Complex Systems with Patrick McKenzie (patio11)

Patrick McKenzie (patio11) and Luke Farrell examine the structural "technical imagination" gap that prevents the US government from delivering high-fidelity digital services. They discuss why states routinely pay full price 29 times for the same buggy codebase, why failure is the default outcome, and why rooms full of government administrators cannot muster the expertise to say a two line code change should be trivial. They also discuss Luke’s work on the "means testing industrial complex,” why the government redundantly pays a private vendor to do a SQL query for information the IRS already knows, and what vendors would say about their own discontents.
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Full transcript available here: http://www.complexsystemspodcast.com/understanding-government-procurement-with-luke-farrell/
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Presenting Sponsors: Mercury &  Framer

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.
Mercury is a fintech company, not an FDIC-insured bank. Banking services provided through Choice Financial Group and Column N.A., Members FDIC.
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.
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Links:
Luke Farrell's Substack: https://donmoynihan.substack.com/
Luke Farrell, The Means-Testing Industrial Complex: https://donmoynihan.substack.com/p/the-means-testing-industrial-complex
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Timestamps:
(00:00) Intro
(01:52) Transitioning from Google to the US Digital Service (USDS) 
(05:18) How rule buildup and administrative burdens create "Kafkaesque" mazes 
(08:21) Using diagrams and funnels to visualize benefit denials 
(11:49) Software logic errors that improperly kicked children off Medicaid 
(18:25) Why government payroll IT costs hundreds of millions of dollars 
(20:02) Sponsors: Mercury and Framer
(22:02) How recursive legal requirements and DOD standards inflate IT scope 
(26:57) Market consolidation and the lack of competition in procurement 
(33:47) Aligning program administrator incentives with successful service delivery 
(36:03) Using in-house technologists to push back on vendor change orders 
(39:27) Shifting from "Big Bang" contracts to iterative, agile development 
(53:10) The moral incoherence of asset limits 
(01:11:36) Insourcing electronic income verification databases 
(01:16:56) Building public sector competence to manage modern technical risk 
(01:20:08) Wrap

Patrick McKenzie (patio11) reads an essay about "industrial-scale" fraud and why it should be treated as a professional business process rather than a series of isolated accidents. He explains how fraudsters leverage specialized supply chains—shared CPAs, incorporation agents, and "least attentive" banks—to loot public funds. Patrick argues that the government’s "pay-and-chase" model is fundamentally broken and suggests that simple "proof of work" functions, like a 30-second cell phone video of a workspace, could provide the visceral signal that paperwork lacks, and examines the state’s lack of "object permanence" regarding serial fraudsters and how scaled data provides the defense-side advantage needed to catch modern frauds.
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Full transcript available here: www.complexsystemspodcast.com/fraud-as-infrastructure/
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Presenting Sponsor: Mercury
Complex Systems is presented by Mercury—radically better banking for founders. Mercury offers the best wire experience anywhere: fast, reliable, and free for domestic U.S. wires, so you can stay focused on growing your business. Apply online in minutes at mercury.com.
Mercury is a fintech company, not an FDIC-insured bank. Banking services provided through Choice Financial Group and Column N.A., Members FDIC.
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Links:
Bits about Money: https://www.bitsaboutmoney.com/archive/fraud-investigation/ 
Dan Davies on Complex Systems: https://open.spotify.com/episode/5QKxzgumJXSQuaWCmYAoM9 
Jetson Leder-Luis on Complex Systems podcast: https://open.spotify.com/episode/3NiC7x9edoxJXkNW9vRfAT 
Stripe’s Emily Sands on Complex Systems: https://open.spotify.com/episode/64Dyh6Gbg1lg4qUFwId0hc 
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Timestamps:
(00:00) Intro
(05:23) In which we briefly return to Minnesota
(09:26) Common signals, methods, and epiphenomena of fraud
(09:30) Fraudsters are playing an iterated game
(11:29) The fraud supply chain is detectable
(14:27) Investigators should expect to find ethnically clustered fraud
(20:11) Sponsor: Mercury
(21:47) High growth rate opportunities attract frauds
(26:04) Fraudsters find the weakest links in the financial system
(32:35) Frauds openly suborn identities
(35:57) Asymmetry in attacker and defender burdens of proof
(40:13) Fraudsters under-paperwork their epiphenomena
(44:22) Machine learning can adaptively identify fraud
(48:14) Frauds have a lifecycle
(50:34) Should we care about fraud investigation, anyway

Patrick McKenzie (patio11) reads an essay about the business of check cashing, a misunderstood industry. He explains why cashing a check is actually a "new credit extension" where the bank bets on both the writer and the payee, and why profit-maximizing institutions often decline to bank individuals who represent even a "material risk" of a single bounced check. From the manual "rituals" of endorsement to the way fintechs like Ingo Money and Cash App use persistent identity to narrow the risk envelope, Patrick examines the technical and social reasons why some people pay to access their own wages, others don’t, and whether we can do anything about that.
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Full transcript available here: www.complexsystemspodcast.com/check-cashing/
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Presenting Sponsor: Mercury
Complex Systems is presented by Mercury—radically better banking for founders. Mercury offers the best wire experience anywhere: fast, reliable, and free for domestic U.S. wires, so you can stay focused on growing your business. Apply online in minutes at mercury.com.
Mercury is a fintech company, not an FDIC-insured bank. Banking services provided through Choice Financial Group and Column N.A., Members FDIC.
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Links:
Bits about Money: www.bitsaboutmoney.com/archive/the-business-of-check-cashing/ 
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Timestamps:
(0:00) Introduction
(2:15) Check cashing
(2:57) An oversimplified explanation of check presentment
(5:48) Depositing a check requires an extension of credit
(10:47) How cashing a check works if you're not banked
(12:16) A brief aside about endorsement
(14:39) Many people hate check cashing and everything about it
(17:06) The internal logic behind that pricing grid
(19:59) Sponsor: Mercury
(21:36) The internal logic behind that pricing grid (continued)
(23:10) Persistent  identities as a KYC possibility
(25:12) A brief discussion about class distinctions in America
(30:45) Check cashing on phones
(34:28) Outro

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.
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Full annotated transcript available here: www.complexsystemspodcast.com/claude-code/
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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.
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Links:
Odd Lots episode with Noah Brier: https://open.spotify.com/episode/2fd3hvYmplEnQzxYZaxPg3?si=ylFxFe3HQ4uivH29uqC_rA
Bits about Money: https://www.bitsaboutmoney.com/ 
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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

Patrick McKenzie (patio11) is joined by Ruxandra Teslo to discuss why drug development keeps getting more expensive despite revolutionary new treatment modalities from GLP-1 agonists to gene therapies. They discuss Eroom’s Law (Moore’s Law in reverse) and Ruxandra's Common Technical Document Project, which aims to build the "Stack Overflow of clinical development" by making regulatory submissions publicly accessible. This will fill a present hole in the education of researchers, lower barriers for small biotechs, and accelerate drug discovery.
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Full transcript available here: https://www.complexsystemspodcast.com/ruxandra-teslo/
 
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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.
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Links:
Eroom's Law (original paper): https://www.nature.com/articles/nrd3681
Ruxandra’s writing: https://www.writingruxandrabio.com/
Ross Rheingans-Yoo on drug development: https://open.spotify.com/episode/4GiO0KYqxJNCIdltCyhN6m?si=2znQniZ3RXKuX8keNcwWtw
Ben Reinhardt on science and development: https://open.spotify.com/episode/0GHegWgLSubYxvATmbWhQu?si=pVCJVITYTqaq65BiST2d0Q
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Timestamps:
(00:00) Intro
(00:56) Challenges in biopharma productivity
(03:12) Understanding clinical development
(04:59) The role of basic science in drug development
(07:39) Clinical development process explained
(09:25) Issues in clinical trials and development
(19:33) The role of information in clinical trials
(20:30) Sponsor: Framer
(21:42) The role of information in clinical trials (continued)
(32:55) Proposed solutions for clinical development
(40:31) Consultant opinions and regulatory documents
(41:28) Streamlining the regulatory process
(43:06) Understanding FDA interactions
(45:35) Building a public library of regulatory documents
(48:18) Encouraging novel approaches in biotech
(50:06) Addressing risk aversion in the industry
(51:52) Analyzing FDA consistency and reviewer heterogeneity
(01:02:15) The importance of courage in professional growth
(01:06:39) Supporting young professionals and catalyzing change
(01:16:14) Wrap