Patrick McKenzie — Money laundering, big tech censorship, SBF & Japan

I talked with Patrick McKenzie (known online as patio11) about how a small team he ran over a Discord server got vaccines into Americans' arms: A story of broken incentives, outrageous incompetence, and how a few individuals with high agency saved 1000s of lives. Enjoy! Watch on YouTube https://youtu.be/18zpjpPNWRw. Listen on Apple Podcasts https://podcasts.apple.com/us/podcast/patrick-mckenzie-how-a-discord-server-saved/id1516093381?i=1000663220048, Spotify https://open.spotify.com/episode/1GAsGNE26xbjEBH8jtWsaN?si=4hZ03qLoR8C1C8QJ2SjyPg, or any other podcast platform. Read the full transcript here https://www.dwarkeshpatel.com/patrick-mckenzie. Follow me on Twitter https://twitter.com/dwarkesh_sp for updates on future episodes. Sponsor This episode is brought to you by Stripe https://stripe.com/, financial infrastructure for the internet. Millions of companies from Anthropic to Amazon use Stripe to accept payments, automate financial processes and grow their revenue. Timestamps (00:00:00) – Why hackers on Discord had to save thousands of lives (00:17:26) – How politics crippled vaccine distribution (00:38:19) – Fundraising for VaccinateCA (00:51:09) – Why tech needs to understand how government works (00:58:58) – What is crypto good for? (01:13:07) – How the US government leverages big tech to violate rights (01:24:36) – Can the US have nice things like Japan? (01:26:41) – Financial plumbing & money laundering: a how-not-to guide (01:37:42) – Maximizing your value: why some people negotiate better (01:42:14) – Are young people too busy playing Factorio to found startups? (01:57:30) – The need for a post-mortem This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit www.dwarkesh.com https://www.dwarkesh.com?utm_medium=podcast&utm_campaign=CTA_1

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Dwarkesh Patel?

  Today I'm chatting with Patrick McKenzie. He is known for many things. On the internet, he's known as Patio 11. Most recently, he ran Vaccinate CA, which probably saved on the order of high four-figure number of lives during COVID. He also writes an excellent newsletter called Bits About Money. Patrick, welcome to the podcast.

• 0:18Speaker 01

  Thanks very much for having me.

• 0:19Dwarkesh Patel?

  So what was Vaccinate CA?

• 0:21Speaker 01

  In early 2021, we were quite concerned that people were making 20, 40, 60 phone calls to try to find a pharmacy that actually had a dose of the COVID vaccine in stock and could successfully deliver it to them. I tweeted out randomly, you know, it's insane that every person or every caregiver is attempting to contact every medical provider in the state of California to find doses of vaccine. California clearly has at least one person capable of building a website where you can centralize that information and send everybody to the website. If you build that website, I'll pay for the server bill or whatever. And Carl Yang took up the gauntlet and invited 10 of his best friends and said basically, all right, get in, guys, we're going to open source the availability of the vaccine in California by tomorrow morning. This is at like 10 p.m. at night California time. And

• 1:03Speaker 01

  so I lurked on into the Discord where, of course, all medical infrastructure is built and gave a few pointers on, you know, making scaled calling operations. And then one thing led to another and ended up becoming the CEO of this initiative. At the start, it was just like this hackathon project of a bunch of random tech people who thought, hey, we can build a website, make some phone calls, maybe help some people find the vaccine at the margin. And it grew a little bit from there. We ended up becoming essentially the public-private partnership, which was the clearinghouse for vaccine location information for the United States of America. That felt a little weird at the time and continues to.

• 1:37Dwarkesh Patel?

  Okay, so the obvious question is, why was this something that people randomly picked up on a Discord server? Why wasn't this an initiative either by an entity delegated by the government or by, you know, the White House has or the pharmacies have a website you're going to sign up for an appointment?

• 1:56Speaker 01

  Oh, there are so many reasons and a whole lot of finger pointing going on. One of the things was that there were almost no actors anywhere in the system who said, yes, this is definitely my responsibility. Various parts of our nation's institutions, county level, public health departments, governors' offices, the presidency, two presidencies over this interval, which will become relevant. You know, they all said, well, I have a narrow part to play in this, but someone else has to do the hard yards of actually like putting shots in people's arms. And someone else is clearly like dealing with the logistics problem, right? And the ball was just dropped comprehensively and no one at the time really had a plan for picking it up or didn't feel like it was incentive compatible for them specifically

• 2:41Speaker 01

  to pick it up right now. It would be great if someone could do this, but just not me.

• 2:44Dwarkesh Patel?

  Okay, so to explain the context and how important it was that people get vaccines at the time and how much these delays mattered, you can account for it, obviously, in the amount of lives saved. You can even look at it in terms of when vaccine news was announced, how much the stock market moved. It was clear it was worth trillions of dollars to the economy that the vaccine be delivered on time. And so it should be priority number one that people know where the vaccine is. Sort of meta question is, why are, I kind of heard about this problem for the first time when I read your article about this. Why is this, there was a bunch of controversy after COVID about people pointing fingers about masks or different kind of protocols.

• 3:27Dwarkesh Patel?

  Why was this not, people are getting called in front of Congress? Why were we not able to deliver the one thing that was needed to arrest the pandemic as fast as possible?

• 3:35Speaker 01

  Well, folks, why don't we, 27,000 words on this. My article in Works in Progress called The Story of X and HCA goes into some of the nitty gritty. Broadly, I think a matter of incentives more than a matter of people choosing to do evil things, although I will say we did choose to do evil things and we can probe on that if you want to. But the, if you look at like the federal government specifically, the federal government institutionally learned one, I believe, wrong lesson, which has terrible consequences from the healthcare.gov rolled out a number of years ago when Obamacare was first abuting. And the thing which many actors in the federal government and the political parties came away from is that

• 4:15Speaker 01

  a president can doom their legacy of their signature initiative if those bleeping tech folks don't get their bleeping act together. And so the United States has decided, like, there is virtually nothing up to and including like the potential of national annihilation that will cause us to actually like put our chips behind making a software problem. That is somebody else who does not have to deal with an electoral mandate or getting called in front of Congress or et cetera, et cetera. Somebody else's problem. Unfortunately, software is eating the world and delivering competence in the modern world requires being competent at software. And the United States, it will tell you differently. And there are wonderful people in the, in the government who are attempting to change this, but

• 4:56Speaker 01

  broad strokes, on an institutional level, the United States federal government has abdicated software as a core responsibility of the government.

• 5:03Dwarkesh Patel?

  I understand why they didn't initially want to pursue this project. I still don't understand the answer to the question of after everything went down. Now, why is it not more of a news item that this was a problem that was not solved?

• 5:17Speaker 01

  So I think we're memory holding a lot of things that happened in the pandemic. And I wish we wouldn't, partly because, you know, of political incentives and we're approaching an election year. And because of the quirky way that the American parties and the candidates bounce off each other. No one's, it's no one's real incentive to say, okay, like, I would like to relitigate the mask issue for a moment. We told people that masks don't block airborne viruses. And we were quite confident of that. And the entire news media backed us up on it. And then we were like 180'd a month later.

• 5:49Speaker 01

  No one wants to relitigate that. No one wants to relitigate California imposed redlining in the provision of medical care. And that was wrong and evil. And, but the, the party that is, was in the case pro redlining does not normally like saying that it is pro redlining. And the other party does not really consider that a hugely salient issue. And so, you know, there are no debates and no one is asking, you know, Governor Newsom. So when you got on TV and said that you were doing geo fencing for the provision of medical care, geo fencing in that context was the same as redlining. Can you explain your support for redlining? And no one has asked Newsom that question. Maybe someone should. But we're surrounded by

• 6:34Speaker 01

  The effects of incentives and the effects of iterated games. And sometimes they don't play out the way we would ideally like them to play out.

• 6:40Dwarkesh Patel?

  Yeah, we can come back to this. I still don't feel like I really understand. So maybe the act it was that everybody has the blood on their hands. And so that's so confusing. I think if you have other kinds of emergencies, like if you lost a war, I don't think you'd just brush it aside. You'd the generals would have to come up in front of Congress and be like, what happened? Why didn't we get that battlefield? But actually, we just lost a war. Maybe that didn't happen.

• 7:08Speaker 01

  If one goes over the history of military conflicts, I don't know how many people losers on either side of the conflict ever actually did that reckoning of like, hey, could we attempt to win in the future? I think there was a broad lack of seriousness across many trusted institutions in American society, in the government, in civil society, in the tech industry about like really approaching this like a problem we want to win.

• 7:30Dwarkesh Patel?

  Yeah.

• 7:30Speaker 01

  And I think a wonderful thing about our country and our institutions is like on things that are truly important for us. We win and win outlandishly because we are a rich and powerful nation. And yet, like, this was obviously a thing where we should have decided to win. And we fundamentally did not approach it as a problem that we needed to win on.

• 7:47Dwarkesh Patel?

  Okay, so going back to the object level here, one would think that instead of different people calling different pharmacies and asking whether they have the vaccine, the obvious thing that people who have not read your article would assume is that either there were just some company would build a platform like this, the government would build a platform like this, I guess you explained that the government didn't do it. The pharmacies might build a platform like this. And I want to meditate on the incentives that prevented random big tech company or Walgreens from building this themselves. Can you explain that?

• 8:18Speaker 01

  Sure. So the federal government and the state government, the American governmental system is quite complex. And there were multiple distinct supply chains with multiple distinct technological systems tracking where these vials were headed all over the country. And there were many attempts at various levels of the government to say, hey, can we commission a consultancy to build a magical IT solution, which will get these databases to talk to each other? And those largely failed for the usual reasons that government software procurement projects fail. Why didn't tech build it?

• 8:50Speaker 01

  I'm constrained on what I can say and cannot say. So I know a little more than this answer, but I will give you part of the answer. The tech industry, both at the level of like App Amagoo FaceSoft, which is my funny sardonic way to refer to like some of the most powerful institutions in the world and many other places that hire, you know, many number of smart engineers who can build the world's least impressive inventory tracking system. Felt political pressure in the wake of the January 6 events in the United States. This is another thing that's gone down the rabbit hole, but in the immediate wake of the January 6 events, people in positions of authority very clearly tried to lay that

• 9:31Speaker 01

  at the feet of the tech companies. And internally in the tech companies, their policy teams, the teams that are supposed to make the company eligible to government and avoid government Yankee's permission to do business. And their communications teams, PR departments, told everyone in the company, like, mission number one right now, do not get in the newspaper for any reason. We are putting our heads down. And when people in those companies who work on public health, and a thing that might not be obvious to most people in the world is that, like App Amagoo Booksoft, there are literally like teams of people who their job is public health, because they are the like, the operating system of the world right now, and the operating system of the world needs public health care.

• 10:13Speaker 01

  Those teams said, hey, we've got this thing. And other people in the company might have overruled them and said, it would be really, really bad right now to have the tech industry saying we're better at the government's job than the government is. So shut that down. Okay, so that's, that's so insane. It is absolutely. The local incentives, like, it makes sense in the meeting when you're saying it. And you are not in that meeting projecting, I am going to cause tens of thousands of people to die at the margin by making this call. And yet, that call was made.

• 10:49Dwarkesh Patel?

  There's two culpable actors here. One, you could say, well, the big tech companies for not taking the political risk. I think what is even more reprehensible is the fact that they probably correctly thought that appearing more competent than the government and saving tens of thousands of lives as a result will be held against them in a way that significantly matters for their ability to continue their other businesses.

• 11:15Dwarkesh Patel?

  Now, OK, so suppose that they had built the software. Let's play with the scenario. And then what would happen? They would get hauled in front of Congress and explain why they weren't delivered even faster because of the ultimate bottlenecks in the supply chain, because you can only manage. What would happen? Like, they build it, and it's like better than the government.

• 11:31Speaker 01

  So many things could happen. One, if you build a thing, this has sometimes been called the Copenhagen Principle of culpability. If you build the thing, various actors in our system will assume, OK, now your responsibility for not just the consequences of the thing you built, but for the totality of consequences of everything associated with the American vaccination effort. So you built the thing. Oh, you big tech geniuses. Well, what did you do about localization? You didn't do enough about localization yet? You hate name group of people here. Like, don't you see the disparity in death rates between demographic A and demographic B? Why haven't you fixed that yet? You have killed so many people, et cetera, et cetera. And no one in government, no one who is making that moral calculation says, I have responsibility for killing people by doing nothing.

• 12:16Speaker 01

  The person who is doing anything has the responsibility for killing people by taking up the burden of doing something. And it is a absolutely morally defensible thing, which you will see over and over and over again in our discourse.

• 12:29Dwarkesh Patel?

  They get hauled in front of Congress, but it's not just because they made a sin of commission. It's also because if you're right, then after January 6, they would be held in. There's one answer where it's like they touched the problem and there's another where it's they did it, they did it better than the government could have and those seem like two different.

• 12:48Speaker 01

  Right. You touched the problem and so you've immediately taken liability for any number of sins of omission because even at the scale of the largest companies in the world, you've not allocated infinite resources to this problem. And also, the stealing a march on the government and embarrassing us will be held against you. And so like you can point back to the Cambridge Analytica thing where Cambridge Analytica is like shorthand for, there was this one time back in the day where the news media in New York and the government in DC and places like it, talked to each other a bit and convinced themselves that a small team of people with a budget of approximately $200,000 have rooted the United States presidential election. Now, rooting the United States presidential election, perhaps on behalf of a foreign power,

• 13:33Speaker 01

  would be an enormously consequential thing. Good thing that did not happen in the world that we live in. However, people believe very passionately in that narrative and as a result of that narrative, they did like very aggressively attempt to clip the wings of tech and tech's core businesses, like say advertising.

• 13:49Dwarkesh Patel?

  Right. There's so much that's crazier. Okay. One question you might have is, we figured out that our, we couldn't delegate to big tech or any of the competent actors and that the native infrastructure that we had, that was specifically earmarked for dealing with public health emergencies, was extremely incompetent to the extent that Discord servers vastly outperformed them. Supposing that public health is not uniquely incompetent among the different functions that the government is supposed to perform, that are, don't get tested until the actual emergency is upon hand. How would we go about if the president hears this and is, let's say, concerned that the

• 14:30Dwarkesh Patel?

  new, the people running the nuclear, nuclear bomb reaction aren't up to snuff or the earthquake reaction? Is there some stress that is test that you could perform on these institutions before the thing goes down, that you could learn beforehand, whether they're competent or not?

• 14:45Speaker 01

  If I look at like the experience of the last hundred years and a little more back to the flu pandemic in 1918, if you read histories of the flu pandemic, a vastly less wealthy, vastly less technologically sophisticated nation with many less people involved in the actual like fixing of this problem, competently executed on nationwide vaccine campaigns and other various various measures. And so in some fashion, like we should be urgently concerned with what decayed institutionally in the interim. I think one of the things that health departments specifically faced is that if you had just given them these kind of vanilla vaccination campaign, maybe they would have been done better than they actually did. I'm not positive of that. I do think there are actually, and here I

• 15:29Speaker 01

  have to stop for a disclaimer, I think that people in county health departments did real important work. I think they probably did work that saved lives on the margin. I do not think the United States should be satisfied with our performance in 2020 and 2021. We should be very dissatisfied and we should get better for the future. And that requires like recognizing that we underperformed by a lot. There was a political decision made that the successful administration of the vaccination was not going to be measured solely by saving lives. There the prioritization schedule that came up, which was Byzantine and complicated and routinely befuddled professional software engineers and health administrators, and which I could not diagram out on a whiteboard, even if you like paid me a million dollars

• 16:14Speaker 01

  to get it right on the first time, was downstream of the United States' political preferences. And so Schedule 1A versus 1B versus 1C was like in the first five seconds of the discussion dictated by medical necessity, but immediately after that was about rewarding plums to politically favored groups. And so the, one of the complexities of this is that the pharmacies and healthcare departments are not set up to discriminate along the axes of whether one is politically powerful or not, because that is not a thing that they have to do in most vaccination campaigns and not a thing that they have to do on like the typical Tuesday of providing medical services. We asked them to do this like radically new thing, which is in part

• 16:59Speaker 01

  responsible for the failures that we had. If we had had a much simpler tiering system, for example, we would have had more than 25% of the shots successfully being delivered in the state of California in January of 2021.

• 17:15Dwarkesh Patel?

  Can you, for people who are not aware, what was the political tiering system that you're referring to?

• 17:19Speaker 01

  Oh goodness. So this was different in different places and confusingly, different places in the United States use the same names for these tiers for different people. But the, in the state of California, tier 1A comes before 1B comes before 1C comes before the tier 2, et cetera, et cetera. So 1A was descriptively speaking at the start, and this changed over time on like a day to day, week to week basis, sometimes in mutually incompatible ways at the same time. It was an entire mess. But descriptively, tier 1A was, okay, healthcare professionals and a few others and people above the age of 75. No, wait, we'll change that to 65. Tier 1B was, we're going to put a few favored

• 18:01Speaker 01

  occupational groups here and some other folks. And tier 1C was people who doctors think will probably die if they don't get the vaccine, if they contract COVID, but who have not appeared in group 1A or 1B yet. And so who got 1A? Well, healthcare professionals, so like doctors administering the vaccine, that sounds like pretty reasonable. Also veterinarians, because veterinarians are like urgently required by society at the time? Not so much, because the California Veterinarians Association is good at lobbying. And that isn't just me alleging that. They sent a letter out to their membership saying, we are so good at lobbying, we got you guys into 1A. Congrats and go get your vaccine now. Have that on my website. Okay, so like tier 1B, school teachers were classified

• 18:45Speaker 01

  as a tier 1B. Why? Because go figure, teacher unions have political power in the state of California. And they said, well, we'll accept not being in 1A, but we are going no lower than 1B. And probably no one in that meeting ever said, like, I definitely think that 25-year-old teachers who are currently under stay-at-home orders should be in charge, should be like in front of the line of people who will die if they get COVID. Like, we made that choice.

• 19:12Dwarkesh Patel?

  So then, in your article, you discussed that the consequence of that was not only the misprioritization of the vaccine, but the bureaucracy around allocating it according to these tiers.

• 19:23Dwarkesh Patel?

  Resulting in 75 year olds not having the capacity to fill out the pages of paperwork that required to decide what tier you're in.

• 19:30Speaker 01

  The state of New York commissioned a consultancy to administer to 75 year olds a 57 page web application, which required uploading multiple attachments to check for their eligibility. And like, talk with a technologist if you don't believe me, we tried to remove everything from a webpage that people successfully get through it. Like, if you can make it, you know, two to four form fields, that's already taxing people's patience. And you are asking people who might be like suffering from cognitive decline or be less comfortable in using computers to do something which would like literally tax the patience and cognitive abilities of a professional software engineer.

• 20:07Speaker 01

  And that wasn't an accident. We wanted to do that. Why did we want to do that? Because it was extremely important to like, to successfully implement the tiering system that we had agreed upon. Why was it extremely important to implement the tiering system? Because that was society's prioritization. Was that the correct prioritization? Hell, no.

• 20:24Dwarkesh Patel?

  Right. Okay. So can we just count off everything? It just, so it's enraging, not only because obviously people died, but because like, nobody talks about it. It was, there's all kinds of controversies about COVID, about whether, I don't know, of vaccination and side effect kind of things, and whether the masking orders were too late, too early, whatever. And then the main thing about whether we got vaccines and people's arms on time because of these political considerations. So you're not allowed, yeah, go ahead.

• 20:58Speaker 01

  Can I jump in with one bit of optimism? We achieved something incredible, which was getting like the first cut of the vaccine done in two days as a result of, you know, many decades of science done by very incredible people. And we successfully got that vaccine productionized in a year. We should have got it productionized in far less than a year. But the fact that we were able to do it in one year and not three was enormously consequential. And so we should feel happy about that. A little annoyed that we didn't have, you know, better protocols at the FDA and places to get that vaccine prioritized for testing much faster than was, quite annoyed at the fact. That like that was a political football and people probably made decisions that pessimized for human lives and optimized for like defeating a non-preferred political candidate.

• 21:41Dwarkesh Patel?

  Are you talking about the fact that the vaccine was announced the after the election results or something, right?

• 21:47Speaker 01

  Yes, I'm basically subtweeting that.

• 21:48Dwarkesh Patel?

  Yeah.

• 21:49Speaker 01

  And I strongly believe that was a political decision, but I don't, I'm just a software guy.

• 21:54Dwarkesh Patel?

  So, okay, the particular kind of craziness that we had during this, during the 2020 and 2021 about equity and wokeness, how much was that uniquely responsible for the dysfunctions of this tiering system? And geolocation slash redlining would basically if it was, if that happened in another year where there wasn't a bunch of cultural craziness, would it have gone significantly better?

• 22:19Speaker 01

  It's difficult to ask that question because like we were clearly in a unique time in 2020 and 2021. And yet, like, point to me in the year in American history in which American society was truly united and had no social issues going on. And if people like counterfactually like point to say World War II, I will say like read more history. But be that as it may, was it the case that like strong societal feelings in the wake of

• 22:48Speaker 01

  George Lloyd's death in 2020 and the racial reckoning, like strongly dictated policy? Yes, as a positive statement rather than a normative statement, that is absolutely the case.

• 23:01Speaker 01

  There's this thing we often say in the tech industry called bike shedding, which is if you're building a nuclear power plant. And many people cannot sensibly comment on like, what is the flow rate through the pipes to cool a nuclear reactor? But if you build a bike shed next to the nuclear power plant, it's very easy to have opinions on the color of the bike shed. And so in the meetings about the nuclear power plant, you will have a truly stupid amount of human effort devoted into what colors you should paint the bike shed. So it is very difficult for most people in civil society to successfully inject a vaccine into someone's arms, to successfully manage a logistics network, to successfully build a nationwide information gathering system, to centralize this information and pass it out to everyone.

• 23:42Speaker 01

  And we aggressively train the entire American professional managerial class, starting at seventh grade or earlier in decrying systemic racism, which, to be clear, is a problem.

• 23:56Speaker 01

  And so, any discussion about what should we do with regrets with regards to information distribution, which goes out to a broad audience in the American professional managerial class, who essentially call all the shots in the US system, will almost invariably get bent to, I have no particular opinions on server architecture here and nothing useful to comment, but, you know, what's our equity strategy? And the equity strategy dominated discussions of the, the correct way to run the rollout to the exclusion of, you know, operationalizing it via medical society, medical necessity.

• 24:35Dwarkesh Patel?

  Yeah.

• 24:36Speaker 01

  People brag about that fact. That fact is enormously frustrating to me. And if you say it with exactly those words and emotional valence, people will say, no, no, that's not exactly what we meant. But when they're talking to other audience, they'll say, no, this is absolutely, absolutely what we mean.

• 24:49Dwarkesh Patel?

  Yeah, okay. So, I mean, even on that point, the, maybe the culprit here is a scarcity mindset involved here with caring more about the proportion rather than just solving the problem.

• 25:02Speaker 01

  This is one of those few times where we were genuinely up against a scarcity constraint that like, you know, physical reality was there were a scarce number of vials and we needed to have a prioritization system. And some people who urgently needed the vials were not going to get them first. Everyone was going to get them eventually. But the mad rush in our political system to dole out favors around the prioritization for those first files exceeded the actual distribution and successful injection of the vials as a goal. Again, California reported to the federal government that it was only successfully injecting 25% of its allocation. It had the most desirable object in the history of the world.

• 25:43Speaker 01

  And rather than adopting any sensible strategy for getting it into people's arms, was bickering over who should get it first. We should be outraged about this, and we're mostly not.

• 25:53Dwarkesh Patel?

  I don't even know what to ask the next because it's so obviously outrageous and There's no clear answer, at least to me, of why there isn't more outrage about it. Also, what the solution to it is, I mean, literally, in the exact context of what we do the next time there's a pandemic, it's not clear to me that we've learned the lesson, let alone the broader lesson of if there's a different kind of emergency, if there's some isomorphic emergency, what would our state capacity be better? And you mentioned the point about 100 years ago, we have maybe would be able to deal with this problem better. I don't know, what changed?

• 26:29Speaker 01

  One of the things that America used to do is when the federal government lacked state capacity for something, it would say, who in civil society or private industry has capacity for this? And then say, congratulations, by order of the president, you are now a colonel in the United States Army. Like, what do you need to get it done, sir? And that was an option. That was an option that was not taken. But, you know, I will play no fights in either of the two administrations that both individually made terrible decisions. But, you know, plausibly, some more enlightened, counterfactual administration could have gone to Google and said, who is literally your best person for solving the data problem that we currently find ourselves in? Great. Will they accept a commission as colonel? Great. Here's an order from the president.

• 27:14Speaker 01

  You have a swearing and ceremony starting in 30 seconds. And like, you will present your, like, project plan tomorrow. And again, like, the successful project plan was made by a bunch of, like, rank amateurs at this topic on Discord in the course of a couple of hours. And similarly, like, there, you know, this is like one part of the huge overall vaccination effort. But you could imagine going to Amazon and saying, like, hey, Amazon, we hear you're pretty good about getting packages between A and B. This package has a, like, a really hard thing about it. It has to be cool as it's delivered. That's like a totally unsolved problem in material science, right? And Amazon would say, we literally do that every day.

• 27:55Speaker 01

  Back in December, people were getting on the night in the news and saying this is going to be an unprecedented logistics challenge because the vaccine has to be kept at ultra-low temperatures, which are the same temperatures at which milk is transported. We understand how to do cold chain logistics. So, Amazon would correct that misperception. They say, "Oh, you guys seem to know what you're doing. We have an absence of that here. Congratulations. Here's your Colonel in a uniform in the United States military. And now your job is we are going to give you a CSV file every day, interface with this other Colonel, please, from Google, on like where this thing needs to go. And you get it there on time every time. And if you can't get it there on time every time, like, call the White House. And we will like

• 28:37Speaker 01

  find you political cover." Is what a functioning system would have done.

• 28:41Dwarkesh Patel?

  Yeah.

• 28:42Speaker 01

  Granted, the American system is dysfunctional in its own way. I think another thing that's been underdone in the course of the last couple of years is like, looking internationally, I don't know if any country anywhere with vastly different political systems is happy with the outcomes that it got. Some were obviously vastly better than others, but there are journals of like comparative international politics. And why are those journals writing anything but? Like, who succeeded at what margins and who did not? And what do we learn about like the proper functioning of political systems, civil society, and like the United States considered as one like hugely complex machine?

• 29:16Dwarkesh Patel?

  No, that's a really interesting point. I actually asked Tony Blair, Tony Blair Institute, they were recommending to the British government, different ways of distributing the vaccine. And they made the obvious recommendation that you should give everybody one dose now and then do the second dose later. You know, obvious things like this, which will save lives. Any British government didn't do a good job there. No government, I think it's actually a very interesting question. There's governments all across the world which have very different political systems. They have, hopefully, I don't know, different intersection of the road you'll mix this. Why didn't nobody get this right?

• 29:49Speaker 01

  So, on the like, you give people the catchphrase for this was first doses first.

• 29:54Dwarkesh Patel?

  Yeah.

• 29:55Speaker 01

  That was not the procedure in many nations which have many smart people in them.

• 30:00Dwarkesh Patel?

  Yeah.

• 30:01Speaker 01

  And it was not the procedure in the United States until, I think, you know, first doses first. You can like sometimes trace policy back to individual blog posts. And so, to the extent that one can be traced, I think it was Alex Tabarrok on Marginal Revolution, who was right. This is very obvious and over determined. If we want to win at this, like first doses first is objectively the correct policy. And after, you know, this like ping ponged around the political system for a while and they, you know, talked to medical experts and et cetera, they were like, yeah, yeah. It turns out that, you know, this is the equivalent of like saying, you should probably consume calories at some point in the typical week. That is better than not consuming calories. Well, we checked with the medical experts and it took six weeks of meeting, but they

• 30:46Speaker 01

  definitely agree. Eating beats not eating for living. So we're going to do that now. And on the one hand, like it is a genuine strength of the United States that like, you know, he's not, there's actually some rando, but relative to like the, the topic in question, some rando on the internet like wrote up a 2000 word blog post and we stopped, stopped doing stupid things. We could have stopped doing the stupid things sooner.

• 31:12Dwarkesh Patel?

  Yeah. Oh, that is an answer to the question of why, like, nobody got it right. If you, if you think there's something particular to the late stage bureaucracy that we have or something, maybe another country is fresher, but even the countries that have more authoritarian models who can just, you know, crack down or something, they did abysmally as well. They made errors often in many cases that were worse in Americas. There's like so many countries, Patrick, why did none of them get it right?

• 31:39Speaker 01

  I'm under informed on much of the, the international comparison, partly because in 2021, I was sort of busy. But I remember Israel for a variety of institutional reasons, having a broadly functional response on this, in particular around end of the day shots, which end of the day shots are in the grand scheme of things, a minor issue, but they're a, a good like quick heuristic for, do you have good epistemics on this at all? Okay. You know, physical reality of the COVID shots is there is five, eight or 10 shots in a single vial. That single vial is, goes bad after 12 hours.

• 32:21Speaker 01

  That is a bit of an oversimplification. It doesn't actually go bad, but for essentially regulatory reasons, we have to pretend it goes bad after 12 hours. It can't be resealed. Okay, so if you vaccinate two people, then the other shots are on a timer and those shots will decrease in value to zero after how many hours are remaining on the timer and then get thrown in the trash can. So, quick question to test if you are a rational human being. At the margin, would you prefer giving a shot to the most preferred patient in your queue of patients who needs for medical needs, or like the trash can? You prefer the most preferred patient. Now, follow up question. Would you prefer giving it to the least preferred patient or the trash can?

• 33:05Speaker 01

  You still give it to the human rather than the trash can. And Israel adopted the policy of like, if the shots are expiring, forget the tiering system, forget anything else. Literally walk out into the street and say, I've got the COVID shot. I need to administer it in the next 15 minutes. Who wants it? And in the United States, we had a policy ban on doing that. We said, no, to protect the integrity of the tiering system, to like, you know, embrace our glorious cause of health equity, you should throw that shot out. And that policy was stupid. And it was announced by governors proudly in December in front of news cameras. And then a couple of weeks later, reality set in and they were like,

• 33:50Speaker 01

  people told them, "Sir, it turns out that throwing out the vaccine is stupid." And the governor did not go on the nightly news again and say, "I gave a, you know, a very confident policy speech a month ago in front of this news camera where I said that I would prosecute anyone who gives out end of day shots." But he literally said that. He literally said that. Oh, this is almost a direct quote, and you can see the actual direct quote in my previous writing on this, but "I will not just prosecute people. I will go aggressively to try to maximize the reputational impact to your firms and your licenses." Yeah. Like, we were pointing Metaphorical and when it came down to it, literal guns at physicians in the middle of a pandemic

• 34:35Speaker 01

  for doing unauthorized medical care. Crazy. But what, you know, when the system corrected, it did not do, it did not correct all the way. The governor did not go out and say, hey, that thing I said a month ago was effing insane. I take that back and apologize. No, it was like, okay, we're going to like quietly pass out the word. That's no longer the policy, but we don't want to own up to the mistake. And people in say, like the regulatory departments of pharmacies make rational decisions based on the, uh, the signals that you are giving them. And the rational decision a pharmacy makes is not, okay, we've been quietly passed the word that the old policy is persona non grata. But can we really trust the quiet word here? One, because like, do we trust that this actor is not going to change their mind in two weeks

• 35:20Speaker 01

  and consequence us for something we authorized today? Just throw out the shots. And pharmacies did not cover themselves in glory. A lot of pharmacists did. Some pharmacists did. But pharmacies, like institutionally, we deliver almost all the medications for almost all the diseases routinely in America. We cannot blow up either that like position of societal trust or our business results over one drug for one disease. And so throw out the shots and make sure we can still delivering medical care in California tomorrow. That, I understand how that decision was made.

• 36:00Speaker 01

  We should not endorse that decision. We, we, there, there were individual acts of heroism by, by particular pharmacists who said essentially in as many words to us when we, when we called them and said, hey, what's the procedure for getting the shot? Okay. An individual like the one you just described cannot formally get the shot right now. So I would tell that individual to go to the county website, tell whatever lies are necessary to get an appointment with me. They come in for an appointment and I will inject them rather than verifying the lies that were on the appointment, appointment card because basically F the rules I swore an oath.

• 36:34Dwarkesh Patel?

  I honestly, I don't know where to begin with some of these things. Okay. I want to understand a bunch of the First of all, can we just go back to 25% of vaccines that were allocated to California were actually delivered in people's arms? Literally, the entire world economy was bottlenecked on this, right? It's like-

• 36:54Speaker 01

  So if you want another funny anecdote, I then asked some people in positions that might know, so how real do you think that 25% number is? And they said, well, the good news is, in addition to being incompetent at delivering the vaccine, we're also incompetent in counting. So it was probably a bit of an undercount. I'm like, oh, so the good news is like, the true count was like 100% or 95% or something? Well, no, not nearly close to that. But we got better at counting after the governor yelled at us because he was embarrassed. We were the 48th state in the nation.

• 37:22Dwarkesh Patel?

  Counting the item, which is a bottle, like, where is the thing that is going to like rescue us from the thing that is destroying the world?

• 37:29Speaker 01

  We had, so like pharmacies, generally speaking, could today, if you ask, you know, someone deep in the bottles of pharmacies accounting department, could you by the end of the business today, give us a count of like, how many bottles of aspirin the pharmacy has physically in the world? By the end of the day, they would have a shockingly accurate number for that. It wouldn't be exact, but it would be like shockingly accurate relative to that number's like trily millions. If you could say like, break it down by address, please, like, where are they physically present in the world? Yeah, easy problem, you know, like managing inventories of drugs, that's what we do. The United States could not do that, like, and did not perceive that to be an urgent problem to be solved.

• 38:05Dwarkesh Patel?

  I mean, I do want to ask you about like the actual finance and software stuff at some point, but I think this is like such an important, I mean, the world is what we're standstill, we still haven't learned the lesson, so I'm just gonna keep going on this topic, because I still don't understand the, okay, so here's, here's another question that's sort of related to this. You have many rich tech industry friends, and I read your article and you're saying, we're trying, I'm filling out these grants for 50K her, and that's like taking up all my time, and I'm trying to raise, you know, a couple hundred grand here, a couple tens here. And I'm thinking to myself, how is this not as trivial a problem as, hey, XYZ, if you give me money that you can find between your couch cushions, we will save thousands of lives and get the world economy back on track.

• 38:50Dwarkesh Patel?

  How was raising money for this hard? Or why was it hard, you know?

• 38:54Speaker 01

  So, again, like trillions of dollars are on the line, the United States is spending tens of billions of dollars or more on its COVID response strategy, like- The true biggest issue is like, why is it coming down to like Patrick McKenzie's ability to fundraise in the tech industry for us to like have a system here? Okay, bracketing that, like the tech industry underperformed my expectations for what the tech industry should have accomplished here. There were some bright spots and less bright spots with regards to fundraising project. For those of you who don't know, the total budget of this project was 1.2 million dollars, which is not quite couch cushion money, but is not large relative to the total amount of resources that the tech industry can deploy on problems. And in some cases, I looked at my email this morning to refresh my memory, I sent a CEO at a particular company, and I'm not going to name people, but they're welcome to claim

• 39:39Speaker 01

  credit if they want to claim credit. I emailed a CEO at a particular company, "Hey, I saw you like to tweet about this on Twitter. I'm essentially raising a seed round except for a 501(c)(3) charity, and we urgently need money for this. Here's a two-page memo." And that, I sent that email at 4:30 PM, 4:30 PM California time. And he got back to me, there was some internal emails of like routed to this person, routed to this person, he run that by blah, blah, blah. 9:30 the next morning, he said, "I'm personally in for $100,000 out of my own pocket. My banker is going to contact you as a wire cleaner the same day." So yay for that. On the like, yes, less yay side, like tech is not exactly a stranger to having bureaucracies.

• 40:24Speaker 01

  And in some cases, it was a matter of like, oh, indicatively, we want to support that, but we have a process, and that process went on for six weeks. And by the time six weeks was over, it was May, and not to the credit of funders, by May, most people in the professional managerial class who had prioritized getting a vaccine for themselves and their loved ones had succeeded at that. And they said, "Okay, so vaccination supply problem pretty much solved, right?" I'm like, "No, it is not solved right now. It is solved for the people who are smartest about working, work in the system in a way it was not solved for even them back in January. But there are many people who are not yet vaccinated, and they say that's a vaccine hesitancy issue. No, it is not merely a vaccine hesitancy issue. It is still the case that there are logistical problems.

• 41:09Speaker 01

  It is still the case that people don't know that you can just Google the vaccine now. It is still the case that around the edges of the American medical system, in places that are like underserved, et cetera, people don't have it, or they can't get transportation, et cetera, et cetera. You should continue funding this team for the next couple of months so that we can do what we can around the edges here." And I was told...

• 41:31Speaker 01

  Again, you know, people can do what they want with their own money. And I understand that charitable founders, funders, rather, have many things. It's just like, okay, relative to the other places we can put money to work in the, in the world. Further investment in the American vaccine supply situation as of May and looking forward doesn't make sense for us. Could you do it in another nation? And we said, like, okay, we're the American effort. We have some advantages here. We would not have them in the other, the other nation. We did talk to people there. We, we tried to see if we could help a team there or go, or go there, et cetera. But we don't find, we don't see that there's a path to like positively impacting the problem there in a way that there's manifestly a path to positive impact here. And we lost that argument.

• 42:16Speaker 01

  We didn't get the money. The, the last hundred thousand dollars in was my daughter's college education fund.

• 42:21Dwarkesh Patel?

  Oh, my God. Okay. Look, I, I agree that it shouldn't be up to tech to solve this huge society-wide problem. But given that nobody else is solving it, I still don't understand. Have you gone back to any of them or have any of them reflected on, yeah, maybe I should have just, you know, wrote you a million dollar check and saved you all this hassle so you could have got back to business?

• 42:44Speaker 01

  So, you know, ultimately, I'm the CEO, like, responsibility for fundraising lies with me. And so, like, I thought any number of things about how could I have done that better? How could I have strategized that, you know, I, I did not stop fundraising efforts, but I stopped lighting up new conversations for a number of weeks because I thought, okay, we've got, we've got the $2 million that we need to run this till the end of August. And that's my sort of internal target for the point at which it doesn't quite stop being useful, but it starts like actually being, you know, a question on the margins where it's not a question until the end of August. So could I have done better? Probably. The, some of the folks in the broader effective altruist community, I'm not a member, but I've read a lot of stuff that they have written over the years and I probably consider them positive.

• 43:29Speaker 01

  They are the but four cause of vaccinate CA, but ask me about that in a moment. But some EA funders talked to me after my piece about it had come out and said, this is physically painful to read. We wrote bigger checks with less consideration to projects that had far less intensive success. Why didn't you just ask us for money? And like the answer, there was twofold. One, I thought I had high quality introductions and a high quality personal network to people who were likely already going to fund it. And so I didn't light up additional funding sources. And two, like, this is a true answer. I'm a flawed human who has a limited number of cycles in their day and was running a very, very complex operation. And it literally didn't occur to me, hey, maybe those people that have been making a lot of noise about writing a lot of money for pandemic checks

• 44:14Speaker 01

  would be willing to write a pandemic check, which like, that was not entirely an irrational belief for me, because I had like, reach out to people who are making a lot of noise about writing money for pandemic checks. And they said, not in the United States, not in May. And I thought, oh, well, it's, you know, if I light up a conversation totally cold with someone now, it's likely to just get, get a no again. And I should try to like, scrimp and save and break the piggy bank for my daughter's college education fund. Which, by the way, she'll go to college, folks, no worries. But it's a, like, how far down the list of like, Plan A, Plan B, Plan C, we were down to like, Plan C at that point.

• 44:47Dwarkesh Patel?

  I'm just to be clear, I'm definitely not blaming you. It goes back to the Copenhagen.

• 44:53Speaker 01

  No, but I should blame me a little bit, because I should be rigorous about my performance.

• 44:57Dwarkesh Patel?

  I think, you know, you go back to the commission versus omission. It's like, the exact same reason that we shouldn't have blamed Google if they got involved. I did this to themselves and maybe made a mistake. It's like, come on, to remove the bottleneck that was basically stopping all global economic activity and causing, you know, millions of deaths, you had to, in your, for the action you were taking about it, take money out of your daughter's college fund. It's so insane. And I-

• 45:29Speaker 01

  So can I say this? And like, there's a positive takeaway here? So there actually is a positive takeaway in that there is one tiny actor who understands that he has unitary control over some decisions, who is capable of like, betting boldly on those without a huge amount of process, when it is important to bet boldly on things. Not to shoot my own horn here, this is literally what happened. So like, on the first day, there- You know, we're getting in Discord together and there's a bunch of infrastructure where we have to sign up. We have to like, you know, get hosting, yada, yada, yada. And there is a like annoying mechanical step at this point where it's like you have to put down a credit card for a potentially unbounded expense. And people were like, okay, you know, there, there's a list of things that we want to do. But since there is no money here, you know, like I'll take this one and you take this one.

• 46:14Speaker 01

  And after I like heard this conversation go on for two minutes, I said, this is not a conversation we should be having. Here is a like a debit card for my business, which have just spun up on the backend. Because like this is literally my job, which has $10,000 on it. Spend the $10,000 on anything that accelerates this project. There is no approval process. There isn't, don't get a receipt. Don't worry about the paperwork right now. And why did I do that? Because we were like doing things like, well, you know, okay, there's like a scrape up like the information about where hospitals exist and what their phone numbers are is probably like scrapable from the internet for free. Or we could buy a commercial database, but that's like a stupid amount of money. It's like $2,000. I'm like, relative to the importance of this project, $2,000 is a trivial amount of money. Just spend the 2,000 immediately rather than spending like four hours writing a scraper.

• 47:00Speaker 01

  And we don't think about that in government procurement and in charities. We have some sacred virtues about like, you must minimize waste. You must minimize opportunities for corruption. You must maximize maximize for like the the funders of the charities for their, for their like, you know, line item

• 47:20Speaker 01

  support vigil things that charities buys. And those sacred virtues conflict with winning. And at the margins with they where they conflict, we should choose winning. We should choose human lives over reducing corruption like.

• 47:36Speaker 01

  And one of the few things we are reflecting on is the

• 47:40Speaker 01

  the tremendous amount of waste and fraud that happened in the like PPP loans and other Corona stimulus things. Like, okay, I'm not just saying this to be contrarian, folks. We should be glad there was waste in like COVID stimulus. If there was no waste, we were clearly not choosing the right margin to focus our efforts on.

• 48:02Dwarkesh Patel?

  So by the way, for the people who don't have context on how much money typically goes around in Silicon Valley, they think, oh, 1.4 million, how hard should that be to raise? If you right now, given your reputation, like literally treated out, I'm not going to tell you my idea, but I'm raising $50 million seed around or something, I would be like, that's going to get filled.

• 48:25Dwarkesh Patel?

  I think people don't understand, like I have like friends who are 16 years old who have some GPT wrapper and they like, they don't have to worry twice about raising 1.4 million dollars.

• 48:34Speaker 01

  Not trying to brag folks, just telling you like the reality of Silicon Valley and also the reality I put in the document. I misapplied the like, I have some knowledge of how seed funding would work if I attempted to raise seed funding for a for-profit company. And I thought originally like, we're probably going to be charitable, but I'm going to pitch this to people as essentially like a seed investment, which they expect to like spend all the money as quickly as possible and go to zero, while driving the total addressable market of the company to zero.

• 49:04Speaker 01

  But I'm bummed, this is what passes for humor with me. And so I told folks pretty confidently in the first couple of days, I'm pretty sure I can get us $8 million. And then like was actually able to deliver on 1.2 after far more tooth pulling. But like, yeah, descriptively, if I was asking for a seed stage investment, if I wanted to get $8 million wired by tomorrow, I think I could probably do that. And that is a civilizational inadequacy because like, can you literally get $8 million for a blank check for something that has a profit motive behind it? But if I write on the check, hey, we want to fix the manifest inability of the United States to figure out where the COVID vials are, that blank paper becomes less valuable by the fact of writing that?

• 49:45Speaker 01

  So maybe on reflection, I shouldn't, I just shouldn't have told people and said, oh, the blank check company was, you know, this thing. And we're making it a 501(c)(3), which some ethics issues in that, but the ethics issues are less bad than allowing people to die.

• 50:05Dwarkesh Patel?

  Okay, so the last episode I released, at least while we're recording this, was about within AI, a former AI researcher who thinks that the field is progressing in such a way that you will need to nationalize the research in order to protect American national security. And when I hear this about the inability of the government to keep track of vials of COVID vaccines, or to get them in people's arms, should for any other emergency that we might be worried about, whether AI, I don't know, the fallout of a nuclear war or something, should we just discount any government response to

• 50:46Dwarkesh Patel?

  zero? And then just, if your plan requires some sort of competent administration by the government, discount to zero, it has to be something on the side?

• 50:55Speaker 01

  So discounting to zero is like the opposite of wisdom here, because we didn't accomplish zero, we accomplished a extremely impressive thing in aggregate, which vastly underperformed like the the true thing that we were capable of. And so have to keep both those parts of the equation in our minds at the same time. I think that people in tech need to become radically more skilled than interfacing with government, to the extent that it is, you know, we have some manifest competency issues in government right now. We can't simply, you know, sit out here and gripe about this on podcasts and et cetera, et cetera. Like, we've got to go out and do something about it. And there was a, I think it's been reported, there was a meeting among like tech leaders

• 51:39Speaker 01

  in early in the vaccination effort, where a bunch of people got in a room, like, this is going terribly, I hope someone fixes it. And like, I hope someone fixes it is no longer a realistic alternative. I think we have to be be part of that solution there. Partly, it's like having, you know, higher fidelity models for how Washington works than simply, oh, they're bad at everything. Like, it is important to understand that the government has some manifest competence issues. It's also important when working with the government to understand, like, telling the government to its face, you have manifest competence issues, is not the maximally effective way to keep getting invited to the meetings. I was very religious about not criticizing anything about this Californian response effort in 2021, because we needed to be in the room where it happens.

• 52:24Speaker 01

  And you know, that was a choice made and I'm 100% happy with that choice. No, but we, we kept some relationships that we really needed. The, and I'm not saying don't criticize the government, obviously, but be, be strategic about the sort of things like play like you were attempting to win the game. And, you know, on the government side, one, like dispelling the massive UG field that surrounds software. This is going to be a part of the future, whether you like it or not, we need to get good at it. We can no longer accept incompetence of this as the like stand, a routine standard of practice in Washington. Two, you know, it is enormously to the United States credit that we have a extremely functional, extremely capable tech industry.

• 53:09Speaker 01

  Maybe we shouldn't treat it like the enemy.

• 53:13Speaker 01

  Putting that out there. Again, this is a thing the United States has done before. It like, there are laws in place, there are decades of practice. We could put a Colonel's uniform on somebody. Like, think seriously about doing that next time. Do I think we have institutionally like absorbed all the correct lessons from this?

• 53:35Speaker 01

  No. When I see like after action reports, the after actor, after action reports praise a lot of the things that people think are like very important for maintaining their political coalition. Yeah. Which were either not productive or anti-productive. Yep. And they fail to identify things that were the, you know, the true issues. And to the extent that they identify things that were the true issues, the sort of recommended action is, well, I hope someone fixes this next time. And it's no longer sufficient. Like the default case is that the ball will be dropped. And goodness, those of us who were involved in COVID-19, CA kind of dread what we call the pet signal, where God willing, there will not be another like worldwide pandemic killing millions of people as long as we live.

• 54:20Speaker 01

  If there is one, like we know what numbers to text to get the band back together.

• 54:27Speaker 01

  Society should not rely on us as Plan A.

• 54:34Speaker 01

  How did this happen?

• 54:36Dwarkesh Patel?

  I mean, the, the, the, the point about gripping a podcast, that's, that's definitely what I'm doing. But I just, I, maybe you're, um, too humble to say this yourself, but I, I do want to commend you for, there are very few people, I think, who kind of, you, you tweeted it out. There are probably other, other projects that other people could have taken up that are not taken up. In this case, you tweeted it out, you saw that there was a thing that could be done and you did it. You like quit your job and you did this full time. You even, what this, and the reason you had to dip into your kid's college fund was because somebody who had promised a donation didn't follow up on it. Right?

• 55:12Speaker 01

  So effectively every time that the, uh, we had, let's say a verbal green light with regards to money. I would advance the, uh, the companies, the charity, charities are companies, by the way, folks. I don't know if that is, that is obvious, uh, was called the shots incorporated. So I would advance, uh, call the shots, uh, the money that was, uh, sort of soft committed, uh, before the money would actually arrive in the bank. And the theory that like this accelerates our impact, we should always choose acceleration over other things, uh, like say minimizing credit risk. Uh, and then, uh, you know, some of the people who had like soft committed, uh, did not actually end up wiring money at the end of the day.

• 55:51Dwarkesh Patel?

  Yeah.

• 55:51Speaker 01

  Uh, and I was like, oh, shoot. Well, uh, you know, uh, choices now are either don't run the last payroll or do run the last payroll, uh, and, you know, do not recover the money I've advanced the company. Well, okay, uh, you know, do run the last payroll.

• 56:05Dwarkesh Patel?

  Did you end up recovering it in the end or?

• 56:07Speaker 01

  No, uh, ended up being a donation of, uh, from, uh, me personally to the effort.

• 56:12Dwarkesh Patel?

  What the fuck?

• 56:13Speaker 01

  That is, that is the least important part of the story, folks.

• 56:16Dwarkesh Patel?

  Sure, but overall, I'm just like, like, kudos isn't obviously enough to commend, uh, to convey what I mean to say here. But like, I mean, yeah, I'm, I'm glad you did that. Um, and I'm grateful, like four figure amount of lives. You just like, you, it's hard to sort of plot that on a graph and make sense of what that means, but.

• 56:34Speaker 01

  If I can be, be. Pretty explicit about it, you know, to the extent kudos are deserved to anyone, you know, Carl Yang for taking up the torch and finding like 10 people in tech industry who would jump into something at nine o'clock. Those 10 people, the the other board members, the hundreds of volunteers, the team of about 12 people who worked out of full time for very full definitions of full time, virtually ceaseless for five, six months. And there were other, you know, projects in civil society. There were many people doing this as their day jobs. Like, the American response effort is not one like small group of people anywhere. It's the collection of all these things bouncing off of each other. And I think, like, you know, I'm happy about our individual impact. I'm happy that if you, like, descriptively speaking,

• 57:19Speaker 01

  if you Googled for the vaccine at any point like vaccine near me after a certain day, you know, before a certain day, there was no answer. After that day, there was an answer. That answer came from us. A little bit satisfied that that didn't come from like people with, you know, vastly more ability to have caused that to happen much earlier. But like, the ultimate takeaway is not about this, you know, little tiny piece of the puzzle. It's how can we make the total puzzle better next time?

• 57:45Dwarkesh Patel?

  Yep. So as you can tell by now, Patio11 is somebody who loves digging into the weeds of how the financial system actually works. And so it goes to figure that he used to work for this episode's sponsor, Stripe. Stripe is how millions of businesses around the world move money and accept payments. And one of the advantages of Stripe's scale is they can invest in fractional optimizations, which are not viable for individual businesses, but add up to massive revenue and conversion increases. For example, last year, Stripe shaved 300 milliseconds off the render time for its payment links. You can think of Stripe as an entire company full of Patio11s dedicated to making sure they can figure out how to make

• 58:30Dwarkesh Patel?

  the payment rails work smoothly for you. And that's why technology companies like Amazon and OpenAI, and even traditional companies like Ford and Hertz, choose to partner with Stripe. Now, back to my conversation with former Stripe, Patrick McKenzie. Okay, let's talk about some finance. So you write, in addition to saving thousands of lives through Vaccinate CA, what you've been doing over the last year or two is writing this finance newsletter, which is very excellent, called Bits About Money. And you explore the plumbing in the financial system. My first question about this, crypto at its peak was worth $3 trillion or something like that. If you buy the crypto skeptic perspective that you have, how do we think about this number?

• 59:15Dwarkesh Patel?

  What does it represent? Was it just the redistribution of wealth from savvy people or from dupes to savvy people? Or to the extent that useful applications didn't come out as $3 trillion? What does it represent?

• 59:26Speaker 01

  So I think I have two broad perspectives on this. One, people often treat the market cap of something as like implicitly that is some sort of cost on society. And I think the true cost to society of crypto has been that anytime one engages in attempting to do productive enterprise, some actor in society has said, okay, I will stake you with some of society's resources, which these resources are rivalrous. They cannot be applied to any other things society needs in the hope that you will produce something that is worthy of being staked with us. How much have we spent on crypto, not on trading tokens around, but on building infrastructure and spending rivalrous resources that we can't get back? Whether that's GPUs or ASICs or electricity that could have gone to other things in China but went into mining?

• 1:00:10Speaker 01

  Or the time of talented and intelligent people that could have been building other software products, but was instead building crypto? That number is in the tens of billions or hundreds of billions of dollars. What do we have to show for that tens of billions or hundreds of billions of dollars? I am very crypto skeptical and I could give you an answer to that question. I think crypto fans would not like to hear it from me. So I prefer Vidalik Bhootaran's articulation of this question from 2017. He asked, at the time it was 0.5 trillion, trivial number, only $500 billion to market cap. He said, have we, and I'm paraphrasing a tweet thread, have we truly earned this number? How many of the unbanked have we actually banked?

• 1:00:52Speaker 01

  How many distributed applications have a meaningful amount of value doing something which is meaningful? And he has about six other meditations on this. And I think, you know, like.

• 1:01:04Speaker 01

  Crypto folks certainly aren't accountable to me. In some manner, you're not even accountable to Buderin, even though he's a clearly like a leading intellectual in the community. You're accountable to like producing positive value in the world. But like, what is the answer to Buderin in 2024? How many of the unbanked have we truly banked? What is the best use case for crypto right now? Once crypto has a responsive answer for that, that is sized anything like proportionate to the hundreds of billions of dollars, tens of billions or hundreds of billions of dollars of resources that we've staked crypto with. I think crypto people should feel enormously proud of that accomplishment in some future where it hypothetically arrives. And in some future where that hypothetically arrives, you have my sword. I will love your initiative.

• 1:01:49Speaker 01

  However, for the last many years, we have been saying, you can still get in early, you can still get in early, you can still get in early, because the value has not arrived yet. And so that is my like capsule summary on crypto. Fourteen years in, we've staked a group of talented people who are very good at giving a sales pitch with tens of billions or hundreds of billions of dollars. And look at what we have built. This would be a failure in any other tech company. So capital F failure. So either like radically pivot and unfail it, or maybe we should stop continuing to stake you with money.

• 1:02:32Dwarkesh Patel?

  So two potential responses from the crypto optimistic perspective. One, I have people who help me with a podcast who are around the world. Not that many, but like the couple I have around the world. I have a clip editor in Argentina. I have a shorts editor in Sri Lanka. And all of these people have asked me, I haven't prompted them. I asked them, how should I pay you? And they say USDC. And so maybe there it wouldn't be that much harder for them to set up a wise account. But I think it's notable that all of them prefer the just, how should I, how should I get paid? Their first answer is a stablecoin.

• 1:03:13Speaker 01

  Absolutely, that is evidence. And you know, like some tech savvy people have a good payment rail. And well, they have a payment rail that they did not have access to 15 years ago. But like at the cost of tens or hundreds of billions of dollars, you know, like counterfactually, if one had thought like, okay, we really want to work on debt payment rail specifically, another way one could hypothetically have, you know, deployed $10 billion is on like the best funded lobbying campaign in history in the United States to work on like AML and KYC regulation to allow more easy transfers of money worldwide.

• 1:03:46Dwarkesh Patel?

  But why doesn't that have to be compared against the best possible counterfactual use case? It's a sins of commission versus omission again, where it's like, on the margin, it made things better.

• 1:03:54Speaker 01

  Don't judge it by like hypothetical worlds, just like keep in, keep in mind that hypothetical worlds might exist. Judge it by like the actual realized utility at the moment relative to the amount of resources consumed.

• 1:04:03Dwarkesh Patel?

  The second point is, if you look at, for example, the dot com bubble, literally close to a trillion dollars were invested in laying out the fiber and the cable for this artifact that now you consider as the most valuable thing that humanity has built. And at the time, reasonably people, a lot of the companies that built this went boss. There was a bubble like dynamic where many of the investors who spent the capital to build out this infrastructure weren't paid back, didn't see immediate use cases from what they'd built. And they had just, the bubble had sort of served as a shelling point to then in the future, get things rolling. And that was hundreds of billions of dollars, a trillion dollars, tens of billions of dollars. If in the future, something cool comes out of it and it's a useful use case, that's probably worth it, right?

• 1:04:44Speaker 01

  Cool. At what point do we get to say that didn't happen?

• 1:04:50Dwarkesh Patel?

  A trillion dollars?

• 1:04:51Speaker 01

  Like at what date in the future do we, do we judge like, someone has been right or someone has been not with respect to, we have created like, you know, people in crypto have very confidently stated in various places that this is the next iteration of the internet. This is, you know, will revolutionize the, the, the world, not just how payments are conducted, but it will be like a fundamentally new computing architecture. Okay. At what day do we compare notes on whether that claim was accurate or not?

• 1:05:17Dwarkesh Patel?

  This 2030 seem like a reasonable year or too far?

• 1:05:20Speaker 01

  It seems like reasonable to me. Can I make a prediction of what is said in 2030? You can still be early. Crypto has created like huge amounts of things, but it's not achieved anywhere near its true potential. Please invest in our new crypto startup and like let's check back in 2030, folks like, please, you know, tweet me if I'm wrong in 2030. I will happily eat crow. I want to eat crow. Like crypto people are like, how couldn't you be interested in programmable money? I'm like, I'm interested in programmable money. Obviously money is programmable money. Like my friends who are trying to sell me on this since like 2010 weren't wrong. This should like totally smash my interests based on what I usually find like intellectually edifying.

• 1:06:03Speaker 01

  And I don't not find crypto intellectually edifying. I actually think there are some interesting things that have come out of the movement. But like I find a, you know, computer built in Minecraft out of redstone to be intellectually edifying. And it's a wonderful like educational device for people who don't understand how a CPU works.

• 1:06:24Speaker 01

  And I'm not proposing to use the like Mindstone, sorry, redstone emulated computer in Minecraft to be like the next computational infrastructure for the world. Because that like fairly obviously will not work very well.

• 1:06:38Dwarkesh Patel?

  So another answer of what the value here is, listen, we want some sort of hedge against. And I think this is actually kind of reasonable argument. I actually don't buy the capabilities that have been unlocked by crypto, but I do buy the argument that we want some kind of hedge against the government going crazy and KYC AML leading to state surveillance and all the compliance departments in the banks just like start seeing if you've been to political protest and de-banking you. And it may seem unlikely, but it's good to have this alternative rail, which keeps the system honest, given that there's an alternative. And if things go off the rails, this is a worthwhile investment, a couple of times.

• 1:07:20Dwarkesh Patel?

  I mean, society as a whole can't even count that low in terms of the other resources that it spends. So it's a good hedge against that kind of outcome.

• 1:07:28Speaker 01

  So I'm actually much more sympathetic to crypto people in this folks than I expect most people who have a traditional financial background to be. I think it is descriptively accurate that the banking system and all companies which are, you know, necessarily tightly tied to the banking system. Which might be all companies. Well, let's come with a central example so that's I can set first. Are a policy arm of the government. And I think, you know, whether people articulate that in exactly those words or not varies a little bit, but when you have your mandatory compliance training, you'll be told in no uncertain terms that you are a policy arm of the government. And I feel for crypto folks that say that

• 1:08:10Speaker 01

  things like this feels like, you know, warrantless search and seizures of people's information in like, very undirected dragnet fashion. And some somewhat complicated thoughts about this. So the modern edifice of know your customer KYC and AML anti-money laundering dates back to the BSA Bank Secrecy Act in the United States, which was late 1970s, early 1980s. And at the time, the federal government in the United States was like strictly rate limited in how much attention it could give to KYC and AML. And so maybe because we thought we had very limited state capacity at the time, like the government would make rational decisions and maybe it will go after like 10 or 100 enormous white

• 1:08:51Speaker 01

  collar crooks and drug trafficking cartels a year and not surveil down to literally everyone in society. But the regulations we wrote and have continued, right, and have continued tightening on over the years, do effectively ask for like transactional level surveillance of every transaction that goes through a bank. And so it is the actual practice, and this is not a conspiracy theory, I'm making nothing up, folks, this is like acknowledged that the actual practice in banks is that they have descriptively about as many intelligence analysts as the American intelligence community has, who get this scrolling feed of alerts that are generated by automated systems. And for each alert, they either go, don't worry, don't worry, don't worry, don't worry, don't worry, don't

• 1:09:35Speaker 01

  worry, don't worry, don't worry, millions of these alerts every day. And then for some tiny percentage, they say, oh, dear. This one might actually have been a problem. I'm going to write a two-page, two to four-page memo and file it with the Financial Crimes Enforcement Network. And in all probability, no one is ever actually going to read that memo. But we have like an intelligence community-sized operation running in banks to write memos that no one ever reads.

• 1:09:59Dwarkesh Patel?

  Right.

• 1:09:59Speaker 01

  Because some tiny portion of those memos will be useful to law enforcement in the future. And if you had explained that trade in like a presidential debate in the 1980s, I find it extremely unlikely that any part of the American polity would say, "Yeah, yeah, I want to buy that. Could we perhaps spend tens of billions of dollars on it?" But we did that. And so to the extent I'm like extremely copacetic with crypto folks on this point, A, like this thing factually exists in the world, I agree with you that it does. B, in an ideal world, I don't think this thing would exist. I think, I agree with you, there are very real like, you know, privacy fears.

• 1:10:35Speaker 01

  And then however, crypto has this habit and, you know, people who are good at sales have various sales pitches that they give to various people and crypto will, actors within the crypto ecosystem will talk in excellent game about privacy as long as number goes up. And when you say, "Ah, but you can choose between like being tied into the banking system, which is necessary for number go up, or you can choose privacy," they will say, "Excellent, I choose number go up." And so-

• 1:11:05Dwarkesh Patel?

  But there's different protocols. You can use the ones that allow privacy if you care more about privacy, right?

• 1:11:12Speaker 01

  Yeah, and descriptively, that is a very tiny portion of crypto.

• 1:11:17Dwarkesh Patel?

  Also, to riff on what you were saying about the analysts, that number as many as would be an intelligence agency, these apparatchiks who are connected to the government's policy just analyzing each transaction. As soon as the government gets the competence to run an LLM across each of these millions of queries-

• 1:11:37Speaker 01

  Right. This is like a legitimate worry because as we-

• 1:11:42Speaker 01

  You know, this is funny in the echoes of like, we have extremely low state capacity for this thing that we didn't think was important, which was, you know, successfully administering vaccines. But we do have extremely high state capacity with regards to running the security state. And if they successfully manage to like, get their technological dux and over in order, which there are pluses and minuses there, but they have like, built some things that are extremely impressive technologically, and then just run it on this data set that we've possibly been been producing, the sort of like, implicit ongoing invasion of privacy is much worse than we kind of baked into the system in 1980, when it would have been people going down to archives to look at things in microfiche to try to do this.

• 1:12:24Dwarkesh Patel?

  And I mean, I'm not even necessarily making a point of crypto here, but I think it's worth meditating on the fact that the default path for this technology is that a very smart LLM is going to be looking at every single transaction that is electronically, AKA every single transaction ever. And it's intelligent enough to sort of understand the implications, how it connects to your other transactions, and what's the broader activity you're doing here.

• 1:12:48Speaker 01

  Yep.

• 1:12:49Dwarkesh Patel?

  And maybe this is just a broader point about.

• 1:12:50Speaker 01

  Can we step back from crypto and finance for a moment?

• 1:12:52Dwarkesh Patel?

  Sure.

• 1:12:53Speaker 01

  I think this is one of the least understood things about the tech industry, where we have this, this like, societal level question that is not being addressed directly, but it's being addressed by misunderstood proxy questions on taking as written that the finance industry is a branch of government in a meaningful sense. Should the tech industry also be a branch of government? And we don't ask that question directly. We have asked instead, things like, should the tech industry be responsible for minimizing the spread of misinformation, et cetera, et cetera. And there was the injunction issued in a court case last year on the 4th of July, which I find oddly aesthetically motivating.

• 1:13:35Speaker 01

  The court case is Missouri et al versus Biden et al. But the argument made in the court case, which the judge accepted, which is extremely.

• 1:13:47Speaker 01

  Well-supported by the record in front of him is that various actors within the United States government puppeted the tech companies and used them as cats' paws to do, frankly, shocking violations of constitutionally protected freedoms like the freedom of speech. And that there were like, not on the level of, we've built this, you know, unaccountable, hard-to-inspect system of LLMs and heuristics. And we started like, turning off a lot of people's feeds on Facebook, but like, no, like, there was an individual person in the White House who was sending out emails like, when are you going to address me on this tweet, guys? We can't have things like this anymore, etc., etc. Again, you know, a feature of

• 1:14:29Speaker 01

  the United States, we are very good about like, keeping records and transparency and having a functioning legal system. And the record before the court is like, I was following along as this was happening. And what was happening was much worse than I understood to be happening. An example of something like, as we were growing up as children, would you ever think that the United States federal government would tell, I believe it was the state of Missouri, hey, you have town halls where like, citizens can come in and speak their mind and advocate for their policy preferences. And you probably have a civics class and talk about like, the First Amendment and things. Yeah, someone said something we don't like at a particular town hall. Take down the recording from YouTube. That

• 1:15:12Speaker 01

  happened. That is a violation of the Constitution of the United States. That is against everything in the traditions and laws and culture of the United States. That is outrageous. And yet it happened. And we have not repudiated the notion of using tech as cats' paws, or using, in some cases, this is like, literally written in the decision, by the way, which I would urge everyone to read. There was an individual and a non-governmental organization, which was collaborating with the governmental organizations in doing this, which said, to get around, I'm not quoting exactly, to get around legal uncertainty, comma, including

• 1:15:55Speaker 01

  very real First Amendment concerns, comma, in our ability to do this, rather than doing it in the government directly, we are outsourcing it to a bunch of college students who we have hired under the auspices of this program. Like, what? Like, one, just as a dangerous professional here, you violated the

• 1:16:16Speaker 01

  The character from the Wire, Stringer Bell. Stringer Bell's dictum on the wisdom of taking notes on a criminal conspiracy. But you literally wrote that down in an email. The outrageous part is not that you wrote that down in an email. The outrageous part is you, like, with full knowledge of it, engaged in something that is outrageously unconstitutional, immoral, illegal, and evil

• 1:16:39Speaker 01

  to the applause of people in your social circle. And everyone involved in the story thinks that they're the good guy in it.

• 1:16:47Speaker 01

  If you write that email, you are not the good guy in the story.

• 1:16:51Dwarkesh Patel?

  I, okay, so on that, by the way, so what is your sense of what the judicial end result of deliberations on this will be?

• 1:17:01Speaker 01

  I think there will be a limited hangout and walk back of some particular things. And do I predict that? And probably, you know, there does exist an injunction. I predict that that continues to happen in the future.

• 1:17:15Speaker 01

  What do I know? I'm just a software guy, but do, like, people want to achieve power? The tech industry descriptively has power because it is good at achieving results in the physical world.

• 1:17:28Speaker 01

  This is certainly not going to be the last time that someone desiring power thinks like, okay, can I force you to give me the power that you have accumulated? And like, that is, you know, ultimately, like, this is fundamentally a political decision about how we construct our democracy, and we should make good decisions about that.

• 1:17:46Dwarkesh Patel?

  Well, I mean, maybe that's the crux here, which is that through the story you illustrated of the vaccinated CIA and the lack of accountability that showed in our institutions, the idea that you're going to go back to Congress and get them to pass some law that says, oh, we're KYC AML, we realize that without alums, it's going to be a bad deal with regards to privacy, we're going to roll that back. We don't like that the collusion between tech and whoever's in power and it being able to dictate what can get taken off the platform. And that, we think about that, that's free speech, we're going to pass laws and take that back. There's no sense in which there is, um, society comes to a consensus and here's the privacy concerns we have, here's the free speech concerns.

• 1:18:25Dwarkesh Patel?

  We have. So that at least one argument goes you the solution has to be that you just go off a rail. You start a new rails for these kinds of things that cannot be constrained in this way. And it's not a matter of just changing the KYC law or that just not that's implausible, given the the manifest. So declining state capacity we've talked about.

• 1:18:44Speaker 01

  Yeah, I don't accept that. That is the only thing possible for us. I don't accept that the United States is incapable of doing nice things. We can't accept that. We have to be optimistic about the future. Otherwise, what are we doing here? And, you know, in the tech industry, like, we know it is not like a physical law of reality or of large institutions that one cannot make systems that work. Making systems that work is the job. We have a few existence proofs. Like, we should increase our engagement with government. And, you know, like, hey, state capacity, we can help you build some of that stuff. Also, you know, Constitution of the United States is a document. We feel like kind of attached to that document.

• 1:19:27Speaker 01

  We understand, like, again, incentives rule everything around us. Tech industry was in early 2021. Very concerned about being told in no uncertain way by people in power. If you embarrass us, we'll end you. And the one thing in the in the record, judicial record of this case. Is that the White House routinely, White House and other government actors routinely overreached and asked the tech companies, we would like you to censor this and this and this and this. And the the tech company said no in a bunch of cases. And so like. Continuing to negotiate for the right outcome rather than the one that people in power merely want is important.

• 1:20:12Speaker 01

  There are some things that will feel unfortunate and maybe a little bit outside of the. Like our true sweet spot of what we would want to be doing on Tuesday in the tech industry where like maybe we have to ratchet up the amount of. Public policy advocacy that we do lobbying is a dirty word in the tech industry. It probably shouldn't be. Maybe we, you know, not just lobbying, but like.

• 1:20:36Speaker 01

  When the do not embarrass us order came down and we're getting very quiet about the fact of feeling constrained by this, maybe we should have spoken out more and spoken more boldly about it.

• 1:20:48Dwarkesh Patel?

  Yeah.

• 1:20:48Speaker 01

  Maybe when it was like the routine case that the White House was, you know, telling Facebook, Twitter, et cetera, et cetera. Everyone knows the names. Companies like on a tweet by tweet, communication by communication basis, and also with regards to broad rules that affected the entirety of the citizenry of the United States and residents of the United States and also everyone else in the world, because these are the operating systems in the world. Like giving direct orders on, there's a certain kind of free speech, rather, there's a certain kind of speech act which we find vexatious and we would like you to stop that everywhere. Like, very plausibly, you should get on the nightly news and say, I received the following

• 1:21:29Speaker 01

  email from the White House that says we should stop this everywhere. Like, if you point a gun at me, I will comply with this at the point of a gun. That is what it will take.

• 1:21:40Dwarkesh Patel?

  But this almost requires civil disobedience in the sense of, if you're right about the earlier statement that in 2021, there are going to be serious political repercussions on the tech companies.

• 1:21:48Speaker 01

  Yep.

• 1:21:49Dwarkesh Patel?

  So, okay, so say that that's right. And then they publish this email, like, here's what the White House just sent me, they take on this tweet. And now Twitter's market cap has just collapsed because people realize the political implications of what Jack Dorsey just got up and said at the time. So then the solution is that you need, tech companies to basically sacrifice their capacity to do business in order to, I mean, maybe that is a solution, but like, that's not a story about like optimism about the ability of the US government to solve problems this way.

• 1:22:22Speaker 01

  You need to have a risk tolerance, right? Like, we, every business everywhere, including the financial industry, including the tech industry, is like balancing various risks. And the risk tolerance was like poorly calibrated. The, you know, one can achieve results in the world by doing things like embarrassing government officials.

• 1:22:41Dwarkesh Patel?

  Yeah.

• 1:22:41Speaker 01

  And, you know, like embarrassing a person in a position of Authority is not a zero risk behavior. It is relatively low risk in the United States relative to other places. That was like extremely important for vaccine A C A. People thought at the at the beginning, are we going to get in trouble for, you know, publishing true information about vaccine availability that will embarrass the state of California? And I said, I have a very high confidence that no matter what we do vis a vis the state of California, that you cannot get in serious trouble in the United States for saying true things. You know, the the first amendment exists. We have like backstopping infrastructure infrastructure here. And if push comes to shove, we will shove back and we will win.

• 1:23:19Dwarkesh Patel?

  Yep.

• 1:23:19Speaker 01

  And like, this is just me as a guy who like took the same civics course that every that that everyone took and does not have like a huge amount of resources relative to say like the entire tech industry.

• 1:23:32Dwarkesh Patel?

  Yep.

• 1:23:32Speaker 01

  Like, maybe we, you know, need to have a certain amount of intestinal fortitude on like a, okay. You know, you've asked us to do something. You've you've threatened us with taking away all the wonderful toys and the great business models that make this an extremely lucrative area to work in. And to sacrifice a value that is very important for us to continue to do that. No, we're going to fight you on this one. And and, you know, the calm is trained part of me is like, don't use the word fight. Is we are going to collaborate with stakeholders across civil society to to achieve an optimal outcome balancing the multiple disparate and legitimate interests of various arms of the government and civil society and blah, blah, blah, blah, blah.

• 1:24:18Speaker 01

  Sometimes that requires fighting. We should fight when it does.

• 1:24:21Dwarkesh Patel?

  Yep, yeah. On Tyler's podcast, you said something like, America doesn't have the will to have nice things and Japan does. But if you think about

• 1:24:29Speaker 01

  In some ways, yes.

• 1:24:30Dwarkesh Patel?

  If you think about your own essay about working as a salaryman, you're working 70 hour weeks and you're killing yourself to get that marginal adornment on the products you're making. Isn't it more efficient? Isn't it better that we have a system where we put in 20% of the work to get 80% of the results? We spend the rest of the effort on, I don't know, expanding the production possibilities frontier. And it's it's good that we don't have the will to have nice things. We just get it done.

• 1:24:56Speaker 01

  I don't think these trade off against each other through relevant margins. I, you know, nothing about culture is monocausational. Also, I don't think culture is a

• 1:25:08Speaker 01

  Sufficient explanation for some of the differences that are achieved in the United States versus the Japan, for example. There's a great book, Making Common Sense of Japan, by a person whose name I'm blanking out at the moment. An argument he makes in it, persuasively and at length, which I don't think is 100% true, but is more true than most people in Well Informed on either side of the Pacific, believe, is that when people say, they do this because it is Japanese culture. What they're often saying is, you know, I usually have a model for why people do things driven by incentives. And I understand this incentive, this incentive, this incentive. And then there's some error term in this equation that I don't understand. I'm going to call that error term culture. I think culture is the real thing in the world, to be clear. But I often think that we that we reach for

• 1:25:53Speaker 01

  that error term far faster than we should. So as my minor observation about culture, with respect to, you know, there are places and pockets of the United States that have the will to have nice things. And often they discover, sometimes surprisingly, that the only thing you need to to do nice things at the relevant margin without spending more money, without having people like kill themselves over 90 hour weeks for the entirety of the career. You can just choose to have nice things. Let's choose to have nice things. Let's not be embarrassed about choosing to have nice things.

• 1:26:25Dwarkesh Patel?

  So you understand all this financial plumbing. If you were an investigative reporter, what is the thing you're looking at that the average reporter at some newspaper wouldn't know to look at to investigate a person or a company or a government institution?

• 1:26:38Speaker 01

  I have an enthusiasm for the minutia of banking procedure in a way that few people have enthusiasm for the minutia. Sometimes banking procedure causes like physically observable facts to emanate into the world. And if you know that those facts are going to emanate, then like you can have a claim made about a past state of the world. Like I did this thing, or I did not do this thing. And that claim will, if it is true, cause metadata in other places, and you can look for the metadata. This is actually how a lot of frauds are discovered, because the fraud is fun, fun, like, basically, the definition of fraud is you're telling someone a story. The story alleges a fact about the world. The story is not true, and you're using the story to extract value from them.

• 1:27:21Speaker 01

  Most frauds will allege facts about the physical world. As the physical world gets more and more mediated by computers, as it gets increasingly sharded between different institutions, there will often be institutions who are not under the control of the fraudster, who have information available to them, which will very dispositively answer the question of whether the alleged fact happened or not. And as a reporter, understanding how institutions and society interact with each other and the physical reality of, okay, if this thing happens as alleged, then these papers will be filed, then these API calls will be made, et cetera, et cetera.

• 1:28:04Speaker 01

  And then, like, doing the core job of reporting and finding people at the institutions who will tell you the truth. As an example of this, Mt. Gox many years ago was insolvent, and that fact was widely rumored but not reported, presumably because the global financial news industry didn't find it convenient to have someone call into the Japanese banking system and ask the right questions in the right way. The CEO of Mt. Gox alleged on Bitcoin Talk that the reason that they were not able to make outgoing wires was because they had caused a distributed denial-of-service attack

• 1:28:47Speaker 01

  on their bank's ability to send foreign currency wires. That bank was Mizuho. Mizuho was the second-largest bank in Japan. Many people at, say, well-regarded financial reporting institutions in New York City find it incredibly exotic and difficult, and maybe, in some ways, kind of unknowable, to extract facts from Mizuho, which, there are addresses, FedEx will deliver letters to them, they have phone lines, we also have fax machines, we love our fax machines. Like, could you send a fax to anybody at Mizuho and say, "Hey, quick question, are you sending, like, wires today?"

• 1:29:29Speaker 01

  And Mizuho would, like, receive the fax, get it kind of physically, and say, "In response to your fax earlier, yes, we are still sending wires, because we are the second-largest bank in Japan. Do you have any other easy-to-answer questions for us?" You know, like, financial reporting, drop the ball on just asking, like, individuals that misohose simple questions about reality. Maybe you should do that next time. And, like, to the extent that you understand, like, okay, like, one, understand that the CEO is giving out gold on Bitcoin talk under his own name, where these are, like, obviously reportable statements, the statements and alleged facts about material reality, and maybe, like, chase down the truth value of that. That's hard. It's so much easier to just, like,

• 1:30:12Speaker 01

  repeat what he says on Twitter and say, as said by this person on Twitter, and then, like, quote the Bitcoin price feed. But reporting is hard. Like, be good at it.

• 1:30:21Dwarkesh Patel?

  Why aren't short sellers doing this? Because they should have an economic incentive to dig to the bottom of this, right? And so we should have a deluge of financial information from short sellers who called the banks and traced through the API calls.

• 1:30:32Speaker 01

  Yeah, that is an ongoing, interesting question. And I think short sellers provide an enormous service for the world in, like, being essentially society's best solution to financial fraud. And, yep, they fail to detect lots of them. Like, they're, you know, and not just throwing short sellers or reporters or anybody else under the bus. I failed to, you know, detect SBF's various craziness despite having, like, sufficient information available to me as a well-read person on the internet to have detected that. Like, where were the freaking wallets? Everybody, like, assumed someone else was looking at it, essentially. So that's one reason. Like, short sellers often assume, like, okay,

• 1:31:14Speaker 01

  you know, I need to find a, like, first get put on the path of something and have a differentiated point of view. And then, like, another issue for short sellers is you have to find an instrument, and you have to find another side of the trade to successfully do that. And there was, without being expert on Bitcoin micro mechanics, it was, like, difficult in size to make the trade. Mt. Cox is insolvent right now, other than, like, pull money out of Mt. Cox, which people were definitely trying to do. I got a number of... Interesting business proposals in the 2012-ish timeframe from people who said, "Hey, you're an American and you clearly understand like international banking and you

• 1:31:55Speaker 01

  live in Japan. Could I like cause you to get some yen and have you wire that to me in America and you can take a percentage?" And I said, "I really don't like where this is going." And they said, "Well, there's this company and I've got some money over there and they can send yen, but they can't send dollars." And I'm like, "Is that because they don't actually have the money?" And they're like, "No, no, no. It's a Japanese banking thing." I'm like, "No, it's not. You know, Japanese banks are very good at sending wires." And they said, "No, no, no. It's really this thing. This is totally clean." I'm like, "You would not be having this conversation with me if it was totally clean. You need a money launderer. I will not be your money launderer."

• 1:32:30Dwarkesh Patel?

  How hard is money laundering? If, on one hand, you mentioned earlier the state capacity that banks have where every transaction is analyzed and flagged, then if it's notable enough, they write a report about it. How sophisticated does the cartel need to be in order to move around seven-figure amounts of money, let's say?

• 1:32:50Speaker 01

  So the definition of money laundering is like extremely stretchy and like taffy. And there's a spectrum of people, much like there's a spectrum of sophistication in financial fraud, there's a spectrum of sophistication in money laundering. So if you want to look at probably the most sophisticated money launderer in history, he's currently a guest of the US government, but wherever SPF is staying.

• 1:33:13Dwarkesh Patel?

  He was sophisticated?

• 1:33:14Speaker 01

  Oh, this is a disagreement I have with a lot of people. SPF was extremely sophisticated. Like a person, not just SPF, I think people like identify him uniquely, right? They identify the the inner circle uniquely as being a fault here. There was an entire power structure there, which was extremely adept at figuring out how power worked in the United States and exercising it towards their own hands. And then it blew up. But until then, goodness, like, you know,

• 1:33:46Speaker 01

  They decided we need regulatory licenses. They're called money transmission licenses in the United States, and those are done on a state by state basis. They got 50 regulators to sign off on it, et cetera, et cetera. Like, there are many objective indicia of them being very good at their jobs until they lost all the money.

• 1:34:01Dwarkesh Patel?

  So, but it was more about politically getting people to look the other way rather than we figured out how to structure the wire in a way that won't get flagged?

• 1:34:09Speaker 01

  It's not merely a matter of getting them to look the other way. But if you go back to the original SBF interviews where he's telling the founding myth of Alameda, he says like very loudly, you know, "The reason why I got this opportunity to do Bitcoin arbitrage between Japan and the United States is because I was able to do something that the rest of the world wasn't. I was able to..." He doesn't say this in as many words, I will say it, "suborned a Japanese bank because you need that as like one of the pieces to run this arb, and then they pulled tens of billions of dollars out of this." I don't think people like really listened to what he was saying there. And he literally says in the interview on Bloomberg, "If I was a compliance person, this would look like the sketchiest thing in the world. This looks like it's obviously money laundering." Because it is money laundering.

• 1:34:54Speaker 01

  And then, interestingly, Michael Lewis retells this story, and he locates the story in South Korea rather than in Japan. And some people who were involved say, "We tried it in South Korea and Japan," which people would like pull on more threads there. Like, there's still lots of that story that we don't know. But anyhow, how sophisticated you have to be to launder tens of billions of dollars around? SBF did that. So, like, that is a bar for sophistication. He was eventually caught. He was not caught for laundering tens of billions of dollars around. He wasn't even under suspicion for laundering tens of billions of dollars around. SBF was Tether's banker. Alameda Research, you know, one of the parts of like the corporate shell game that they were playing, moved tens of billions of dollars of cash around the financial system, largely

• 1:35:35Speaker 01

  under like full color of law, on behalf of Tether, to move it from wherever Tether had it, goodness knows, or wherever their buying customers had it, to, I think at the moment it's mostly at Cantor Fitzgerald. Some shoe has to eventually drop there. I will eat a lot of popcorn when it does, but be that as it may. There's many other ways to launder money. You can like do things like, say, I...

• 1:36:03Speaker 01

  I establish a shell corporation and I buy a piece of real estate in New York City and then I rent that real estate out to people and I collect a stream of rents from that. And that that money looks clean because there is an executive business. It's my shell corporation that is renting this real estate that really exists to a totally legitimate person, this money is clean. And the money that I like put into the system to buy to buy this on behalf of the shell corporation, I'm just gonna like wire it to a lawyer and the lawyer's gonna answer any question from the bank with, I don't know where it came from, I don't have to tell you, I'm a lawyer, it's a real estate transaction, what do you want from me? In one sense, that's money laundering. If the like original, you know, money was the proceeds of crime. In another sense, that's how every real estate transaction goes down at those scales.

• 1:36:48Speaker 01

  And so like often like skill facility at money laundering is one facility at operating in the economy, plus, you know, willingness to do that to hide the proceeds of some other crime. And I think I would be really good at money laundering. I'm glad I haven't done it professionally, but that it's fascinating intellectually. Previous communications departments I've worked at probably would like explicitly anti- endorse that sense. What can one do?

• 1:37:16Dwarkesh Patel?

  We are originally confident that you're not laundering money.

• 1:37:19Speaker 01

  I would be much wealthier if I was.

• 1:37:22Dwarkesh Patel?

  Well, a separate topic, but when you look, you emphasize that people tend to undercharge for the products they serve. If you have identified somebody who actually does charge for products where they can get away with, what psychologically do they have that the rest of us don't?

• 1:37:38Speaker 01

  So I think interestingly, here is one of those places where culture is not necessarily merely their term, but is actually descriptive in some ways. Without pointing fingers at particular examples because it gets contentious, there are like some cultures in the world that like institutionally have adopted more of a

• 1:37:59Speaker 01

  How do you put it? Pro-capitalist, pro-mer- mercantilist, et cetera, like, less of an ingrained skepticism regarding, like, earning money and accumulating resources as a goal. And there's other cultures which have an extreme ingrained skepticism about earning money and accumulating resources as a plausible goal. And those cultures generate people who have very different negotiation strategies. And when you, like, impact people with different negotiation strategies against, like, the reality of a well-operated, I don't know, Google, for example, they arrive at very different numbers.

• 1:38:32Speaker 01

  What's the, is it Ime Choua who wrote Market-Dominant Minorities, a piece about, a book about that subject, et cetera? Like, one of the, one of the things in that is that, you know, like, all people are equal in the eyes of God and hopefully in the eyes of the law, but, like, not all cultures, like, physically make the same decisions with regards to the same, the same facts on the ground, and that causes some disparate outcomes. And so that, that is one tiny part of that thesis, which I don't, I've read a lot of books, I don't necessarily endorse every word in every book that I read, but I think there is something to that.

• 1:39:09Speaker 01

  I think another thing is that, you know, there's a certain personality type cluster, I guess you would say, of people that got into tech, and many of us, it is over-advanced, that's the tech industry, and the pathologies of the tech industry are caused by the nerd versus jack distinction in American high schools. Heavily over-advanced. Amount of truth to that? Not zero. And, like, many of us were, you know, we came up, we feel we were largely getting beaten down by the system around us, we were not worthy, yada, yada, yada, and then we have, carry those issues into our professional lives, and some people work their way out of it quickly, some do not.

• 1:39:53Speaker 01

  Some people work in, you know, they, for class and et cetera reasons, go to institutions like Stanford and hear from, I don't know who you hear things from if you go to Stanford, because I certainly didn't go there, but, I don't know, an elder fraternity brother that says, "Yo, bro, this is the way the world works. You really got to negotiate when you get in the offer with, when you get in your discussion with Google. I've talked to so many brothers and they don't negotiate, and so the ones that do make a whole lot more money." You're like, "Wow, good for that." Most people don't, like, get that talk from their elder fraternity brother, because they do not go to Stanford or don't have an elder fraternity brother. And so, like, Until vaccinate, the most important thing I'd probably done professionally was writing a piece on the internet about salary negotiation that gets subtitled "Make More Money and Be

• 1:40:34Speaker 01

  More Valued," which is just an exhortation for descriptively mostly young people who had some of the issues I had when I was young and growing up, like, hey, you're allowed to negotiate. That's not a moral failing. You have no less right to the marginal dollar than a company has to the marginal dollar. Go get it. And then you can put it towards all sorts of interesting ends. 500,000 people a year read that piece, and it's now 12-plus years old. I keep a folder in Gmail about who has written and said, "I got $25,000 to $100,000 per year more as a result of reading the piece." I used to keep a spreadsheet. I stopped keeping the spreadsheet after it ticked into the eight figures. I'm like,

• 1:41:18Speaker 01

  keeping the spreadsheet was just an ongoing source of stress for me.

• 1:41:20Dwarkesh Patel?

  Eight figures?

• 1:41:21Speaker 01

  Yeah, per year. You would assume that 500,000 people read it per year. Some take the advice. Most who take the advice probably don't write me to say, "Hey, I took the advice. Thank you." And maybe I miss some emails, yada, yada. So the true economic impact is probably larger than that. There are probably people who have the inverse of that spreadsheet, where it's like, darn it, we got quoted a penny eleven against us again. Because we have these numbers, and there's only a few firms in the tech industry that do scaling, scaled hiring. Anyhow.

• 1:41:54Dwarkesh Patel?

  Okay. There's less people today who are in their 20s who have prominent software businesses than maybe 10 or 20 years ago, having been in the software industry less than, I don't know when you started exactly. Is your sense that this is because the nature of software businesses has changed? Or is it because the 20-year-olds today are just less good?

• 1:42:19Speaker 01

  I've met many young, intelligent people over the course of 20 years in the software industry, and young, intelligent people continue being young and talented. I think one thing that is partially explanatory is that when there's a new frontier that opens up, the existing incumbents, both in terms of Institutions and in terms of people with, you know, deep professional networks and personal resources and similar like do not immediately grab all the value in that new thing. It's Terra Nova. And so to the extent that tech is no longer Terra Nova, I think you would expect less people who are less resourced, who are younger, et cetera, to to rise to the heights of prominence in tech. To be clear, I'm not at the heights of prominence in tech. And when I ran companies, I was not running companies like some other guests of this podcast

• 1:43:02Speaker 01

  run companies. It was bingo card creator. I was making bingo cards for elementary school teachers while living next to a rice paddy in central Japan. But that's kind of like my dominant hypothesis. There are, you know, some things that are affecting the youth that I think are negative. I think some products that the tech industry has created do not maximize for the happiness or productivity of people that consume those products, TikTok, et cetera. But, you know, I continue to be bullish about the youth and I have two children who, knock on wood, will accomplish things in their lives. And so I'm intrinsically skeptical about, oh, the kids these days, they're just bad kids.

• 1:43:42Dwarkesh Patel?

  How much do you worry about video games as a method, as a sort of wireheading that somebody like you, but 20, 30 years ago, or 20, sorry, now has access to Factorio and will just wirehead themselves to that instead of making a really cool software product? How much should we see this in the productivity numbers?

• 1:44:03Speaker 01

  Oh, goodness. I don't know about the productivity numbers. Generally, I do know that Steam keeps a counter of like how much I am playing video games in a given time. And the knock on wood, I've accomplished a few things in my career. And also, like against that, what was my Steam counter up to? So Steam didn't include World of Warcraft. World of Warcraft was at least 1,000 hours for me. Factorio recently was 750. And then if you like some over 20 years, I've probably played video games for

• 1:44:34Speaker 01

  4,000, 6,000 hours. And so that's, you know, two to three years of professional effort if one thinks that it trades off directly with professional effort.

• 1:44:43Dwarkesh Patel?

  But do you? Because if you then include every single young guy who's a nerd and often they, you know, how much we worry that there are a bunch of their productive time is going to video games instead of making the next offer business?

• 1:44:56Speaker 01

  I worry at least about a little bit about it for myself. One of my, so I recently started working for an executive assistant and one of the first suggestions that he gave was, "Hey, Patrick, will you friend me on Steam so that I can see how much you're playing any given week? And so if you're like not making your priorities happen, we can have an honest discussion about priorities."

• 1:45:15Dwarkesh Patel?

  You've got a very-

• 1:45:15Speaker 01

  That's really good advice, given that I spent far too much time rat-holing on Factorio relative to my true preferences.

• 1:45:21Dwarkesh Patel?

  You've got a really confident DA.

• 1:45:25Speaker 01

  Go, Sammy, go.

• 1:45:28Dwarkesh Patel?

  Hey, boss, can we have a honest conversation?

• 1:45:31Speaker 01

  I don't know if I'm inserting those words into his mouth, but the suggestion was genuinely his and he heard, you know, on the one hand, Factorio, wonderful game. I actually think Factorio matters far more to the world than most video games do. That's an entirely different piece that I'm trying to write at the moment. Be that as it may.

• 1:45:46Dwarkesh Patel?

  Have you read Bern's piece on this? The Factorio mindset?

• 1:45:48Speaker 01

  Yes. I love many things that Bern writes. I think I luckily have a differentiated point of view on this one, so I will hope to get it out to the internet someday. But,

• 1:45:58Speaker 01

  you know, on the one hand, I loved it. I think Factorio, Space Exploration Mod specifically, was the best video game I ever played. And yet I spent 750 hours on that over the course of a year. And I was, you know, on sabbatical and recharging from six very hard-charging years at Stripe and also running the United States for a national location information effort. But, you know, there's a question of like, at relevant margins, are you maximizing for your true values? And I was like, oh, a little worried about that. And so now my EA checks on me. Do I worry about it for other people?

• 1:46:32Speaker 01

  I will say that when I was young and a World of Warcraft raid guild leader, who spent 1,000 hours on that, that it was a substitute advancement ladder for me. The actual job I was working, Sailor Man in Central Japan, gave me no scope of control over things. And I thought, if I was a startup CEO, I could make decisions right now. I could build something awesome, but I don't have that ability. And I don't see myself as being the kind of person who could become a startup CEO. So if I can't be satisfied in my nine to five, in terms of making things happen in the world, at the very least, I can make sure we kill the dragon in two hours. Don't stand in the fire. Come on. Team leaders, you need to make sure that people are equipped with the resist gear before they get there. Oh, we're having like internal spats about allocation of resources. Like, we need to

• 1:47:17Speaker 01

  have a better D K P system. By the way, World of Warcraft raid guilds and all other places where intellectual effort comes together in the video game community are much more sophisticated than people give them credit for. When I started Vaccinate C A, I told people my sole prior leadership experience is having 60 direct reports in a raid guild. And that's true. And also, like, we don't rat hole on the subject, but like, there are parts of Vaccinate C A that are very, very definitely downstream of the like, intellectual efforts about managing raid guilds specifically. There are multiple people internally who were like, yep, like, we are running the raid guild playbook right now. But be that

• 1:48:01Speaker 01

  as it may, like, you can do something with your life, like, choose to do something with your life. And then if you want to play, you know, a reasonable amount of video games, then play a reasonable amount of video games. And then like, with respect to individual people, I sometimes worry that you kind of get into, I think, I've struggled with depression at some points in my life. Many people struggle with under diagnosed, under treated depression. I think sometimes you get into a self-destructive spiral, measured against like your true values and similar values and preferences where.

• 1:48:34Speaker 01

  Due to depression and other factors, you aren't making as much progress on the true goal as you do. You use video games as an escapement from that, and not just video games, books, television, et cetera, et cetera. There are many poisons available in life. You pick your poison, use that to escape. The amount of effort you put into the poison causes you to have less effort available to do the thing. So you get less good results than the thing. So helping people out of those self-destructive spirals is something that we as a society could stand to get much better at.

• 1:49:07Dwarkesh Patel?

  I was speaking of Verd, by the way. I noticed that a bunch of my favorite writers are finance writers. There's you, Bern, Matt Levine. Is there some reason why finance has hogged all the writing talent?

• 1:49:20Speaker 01

  I think there are many good writers in the world. Derek Thompson, for example, has written some, he's a chemical engineer and he's written some things which I barely understand. I have enough of an engineering degree to appreciate half of the chemistry and I can't appreciate like the full totality of why uranium hexafluoride or whatever is a terrible substance to work with. And he has some excellent writing on why that is a terrible substance to work with.

• 1:49:43Dwarkesh Patel?

  But the broader question being, why does finance have a greater concentration of writing talent? And not just about current bloggers, but you know, finance histories are some of the best history books out there. The Bethany McLean's and so forth. And I'm curious why this is. Is it just an intrinsically more interesting subject?

• 1:50:01Speaker 01

  There's some path dependence. If I had ended up working in a water treatment plant, I'd be writing about water treatment plants because I like writing. And I am positive, I know, I know enough about myself to know that a discussion about how alum works in water treatment plants, which is something I read when I was like six, that could totally captivate me for multiple years on end. And I would write about that if I was captivated by it. I agree with the point Matt Levine made once, which is that finance and the tech industry have for a while been a relatively reliable way to turn intelligence into money. Many good writers are very intelligent. Not all people who are very intelligent are good writers. I think it is a skill that more intelligent people could learn. But

• 1:50:42Speaker 01

  simply if we, you know, create an incentive system which will tend to allocate

• 1:50:49Speaker 01

  Not yours truly, but scriptively, like a lot of the country's top brains into like particular fields where they will be come experts at those particular fields. I would expect also a lot of the writing talent to be there because good writing is good thinking. That's a Paul Graham quote, I think, but is broadly true.

• 1:51:05Dwarkesh Patel?

  Speaking of which, so you went to Japan because if I'm remembering this correctly, you thought that after the dot com boom, that the programmer alone, demand will diminish and it will require some combination of skills. Separate from, and you weren't the only one. There were many other people who thought this way.

• 1:51:23Speaker 01

  The Wall Street Journal said it, and the Wall Street Journal had never been wrong. My experience as a 19 year old didn't know anything about anything.

• 1:51:29Dwarkesh Patel?

  But separate from the object level predictions that you might have gotten wrong about the software industry, at a meta level, what was a mistake you made? Did you just not, how would we characterize that?

• 1:51:40Speaker 01

  Sure. So I had a whole lot of rigor chasing a decision that had no basis in fact. So believing in the Wall Street Journal that all future engineers would be hired in places like India and China and not the United States. And so there would be no future engineering employment in the United States. I made a spreadsheet of like, okay, here are the languages my university teaches. Here's my best estimate of the number of people in that country who speak it, Americans who speak it, the amount of their software that gets sold here, amount of US software that gets sold there, blah, blah, blah, multiply these together, sort by column H descending. And this is like larping at having rigor here, but it felt like a good decision-making process to me in the time. Now, the meta discussion is

• 1:52:24Speaker 01

  like, don't larp at having rigor, actually have rigor.

• 1:52:27Dwarkesh Patel?

  But what would that look like in this context? What was your done differently?

• 1:52:31Speaker 01

  Ultimately happy with the decision I made, although like, as presented is the wrong decision. The, I'm happy about it for other factors about life. Working in Japan as a, as a young engineer, there are some very rough parts about that. But like, on a meta level, maybe this is an early opportunity to trust institutions less and trust like systemically viable reasoning patterns more. Like, okay, the Wall Street Journal has asserted, assuming I'm remembering this article right, and I'm pretty sure I am because it was a flexion point in life for me. The Wall Street Journal has asserted that no future Americans will get hired at software companies. Assume this is true. What happens in the American software industry?

• 1:53:13Speaker 01

  Maybe I did not have enough knowledge to like confidently predict that at the moment, but I can confidently predict some things now, like software companies are going to start to break as older engineers age out of the engineering population and they have no one coming up to replace them, et cetera. Like, the industry institutionally must hire people every year, and hiring freezes are necessarily temporary as a result of that. That's, you know, as close to the law of physics as one can have. So, like, if you are telling me something which is, which says the law of physics has been suspended and will be in the future, like, don't agree to that. How would I learn the law of physics? Like, I did not know anyone in software engineering at the time, which is partly why I was getting my advice from this, from the Wall Street Journal. But if I had been

• 1:53:58Speaker 01

  slightly more agentic about it, I was at a research university in the United States, I could have found someone who knew someone who was in the software industry to explain this to me.

• 1:54:07Dwarkesh Patel?

  Couldn't you use that same logic to say that the journalism jobs won't go down because senior journalists will have to be replaced by new journalists? And that's true, but that doesn't take that many people to study journalism, and it actually would have been a bad call to major in journalism and pursue that as a career.

• 1:54:21Speaker 01

  But the, like, fundamental thesis was that for journalism is that the, like, total size of the pie is decreasing in journalism due to structural factors. And the Wall Street Journal's thesis was not simply that the size of the pie would decrease in the wake of the dot-com bust, which I don't think they even got as far as articulating in that, although it's been 25 years, but was more like, oh, you know, companies will maximize for cost of labor, et cetera, and therefore ship out all the jobs.

• 1:54:46Dwarkesh Patel?

  I see, I see. You've emphasized that founders should do more A/B testing. That's like, one of the main themes of your blog, if you go back through it. So they should they're under optimizing on this. What do they tend to over optimize on?

• 1:55:02Speaker 01

  So interestingly, I was the marketing engineer earlier in my career and really thought that that was important. And in terms of like, high-level advice I would give a founder, I would probably tell them a little bit about marketing engineering, but wouldn't spend 95% of my time talking about that unless that was explicitly what they brought me in on. What founders spend too much time on? Playing house and chasing status is, are both two sort of like, well-known pitfalls where you can get addicted, which is not quite the right word. Your incentives will draw you into playing the role of the CEO of a successful company before your actions have earned the company its level of success. Like, the fundamental nature of early-stage business is that investment in you is not

• 1:55:47Speaker 01

  a vindication of what you have achieved, it's an advance on your future accomplishments. And you need to rigorously pursue actually making those future accomplishments. And there's many ways to rigorously pursue it, like, talk to more users, write more software, make something excellent, get more people to use it, get better at selling it, et cetera, et cetera.

• 1:56:08Speaker 01

  That's an important strain of Silicon Valley culture. I'm glad we have it, I'm glad we are popularizing it to as many places in the world, including to me in central Japan. And yet, you know, there are always other games that are going on, and those other games are less important, but they are very, very attractive games. Not video games here, but why don't you go to a conference? Why don't you meet more interesting people? Why don't you show up at the best parties, et cetera, et cetera? Showing up at the best parties does not, at most margins, increase the number of users you talk to, it doesn't write functioning code, like, do those things that actually matter. And some distractions, like, proudly wave, I'm a distraction from everything that matters. And some don't.

• 1:56:51Speaker 01

  Some definitely, like, say, I'm real work, I definitely feel like real work. And they're just not. And so, don't do the things that don't matter, which sounds vacuous, and yet.

• 1:57:02Dwarkesh Patel?

  Okay, I want to go back to vaccinate CIA, and I want to close the loop on one question that I had that I don't know if we got a good answer to that I think is important, which was, suppose you're the President of the United States, maybe you're a new one, so this one's been replaced, and you're looking back on what happened. If you personally were President, what is it that you're doing to bring accountability to what happened and making sure that in a future crisis, which might look different than COVID, things are ready to snuff? Maybe you, like, fire the right people, but beyond that, there's a lot of different things that could go wrong. How do you make sure that we're ready for them?

• 1:57:40Speaker 01

  One cultural practice of the tech industry that I think it would be more...

• 1:57:46Speaker 01

  Salubrious for the broader civil society to adopt is the concept of blameless postmortems. We talked about earlier about who to blame for various failures, et cetera, et cetera. I broadly believe that there is some amount of blame which performs useful societal purposes. And then beyond that, like the diminishing returns set in pretty quickly. And we are, you know, the magic word in Washington is accountability. We want accountability for failures, et cetera, et cetera. People are terrified of accountability. And that causes there to be fields of distortion around things that actually happened, mistakes that were actually made, opportunities that were not pursued, and similar.

• 1:58:28Speaker 01

  And so changing our general practice about how we accomplish accountability towards the direction of, okay, first, let's get a dispassionate record of what actually happened. It's less important that it was a, you know, this named official, it's less important that it was under this legislative authority, et cetera, et cetera. What did we do? Okay. Now, how did what we do lead to the outcome that we got? Given that what we did led to this outcome, what could we have done better? Okay. What are the, like, given that there are these things that we could do better, how

• 1:59:09Speaker 01

  do we, like, inject that back into the currently running system such that the next time this happens, we don't do the mistake again? Sometimes that will involve in someone losing their employment, although hopefully not that frequently. A non-zero amount, that is important to say. But there's many things that we postmortem of the experience, and I don't know if we have, like, several thousand hours of time to go over all of them. There should be an inquiry, is an easy thing to say, like.

• 1:59:40Speaker 01

  Let's at a minimum, like, ask all involved parties, "Hey, can you write down the history of the COVID experience?" Just passionately, like, record dates, times, actions taken. We want it to be truthful and comprehensive and highlight what you think is the most important part about this.

• 1:59:59Speaker 01

  Like, that is step one. Like, maybe we ask for step one, and then try to get to step two. Yeah. Final question, what are you gonna work on next? I don't exactly know what will be my next big professional splash in. I've been on semi-sabbatical this year, I've been writing bits about money, but bouncing between like 20 and optimistically 80% productive relative to what like 100% productive looks like to me. I might do a software company next, I might raise a small VC fund, not entirely decided, might do something entirely different. At the moment, I'm kind of focusing on family-oriented things, and our family immigrated from Japan to the United States and are going through, you know, all the fund adjustment issues.

• 2:00:41Speaker 01

  And I'm partly, I focused very much on career and other things over the course of the last eight years, and I'm rebalancing that to help them on this adjustment and then figure out whatever happens for the next chapter of life. Excellent. Patrick, thanks so much for coming on the podcast. Thanks very much for having me.

• 2:00:57Dwarkesh Patel?

  Hey, everybody. I hope you enjoyed that episode with Patrick McKenzie. As always, if you did, the most helpful thing you can do is just share it, send it to your friends, group chats, Twitter, wherever else. It's also helpful if you can leave reviews and ratings on Apple Podcasts, Spotify, YouTube, wherever else you listen. And of course, as you can tell, I'm doing ads on the podcast now, so if you're interested in advertising, go to dwarkeshpatel.com/advertise. Other than that, I'll see you on the next one. Cheers.