We Study Billionaires - The Investor’s Podcast Network - TIP841: Palantir – Palantir is Cheaper than I Thought! w/ Daniel Mahncke & Shawn O’Malley

Episode Date: August 27, 2026

Daniel Mahncke and Shawn O’Malley take a deep dive into Palantir (NASDAQ: PLTR), the data and AI platform behind everything from battlefield targeting systems to Airbus’s A350 production line, with customers including the U.S. Army, the NHS, Ferrari, and Airbus. Palantir is growing revenue at over 90%, with net dollar retention at 157% and adjusted operating margins above 60% — a Rule of 40 score of 155%, roughly double what the best software companies in the world achieve. It also trades at around 60 times sales, which is why The Economist called it possibly the most overvalued firm of all time. Daniel and Shawn discuss whether the ontology layer is a sustainable moat now that Microsoft and Google have launched competing products, what Alex Karp and Peter Thiel’s politics mean for a company selling to Western governments, and why twenty years of losses turned into the fastest-accelerating software business on the market. In the end, Daniel values the business and decides whether PLTR deserves a spot in The Intrinsic Value Portfolio. IN THIS EPISODE YOU’LL LEARN: (00:00:00) Intro (00:02:29) How Palantir’s Ontology actually works (00:16:26) How AI turned around Palantir’s business (00:20:59) Why Palantir has the best margins in the industry (00:34:22) Why no one seems to be able to copy Palantir’s Ontology (00:38:01) How Palantir grows its customer base (01:07:36) Palantir's valuation discussion (01:11:37) How much Palantir stock is actually worth (01:12:52) Whether PLTR will be added to The Intrinsic Value Portfolio Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences. BOOKS AND RESOURCES Join the exclusive ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Mastermind Community⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Track ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Portfolio⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn more about how to join us in NYC for our ⁠⁠⁠⁠⁠⁠Intrinsic Value Conference⁠⁠⁠⁠⁠⁠. Portfolio Review ⁠⁠⁠⁠⁠Submit Tool⁠⁠⁠⁠⁠. Satish Terala’s AI Masterclass. Future Investing’s Interview with a Palantir FDE. Check out our previous Intrinsic Value breakdowns: Constellation Software, Dell, Alphabet, Constellation Software Spinoffs. Related ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠books⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ mentioned in the podcast. Ad-free episodes on our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Premium Feed⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. NEW TO THE SHOW? Get smarter about valuing businesses through ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Intrinsic Value Newsletter⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Check out ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Investor’s Podcast Starter Packs⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Follow our official social media accounts: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠X⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠LinkedIn⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ | ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Facebook⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Try our tool for picking stock winners and managing our portfolios: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Finance⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Enjoy exclusive perks from our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠favorite Apps and Services⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Learn how to better start, manage, and grow your business with the ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠best business podcasts⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. SPONSORS Support our free podcast by supporting our ⁠⁠⁠⁠⁠⁠sponsors⁠⁠⁠⁠⁠⁠: Scribe Plus500 Netsuite Plaud References to any third-party products, services, or advertisers do not constitute endorsements, and The Investor’s Podcast Network is not responsible for any claims made by them. Support our show by becoming a premium member! https://theinvestorspodcastnetwork.supportingcast.fm

You're listening to TIP. Welcome back to The Investors Podcast, episode 841, and the last time the two of us talked, we discussed our biggest winners and our biggest losers out of all the companies that we pitched in the last one and a half years. And I thought that was of a lot of fun. It was a nice change of pace. But today we're getting back to what we do best, and that's flipping over more rocks, looking for opportunities.

And you've got a stock pick today that listeners will probably have very mixed opinions about and there's others who have heard a lot about it, but I'm guessing really are going to be excited to better understand what the business is all about. It is a divisive company, I would say, but also a very popular company, especially in the investment circles. And I know you and Kyle looked at SpaceX not too long ago and surprise surprise, that company is far away from being a value play and therefore not the type of company that we want to invest in. And I thought it might be the same for today's pitch, which maybe we should say it is Palantir. And please don't get me wrong. Palantir is not a value play. But when I started my research, I did it thinking in the back

of my mind at least, I might need to abort and look for another company because there's just no sense in pitching it. But that wasn't a case. I actually found myself pretty excited about the opportunity. Just a year ago, Palantir traded at twice the multiple with half the growth rate. And that has completely shifted now. And again, that does make it a value play. But for everyone who loves high-quality companies as most of us do and is a generally curious person. I think you should listen to this. I think you will be positively surprised by today's pitch. Yeah, maybe I'll be one of them. Just like you, I never looked at Palantir thinking it was way too expensive anyway. But if you're intrigued by it, then I'm ready to get into it. Since 2014, with more than 200 million downloads,

we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now, for your hosts, Sean O'Malley and Daniel Manker. All right, so where do you want to start? Personally, I think I could use a brief explanation of what exactly Pounder does. I can't really say I have a good idea of what

they do. It's a very enigmatic company. Yeah, before looking at this for the episode, I honestly didn't really know either, but it's quite fascinating. So to give the first quick example, let's imagine any large organization, right? It could be an airline, it could be in hospital, it could be a car manufacturer or the army, which is actually a big client, but it could be anything else too. So there's always a lot of information in all of these organizations, right? but it's scattered across dozens of separate systems and departments that barely ever talk to each other, at least not efficiently. And I certainly can say that's the case in Germany, but I think it's also the case in the US.

So let's just stick with the example of an airline for now. Assume you have an airplane that runs into technical problems in, let's say, you know, Frankfurt Airport, which likely happens again in two weeks time when I'm on my way to our intrinsic value conference in New York City. That's traditionally how it works with my travel. But then the question for the airport is, what happens now? Well, the maintenance team wouldn't know which part has failed and how long the repair would take. A different system would then know, you know, what's about the crew and how many duty hours have they left. A third one, which would know what passengers are on board.

Then a fourth would know which of those passengers have connecting flights that they need to get. And a fifth one would know what those replacement seats are worth. So you basically have five different systems and teams that need to communicate and coordinate. And the way, this is actually still getting resolved today in 2026. is but just phone calling each other. And all the while, Daniel, you're just sitting there inside of that plane, stressing about whether you're going to make it to the conference in time and hopefully not finding yourself waiting on four canceled flights,

like what happened when we went to Omaha last time for the Berkshire Hathaway shareholder meeting. But it's a good thing you'll be arriving in New York a couple of days early this time. Yeah, I'm not taking any chances this time. By the way, if you're asking yourself, what is this in conference in New York City? well, as Sean, you put it rightfully before, you labeled it as the value investing conference or event of the year. And that means on Saturday, the 19th, we will host an intrinsic value conference in Midtown,

Manhattan in September. And we will have speakers from our mastermind community. And of course, you, Carl and I will also be on stage. And if you think that sounds great and you want tickets, I will link to those in the show notes. Otherwise, the easiest way to join for free is to be part of our mastermind community. and I will also have a link to the application process for that in the show notes as well. Yeah, if you want a ticket, you can just go to intrinsic value conference.com.

That's another way to do it. But all right, let's get back to Palantir. So what do they actually do and what do they sell? Yeah, it's kind of complicated. So what Palantir sells is a software layer that sits on top of all the five systems that we talked before, right? And then, you know, to just stay with the airline, they would tell us. you, where's the airplane? Where's the part that you need? Where's the crew? Where are the passengers and the connections between all of those? And they call it things. So all of these

things are not connected on what you sort of can imagine as a map. And crucially, the software also knows who is allowed to do certain things. So rebook a passenger, assign a different crew, rather than aircraft somewhere else. So you can imagine it as looking at this map that knows everything that's happening in real time. That's what, you know, Pellantier calls the ontology. And you might think, well, isn't this just a database? Because that's what came to my mind first. But the difference is that what Palantir builds is not only facts. So, you know, the plane's tail number, for example, or passenger seat,

but also the relationship and the actions between all of these things that I mentioned. So Palantir system knows that passenger X is on this particular airplane, which needs this particular part, which is fitted by this particular crew. That's how you can imagine it. And it also knows that rebooking is an action that exists. So who is permitted to approve it? They know that. And what else has to happen when it does?

So the combination of all of these things is what Palantia calls an ontology. And the ontology is what we'll talk about today quite often. So again, if you just have to have something in mind, think of a map that has everything that you could imagine on it and basically knows who is who and what is somebody allowed to do so it's easier to communicate. Yeah. So basically you have this all-knowing map or ontology layer. as they refer to it.

And that always basically knows what's going on and what has to happen next and who can make that happen. And so, gosh, it kind of reminds me of something that would be part of a Hollywood movie, like some action movie where the lead roles are out there in the field fighting the bad guys. And then there's like this control center that always knows exactly what's going on. And it's like feeding them advice. That's what I think of when I think of Palantir.

That's probably not that far off, especially when you think about the surveillance and defense work. And I'll get back to that. and explain it in more detail and how it all works. But I think we should also take a quick detour and talk about the history of the company because that's quite interesting as well. So Palantir was founded in 2003 by Peter Thiel,

Alex Karp, who is also the current CEO, Joey Lounsdale, Stephen Cohen, and Nathan Gettings. And the idea actually goes back to one of our favorite companies of all time, PayPal. And I say that somewhat ironically, because we lost some money on that bet. Obviously, Peter Thiel also founded that company, PayPal, and he repeatedly had problems with fraud. As you can imagine, it's a payment provider. There are a lot of people who want to take advantage of that.

And the fix he eventually came up with was that, you know, you could have a mix of software, which could sort of surface suspicious patterns by going through a ton of data. And then you have a judgment call of a human that is still at the end. And at least then, the most accurate thing that you could do. And then something happened in the US, and there was 9-11. And it became clear that U.S. agencies generally had all the information, they needed to stop the attack from happening,

but the information was scattered across different agencies that couldn't bring it all together in time. Again, going back to this ontology idea, they had all the information, but it was not on one map. They didn't know who can communicate to who, and that was the idea. And that's why and also how Peter Thiel got the idea for Palantier,

because he thought, what if you could build a system that connects all of these fragmented, seemingly unrelated data points, to map out hidden criminal behavior, similar to what he did with PayPal, just in a whole other scale. Do you know why Peter Thiel isn't the CEO of Palantir or why he didn't want to be CEO? Because as far as I know, he chose Alex Carp early on to run the business.

And he's taken on more of a fundraiser and advisory role. But he also owns the largest individual stake in Palantir at about 4%. And Alex Carp holds 2.5%. So he has the most skin in the game of anyone. I think you all don't fully know what goes on in Peter Thiel's mind, but I would say there's something to say about that being a strategic choice as well, that Peter Thiel might not be the best person for the CEO job. He had the vision, certainly, but he might not been the guy who wants to be the CEO of the company. Actually, you know, if you think about PayPal, he wasn't

the CEO there either for a very long time. And he just generally tends to work more on building new stuff and maybe gaining influence in both the tech founder world, but then also in politics, which seems to be more interesting to him nowadays. And I would say that's at least how it seems to me. And I don't know as well as you what Peter Thiel's reputation is in the US, but I can tell you that it's not that great here in Germany. And I'm sure there's more of a spotlight on him since he was born in Germany. That could be one of the reasons.

But I think getting international deals with governments might just be easier, especially considering the sensitive information needed if Peter Thiel is not the CEO. Although I got to say, Alex Karp is probably on his best way of getting an equally bad reputation. And again, he might be viewed more critically here in Germany, too, because he actually lived here and he studied here for over a decade. Actually, fun fact, he got his PhD at the Goethe University, which is also where I studied. And his doctoral advisor was the famous German philosopher, Juergen Habermas. Wow. So Stanford first and then go to university. I didn't realize how strong that German connection is that runs through Palantir. And for Peter Thiel, gosh, I mean, he's controversial,

of course. Rightly or wrongly, he gets caught up in a lot of conspiracy theories. And I have to admit, he does give off like supervillain vibes, which doesn't pair very well at all for a company that is really generally working to increase government and corporate surveillance in some sense. But whenever I think about Palantir, I don't know again, like the empire from Star Wars comes to mind, you know, like the bad guys, Palantir and Peter Thiel, they probably both need a lot of PR help, some sort of rebranding would go a long way. But again, it also goes without saying that Peter is hugely respected in the investment community in Silicon Valley.

And his book, zero to one is one of my favorite investing books ever. And if you read that book and then you look at Palantir, I think it gives you an idea of what the philosophy behind founding that company was. And besides Peter Thiel, who bankrolled an initial cost of $30 million for this company, in QTel, the CIA's venture arm, also put in $2 million, which doesn't sound like a lot when you compare to Palantir's size today, which is depending on the day, between $350 and $400 billion. But it was less about the $2 million and more about the access that you get to the government sector if you're sort of sponsored by the venture arm of the CIA.

They actually introduced Palantir to working for most of these intelligence agencies, but also analysts. And for a good two years, Palantir basically built the product or their only product just for this one client. You said it casually there, but there's a venture armed or the CIA. That's something I'm going to be researching more after this episode. That sounds really interesting to learn more about what kind of venture bets the CIA makes. But you said two years. Is that how long it takes to onboard a customer for Palantir? Well, it used to.

And that's actually quite interesting because the long onboarding time is why Palantir actually looked like a failed company just a couple of years ago. So first of all, why does it take so long to onboard a customer? to Palantir. As we said earlier, the ontology layer is basically a digital twin of a customer's entire organization. So you need to understand every single little detail of a corporation. If that's a huge one, that takes a lot of time. And the setup was that Palantir had two kinds of engineers. So there were product engineers who built the actual software. And then there were so-called forward deployed engineers or FDEs, who flew out to the customer and worked from the

customer's offices for at least three to four days a week. And that could easily take, a long time. I mean, not necessarily two years anymore, but it can still take months until they've actually finished their job. And on the ground work is what costs so much time. I've gone through quite a lot of reports from ex-Polentia employees where they walk through their experiences, basically, and many of them mention what we said above, which is that before AI, Palantir was even seen as a fake SaaS company because basically many people thought of them just like enterprise consultants and not much more because they travel to the client, they work with them, and they deploy some sort of, how much or how difficult can that actually be. And that's because a lot of what they do is on

the ground work, you know, just figuring out how things work, how things work together and what works and what doesn't inside the company and all that sort of stuff. The Boots on the ground approach reminds me a co-star, which is a SaaS company that we have in our intrinsic value portfolio. And for decades, though, they sent people to commercial properties to take photos and map it all. And they still do that. And they have a lot. And they of armies of people that are, you know, creating this basically unique data that nobody else has because they're going out and physically documenting all the details of these properties. And that might not be the most efficient way to do it.

It's not the fastest, but it definitely builds a moat because most other competitors are not going to go that far into the weeds. And it would be hard. It would just take the many years to recreate something like the database that Kostar has. And so it seems like Palantir has maybe done something similar. Actually, also thought of Koster when I heard about this, but obviously what Palanty does is 100 times more difficult. No disrespect to Koster.

It's a holding on our portfolio. But it's way more complicated. I mean, the biggest problem is that the data, it needs to create these digital twins and highly capable and actionable databases is scattered across the entire company. And often the data is only halfway digitized too. So, I don't know, think about handwritten documents that were scanned to a PDF, but as you would know,

that still makes it unsearchable, right? It's digitized, but you cannot just search it up, which makes things just way more complicated. That's just one out of a hundred possible problems. Again, when I went through, you know, these ex-employee articles of what they encountered there, it was just sometimes it was almost unimaginable. And another very interesting part is that many ex-employees described internal politics as one of the toughest hurdles.

So before Pallantier comes in, everybody is doing their own thing. And because of inertia and perhaps also the fear that you just won't be needed any longer when Palantir software actually exists, many times the middle management more or less refuses to hand out the actually important data. So again, the stories you can read about that are actually quite funny and I might link to some of them in the show notes. But of course, they can blatantly refuse to give out the data when the company has actually hired Palantir to work with them.

But they will just come up with these little excuses and for like, this specific database can't be accessed because, you know, security protocols. Or maybe they just literally keep delaying the meetings and, you know, cancel on calls. That's the stuff that people did in the past. So in short, I think it just turned out that a lot of the work has gone into figuring out internal politics. And then especially in high tech industries or national security, there are actual concerns about how to best give the data they need without risking any espionage or just data leaks or whatever. It's interesting because it sounds like it's just more difficult than one would assume to actually

get the data to even start the process of this ontology layer and mapping the entire business. And what's really interesting to me when I look at the numbers for Palantir is that there was actually a period of time here where growth slowed down a lot. And that was pre-AI, I guess, you know, pre-chatGBT at least. And we just talked off the record about why that happened. And you said that the entire process of onboarding and using Palantir was so complex that it really hindered their growth. And so if you look at the growth chart now, of Palantir's revenue, you basically saw growth to accelerate from 2019 through about halfway through 2023, where year-over-year revenue growth was as low as 12%. But then from there on,

it's accelerated dramatically like a rocket ship. And we're talking about 100% year-over-year growth, doubling revenues every year. That's pretty insane. And I think to explain what happened, we should start talking about the four platforms that Palantir has to. They're calling them Gotham, Foundry, Apollo, and AIP. And Gotham was the first platform that Parenthood. And it took about five years of consistent updating and improving. It was part of the first project that they did for the government agencies and was built for, as I said, intelligence generally.

So that work started in 2003 and it was based on solving the problems primarily leading to 9-11. And Gotham is basically the part that creates the digital twins for defense agencies. you know, well, Foundry is primarily a platform that was built in way later, 2016, so 13 years later, actually, and they build digital twins for corporate operations. And both of them sit on, and now it gets a bit complicated, both of them sit on Apollo. And Apollo is just sort of a deployment engine. So, you know, whenever new update drops, Apollo is shipping it to Gotham Foundry and also AIP. And you might think, okay, well, why do you need a deployment engine?

Is it so difficult to just get an update? But if you think about all of the silos that the data is sitting in, you know, on the one hand, you have intelligence agencies. On the other hand, you have huge corporations. It's not just one click of, hey, we have an update. You can click here and you get it. It's way more complicated than that. It's getting an update into what is silo databases.

There are a lot of security behind that. So that's why you need an entire deployment engine to some extent. The real game changer was AIP, which is a very smart name for the AI platform, AIP. That was an abbreviation that I think most of us could also come up with. But it actually changed the game for how Palantir approach customers and also how efficiently the software can be run on each of those platforms. Yeah, one of the things they did is they started to run boot camps, right? They basically invited a bunch of CEOs and CIOs from potential clients to showcase what

Palantir can do. It's obviously the potential clients had to bring maybe some of their data, probably not sensitive data. And then in a workshop over three to five days, Palantir showed them some ways in exactly how they could improve their business and solve some. problems for them. And so I think the powerful thing about this is that every company thinks it's different from all the others, right? And to some extent, that is true. But because of that, even if they generally know how strong Palantir is, they still think it might not work for them.

They might be hesitant. And these boot camps are really set up to prove that Palantir can, in fact, really help almost any type of company. And it's important to say that Palantir paid for those workshops out of their own pockets of companies that attended took on the wrist. except for, as you said, handing over data, but, you know, again, that was most likely not the most sensitive data in the company. I mean, perhaps we're talking about some inventory data on something similar with just the goal of showcasing how Pallantier can make the business more efficient. And you could probably say that this was a turning point that you alluded to when you talked about the numbers and growth going down to as much as 12% in 2023, because AIP made

using and also onboarding so much easier that Pallenteers suddenly exploded. And what onboarding is an important part was not so much the customer account that grew. In fact, customer account growth has actually come down from about 50% in 2024 to about half of that lately, but the money existing customers spent with Pallantier increased significantly. So net dollar retention, which is the metric that we're talking about here, is basically measuring how much existing customers spend with you. And that metric increased from a low of about 100% in 23, which basically means they spent as much this year as they have last year to almost 160.6%. 60% in the last quarter. So for every dollar spent last year, a customer now spends a dollar

and 60 cents. Let's take a quick break and hear from today's sponsors. Most leaders are automating work. They've never actually watched happen. They know how the process is supposed to go. Someone walked them through it once. It sounded clean, but the version that runs day to day looks completely different. And nobody's doing anything wrong. That gap is bigger than most of us realize. and it means the decisions about what to fix, automate, or hand to AI are running on gut, not data. That's exactly the problem that today's sponsor, Scribe, was built to fix. Scribe is a workflow AI platform trusted by 94% of the Fortune 500, and Scribe Optimize is your AI roadmap.

It passively captures how your team actually works across your approved business apps, no interviews, no manual process mapping, and follows workflows wherever they go, even when they start in one tool and finish in another. The dashboard shows you what's happening and where the time is going live right now, not a report someone built last quarter, and its top issues view doesn't just flag your biggest inefficiencies, it tells you why they're happening and gives AI-powered recommendations with estimated time savings built in. Importantly, it's a leadership visibility tool, not employee monitoring. It only runs on apps your admin approves, user level data is anonymized by default, and sensitive information is automatically redacted and never leaves your firewall.

To C-optimized in action, head tocribe.how slash W-S-B and mention the investors' podcast for a 30-day risk-free trial. That's S-C-R-I-B. That's S-C-R-I-E. Dot How slash W-S-B. Curious about online trading, but haven't taken the first step yet? You're not alone. And Plus 500 Futures is a great place to start.

The futures markets are moving fast, and with Plus 500, you can explore popular assets like oil, gold, S&P 500, Bitcoin, and more. From crypto to commodities, there's always something happening. The platform is super easy to use so you can trade on the go right from your phone. You can get started with just $100 and jump into the action. See something interesting? Once your account is open, you can trade it in just a couple of clicks. And if you're not quite ready yet, you can practice with a free demo account.

No risk, no pressure. With 20 years of experience, plus 500 makes trading more accessible than ever. check it out at plus 500.com. Trading and futures involves risks of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus. They say every day your business is late to AI.

You fall two days behind. And the competition, they're only moving faster. Fortunately, there's NetSuite next. You probably already know NetSuite, the AI-powered business suite that securely connects all your data, financials, inventory, commerce, HR and CRM, all in one source of truth, trusted by over 43,000 customers. NetSuite Next is the next huge leap because now AI is built into everything you do.

It surfaces custom insights throughout your day. AI agents work alongside you on the routine stuff, and anytime you've got a question about anything, you just ask, like you're talking to a colleague. And I use it, and really, I think you should too. For the first time ever, you can try NetSuite Next for free. If your revenues at least in the seven figures, go to net suite. dot AI slash TIP. Built for every industry, ready for every boardroom, net suite.

a.ai slash TIP. All right. Back to the show. Incredible time of Palantirers at all this growth, which is pretty much unheard of for a company of this size, did not come with any margin compression. It didn't take any major marketing expenses or anything else that they really needed to invest in to scale the business. dramatically to accelerate this growth. And profit margins expanded alongside their top line growth

metrics, which is, of course, an explosive recipe for shareholder value creation. And so back in 2020, when growth slowed down pretty materially, the company was barely breaking even with a net profit margin of just about 3 to 4%, which is pretty modest. Today, though, net profit margins are 60% are almost there. And so you have this double engine of incredible growth. on the top line paired with this incredible margin profile and a huge, I mean, a tremendous amount of operating leverage. I think that's the biggest swing in margin profitability that I've seen from revenue scaling from maybe any company besides Uber, which is one of our favorites.

Well, there's not one episode where we don't have to talk about the margin inflection of Uber, but it's actually quite impressive, especially when you think about modeling these companies, right? We always think about, well, five years out, where do I see the margin? and you want to have those companies that surprise you to the upside on exactly that metric, right? We just did an episode on all of our winners. One thing that we saw with many of them is that the margin goals that we set for three or four years time, they basically hit next quarter because they just completely changed how they think about

capex spending and all of that. And also, you know, that's, as you said, like a recipe for just success. And Palantir showed both of that to an incredible extent. And one thing you can do for, especially software companies, is look at the so-called rule of 40. And that's often used again for software companies, but also some other companies we technically can say, well, you can generate high margins, right? We're not talking about, let's say, Dell or these infrastructure companies. So what you basically do with this is you add up a company's growth rate, the top line, the revenue, and the profit margin. So let's say you have a company that has 20% top line growth and a 20% margin.

That gives you 40 in total. So this would be a company that's hitting the rule of 40. And that's considered a pretty healthy company and growth at a good margin. Now, for Palantir, that number is not 40%. It's 155%, 65% in profit margins and 90% top line growth. And if you believe Carp and, you know, the guidance, this will get even better in the next quarters. And I cannot say it enough.

This is an insane number if you look at it the first time. And that's also the case because Palantir only goes for big customers with significant upsell potential, which is, as I mentioned before, but the overall customer account of only 1,000 seems quite low. I mean, Pallantier's average deal size is in the millions, and just this quarter, they closed 220 deals of at least a million dollars. Close to 100 of those was at least $5 million, and more than 70 deals were at least $10 million. So most enterprise deals that we know from companies like Salesforce, for example, which is also

a company that we covered here on the show, they are in the, you know, five to six figure range, maybe a seven-figure deal every now and then. But Pellanty is only going for those big ones. They're not even trying to win those smaller ones, which is why the customer account generally is not accelerating as fast as the volume. So gaining 42 new customers might not seem that impressive, but closing $2 million deals, that's pretty impressive. And that's why net dollar retention is so high and why Pallanty is growing like a weed.

It's absolutely insane what they're doing. Words really don't do it justice. And that's why the market has, I think, rightly put absurd multiple. on Palantir. Because the multiples look absurd because they're based on trailing earnings and they're not accounting for or not reflecting the future growth that it seems like is very possible for Palantir. And so you had the socket times trading at like a hundred times sales, which again sounds ridiculous. And we'll talk about valuation later. But when you're growing at this incredible rate and there's such a large addressable market for you to continue

you to roll these services into. It starts to feel a whole lot less crazy for the stock be trading at 100 times trailing sales, emphasis on trailing. We will talk about it later and I don't want to spot anything, but I can't say that Pellantier is actually as attractively valued as ever, even though the multiples look kind of scary at first. And again, I really came into this with all sorts of biases. There is more to it than, you know, you would think looking at a headline P, as you just said. And I got to say, still, I'm a bit mad because when I first looked at Pellant, Palantia, which has been about a couple of weeks ago, I thought this looks like a pretty good opportunity. And then earnings came up, and suddenly the stock went up 40%. And I got to say that was a bummer.

You know, we still sound pretty confident here. And I think many people are surprised if they listened to this episode and the value guys suddenly like Palantier. But again, when we go to the valuation and also, you know, all this stuff now that comes to just the qualitative effects of the company, I feel like people will understand why we like the idea so much right now. Yeah, it's hard to say that the valuation is as attractive when it's jumped. up 40%, but also it's a great testament to the fact that Palantir is just continuing to perform and absolutely blow out the numbers of any kind of estimates that people think of are possible. And so judged by Carp's growth outlook, even after that jump, there might still be an

opportunity there. So, you know, talking about the latest earnings release, my question for you is, does Palantir report which platform is driving the most profit or is growing the fastest? Is there any insights that we get into that? Unfortunately, no. We only get to see the split between commercial and government revenues, as well as a breakdown by geography. And you can generally say that government and commercial growth are pretty much in line, which is something that I like to see because it also reduces Palantir's dependency on government contracts,

which at least in my opinion, can be a bit more of a volatile feel depending on who's in the White House and also internationally, that's a similar more volatile field to play in. And in the last few quarters, commercial has actually outpaced government, but this has shifted in the past. So perhaps we'll see that shift again. Although I would expect commercial to grow more in the long run, just given that the universe of customers is obviously larger. And Pallantier has improved significantly, which is what we discussed in the onboarding of customers. So I would be surprised if we don't see that outpacing government in the long run, at least. And also looking at the EBIT of both sectors, so the earnings before interest and taxes, which is a profit,

proxy, you can also see that Palantir has a similar margin for both government and commercials. It's not like one of them is significantly more or less profitable than the other. There is a significant difference here between growth in the U.S. and the international markets. And the U.S. growth has more than nine-xed since 2023, which is so absurd. And it's up 115% year-over-year this past quarter. While international growth has definitely been much more volatile and it's currently setting at 30%, which for any... Any other company on the planet would sound very impressive.

But for Palantir, it does not sound very impressive. And so my question, I guess, is, is that primarily because of Palantir's poor reputation internationally? Or what really is the reason for that? Is there any kind of explanation there? I've read that Palantir systems were critical to helping the U.S. government, for example, track down Bin Laden back in the day. So if anything, I'm actually kind of surprised that the company's even allowed to work with

international clients and even commercial clients. on the company's importance to the Pentagon and access to national security data. We'll get to that later, but it's actually quite fascinating story. For example, why Palantir is allowed to work with European customers and also the corporate space. And generally, I would say, it's a mix of things. So there's certainly a European resistance to being reliant on American companies, especially when it's about data management on the level that Palantir practices it.

I mean, both France and the UK have recently ended deals with Palantir to go for local solutions that I think do not yet exist, but they want to build them. We'll see how that plays out. But they are also, you know, sales and market dynamics that we have seen in other markets like, you know, cloud computing or even now AI, where adoption just takes longer in Europe. And given how closely Palantir has to work with its clients, you can probably also just, you know, not hop on a Zoom call and then onboard, you know, the client and the new software. So you need boots on the ground. And while Palantir has offices in most major cities in Europe, I would assume there's much less capacity there compared to the US. And I think Karp's

relationship, and that's what I'm, you know, talking about earlier with other countries, is also a bit difficult. I think he lately said in an interview that he just likes to support Europe's institutions. Otherwise, he wouldn't even make any business there because, quote, the growth sucks. So, I don't know, think about that whatever you want, but I guess the fact that Europe has been growing much slower than the US is another major reason for why US numbers for Palantier are just better. And by the way, on the last Alex call, because we talked about guidance, for example, here, Alex Carp said that he will grow the business at a rate equal or above what the U.S. commercial business is doing for the next 18 months.

And just for context, that would imply a growth rate of about 150%. And even if he only reaches, you know, let's say 100%, that would take Palantir to $17 or $18 billion in revenue at the end of 2027, which is insane. even if I don't exactly understand what Palantir does or what makes them so special compared to other consulting and data businesses, the financial fundamentals and the business itself are looking really, really good. But again, I'm still asking myself this question of why is there no one that seems to be able to copy what Palantir is doing?

I mean, what about OpenAI and Anthropic or the big software companies you mentioned earlier, Salesforce, Service Now, or even Microsoft? couldn't they do what Palantir has done with their suite of products, and especially the connections of the enterprise universe that they already have, you would think they might be able to build on that and create some kind of ontology similar to Palantir. And so we mentioned many times in recent episodes that distribution seems to be one of the most important advantages in the age of AI.

And that means already having a widespread customer base. And as outsiders, without any insights into Palantirms, How are we supposed to have conviction and their technological advantages? How do we even begin to rate the strength of their mode? Yeah, this will be probably the most important point of this episode. And it's not easy, primarily because a lot of Palantir's advantage seems to come down to execution, which is always a bit difficult to talk about and judge, if you, you know, as you said on the outside.

But I will try my best. And probably the first thing I have to talk about, it's the switching cost mode. You know, we talked about how Palantir creates the ontology. and how long all of that can take. And once you go through that multi-month or even year-long process, I think you will think twice about switching and doing it all over again. And since Pallanty has by far been a first mover here, right, there is no competition that has come up even remotely in the last two years.

They just build a massive client base before anyone else can start. And especially if you think about who are those customers. It's not only a thousand customers that you have, but you have the biggest corporations and you have the government. So those are contracts that if they are multi-year-long, I think it's just incredible difficult to get into that sort of space and compete and to just zoom in on that process again. That alone can probably not be done by most of the companies. We talked a bit about it before I'll call here. But as you can imagine when listening to an

ex-cop interview for just two minutes, this company has a very unique culture. And I mean, I think we have a pretty unique culture here at TIP, but it's something entirely different when your company is worth hundreds of billions of dollars. There's just not really a hierarchy as it seems. and people can do what they believe creates most value at the time. And of course, their limits to that, as always. But that's how it generally seems to work. And then when you look at it from just the product side, it basically goes against all industry wisdom, right?

I mean, the way enterprise customers used to buy software tools was to go to many different companies and then pick the best and class solutions for each of the use cases that they look for a product for. And then a company might use Slack because they preferred over teams, just as we do at TAP. They might use Excel because,

they preferred over Google Sheets, which is what we don't do at TIOP, and then Zoom because they preferred over Google Meet. And maybe Salesforce is the company that they have for the databases because they preferred over whatever competitors out there, right? So that's how you can think about it in the past. And Palantir sort of change that dynamic. So you usually have companies that build maybe one or two best in class tools and sell them to as many different enterprises as possible. And so that's lower value per transaction than what Palantir does. but it is much higher volume. And so it's sort of like Palantir is a more comprehensive AI-native version of Salesforce,

at least in terms of importance to enterprise productivity. Yeah, I guess that's fair. And then you also have a company like Microsoft and then you have Google too to some extent that put out many tools where only one or two are, again, actually best in class, but the others are good enough to be sold alongside them as a bundle. And so I guess wouldn't it be possible for those companies to level up their needs? entire bundle and connect it with AI, similar to what API has done for Palantir and then basically offer a similar form of ontology. And it sounds like Palantir developed a really specialized

machine learning technology set well ahead of the AI craze of the past few years and primarily targeted it at the government and military. But now growth is exploding as they've rolled out this model to commercial customers. And so I just can't imagine, though, that companies like Salesforce, IBM, Google, Microsoft, many of the biggest names in tech. I can't imagine that they're just going to take this lying down. I've seen estimates that Palantir could have as much as a $2 trillion addressable market. And if that is even remotely true, it's going to surely have some serious competition from some really powerful companies chasing after those same dollars. I think it's safe to say that Palantir has not yet been tested by a competition, but I also think

that it's easier set and done to switch from building tools that are just good enough to tools that are actually best in class. And not only one tool, we're not talking about Slack, but a tool as comprehensive as what Pallanteer build. And we said in both of our Google and especially on Microsoft episode, that's what they do, you know, good enough tools that they can just put into the ecosystem and it works because they sell it to these enterprise customers. And I should also say that Pellanty is not taking their market. So Google can sell their bundle just like they did in the past and Microsoft can do the same. So they're not necessarily. necessarily competing. So you don't have to invest just as a defense mechanism, basically.

And you often hear me say that I don't like to bet on companies that compete with the likes of Google, Microsoft, or Amazon. But I think in this case, I don't know, I think the way to bloated and just not flexible enough to compete with a company like Pellantier on that ontology front. I mean, I told you before that if you ask yourself, which of these companies should have actually sent out FTEs, these forward deployed engineers to enterprise customers to set up their tools. I think none of them would have done that. All of them would have settled for keeping the engineers in-house and deploy them for their software solutions where they make 60% margins, right? And I mean, Microsoft is trying to do that right now, the billing anotology layer. But

I don't know, looking at it, and by the way, they call it Fabric IQ, I would call it an attempt at best. I think it makes sense for them just to better connect all of the different products they have. But I don't see it rivaling Pallentee anytime soon. And this goes back to the sort of good enough. You know, you're good enough to connect all your tools. This is so far away from what Pallentee is building for the highest class customers, that I think it's a reach to say that this will compete with Pallanty anytime soon. And I think the one company where I can't really figure out whether they would become a bigger competitor eventually is ServiceNow, because it's the one company that we discuss here now that I haven't yet deep dive.

So my understanding of Service Now is significantly below the level of the other companies. From what I understand, though, Service Now understands itself as, a SaaS company that becomes AI native, right? And they actually have a lot to lose if they would have, you know, this $2 trillion market that they're just not participating in. And it's very good at workflows that are based on, I think what they call predefined relationship data. So how can I explain that?

I would say that predefined relationship data is you already know what you're allowed to do. And now you just put it in a sequence that you now know, hey, this thing is allowed to give access to this thing. And it makes sense to now put this thing just after that. So you sort of get this linear line of what are you allowed to do. What Pellanty is doing, it creates those relationships. You know, it's saying we know that there are these things, you know, X, Y, Z, and they have permission to do certain things.

Now, how can we connect that to the entire rest of the map so that it makes sense? It's just hard to imagine, but way more complicated than what any of these SaaS companies are currently doing. And I think that's just a complex way of saying service now is good at managing data that is already set in place where Pallanteer is. basically taking raw data from all sorts of places and then creates a relationship in all of that itself. Well, maybe I'm naive, but what about companies that maybe can use Claude, co-work, and chat,

GBT, codecs and these different AI native tools to actually recreate this ontology in-house, right? Maybe AI enables them to map things in a way that only Palantir was able to do, but now that technology has been more democratized. And I guess building here doesn't exactly mean doing all the coding work, but I just mean sort of what you described in the beginning, finding a way to group all sorts of best in class services and redefine what the best relationship between them would be

and connect them in different ways. And so essentially, you would just be rethinking how things are connected inside your organization. And maybe you won't be able to do it as well as Palantir, but for a fraction of the cost and with different AI tools, perhaps it's good enough. And actually this time, good enough would actually be good enough because I think if you get a tool from Microsoft that they think is good enough,

it's not actually good enough for your corporation, but if you build it in-house, you know what level you need to reach that actually makes sense for you. And just for contacts in case anyone is asking themselves, well, if that would be possible, wouldn't they have done so already? I think the reason it might be more popular today

is that Pallantier showed companies just how inefficient they actually are with their data management. And before, it just wasn't as obvious. I mean, everybody sort of knows that there are things that are, you know, not the most efficient, but it always feels kind of unchangeable, right? And now that AI is there and seeing what AIP is doing for Palantir, I think that just makes them realize there's so much more that they can get out of their data and so much more

efficiency gains that they could get. And also, you know, cost savings, which is one of the biggest things that customers of Palantir actually reporting about. And all that said, I think in-house solutions are to some extent wishful thinking. and we already went over why, basically when I explained how Palanty's going into these companies with their engineers and how they implement their products. I mean, there are dozens of different incentives for people working in the same company in different departments, right?

So again, that's why I talked about, hey, Palantir's going out there and befriending, for lack of a better word, the C-Suite first, and then the project workers instead of the middle management, because that's where a lot of the resistance for new stuff actually comes up. And then if you would think about who is building these in-house solutions, well, it almost has to be the middle management, right? The CEO can maybe say, that's what we want to do. But then the middle management has to take that idea and deploy it in their own department. And I don't think that will happen.

It hasn't happened in the last decade. I think it's still unlikely. I can see why that worked really well at a smaller scale, but it doesn't really sound scalable to me. And I wonder if something is lost in translation as they change their playbook to accommodate more types of enterprises. And so, I mean, you can't befriend the C-suite of every single customer you have if you want to be a trillion-dollar company. And to your point, though, I think it does make sense. As a middle manager, you don't want to rule over a smaller kingdom or suddenly have someone

from the outside coming in, changing up your entire department and telling you what to do. And so as the CEO or CIO, you care more about the overall performance of the company. And as a project worker, you just want the best tool at hand so you can do your job as efficiently as possible. I think they noticed that it's not that scalable in 2023 when you know the growth rate has going down to 12 percent. And that's why they started the workshops, you know, where they said, well, if we go out to all of those companies and we befrient the C-Suite, that takes a lot of time, you know, time that is inefficiently spent to some extent. So why do we not just give them proof of concept? We invite them after Pellantor was better known in the enterprise. Now they are coming over.

So they're already sort of in the realm of becoming customer of Palantir. Now they're in the workshop. Now Palantir is showcasing their product. And that's how you scale significantly better. I think I heard that they had over a thousand workshops already. And mind you, their CEOs and CIOs sitting in all of them. So you can sort of see the scale of this new approach. What about Anthropic and Open AI just to bring them up again?

I mean, if there's any company that should have the best AI capabilities to get this done, it would be them. I know Anthropic in particular is focused on taking more of a B2B approach, whereas OpenAI has hundreds of millions of users, and that's been sort of actually a problem for them because it's so compute intensive to create responses to very basic queries from everyday people, but they very much want to move into providing more enterprise-based solutions. And so I guess with that said, it. I'm wondering now what model does Palantir even use? Do they have their own? LLM? Are they using Open AI and Anthropic themselves? And I wonder what the competitive dynamics between them are and how

that could evolve over time. Yeah, that's a good question because it's actually an important point. I mean, Palantir does not have its own model. It uses a variety of models out there. And it basically depends on the customer, which model they want to use and maybe also they change between them. So Pellonty itself offers, you know, Claude, Chachyp-T, but also Gemini, mistral, lama, and basically whatever model is out there. And I would say the magic of Pellonty really comes from the context that the ontology creates. You know, again, imagine you have this map. And before, if you were an employee of a company who uses this, you have to go manually

through all of these data points, through all of the things that are possible within this map. Now, you're just typing in a prompt. You're saying, hey, I'm looking for getting this aircraft to another tower, right? and then just typing it in there and then whatever model you choose, it's doing all the work for you. So it just simplifies things and that's how I would think about it.

So the magic of Pellantier really comes from the context that the ontology create. So I think we actually have a video on our YouTube channel that is called a master class on AI by one of our mastermind members who understands LLMs

and the entire space much better than we do. And he actually has an argument for why some models feel so much longer than others, although they're kind of similar in strength. And I would say we'll just show it here because he makes the point pretty good. The common word in Parallens for us is what is called as an harness.

So we call this as an agent harness, right? An agent harness is access to the data that's sitting on your desktop or some particular ecosystem where the data lives. In this case, in some cases, for example, you know, Jeff, you were asking what happens in Palantir, right? The LLM is still the actual reasoning and planning part of it, right? But the agent harness now involves data that comes from your databases. The ontology now becomes a thing that the agent that you can provide to the agent can say,

here's the ontology of how my data such looks like. Here's where I have my inventory data. Here's where I have my supplier information. Here's where I have my X, Y's information. And Palantir simply builds an ontology on top of it. Now the agent can look at that data and then reason about it right now. That's why the LLM can look at the data and reason it. The whole thing is what is called as an agent at this point.

So just as he said, the context is very important. So Claude feels much more powerful than, for example, chat chepD, just because they do a way better job of giving context to the model. And it's kind of similar with Pellantier. Its ontology is basically feeding context, so that is data governance tools, guardrails to whichever LLM is used. And thus, the LLM stops hallucinating. And they make the model much more powerful because it's basically a custom-tailed solution for the use case at hand. I think that makes sense. but at some point after OpenAI and Anthropic have IPOed,

they're going to be trying to justify these trillion-dollar valuations. I would think it would be very tempting for them to start a business where they basically offer their service to customers in a similar way to what Palantir has done and maybe creating a similar ontology. I know we keep using that word a lot today and really taking advantage of their own models in the context they have and the fact that they do already have, let's say,

a lot of existing enterprise relationships and basically leveling those up. So how do you think about that? Is that something that is a real threat to Palantir? I guess it's a problem in theory, yes. But I'm also asking myself, why should any business want that over Palanty? I mean, after all, you would now have pretty much the same product, assuming open AI and anthropic are actually able to build such an ontology layer, but you're limited to just one model instead of being model agnostic.

And if you think about a cooperation and what that means, basically all the pricing power then sits, for example, with Anthropic, where now if the Anthropic model is too expensive, well, you can still use Palantir and you just use Chachapit. And if Chachapit is too expensive, you just use Mistral. So I think it's just a way more diversified way. You could still say, you know, especially looking at Palanty's margins, or the pricing power sits with Palantir right now. But probably we will see that come down over time, especially with, you know, maybe Anthropic

or Open Air. will actually start and put up a competitive business. I still think that Pallanty would win, but certainly we haven't seen the margins being tested by a competition. So that's definitely something we have to look out for. Generally, Alex Karp is frequently shooting against Anthropic and Open AI and basically warning about those companies, you know, and how you shouldn't give them your IP and your business model,

because these frontier models sooner or later will just take over your business. And obviously, Alex Karp has a major incentive to fuel fear, among corporations because those are his potential customers. But I would also say that doesn't mean he's wrong. I mean, whatever you put into chat GPT or Claude, they can take it to train their model. And who knows what the actual policies are for saving your data? I know that I personally sometimes ask it,

hey, by the way, if I send you this PDF, will you save it or is it just gone when I delete the chat? They never give you a full answer to what they actually do with the data. So I can say that I take the liberty of not caring too much, but most of the time it's not that important information. And probably it's a bit naive on my point, but if you're a company and you know you have important IP and you have a business model to protect, you should care much more about your privacy and safety than I do.

Let's take a quick break and hear from today's sponsors. One part of being an investor that I don't think gets enough attention is how hard it can be to continue to improve as an investment researcher. And for myself, I often find that when I finish a great conversation with some industry expert or fund manager, my head is full of ideas. but by the time I sit down to write it all up, half of them are already gone. That's why I've been using Plod Note Pro. It's a small device that sticks to the back of my phone and captures the conversation and

hands me back a clean, searchable recap. And so the key points, the follow-ups, the things I usually want to act on. It has all of that. And that allows me to stay present in the room instead of scribbling notes that I won't be able to read back later. And I notoriously have very bad handwriting. And so it's changed how I prep and how I. follow up with investors. It's also built for people who take conversations seriously. Enterprise-grade

security. So if you're recording calls with clients or industry contacts, that's covered too. So if you live in meetings, calls, and interviews, we'll give it a look. Go to plod.com. slash USB and use code WSB for 10% off. That's plod. dot AI slash WSB, code WSB. And always get consent before you record a conversation. Curious about online trading, but haven't taken the first step yet. You're not alone. And plus 500 futures is a great place to start.

The futures markets are moving fast. And with plus 500, you can explore popular assets like oil, gold, S&P 500, Bitcoin, and more. From crypto to commodities, there's always something happening. The platform is super easy to use so you can trade on the go right from your phone. You can get started with just $100 and jump into the action. See something interesting? Once your account is open, you can trade it in just a couple of clicks. And if you're not quite ready yet, you can practice with a free demo account.

No risk, no pressure. With 20 years of experience, plus 500 makes trading more accessible than ever. check it out at plus 500.com. Trading and futures involves risks of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus. They say every day your business is late to AI.

You fall two days behind. And the competition, they're only moving faster. Fortunately, there's NetSuite next. You probably already know NetSuite, the AI-powered business suite that securely connects all your data, financials, inventory, commerce, HR, and CRM, all in one source of truth, trusted by over 43,000 customers. NetSuite Next is the next huge leap because now AI is built into everything you do. It surfaces custom insights throughout your day.

AI agents work alongside you on the routine stuff, and anytime you've got a question about anything, you just ask, like you're talking to a colleague. And I use it, and really I think you should too. For the first time ever, you can try NetSuite, next for free. If your revenues at least in the seven figures, go to net suite.a.ai slash t-ip. Built for every industry, ready for every boardroom, net suite. dot a.i slash t-IP. All right. Back to the show. I guess the question is whether you can trust

Palantir and aka Carp and Peter Thiel with your data. And perhaps we can talk more about the management team than in general without getting too political. Carp and Teal are both very controversial people, as we've alluded to. And you mentioned earlier how that can actually impact, for example, the international business. First of all, I should say that, I don't know if you can trust them, but Palantir's customers keep all the rights to their data, of course. So why Palantir, you know, gains a lot of insight into how the business operates and works, that's a bit different from just using Cloudor chatypd, where they more or less own everything that you feed to them, but getting to the management part. As mentioned before, Alex Carp has been running the business as CEO for

23 years now. Stephen Cohen, who built the first prototype back when he was still a student at Stanford, is still part of the board. Teal is also on the board, but the entire founding team, you could say, is involved, but not as actively as Alex Carp. So if you now think about just

one person and Palantir, it would be Carp, and to some extent still Teal just because you feel like the vision might be. Just for context, Carp and Teal met at Hoverford, the Law School of Stanford. So Carp then went to, again, I mentioned before my alma mater in Frankfurt.

And then he actually learned German and lived there for about a decade, which is significantly longer than I thought. And I think he mentioned that he was primarily interested in the Frankfurt School of Thought, which you told me, you did some research on that after I told you about it. And it's basically a philosophy that analyzed how modern capitalism, mass culture, which was also a big thing, and fascism shape human psychology and social control. And Karp, just like Tiel, was extremely interested. in just, I think you could say, understanding fascism. And I'm not quite sure whether his

interpretation of the Frankfurt School actually aligns with the original idea, but it is quite important to understand how he thinks about it just for, you know, getting the vision of why Palanty exists and acts the way that it does. This has got to be the most philosophical we've ever gotten during a company analysis. Well, I got to say that, keep it brief on the details. I tend to get lost in that stuff just because I'm a slight interest in it. But I also got to admit that it has been a while since I actually read a lot of the theories of the Frankfurt School, basically a couple of years ago when I was still studying there. But I would say it's also not too important to actually get the details. The main idea that I found so interesting is that

Karp is thinking that American thinking, whatever that means, cures nations of fascism and that it's a sort of moral obligation for Silicon Valley to return to its roots. And that basically is the US defense system. And that goes back to your point earlier in terms of, Why does the CIA have a venture arm? Well, in the early days of the Silicon Valley, most of the companies were founded, especially these early semiconductor companies and the computing companies, just because the Pentagon paid for them. And then somewhere in the last 30 years, that's Cops theory, the industry decided that working on national security is sort of distasteful and that they should redirect the best engineering talent in the world towards consumer

apps and advertising. And one of his examples was Google, which is the biggest company in our portfolio. So we're happy they did this sort of switch. But his example was Google walking away from a Pentagon contract in 2018 after employee protest. And he claims that this has been a mistake for both sides, actually. So tech lost any sense of what he calls a larger purpose. And the government lost access to the best engineers and the best software engineers in the world. And I think he partly believes that this was part of the critical theory that came out of Germany and Europe, where philosophers were more or less critical of technology and innovation, because, well, one of the most advanced nations in the world still started the Second World War. And Carp's things,

and this is the last point I will mention here, that this defeated mindset that the critical theory had in many aspects also came to the US, although they won the war. And anyway, long story short, Pellantir is now supposed to bring back this American tech to its roots, to the defense of America and the West and their allies generally against attacks from the outside. It seems to a very ideologically driven company, which is sort of weird. We don't usually get into this terrain in our episodes. And I suppose when you take that context, it makes sense why Karp would do business in Europe. He's not really thinking about the economics, right? He said that gross sucks. But he is seeing it.

it is part of a mission to support the West, whatever that means. I guess so. I think it's kind of up to you whether you believe all of that. I mean, Parenthood is still generating quite a lot of money in Europe. So I don't know, I doubt that altruism is the primary motive for making business there. I suppose Peter Thiel has the same or some sort of similar mission? More or less, I would say, I don't know whether they agree on everything politically, but that's also not really the topic here. I mean, we only discuss all of this because their worldview is important

when you build a company that is taking on some of the most sensitive defense contracts in the world. And right now, I think I could say that few investors care about Pellanty's reputation outside of the investment world. But when people are actually afraid to invest in matter, because of its public perception, a company that is building an app called Migration OS for ICE definitely comes with much more reputational and regulatory risks, if you are. ask me. And in several countries, courts have actually ruled that the way Palantir software connects and automates data is not in line with law. So there's a lot of potential for problems internationally, probably also in the US sooner or later. There's got to be two angles to investing

in Palantir. It's a personal one where you have to decide whether investing in the company aligns with your values. And then there's a question of how this reputation that Palantir has can actually affect the business and cash flows. And it's similar to thinking about Tesla and the political impact that Elon Musk has had on that business. And so as you hint to that, France's internal security directorate replaced Palantir. Germany's domestic intelligence service appears to be likely to do the same. You had the mayor of London blocking a police contract that would have been worth 50 million

pounds. So those are some lost revenues for Palantir already. But to be fair, as we've gone to. through the numbers earlier. This is just a drop in the ocean compared to the business that Palantir now generates. In fact of the matter is that Europe is spending a lot on defense right now. And if they can't build a viable alternative to Palantir themselves, I believe that sooner or later, I would at least be surprised not to see deals with governments in Europe more. And I don't know, I'm a bit skeptical that, you know, I think Germany and France are sort of building a system on

AI platform to challenge Palantir, knowing about our data laws, I'm not quite sure. of that will turn out successful. Moving on from politics and philosophy, let me ask your question about what feels like a lighter topic for investors, which is how does the capital allocation look at Palantir? Well, Palantir has a major cash pile. They hold more than $9 billion in cash and there's no debt on the balance sheet, not long term, not short term. So they could return all that cash to shareholders if they wanted to, but I got to say that doesn't

seem to be on the plan, at least not anytime soon. They don't do any M&A either. and they terminated this share repurchase program that they had in place in January of this year. I actually think that's a smart decision because I would rather have the opportunity for more opportunistic buybacks in the future instead of buying backstock when it's trading at triple digit sales multiples as it has in the past. Yeah, the problem of having no buybacks is that stock-based compensation is running at 13% of revenue. So shareholders are getting diluted at a pretty significant rate. And while the trend is

Moving in the right direction, I think that's mostly because revenue is increasing so much. Two years ago, the stock-based comp was as high as 20% of revenue. And so that is a real hit to shareholders and shareholder value. They're basically slice of the pie against their own consent is being shrunk down. And so, you know, as the pie keeps growing bigger and bigger, if you have a smaller slice, you know, financially can still work out. But you are being diluted. And, you know, like I said, I'm sure they didn't care that much about the solution when the stock was going from $20 to $170. But as we're looking forward and thinking about our decision today, it's definitely a headwind. And as you said, on the other hand, I'm not sure how excited I would be

to see them buying back stock at 150 times earnings or 100 times sales, you know, overpaying to retire shares. If you believe that Pounter is overvalued, that can be quite, you. destructive to shareholder value, even if it's somewhat mentally reassuring, see, hey, there's buybacks going toward offsetting dilution. Again, like I said, if you're dramatically overpaying well above intrinsic value, you are destroying value for shareholders, which is, you know, a little abstract, a little bit academic, but it is, I think there's truth to that idea. And by the way, if you're asking yourself, well, aren't you guys bullish on Pellanty? You're talking about that for 60 minutes now. So wouldn't you think that it's attractive to buyback shares at today's prices?

I should really clarify again that last year and the year before that, the story was completely different. So Pellanty actually changed compared to last year because growth has accelerated so much and the valuation has come down that I do believe it's attractive here and especially it has been before the earnings release. Just a year ago or two years ago, I considered it rightfully so, I believe, to be one of the most expensive companies in the market and probably would have been a good shot. But what I asked myself in terms of capital allocation is why does Pellanty not invest more money in their workforce, especially because.

given that they always say they have so much more demand for their products and they keep generating more revenue per user. So I just feel that an investment in the workforce would seem like quite a good investment. What Pallantier does instead, and I talked to you before a recording about this, I don't fully understand it, is that it partners with the consultancy firm Accenture. And basically, they use Accentia employees as forward deployed engineers. So Accenture trains its own consultants on Foundry and NIP, so they obviously have a better idea of what Pellanty is than the average Accenture consultant. But still, those people then do the deployment work at the customer side. And Pallantier sells the software license. So on paper, it makes sense because they keep the high

margin revenue. But I feel like that doesn't fully make sense because you feel like Pallentiers only hiring these highly talented people because a lot of them work that they do is going to the company, figuring out how it works, doing all the politics, and then getting the ontology. And now it seems like you can just get a thousand, you know, nothing against people who work at Accenture. Please don't misunderstand that. But you can just get people from Accenture who don't understand Pellantir to the same level than Pellantyre engineers and they do the work for you. And again, it's not a small amount of people for context. Pellanty has about 4,500 employees. Accenture has close to 800,000. And they already have more than 1,000,000,000.

I'm stunned that there are companies out there employing 800,000 people that I can't even fathom that I don't know where you even begin and overseeing that many employees. And so it probably makes a ton of sense why Accenture would be looking for outside help or why Palantir would be looking to tap into their network of employees. But how about we transition to talking about valuation now. I'm very curious to hear how you think about this as a value investor, but also as someone who seems quite excited by Palantir's technology and the growth. It is really riveting. And so admittedly, I would have dismissed Palantir as being a hopelessly overvalued meme stock, but you already told me before recording that there is maybe the chance for legitimately

attractive entry points in this stock, especially with how volatile it is. I was surprised myself. as I say today multiple times in the episode. And obviously, again, you don't have a value stock here. I'm fully aware of that. But you really got to put the valuation into perspective, considering the incredible growth. And if Kopp is actually the right about being able to grow a palanteer overall at the current rate of the U.S. business until the end of 2027,

well, then the price to sales ratio would decline from where it is today, which is about 60, to about 20. And then it pretty much all depends on, you know, the growth rate in 2028 and 227. 29. And of course, this is speculative, but Karp has always delivered up until now on the guidance that he gave. And of course, you could argue this is not only a guidance, but something that he said in an interview. But I would just assume, I will take it for granted here, that this is what he actually aims to achieve. And analysts have massively under estimated Palantir again and again. And I should say that if you think of World Press to sales is not

the most useful metrics, generally, I agree with you. But I think it makes the point here quite well because Pellantier has incredibly high margin. So when the average enterprise software company is trading at about, you know, seven times sales on roughly a 20% operating margin, that's a 35x on operating profit. Now, if Pallantir on its assumed 2027 numbers would be about 22 times sales, but it has a 60% margin that would also result in 35 times operating profit. So the massive growth and the margins make Pellantir relatively, at least, to other software companies look more expensive today than it actually might be. Yeah, that just shows the power of having high operating leverage and higher profit margins.

And again, like you said, it's not a value play, but it's also not as ridiculously priced as I would have thought. I think the only thing we can do to convince people here is actually jump into the model. So I'll put two base cases this time. One with the numbers that carp predicts until the end of 2027 and one with the analyst estimates. So of course, it's a five-year model, so everything after 2027 is still obviously my own estimate, but still, in the first base case, using carbs growth rate of about 150% for next year, IDK growth after that personally to 60%, and then 15 to 20 percentage points per year

lower. So we would end up with 28% growth in 2031. You know, just summarizing that because it's a lot of numbers. The revenue Kega in this model would be in the high 50s for the next five years. For comparison, though, the second base case, built up on analyst estimates, works with the revenue cake of only 22%. So I keep margins in both cases relatively stable, which is about 60% operating margin. You could say, well, if there's more competition, so let's say Anthropic gets into the market, Microsoft gets into the market, the margin will be pressured. It's possible, but at this point, it's completely speculative, whether that would actually happen. So let's just assume a 60% margin here. If you then go with the analyst estimates, and you, you know, you

you apply a 30x exit multiple and the 10% discount rate, the 20% margin of safety, which is what we usually do, you would get a fair value of $90. If you trust Karp's estimates and slightly higher growth afterward compared to analysts, and when I say slightly higher, we're talking a difference about 10% points per year, so you could argue it's significantly higher. The fair value is at about $240 a year, so a significant difference and way more than the stock is currently trading at. Looking at your model, you also adjust for dilution with share account growth of 1% annually,

even though we talked about stock-based comp being in the double-digit percentages. And so you don't have buybacks or dividends either in your model. So it seems like you don't think Palantir will be paying cash to shareholders or doing any kind of capital returns. Yes, I think you will not see any buybacks or dividends anytime soon. By the way, I've also done the model with more dilutions, so 1.5%, 2.5% a year. just because of the growth, it doesn't change your return massively, especially in COPS scenario. If you think just about the analyst estimates, there's more of a change. And again, you can just download the model.

We'll have a link to it in the show notes. And also, we also have a newsletter about Pallantier coming out today. We're also linked to that one in the show notes. And in that newsletter, we'll go through the model in more details. And you can download it. And if you do that, you can adjust all of my assumptions in the way that you want. But yes, to your point, I think of a dilution of about one. one to one point five percent a year, which is in line with the last couple of years, I should say

that, and no buybacks and no dividends. I got to say you got me excited here. I didn't expect to end up liking Palantir at all, but I'm just so intrigued. It's maybe one of the most interesting companies that we've come across from both a financial perspective and also a non-financial perspective when you get into the philosophy and the people involved with the business and the types of projects that they worked on, right? We were talking about a company that helped track down, been lauded. So it's just really unique. And yeah, after today's episode, I can definitely understand why you have felt some excitement, too, about looking at Palantir. So with all that said, I assume that you are going to recommend not investing in it nonetheless.

Well, I was closer to wanting to invest before earnings. So I got to say that. But even then, and this sort of goes back to the learnings that we discuss in our biggest loser episodes, Pellanty's outcome is almost completely dependent on its top line growth. And one thing that I like to do when I look at companies that are growing rapidly and everything looks great at the surface is that I come up with a scenario in my head, which basically goes like this. So I would assume the next earnings support is coming out. And then growth is cut in half from what people are expecting.

So let's assume, you know, carbs outcome, 150% growth. Now suddenly, you only get 75%. What I think I'm confident enough to be able to figure out and explain why the company grew significantly slower than people anticipated. I think, for example, if you would have looked at Ludo Lemon's growth slowing down, it wouldn't have been that difficult to figure out why. In the end, they sell less clothing, and the reasons for that are quite straightforward. Either you have customers going to a competitor, or there's a recession and every brand has problems

selling their clothing. If you think about payment companies, it's a bit less straightforward. It's also about competition or macro, but it's not as easy to track which one is actually the answer. because getting the data is a bit more difficult, but still you can do it. And then there's a company like the Trade Desk, where I have absolutely no clue why the top line growth is declining. And I also have no clue where the bottom would be. And I think if I'm being honest with myself, Palantir has to fall into that category.

I think when the business is doing great and it's growing, everyone has this illusion of knowing and understanding why it's growing so great. But if there was suddenly changing, I'm just not sure how many would still claim to understand the business at well. I think the entire story here comes down to, does it make sense for me and do you fully understand the technology behind it? And the honest answer is no. And just to make it clear, I feel like you don't need to understand everything. If you, for example, work in the sector and you have a much better understanding of how the industry generally works, I think that's not the case for you and I, Sean. I think the two of us would probably be better off sitting on

the sidelines, just admiring what Pallanty is doing and not investing today. Surprise, surprise. The value investors here, two guys who are very inspired by Buffett and Munger didn't want to invest in Palantir. I don't think that's a shock. But also, that doesn't mean Palantir won't continue to do well. If anything, my gut feeling is the company probably will do very well. And probably the stock will too. I don't know about from current prices, but if there's a sell-off in it, that could be a really interesting entry point

for folks who are willing to speculate more. And as you said, if you don't really understand what drives the business, then to me, you're not investing. To be an investor, that really means you have to think like an owner and feel like you understand all of the variables affecting the business. And so if you're just buying a stock and you don't have that owner mindset and that understanding of what is driving things, well, then you're just speculating. And speculating can be profitable or it can be quite cost.

But our aim, first and foremost, is to be disciplined investors. And so if we're going to adhere to that, then, yeah, we can't invest in something like Palantir, even if it's very exciting. At least not today. I think it's one of those where, for example, with the trade task, I just felt like it's very difficult to understand. And maybe there's also not a reason to do so because the stock is not, or the company is not doing that well.

I think if Palantir keeps chugging along like this, and we have some people, especially in our mess in our community, that will most likely understand this business. much better than the two of us do. So I could see myself with, you know, a couple of talks, understanding the business a bit better, seeing even more proof of what they do, even better understanding what the ontology means and whether that is actually copyable for other competitors. I think all of that means I could have a lot of watch list and at the right price and especially the right understanding of me and the company.

I could see as investing in it generally. I wouldn't say that it's a stock that I would never put money in. It's primarily about how well do I understand the stock right now and also where is it trading. And even at $130, which was, you know, the price before earnings, I think it was not cheap, but it was kind of reasonable if you believe in the growth. I think today, a lot of that opportunity is basically gone. And, you know, if you see the stock below $100 and nothing changes, count me in and I would be way more interested to kind of say it with Buffett in terms of, you know, your philosophy

of, you know, speculation and investing. Buffett said, quote, the line separating investment and speculation, which is never bright and clear becomes blurred further when most market participants have recently enjoyed triumphs. Nothing today's rationality like large doses of effortless money. And I would say that you have a lot of people in Palantier who made a lot of money and I'm glad for all of them, but many of them might not understand the stock to at least the extent that the two of us would want to understand the stock when we invest. Again, it's up 2400% from the 23 lows. So it's only natural that some people are okay with some blind spots in their thesis. And with that, I hope you guys enjoyed

today's episode as much as we did. See you all in the next one. Thanks for listening to TIP. Follow the Investors podcast on your favorite podcast app and visit the investorspodcast.com for show notes and educational resources. This podcast is for informational and entertainment purposes only and does not provide financial, investment, tax or legal advice. The content is impersonal and does not consider your objectives, financial situation or needs. Investing involves risk, including possible loss of principle and past performance is not a guarantee of future results. Listeners should do their own research and consult a qualified professional before making any financial decisions. Nothing on this show is a recommendation or solicitation to buy or sell

any security or other financial product. Hosts, guests, and the Investors' Podcast Network may hold positions in securities discussed and may change those positions at any time without notice. References to any third-party products, services or advertisers do not constitute endorsements and the Investors Podcast Network is not responsible for any claims made by them. Copyright by the Investors Podcast Network. All rights reserved.