Complex Systems with Patrick McKenzie (patio11)

In this episode, Patrick McKenzie (patio11) walks through how perpetual futures work, from funding rates to liquidations to the surprise of automatic deleveraging. Perps are the dominant trading mechanism in crypto (6-8X larger than spot volume) and exist primarily to let exchanges and market makers run casinos more capital-efficiently. He explains why this intellectually interesting innovation pr...

In this episode, Patrick McKenzie (patio11) is joined by Ben Reinhardt, founder of Speculative Technologies, to examine how science gets funded in the United States and why the current system leaves much to be desired. They dissect the outdated taxonomy of basic, applied, and development research, categories encoded into law that fail to capture how actual breakthrough science happens. – Full tran...

Why do billions of dollars of stock trade hands based on napkin math and vibes? Billy Gallagher, CEO of Prospect and former Rippling employee, joins Patrick McKenzie (patio11) to walk through the information asymmetry that costs less-sophisticated employees massive amounts of money. From understanding when to early exercise options to navigating 83B elections and tender offers, they discuss the cr...

Patrick McKenzie (patio11) reads his essay on title insurance, a service designed to never be performed with a "laughably low" 5% loss ratio compared to 50-80% for almost all types of insurance. The typical American moves every seven to eight years, paying a $500 annual tax for basically no good or service. This is due to a quirk about how America records real estate ownership: it mostly doesn’t....

Patrick McKenzie (patio11) reads his Bits about Money essay on deposit insurance, explaining this critical financial infrastructure, with some thoughts on its performance during 2023. He covers what deposit insurance actually covers (and critically, what it doesn't), how fintech users often misunderstand their exposure to counterparty risk, and the anatomy of bank failures. This is infrastructure...

In this episode, Patrick McKenzie reads his essay about the financial infrastructure that makes buying windows painless. When a window installer can originate, underwrite, and fund a $25,000 loan in 15 minutes before leaving your house, it's because four parties—window companies, facilitating platforms, specialized banks, and capital providers—have built a system that actually works. Patrick expla...

Patrick McKenzie (@patio11) shares his remarks to the Bank of England on critical vulnerabilities in financial infrastructure. Drawing from the July 2024 CrowdStrike outage which brought down teller systems at major US banks, Patrick discusses how regulatory guidance inadvertently created dangerous software monocultures. He also examines the stablecoin market, its impressive growth, and the elepha...

Patrick McKenzie (patio11) is joined again by Ricki Heicklen to discuss Metagame 2025, a conference where 250 attendees were divided into Purple and Orange teams competing for territories across campus. Patrick built a complete roguelike RPG in 25 days using LLMs, discovering that providing minimal world-building context transformed generic fantasy outputs into emotionally resonant storytelling. T...

Patrick McKenzie (patio11) is joined by Oliver Habryka, who runs Lightcone Infrastructure—the organization behind both the LessWrong forum and the Lighthaven conference venue in Berkeley. They explore how LessWrong became one of the most intellectually consequential forums on the internet, the surprising challenges of running a hotel with fractal geometry, and why Berkeley's building regulations i...

Patrick McKenzie is joined by Clara Collier, editor and publisher of Asterisk Magazine, to discuss how we create institutions that bend towards truth. Clara explains why she launched a quarterly print magazine in the Internet age. She traces how 19th century German universities invented the modern infrastructure for rewarding knowledge production and training researchers at scale, and where our pu...

Patrick McKenzie is joined by Chris Best, CEO of Substack, to discuss how the platform created new economic infrastructure for independent media. They explore Substack's evolution from a simple newsletter tool to a full media network, the revenue guarantee program that attracted prominent writers, and the company's principled stance on press freedom during the "cancel culture" years. Chris explain...

Patrick McKenzie is joined again by Kelsey Piper, who has co-founded "The Argument" to revive principled liberal discourse after witnessing how coordinated social media campaigns replaced substantive disagreement in newsrooms. Their conversation traces this institutional breakdown from media to government, examining how DOGE's spreadsheet-driven governance nearly destroyed PEPFAR, America's most s...

Patrick McKenzie (patio11) is joined by Emmett Shear, co-founder of Twitch, former interim CEO of OpenAI, who now runs Softmax AI alignment. Emmett argues that current AI safety approaches focused on "systems of control" are fundamentally flawed and proposes "organic alignment" instead—where AI systems develop genuine care for their local communities rather than following rigid rules.  – Full tran...

Patrick McKenzie (patio11) is joined by Will Wilson, CEO of Antithesis, to discuss the evolution of software testing from traditional approaches to cutting-edge deterministic simulation. Will explains how his team built technology that creates "time machines" for distributed systems, enabling developers to find and debug complex failures that would be nearly impossible to reproduce in traditional...

Patrick McKenzie (patio11) is joined by Bean, a pseudonymous defense industry expert, to explore the intellectual crossovers between military and civilian domains. The conversation reveals how the defense industry's fundamental constraint of having only one customer (a monopsony) creates entirely different incentives than tech, leading to conservatism and 30-50 year product lifecycles. Bean argues...

This week on Complex Systems, Patrick McKenzie (patio11) is joined by Joel Becker from METR. They discuss groundbreaking research on AI coding assistants. Joel et al’s randomized controlled trial of 16 expert developers working on major open source projects revealed a counterintuitive finding: despite predictions of 24-40% speed improvements, developers actually took 19% longer to complete tasks w...

In this solo episode, Patrick McKenzie reads his classic essay "Seeing Like a Bank," exploring why financial institutions often appear to have no memory of previous customer interactions despite being excellent at tracking money itself. He breaks down the complex web of legacy systems, tiered support structures, and regulatory constraints that create Kafka-esque experiences for bank customers. Usi...

Patrick McKenzie (patio11) is joined by Jim Weisser, a serial entrepreneur and founder of SignTime, for an in-depth exploration of Japan's software market and startup ecosystem. They discuss the unique challenges of building software in a culture that prizes stability over rapid iteration, the dominance of systems integrators, and how Japan's economic stagnation shaped its relationship with techno...

Patrick McKenzie (patio11) is joined by James Riney, partner at Coral Capital, to explore Japan's transformation from a $700 million startup ecosystem to today's $5-10 billion market. They discuss the cultural and structural factors that initially limited venture activity in Japan. The conversation covers unique aspects of building startups in Japan, from the quirks of being a foreign professional...

Patrick McKenzie is joined by AI researcher Yoav Tzfati to discuss “vibe coding” - using LLMs to delegate software engineering work to AI models. Yoav runs a bootcamp teaching programming novices to build full-stack web applications using AI, without them ever looking at code. Patrick and Yoav discuss the fundamental shift in software engineering, where humans increasingly act as product managers...

Patrick McKenzie (patio11) is joined by Cate Hall, CEO of Astera Institute and author of a forthcoming book on agency, to explore how individuals can systematically develop higher agency in their lives. They discuss the selection effects that draw agentic people to fields like poker and startups, the importance of being comfortable with ignorance and feedback, and practical strategies like asking...

Patrick McKenzie (patio11) is joined again by Ricki Heicklen to discuss the evolution of her trading education business, Arbor, one year after their first conversation. They dive deep into the pedagogy of trading, exploring how simulated markets teach concepts like adverse selection, team dynamics, and risk management through hands-on experience. Ricki shares war stories from the bootcamp trenches...

Patrick McKenzie is joined by Adam Jarvis, author of the Public Service substack and a New Zealand civil engineer and public sector veteran. They discuss how political capital constraints, funding misalignment across government levels, and accumulated regulatory "scar tissue" make infrastructure projects extraordinarily difficult. The conversation reveals why replacing a water pipe now costs more...

In this episode, Patrick McKenzie (@patio11) is joined by Jennifer Li, a general partner at a16z investing in enterprise, infrastructure and AI. Jennifer breaks down how AI workloads are creating new demands on everything from inference pipelines to observability systems, explaining why we're seeing a bifurcation between language models and diffusion models at the infrastructure level. They explor...

In this episode, Patrick McKenzie (patio11) recorded with Zvi Mowshowitz (TheZvi) live at the LessOnline conference. They explore practical strategies for getting better results from large language models. Zvi explains how to customize AI behavior through thoughtful system prompts, while Patrick shares techniques for using LLMs as writing partners and research assistants. They discuss the evolving...