The FDE Playbook for AI Startups with Bob McGrew

**Bob McGrew** (0:00)
With AI agents, there is no incumbent product. And so that, I think, is why you're seeing the FDE model taking off, because there's so much product discovery to do. You want to drive the contract size up. You're doing more and more valuable work for this customer and also for future customers. The FDE model effectively is doing things that don't scale at scale.

**SPEAKER_3** (0:29)
Hello, and welcome back to another episode of The Lightcone. Gary wasn't feeling great today and couldn't be here, but we're thrilled to be joined by Bob McGrew. Bob was an early engineer at PayPal, an early executive at Palantir, and was recently Chief Research Officer at OpenAI, where he led the development of ChatGPT, GPT-4, and the O1 reasoning model. Now, he's exploring the future of AI and has an exciting new role with the US Army that we'll get to in a bit. Bob, thanks so much for being here.

**Bob McGrew** (0:55)
Great to be here.

**Jared** (0:56)
So Bob, I've been particularly excited to sit down with you to talk about the four deployed engineer model, because this is a topic that keeps coming up in our lives. It is a really hot topic in Silicon Valley right now, and especially among the AI agent companies that we've talked about on this podcast a lot. You were in the room when it all got started, and so you know, like, you're exactly the right person to explain it. You were actually telling me a funny story. You were at an AI conference that YC organized a few months ago, and you expected that all the founders would come up to you to talk to you about, you know, inventing ChatGPT. And instead, what all of these AI startup founders wanted to talk to you about was the Palantir 4 deployed engineer model.

**Bob McGrew** (1:36)
Well, and it's really true. It hasn't just been that one conference. As I've been advising startups this last year, I would say that a lot of them are pretty much exclusively trying to learn how the FDE strategy works.

**Jared** (1:47)
Yeah, so there's this intense topic of fascination, and it's super timely because it's actually become, I think, the dominant way that the AI agent startups are organizing themselves. I was looking earlier today, and if you look at the YC job board, there's over 100 YC startups that are hiring for a job with the title Forward Deployed Engineer, and up from basically zero three years ago. Perhaps before we get really into it, for anybody who doesn't already understand, can you just explain what a Forward Deployed Engineer is and how it's relevant today?

**Bob McGrew** (2:18)
So a Forward Deployed Engineer is someone, typically technical and engineer, who sits at the customer site and fills the gap between what the product does and what the customer needs.

**Jared** (2:30)
And how does this play out in practice?

**Bob McGrew** (2:32)
You'll have a product and you go to a new customer site. You start working with a new customer and the problem that they want you to solve is not a problem that you've ever solved before. But you believe that it's one that with a little bit of work, maybe a lot of work, you can solve for this particular customer and you'd be making a huge impact for them. You'd be delivering an outcome to them that would be extremely valuable for them. So you take the product that you have and the FDE, with help from the product team, figures out how to deliver that outcome, how to build that use case, how to deliver the piece of software that you've built in a way that actually works for the customer.

**Jared** (3:10)
To go all the way back to the beginning, you were there at Palantir when this whole model that is now exploding in Silicon Valley was invented. Can you talk about how it all got started?

**Bob McGrew** (3:19)
And the interesting way to think about the beginning of Palantir is that when we got started, the focus of our company was to build software for the intelligence community, specifically software for spies. And so one of the challenges in building software for spies is that I don't know any spies. You probably don't know any spies either. And if you happen to find a spy and you go and ask them, so what is it exactly that you do?
They're not usually going to tell you. And so we had to take an approach that was sort of very unusual at the time. But effectively, we started by building a demo and we took that demo to potential customers in the intelligence community. And, you know, Stephen Cohen very famously did this, one of the founders of Palantir. And he showed them the demo and he said, you know, well, what do you, what do you think? And they said, well, this is terrible. This isn't related to what we do at all. And he said, oh, well, how would you like it to be different? And then, you know, they would say, oh, well, could you make this change and this change? He's like sitting there writing all of this down. So far, this story feels very much like you would, the standard advice you would give to founders today, right? That you have to go, you have to make something that people want, you have to get out of the building, you have to go talk to customers. I think we were doing this back in like the mid 2000s. And so, you know, there's a little bit of that meme where like I spent years mastering this technique and Paul Graham just tweeted it out for everybody. But the thing that changes and that really causes the FDE strategy is that what you expect and the standard thing that you expect is that you spend a lot of time early on, you know, doing things that don't scale, going out and visiting customers, getting very close to the customers. And then you discover product market fit. And once you discover product market fit, you know, if you in this is class, you know, if we cross the chasm or any of these books, once you discover product market fit, you do something entirely different. So, you know, instead of going, you know, staying deep with the customers, doing as much as you can to really understand the customer, instead you want to embrace distance from your customer. And all you want to focus on is scaling. How do you sell more? How do you treat all customers exactly the same? And, you know, I think I want to say that 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. But it didn't work for us. And I think this is where Sham Sankar, who's very early employee, you know, now I think the president and CTO of Palantir, he really invented the FDE strategy. And the basic thing we found was that the customers that we had, the product that they needed was slightly different at every place. And so we moved from one customer, building a product for them. We went to the next customer, and we saw they had something was slightly different. And instead of building two products, or building the exact right feature for each of them at each site, we built something that was more a platform than a product, that had a lot of ability to be customized at each site. So when you do that, well, okay, you need to bring someone to the site to understand what the users are doing, and build customization. And historically, that's been understood as services, right? So that's something you want to minimize. You don't want to be doing a lot of work per customer in this, you know, product market fit. And what Sean realized was that you can actually flip this around and make it valuable. So what he realized we needed was for the FDEs 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 builds like a gravel road to where the product needs to go. And then the role of my team of the product and engineering team was to look at that and basically figure out how that should generalize to the next five customers or the next 10 customers, and then turn that, you know, gravel road into like a paved super highway.