Welcome back to Squawk Box this morning.
Russian President Vladimir Putin raising the stakes in its war with Ukraine.
Putin says he's not bluffing when he says he's going to use all means to defend Russia,
including potentially using nuclear weapons.
Joining us right now to talk about this and Putin's nuclear threat is Alex Karp, CEO and co-founder of Palantir.
And the last time we saw you in Aspen and prior to that in Davos.
In some ways, you called this in terms of this potential threat.
So where are we really at this point?
Well, you know, we, it was a pleasure to talk to you then and a pleasure to talk to both of you now.
You know, when we were talking about the real -- the reality
that nuclear weapons are on the table three and two months ago, of course, that was derided.
The general belief I had just comes from building a software business
and seeing software in action in war, where software plus heroism can really slay the giant.
And I think I know the Russians just underestimated the power of kinetic plus software plus heroism.
And then I believe it's a zero sum game in Russia, and there is no ability for Putin to lose.
He can't just fail at war and then retire, which is what we're used to in democracy.
You know, politicians fail and then we have another politician.
And so the reason why I was sounding the alarm at Davos and then again,
when we talked -- to much derision -- was simply this combination of American software,
the way we build software, plus a kind of heroism that is very unusual.
We'd outperform the giant of spend.
And that leads to just this jarring reaction.
And we don't want to believe in the West that people would be zero sum.
We're not that zero sum in the West.
So basically, he's been backed into a corner.
He's a caged animal.
You're backed into a corner where the corner is
if you fail, you will be you will be killed, your friends will be killed, your family will lose their assets.
How do you then handicap what his options are?
And what the real possibility of him using nuclear weapons would be?
What I believe we should do is continue to support Ukraine
and begin to engage in a dialogue where we figure out
what it looks like for him to fail without having to say at home, we failed.
Now, so what does that look like to you?
Well, Ukrainians have to decide.
I believe --
I believe I know having gone there, that they very much believe that their territory should be respected.
I think we in the West should -- we should stick by the line that
every country should be able to have its own sovereignty over its territory.
I don't know.
But I do know what it's very -- it's the thing -- the things that we discussed and predicted
that Ukraine would massively outperform have happened.
The dangerous scenario of massive outperformance
is that your adversary is backed into a corner, whether that's
But if he's failing and we need to find a way for him to look like he hasn't failed, to his own people,
what is that?
Well, we're very good at that in the US.
We're always we're failing in a lot of stuff and we convince ourselves we're not.
Somebody -- somebody has got to be -- somebody who's very good at this.
What does a politician do for a living?
I mean, I happen to be more on the left.
Some people are more on the right.
The job of a politician is to convince you you haven't failed and then get your vote.
You sound like Henry Kissinger, though.
Basically, we're going to have to give something away.
Well, Henry, I know -- you know, Henry, I discussed this with him.
He believes that -- my belief is the Ukrainians decide.
But you need someone who's not me, like I'm not adept.
My job is to actually deliver something that works and win.
There are people whose whole professions are to help you explain to your people why it wasn't a failure.
I don't do that for a living, but I do know that somebody who does that for a living needs to be very engaged right now.
Because if you've won something against all odds,
whether it's a, you know, less importantly a tech company or you've defended your—
no one, I don't actually believe most people in the West, in America and England, really believed Ukraine could win.
And in fact, I know they didn't believe it because I, you know, through our clients hear what the assessments were.
But if you've won against all odds, you've cost your family,
your family members have died,
there's no way you're going to compromise,
unless it's on your terms.
And that's why I think it's gotten so much more complicated.
Exactly.
And then you have to roll in people who are specialized at that, and people who are specialized at that are called politicians.
That's what they do for a living.
And they need to sit down and figure out how do you --
how do you explain to the Russian people that although you failed, it's not a failure. And there is a way to do that,
but first you have to begin.
And the beginning part is, look, if you've won something in a negotiation against all odds,
both parties have to accept you've won.
Well, first of all, let's just talk about that,
which is some people would argue that Ukraine has not won yet and that we're going to have a very difficult winter.
Right.
That things may sort of calm down or at least temporarily slow down because of the weather.
And then -- and then -- and then we have to see what happens.
I'm not -- I'm not -- winning isn't won till you've won, obviously, but you have a perception based on expectations.
If I go out onto a football court and I'm like a halfway surviving linebacker, I've won.
And like this -- nobody, which -- when we talked at Davos,
and you asked me what I thought would happen, it looked like,
"Oh, there goes batshit crazy Karp again with some crazy prognostication that will never happen.
Ukraine could win and it could be dangerous because they're going to win." That looked batshit crazy.
In fact, that is the reality we're in.
And we have to,
you have to begin with the facts.
The facts are they have massively outperformed.
By the way, this is going to change the way war is fought,
because here you have a tiny country with very little assets and they -- in the use of software and heroism.
You can push off and win against a Goliath.
You keep saying "use of software" -- explain that.
Well.
This is the Palantir part of the story.
The part that we're not allowed to talk about, is -- you just --
in classic warfare, it just comes down to the last, a post-World War II --
America spends 800 billion and Russia spends,
I don't know, 65 billion, but Russia thinks half of it is it waste and they're willing to do things on the human rights front
we would never do.
So they think it's parity, right.
However, when you when you use information technology, who's moving?
What's moving?
Under what conditions?
Can you identify people from space?
How can you identify -- can you unmask people who are trying to mask themselves?
What is the action of the battlefield?
Where do you put your assets?
Where are their biggest assets?
This all -- this plays in, by the way, into the American strategy of war fighting, which is quick, quick, quick attack.
But you have to know where to attack.
How do you -- how do you deceive your adversary?
You know, America has been fighting wars, most of which I've been against, for 20, 30 years.
We've learned a lot about how to fight wars.
The thing is that -- and so we have this great knowledge of what it means.
And part of that is something that is interestingly very cheap to produce, but it really is best produced in the West.
Why is software best produced in the West?
Would you want to run a software company in Russia or China and get it -- ?
You lose it.
You just mentioned China.
Is there a lesson that you think the Chinese are learning
about war and about -- to the extent that they're thinking about the future of Taiwan
and how that may relate to what's happening in Ukraine.
Every country in the world, including China, and they're like -- we should never underestimate our adversaries.
These are some of the most interesting, formidable and creative, intelligent, wise cultures in the world.
And they are very much, again, looking at what their expectation was and what was reality.
The expectation was probably this lasts a month, maximal, and reality.
And then they're, I'm sure, looking at we're spending gazillions, they're spending a lot less.
What is special about what they're doing that's allowing them to massively outperform, and again,
in a much less relevant context, why is tech dominated by America?
It's like, well, there are all these reasons you have to understand
and with 100% certainty, every country in the world that is big is saying,
Holy shit, we thought we could just win because we're big.
If the people are willing to fight to die and if they have very specialized, not very costly software and other products
and kinetic weapons tanks, but but not really the big ones, they can outperform us and grind us into the dust.
And that changes the way the world actually works today.
Here's a software question: how do you think about the Chinese in terms of their talents, abilities?
Well, this is again, we tend to think we are at a massive disadvantage in the West because we won't violate human rights.
But actually, we're -- we have a massive advantage.
Well just explain that.
The argument is because we won't violate human rights
and because of civil liberties, we don't have access to the same kind of data stream.
Well, we don't -- for example, we would not support something that tracks everyone walking by here
and tells us what they're doing during their lunch hour when they say they're at work.
Right.
We just don't -- I don't support that.
I don't think anyone here supports it.
You have debate, but it's pretty -- actually on international standards in a very narrow spectrum.
Some people are in favor of knowing that if someone's a terrorist, you get in debates, who's a terrorist, who's not.
But no one supports broad, broad surveillance of the Chinese nationalist kind, that is supported, by the way, by wide swaths of the world.
Most people look at that as a disadvantage.
I'll tell you, that's an advantage.
Why?
Because we focused all our efforts for the one area that actually matters, fighting wars.
And by the way, if you're going to build software for that, you need the best of the best of the best of the best.
Those people don't want to build companies in countries where you could lose your company.
They don't want to build.
By and large, it's certainly at my company.
We don't want to build technologies that stop us from having a normal social life,
including -- a normal social life, means things we're not actually wanting to discuss in public.
Alex, If all of this gives us such an advantage, why have we seen such a hit to so many software companies?
I think you guys are down 58% this year in your stock price.
Well, you know what?
Look, bad times are are incredibly good for Palantir because you -- you sort out -- you get the durable --
There's this thing where -- you've been involved in these things for long years, like Palantir, 20 years old, 18 years old.
The bad times really uncover the durable companies.
And tech is going through bad times.
And there are lots of reasons, interest rates, other reasons.
But you will see that the durable companies that come out of this in three, four years, two years, however long it takes,
are largely going to be from America, largely from the West Coast.
And they're going to be very focused on producing things that actually matter.
Will this, like, deadly tidal wave wipe out some companies?
Yes, it will.
And what do you see -- when we were talking about employment and labor, in terms of your employment, and being able to hire talent,
what are you seeing right now
with how easy or hard it is?
Plus, by the way, I imagine there are a lot of employees sitting looking at the stock price saying,
I'm underwater or I'm you know, I got half of what I thought I had.
Well, look, we built Palantir --
we were private for almost 16 years and our share price on the non-private market was going down.
So, like, these times, in the end, bad times help us also because the alternatives end up being like --
our main competition is iwanttobeacockroachholder.com who recruits our people.
That's our actual competition, the startup that is two days away from failing.
But engineers don't know it.
Those companies aren't getting funding.
And so, like, instead of going to mycockroachtrap.com,
people are like, yeah, the stock is down, we're doing crazy important things and the alternatives suck.
Do you see in terms of clients, though, right now, spending,
I mean, on the corporate side and even on the government side, given what's happening in the economy.
We see a big difference between US and, to be frank (probably too frank)
the US is just completely different than everywhere else.
Our US business has grown 67% a year the last three years from 233 million to just over a billion.
The rest of the world --
Yeah.
People react.
Americans, for all of our foibles, we react to bad times by rolling up our sleeves and adapting.
The rest of the world has trouble with adapting at the pace we adapt.
So, yes, our business is being -- is being negatively afflicted by the inability to -- in other countries, to adapt the way they adapt,
we adapt in America.
On the other hand, you know, we're we're an 18 year old business.
The last three years, our largest -- the American segment is growing 67%, despite me as a front man.
So it's like, you know, maybe if we, you know, we have a more successful front man,
we can even -- I'm not planning to go anywhere --
but it's like, despite or because of our various disabilities,
we're growing 67% a year in the most important, most interesting market in the world.
And yes, we we are not growing that way in Germany and France and other places.
And I don't expect to grow that way.
I do think there'll be a handoff.
What I think is going to happen is we're going to have a couple of years of terrible times.
Those companies that are most robust will survive and thrive.
You'll get credit for it in a couple of years and the rest of the world will do what it often does.
It will follow what we did well while deriding us for how crazy it is in America.
Do you see a recession coming around the globe?
Do you see a recession coming here?
I don't know.
It's very hard to tell -- a lot of this definitional --
but what I do see is that people are scared shitless about energy outside of America.
They're -- they're more -- they're so scared about the macro political conditions that no one wants to talk about them.
Their enterprises are built for a static, unified world of peace.
And the balance sheets obviously are not often prepared for what's going to happen,
which I think is going to be pretty bad the next couple of years, politically, economically.
And then also, you know, that's actually the real problem you have in tech.
If you've been -- if you've been raised in an orgiastic environment
where you go from high grades in high school to high grades in college to being a billionaire,
you've never seen bad times.
The worst time you've seen is you can't get a date in high school.
That's your bad times.
Alex Karp, never one to hold back.
So glad we're on cable rather than broadcast this morning.
We appreciate you being here.
I appreciate you, as always, being candid with us.
And it's something.
So we look forward to see you again soon.
Take care.
You don't need to -- you can hang out! You don't need to get off the set --
I'm used to getting thrown out as soon as -- !
Oh, time to go...!
You can stay,
you can stay.