Complex Systems with Patrick McKenzie (patio11)

• The AI energy bottleneck, with Tim Fist

  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. –Full transcript available here: www.complexsystemspodcast.com/the-ai-energy-bottleneck-with-tim-fist/–Sponsor:  VantaVanta 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: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=RPEjrs67S9CFA0lLak6OVAFracking 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–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

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• Taking stablecoins seriously, with Haseeb Qureshi

  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:  SafebaseReady 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

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• The past, present, and future of AI, with Stripe

  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:  VantaVanta 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

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  1:33:48
• No, poor people aren’t funding your credit card rewards

  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:  VantaVanta 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

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  1:06:47
• Points, profits, and packed planes, with Gary Leff

  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: VantaVanta 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

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  1:31:27

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