Postcards: The Palantir Paradox

The company that could solve the problem of government spending finds itself overly reliant on that spending in the first place.

Dear Fellow Expat:

Elon Musk has positioned himself for a role in a second Trump administration as "Secretary of Cost-Cutting." Perhaps this is one reason why the government is investigating Tesla yet again.

But there's a solution to government spending that few are discussing.

We already have a company that has the technology to tackle government waste.

It just doesn’t perform those tasks.

That company is Palantir Technologies (PLTR), one of the world's most sophisticated data analytics firms.

Palantir software helps governments track international money laundering, analyze terrorist networks, and process complex data that would take humans years to understand.

Their flagship products – Gotham and Foundry – are used by intelligence agencies, defense departments, and financial institutions worldwide.

Their original platform, Gotham, helps government agencies integrate and analyze vast data feeds. It’s used for counterterrorism, intelligence analysis, and national security.

The company’s commercial platform is called Foundry. It’s used to build predictive models and assess large amounts of corporate data, including spending. The company’s newest offering, the Artificial Intelligence Platform (AIP), has helped drive its stock up 160% year-to-date, according to Beth Kindig at Seeking Alpha.

Palantir's capabilities are staggering.

They can follow complex financial trails across borders, spot patterns in random data, and help agencies connect “unconnectable” dots.

Their technology helped track virus spread and manage vaccine distribution during the COVID-19 pandemic. Their software is so advanced that intelligence agencies rely on it for their most sensitive operations.

So why isn't Palantir already helping to cut wasteful government spending?

The answer is a paradox.

Palantir can't be the solution because Palantir is part of the system.

Roughly half of Palantir's revenue comes from government contracts. Imagine what would happen if they used their powerful analytics tools to identify wasteful government spending.

Palantir would be investigating its own clients.

And do some might expose problems at the same agencies that pay its bills.

The Department of Defense, CIA, FBI, and other agencies might think twice about sharing sensitive data with a company actively working to reduce their budgets.

Is There a Solution?

What if Palantir could be incentivized to help cut waste without risking its core business?

Here's a proposal that shareholders might love: For every dollar of waste Palantir helps the government eliminate, the company gets to keep 10 cents.

This would align Palantir's interests with taxpayers while maintaining its relationships with government agencies.

This arrangement could transform Palantir from a passive beneficiary of government spending into an active partner in fiscal responsibility.

The company could earn billions, help eliminate hundreds of billions in waste, and maintain its core business relationships while doing so.

Yet even this clever solution faces challenges.

Government agencies might resist having their budgets scrutinized.

Political interests often protect wasteful programs. And the complex web of federal spending makes it difficult to attribute savings to any single intervention.

While Musk talks about cutting waste from the outside, Palantir's situation shows why real change is so difficult.

The systems and companies best positioned to identify inefficiencies are often the ones most invested in maintaining the status quo.

This is the Palantir Paradox:

We have a company with the technical capability to solve a massive problem; however, it can't because doing so would undermine its business model.

Until we find a way to resolve this contradiction, the dream of using technology to eliminate government waste may remain just that – a dream.

That’s America, baby!

Stay positive,

Garrett Baldwin

Secretary of Defense