There are multiple ways to determine the cost of running a LLM (electricity use, compute cost, etc.), however, if you use a third-party LLM (a LLM-as-a-service) they typically charge you based on the tokens you use. Different vendors (OpenAI, Anthropic, Cohere, etc.) have different ways of counting the tokens, but for the sake of simplicity, we’ll consider the cost to be based on the number of tokens processed by the LLM.

The most important part of this framework is the idea that different models cost different amounts. The authors of the paper conveniently assembled the below table highlighting the difference in cost, and the difference between them is significant. For example, AI21’s output tokens cost an order of magnitude more than GPT-4’s does in this table!

Table 1 from the paper

As a part of cost optimization we always need to figure out a way to optimize the answer quality while minimizing the cost. Typically, higher cost models are often higher performing models, able to give higher quality answers than lower cost ones. The general relationship can be seen in the below graph, with Frugal GPT’s performance overlaid on top in red.

Figure 1c from the paper comparing various LLMs based on the how often they would accurately respond to questions based on the HEADLINES dataset

Using the vast cost difference between models, the researchers’ FrugalGPT system relies on a cascade of LLMs to give the user an answer. Put simply, the user query begins with the cheapest LLM, and if the answer is good enough, then it is returned. However, if the answer is not good enough, then the query is passed along to the next cheapest LLM.

The researchers used the following logic: if a less expensive model answers a question incorrectly, then it is likely that a more expensive model will give the answer correctly. Thus, to minimize costs the chain is ordered from least expensive to most expensive, assuming that quality goes up as you get more expensive.

Figure 2e from the paper illustrating the LLM cascade

This setup relies on reliably determining when an answer is good enough and when it isn’t. To solve for this, the authors created a DistilBERT model that would take the question and answer then assign a score to the answer. As the DistilBERT model is exponentially smaller than the other models in the sequence, the cost to run it is almost negligible compared to the others.

One might naturally ask, if quality is most important, why not just query the best LLM and work on ways to reduce the cost of running the best LLM?

When this paper came out GPT-4 was the best LLM they found, yet GPT-4 did not always give a better answer than the FrugalGPT system! (Eagle-eyed readers will see this as part of the cost vs performance graph from before) The authors speculate that just as the most capable person doesn’t always give the right answer, the most complex model won’t either. Thus, by having the answer go through a filtering process with DistilBERT, you are removing any answers that aren’t up to par and increasing the odds of a good answer.

Figure 5a from the paper showing instances where FrugalGPT is outperforming GPT-4

Consequently, this system not only reduces your costs but can also increase quality more so than just using the best LLM!

The results of this paper are fascinating to consider. For me, it raises questions about how we can go even further with cost savings without having to invest in further model optimization.

One such possibility is to cache all model answers in a vector database and then do a similarity search to determine if the answer in the cache works before starting the LLM cascade. This would significantly reduce costs by replacing a costly LLM operation with a comparatively less expensive query and similarity operation.

Additionally, it makes you wonder if outdated models can still be worth cost-optimizing, as if you can reduce their cost per token, they can still create value on the LLM cascade. Similarly, the key question here is at what point do you get diminishing returns by adding new LLMs onto the chain.

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