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Saturday, September 25, 2021

Demystifying Palantir (PLTR) for a new investor

Background:

This article is an attempt to breakdown what Palantir does in a simple easy to understand manner. This article is not going to discuss the financial metrics or valuation of the company which is discussed here (Palantir Operating profitability and expense trends). I have also reviewed the numerous contracts that Palantir has won (as of Sept '21) since they became public. This article can be accessed here (A network of Palantir contracts). This piece is more about what it does in a hopefully simple to understand manner.

The word Palantir refers to a fictional magical artifact. J. R. R. Tolkien (of Lord of the Rings fame) imagined this to be an indestructible crystal sphere. Main use for this object was for communication and to see events in other parts of world (past or future). The name of Palantir Technologies is apt in its description of it capabilities. The ability to see what other can't see

So lets dig into what some of Palantir Technology does.

In its most basic function, 

Palantir's programs use computers and software to analyze information, identify and learn from the problem and devise solutions.

Palantir does some of this in part by collecting data from multiple sources, cleaning and making it usable, comparable. Finding patterns using visualization techniques. Then using the information using human intelligence or Machine learning (ML)/Artificial intelligence (AI) to solve the problem.

1) Helps with Data integration and  translation.

Palantir helps organizations to build a solid, high quality database from different sources. Palantir will translate the integrated data interactions in easy to read format. This of course comes with high degree of customization.

2) Helps with Data interconnections.

Data is often spread across the enterprise. Models derived from these disconnected data are difficult to comprehend. 'Micro Models' is a new approach developed by Palantir to address this problem. Micro Models addresses parts of a large problems. It then combines those solved parts back for a solution. Thus, it breaks a ‘BIG’ problem into smaller problems and solves all the smaller problems. Palantir software then chains those solutions together, to solve, the ‘BIG’ problem. The standardized solutions chain thus leads to interconnected workflows. 

3) Helps to Model Objectives.

Business objectives are clear targets and goals for a company to achieve. They may also include strategies achieve the said tasks.

Figure: Palantir keeps improving on the processes leading to objectives being met and improved

The objective model (OM) collects goals, training, evaluation data, result and metrics. This is in context of the underlying logic behind the objective. Thus, OM is a hub, receiving, transmitting and analyzing information about goal achievement. As  with micro-models, Palantir binds individual models to a larger design. This design powers several different workflows. The design has a 'write back' property to improve accuracy of future uses.  Thus, Palantir keeps refining the process, to ensure goal accomplishment and goal improvement.

4) Capable of building and deploying AI/ML Infrastructure

Palantir combines the data foundation (#1) with end-to-end AI/ML deployment infrastructure.  Think of these a AI/ML codes 'widgets' (each doing a specific task), placed at various points in a task workflow. Palantir allows scientists to decide where to place them. They also know how the widgets interact and check their function.  

5) Provides Artificial intelligence for Internet of Things and Edge computing.

Many electronic devices a.k.a 'things' use internet to stay connected  (e.g a smart thermostat, TV etc)  . This internet 'of things' (edge) usually communicates with a Cloud computing (center). Decisions go back to the IoT devices. This can be slow.  Palantir's 'Edge AI' powers decision at the edge detaching the cloud. Thus processing data is faster, with minimal lag, for immediate use. This Palantir tech is being used in ground vehicles, watercraft and spacecraft.

Applications:

The applications of such a technology are rather unlimited. Think of Palantir like a Swiss army knife a multipurpose tool for any number of applications.  I have highlighted some of the applications below

1) Solving financial crimes

Financial crime is complex. There are many moving parts, including the bad actors who are responsible for the crime. Also involved are intermediaries (banks/financial institutions) and victims (individuals and companies).   Criminals are also using newer and smarter ways to commit crimes. Hackers have held companies at ransom demanding cryptocurrencies. These innumerable data points make it difficult to track a financial crime. Conventional approach has been a 'fixed set' of rules with one lead leading to next, which leads to the next. This is labor and time intensive. Palantir provides tools to join billions of records to analyze data fast. Palantir’s enables linking of customers, networks, and counter parties. All this is compliant with privacy and security standards per Palantir. This system can allow banks to move away from the legacy systems. Palantir guides analysts through the investigation to focus on the most important risks. With this high level 30,000 foot view analysts can multitask the investigation. The analyst can addend the generated report to be filed with the authorities.

2) In automotive industry and racing

Palantir is working on its data analytics with Ferrari the car company. The vast number of data points are being used to make the cars safer, faster.

3) Use in Data protection

While data is being used for analysis, Palantir ensures that the data is secure. This is per the regulations that govern data privacy. This compliance with regulatory bodies allows continued use of data in correct manner.

4) Use in Defense and military applications

Palantir has worked for a long time with US armed forces. Its use is in principle the same.  Palantir integrates data external sensors/sources through a single point of access. This reveals unseen links across their entire universe of data. Palantir use if in Data Integration, Resource Planning, Finance & Accounting and Military Readiness.

5) Applications also include using Palantir software in energy sector.  

Energy companies deal with fluctuations in energy demand, transition to green energy. Palantir assists with these concerns by digitizing data and using it analytics.

6) Use in financial planning and analysis

Palantir queries, unifies, creates a usable database for financial management

Palantir has been used for analyzing troves of financial data to streamline expenses, budgets etc. It can query multiple disconnected systems for data, unify it into one harmonized database. This then lets it create a foundation database that finance professionals can use to analyze portfolio, audit finances, track budgets, reprogram funds and reallocate capital. This has been successfully applied to study contract renewals in US army.

 

7) Use in health sciences and medicine

 

Figure: How Palantir can transform medical discovery. The platform is flexible enough to be positioned at every sequential step of medical scientific process, enhancing efficiency and speed.

Palantir's foundry is a powerful tool that is being used currently for all aspects of medical progress. From basic sciences, pre-clinical studies including drug design and development, to developing cell clones Foundry can assist with data management. It also accelerates medical discovery by assisting in phase 0, I, II, III and IV clinical trials. Finally, data can be analyzed from post marketing information making Foundry indispensable for medical discovery. 

Conclusion:

Palantir's software (called Foundry & Gotham)  is a versatile tool which can be used in any industry, seeking solutions to problems which had previously been difficult problems to solve. The program does this by its unique approach of visualizing and finding patterns in data allowing either machines or humans to interact with the patterns for finding solutions. The sheer versatility and application is evidenced by its numerous contracts it has with industry in variety of sectors. 

Disclaimer: I own shares of Palantir. Information has been sourced from public websites.