The Ledger
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McGrew: LLMs have entered a pure scaling regime toward AGI
“And now that that has been cracked at this point, I think we actually have a very clear path to just focus on scaling. You know, we were, you know, talking about that you know, the zero to one part, that's not about scaling. I think there's a really strong cas…”
McGrew: FDE-led product discovery beats traditional sales-led discovery
“Sales-led product discovery, you're talking to people from the outside. And again, this is important very early on, but it's not as effective as the FDE-led product discovery, where you're solving these problems from the inside.”
McGrew: Building what customers ask for turns startups into consulting firms
“I think one of the other failures, by the way, that's even prior to that, and more, the easier failure to become a consulting firm, it's where you build the product in the field that the customers are asking for, rather than the one that's actually valuable to…”
McGrew: Startups should avoid FDE strategy unless no alternative works
“My first, second, and third pieces of advice to people who are thinking about trying an FDU strategy is like, don't,
Don't do this at home.
If you can avoid it, like it's probably bad for you.
Probably you're going to end up doing services.
And then only if yo…”
McGrew: In five years, AI agents won't be a single category
“Probably in five years, we'll look back, we'll be like, well, AI agents, there wasn't even a thing at all, right?
We were actually doing all these different things.”
McGrew: FDE strategy succeeds by growing contract sizes rather than cutting customization
“In the product market fit strategy, you want to be doing less work for every customer, you want to be driving down costs, you want to keep the contract size the same. In the FTE strategy, you want to drive the contract size up. So you're doing more and more va…”
McGrew: AI capabilities will outpace adoption over the next five years
“What the world is gonna look like over the next five years is that the capabilities just race ahead and race ahead and race ahead.”
McGrew: Nobody believed next-token prediction would work before GPT-1
“And the core idea behind GPT-ONE is that if you have a transformer and you apply this super simple objective of guessing the next token, guessing the next word, that that would be enough signal that you could actually have something that would be able to gener…”
McGrew: LLM pre-training scaling will inevitably hit a data wall
“It is definitely the case that there is a data wall and that if you take the same techniques that we were using to scale LLMs you know, at some point you're going to run into that.”
McGrew: AI founders should build with frontier models first, distill later
“Yeah, I would say if you're a founder, the right approach is to start with the very best model you can, because, you know, your startup is only going to be successful if it exploits some, something about AI that realistically is going to be on you know, the fr…”
McGrew: AI impact is not visible in productivity statistics
“I mean, yes, AI has had some effects, you know, particularly on people who write code, but, you know, I don't think you can see it in the productivity statistics, unless it's about how big the data centers are that we're building.”
McGrew: Future human jobs will bifurcate into 'genius' and 'manager'
“I think that the role that we're going to be playing, You know, one, I think there's going to be two roles. One will be something like a lone genius. You know, the Alec Radford of the world working alone at his computer, coming up with some crazy idea, but now…”
McGrew: Robotics will see a 'ChatGPT moment' within five years
“Robotics companies now are where, you know, LLM companies were five years ago. So I think in five years, you know, or even, even sometime in the next five years, we will see the chat GPT moment for robotics.”
McGrew: AI will automate scientists before physical experimenters
“I think weirdly we're going to end up with, you know, automating the scientist, the innovator before we automate, you know, the experiment doer.”
McGrew: FDEs function as product discovery linking client needs to platforms
“What he realized we needed was for the FTEs to act as product discovery. So they would go to the site, they would take the product as it was, and they would fill the gap between what the product did and what the users needed. So, you know, the FDE goes and bui…”
McGrew: Forward deployed engineers must be rapid prototypers, not code craftsmen
“And then for your deltas you want someone who's really good at prototyping. So the wrong profile for a Delta would be someone who's a craftsman who really loves, you know, making sure the abstractions are exactly right. That, you know, they're building softwar…”
McGrew: FDE deployments start at negative margins before becoming profitable
“From a business model perspective, one of the key things that you will see, that you should see, is that it may be the case that you're, when you go into, you do a new deployment at a customer, that you're actually losing money early on. As the longer you're a…”
McGrew: Bringing one-off FDE solutions directly into core products causes over-specialization
“There's a classic failure mode here where, you know, the FD implements something for one customer and you say, great, well, that's how you should do it. And you bring it directly into the product. And it turns out if you do that, you're building something that…”
McGrew: Palantir avoided hiring traditional PMs who lacked abstraction skills
“We didn't hire product managers for a long time. And when it did come time for me to hire product managers, I would interview people who were amazing product managers at, you know, other companies. And I would ask them to think at this level of abstraction. Th…”
McGrew: The FDE model is doing things that don't scale, at scale
“Well, that's the advice that you give to an early stage founder, and the FDE model effectively is doing things that don't scale at scale.”
McGrew: Most successful FDE startups have Palantir alumni leading the model
“I think the startups, the most successful startups doing the FTE model have people from Palantir running the FTE model.”
McGrew: Early startups should take on execution risk with outcome-based pricing
“Early on, it makes sense for the startup to just take on all the risk and say, we're going to just believe in our own execution. And, you know, we're going to take on the risk and you pay us if it works or you pay us when, you know, we're actually able to expa…”
McGrew: Platform teams must treat internal FDEs as their key customers
“You want to focus on, on the user experience and you have to do that, but you also have to remember your other key customer is the FDE. Your product should be, you know, ultimately delivering a good thing to the user after FDE customization, but it should be d…”
McGrew: Solving Dota 2 proved scale enables AI generalization
“And there was real insight that was generated there, which was that it really strengthened our belief that scale was the path to improving artificial intelligence. That with Dota two, the secret idea was that we could take huge amounts of experience and feed i…”
McGrew: Ilya Sutskever was the guiding light shaping early OpenAI research
“Early on there were sort of, you know, a couple big projects, as I said, and then some room for exploratory research. And at the very earliest days, the exploratory research was really about you know, it's about what the researcher wanted to do, but also it wa…”
McGrew: DeepMind was top-down while Google Brain replicated unguided academia
“And so early on the deep mind culture was I, you know, a caricature is Demis had a big plan and he wanted to hire a bunch of researchers so he could tell them to move forward with his plan. And Google brain said, let's rebuild academia. Let's like bring in all…”
McGrew: OpenAI succeeded by balancing startup agility with opinionated scaling bets
“And we took a different approach, which was really more like a startup where there was no sort of big centralized plan. But at the same time, people didn't have, you know, it wasn't just sort of let a thousand flowers bloom. Instead we had opinions about what …”
McGrew: Academia's obsession with individual credit inhibits collaboration
“I think academia is good for this very narrow thing of, you know, small groups, you know, trying out crazy ideas, but academia has a lot of incentives that prevent people from collaborating. And in particular in academia, there's this obsession with credit.”
McGrew: Initial AI breakthroughs are completely separate from scaling laws
“Just getting to that point where it's sort of plausibly begins to work is, is a huge, difficult problem. And it's completely separate from using scaling laws. Now, once you get it to work, that's when scaling laws come into play.”
McGrew: Extended reasoning compute will unlock reliable autonomous AI agents
“What we're going to see out of reasoning, out of long thinking is that it's really going to unlock the possibility of agents to do actions on your behalf, which, you know, has sort of always been possible, but it's just never been quite good enough.”
McGrew: Adding a 'nine' of AI reliability requires 10x more compute
“There's a rule of thumb that I like, which is basically, you know, if you want to go, if you want to add a nine, if you want to go from 90 to 99% or 99 to 99.9%, That's maybe an order of magnitude increase in compute.”
McGrew: Men are not seeking deep emotional connections with AI girlfriends
“I am a little skeptical of the deep emotional connection, you know, that, that, you know, guys are gonna have AI girlfriends. I think that's not what guys are looking for in a girlfriend, frankly.”
McGrew: Startups that can scale with identical customer setups should avoid FDEs
“If you're in a business where this is working for you, That's great. Don't do the FDE strategy. You have been given an amazing gift. If you have the opportunity to just scale, treat all the customers the same, go ahead and do that.”
McGrew: Palantir CTO Shyam Sankar invented the FDE strategy
“And I think this is where Shamsankar, who's very early employee, you know, now that I think the president and CTO of Palantir, he really invented the FDE strategy.”
McGrew: Enterprise implementations fail unless addressing CEO's top five priorities
“If you're not solving one of the top five priorities for the CEO, it's probably not going to work. They probably won't have the energy to persist through the much more challenging route of getting effectively a new piece of the product built in a way that work…”
McGrew: Forward-deployed domain experts must be 'heretics' rejecting existing workflows
“So the echo team, you know, a classic Profile for someone to join your echo team would be someone from the domain you're working in. So, you know, possibly a former army officer or someone who worked deeply in healthcare. So they have deep domain knowledge, bu…”
McGrew: Forward deployed engineering is ideal training for startup founders
“What you're doing you know, in each of these new environments at each of these customer sites, Is a little bit like being a startup founder, but you're a startup founder where you have access to some very powerful piece of product leverage that makes your job …”
McGrew: The FDE model sells business outcomes, not software installation
“Fundamentally what you're selling with the FDE model is that you're not selling the installation of software. You're selling an outcome.”
McGrew: FDE model pushes startups toward larger, flexible customer contracts
“With the FD model, you're going to get pushed towards larger and larger contracts. Like we talked about, you're going to be growing contracts per customer over time. The contracts, because they're complex are going to be more flexible.”
McGrew: Demo-driven development forces teams to focus on customer pain points
“What the demo does is it changes the locus of what you're thinking about from thinking about what can I build to what is it that the customer wants? And am I solving that pain point for the customer?”
McGrew: Joining a fast-growing young company best prepares future founders
“My advice to people, if they're thinking about where to join a company is I tell them to join a young company, not necessarily a small company. Right. But a young company, because a young company is still figuring things out. It's still learning. It hasn't suc…”
McGrew: Palantir spawned many startups because its culture prioritizes continuous learning
“This is why Palantir has birthed so many other startups is because even as a very large company, it is still a company where everybody all the time is learning, focused on learning and, you know, always doing that same grinding motion that it is to be a new st…”
McGrew: Army tech transformation mirrors the FDE playbook
“In many ways it does feel a lot like running the FDA strategy, you know, on the army. We get to see, you know, what is the, what are the CEOs? What are the leadership's top five priorities? Can we make progress against those? But also in a world where you see …”
McGrew: OpenAI authored early robotics paper as 'OpenAI' to avoid credit disputes
“And one of the early robotics papers, we actually said site as open AI because we didn't want to get into a fight. You know, the first author is the one who, you know, gets cited and their name shows up every single time. So we said, you know, we're not going …”
McGrew: Frontier labs will increasingly rely on model distillation for smaller models
“I think over the last year, the big frontier labs and a lot of other people have figured out the tricks to take big models. And, you know, take a very particular distribution of user input and train a model that is almost as good as the big model, but much, mu…”
McGrew: Highly personalized workplace AI assistants are a market hole
“I think this is actually a real hole in the market because that's not something I can go out and purchase today.”
McGrew: AI adoption requires redesigning workflows rather than automating existing ones
“I think that's the, like that we need some twist like that for AI that lets people figure out How to use the AI to solve the problem they actually have not just sort of take their existing workflow and have AI do that workflow.”
McGrew: Learning to code builds critical thinking even if AI writes code
“And I think the answer is that like right now we still have to, like, this is how you learn how to do critical thinking. And, you know, I think back to Paul Graham's idea of the resistance of the medium, like even once You know, the computer can do the program…”