Palantir: The Silicon Valley Unicorn No One Knows About

Go to your local Starbucks and ask someone to list the most powerful technology firms today – you’ll probably hear Google, Facebook, Apple, or Amazon. Compared to these firms, Palantir has largely gone unnoticed, yet it may have just as much influence in our daily lives as its peers. Valued at $20 billion in 2015, Palantir shares its spot with Airbnb, Xiaomi, and Uber as one of the world’s most valuable tech startups.

The name “Palantir” comes from J.R.R Tolkien’s Lord of the Rings. It is a dark crystal ball that allows its user to see any part of the world. Palantir Technologies Inc. plays a similar role for its clients by funneling data sets through its software interface to create intuitive maps and predict the future. The NSA, FBI, CIA, law enforcement agencies, various military agencies, and even the IRS have used “Palantir Gotham” to make sense of the enormous amounts of data they’ve collected. The Pentagon used Palantir to track patterns in roadside bombs. Infowar Monitor used Palantir to uncover China’s cyber-espionage operations, Ghostnet and Shadow Network. Palantir is even rumored to have helped track down Osama Bin Laden. 

Palantir’s sensitive “big brother” clients have kept the company private with minimal publicity, but that may soon change as the company is mulling an IPO in 2019. Over the course of 10 years, Palantir has slowly shifted its business from counterterrorism towards the commercial sector. “Palantir Metropolis” helps hedge funds, banks, and financial services identify trends and anomalies from various data sets. Today, commercial contracts generate approximately half of Palantir’s total revenue.

Not much is known about Palantir’s business model, but the company is expected to turn a profit for the first time this year in its 13-year history. A report by Zion Market Research predicts the global advanced analytics market to reach $60.44 billion by 2021, growing around 33% per year. Palantir seems poised to capture this growing market. Its European operations have tripled revenues since 2013 and cash burn rate has decreased by 60% across the company, according to Alex Karp, the company’s CEO and co-founder. However, it will face intense competition from established players – IBM, Microsoft, and Oracle.

For now, it is uncertain whether Palantir will follow through with its plans to go public in 2019. With a growing commercial demand for big data analytics and trends in global counterterrorism and information warfare, Palantir’s potential for explosive growth should not be overlooked by tech investors.

Elon Musk’s Entrance into the Hyperloop Industry

On July 20, 2017, Elon Musk announced in a tweet that he has secured “verbal [government] approval” to create an underground hyperloop between New York and Washington D.C. This came as a surprise to the numerous hyperloop startups that spawned after Musk offered this idea to the public in a white paper written by his SpaceX engineers. Four years ago, Musk claimed that he was so busy with his other revolutionary ventures (Tesla, SpaceX, and SolarCity) that he wasn’t planning to build the hyperloop himself. Now that Tesla and SpaceX have working business models, Musk has changed his mind.

Of all the Hyperloop startups spawned after Musk’s white paper, Hyperloop Technologies Inc., or “Hyperloop One”, is the only company that have developed a working prototype so far. The prototype pod reached speeds of 200mph in its latest test in the deserts of Nevada,  a fraction of the 700 mph promised in the original white paper. The rest of the startups have made grand promises but vague progress. Although Elon Musk has had minimal involvement with the existing hyperloop startups, his name is often associated with those companies. Through a new tunneling venture, Boring Co., Musk will finally enter the arena of hyperloop competitors that he helped create.

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Incumbents enjoy a head start in the development of the loop, as well as stronger business and government relationships. But with Elon Musk’s entrepreneurial reputation, Boring Co. will likely receive favorable public attention in its debut project. Musk is also one of the few hyperloop executives that possesses prior experience in an utterly new industry. The commercial space launch market, dominated by Musk’s SpaceX, is not so different from the hyperloop ventures.

Both SpaceX and Boring Co. are commercial interpretations of what was traditionally government-run enterprises. The challenges and the lack of monetary payoff in early space flight mean that space exploration was originally government-sponsored with emphasis on symbolic value. As space technology became cheaper to develop, SpaceX and other space ventures found that there was a niche market waiting to be fulfilled. NASA’s budget for space travel has been on a steady decline since the heydays of the cold war. The retirement of the space shuttle in 2011 meant that the only way for the U.S. to recover its ISS astronauts is to spend $80 million per seat to use Russia’s 1966 Soyuz spacecraft. Commercial satellites had to be launched through costly and dated government rockets, until SpaceX revitalized the industry with private investment.

In a similar manner to government space travel, our state-owned Amtrak trains are often shunned in lieu of Greyhound buses and road trips with cars. The exorbitant cost of railroad construction and an unprofitable, government-subsidized public carrier means that there should be ample room for a hyperloop company to bloom once they develop a working model. Both industries require companies develop an efficiency in their businesses that renders government players obsolete. The public impact of the ventures means that both industries will have to wrestle with heavy government regulation.

Neither of the nascent industries have an established technology and business model. Though governments have been using similar methods of space flight for decades, the goal of private space flight is to disrupt that model with something drastically better. Space exploration ventures have a variety of approaches: SpaceX with home-seeking rockets focused on low-cost cargo transportation, Blue Origin and Virgin Galactic with reusable shuttles hoping to create a space tourism market. Hyperloop startups each have different approaches as well. TransPod Hyperloop focuses on high-speed passenger transit, while Arrivo wants to disrupt the freight market with high-speed cargo pods. Hyper Chariot promised supersonic speeds of 4000 mph using “railgun” technologies that could put existing hyperloops to shame in 2040. Elon Musk’s Boring Co. is the only venture that plans to build a hyperloop underground, through futuristic tunneling machines. There will likely be big winners and losers as the industry leaves the incubation stage.

Regardless of approach, Elon Musk’s entrance into the hyperloop race is an exciting turn for a relatively quiet industry. Musk’s reputation for turning absurd promises into reality bodes for Hyperloop publicity and investment. Time will tell whether Boring Co. is truly “in the loop.”

NAFTA: Past, Present, Future

Since its inception in 1992, the North American Free-Trade Act (NAFTA) has increased continental trade from $290 million to over $1 trillion in 2011. By eliminating trade barriers between the U.S., Canada, and Mexico, NAFTA created a single market in North America and allowed businesses to operate in Toronto as they would in California. It is the bedrock of North American economic relationships and has dominated political discourse in the past due to the controversies of free trade. Having remained untouched for over twenty years, NAFTA and its participating economies will soon face changes as the Trump administration renegotiates parts of the deal.

Built upon the free-trade agreement that existed between the U.S. and Canada, NAFTA’s controversy came when George H.W. Bush added Mexico, a developing country with wages far lower than the average of its neighbors. Ross Perot, who ran against Bill Clinton for President in 1992, characterized the negative effects of NAFTA as “a giant sucking sound going south”. Perot and many politicians at the time opposed NAFTA for fear that American and Canadian workers would lose their jobs to cheap labor from Mexico. They were partially right – a study by the Economic Policy Institute estimated that around 600,000 jobs have been transferred to Mexico as of 2010 but also stated that “trade both creates and destroys jobs”. For every manufacturing job lost to Mexico, the US economy earned around $900,000 of benefits in terms of cheaper prices, higher productivity, and export-related jobs. American companies gained access to cheaper labor and intermediary components, lowering operating costs and enhancing their competitiveness worldwide.

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“A giant sucking sound [of jobs] going south” – Ross Perot

The federal government has long anticipated that trade with lower-wage countries would shift blue-collar jobs to other sectors. The Trade Adjustment Assistance (TAA) Program was established in 1962 to help suffering workers afford reeducation to work in other industries. But original funding for the TAA did not account for the impact of globalization in recent decades as Asia entered the labor market. Without additional funding from Congress, the TAA’s impact was negligible when American workers needed it the most.

Feeling neglected by the government, U.S. manufacturing workers played a significant role in the election of President Trump, who has promised to bring jobs back on American soil. The renegotiation of NAFTA fits that agenda, but may not result in many jobs being brought back to the U.S., as the overwhelming majority of the U.S. trade deficit lies with China. The biggest culprit of job loss may not even be trade itself. A report by Ball State University estimates that “88% of job losses in manufacturing in recent years can be attributable to productivity growth.” As technology advances and companies become more efficient, workers aren’t needed in the same quantities as in prior decades.

Mexican laborers may have more reason to agree with President Trump’s intent to renegotiate NAFTA than their American counterparts. Mexico signed NAFTA believing that the pact would help modernize their economy and provide higher income jobs, but the results have been mixed. Mexico’s per capita GDP growth since the signing of NAFTA has lagged behind that of other Latin American countries dramatically. The Center for Economic and Policy Research (CEPR) attributes this to Mexico’s dependency on the U.S. economy after NAFTA. While the financial crisis of 2008 wrought havoc on the U.S. economy, Mexico suffered far worse. U.S. GDP sunk by 2.4% in 2009 while Mexico’s fell by 6.5%. NAFTA also opened Mexican markets to U.S. competition – 1.9 million Mexican family farmers lost their jobs due to competition with U.S. agricultural conglomerates. The lack of economic opportunity drove rural Mexicans to immigrate to the U.S. to compete for jobs, deepening the rift between beleaguered workers of both countries.

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President Trump surprised the public when he called NAFTA “the worst trade deal ever signed” during the first presidential debate. While that’s a bold assertion, it is clear that NAFTA, like any other piece of legislation, is far from perfect. Considering NAFTA’s benefits to the U.S. economy, a hardline approach to trade with Mexico will probably end in a lose-lose situation in which we alienate an important regional ally. Through respect and mutual cooperation, we can minimize NAFTA’s harm where it is most concentrated, while still enjoying the benefits of free trade. A strong Mexican economy will reverse the flow of immigration and provide a bigger market for U.S. firms, both of which means more jobs for U.S. workers. If President Trump and American workers believe that our relationship with Mexico is unfair, help instead of punishment can be the ultimate solution to our problems.