Eccentric, genius, maverick, villain, philosopher, dreamer.
Such impressive descriptors for a CEO. Alex Karp, CEO of the American software company Palantir, is what makes the company unique. It seems that Karp embodies the secrets to Palantir's success in the tech industry today—unconventional thinking, a unique sense of mission, and controversial principles.

He receives both the cheers of fans thrilled by fantastic stock returns and the criticism of opponents angered by Big Brother-like ideas. Alex Karp, co-founder and CEO of Palantir, was interviewed. Here is an introduction to Alex Karp along with the interview content. (Statements made by him during the interview are indicated in bold within quotation marks.)

*This article is the online version of the Deep Dive newsletter published on October 17. Subscribe to the Deep Dive newsletter for 'economic news that draws you in as you read.'
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Introverted, with ADHD, and extremely candid. This was the character assessment of Karp, which made the interviewing journalist nervous. The time allotted was just 10 minutes. There was concern whether the interview would proceed properly in a bustling corner of the pop-up store event in Seongsu-dong, Seoul.

He lightened the mood from the start with this statement. “You probably didn't know, but all my friends in high school were Korean, and my first girlfriend was Korean. That's why I like kimchi stew. And young radish kimchi!”

Who would have thought that the curly-haired African-American Jewish CEO (with a Jewish father and an African-American mother) known for lacking sociability would shout out for young radish kimchi. He added, “The characteristic of Koreans is their high level of competence and very sophisticated aesthetic sense. And everyone knew how to do this.”

He then demonstrated pen spinning with his fingers. “You can tell I went to school with Koreans by this.”

He also mentioned his mother, an artist. “My mother collects Korean art. She used to spend three months a year in Korea to learn Korean and study Korean art.”

Karp graduated from Central High School, a magnet school in Philadelphia, in 1985. He then majored in philosophy at Haverford College, graduated from Stanford Law School, and obtained a doctorate in social theory from Goethe University in Frankfurt, Germany. As he explained in a past interview, he has no technical degree, no cultural ties to the government or industry, and his parents were hippies, making him an outsider in both Silicon Valley and Washington.

Karp, who was running a successful investment firm based on the inheritance from his grandfather, was drawn into founding Palantir in 2003 at the age of 36 by his close friend from Stanford Law School, Peter Thiel. Thiel is a legendary Silicon Valley investor known as the 'godfather of the PayPal Mafia.'

After the shock of the 9/11 attacks in 2001, Thiel thought of creating a tech company to prevent terrorist attacks using fraud detection software designed for PayPal. Karp was one of the co-founders gathered, and Thiel offered him the CEO position.

Why? Thiel explained in a New York Times interview, “Alex doesn't look like a salesman you would send to the CIA. The paradox when selling something to someone is that you have to be just like them for them to trust you. But at the same time, you have to be very different for them to think you have something they don't.”

Palantir, named after the all-seeing crystal ball 'Palantir' in the novel 'The Lord of the Rings,' integrates vast amounts of data held by government agencies or companies to see through their correlations, patterns, and trends.

The business model is somewhat unique. Palantir engineers, who receive high salaries, are directly deployed to client sites to develop customized problem-solving software platforms needed by the clients. Essentially, engineers work autonomously with a sense of ownership, as if they were 'startup CTOs.' Each of these 'Forward Deployed Software Engineers' plays a crucial role in the company.

Thus, Karp emphasizes the artist spirit. In his book 'The Technological Republic,' he states, “Software and technology development is an art and science based on observation, not theory. (…) The most productive software companies are like artist communities, filled with temperamentally difficult and talented souls.”

In fact, Palantir distributes books on improvisational theater to new employees. They believe that actors performing improvisational acts on stage and engineers developing new software are connected. Hierarchy? Authority? Rank? Such things that don't suit artists are unnecessary at Palantir. Instead, they pursue a culture of collision, confrontation, and debate.

This mindset of 'technology development = art' was also evident in the interview. When asked, 'Korea is strong in semiconductors but weak in software. What do you think Korea needs to develop software technology like Silicon Valley?' he responded:

“Rather than trying to become like Silicon Valley, it is better to create something unique to Korea. It will probably be a hybrid of software and hardware. Being original is better than being a mediocre second. If it were me, I would focus on hardware-software partnerships and learn how to achieve that.”

-Do you think Korea's future is bright?

“Of course. I believe there is a significant correlation between the ability to form music groups and the ability to handle technology. Creating a great tech company and forming a music band are not so different. Korea is the only non-English-speaking country that exports music and art to a significant level. No other country does that. And Korea has a history of survival. It started from nothing and was oppressed. It is also the only Christian country in Asia. I think the entire mindset, such as the structure of morality, is similar to (the U.S.).”

His sudden shift to K-pop was intriguing as it aligned with the content of his book. When asked if he listens to K-pop, he replied:

“Unfortunately, it's not my taste, but I know it sells well. It's, how should I say, charismatic. Building a charismatic business is something only America has done. The only place I've seen that outside the English-speaking world is Korea. I think you underestimate how unique that is.”

Karp emphasizes “Palantir's revenue grows like a startup and has high margins.” He states, “It is growing astronomically in the U.S.” and when asked about the so-called 'AI bubble theory,' he says, “Our product demand is so strong that I don't know what that means.”

Indeed, Palantir's revenue in the second quarter surpassed $1 billion for the first time (a 48% increase year-on-year), surprising Wall Street. Having erased its past of continuous losses for 20 years since its founding, it now boasts eight consecutive quarters of profitability. The gross profit margin (the ratio of profit after deducting the cost of sales) is a staggering 80%. Although the initial cost of platform development is high when acquiring customers, once established, the business structure allows for significantly increased profitability.

This is the secret behind the phenomenal stock return of 324% over the past year and 1007% over two years. Palantir enjoys enthusiastic support from 'Seohak ants' (Korean retail investors investing in foreign stocks). This is why Palantir, a B2G and B2B company with governments and businesses as clients, held a pop-up store in Korea for the first time on October 14-15. Karp states, “Korea is one of our largest individual investor groups. We love individual investors. They are very important to us.”
Palantir gained fame when it was revealed to have played a crucial role in tracking Osama bin Laden, who was killed by U.S. Navy SEALs in 2011. Now, Palantir software is used not only for government tasks such as tracking terrorists and detecting drug smugglers but also for detecting fraudulent transactions and money laundering by investment banks, analyzing data for new drug development by pharmaceutical companies, and developing faster Formula 1 cars for Ferrari.

Many companies that have adopted the Palantir platform have experienced dramatic productivity improvements. Recently, a supply chain manager at the hamburger chain Wendy's revealed that with Palantir's AI platform (AIP), tasks that took 15 people a day could now be completed in 5 minutes. Once companies experience the effects of small projects, they tend to gradually expand the scope of Palantir technology application.

But doesn't this naturally raise the question: What happens to the jobs of those 15 people replaced by Palantir software? Are humans being pushed out of jobs?

Karp rejects such pessimism. He argues that AI will not threaten or eliminate human jobs but rather enhance the value of 'real work.' He states, “In places like Korea, where there is a highly trained professional workforce, such issues (job loss due to AI) will not be severe. For example, people who weld ships. Such people are not laid off. Frankly, there are countless jobs for such workers in the U.S., and it's the same here.”

In this regard, Palantir recently launched a campaign called 'Work Intelligence: The AI Optimism Project.' The manifesto includes the following: “You are being forced into an AI future where you become useless or meaningless. We see it differently. AI does not eliminate jobs but transforms them. AI does not take away people's life purpose but liberates them from hard labor, allowing them to do what humans do best.”

Palantir, one of the top three favorite stocks of 'Seohak ants' (after Tesla and Nvidia), raises the natural question: Can Palantir's unique technological competitiveness, which justifies this insane stock price with a PER of 600 times, continue? Won't other data analysis and AI solution big tech companies catch up and threaten Palantir's status?

From an investor's perspective, we asked: Who is Palantir's competitor?

“As you know, we mainly compete with ourselves. Sometimes doing foolish things. We are not particularly competing with anyone. It helps to think of this from a more Asian perspective, focusing on making oneself better rather than concentrating on others.”

A response befitting a meditation, Tai Chi, and cross-country skiing enthusiast. By. Deep Dive

*This article is the online version of the Deep Dive newsletter published on October 17. Subscribe to the Deep Dive newsletter for 'economic news that draws you in as you read.'
https://www.donga.com/news/Newsletter

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