by Amit Shekhar · 20 July 2026
How does Claude Code work?
How Claude Code works. We will also see what Claude Code is, why a normal AI chatbot is not enough, how the agent loop drives it, what tools give it its eyes and hands, how it searches a big project and verifies its own work, and how CLAUDE.md, permissions, plan mode, subagents, and hooks fit together.
Read on Outcome School ↗then come back to lock it in
Before you read, guessWhat scenario is described when seeking assistance for a project error using a standard AI chatbot?
Ten seconds, a guess, then read — a wrong guess still makes the answer stick.
What this article covers
- What is Claude Code?
- The problem with a normal AI chatbot
- The agent loop
- The tools of Claude Code
- Example: Claude Code fixing a bug
- How does Claude Code search a big project?
- How does Claude Code verify its own work?
- CLAUDE.md: The project memory
- Permissions: How we stay in control
- Plan mode, subagents, and hooks
- Putting it all together
The article lives on outcomeschool.com. Read it there, then come back: the tutor in the margin has read it and will answer questions, and the questions below check what stayed.