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

Institutional state capacity failed significantly during the COVID-19 pandemic, forcing grassroots tech initiatives like VaccinateCA to centralize critical vaccine information. This breakdown resulted from perverse incentives where government actors prioritized political risk management over operational success, leading to inefficient tiering systems and poor distribution. Competent private entities avoided intervening due to the "Copenhagen principle of culpability," where assuming responsibility for a complex system invites liability for any failure, while inaction remains unpunished. Beyond public health, the financial system mirrors this dysfunction; KYC and AML regulations effectively transform banks into policy arms of the state, conducting automated, dragnet surveillance of every transaction. These systemic issues highlight a broader decline in the ability of large institutions to solve concrete problems, as the incentives for maintaining political legitimacy often conflict with the operational requirements for achieving tangible results.