Patrick McKenzie

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

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 & 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: 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

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: Framer 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: Odd Lots episode with Noah Brier: https://open.spotify.com/episode/2fd3hvYmplEnQzxYZaxPg3?si=ylFxFe3HQ4uivH29uqC_rA Bits 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

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. Using the lens of institutional legibility borrowed from "Seeing Like a State," Patrick explains how banks' technical architecture and organizational design choices—from core processing systems to customer service tiers—systematically generate the dysfunction that customers experience when things go wrong. – Full transcript available here: www.complexsystemspodcast.com/how-banks-actually-work/ – Recommended in this episode: Patrick’s Bits about Money essay, Seeing like a bank: https://www.bitsaboutmoney.com/archive/seeing-like-a-bank/ – Timestamps: (00:00) Intro (03:52) Recordkeeping systems (10:20) Sponsor: Safebase (11:50) Human accountability and its malcontents (22:57) Two embedded surprises about bank staffing (27:47) Society has goals which conflict with banks being good at banking (30:52) So what can be done about this?

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 directing AI "junior engineers," and explore the implications for the future of programming careers and the democratization of software development. – Read full transcript here: www.complexsystemspodcast.com/how-ai-reshapes-software-engineering/ – [Patrick notes: Complex Systems now produces occasional video episodes like this one!You can access them directly on YouTube: https://www.youtube.com/@patio11podcast . My kids inform me that I’m supposed to tell you to like and subscribe.] – Links: Follow Yoav Tzfati: https://x.com/yoavtzfati Yoav's bootcamp: https://www.code-bloom.app/ – Timestamps: (00:00) Intro (00:32) Defining vibe coding (01:35) The evolution of software engineering with LLMs (04:07) Practical applications of vibe coding (09:37) Teaching vibe coding to novices (18:30) Future of AI in software development (21:42) Discussing timelines and model capabilities (22:12) Flappy Bird and the evolution of game development (23:27) The impact of LLMs on software engineering (24:46) Future of coding and human roles (29:47) Monitoring and error handling in software (31:20) The role of LLMs in code review and maintenance (35:12) Wireframing and project management with LLMs (36:40) The future of software engineering careers (43:07) Practical tips for software engineers (44:38) Wrap

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—infinite loop bugs that mirror Knight Capital's disaster, WiFi outages that create unexpected trading opportunities, and that the most successful trading teams often focus on internal team communication even more than trade execution or technical acumen. See the full transcript: https://www.complexsystemspodcast.com/think-like-a-trader-ricki-heicklen/ – [Patrick notes: Complex Systems now produces occasional video episodes.You can access them directly on YouTube: https://www.youtube.com/@patio11podcast . My kids inform me that I’m supposed to tell you to like and subscribe.] – Links: Trading Camp : https://trading.camp/ Metagame: https://www.metagame.games/#tickets Story of Knight Capital: https://www.sec.gov/files/litigation/admin/2013/34-70694.pdf – Timestamps: (00:00) Intro (00:46) Ricki's journey from trading to teaching (01:25) The birth of Arbor and first bootcamps (03:32) Developing a trader's mindset (05:53) Understanding heuristics in trading (08:21) Adverse selection in everyday life (15:40) Insights from teaching trading bootcamps (21:07) Pedagogical approach: learning by doing (32:00) Handling mistakes and learning opportunities (36:17) Unplanned bugs and real-world lessons (39:47) Learning from Knight Capital's bug (40:24) Understanding exchange-side bugs (43:10) Risk limits and strategy separation (44:41) Importance of UI in trading bots (46:53) The Madagascar button (48:20) The big red button in manufacturing (49:45) Simulated trading and information aggregation (50:29) Sibling trading game explained (53:24) Modeling and hidden information (01:01:15) Trading behavior and market updates (01:04:38) Real-world applications and lessons (01:13:58) Surprises and market opportunities (01:16:24) Pedagogical approaches in trading education (01:17:08) Market dynamics and counterparty behavior (01:17:53) Retail vs. institutional order flow (01:19:23) Simplifying trading concepts for beginners (01:21:27) Introducing market characters and their roles (01:31:31) Team dynamics and communication in trading (01:39:13) The importance of redundancy in trading systems (01:47:52) Future of trading education and online classes (01:53:47) Wrap

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 planning than the entire project did a decade ago, and how talent sorting has drained capacity from public institutions. Despite these challenges, Patrick and Adam find reasons for optimism about reforming government capacity. Complex Systems now has video episodes as well. Watch this episode and subscribe at: https://www.youtube.com/@patio11podcast – Full transcript: www.complexsystemspodcast.com/achieving-results-in-the-physical-world-with-adam-jarvis-of-public-service/ – Links: Public Service Substack: https://alethios.substack.com/ – Timestamps: (00:00) Introduction to Complex Systems (01:13) Understanding local government functions (03:41) Challenges in public sector project delivery (06:31) Funding complexities in public projects (09:14) The burden of regulatory and legislative constraints (17:04) Appreciating the infrastructure we take for granted (23:02) Historical and modern infrastructure challenges (30:04) Talent mobility and its impact on public sector (33:35) Public sector hiring practices (34:11) Agglomeration effects and brain drain (36:04) Aging population and resource allocation (36:59) Structural factors in public sector layoffs (37:49) Hiring and firing in the public sector (40:39) Labor mobility and job security (46:34) AI and automation in public sector jobs (52:56) Risk aversion and process overload (01:01:30) Optimism for public sector reform

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 relationship between content creators and AI training data, touching on the emerging field of "generative engine optimization" (GEO). The conversation also covers multimodal capabilities, recursive AI use, and strategies for avoiding common failure modes like hallucination and sycophancy. – Full transcript: www.complexsystemspodcast.com/getting-better-at-llms-with-zvi-mowshowitz/ – 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 – Links: Don’t Worry About the Vase https://thezvi.wordpress.com/ – Timestamps: (01:08) Understanding system prompts (02:04) Customizing LLM behavior (05:58) Memory features in LLMs (10:21) Generative Engine Optimization (GEO) (15:59) Sponsor: Vanta (17:17) Art and AI: Enhancing creativity (20:36) Recursive use of AIs (25:22) Addressing LLM frustrations (27:05) Checking for hallucinations in AI outputs (28:11) Experimenting with AI models (29:44) Optimizing AI prompts and outputs (31:19) Using AI for writing and editing (32:32) AI as a research and writing partner (33:26) Prompting AI and humans effectively (39:39) Balancing AI assistance with personal voice (51:03) Wrap

In this episode, Patrick McKenzie (patio11) revisits his widely-shared negotiation essay, which he notes may be the most impactful thing he's done in his career aside from VaccinateCA. The essay covers the psychology and tactics of salary negotiation, emphasizing that engineers have turned being bad at negotiation into a "perverse badge of virtue" and that the financial stakes are enormous—a small salary increase compounds over decades to six-figure differences. Patrick walks through practical advice including never giving a number first, understanding how employers actually think about compensation costs, and reframing negotiation as a professional business discussion rather than something morally questionable. – Full transcript available here: www.complexsystemspodcast.com/how-to-negotiate-your-salary-package/ – 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. – Recommended in this episode: Patrick’s essay Salary Negotiation: Make More Money, Be More Valued: https://www.kalzumeus.com/2012/01/23/salary-negotiation/ – Timestamps: (00:00) Intro (03:25) Why negotiation matters (05:21) Shifting your mindset to embrace negotiation (06:49) Your counterparty does not share your mental model of negotiation (12:46) Your negotiation started before you applied to this job (17:21) When does a salary negotiation happen? (19:38) Sponsor: Mercury (23:16) The first rule is what everyone tells you it is: never give a number first (28:45) Listen to what people tell you. Repeat it back to them. (33:22) Research, research, research (37:13) New information is valuable and can be traded for things you want (41:20) You have a multi-dimensional preference set. Use it. (44:08:) For your further perusal

In this episode, Patrick McKenzie (patio11) and returning guest Ross Rheingans-Yoo discuss the strategic advantages of starting a podcast, particularly for professionals seeking to build trust, expand their networks, and support fundraising efforts. They explore the nuts and bolts of podcast production models, recording logistics, transcript creation, and how to make the experience frictionless for high-value guests. Ross shares his thought process around his newly-launched show Development and Research while Patrick gives a behind the scenes look at the makings of Complex Systems. – Full transcript available here: https://www.complexsystemspodcast.com/capitalists-guide-to-podcasting-with-ross-rheingans-yoo – 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. – Recommended in this episode: Development and Research Podcast: https://developmentandresearch.bio/ Podcast Twitter feed: @DevAndResearch Ross & Ricki’s Trading Bootcamp June 3-5: https://trading.camp/complex Ross' first appearance on Complex Systems: https://open.spotify.com/episode/4GiO0KYqxJNCIdltCyhN6m Ricki Heicklen on Complex Systems (our first episode!): https://open.spotify.com/episode/11kEUYRn4gXZGju232hzcg – Timestamps: (00:00) Intro (01:18) The power of podcasting for venture capitalists (03:09) Building trust through voice (07:11) Podcast production models (16:38) Recording and equipment essentials (23:05) Sponsor: Mercury (24:18) Post-production and transcripts (32:22) Advertising vs. User experience (33:28) Creating standalone artifacts (34:20) The power of video clips (35:22) Challenges in podcast distribution (42:12) The role of guests in podcasts (47:12) Pre-recording preparation (49:22) Recording session best practices (54:22) The value of silence in conversations (56:38) Launching and growing a podcast (59:18) Trading bootcamp (1:02:27) 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. – Full transcript available here: www.complexsystemspodcast.com/understanding-and-wielding-power-in-local-government-with-daniel-golliher/ – 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: 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/ – 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 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