by Randall Lane
And perhaps it’s even artificial to divide the world into the individual versus the corporation. Many critics deride Airbnb and the like as short-term fads for slow economic times. (Airbnb’s report found that 42 percent of hosts use the income to pay everyday living expenses.) Safety, value, customer service, and quality of goods remain areas where it could stumble.
But human beings have been swapping before money even existed. New technologies only grease the wheels of these ancient transactional instincts. Even if growth levels off, it doesn’t change the fact that peer exchanges like Airbnb are simply another way for entrepreneurs to reach customers.
CHAPTER 11
Alex Karp, Palantir:
Meet Big Brother
There’s virtually no company in the world—certainly in the transparency-will-save-us tech world—as mysterious as Palantir. Few people understand what it does, or the extent to which its data-mining systems and custom-built programs and techniques can perform impossibly complex tasks with the push of a button. As a force for good, it can track terrorists for the government and detect fraud and hacking for corporations. The omniscience Palantir empowers (and the CIA money that first funded it), however, has many a civil libertarian describing it in Orwellian terms.
If Big Brother has a human face, it’s Alex Karp. A self-described “deviant” philosopher, he found himself, at first by chance (he was the favored law school intellectual sparring partner of Palantir cofounder Peter Thiel) and then by instinct, running a company with powers previously reserved for all-knowing gods. Andy Greenberg and Ryan Mac were the first to introduce Karp, now forty-seven, and Palantir to the wider world, and they did so at a critical time: Palantir, at the tail end of 2013, was raising big money at big valuations (enough to almost make Karp a billionaire) and looking to expand its reach in the private sector. In the world of WikiLeaks and Snowden, it’s a tale that can affect us all.
Ever since rumors spread that a startup called Palantir helped to kill Osama bin Laden, Alex Karp hasn’t had much time to himself. On one sunbaked morning in the summer of 2013, Palantir’s lean chief executive, who sports a top-heavy mop of frazzled hair, hiked the grassy hills around Stanford University’s massive satellite antennae known as the Dish, a favorite meditative pastime. But his solitude was disturbed somewhat by “Mike,” an ex-Marine—silent, six foot one, 270 pounds of mostly pectoral muscle—who trails him everywhere he goes. Even on the suburban streets of Palo Alto, steps from Palantir’s headquarters, the bodyguard lingered a few feet behind.
“It puts a massive cramp on your life,” Karp complained, his expression hidden behind large black sunglasses. “There’s nothing worse for reducing your ability to flirt with someone.”
Karp’s 24/7 security detail is meant to protect him from extremists who have sent him death threats and conspiracy theorists who have called Palantir to rant about the Illuminati. Schizophrenics have stalked Karp outside his office for days at a stretch. “It’s easy to be the focal point of fantasies,” he said, “if your company is involved in realities like ours.”
Palantir lives the realities of its customers: the NSA, the FBI, and the CIA—an early investor through its In-Q-Tel venture fund—along with an alphabet soup of other U.S. counterterrorism and military agencies. In the past six years, Palantir has become the go-to company for mining massive data sets for intelligence and law enforcement applications, with a slick software interface and coders who parachute into clients’ headquarters to customize its programs. Palantir turns messy swamps of information into intuitively visualized maps, histograms, and link charts. Give its so-called forward-deployed engineers a few days to crawl, tag, and integrate every scrap of a customer’s data, and Palantir can elucidate problems as disparate as terrorism, disaster response, and human trafficking.
Palantir’s advisors include Condoleezza Rice and former CIA director George Tenet, who said in an interview that “I wish we had a tool of its power” before 9/11. General David Petraeus, the former CIA chief, described Palantir to Forbes as “a better mousetrap when a better mousetrap was needed” and calls Karp “sheer brilliant.”
Among those using Palantir to connect the dots are the Marines, who have deployed its tools in Afghanistan for forensic analysis of roadside bombs and predicting insurgent attacks. The software helped locate Mexican drug cartel members who murdered an American customs agent, and tracked down hackers who installed spyware on the Dalai Lama’s computer. In the book The Finish, detailing the killing of Osama bin Laden, author Mark Bowden writes that Palantir’s software “actually deserves the popular designation Killer App.”
Palantir has emerged from the shadow world of spies and special ops to take corporate America by storm. The same tools that can predict ambushes in Iraq are helping pharmaceutical firms analyze drug data. According to a former JPMorgan Chase staffer, they’ve saved the firm hundreds of millions of dollars by addressing issues from cyberfraud to distressed mortgages. A Palantir user visiting a bank can, in seconds, see connections between a Nigerian Internet protocol address, a proxy server somewhere within the U.S., and payments flowing out from a hijacked home equity line of credit, just as military customers piece together fingerprints on artillery shell fragments, location data, anonymous tips, and social media to track down Afghani bomb makers.
Those tools have allowed Palantir’s T-shirted twentysomethings to woo customers away from the suits and ties of IBM, Booz Allen, and Lockheed Martin, with a product that deploys faster, offers cleaner results, and often costs less than $1 million per installation—a fraction of the price its rivals can offer. Its commercial clients—whose identities it guards even more closely than those of its government customers—include Bank of America and News Corp. Private sector deals now account for close to 60 percent of the company’s revenue, which Forbes estimated hit more than $450 million in 2013, up from less than $300 million a year earlier. Karp projects Palantir will sign $1 billion in new, long-term contracts in 2014, a year that may also bring the company its first profits.
The bottom line: A CIA-funded firm run by an eccentric philosopher has become one of the most valuable private companies in tech, worth $9 billion, according to a round of funding in December 2013. Karp owns roughly a tenth of the firm—just less than its largest stakeholder, Peter Thiel, the PayPal and Facebook billionaire. (Other billionaire investors include Home Depot cofounder Ken Langone and hedge fund titan Stanley Druckenmiller.) If and when the company goes public, a possibility Karp says Palantir is reluctantly considering, his net worth will likely surge past $1 billion.
The biggest problem for Palantir’s business may be just how well its software works: It helps its customers see too much. In the wake of NSA leaker Edward Snowden’s revelations of the agency’s mass surveillance, Palantir’s tools have come to represent privacy advocates’ greatest fears of data-mining technology—Google-level engineering applied directly to government spying. That combination of Big Brother and Big Data came into focus just as Palantir emerged as one of the fastest-growing startups in the Valley, threatening to contaminate its first public impressions and render the firm toxic in the eyes of customers and investors just when it needs them most.
“They’re in a scary business,” said Electronic Frontier Foundation attorney Lee Tien. ACLU analyst Jay Stanley has written that Palantir’s software could enable a “true totalitarian nightmare, monitoring the activities of innocent Americans on a mass scale.” Karp, a social theory PhD, doesn’t dodge those concerns. He sees Palantir as the company that can rewrite the rules of the zero-sum game of privacy and security. “I didn’t sign up for the government to know when I smoke a joint or have an affair,” he acknowledged. In a company address he stated, “We have to find places that we protect away from government so that we can all be the unique and interesting and, in my case, somewhat deviant people we’d like to be.”
Palantir boasts of technical safeguards for privacy that go well beyond t
he legal requirements for most of its customers, as well as a team of “privacy and civil liberties engineers.” But it’s Karp himself who ultimately decides the company’s path. “He’s our conscience,” said senior engineer Ari Gesher.
The question looms, however, of whether business realities and competition will corrupt those warm and fuzzy ideals. When it comes to talking about industry rivals, Karp often sounds less like Palantir’s conscience than its id. He expressed his primary motivation in a 2013 company address: to “kill or maim” competitors like IBM and Booz Allen. “I think of it like survival,” he said. “We beat the lame competition before they kill us.”
• • •
KARP SEEMS TO ENJOY listing reasons he isn’t qualified for his job. “He doesn’t have a technical degree, he doesn’t have any cultural affiliation with the government or commercial areas, his parents are hippies,” he said, manically pacing around his office as he describes himself in the third person. “How could it be the case that this person is cofounder and CEO since 2005 and the company still exists?”
The answer dates back to Karp’s decades-long friendship with Peter Thiel, starting at Stanford Law School. The two both lived in the no-frills Crothers dorm and shared most of their classes during their first year, but held starkly opposite political views. Karp had grown up in Philadelphia, the son of an artist and a pediatrician who spent many of their weekends taking him to protests for labor rights and against “anything Reagan did,” he recalled. Thiel had already founded the staunchly libertarian Stanford Review during his time at the university as an undergrad.
“We would run into each other and go at it . . . like wild animals on the same path,” Karp said. “Basically I loved sparring with him.”
With no desire to practice law, Karp went on to study under Jürgen Habermas, one of the twentieth century’s most prominent philosophers, at the University of Frankfurt. Not long after obtaining his doctorate, he received an inheritance from his grandfather, and began investing it in startups and stocks with surprising success. Some high-net-worth individuals heard that “this crazy dude was good at investing” and began to seek his services. To manage their money he set up the London-based Caedmon Group, a reference to Karp’s middle name, the same as the first known English-language poet.
Back in Silicon Valley, Thiel had cofounded PayPal with Elon Musk, among others, and had sold it to eBay in October 2002 for $1.5 billion. He had gone on to create a hedge fund called Clarium Capital but continued to found new companies: One would become Palantir, named by Thiel for the palantiri, seeing stones, from J.R.R. Tolkien’s Lord of the Rings, orbs that allow the holder to gaze across vast distances to track friends and foes.
In a post–9/11 world Thiel wanted to sell those palantiri-like powers to the growing national security complex: His concept for Palantir was to use the fraud-recognition software designed for PayPal to stop terrorist attacks. But from the beginning the libertarian saw Palantir as an antidote to—not a tool for—privacy violations in a society slipping into a vise of security. “It was a mission-oriented company,” said Thiel, who has personally invested $40 million in Palantir and today serves as its chairman. “I defined the problem as needing to reduce terrorism while preserving civil liberties.”
In 2004, Thiel teamed up with Joe Lonsdale and Stephen Cohen, two Stanford computer science grads, and PayPal engineer Nathan Gettings to code together a rough product. Initially they were bankrolled entirely by Thiel, and the young team struggled to get investors or potential customers to take them seriously. “How the hell do you get them to listen to twenty-two-year-olds?” said Lonsdale. “We wanted someone to have a little more gray hair.”
Enter Karp, whose Krameresque brown curls, European wealth connections, and PhD masked his business inexperience. Despite his nonexistent tech background, the founders were struck by his ability to immediately grasp complex problems and translate them to nonengineers.
Lonsdale and Cohen quickly asked him to become acting CEO, and as they interviewed other candidates for the permanent job, none of the starched-collar Washington types or MBAs they met impressed them. “They were asking questions about our diagnostic of the total available market,” says Karp, disdaining the B-school lingo. “We were talking about building the most important company in the world.”
While Karp attracted some early European angel investors, American venture capitalists seemed allergic to the company. According to Karp, Sequoia Chairman Michael Moritz doodled through an entire meeting. A Kleiner Perkins exec lectured the Palantir founders on the inevitable failure of their company for an hour and a half.
Palantir was rescued by a referral to In-Q-Tel, the CIA’s venture arm, which would make two rounds of investment totaling more than $2 million. “They were clearly top-tier talent,” said former In-Q-Tel executive Harsh Patel. “The most impressive thing about the team was how focused they were on the problem . . . how humans would talk with data.”
That mission turned out to be vastly more difficult than any of the founders had imagined. PayPal had started with perfectly structured and organized information for its fraud analysis. Intelligence customers, by contrast, had mismatched collections of e-mails, recordings, and spreadsheets.
To fulfill its privacy and security promises, Palantir needed to catalog and tag customers’ data to ensure that only users with the right credentials could access it. This need-to-know system meant classified information couldn’t be seen by those without proper clearances—and was also designed to prevent the misuse of sensitive personal data.
But Palantir’s central privacy and security protection would be what Karp terms, with his academic’s love of jargon, “the immutable log.” Everything a user does in Palantir creates a trail that can be audited. No Russian spy, jealous husband, or Edward Snowden can use the tool’s abilities without leaving an indelible record of his or her actions.
From 2005 to 2008, the CIA was Palantir’s patron and only customer, alpha-testing and evaluating its software. But with Langley’s imprimatur, word of Palantir’s growing abilities spread, and the motley Californians began to bring in deals and recruits. The philosopher Karp turned out to have a unique ability to recognize and seduce star engineers. His colleagues were so flummoxed by his nose for technical talent that they once sent a pair of underwhelming applicants into a final interview with Karp as a test. He smelled both out immediately.
A unique Palantir culture began to form in Karp’s iconoclast image. Its Palo Alto headquarters, which it calls “the Shire” in reference to the homeland of Tolkien’s hobbits, features a conference room turned giant plastic ball pit and has floors littered with Nerf darts and dog hair. (Canines are welcome.) Staffers, most of whom choose to wear Palantir-branded apparel daily, spend so much time at the office that some leave their toothbrushes by the bathroom sinks.
Karp himself remains the most eccentric of Palantir’s eccentrics. The lifelong bachelor, who says that the notion of settling down and raising a family gives him “hives,” is known for his obsessive personality: He solves Rubik’s cubes in less than three minutes, swims and practices the meditative art of Qigong daily, and has gone through aikido and jujitsu phases that involved putting cofounders in holds in the Shire’s hallways. A cabinet in his office is stocked with vitamins, twenty pairs of identical swimming goggles, and hand sanitizer. He addresses his staff using an internal video channel called KarpTube, speaking on wide-ranging subjects like greed, integrity, and Marxism. “The only time I’m not thinking about Palantir,” he said, “is when I’m swimming, practicing Qigong, or during sexual activity.”
In 2010, Palantir’s customers at the New York Police Department referred the company to JPMorgan, which would become its first commercial customer. A team of engineers rented a Tribeca loft, sleeping in bunk beds and working around the clock to help untangle the bank’s fraud problems. Soon they were given the task of unwinding its toxic mortgage portfolio
. Today Palantir’s New York operation has expanded to a full, Batman-themed office known as Gotham, and its lucrative financial-services practice includes everything from predicting foreclosures to battling Chinese hackers.
As its customer base grew, however, cracks began to show in Palantir’s idealistic culture. In early 2011 e-mails emerged that showed a Palantir engineer had collaborated on a proposal to deal with a WikiLeaks threat to spill documents from Bank of America. The Palantir staffer had eagerly agreed in the e-mails to propose tracking and identifying the group’s donors, launching cyberattacks on WikiLeaks’ infrastructure and even threatening its sympathizers. When the scandal broke, Karp put the offending engineer on leave and issued a statement personally apologizing and pledging the company’s support for “progressive values and causes.” Outside counsel was retained to review the firm’s actions and policies and, after some deliberation, determined it was acceptable to rehire the offending employee, much to the scorn of the company’s critics.
Following the WikiLeaks incident, Palantir’s privacy and civil liberties team created an ethics hotline for engineers called the Batphone: Any engineer can use it to anonymously report to Palantir’s directors work on behalf of a customer they consider unethical. As the result of one Batphone communication, for instance, the company backed out of a job that involved analyzing information on public Facebook pages. Karp has also stated that Palantir turned down a chance to work with a tobacco firm, and overall the company says it walks away from as much as 20 percent of its possible revenue for ethical reasons. (It remains to be seen whether the company will be so picky if it becomes accountable to public shareholders and the demand for quarterly results.)
Still, according to former employees, Palantir has explored work in Saudi Arabia despite the staff’s misgivings about human rights abuses in the kingdom. And for all Karp’s emphasis on values, his apology for the WikiLeaks affair also doesn’t seem to have left much of an impression in his memory. In an address to Palantir engineers in 2013, he sounded defiant: “We’ve never had a scandal that was really our fault.”