Complex Systems with Patrick McKenzie (patio11)

In this episode, Patrick McKenzie (patio11) is joined by Zac Townsend, a serial founder and CEO of Meanwhile, a fully regulated life insurance company operating in Bitcoin. They explore the differences between life and property insurance, explain why term life is essential financial protection everyone should consider, and dive into the tax benefits that shape the industry. Zac shares insights on how private equity firms are acquiring insurers for their stable capital base, and explains Bermuda's role as the world's insurance capital.

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Full transcript available here: https://www.complexsystemspodcast.com/life-insurance-and-your-money-with-zac-townsend/

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Sponsor:  Mercury

This episode is brought to you by Mercury, the fintech trusted by 200K+ companies — from first milestones to running complex systems. Mercury offers banking that truly understands startups and scales with them. Start today at Mercury.com 

Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Column N.A., and Evolve Bank & Trust; Members FDIC.

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Recommended in this episode:

• Meanwhile https://meanwhile.bm/

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Timestamps:

(00:00) Intro

(00:23) Overview of Meanwhile Insurance

(00:56) How Bitcoin is being used in the insurance industry

(02:12) Understanding different types of insurance

(06:13) Term life insurance explained

(07:26) Life insurance tips for tech professionals

(12:47) Permanent life insurance and annuities

(18:57) Sponsor: Mercury

(20:11) Insurance regulatory insights

(25:46) Principal-agent problems in insurance

(37:09) Tax considerations in life insurance

(42:16) Leveraging life insurance for estate planning

(44:55) Premium financing explained

(47:39) Wealth management and market segmentation

(52:09) Regulatory challenges and mispricing in insurance

(01:03:32) Reinsurance and the role of bermuda

(01:10:27) Private equity's interest in insurance

(01:14:24) Building a crypto life insurance company

(01:20:02) Wrap

In this episode, Patrick McKenzie (@patio11) is joined by Mikey Dickerson to discuss the complex realities behind government software projects. Mikey shares insights from leading the healthcare.gov rescue effort and founding the United States Digital Service, explaining how procurement processes create requirements through committee decision-making without market-based feedback loops. They explore how government systems handle software development differently than industry, with Mikey noting that the issues are less about individual competence and more about systemic incentives that reward risk aversion. The conversation covers the challenges of "modernization" efforts, the loss of organizational management knowledge over decades, and reflection on when and how technologists might effectively contribute to public service.

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Full transcript available here: https://www.complexsystemspodcast.com/episodes/fixing-government-technology-with-mikey-dickerson/

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Sponsor:  Mercury

This episode is brought to you by Mercury, the fintech trusted by 200K+ companies — from first milestones to running complex systems. Mercury offers banking that truly understands startups and scales with them. Start today at Mercury.com 

Mercury is a financial technology company, not a bank. Banking services provided by Choice Financial Group, Column N.A., and Evolve Bank & Trust; Members FDIC.

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Recommended in this episode:
www.complexsystemspodcast.com/fixing-government-technology-with-mikey-dickerson/

• Bureaucracy by James Q. Wilson: https://www.amazon.com/Bureaucracy-Government-Agencies-Basic-Classics/dp/0465007856 
• Movie: The Pentagon Wars https://en.wikipedia.org/wiki/The_Pentagon_Wars 
• Mikey Dickerson's company Layer Aleph: https://layeraleph.com/ 
• Complex Systems with Dan Davies https://open.spotify.com/episode/5QKxzgumJXSQuaWCmYAoM9?si=uQWgAx1iSzGm5iCUBWei8A 
• Complex Systems with Dave Guarino https://open.spotify.com/episode/0UlTIRosmjtvpcdHQ7t2tK?si=MlUqO3uWRie1E_GRQ5D7jg 

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Timestamps:

(00:00) Intro

(00:24) Government software procurement

(06:02) Fighter planes and requirements

(08:37) Software development cycles

(11:37) Deadline challenges

(12:18) California vaccine scheduling

(16:15) Pandemic priorities

(17:27) Sponsor: Mercury

(18:40) Government employee competence

(22:30) Government pay scales

(25:56) IRS modernization reports
(27:48) System modernization plans

(34:33) Healthcare.gov lessons

(36:59) Government software capability

(40:29) Feedback loops in civil service

(44:09) Legislative expertise

(46:49) Applied mathematics

(47:57) Loss of knowledge

(49:28) Tour of duty recommendation

(53:06) Wrap

In this episode, Patrick McKenzie (@patio11) is joined by Daniel Golliher, founder of Maximum New York, to discuss the opaque mechanics of political power and how everyday people can effectively engage with government systems. They explore the stark gap between formal political science degrees and how politics actually works, practical tactics for influencing policy (like optimizing the printability of a blog post to placing well-timed calls to legislators), and Daniel’s concept of ‘blue tape’. Throughout the conversation, they emphasize that participating in governance requires far less expertise and connections than most people assume—mainly just the willingness to show up prepared.

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Full transcript available here:
www.complexsystemspodcast.com/understanding-and-wielding-power-in-local-government-with-daniel-golliher/

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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

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Recommended in this episode:

• Daniel Golliher’s essay: Political Science Degrees Must End: https://www.maximumnewyork.com/p/political-science-degrees 
• Patrick McKenzie: https://worksinprogress.co/issue/the-story-of-vaccinateca/ 
• Statecraft by Santi Ruiz: https://www.statecraft.pub/ 

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Timestamps

(00:00) Intro
(00:33) The reality of political science education
(02:45) The apprenticeship model in government
(04:24) Challenges in government training
(07:06) The role of legislative aides
(10:33) Local government and housing policies
(14:24) Effective political engagement
(16:15) The power of communication in policy
(20:26) Sponsor: Vanta
(21:44) Witnessing government in action
(31:29) Learning government and politics
(32:21) LLMs and policy
(35:10) Engaging with local politics
(37:58) Influencing policy
(43:25) Running for office
(47:10) Blue tape
(58:39) Wrap

In this episode, Patrick McKenzie (@patio11) is joined by Tim Fist, Director of Emerging Technologies at the Institute for Progress, to discuss how energy constraints could bottleneck AI development. They explore how AI training clusters will soon require gigawatts of power—equivalent to multiple nuclear plants—with projections showing a single cluster needing 5 gigawatts by 2030. Tim explains why behind-the-meter generation and geothermal energy offer promising solutions while regulatory hurdles like NEPA and transmission permitting create "litigation doom loops" that threaten America's competitiveness. The conversation covers the global race for compute infrastructure, with China and the UAE making aggressive investments while the US struggles with permitting delays, highlighting how energy policy will determine which nations lead the AI revolution.

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Full transcript available here: www.complexsystemspodcast.com/the-ai-energy-bottleneck-with-tim-fist/
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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

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Recommended in this episode:

• Compute in America https://ifp.org/compute-in-america/
• Tim Fist on Twitter https://x.com/fiiiiiist 
• The Enchippening by Sarah Constantin https://sarahconstantin.substack.com/p/the-enchippening 
• Solar economics with Casey Handmer https://open.spotify.com/episode/0GHegWgLSubYxvATmbWhQu?si=VKJYaSwaRJq_YcK8kJIdvQ 
• AI & Power economics with Azeem Azhar https://open.spotify.com/episode/3KkvPiYpGvXCRukWxHP7Ch?si=RPEjrs67S9CFA0lLak6OVA
• Fracking with Austin Vernon  https://open.spotify.com/episode/0YDV1XyjUCM2RtuTcBGYH9?si=hSniC3N0QkqhF74ra-XAcA 
• Economics of the grid with Travis Dauwalter https://open.spotify.com/episode/5JY8e84sEXmHFlc8IR2kRb?si=BsqMZGu6Qr-2F7-RSyyEhw

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Timestamps:

(00:00) Intro

(00:40) Energy bottlenecks in AI development

(02:56) Technical and policy solutions for energy needs

(05:18) Challenges in transmission infrastructure

(12:14) Behind the meter generation explained

(17:50) Solar and storage: The future of energy

(18:47) Sponsor: Vanta

(20:05) Solar and storage: The future of energy (part 2)

(29:07) Power purchase agreements and financing

(33:17) Financing geothermal wells

(33:53) The promise of geothermal energy

(35:25) Challenges in geothermal adoption

(36:59) Industrial applications of geothermal heat

(45:01) Geothermal energy and national security

(49:27) Global investments in AI and energy infrastructure

(56:29) Policy and technical expertise in AI

(01:00:54) The role of government in technological advancements

(01:05:07) Wrap

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.

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

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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 

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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/ 

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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.

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

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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

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Recommended in this episode:

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

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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.

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

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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
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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 

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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.

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

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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

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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/

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Twitter:

@patio11

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

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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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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/ 

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Twitter:
@patio11
@larsiusprime
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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.
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Full transcript available here:
www.complexsystemspodcast.com/two-americas-one-50k-withdrawal/

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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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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

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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