Palantir Will be Bigger than Tesla

Various Mental Models

Edited by Brian Birnbaum

As an early investor in Tesla, I see great potential in Palantir being an even better investment over the next decade. Here’s why.

The way the world is shaping up, I believe Palantir has meaningful odds of surpassing Tesla in terms of market capitalization over the next ten years. Which ends up bigger is fairly irrelevant to my portfolio if what I explain in the remainder of this deep dive ends up closely reflecting reality; in such a scenario, both my Palantir and Tesla positions would yield notable returns over the next decade.

The world is now on an accelerated path to commoditizing everything a machine can make or do. We can now teach machines how to think and improve on their own. Still, some believe AI is a fad. Since the early 1930s humanity has exponentially increased compute per dollar of investment. Whether AI is “hyped” or not, the ability of machines to make and do things for us will maintain this exponential rate of improvement. 

Because the trend is exponential, the results of each incremental step are hard to visualize. But we are just one or two incremental steps away from machines beating humans at most repeatable tasks. 

This is best visualized in the graph below, first shared by futurist Ray Kurzweil. The Y axis plots computation per second per dollar on a logarithmic scale. On the X axis is linear time. As with the stock market, the chart yields a relatively straight line up and to the right. This trend has enabled humanity to ingest and process exponentially more data over the last century, which is what gives machines the context to commoditize tasks that they will soon automate. A decade from now we will be able to process exponentially more data per second.

Much smarter machines will do most of the work that underpins the economy today. The bedrock of capitalism will be computing hardware on the one hand (chips), while on the other, the software that we use to gather, organize and feed data to algorithms in an orderly manner. 

Palantir management named this software “Ontology,” which is basically a digital copy of real life. At present Palantir has no real competition, and, as it continues to further productize its platform, Ontology is set to permeate industry across the West. If it does saturate Western industry–which seems likely to me at this point–and evolve into an effective monopoly, Palantir will become the default Ontology and hence a foundational component of the economy. 

Tesla is on a path to create a second Internet of sorts. Instead of sending around emails and pictures, Tesla’s network will provide the pathways for autonomy tokens. By iterating faster than any other organization on Earth its AI, manufacturing, and energy curves, Tesla is set over the next decade or two to deliver autonomous robots that perform basic tasks and harvest their own energy, per the graph below. This promises to evolve into a platform that abstracts away manual labor, unlocking some form of material abundance.

This is paving the way for a scenario in which eventually anyone can plug into Tesla’s network via an API and, assuming hardware is compatible, gift their machine of choice with autonomy. Since the economy is essentially the number of people multiplied by their productivity and sublated by any synergistic effects, Tesla’s platform aims to raise by orders of magnitude the ceiling for productive output, rendering the Malthusian world-view obsolete and opening up a new chapter of economic history. 

At a higher level of abstraction, the above is an Ontology for autonomy. Hence, while Tesla is building an Ontology for a crucial horizontal component of the economy, Palantir is building a platform that is set up to power all other vertical Ontologies. Per the illustration below, once Tesla has figured out how to teach robots to navigate three dimensional space, the robot in question needs to learn how to apply these general skills to more specialized environments, like construction, healthcare, defense and others.

Even when energy, transport, and production are fully commoditized, perfecting vertical Ontologies will be the next frontier. Incremental wealth will be created by those who own the best vertical Ontologies, have the most and highest quality data, and are thus able to extract the highest return from the available horizontal Ontologies. 

Vertical and horizontal ontologies are valuable on their own. But this is a comparative analysis. The paramount mental model is that, ultimately, autonomy needs specialized datasets to be productive across the board. 

Tesla is currently gathering one highly specialized dataset: road traffic. But Palantir is gathering the rest of the vertical datasets, across nations, industries, and functions within industries. This is why, when automation becomes a given, igniting Tesla’s stock into a second proliferation, competitive edge will belong to those who have specialized datasets via which autonomy and other horizontal Ontologies can be leveraged.

Although it may seem impossible at present, for these reasons I believe Palantir is likely to surpass Tesla in terms of market cap over the coming decade or so.

Until next time!

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Disclosure

These are opinions only of the individual author. The contents of this piece do not contain investment advice and the information provided is for educational purposes only and no discussions constitute an offer to sell or the solicitation of an offer to buy any securities of any company. All content is purely subjective and you should do your own due diligence.

Antonio Linares makes no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness or reasonableness of the information contained in the piece. Any assumptions, opinions and estimates expressed in the piece constitute judgments of the author as of the date thereof and are subject to change without notice. Any projections contained in the Information are based on a number of assumptions as to market conditions and there can be no guarantee that any projected outcomes will be achieved. Antonio Linares does not accept any liability for any direct, consequential or other loss arising from reliance on the contents of this presentation. Antonio Linares is not acting as your financial, legal, accounting, tax or other adviser or in any fiduciary capacity.