--:-- Michelle Hackman: We're here to serve the American people, and my version of service is the soldiers are happier, the enemies are scared. That voice isn't a military general or a politician. It's the CEO of a major tech company, Alex Karp. He runs Palantir, and for a tech CEO, he talks a lot about war.
--:-- Heather Somerville: I don't think in win-lose. I think in domination. That's because his company makes software that's used by militaries and government agencies. Our product is used on occasion to kill people. No other CEO I have ever encountered talks the way Alex Karp talks.
--:-- Michelle Hackman: Palantir has, for most of its existence, been an outsider. We were the most hated, most pariah. Was very much dismissed or disliked. Maligned for being pro-American. It's really cultivated this cloak-and-dagger image over the years as being this mysterious company that does something with data, does something with intelligence and national security, but nobody really knows what.
--:-- Heather Somerville: Palantir has been around for more than two decades. For most of that time, they've flown under the radar. But now... You look at this thing, Palantir up 600%. Their revenue topped a billion dollars, first time we've seen that. This is the best story in software right now. Palantir is suddenly one of the 10 most valuable tech companies in America by market cap, and one of the most powerful in Washington.
--:-- Michelle Hackman: If you were to boil it down to just a few things, what were the main ingredients that sort of fueled this rapid growth?
--:-- Heather Somerville: I'd say it was playing the long game, making bold moves in moments of crisis, a little bit of hype, and a lot of Trump.
--:-- Michelle Hackman: Welcome to The Journal, our show about money, business, and power. I'm Michelle Hackman. It's Monday, August 11th. Coming up on the show, how Palantir went from pariah to Washington Power Player.
--:-- Heather Somerville: The idea behind Palantir is kind of simple. It's a software company that processes large sets of data and helps find patterns. What's more unique about the company or its clients?
--:-- Michelle Hackman: Militaries, spy agencies, and immigration enforcement have all relied on Palantir's software. So that could look like something like military officers being able to detect where drone attacks are the most likely to happen.
--:-- Heather Somerville: That could mean a company tracking its supply chain and figuring out in a very quick way where there's vulnerabilities or breakdowns in their supply chain. It can look like a whole host of things. But basically, it's a better way to use data.
--:-- Michelle Hackman: Where does the name Palantir come from?
--:-- Heather Somerville: It's from Lord of the Rings. It's a magical seeing stone for communicating with distant objects.
--:-- Michelle Hackman: We've been strangely fortunate. Pippin saw in the Palantir a glimpse of the enemy's plan. So the idea, of course, was that Palantir software could see things in the data that no human or, I guess, other computer program could.
--:-- Heather Somerville: Oh my God. Wow, sounds kind of ominous. Well, I think it's supposed to be a little sexy, too. Sexy? Maybe. Nerdy? Definitely. It was a whole fellowship of nerds that was behind the founding of Palantir all the way back in 2003.
--:-- Michelle Hackman: Most famously, there was Peter Thiel, the billionaire techno-libertarian founder of PayPal. There was also Joe Lonsdale, a Texas venture capitalist. And then there's Alex Karp, the guy who now runs the company. He has a shock of silver curls and rocks a pair of frameless glasses
--:-- Heather Somerville: Karp went to law school at Stanford before heading to Germany to get a PhD in philosophy He is decidedly not extremely technical He is sort of the thought leader and the mouthpiece of Palantir. He makes a lot of big statements, usually around how great his company is, how big a defender of the West he is, how much he supports Israel.
--:-- Michelle Hackman: He wades into geopolitical thorny issues without the bat of an eye. Karb supported Joe Biden and Kamala Harris in their presidential runs, but he's also donated to Republicans. He's criticized Silicon Valley for not working with the U.S. government enough.
--:-- Heather Somerville: In a book published this year, he wrote that Silicon Valley companies only exist because the United States, quote, in many cases, made their rise possible. And CARP believes Silicon Valley should repay that debt. Silicon Valley ought to be involved in fighting terrorism and protecting our civil liberties.
--:-- Michelle Hackman: Part of the lore around Palantir is that it helped the U.S. government find and kill Osama bin Laden. Now, Palantir's never confirmed that, and I'm personally not sure if it's true, but they sure as heck like that it's part of their mythology.
--:-- Heather Somerville: So according to your reporting, who were Palantir's early clients? What did their early work look like?
--:-- Michelle Hackman: Palantir's early clients were primarily the CIA. It was funded in part by In-Q-Tel, which is a venture capital firm that is aligned with the CIA and helps find technologies that the U.S. government intelligence agencies can use.
--:-- Heather Somerville: So that was a natural client. It also worked for the FBI. It doesn't work for the FBI anymore. And also earlier on, it did some work with police departments, notably Los Angeles Police Department.
--:-- Michelle Hackman: And that really turned Palantir into this anomaly in the tech world, because what are you doing with the CIA? It was secret. It was classified. Nobody knew.
--:-- Heather Somerville: This was in the 2000s, when taking on this kind of government work was taboo in Silicon Valley. Palantir's contracts were controversial and often made the company the target of protests.
--:-- Michelle Hackman: But over the years, CARP has brushed off the haters. We are not everyone's cup of tea. We may not be your cup of tea.
--:-- Heather Somerville: The details of Palantir's work were shrouded in mystery. The company didn't advertise. It didn't have a sales team. It did line up a few contracts, like working with the Obama administration to combat human trafficking.
--:-- Michelle Hackman: But the company wasn't raking it in. Most of Palantir's existence until very recently was pretty unremarkable. The company was treading water, short on cash often. It was not a power player.
--:-- Heather Somerville: They struggled to secure bigger contracts with the Pentagon. And in 2016, they even sued the Army over unfair contracting processes and won.
--:-- Michelle Hackman: When do things really start to turn around for them?
--:-- Heather Somerville: It was around 2020. The pandemic hits, and Palantir very quickly secures contracts to track the virus, vaccine production, and distribution in the U.S. as well as in the U.K. That's a big moment.
--:-- Michelle Hackman: At a critical moment, Palantir's technology offered a solution. And this is emblematic of something that Palantir, under CARP's leadership, has done very well.
--:-- Heather Somerville: There's a crisis, a global crisis. Palantir mobilizes. 24 to 36 hours later, Palantir has inserted itself into whatever that crisis is.
--:-- Michelle Hackman: Coming up, more crises, more opportunities. Over the last few years, as conflicts arose, Palantir always seemed to be in the mix.
--:-- Heather Somerville: In 2022, when Russia invaded Ukraine, Alex Karp flew to Kiev to offer Palantir's technology to Ukraine's president. Software plus heroism can really slay the giant
--:-- Michelle Hackman: And I think I know the Russians just underestimated the power of kinetic plus software plus heroism
--:-- Heather Somerville: Palantir soon became embedded in more than a half dozen Ukrainian government agencies and military organizations It has been used in battlefield targeting.
--:-- Michelle Hackman: And when Hamas attacked Israel on October 7th, Palantir's leadership quickly boarded a plane to Israel to offer its tools.
--:-- Heather Somerville: Palantir's software also helped in Israel's air defense when Iran launched its strike last fall.
--:-- Michelle Hackman: It doesn't matter what it is. Palantir is presenting itself as the hero to provide a solution. They will make big moves, whatever the geopolitical, whatever the social chaos, whatever the crisis is.
--:-- Heather Somerville: And that is how Palantir starts to build its government contracting business. Another way it attracted business? Pivoting quickly to artificial intelligence when that became the next big thing.
--:-- Michelle Hackman: What Karp did is he sees the writing on the wall. AI is going to change everything. AI is where the world is going. And we need to be there.
--:-- Heather Somerville: So he's announced this new product that he called AIP, Artificial Intelligence Platform, and announced it to the world before even his engineers knew about it. That's bold.
--:-- Michelle Hackman: But it seemed to work because then, you know, Palantir did deliver this product and it put Palantir on the map as being one of the leading AI companies that is now contracting with the U.S. and allied governments.
--:-- Heather Somerville: All that work set the stage for this year when a new administration took over D.C.
--:-- Michelle Hackman: Palantir, we buy a lot of things from Palantir. The backdrop to this was the exuberance and the thrill of a Trump administration that would start to integrate these one-time outsider technology companies that hadn't had a fair shot before because these big defense contractors took all the money.
--:-- Heather Somerville: And Trump was going to shake that up, just like Trump was going to drain the swamp. He was going to shake up the defense industrial base. And this was going to be the moment for these outsider tech companies to start to strike it rich.
--:-- Michelle Hackman: In December, shortly after Trump won the election, defense contractors, tech executives, and congressional staff gathered at the Reagan National Defense Forum in Southern California.
--:-- Heather Somerville: The wine was flowing. It was basically prom for the defense tech world. Heather was there too.
--:-- Michelle Hackman: It is sort of the capstone event for defense and technology and national security issues at the end of every year. And the big name folks who walk in sort of get a nod from the crowd and everybody goes back to their conversations and their wine sipping.
--:-- Heather Somerville: And then Alex Karp walks in. And you would have thought it was the president himself or the secretary of defense or name your favorite movie star because the courtyard just stopped.
--:-- Michelle Hackman: People looked at Karp and it was a moment for me that seemed to solidify that, oh, this guy's made it. This is Palantir's moment.
--:-- Heather Somerville: After two decades of being an outcast, Palantir was now the bell of the ball. Karp was happy to gloat. And to all supporters of Palantir, Merry Christmas and a Happy New Year's. And to all people who've hated on us, enjoy your call.
--:-- Michelle Hackman: Palantir's days of begging for work were over. It aligned its mission to serve Trump's America First agenda.
--:-- Heather Somerville: So what kind of contracts is it now getting? Can you give me the landscape of this Trump bonanza?
--:-- Michelle Hackman: So to give you an example, Palantir is positioning itself to be the key data integrator, a lead contractor on Trump's Golden Dome project.
--:-- Heather Somerville: And this is this kind of extraordinarily expensive plan to build a missile defense shield that would cover the United States from incoming threat We see whether it can be done But this is a huge project a ton of money
--:-- Michelle Hackman: So you starting to see how the huge checks are lining up for Palantir
--:-- Heather Somerville: Several high-ranking former Palantir employees now serve in major roles in the Trump administration.
--:-- Michelle Hackman: Almost a decade after having to sue the Army, Palantir had just scored a 10-year contract worth up to $10 billion providing software for the Army.
--:-- Heather Somerville: Palantir is embedded in missile defense, command centers, AI programs.
--:-- Michelle Hackman: And this spring, it signed a deal to assist with Trump's mass deportation agenda, a six-month pilot with Immigration and Customs Enforcement, or ICE.
--:-- Heather Somerville: ICE has a mandate to deport a whole lot of people every day under this administration. Palantir has a $30 million pilot program contract with ICE to help build out an application that would enable more faster, more effective deportations.
--:-- Michelle Hackman: Now, Palantir is not the one going out and spying on people believed to be in the country illegally, but Palantir is providing an effective tool for the ICE agents who are going out and apprehending and then putting people in process for deportation.
--:-- Heather Somerville: The acting director of ICE said at a conference with tech companies, including Palantir, that he wants to use their technologies to create a, quote, Amazon Prime for deportations.
--:-- Michelle Hackman: Palantir's growing role in Trump's deportation efforts hasn't been without criticism.
--:-- Heather Somerville: Former employees of the company published an open letter in May accusing Palantir of, quote, normalizing authoritarianism.
--:-- Michelle Hackman: Palantir leadership has said the company assesses the risk of every contract for potential violations of its principles on civil liberties and privacy.
--:-- Heather Somerville: The company also said only a tiny fraction of its more than 4,000 former employees have raised concerns.
--:-- Michelle Hackman: Amid recent controversy, Palantir's fortunes are soaring. It's become one of the buzziest stocks on Wall Street with a valuation of $440 billion.
--:-- Heather Somerville: And it's now worth more than any other American defense contractor, like Boeing or Lockheed Martin.
--:-- Michelle Hackman: Do you think if Palantir has sort of become so Trump-coded, Do you think the good times could potentially come to an end if a Democrat is elected?
--:-- Heather Somerville: Palantir says it serves the agenda of the U.S. government, irrespective of who's in charge.
--:-- Michelle Hackman: But the last thing, which may be the most important, is once a government agency has Palantir, it's kind of hard to get rid of.
--:-- Heather Somerville: You know, part of that is that once you have consolidated and housed all of your data from disparate places into Palantir, are you really going to rip out and start over?
--:-- Michelle Hackman: That's expensive and also just kind of the inertia of bureaucracy would prevent that.
--:-- Heather Somerville: On a recent earnings call with investors, Alex Karp said that he expected the company's revenue from the United States would have 10 times the growth in the next five years or so.
--:-- Michelle Hackman: I mean, this is sort of astonishing. Alex Karp has been fairly prescient about a number of other things for Palantir.
--:-- Heather Somerville: So we will see if he proves to be true. and that is a testament to this man's savvy and his ability to position the company to win no matter who got into power and no matter what that president's objectives were.
--:-- Michelle Hackman: That's all for today, Monday, August 11th. The Journal is a co-production of Spotify and The Wall Street Journal.
--:-- Heather Somerville: Additional reporting in this episode by Vera Bergengrun, Joel Schechtman, and Eric Schwartzel.
--:-- Michelle Hackman: Thanks for listening. See you tomorrow.
