Alex Karp Leaves BlackRock CEO Speechless

Well, first of all, delighted to be here and with that introduction, maybe I should just stop. Let's go downhill from here. Would you like to talk about our return some more and I'll just time.

I've been public 26 years. I think one of the things to remember, the background backdrop of your question I think for is though you have in America and I would say also in Europe historically industrial development and military technology were obviously co-in. As a generalization but more true than not, you developed a product for the military that then was dual functioned and raised the standard of living of the country. And then for lots of reasons I'll just leave aside for now, that's not the way at least technology was built until now. There's all these defense tech startups and Palantir, it was that you had this thing where you were going to create something that had to work under the harshest conditions that was presumably significantly better than anyone else's to the point where it would give you more than a slight advantage on a battlefield, especially if combined with your way of fighting.

And you saw this, there was a very famous socialist German historian who said one of the problems Germany had was the war fighting machine was so good that they just said, 'Well, we'll decide on the battlefield who's right.' And that led to obviously lots of disjunctions and real problems. In the American context and I would say there you have a dislocation between what has happened recently in America and what is happening in Europe. And what I think, so I think America and China are very successful and I spent most of my adult life in Europe and I'm very pro-European but I think any honest assessment is it's not, that's not gone very well. You built things that could be used in an adverse condition. So rough, dirty, morally gray conditions. So how do you change the morality to fit with how we fight in the west is also a big vector. So the morality is difficult. The conditions under which you use the technology are difficult. In a software context, you're not directly connected to the network. In many cases, you have constraints under which you have to fight even though that's not the optimal way to fight and you have very specialized ways of fighting in each country. The positive side of that was that you also were building something that could be deployed that had an obvious value to the average citizen.

So now you have this, the AI thing is there's many things that are really interesting about it. But if you start with the banality that I think until very recently all kind of adversaries of broadly defined the west assumed that investments in software-based defense were some kind of crazy thing Americans do for marketing, a get-rich company blows up, you're on your beach in the Bahamas but shareholders are happy and it's gone kind of thing. So first of all you could say well that's changed. But germane to your question, the learning process in building, how do you build this for sovereign governments is also a learning process for how do they adopt these technologies. So it's not just the technology because if you're building a tank like the British and then the French and then the Germans kind of optimized tank technology it's easy to see how you would deploy it. But how do you deploy a system that's primary value is organizing parts on the battlefield without seeing the parts on the battlefield and seeing does it work, how much does it work, is it much better than what we had, can we do things we couldn't do in the past.

And then there's a hidden thing about software AI that a lot of the value interestingly people always assume the value is from where you are to where you should be and that's obvious. But in most sovereign nations in the world, I mean we deal with almost all in one form or another that are broadly defined, the actual technological rigor of the enterprises has significant holes in it. So it's like, as you know I'm dyslexic, it's very dyslexic. There are like whole pieces of the enterprise that exist on a PowerPoint that when you go to battle you will find out do not exist. And this, whatever country you're in in this room, if you are in the west, this is a problem you have. A day of battle, you will find out. This is one of the advantages the Ukrainians had. They essentially started from nothing. And so you didn't have to rediscover that your enterprise didn't work after in fighting. And one of the huge advantages America has is just for better or worse, I believe it or not think mostly for worse, I was always against interventions, I'm not a neocon, we had just all this experience on the battlefield so you could see what worked and what didn't work.

But pulling it back to the, so the first thing that sovereign nations really struggle with is can I identify which tech is better objectively? Can I even rate it? Can I rate, I'm looking at, I just say yeah.

Actually let me reframe it. You have to know where you are to know where you want to go.

So like the point I'm making is with this exogenous, is one of the most important things Palantir's done on the battlefield is be able to make up for the fact that half your enterprise doesn't even work on the battlefield. It does work in a lab on a PowerPoint only built by country.

Well because the conditions of a battlefield are rough. And like for example, if you just take Ukraine as an example just to make it empirical, you know as everyone reads this like okay well how hard could it be to move a drone from A to B. Well actually first of all you're going to need to know where you want to put the drone that's going to require synchronizing all your data. You're going to need to do that without transferring that data to your adversary which means you're going to have to know every single person who touched it. You're going to have to obfuscate it till the final thing. Then you're going to want to do it presumably either within the accordance of your strategy or with your ethics. Where does it not go? You're going to want to be able to correlate. Do you want to put the drone on your asset? No one, only two people in Ukraine may know that one of the generals is your asset. You can't tell people that's your asset. How do you make it look like to your soldiers that you actually were taking people out and you just missed your asset? Then and then the war advances. So the Russians, which are often very underestimated for reasons I don't understand but like they're mathematically arguably the best in the world and things they may not have in the beginning they can kind of cobble together and so they began jamming electronics. So now you have a completely different problem, but presumably your enterprise has to be the same or developed because now it's not a question of going from A to B. It's a question of going through a completely jammed environment where you have no connectivity while actually collecting data while you go through that environment. And every one of those things is like a dynamic challenge.

None of which were foreseen even before the Ukrainian. Every single battle zone in the world has a... By the way, the other thing is then people fight differently. So like if you look at the big battlefields, I'm sure some people love our work here and some people hate it. By the way, we welcome all opinions at Palantir. Even inside Palantir, we have people who love our work and people who are unhappy with the work. We welcome all.

It's a spirit of dialogue with somewhat of a leader. If you look at how, when the Ukrainians, it's a small team of people and very courageous soldiers that are very technical. They have highly technical people that have built on top of our product, things that we don't understand and proprietary ways of using the product. In Israel, they according to rumors use their intelligence. So most people fight military to military. This was intelligence in Iran from what I can tell from the papers. And then in America you just have massive forces that no other country has but they had to be integrated and the integration capacity. So every one of those things is different and so the two-fold role of enterprise software on a battlefield is one to make sure all the underlying things actually works and then two to raise the level to a level no one else has in the world.

Well, first of all, the fact that it's basically a purely raw naked environment means that you actually know the ground truth of what could work independent of what enterprises think can work. And the general, I think at a high level it's almost one-to-one translatable but precisely because, just to take enterprises in general, not all enterprises tend to want to over time become like every other enterprise. So if you take five A enterprise and B enterprise and C enterprise, they're in the same market. Their tech infrastructure is trying to make them into the same enterprise. They have the same org chart.

They have presumably roughly the same, they don't have the same data and infrastructure. And what you learn on the battlefield is that and in life is that that's not particularly valuable. What is very valuable is an enterprise can do something no enterprise in the world can do. And so that is the goal of every single military and intelligence service. In fact, all these intelligence services and militaries have their own specialization. And so when we went to commerce like what we're saying is how can we make your insurance company, the way you underwrite, how can we make that to your tribal knowledge about underwriting? How can we transform this to knowledge everyone has to a knowledge only you have and with efficiencies that no one else has.

So as an example on the battlefield one of the most important issues is how do you acquire data, process it and then put it into a framework where it can be actioned either from an intelligence perspective. Yeah. So just obviously what does a business do in the end of the day, what is a business doing? I mean it is, so for example especially in anything underwriting, banking, hospital intakes, it's information, it's sorting the information in a way that you have a distinct advantage over other people who are similarly situated, that advantage can't be eviscerated easily. And so de facto for what you're doing on the battlefield with our products without getting happy to is like what you're doing with ontology and foundry in some cases on the battlefield but definitely in like commercial organizations across the world but especially in America is when you approach the underwriter or the hospital, we power tons and tons of hospitals right, they have an intake problem, they all have an intake problem, they all have a shortage of doctors and nurses, they are working in a low margin environment but every single one has a different way of processing their patients according to what their specialty is and the kind of patients they don't do well with and how do you manage that. And so the intake flow and into your enterprise in a way that you can actually process these things 10, 15 times faster than you could before.

It saves, what saves a lot of lives. It also interestingly because you're processing the LLM in an ontology you have a structure, it all despite what people may want to believe it also bolsters civil liberties because now you can say well I mean just simple questions was someone processed based on economic considerations or were they processed based on their background? Like those things are impossible to see unless you have like, there's a huge civil liberties betterment side of this that typically people don't believe we care about or but it's actually exactly the opposite. We do care and showing is caring. It's like we can granularly show why someone came in, why they were taken, why they were rejected and we can do it in a way that makes business sense for the business itself. And then it leads to safety efficiencies.

Well, the if you want to do a shorter kind of financial version, you basically in the past to do what we can do in the full light of a public market, you needed to take the company private. So, and then you would take out the cost structure and you that you probably resell it. Well, now you can take out the cost structure, make the workers more important. So, the actual workers, not the fat kind of in the middle. And then you can change the way they go to market.

Much faster and then the nurses, the nurses, one of the, the nurses and doctors are also happier.

No no what I'm suggesting is they don't have to do that anymore.

Well, I mean our adoption accelerates beyond our capacity. I think if you just buy large language models off the shelf and try to do any of this, it won't work.

It's a, and well, also it's not precise enough. It's like you can't do underwriting with a large, you couldn't do any of these things that are regulated. The problem with adoption at this point is people have tried things that just can never work. Like buying, you borrow a large language model, you put it on your stack and you wonder why you know it's like not working. And so what you're going to see especially in America is people trying to do something like what we do with ontology maybe by hand because once you build a software layer to orchestrate and manage the large language models in a language that your enterprise understands you actually can create value.

Like there's a lot of discussions like are we in an AI bubble? What is the meaning of the bubble? I think what if anything we're just in a lag where there's a lot of AI, some of it works. Again, if you go back to the battlefield context, like everybody in the world assumed this would not work, but now it does work. And so now the question isn't does it work, but how can we get it to work for my country? And this is exactly what's happening in companies. It's like, oh, this company it worked, mine didn't. What are you doing? Like for example, I mean, if you want to just make it like parochial to us, Palantir barely has a sales force. In fact, it seems to be getting smaller every time I go see them. And it's not because we're trying to save on the unit economics. It's actually because it is a low trust environment in AI. People have tried lots of stuff. A lot of it hasn't worked. But if you've delivered stuff that does work, why do you need a salesforce?

Well, you have to say, hey, don't talk to us. And then that's on commercial. In government at this point it's very hard to export simply because we have to train the people and we have limited bandwidth.