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AI Agents Explained (at 3 Levels of Agency)
Tools, Workflows, and LLMs in a Loop
This is the first article in a larger series on AI agents. Although 2025 is said to be the “year of AI agents”, for many, it’s still unclear what makes an AI system an “agent” and why we should care. In this post, I describe the key features of these systems and concrete examples at 3 levels of agency.
Companies are making big bets on AI agents. OpenAI is shipping models like Operator and DeepResearch. YC says vertical AI agents could be 10X bigger than SaaS [1]. And AI apps like Cursor and Windsurf have replaced their chat interfaces with agentic ones.
This has created lots of excitement around agents even beyond AI companies. However, for the uninitiated, it may not be clear what an AI agent (actually) is.
What are AI agents?
One of the causes of confusion is that no one agrees on a single definition of an AI agent. To demonstrate this, here are a few from leading organizations.
- OpenAI: a large language…
