AI's $1B Secret: The Best Engineers Stopped Writing Prompts in 2025

Everyone's still tweaking prompts. Meanwhile, the winners rewired how AI thinks. Context engineering just changed everything.

Tobi Lütke nailed it: "Context engineering is the art of providing all the context for the task to be plausibly solvable by the LLM." The shift from prompt engineering to context engineering marks AI's evolution from parlor trick to production powerhouse. Agent failures aren't model failures anymore, they're context failures.

Context isn't your prompt. It's everything: system instructions, user history, long-term memory, retrieved information (RAG), available tools, structured outputs. The "cheap demo" agent sees "quick sync tomorrow" and responds robotically. The "magical" agent checks your calendar, email history, contact importance, then sends: "Hey Jim! Tomorrow's packed. Thursday AM free? Sent an invite."

This isn't incremental improvement, it's architectural revolution. Context engineering means building dynamic systems that deliver the right information, right format, right time. Not static templates. Living systems that adapt. Your code doesn't generate responses anymore; it orchestrates information flows.

The implications destroy current AI strategies. Companies burning millions on prompt optimization while ignoring context architecture. Winners understand: powerful agents need memory systems, tool integration, dynamic retrieval. The magic isn't smarter models. It's smarter context.

• Most agent failures: context failures, not model limitations
• Context components: 7 distinct layers beyond prompts
• Shift: from crafting strings to engineering systems

❓ When context determines capability, are you still prompting or programming reality?

Read the full article on PHILSCHMID.

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💡 We're entering a world where intelligence is synthetic, reality is augmented, and the rules are being rewritten in front of our eyes.

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