This is a classic case of overcomplicating a solution because the problem wasn't fully defined. The user has two working formulas: one that dynamically switches a data validation range based on a cell value, and another that displays a placeholder when a required field is empty. The instinct to combine them into a single cell is understandable, but it misses the point of how data validation actually works in a spreadsheet. You don't nest INDIRECT and IF together to get a dropdown that also shows a prompt. That's not how the feature is designed.
What this user really needs is to separate the mechanics from the user experience. The INDIRECT formula belongs in the data validation source field, where it controls the list options. The IF formula belongs in a helper cell or a conditional formatting rule that visually guides the user to make a selection. Trying to force both into one formula creates a logical collision, INDIRECT expects a range reference, and the IF formula returns a text string. Spreadsheets don't handle that hybrid gracefully. The practical fix is to use INDIRECT for the dynamic range, and then use a separate conditional format or a simple validation error message to handle the empty state.
We see this pattern often: users reach for nested logic when a two-step workflow would be cleaner and more maintainable. The desire to compress everything into a single cell is a habit inherited from traditional spreadsheet thinking, where every inch of screen real estate feels precious. But AI-native tools and modern spreadsheet design encourage a different approach, modularity. Break the problem into its components, solve each one where it naturally belongs, and let the spreadsheet engine do the rest. The result is easier to debug, easier to share, and far less likely to break when someone else inherits the file.
So here is our plain opinion: stop trying to combine these formulas. Put INDIRECT in the data validation source and use a simple conditional format or a helper cell for the placeholder. That's the solution that scales, that a colleague can understand at a glance, and that actually works the first time. If you're still stuck, ask yourself whether the real goal is fewer cells or fewer errors. The answer should guide every decision.