Palantir Technologies’ intelligence software is gaining fans worldwide, and some investors want to cash in

Unlocking Secrets, if Not Its Own Value


Alex Karp, chief of Palantir Technologies, has resisted calls for it go public. Despite a growing number of private clients, he says an I.P.O.’s emphasis on stock price would be “corrosive to our culture.”CreditPeter DaSilva for The New York Times


Palantir Technologies will not help you share, message, pin, post or chat. It does not exist to make you more social or connected, or even to help advertisers get to you. Its technology is deeply geeky, its work secretive. Nonetheless, it’s one of the most valuable private tech companies in Silicon Valley.

Founded in 2004, in part with $2 million from the Central Intelligence Agency’s venture capital arm, Palantir makes software that has illuminated terror networks and figured out safe driving routes through a war-torn Baghdad. It has also tracked car thieves, helped in disaster recovery and traced salmonella outbreaks. United States attorneys deployed its technology against the hedge fund SAC Capital, which was also an early investor in the company. (SAC, which changed its name to Point72 Asset Management after it pleaded guilty to insider trading charges, declined to comment on its investment.)

Palantir’s software has been used at JPMorgan Chase to spot cyberfraud and to sell foreclosed homes; at Bridgewater Associates to help figure out investments for its $157 billion under management, and at Hershey to increase chocolate profits. The technology is complex, but the premise is simple: The software consumes huge amounts of data — from local rainfall totals to bank transactions — mashes it together and makes conclusions based on those unlikely combinations. Where is a terrorist attack likely to occur? What is a bad financial bet?

This year, Palantir, which is based in Palo Alto, Calif., is expected to bring in about $1 billion in revenue, mostly from private companies interested in adaptations of its intelligence software. Though it is not yet profitable, investors have given Palantir almost $900 million in total. The most recent round, last December, sold shares in the company to investors at an implied valuation for the company of $9 billion.

All of this has its investors, including some of the world’s most successful hedge funds, salivating for a big payday from an initial public offering. “The company has been incredibly successful, and every investor likes when companies go public,” Justin Fishner-Wolfson, a managing partner at 137 Ventures, which is one of those investors, said in an email.

You would think this would be exciting for Alex Karp, 46, Palantir’s co-founder and chief executive. But Mr. Karp, who has a doctorate in philosophy and an idealistic vision for the company, says he is resisting the big wealth and publicity of an I.P.O. He fears that the money — and the emphasis on stock price — will destroy Palantir’s mission: to use its software to improve the world.

An I.P.O. “is corrosive to our culture, corrosive to our outcomes,” he said. A lean man with distinctive sprouts of graying hair, Mr. Karp holds about 10 percent of Palantir. That makes him nearly a billionaire on paper, but he rents a townhouse, his only permanent residence, near the company’s headquarters. He doesn’t know how to drive, either. His backers and Palantir’s clients, he added, “do not see us as supernormal.”

“When you are saving the world, fighting fraud and slave labor, you can do great things,” Mr. Karp said. Palantir does not charge for most humanitarian work, which is a source of internal pride. “What concerns me,” he said, “is working with commercial entities, and non-U.S. governments.”

There is the rub. Mr. Karp is eloquent on the subject of Palantir saving lives, but it is in business to make money — as are its eager investors. It actively seeks corporate contracts worth tens of millions, and is getting bigger by the day. People familiar with the company say it has big deals with insurers, health care companies and media corporations, among others. Its advisers include James Carville, the Democratic strategist; Condoleezza Rice, the former secretary of state; George J. Tenet, the former C.I.A. director; and Michael Ovitz, the former head of Disney Studios and Hollywood superagent.

Palantir is growing by selling software to private companies. Whether those companies will properly use its privacy safeguards, which were designed for the government, is entirely up to those customers. Palantir has worked to recover from its own ethical lapses, but Mr. Karp acknowledges that it cannot control the ethics of its customers.

Still, Palantir stands out in the tech industry. Near Mr. Karp’s office are books that employees are encouraged to read on subjects like database structures, critical histories of the C.I.A. and improvisational theater. The company caps salaries at $137,000 a year and bonuses at $15,000; it allows internal stock sales, but only up $300,000 a year. Given the current Valley gold rush, where mundane work can make people millionaires before 30, a place where engineers settle for a “mere” total of $450,000 seems extraordinary.

Instead of selling stock to the public, Mr. Karp and other executives are toying with the idea of creating new kinds of financial instruments, like a bond that pays off on future earnings, to unlock a bit of Palantir’s value.

“You may not get rich” working at Palantir, Mr. Karp said, but “you live like the prince of a small municipality.” That means not just the usual free food, drinks and foosball that are expected in Palo Alto companies, but also “interesting work that matters.”

Ideals vs. Commerce

Palantir is not the first company dealing with big data that has been conflicted between ideals and commerce. As graduate students at Stanford, Sergey Brin and Larry Page wrote that “advertising-funded search engines will be inherently biased toward the advertisers.” Then they started Google, which makes money from advertising. Mark Zuckerberg of Facebook used to talk about a society of complete openness, while mining people’s lives to sell ads.

The issues at Palantir go beyond advertising. Critics are skeptical of the company’s self-aggrandizing promises of privacy protection. But executives worry more about what compromise might do to the company — and to society.

Courtney Bowman, a former Google employee, works at a Palantir as a “civil liberties engineer,” examining Palantir’s obligations and making recommendations about how lawmakers should think about the power of modern technology. Palantir also sponsors conferences on privacy in the age of big data.

“I was a quantitative analyst at Google, doing ad auction design and targeting,” he says. “I had access to ways of deriving personal identity information without breaking any laws. It was a constant anxiety to me.”

A feature of Palantir software is a series of safeguards limiting who can see particular data, along with “audit trails” that enable investigators to check that the rules were followed. While audit-trail technology is built inside private-sector versions of Palantir, its use is not mandated.

“What keeps me up at night is that we have to keep thinking about this as we grow into new markets and new regions,” Mr. Bowman continued. “As you move into higher levels of computing complexity, you can’t retreat into the argument that this,” the technology of finding hidden things, “is neutral.”

To Palantir’s critics, such introspection is a collective delusion at best. “They are a key force in the surveillance-industrial complex, but they are in denial about it,” said Christopher Soghoian, a technologist at the American Civil Liberties Union. “Their product is used by state and local law enforcement. It’s problematic for them to spread money to their critics at conferences.”

In 2011, the world got a taste of what could go wrong with Palantir’s confluence of commerce and surveillance. Along with two Beltway intelligence firms, a Palantir employee had pitched a Washington law firm on ways that it could expose the workings of WikiLeaks, the group that publishes secret government and private-sector information. The pitch included the idea of using disinformation and cyberattacks.

The idea fizzled, but Anonymous, the loosely associated network of cyberactivists, posted both the pitch and emails indicating that Palantir also proposed creating misinformation about journalists, including Glenn Greenwald, who wrote in support of WikiLeaks and who recently shared a Pulitzer Prize for his articles on Edward J. Snowden’s leaking of National Security Agency spying documents.

Mr. Karp publicly apologized to Mr. Greenwald. On the recommendation of an outside law firm, the employee was suspended for a while, but still works at Palantir.

Inside Palantir, people were equally troubled by published emails in which the employee compared the law-firm work to “money falling from the sky for those of us used to working for the government sector.”

If Palantir had carried out the proposed action on WikiLeaks, “we would have collapsed,” said  Ari Gesher, who serves as a recruiter and public face of Palantir. “We really learned that we do work in areas where we come into contact with bad actors. We have to be vigilant.”

Back then, Palantir had a few hundred employees, and a culture of internal discussion on any number of issues. There are still such talks, but the company is now much larger — making a consensus harder to establish. Should Palantir keep working with the British government, despite its harsh press laws? The contracts continue. Some employees do not want Palantir aiding Israel, because they disagree with its policies toward Palestinians. There are still contracts with the Israeli government. Palantir has decided not to work with China. After an internal debate, the company decided not to do business with tobacco companies.

Palantir’s products do help the United States military kill people, Mr. Karp agrees, but only those with whom the nation is at war. Palantir is “building something for the betterment of the world,” he says, “but not in absence of realities about the world.”

As Palantir expands into offering services to the private sector — now perhaps 70 percent of its business — Mr. Karp’s worry is losing control of what happens with its software. The privacy controls are, after all, optional. And, ultimately, it can’t control who gets the software. If, for example, a tobacco company wanted Palantir technology, it could acquire an existing Palantir client.

“The thing Alex worries about the most is they have a culture that’s hard to sustain as it grows,” said Mr. Carville, the Democratic consultant. “I take walks around Stanford with him, and he talks about it: ‘If we become something besides Palantir, what are we?’ ”

PayPal and the Hobbits

Palantir began in the mind of Peter Thiel, the Silicon Valley investor and PayPal founder. He began thinking about it in 2003, a year after he sold PayPal to eBay. It was two years after the terrorist attacks on the United States, and Mr. Thiel, a fierce libertarian, wondered if the world could be made safer without losing freedoms.

“I felt we were drifting to a place in the U.S. we’d have a lot fewer civil liberties and no real effective protection,” Mr. Thiel said. He enlisted Mr. Karp, a college friend, as well as veterans of PayPal and his investment fund.

A big fan of J.R.R. Tolkien, he named Palantir after a set of magic stones in “The Lord of the Rings” that grant powerful people the ability to see the truth from afar. The company headquarters are called the Shire, after the home of the Hobbits.

Palantir’s founders started with an idea from PayPal. At one point, PayPal was losing the equivalent of 150 percent of its revenue to stolen credit card numbers. It figured out how computers could spot activity — like a flurry of payments to a brand new account — at a global scale. The flagged actions would then be put before a PayPal employee to investigate.

Palantir’s founders thought the same approach would work for national security. Almost no one in the venture capital world agreed except In-Q-Tel,the C.I.A.’s venture fund, which gave Palantir $2 million; Mr. Thiel eventually put in about $30 million of his own money. In-Q-Tel gave the founders introductions to the C.I.A. and other spy outfits.

Palantir’s first full-fledged C.I.A. job was in 2008. Mr. Karp got more work from word of mouth, and donated Palantir’s technology to cyberactivists, who mapped Russian hackers attacking the nation of Georgia in 2008. (The spyware was rumored to have found Osama bin Laden, but Palantir would not confirm or deny such jobs.)

To drum up private-sector business, Mr. Thiel called on Mr. Ovitz, whom he knew through Marc Andreessen, the former Netscape whiz kid turned venture capitalist. At first, Mr. Ovitz thought Palantir could be used in selling online ads, but the housing crisis changed his thinking. Banks had thousands of homes in foreclosure across the country, and no idea how to efficiently clear the backlog in a collapsing market.

“The idea was to pick one bank, and the rest would follow,” Mr. Ovitz said. JPMorgan was the first. Much as Palantir figured out navigating Baghdad by analyzing recent roadside attacks, satellite images and moon phases, it derived home-sale prices by looking at school enrollments, employment trends and retail sales. Data that JPMorgan thought would take two years to integrate was put into action in eight days.

JPMorgan still uses Palantir for cybersecurity, fraud detection and other work, loading half a terabyte of data onto a Palantir system each day, according to a Palantir video. A spokesman for JPMorgan said the bank uses Palantir, but would not comment on specific projects.

Morgan Stanley is another customer.

“No human can look at all the data sources at one time,” said Jim Rosenthal, Morgan Stanley’s chief operating officer. The company uses Palantir to spot money laundering and employee theft, as well as for cybersecurity.

Government clients also struggle with a data explosion. “Everything becomes more difficult, the more crime becomes global, the more state actors are involved, the more trades there are around the globe,” said Preet Bharara, United States attorney for the Southern District of New York. “It’s malpractice to have records and not search them.” He has used Palantir for several cases, including the SAC investigation.

Investors are growing restless. Mr. Karp says he hears from them nearly every day. Joe Lonsdale, a co-founder who left to form his own investment firm, still has shares in the company and has stated in online forums that Palantir will go public. But while an I.P.O. may be hard to resist forever, Mr. Thiel said in an email that Palantir “has no plans to I.P.O. in the next few years.”

Palantir is now Palo Alto’s biggest tenant after Stanford, occupying about 250,000 square feet in downtown buildings, which hold many of Palantir’s 1,500 employees. Contracts around the world have surged as everyone’s data increases in size and diversity. Mr. Karp thinks the firm can grow to 5,000 employees for its maximum effectiveness, without, he says, the possibly corrupting influence of going public.

In Tolkien’s tale, the world was saved from darkness. The Shire, though, became an industrial wasteland. Mr. Karp hopes that Palantir can save itself, along with the world.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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