto
(01:14:40) Citizen journalists and the crypto-skeptic community
(01:20:36) The abilities and limitations of institutional journalists
(01:26:00) Wrap

Patrick McKenzie (@patio11) is joined by Travis Dauwalter, energy enthusiast (and PhD), to explain the systems we often take for granted behind the US electrical grid. The conversation covers how the grid maintains perfect supply-demand balance in real-time, the challenges of integrating renewable energy sources, and why America actually has three separate interconnected grids. Patrick and Travis weave through the economics of power generation, transmission line physics, and how data centers are reshaping energy markets. (Also, in a bit of a surprise, Patrick defends the honor of Bitcoin miners.)

–

Full transcript available here: complexsystemspodcast.com/electricity-grids-travis-dauwalter/

–

Sponsors:  Safebase 

Ready to save time and close deals faster? Inbound security reviews shouldn’t slow down your team or your sales cycle. Leading companies use SafeBase to eliminate up to 98% of inbound security questionnaires, automate workflows, and accelerate pipeline. Go to safebase.io/podcast 
–

Links:

• Utility Dive: https://www.utilitydive.com/ 
• The Bitter Lesson by Rich Sutton: https://www.cs.utexas.edu/~eunsol/courses/data/bitter_lesson.pdf 
• Austin Vernon on Fracking: https://open.spotify.com/episode/0YDV1XyjUCM2RtuTcBGYH9
• Casey Handmer on Solar Economics: https://open.spotify.com/episode/0GHegWgLSubYxvATmbWhQu 

–

Twitter:

@TravisDauwalter

@patio11

Travis’ LinkedIn: https://www.linkedin.com/in/travisdauwalter/ 

–

Timestamps: 

(00:00) Intro
(00:28) Understanding the energy grid
(02:22) The complexity of supply and demand
(05:43) Regional differences in energy grids
(08:16) Seasonal and daily energy demand
(11:22) Renewable energy and storage solutions
(17:17) Sponsor: Check
(18:29) Renewable energy and storage solutions (continued)
(24:07) Demand response and time of use rates
(34:08) Bitcoin mining and energy economics
(39:29) Exploring behind the meter arrangements
(40:44) Transmission line challenges and innovations
(45:51) Dynamic line rating and grid efficiency
(50:58) Data centers and energy demand
(58:33) Interconnection queue and grid security
(01:03:38) Understanding the US grid structure
(01:09:46) Wrap