You Only Have to Be Right Once (13 page)

A unique Palantir culture began to form in Karp's iconoclast image. Its Palo Alto headquarters, which it calls “the Shire” in reference to the homeland of Tolkien's hobbits, features a conference room turned giant plastic ball pit and has floors littered with Nerf darts and dog hair. (Canines are welcome.) Staffers, most of whom choose to wear Palantir-branded apparel daily, spend so much time at the office that some leave their toothbrushes by the bathroom sinks.

Karp himself remains the most eccentric of Palantir's eccentrics. The lifelong bachelor, who says that the notion of settling down and raising a family gives him “hives,” is known for his obsessive personality: He solves Rubik's cubes in less than three minutes, swims and practices the meditative art of Qigong daily, and has gone through aikido and jujitsu phases that involved putting cofounders in holds in the Shire's hallways. A cabinet in his office is stocked with vitamins, twenty pairs of identical swimming goggles, and hand sanitizer. He addresses his staff using an internal video channel called KarpTube, speaking on wide-ranging subjects like greed, integrity, and Marxism. “The only time I'm not thinking about Palantir,” he said, “is when I'm swimming, practicing Qigong, or during sexual activity.”

In 2010, Palantir's customers at the New York Police Department referred the company to JPMorgan, which would become its first commercial customer. A team of engineers rented a Tribeca loft, sleeping in bunk beds and working around the clock to help untangle the bank's fraud problems. Soon they were given the task of unwinding its toxic mortgage portfolio. Today Palantir's New York operation has expanded to a full, Batman-themed office known as Gotham, and its lucrative financial-services practice includes everything from predicting foreclosures to battling Chinese hackers.

As its customer base grew, however, cracks began to show in Palantir's idealistic culture. In early 2011 e-mails emerged that showed a Palantir engineer had collaborated on a proposal to deal with a WikiLeaks threat to spill documents from Bank of America. The Palantir staffer had eagerly agreed in the e-mails to propose tracking and identifying the group's donors, launching cyberattacks on WikiLeaks' infrastructure and even threatening its sympathizers. When the scandal broke, Karp put the offending engineer on leave and issued a statement personally apologizing and pledging the company's support for “progressive values and causes.” Outside counsel was retained to review the firm's actions and policies and, after some deliberation, determined it was acceptable to rehire the offending employee, much to the scorn of the company's critics.

Following the WikiLeaks incident, Palantir's privacy and civil liberties team created an ethics hotline for engineers called the Batphone: Any engineer can use it to anonymously report to Palantir's directors work on behalf of a customer they consider unethical. As the result of one Batphone communication, for instance, the company backed out of a job that involved analyzing information on public Facebook pages. Karp has also stated that Palantir turned down a chance to work with a tobacco firm, and overall the company says it walks away from as much as 20 percent of its possible revenue for ethical reasons. (It remains to be seen whether the company will be so picky if it becomes accountable to public shareholders and the demand for quarterly results.)

Still, according to former employees, Palantir has explored work in Saudi Arabia despite the staff's misgivings about human rights abuses in the kingdom. And for all Karp's emphasis on values, his apology for the WikiLeaks affair also doesn't seem to have left much of an impression in his memory. In an address to Palantir engineers in 2013, he sounded defiant: “We've never had a scandal that was really our fault.”

• • •

AT 4:07 P.M. ON
November 14, 2009, Michael Katz-Lacabe was parking his red Toyota Prius in the driveway of his home in the quiet Oakland suburb of San Leandro when a police car drove past. A license plate camera mounted on the squad car silently and routinely snapped a photo of the scene: his off-white, single-floor house, his wilted lawn and rosebushes, and his five- and eight-year-old daughters jumping out of the car.

Katz-Lacabe, a gray-bearded and shaggy-haired member of the local school board, community activist, and blogger, saw the photo only a year later: In 2010 he learned about the San Leandro Police Department's automatic license plate readers, designed to constantly photograph and track the movements of every car in the city. He filed a public records request for any images that included either of his two cars. The police sent back 112 photos. He found the one of his children most disturbing.

“Who knows how many other people's kids are captured in these images?” he asked. His concerns went beyond a mere sense of parental protection. “With this technology you can wind back the clock and see where everyone is, if they were parked at the house of someone other than their wife, a medical marijuana clinic, a Planned Parenthood center, a protest.”

As Katz-Lacabe dug deeper, he found that the millions of pictures collected by San Leandro's license plate cameras are now passed on to the Northern California Regional Intelligence Center (NCRIC), one of seventy-two federally run intelligence fusion organizations set up after 9/11. That's where the photos are analyzed using software built by a company just across San Francisco Bay: Palantir.

In the business proposal that Palantir sent NCRIC, it offered customer references that included the Los Angeles and New York City police departments, boasting that it enabled searches of the NYPD's 500 million plate photos in less than five seconds. Katz-Lacabe contacted Palantir about his privacy concerns, and the company responded by inviting him to its headquarters for a sit-down meeting. When he arrived at the Shire, a pair of employees gave him an hour-long presentation on Palantir's vaunted safeguards: its access controls, immutable logs, and the Batphone.

Katz-Lacabe wasn't impressed. Palantir's software, he points out, has no default time limits—all information remains searchable for as long as it's stored on the customer's servers. And its auditing function? “I don't think it means a damn thing,” he said. “Logs aren't useful unless someone is looking at them.”

When Karp heard Katz-Lacabe's story, he quickly parried: Palantir's software saves lives. “Here's an actual use case,” he said, launching into the story of a pedophile driving a “beat-up Cadillac” who was arrested within an hour of assaulting a child, thanks to NYPD license plate cameras. “Because of the license-plate-reader data they gathered in our product, they pulled him off the street and saved human children lives.

“If we as a democratic society believe that license plates in public trigger Fourth Amendment protections, our product can make sure you can't cross that line,” he said, adding that there should be time limits on retaining such data. Until the law changes, though, Palantir will play within those rules. “In the real world where we work—which is never perfect—you have to have trade-offs.”

And what if Palantir's audit logs—its central safeguard against abuse—are simply ignored? Karp responded that the logs are intended to be read by a third party. In the case of government agencies, he suggested an oversight body that reviews all surveillance—an institution that is purely theoretical at the moment. “Something like this will exist,” Karp insisted. “Societies will build it, precisely because the alternative is letting terrorism happen or losing all our liberties.”

Palantir's critics, unsurprisingly, weren't reassured by Karp's hypothetical court. Electronic Privacy Information Center activist Amie Stepanovich called Palantir “naïve” to expect the government to start policing its own use of technology. The Electronic Frontier Foundation's Lee Tien derided Karp's argument that privacy safeguards can be added to surveillance systems after the fact. “You should think about what to do with the toxic waste while you're building the nuclear power plant,” he argued, “not some day in the future.”

Some former Palantir staffers said they felt equally concerned about the potential rights violations their work enabled. “You're building something that could absolutely be used for malice. It would have been a nightmare if J. Edgar Hoover had these capabilities in his crusade against Martin Luther King,” said one former engineer. “One thing that really troubled me was the concern that something I contribute to could prevent an Arab Spring–style revolution.”

Despite Palantir's lofty principles, said another former engineer, its day-to-day priorities are satisfying its police and intelligence customers: “Keeping good relations with law enforcement and ‘keeping the lights on' bifurcate from the ideals.”

He went on to argue that even Palantir's founders don't quite understand the
palantiri
in
The Lord of the Rings.
Tolkien's orbs, he pointed out, didn't actually give their holders honest insights. “The
palantiri
distort the truth,” he said. And those who look into them, he added, “only see what they want to see.”

• • •

DESPITE WHAT ANY CRITIC
says, it's clear that Alex Karp does indeed value privacy—his own.

His office, decorated with cardboard effigies of himself built by Palantir staff and a Lego fortress on a coffee table, overlooks Palo Alto's Alma Street through two-way mirrors. Each pane is fitted with a wired device resembling a white hockey puck. The gadgets, known as acoustic transducers, imperceptibly vibrate the glass with white noise to prevent eavesdropping techniques, such as bouncing lasers off windows to listen to conversations inside.

He reminisced about a more carefree time in his life—years before Palantir, putting down his Rubik's cube to better gesticulate. “I had $40,000 in the bank, and no one knew who I was. I loved it. I loved it. I just loved it. I just loved it!” he said, his voice rising and his hands waving above his head. “I would walk around, go into skanky places in Berlin all night. I'd talk to whoever would talk to me, occasionally go home with people, as often as I could. I went to places where people were doing things, smoking things. I just loved it.

“One of the things I find really hard and view as a massive drag . . . is that I'm losing my ability to be completely anonymous.”

It's not easy for a man in Karp's position to be a deviant in the modern world. And with tools like Palantir in the hands of the government, deviance may not be easy for the rest of us, either. With or without safeguards, the “complete anonymity” Karp savors may be a 20th-century luxury.

Karp lowers his arms, and the enthusiasm drains from his voice: “I have to get over this.”

Pejman Nozad, Angel Investor:
Silicon Valley's Cinderella

While Pejman Nozad is the least successful subject of this book, as measured strictly by financial success or companies directly created, he's also among the most inspiring. Nozad isn't an entrepreneur full of disruptive ideas. He's not even the guy betting on the entrepreneur with the disruptive ideas. Instead, he's a person in the right location, at the right time in history, to put those camps together in a manner that is, in itself, earnestly brilliant. Silicon Valley is a meritocracy, where idea and execution rule over all else. But it still matters whom you know. And if you didn't go to Stanford, then perhaps the best place to get a deal to flow is a few miles down from campus, at the Medallion Rug Gallery.

Nozad, an Iranian immigrant, came into the tech game through selling carpets. That's it. Mix in charm, hustle, smarts, and instinct, and you get a $100 million fortune.
Victoria Barret
found Nozad the way great reporters do—following the connection from one story to another (in this case, Dropbox's Drew Houston, who within days of meeting Nozad, reports that “basically, he was our pimp.”) It's not often that a business saga reads like Cinderella. This one fits the slipper.

 

O
n a balmy February evening in Palo Alto, Pejman Nozad sipped tea on the deck of the Rosewood Hotel, the hot spot of venture capital's capital, Sand Hill Road. He chose a table situated just central enough so that he could see everyone who walked in. As usual, it was packed with the startup crowd—entrepreneurs in thick-rimmed glasses and jeans mingling with their backers, finance types in pressed slacks and camel-colored Italian leather loafers. Nozad has the peppered-hair look of one of the money guys, but in his soft blue blazer, adorned with a pastel paisley pocket square, he buoyantly bridged both groups.

“There's Mike Abbott. You know him? One of the smartest guys I know, just brilliant,” said Nozad, waving him over for a warm hello. He asked about his kids. Abbott had just left Twitter, where he ran engineering, for a partner spot at venture shop Kleiner Perkins Caufield & Byers. As Abbott left, Nozad leapt up. “My gosh, how are you?” he said, motioning over Lorenzo Thione, the Italian-born cofounder of search firm Powerset (which sold to Microsoft for $100 million in 2008). “I knew you wouldn't last at Microsoft,” said Nozad, an early investor in Powerset. “Starting things is in your DNA.”

Thione beamed a wide smile as he describes his latest “passion,” a Netflix-like service for high-end contemporary art. He mentioned how much money he was looking for. Nozad leaned in a little: “This is so fascinating. I have people you should talk to. I know the top interior designers in New York. And I want to meet your cofounder. I never invest without that.”

As the patio cooled, Nozad scanned the bar. The Rosewood was morphing into the night. The tech set had scuttled their iPads, settling in for cocktails, as a few coiffed call girls worked the crowd—perhaps the surest sign yet that money again flows freely in techland. Nozad wanted the L-shaped couch just at the corner of the entrance. “I'm afraid my friends might not find me,” he told a buxom waitress.

Ensconced in his new perch, he spotted Darian Shirazi, who joined Facebook out of high school as its first intern and early hire. Within minutes Nozad listed names of key investors and possible board members Shirazi should seek out for his business data startup, Radius. In the same breath Nozad mentioned a friend Shirazi should set up his cousin with. “He is the nicest guy, but she has to move from London,” said Nozad emphatically. “She belongs here.” Shirazi chimed in, acting as cultural translator: “Persians are always matchmaking.”

And, yes, that's exactly what he's doing, all day of every day. Nozad is one of Silicon Valley's greatest connectors. Top investors take his calls. Hit-making entrepreneurs consider him an uncle. And somewhere in between he's piling up small stakes in some of the hottest startups in the world. Yet Nozad doesn't have the staple calling card of Silicon Valley. No MBA. No PhD. No “technical background whatsoever” (his words). He's never even worked at a technology company.

Nozad's path to Silicon Valley power broker—and VC investor with a net worth in the ballpark of $100 million—was a far simpler one: He sold carpets.

• • •

UNIVERSITY AVENUE REFLECTS PALO
Alto's diversity in full. It starts as an exit off the Dumbarton Bridge, which cuts across the southern edge of San Francisco Bay, runs though rough-and-tumble East Palo Alto, then tree-lined stretches dotted with multimillion-dollar mansions, and eventually hits, as the name implies, the Stanford campus. A few hundred feet before that terminus, across from a Starbucks and a Thai restaurant, sits the Medallion Rug Gallery, a warehouse-like store where for thirty-six years the Amidi family has been selling “exquisite art forms” that just happen to cover your floor.

In 1994 the family patriarch, Amir Amidi, found himself on the phone with Nozad, who despite no tangible experience and a poor command of English, had answered a television ad for a salesperson. “Have you ever sold anything?” Amidi asked the brash caller in Farsi.

“No, but give me a chance,” Nozad responded. “How can you deny someone you haven't even met?”

Nozad had already learned that you can't get something if you don't ask. He grew up in Tehran, but in the 1980s his family fled to Germany. Nozad intended to join them after his compulsory stint in Iran's military service, which he would satisfy by playing soccer for the country's premier team. When a military officer questioned his discharge, on account of his sporty tour of duty, Nozad found a high-level cleric and published an interview with him on the benefits of soccer—and then had that cleric expedite his discharge.

Within a month of rejoining his family in Mannheim, Germany, with the intent of playing more soccer, his brother persuaded him to show up at the U.S. consulate and ask for a visa. It was a set-up of sorts. His brother was obsessed with American culture and went to the consulate almost daily only to be denied. Nozad showed up one morning, mentioned his soccer interviewing days and promptly scored a journalism visa. Two months after that he was on a plane to San Francisco, where an uncle lived, with $700 and a few words of English.

He worked at a car wash in San Jose owned by Iranians and then a coffee and yogurt shop in Redwood City tucked between a Mexican restaurant and a Social Security office. He studied English at night, living in a small room above the shop cluttered with boxes of napkins, cups, and coffee beans. That's when he stumbled upon the carpet want ad placed, fortuitously, by an older Iranian immigrant who had made a success of himself after fleeing his homeland when the Shah was deposed.

“My father had the experience, Pejman had the enthusiasm,” said Amidi's son, Saeed (Amidi died in 2000). “The American dream works both ways. A lot of rich people have to share their knowledge and take risks with a young person. That's how they stay rich. It's familiar, too. Someone did the same for them years ago.”

Over the next fifteen years, as his English and confidence improved, Nozad proved Amidi's top rug seller, moving $8 million worth of floor coverings in his best year. But far more than that, he was an opportunist in the greatest sense. This American neophyte recognized that fate had bequeathed him access to the most important people in the most important region of the most important industry during its most important era.

So he made sure not to blow chance's gift. Nozad insisted on meeting his clients at their homes, toting along twenty or so rugs (“that's two hours of talking, at least”). And before these visits he researched his hosts on Google, so that he could turn showing carpets into a two-way tutorial, peppering each ever so gently with questions about their careers, their tastes, their views on how the world works. It was awkward at first. But within months of the routine he had names to drop and technology trends to ponder. “The smart ones understood me,” he said. “They got it. They'd invite me to their office.”

Nozad started playing host. He gathered some top VCs regularly at the rug store for meet-and-greet cocktails with entrepreneurs. “People used to tease me for going there,” said Sequoia Capital's veteran partner Doug Leone. “At five o'clock the rugs would go up and flat screens would come down. We were all immigrants . . . Italians like me, Iranians, Indians. I was very comfortable.”

Nozad still didn't have any significant assets to speak of. But his boss, who had come to call Nozad his “third son,” had taken notice of his matchmaking skills. Amidi had also caught the VC bug. The family had purchased a small office building down the road from the rug store and took note as one tenant, Google, which had a few employees, exploded. Another tenant, PayPal, also grew out of its space—this time Amidi invested. “We noticed everyone around us was making more money than we were,” said Saeed Amidi. “We wanted to be part of the big game.”

In 1999, the Amidis formally launched an investment fund, cutting in Nozad as the de facto deal scout. It started with $2 million. Nozad kicked in $200,000, almost everything he had, for a one-third stake. The firm's name, Amidzad, even blended the two family names. While their investments were relatively small stakes—$25,000 or $250,000, the kind of numbers that most VCs wouldn't bother with—Nozad's hustle invariably earned him what Accel Partners' Sameer Gandhi terms “the Pejman exception.”

“He has a good sniffer, and I trust the guy,” said Sequoia's Leone, who has let Nozad coinvest with him in four different companies. “He's like me, from the earth.”

Nozad's first big bet was on a startup called Danger, which aimed to make handheld devices for exchanging data. Nozad had sold Danger's cofounder Andy Rubin a $5,000 rug. The deal took hours of negotiation, and Nozad was impressed. He inquired about Danger. He couldn't quite make sense of the technology, but after the first business meeting with Rubin (who now runs Google's Android division), Nozad turned to his mentor Amidi and said: “I would invest in that guy if he was selling red balloons. He will make things happen.” And so Amidzad wrote a check for $400,000.

Danger became a mobile phone software firm and was acquired by Microsoft for $500 million, but by then Amidzad's stake had been diluted to a pittance. Nozad made just two times his investment over an eight-year stretch. Sam Ferdows was brought in as Amidzad's lawyer soon after the Danger deal. His memory: “Once a week Pejman was telling me about some new ‘best deal ever.' He was doing business with handshakes. And no one ever read the fine print. I don't think they even realized there was fine print. Once, he told me a guy was going to give us a piece of his carried interest. What the heck does that mean?”

Nozad recognized his weakness and began doing deals only if someone more experienced, and whom he liked, was willing to put up funds, too. One of his first such helpers was Babak “Bobby” Yazdani, an early investor in Google and Salesforce.com. He advised Marc Benioff on his first key recruits and also founded Saba, a human resources software company. Nozad sold Yazdani a few rugs and then asked him to meet a chip designer with a startup idea. Why didn't Yazdani just blow him off politely? Yazdani explained: “There's a lot of humility in our culture. I'm talking about immigrants and entrepreneurs in Silicon Valley. We all had just our families and our educations when we came here. So when someone who you have a relationship with asks you to do something, you do it. It's a courtesy but also a discipline.”

Yazdani has since invested in eight startups with Nozad. He's one hook that makes Nozad's money attractive. Joe Lonsdale already had one hit under his belt when he attended a dinner hosted by Nozad at a Persian restaurant. He had cofounded data-mining outfit Palantir and had many suitors knocking when he left to launch his second venture, a private wealth management technology service called Addepar. Nozad insisted Lonsdale meet with him and Yazdani. He delicately pushed the idea of meeting at Lonsdale's Los Altos house. “You learn a lot about someone in their home,” said Nozad, in a nod to his carpet-peddling days. Then he watched how Lonsdale and Yazdani interacted. As for Lonsdale: “I like Pejman. I needed Bobby. He knows how to evolve a startup. I didn't know how to build a management structure over time.”

Nozad sought out technology advisors, too. Lou Montulli, a founding engineer at Netscape, was one of his first Silicon Valley friends. In 1997, Montulli wandered into the rug store owning three rugs from “an ex-wife and an expensive decorator.” He wanted to have them cleaned or, better yet, get rid of them. Nozad quickly had him buying two more rugs. He now has twenty in various homes. Nozad showed him antique looms and videos of weavers and walked him through the history of Iran's rug industry. “He made me appreciate the craft,” said Montulli, who then brought in other Netscape millionaires in need of rugs. Over time they talked technology, and Nozad started introducing Montulli to entrepreneurs. “It seems like such a leap from rugs to startups. But he was seeing amazing deal flow. He built a great network, and that's one of the keys to doing this successfully,” said Montulli.

Nozad's instincts weren't perfect—most notably, he walked away from a stake in Facebook and instead invested in Stanford's ill-fated version of a social network, Affinity Circles. (“Here is the e-mail from Sean Parker!” crowed Nozad as he pulls up a piece of would-be history on his iPhone.) But his track record overall was proving formidable, as many of his early investments were gobbled by the tech giants at prices five times what he put in, including Vudu, Vivu, Bix, and Milo. While far from wealthy, he was living a proper American dream.

And then he spotted two young entrepreneurs, Drew Houston and Arash Ferdowsi, at a Y Combinator conference in 2007, toting the demo of a cloud storage system they called Dropbox. He cornered Ferdowsi, chatting him up in Farsi, and within days had the pair visiting him at the rug shop.