Before it landed a customer, Palantir was given a rare audition with the agency that knew better than any other the dangers of misguided analysis. According to a government official familiar with the episode, the CIA allowed Palantir to set up its software in the agency’s counterterrorism center, the hub of its global campaign to track down terrorists. The official was astounded that a little-known company from Silicon Valley was allowed to place its equipment on a network that pulses with some of the most highly classified intelligence the government collects. The CIA let Palantir use some of that intelligence to show off its software, the official says, an extraordinary departure from normal security protocols.
Palantir didn’t disappoint. The official says the company worked for several months without pay and convinced the CIA that its technology could do what it claimed. Yet heading into mid-2008, Palantir still hadn’t won a government contract or earned a dollar of revenue. The small number of investors the company had managed to attract were getting impatient. Karp had already delayed the release of the software by a year because he felt it wasn’t ready. “I’m not motivated by money,” Karp says. “It’s not what gets me out of bed in the morning.”
Patience paid off. At yet another analyst meeting, Cohen showed a group of more senior government officials what enhancements the engineering team had made. Out of the corner of his eye, Cohen said, he saw two stoic men in gray flannel suits, what he called “the cliché of government guys,” turn to each other and, without speaking a word, give each other high-fives.
“At this moment it was really clear to me: We’re going to have a very, very valuable business”
“At this moment it was really clear to me: We’re going to have a very, very valuable business,” Cohen said.
Back in Palo Alto, Palantir moved into a 7,000-square-foot office. The founders were about to sign their first contract with a government agency. Karp won’t give the name, and while sources’ accounts conflict, it was likely the CIA or a Defense Department group set up to fight improvised explosive devices and bomb makers.
Before closing the deal, Palantir’s new government customers wanted to see the office. Cohen said he went to Ikea and bought as many desks as employees could assemble in 24 hours. Realizing they’d just filled up a big office with empty desks, they went to an electronics store and bought computers. All that was missing now were the employees—the founders still had hired only a handful of full-time staff.
Cohen, who said that the only time he’s awake early in the morning is when he’s been up all night, invited the government officials to come to the office at 9 am. When they looked around and asked about all the unoccupied desks, “we explained the obvious,” Cohen said. “Silicon Valley isn’t awake at 9 am.”
Palantir began recruiting top students from Stanford and other elite computer-science schools. It offered the typical tech-employee perks, including free dry cleaning and three meals a day. On the company intranet, Karp sent out motivational videos that instructed employees how to talk about Palantir with customers. Employees nicknamed it KarpTube.
“The office was like a fraternity for very smart people,” says Tim Su, who worked for two years as a software engineer. “We ate together, played video games together, and spent a lot of time at work together. Every Friday night, we’d hang out at the office and party together.”
The cultures of Washington and Palo Alto found enough common ground that Palantir’s single contract turned into a second and then a third.
“We came to market with an anti-Washington strategy,” Karp says. Traditionally, a company wanting to break into the government market would start at the top of an organization, trying to win friends and influence senior decision-makers who have the official say on what to buy. But Palantir’s early business was based on word of mouth from those early test users—Karp calls it “a rumor mill of people who’d worked with the product”—who called friends in other agencies and urged them to buy it.
Rod Rhines, a former Navy SEAL and CIA officer, recalls that a colleague in the military phoned to tell him, “Palantir is a game-changer for us.” Rhines now helps manage Palantir’s business with the Defense Department.
“They got in at the tactical level,” says a former military intelligence officer who now works for a large defense contractor and has used Palantir’s software. Forces on the frontline got hooked on the product and then demanded that their bosses buy it. They also told intelligence organizations high up the chain to send them intelligence reports in a format compatible with Palantir. These early battlefield adopters were essentially on the same rung of the hierarchy as the intelligence analysts who gave Palantir its early tests.
As the word spread, Palantir began making money. In fiscal year 2008, it booked nearly $1.2 million in sales through government contracts called schedules, which let agencies buy goods and services without having to go through a lengthy contracting process. The next fiscal year, Palantir’s schedule sales ballooned to $5.8 million. The year after that, they hit $7.4 million. These figures don’t account for sales using contracts other than the schedule.
Beyond government, Palantir’s business now includes some of the country’s most prominent banks and financial institutions, such as JPMorgan Chase and the hedge-fund manager Bridgewater. Palantir is now moving into health care, helping to spot fraud and inefficient spending. In 2011, including all sales to government and private-sector clients, Palantir is estimated to have earned just over $250 million.
Palantir’s success was built on a foundation in Washington, and its bottom-up insurgent maneuver left larger defense contractors bewildered—even offended.
The former military intelligence officer says that when Palantir employees came to his office to discuss how they might work together, they showed up in jeans and matching black track jackets embroidered with the Palantir logo. “I was unimpressed,” he says.
Palantir’s early success may have gone to its employees’ heads. “Their assumption was that they would sell their product to us and that they would have control over training,” the former officer says. “I was like, ‘Who do you think you are?’ All they wanted to do was to charge us money, an exorbitant amount, to teach our customers how to use their tool.”
The Palantir employees also seemed to presume that selling their software to a government agency would give them special privileges to help run that agency’s computer network. “That was completely naive,” he says. “Any government agency already has systems administrators who’ve been running their networks for years. It was like Palantir was selling a doorknob, and to make it work they wanted the government to let them build the house around it.”
Palantir’s corporate ethos sometimes feels more connected to fantasy than reality. In public remarks, several employees have said their job is to assist the people “who are out saving the Shire.” It’s an allusion to J.R.R. Tolkien’s The Lord of the Rings saga. The Shire is the home of the Hobbits, who band together with their elf, dwarf, and human compatriots to save the world from the armies of Sauron, the master of evil. The company is permeated with Tolkien references.
Its Palo Alto office is known as the Shire, and the Tysons Corner branch is Rivendell, which is the home of the elves. The company’s name itself is from Tolkien—a palantir is a magical stone that lets its holder see across great distances. That the stone is also used by Sauron to conduct surveillance as he wages war against the known world isn’t mentioned in any of Palantir’s corporate literature, although a figurine of the evil wizard Saruman, Sauron’s chief flunky in the Lord of the Ring movies, sits on a windowsill in the Rivendell lobby.
These are apt allusions, because just like Tolkien’s palantir, the ends to which the Palantir software is used depends on who’s manipulating it. And that includes not just Palantir’s clients but its own employees, some of whom have embraced their increasingly powerful status as an arm of the real surveillance state.
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