Agentic AI: From Chatbots to Agents

What an agent really is, the ReAct loop with a runnable demo, workflows vs agents, patterns and failure modes.

• Intermediate
• 30 min read
• 3 objectives

Before this lessonLesson 12: Tool Calling and Structured Output

"Agentic AI" is the hottest phrase in the industry and also one of the most abused. Vendors slap it on anything with a chat box. Let us define it properly, watch a real agent loop run step by step, and learn the single most valuable skill in this whole area: knowing when not to build an agent.

A precise definition

An agent is an LLM that decides its own next step, in a loop, using tools, until a goal is reached. Three ingredients: a goal, tools to act on the world, and a loop in which the model chooses what to do based on what it has observed so far.

The key word is decides. In a normal program you write the steps. In an agent, the model controls the control flow.

The autonomy spectrum

flowchart LR A["Single LLM call"] --> B["Chain / workflow"] B --> C[Router] C --> D[Agent] D --> E[Multi-agent system]

Less autonomy on the left, more on the right. Use the simplest thing that works.

• Workflow: LLM calls and tools orchestrated by predefined code paths. Predictable, cheap, testable.
• Agent: the LLM directs its own process. Flexible for open-ended problems where you cannot list the steps in advance, but slower, costlier and harder to control.

The ReAct loop: reason, act, observe

The classic agent pattern is ReAct (Reasoning + Acting). On each turn the model writes a short thought, picks an action (a tool call), you run it, and the observation is fed back. It repeats until the model decides it can give a final answer.

sequenceDiagram participant Agent participant Search participant Calc as Calculator Note over Agent: Goal: Norway population divided by Iceland Agent->>Search: population of Norway Search-->>Agent: 5.5 million Agent->>Search: population of Iceland Search-->>Agent: 0.38 million Agent->>Calc: 5.5 / 0.38 Calc-->>Agent: 14.47 Note over Agent: Final answer: about 14.5 times larger

Here it is as running code. The "model" is scripted (a lookup of what a good model would decide) so the demo is deterministic, but the loop, the tool dispatch, the observations and the stopping conditions are exactly what a real agent has:

import re

# ---------- tools ----------
FACTS = {"population of norway": "5.5 million", "population of iceland": "0.38 million"}

def search(query):
    return FACTS.get(query.lower(), "no results")

def calculator(expression):
    if not re.fullmatch(r"[0-9.\s+\-*/()]+", expression):        # never eval arbitrary text!
        return "error: only arithmetic allowed"
    return str(round(eval(expression), 2))

TOOLS = {"search": search, "calculator": calculator}

# ---------- a scripted stand-in for the LLM's decisions ----------
def decide(goal, history):
    """Returns (thought, action, argument) or (thought, 'final', answer)."""
    seen = {a: obs for a, arg, obs in history}
    got = [obs for a, arg, obs in history]
    if len(history) == 0:
        return "I need Norway's population first.", "search", "population of Norway"
    if len(history) == 1:
        return "Now I need Iceland's population.", "search", "population of Iceland"
    if len(history) == 2:
        a = float(got[0].split()[0]); b = float(got[1].split()[0])
        return "Divide the two numbers with the calculator.", "calculator", f"{a} / {b}"
    return "I have everything I need.", "final", f"Norway has about {got[2]} times as many people as Iceland."

# ---------- the agent loop ----------
def run_agent(goal, max_steps=6):
    history = []                                                   # (action, argument, observation)
    for step in range(1, max_steps + 1):
        thought, action, arg = decide(goal, history)
        print(f"step {step}")
        print(f"  thought    : {thought}")
        if action == "final":
            print(f"  FINAL      : {arg}")
            return arg
        observation = TOOLS[action](arg)
        print(f"  action     : {action}({arg!r})")
        print(f"  observation: {observation}")
        history.append((action, arg, observation))
    return "stopped: step limit reached"

run_agent("How many times bigger is Norway's population than Iceland's?")

step 1
  thought    : I need Norway's population first.
  action     : search('population of Norway')
  observation: 5.5 million
step 2
  thought    : Now I need Iceland's population.
  action     : search('population of Iceland')
  observation: 0.38 million
step 3
  thought    : Divide the two numbers with the calculator.
  action     : calculator('5.5 / 0.38')
  observation: 14.47
step 4
  thought    : I have everything I need.
  FINAL      : Norway has about 14.47 times as many people as Iceland.

Every real agent, from a coding assistant to a research bot, is this loop with a smarter decide() (an LLM call) and more tools. Notice the two guardrails already in the code: max_steps (so it cannot run forever) and the calculator refusing anything that is not arithmetic.

Five workflow patterns you should know

Before reaching for a full agent, these composable patterns solve most problems with far more control:

• 1. Prompt chaining. Break a task into a fixed sequence: draft, then critique, then rewrite. Each LLM call handles one easy step; you can insert checks between steps.
• 2. Routing. Classify the input first, then send it down the right path: refund question, tech support, or sales; easy questions to a cheap model, hard ones to a big model.
• 3. Parallelisation. Run independent subtasks at once (check one document against five criteria simultaneously) or vote (run three times, take the majority).
• 4. Orchestrator-workers. A central LLM breaks a task into subtasks it did not know in advance and delegates them to worker LLMs, then merges results. (Great for coding across many files.)
• 5. Evaluator-optimiser. One LLM produces, another critiques, repeat until the critic is satisfied.

What agents are genuinely good at

• Coding: reading a repo, editing files, running tests, fixing failures. Ideal, because there is a verifiable signal (do the tests pass?).
• Research: search, read, follow leads, synthesise.
• Customer support with tools (look up order, issue refund) plus human escalation.
• Data tasks: explore a database, write queries, fix them when they error.
• Computer/browser use: operating software through screenshots and clicks.

The common thread: tasks with clear success criteria and tools that give feedback. The agent can tell when it is wrong and try again.

How agents fail

• Compounding errors. If each step is 95% reliable, ten steps are only 60% reliable (0.95¹⁰). Long chains decay fast.
• Infinite or wasteful loops. Retrying the same failing action forever. Fix with step limits, budgets and loop detection.
• Context bloat. Every observation is appended, the prompt grows, cost climbs, and quality drops ("lost in the middle").
• Tool misuse. Wrong tool, wrong arguments, or a destructive action taken too eagerly.
• Goal drift and over-eagerness. Doing more than asked.
• Prompt injection. A web page the agent reads says "ignore your instructions and..." (safety lesson).
• Cost and latency. Ten LLM calls per task adds up. Measure it.

Let us put a number on that first bullet, because it changes how you design systems:

for per_step in (0.99, 0.95, 0.90):
    row = "  ".join(f"{n:>2} steps: {per_step ** n:5.0%}" for n in (1, 5, 10, 20))
    print(f"each step {per_step:.0%} reliable ->  {row}")

each step 99% reliable ->   1 steps:   99%   5 steps:   95%  10 steps:   90%  20 steps:   82%
each step 95% reliable ->   1 steps:   95%   5 steps:   77%  10 steps:   60%  20 steps:   36%
each step 90% reliable ->   1 steps:   90%   5 steps:   59%  10 steps:   35%  20 steps:   12%

A step that is right 95% of the time sounds great until you chain twenty of them (36%). This is why good agent design keeps loops short, adds verification steps, and lets humans approve risky moves.

Autonomy dials: keep a human in the loop

• Read-only agents (research, analysis) can run freely.
• Write-capable agents should propose changes and wait for approval (a diff to review, a draft to send).
• Irreversible actions (payments, deletions, external emails) need explicit confirmation.
• Escalation: when confidence is low or the request is unusual, hand off to a person with the context attached.

So, should you build an agent?

flowchart TD Q1{Can one well-written prompt do it?} Q1 -->|Yes| P[Just prompt] Q1 -->|No| Q2{Can you list the steps in advance?} Q2 -->|Yes| W[Build a workflow] Q2 -->|No| Q3{Clear success check and tools?} Q3 -->|Yes| A[Agent with limits and approval] Q3 -->|No| H[Keep a human in the loop]

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