How people and systems handle complexity (investment implications)
Complexity doesn’t just confuse people — it reallocates power to whoever offers the safest, simplest authority-wrapped default.
Why people “check out” under complexity
When complexity rises, most people opt out (ignore), opt up (defer to authority), or opt safe (choose defaults). Through the lens incentives > ideals; control > fairness; stability > truth, that’s not a flaw - it’s how systems keep moving.
Cognitive economy: Brains minimize energy. Nuance costs cycles; authority is a shortcut that preserves stability.
Time scarcity: Most decisions are made under deadlines; the payoff for deep analysis is delayed, while the payoff for deference (no blame now) is immediate.
Risk transfer: When stakes are high, blame aversion dominates. Following the default or “the expert” moves liability off you.
Ambiguity pain: Uncertain payoffs trigger loss aversion. A “clear” wrong answer feels better than a probabilistic right one.
Social alignment: The group rewards coherence over accuracy. Belonging (status) pays today; “truth” often doesn’t.
How systems exploit this (revealed preferences)
Policy-by-default: Make the “approved path” one-click; noncompliance = paperwork, delays, penalties.
Complexity theater: Wrap choices in acronyms/standards; users will pick the blessed config.
Narrative compression: Issue TLDRs with moral framing (“safe”, “for children”, “national security”) so dissent signals anti-social risk.
Ratcheting UX: Once the default is adopted, reverse requires effort + social justification - rarely paid.
Implications (markets, policy, culture)
Market share accrues to default vendors (identity, compliance, cloud, money rails). Not because they’re best, but because they absorb blame.
Regulatory moats widen: The harder the rule-book, the more buyers outsource judgment to platforms with pre-baked compliance.
Price of nuance rises: Independent analysis underperforms optically (more variance), so capital allocators underweight it.
Truth is slow capital: It compounds - eventually - but stability wins cash flow in the meantime.
Distribution (selling ideas, products)
Ship a one-click “safe config”. Lead with “compliant by default”. Hide the knobs; expose them only to power users.
Blame shield messaging: “Auditable, revocable, court-grade”. Buyers pay to move risk away from themselves.
Signals that complexity will drive adoption of State-Embedded software
Mandates with RFP verbs: attest, prove, trace, revoke, rollback. Complexity just went up; default vendors win.
Perimeter moves: app-store/bank/cloud AUP tightenings. Users will choose the approved wallet/tool.
Incident + standard drafts within 30 days: Decision compression in action; procurement shortcuts follow.
Where this yields alpha (examples)
AI in regulated workflows: Only platforms with provenance/consent lineage will scale. (PLTR/MSFT/).
Programmable money: Stablecoins/tokenized deposits w/ ID by default become MoE; BTC shifts to SoV unless self-custody incentives change.
Cyber for critical infra: Buyers want policy-grade controls (PANW) and evidence artifacts (PLTR) to survive audits.
My current outlook in terms of companies: PLTR > MSFT > PANW.
My current outlook in terms of assets: PLTR > Bitcoin > Gold > MSFT > PANW.
I’ve written more about my state-embedded investment thesis in these 2 articles:
Hard truth
Incentives > ideals: People don’t want the truth. They want a credible excuse that pays today and won’t get them fired.
Control > fairness: Systems will choose controls that scale deference (defaults, compliance consoles) over perfectly fair but cognitively expensive processes.
Stability > truth: A simplified wrong-but-stable rule will be adopted faster than a nuanced right-but-fragile one. Markets reward the former first.
One-page rubric (use every time)
Who eats the blame? Buy the entity that can credibly say “we do”.
What’s the default? That’s your base case, not your belief.
Where are the knobs hidden? Platforms that expose just enough control win.
How is noncompliance taxed? If the tax > 0, adoption will track the easiest compliant path.
What gets simpler after I opt in? If “everything”, you’ve found the winner.
Complexity doesn’t just confuse people — it reallocates power to whoever offers the safest, simplest authority-wrapped default. Invest in those defaults, sell some into clarity ramps, keep core, and reserve your nuance for the handful of choices where you keep the upside of being right.
State-Embedded companies/Governments use “Complexity by Design“
When you understand the concept “complexity by design”, you start to appreciate how brilliantly-retarded modern systems are.
Complexity by Design is when systems are made needlessly complicated to:
raise the cost of entry and dissent,
preserve discretion for insiders,
and convert compliance itself into a revenue stream.
Just one deep dive into how fiat works, or how financial markets work, and you understand what I mean by “complexity by design”.
Deliberately adding moving parts, actors, steps, and exceptions allows the system to exclude rivals, shift blame, throttle outcomes, and monetize compliance - while claiming it’s about safety, fairness, or innovation.
The core motives of “complexity by design” are:
Barrier to entry: Make participation expensive/time-consuming; incumbents win by attrition.
Selective enforcement: With enough rules, everyone is violable; insiders get waivers, outsiders get penalties.
Plausible deniability: When harm occurs, blame “the process”, not the decision-makers. Split responsibility across agencies/committees → no single point of accountability.
Discretion & control: Complexity creates levers (permits, exemptions, accreditations) to steer results without overt bans.
Rent extraction: Audits, licenses, certifications, data feeds, middleware, lawyers - compliance becomes a market.
Complexity by design is not just used to protect state-embedded companies.
You can see “complexity by design” applied in almost all government systems:
Tax & reporting
Healthcare billing
Financial regulations
Defense procurement
Privacy “consent”
Law, and many others.
Complexity is not a bug - it’s a revenue model and a control surface.
When complexity rises, most people opt out (ignore), opt up (defer to authority), or opt safe (choose defaults).
None of this should be considered investment advice.
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