In the earlier days of the Covid-19 pandemic, many of the country’s public health departments, still reliant on fax machines, were woefully unprepared for the massive amounts of data they needed to process. Looking for a tidy private-sector solution to a messy government problem, the Department of Health and Human Services (HHS) paid a shadowy Silicon Valley company with ties to the Trump administration to build something new. That company is called Palantir Technologies, and if you don’t know much about it, that’s by design.
A lot of that could change in the coming months, however: Palantir is about to go public.
Palantir specializes in data-gathering and analysis, most of which it does for government agencies. It has about $1.5 billion in federal government contracts alone, including, recently, with the Space Force and the Navy. In July, with new Covid-19 case numbers breaking records daily, the HHS announced an abrupt shift in how that data would be reported: hospitals would now report their data exclusively to HHS Protect, a new platform Palantir developed that would be run by another private company called TeleTracking. This would effectively replace the Centers for Disease Control and Prevention’s (CDC) National Healthcare Safety Network, per the Trump administration’s orders to hospitals to stop reporting their information to it. HHS Protect, which was not accessible to the general public, was now the only source for this information.
“Today, the CDC still has at least a week lag in reporting hospital data,” Michael Caputo, assistant secretary of the HHS for public affairs, told the New York Times then. “America requires it in real time. The new, faster, and complete data system is what our nation needs to defeat the coronavirus.”
A month later, however, the order to bypass the CDC was reversed as public outcry along with complaints from state attorneys general, members of Congress, and health workers mounted against it. HHS Protect also unveiled a public data hub for the information, though this has been plagued by reports that the data is incomplete, inaccurate, and more delayed than the CDC’s ever was.
Palantir, the architect of this complete data system, isn’t a household name like its Palo Alto peers, but the 17-year-old company founded by Peter Thiel is one of the most valuable private companies in Silicon Valley. That anonymity is a feature, not a bug: Palantir does most of its work for the government, including national security and intelligence operations. Its recently released financial documents say the company hopes to extend that reach even further, taking advantage of the Trump administration’s push to use commercial products rather than build its own to “become the default operating system for data across the US government.”
In recent years, headlines about the company have stressed its access to everything about all of us, which privacy advocates have long criticized. Palantir’s data-mining software has been credited with killing Osama bin Laden (a claim that has never been confirmed) and blamed for tearing unauthorized immigrant families apart.
As the notoriously secretive surveillance startup that the White House is entrusting with the nation’s coronavirus data is about to go public, some details of how the company works and its Trump administration-inspired vision are, too.
The Lord of the Rings-based solution to 9/11
Palantir was founded in 2003 by venture capitalist and Paypal co-founder Peter Thiel along with Joe Lonsdale, Stephen Cohen, Nathan Gettings, and Alex Karp, its eccentric CEO who has a law degree and a PhD in neoclassical social theory and keeps 20 identical pairs of swimming goggles in his office. The company’s name comes from J.R.R. Tolkien’s “palantíri,” which are magical orbs that let their possessors see anything happening in the world at any time. The name fits, too, as Palantir’s vision has always been to create software that can mine and analyze large and disparate data sets, putting them all in one place and finding connections between them.
The company came together not long after 9/11, when Palantir was pitched as a tool that could have identified and stopped the hijackers and would prevent similar attacks from happening in the future. Sure enough, by 2011, Bloomberg Businessweek was calling Palantir “an indispensable tool employed by the US intelligence community in the war on terrorism.” The magazine added, “Palantir technology essentially solves the Sept. 11 intelligence problem.”
Indeed, the CIA was one of Palantir’s earliest investors through its venture capital arm, In-Q-Tel (yes, the CIA has a venture capital arm). It was Palantir’s only customer for years as the company refined and improved its technology, according to Forbes. By 2010, Palantir’s customers were mostly government agencies, though there were some private companies in the mix. Having managed to quietly work its way toward a $1 billion valuation, it was then one of the most valuable startups in Silicon Valley. By 2015, Palantir was valued at $20 billion.
“I think it’s worth keeping in mind that Palantir sees itself not alongside Uber, Twitter, and Netflix, but alongside Raytheon, Lockheed Martin, and Booz Allen,” said the Intercept’s Sam Biddle, who has covered Palantir for years. “Palantir wants to be a defense contractor, not a Silicon Valley unicorn.”
Palantir has grown into a company with roughly 2,400 employees, most of them engineers who write the software that collects data, and embedded analysts who work on site with Palantir’s customers to make sense of it. Company culture has been described as cult-like, big on T-shirts and Care Bears, and “more Google than Lockheed.” Employees are called “Palantirians.”
One of Palantir’s product demonstrations, as described in Bloomberg Businessweek’s 2011 article, presents a fictional example of the software’s capabilities: A terrorist leaves a trail of data across Florida, including one-way plane tickets, condo rentals, bank withdrawals, phone calls to Syria, and security camera footage from Walt Disney World. Taken separately, these details don’t add up to much, but Palantir’s software ties together thousands of databases across various agencies and helps clients see connections across them. In this case, actions that are innocuous on their own are much more suspicious when combined, and the CIA could identify and stop a terrorist’s plan to attack a theme park.
Again, that was a hypothetical product demonstration, but Palantir’s technology has been credited with saving its financial institution customers hundreds of millions of dollars, being used to detect Chinese spyware on the Dalai Lama’s computer, thwarting Pakistani suicide bombers, and unraveling Bernie Madoff’s Ponzi scheme. Its customers have included the CDC, police departments in America and abroad, and large corporations like JPMorgan and Home Depot. Palantir even sued the US Army in 2016 to force it to consider using its intelligence software after the Army chose to go with its own. Palantir won the suit, and then it won an $800 million contract.
Despite its high valuation and lucrative contracts, however, Palantir’s financial documents show the company has never made a profit, with a net loss of about $580 million in 2018 and 2019 and nearly $165 million in the first half of 2020. Those numbers are trending in the right direction, though the company admitted in the filing, “[W]e expect our operating expenses to increase, and we may not become profitable in the future” and “we may not be able to sustain our revenue growth rate in the future.”
“A monstrous government snoop”
Palantir’s work, the government agencies that contract it, and the relative lack of details about the company’s inner workings mean it’s often seen as secretive, all-knowing, and even malevolent. Seven years after touting Palantir’s terrorism-fighting abilities, Bloomberg Businessweek ran a feature on the company with the headline “Palantir Knows Everything About You.” In a book with the phrase “destroying democracy” in the title, Robert Scheer called Palantir a “monstrous government snoop, mining our most intimate data.” The company’s software has been criticized for its dragnet ways, pulling in records about millions of innocent people so it can catch a few possible criminals.
“Palantir’s data-mining software is used to analyze vast amounts of personal data held by the federal government to make determinations that affect people’s lives with little to no oversight,” said Jeramie D. Scott, senior counsel for the Electronic Privacy Information Center (EPIC), which successfully sued Immigration and Customs Enforcement (ICE) to get records on its work with Palantir. “Palantir analyzes databases containing telephone numbers, email addresses, financial data, call transaction records, and social media information. ... The documents EPIC obtained showed that ICE’s Palantir-based databases could analyze call records and GPS data as well as conduct social network analysis of the information linking different individuals.”
The company suffered one of its first rounds of bad press in 2011 when a hacker discovered it was part of a proposal to Bank of America to sabotage Wikileaks. In response, Palantir issued a public apology, created a “Council of Advisors on Privacy and Civil Liberties,” and suspended — but did not fire — the engineer responsible.
The post-9/11 world that Palantir was born into in 2003 then changed considerably in 2013 when leaks from Edward Snowden revealed that the National Security Agency used the directive of protecting the country at all costs in order to mass-collect the phone records of millions of Americans, leading to widespread outcry and some reforms. Palantir denied working with the NSA on that particular project but has worked with the agency on others, according to an internal video that was leaked to BuzzFeed News.
Palantir’s work with various police departments across the country has also brought renewed scrutiny to the company, especially in light of recent protests against police brutality. Palantir’s software powers the Los Angeles Police Department’s predictive crime program, called Operation LASER, which tries to identify and target potential criminals for increased surveillance. The program ended in 2019 amid doubts that predictive policing was an effective crime deterrent, as well as criticism from civil rights organizations that it unfairly targeted minority communities. It’s hard to get exact numbers on how many police departments Palantir has contracts with, but New Orleans’s and New York’s police departments are known customers, and Palantir boasts on its website of its work with the Salt Lake City Police Department.
Palantir declined Recode’s request for comment, but the company has said its technology is built with protections for privacy and civil liberties. While the company’s software obviously collects and works with data for its clients, the company says it doesn’t collect or use any of that data for itself.
Palantir’s less-than-great public image has come with some consequences. In the past few years, nonprofits have dropped Palantir as a corporate sponsor, and students regularly protest Palantir-related campus events and recruiting sessions. In an op-ed for the Washington Post, Karp noted that a “small group” of protesters regularly assembles outside Palantir’s offices, and he’s said that his own home is the site of near-daily protests. He has a personal security guard at all times. The Investor Alliance for Human Rights criticized Palantir’s work with the government and ICE, saying it was “failing to fulfill its human rights responsibilities” and noting that its use of personal data came with “legal risks” and could be in violation of state laws.
That reputation has followed Palantir even as its technology seems to be doing some good during the Covid-19 pandemic. The company is providing its services at almost no cost to the United Kingdom’s National Health Service (NHS), but headlines focused on how much patient data the company was getting access to in order to do that work and what it would do with it. The NHS has also provided patient data to other companies, including Microsoft and Amazon.
Stateside, there’s HHS Protect — another example of Palantir’s expansion into how the government collects and manages data and whom it trusts to do it (and, it seems, whom it does not). A spokesperson for HHS told NBC News in June that ICE would not have access to HHS Protect and that all information in it was de-identified anyway. But some politicians have still expressed their concerns about if and how patients’ personal health information will be protected, and that it won’t be shared with other federal agencies. They’ve specifically cited Palantir’s work on the project as one of their issues.
“Our concerns that HHS Protect could be misused in this way are compounded by the fact that Palantir has a history of contracting with ICE, including two active awards worth over $38 million in total,” they said in a June letter to HHS Secretary Alex Azar.
Palantir admitted in its filing that negative coverage — which it said was often inaccurate and misleading — and the resulting public perception of its services could damage its relationships with current customers, dissuade potential new customers, and upset both investors and employees.
“Palantir is complicit in the surveillance, arrest and deportation of our communities through their work with ICE,” Jacinta Gonzalez, a senior campaign director at Mijente, an advocacy hub that has railed against Palantir and its ICE contracts for years, said in a statement to Recode. “Their S-1 recognizes that these are risky contracts to take on. We’re calling on investors everywhere not to invest when the IPO happens. An investment in Palantir only serves to profit off the continued surveillance and exploitation of communities by ICE.”
Palantir’s Peter Thiel problem
Palantir is also controversial because its co-founder and board chair, Peter Thiel, is controversial. Thiel, who was one of Facebook’s first outside investors and maintains a position on its board of directors, has seen his share of criticism over the years, but the libertarian billionaire really came into the public eye in 2016 when he revealed himself as the money behind Hulk Hogan’s privacy lawsuit against Gawker (which would ultimately kill the site) and an early Trump supporter.
As most of liberal Silicon Valley’s big names publicly came out against Trump, Thiel was one of relatively few public figures who supported his candidacy. After speaking at the Republican National Convention, he gave the Trump campaign $1.25 million, and when Trump won the election, New York magazine said he was “poised to become a national villain.” Thiel has been rewarded for his support: He was chosen to be a member of the president’s transition team; in the early days of the Trump presidency, Politico dubbed Thiel “Donald Trump’s ‘shadow president’ in Silicon Valley”; and Thiel’s chief of staff and protégé, Michael Kratsios, served as the White House’s chief technology officer from 2017 until this month, when he was named acting undersecretary for research and engineering at the Department of Defense. Thiel’s Trump support is said to have changed going into the 2020 election, however, and he hasn’t donated to Trump’s campaign since October 2018.
Due, in part, to Thiel’s Trump links, the company has faced a new round of scrutiny. Its contract with ICE caused numerous civil rights organizations to blame Palantir for helping the agency find and deport unauthorized immigrants. While other companies were ending their relationships with certain government agencies over purported ethical concerns, Palantir renewed its ICE contract in 2019 despite reported opposition even from its own employees, some of whom left the company over it. Palantir’s CEO, on the other hand, has said it’s not his company’s place to decide how its software is used.
The company appears to have doubled down on this reputation, according to statements made by Karp in a letter included with the company’s public filing documents.
“Our company was founded in Silicon Valley. But we seem to share fewer and fewer of the technology sector’s values and commitments,” Karp wrote. “We have chosen sides, and we know that our partners value our commitment. We stand by them when it is convenient, and when it is not.”
Perhaps to that end, Palantir recently moved its headquarters from its longtime home of Palo Alto to Denver, Colorado.
“For a while, it suited Palantir to paint itself as this lean and mean ‘secretive” startup,’” said Biddle, who used to work at Gawker. “Now that they’re established and have clearly weathered popular outrage over their work with ICE and a lifetime association with Peter Thiel, it’s time to cash in.”
The company that would never go public is about to go public
Karp famously and repeatedly said that he would never take his company public, believing that staying private gave Palantir an edge its public company competitors didn’t have.
“The minute companies go public, they are less competitive,” Karp said in 2014. “You need a lot of creative, wacky people that maybe Wall Street won’t understand. They might say the wrong thing all the way through an interview. … You really want your people to be focused on solving the problem.”
But Karp has seemed more amenable to the idea in the last few years. When Palantir added its first female board member in June, a public filing seemed all but certain — according to California law, public companies must have at least one female board member. Palantir filed its initial paperwork with the SEC on July 6 in a confidential filing that allowed it to avoid revealing much about its inner workings to the public. Twitter, Uber, and Spotify, among other startup giants, have done the same thing. There’s no timeline for when the company might actually go public.
Despite Palantir’s enormous valuation, the company has never made a profit and “struggled to live up to” its “hot startup image,” as the Wall Street Journal said in 2018. Bloomberg reported last year that Palantir’s valuation had plummeted to half, maybe even a quarter, of its 2015 peak, as investors wrote down the value of their holdings and the company offered discounted shares to employees to boost morale. Big corporate clients such as Coca-Cola, American Express, Hershey, Nasdaq, Home Depot, and JPMorgan have dropped the service, as has the NSA, according to BuzzFeed News.
But 2020 has been mostly good to Palantir, if to no one else. The company pulled in $480 million in revenue in the first half of the year, putting it on track to possibly hit $1 billion by the year’s end. It has that $800 million contract with the Army and is said to be increasing its corporate customer base with its “Foundry” product, which requires significantly less time, money, and employees to set up than the company’s custom-built solutions. Meanwhile, as evidenced by its recent work with HHS, the pandemic has increased worldwide demand for its software. Investors and employees alike have been itching for a return on their investment for years, and now might be the best time to make their wishes come true.
“The market right now is crazy,” Ashu Garg, a partner at venture capital firm Foundation Capital, told Recode. “There’s a junk rally for tech stocks in the public markets, and most tech stocks are very richly valued without a lot of discrimination around quality.”
Going public will mean Palantir’s opaque business practices will have to be more transparent, and the company may not be able to simply wave off public outcry over its work as it has in the past. But experts and advocates seem to doubt much will really change on either of those fronts.
“Going public might make some additional information public, but it does not guarantee oversight or accountability,” Scott said.
Garg doesn’t think Palantir’s work with agencies like ICE and the resulting bad publicity will be too much of a detriment in the market, given how interwoven that work is and has always been with the company’s business model — not the case for, say, the Facebooks and Ubers and Zooms of the world.
“Palantir’s core business, and probably its most profitable business, is its government business — especially work for three-letter agencies and the Department of Defense,” Garg said. “I don’t think that’s going to change.”
What remains to be seen, then, is if Palantir’s ability to marry 21st-century Silicon Valley disruption to 20th-century defense contracting will live up to its valuation when it hits the stock market. At a time when Big Tech companies are trying to make their data collection practices more transparent and say they’ll give consumers more control over them (and are facing increased pressure from lawmakers to do so), Palantir has been able to keep much of its work with our data secret. A successful IPO will only give it more reasons and opportunities to do so.
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