What is artificial intelligence (AI)?

What is artificial intelligence (AI)?

Artificial intelligence (AI) is the ability of a computer to do tasks that normally need human intelligence: understanding language, recognizing images, solving problems and making decisions.

Computer scientist John McCarthy coined the term in 1955, in a proposal for a summer study at Dartmouth College. That study ran in 1956, and Dartmouth calls it "a seminal event for artificial intelligence as a field."

McCarthy's own definition was short: "the science and engineering of making intelligent machines."

Today, the word covers 4 layers, each one inside the one before it:

So when people say "AI" today, they almost always mean the innermost layer: generative AI, like ChatGPT, Claude and Gemini.

You can see how every term in that stack connects on the map at aiglossary.io.

How does artificial intelligence (AI) work?

Modern AI learns from examples. Older software followed rules a programmer wrote by hand.

For example, a spam filter studies millions of emails that people marked as spam. It learns what spam looks like, then flags new emails that match.

That learning happens in 3 stages.

Training

The model studies a huge dataset and adjusts its parameters, the numbers it learns, until its predictions match the data.

Training a large model takes thousands of GPUs, weeks of computing and millions of dollars.

Fine-tuning

Next, the trained model is adapted to a specific job with a much smaller set of examples. That's called fine-tuning.

It's how a raw model becomes an assistant that follows instructions. ChatGPT, for example, was fine-tuned from a model in the GPT-3.5 series.

Inference

Inference is when the model uses what it learned on something new. Every message you send to ChatGPT or Claude starts one.

Here's the catch: the model doesn't learn anything during inference. Its parameters stay exactly as training left them.

So a chat model never learns your business from your conversations. Anything it should know has to be in its context, every single time.

A large language model like Claude writes its answer 1 token at a time, predicting the most likely next piece each time.

A short history of artificial intelligence (AI)

The term artificial intelligence is 71 years old. Here are the milestones that took it from a research proposal to ChatGPT:

Then generative AI spread faster than anything before it. It reached 53% of people in just 3 years, faster than the personal computer or the internet, according to Stanford's 2026 AI Index.

Types of artificial intelligence (AI)

AI is grouped 2 ways: by what it can do, and by how it works.

By what it can do

By how it works

Type	How it works	Example
Machine learning	Finds patterns in data to make predictions.	Your bank's fraud check on a card payment
Deep learning	Machine learning built on layered neural networks.	Face unlock and speech recognition
Generative AI	Creates new text, images, audio, video and code.	ChatGPTClaudeGeminiGrok

Generative AI tools by what they make

Generative AI is the type you will use most, so here are the main tools for each kind of output:

Category	Tools
AI chatbots	ChatGPTClaudeGeminiGrokPerplexity
Image generators	MidjourneyGPT Image 2Nano BananaFLUXIdeogramRunwayHiggsfieldMagnificOpenArtElevenLabsfal.aiWaveSpeed
Video generators	VeoKlingSeedanceRunwayHeyGenHiggsfieldMagnificOpenArtElevenLabsfal.aiWaveSpeed
Avatars	HeyGenHiggsfieldMagnific
Text to speech	ElevenLabsMagnificHiggsfieldHeyGen
Music generators	SunoElevenLabsMagnific

You can compare every one of these tools side by side in my AI Tools Library.

Examples of artificial intelligence (AI) you already use

AI already runs inside most of the apps on your phone:

• Gmail and Outlook use AI to keep spam out of your inbox.
• YouTube, Netflix and Spotify use it to pick what you see and hear next.
• Your phone uses it to recognize your face when you unlock it.
• Google Translate uses it every time you translate a sentence.
• Siri and Alexa use it to understand what you say.
• ChatGPT, Claude, Gemini and Microsoft Copilot use it to answer, write and summarize.

That last group is where the work happens. Put 1 of those models inside an AI agent, and it can do the work for you.

What are AI agents?

An AI agent is an AI model that can use tools and take actions for you.

A chatbot tells you what to write in a reply. An agent opens your inbox, drafts the reply and sends it.

Agents like Claude Code, Codex and Cursor work inside your own files. They read documents, run commands and build things from a request in plain English.

But an agent has the same limit as the model inside it. Open a new session, and it knows nothing about your offer, your customers or how you write.

That's the problem an AI operating system (AI OS) solves. It's a folder of plain text files that every agent reads at the start of every session, built in 7 layers:

Each layer needs the one below it, so you build them in order.

Why artificial intelligence (AI) matters for founders and creators

AI is the first software that can do work in words: drafting, summarizing, researching and replying.

And the results are real. Here's what 3 controlled studies found:

The biggest gains went to the least experienced people. In the BCG study, below-average performers improved 43%, compared to 17% for the top performers.

That's great news if you run a business on your own. AI covers the jobs you were never trained for.

Case in point: Maor Shlomo built Base44 as a solo founder. Wix bought the 6-month-old company for $80 million in cash, when it had 8 employees (TechCrunch).

For a founder or a creator, AI changes 10 things:

What AI gets wrong, and how to fix it

AI makes things up. It's called a hallucination: an answer that sounds right, but is wrong or invented.

It happens because a model guesses when it's unsure, instead of saying it doesn't know.

How often depends on where the answer comes from:

In other words, AI is far more reliable when it works from your documents than from its memory. That's exactly what the Context and Data layers of an AI OS give it.

The second problem is less obvious. On a task just outside what AI does well, the BCG consultants who used it were 19 percentage points less likely to get the right answer.

The fix is a skill: the steps you trust, written down, so the agent follows them instead of improvising.

How to make money with artificial intelligence (AI)

I analyzed 14 of the top-ranking guides on making money with AI. Here are the 9 ways that come up most, plus 1 that none of them list:

The model is the same for everyone. What makes the work yours is your AI OS: your context, your skills and your automations.

1. Freelancing with AI

You sell a service you already know, like writing, design, video editing or translation. AI helps you deliver it faster, so you can take on more clients.

AI video is a good example. Iman Oubou says she sells AI talking-head videos for $150 to $300 each, and that 1 10-minute video sold for $7,000.

In your AI OS, each service becomes a skill with your process and your quality bar.

2. Digital products and online courses

A digital product is anything people buy and then download or log into: an online course, a template, a prompt library or a starter kit.

You make it once and sell it again and again. I sell digital products and courses myself, including the AI OS Starter Kit and my AI workshops.

Your AI OS drafts each product from your context and your past content, so it sounds like you.

3. AI automation services

Businesses pay you to build automations and AI agents for them: lead follow-up, customer support and reporting.

The usual model is a setup fee to build it, then a monthly retainer to keep it running.

If you can build an AI OS for yourself, you can build one for a client: the same tools, skills and automations, set up around their business.

4. Websites and apps built with AI

AI coding agents like Claude Code, Codex and Cursor build a website or an app from a request in plain English. You can sell the builds to clients, or ship your own product.

Pieter Levels posted that he built a flight simulator game "100% with Cursor in 3 hours." Less than 3 weeks later, he reported $72,000 a month from in-game ads.

I build my own sites and apps the same way, including aios.guide. The agent already knows my brand from my context, so every page matches.

5. Content creation

AI helps you research, script, voice and edit, so you publish more often on YouTube, a newsletter or a podcast. You earn from ads, sponsors and affiliate links.

But be careful with mass-produced content. Since July 2025, YouTube won't monetize videos that are "mass-produced, generic, repetitive, or manipulative."

The fix is to make it yours. Your context holds your voice and your views, so your AI drafts in your words.

6. AI consulting

Remember: only 19.8% of US businesses use AI. That leaves a lot of businesses that need help getting started.

As a consultant, you find where AI saves them time or money, then set it up and train their team.

I do this for clients too. And the AI OS gives you a clear structure to sell: audit their week, then build the 7 layers in order.

7. Affiliate marketing

Many AI tools pay you a commission when someone you refer becomes a customer. Here's what 3 of them pay, from their own affiliate programs:

Tool	Commission
HeyGen	35% recurring for 3 months
ElevenLabs	Up to 22% for 12 months
Descript	$25 per new subscription, paid once

I run affiliate programs through my AI Tools Library, where every tool I recommend has its own page. A skill can draft each review from your notes, in your voice.

8. AI art and print on demand

You create designs with an image generator like Midjourney, then sell them on shirts, posters and mugs through a print-on-demand service. You never hold any stock.

Check 2 things before you sell. First, Midjourney lets you use your images commercially, but a business making more than $1,000,000 a year needs a Pro or Mega plan.

Second, in the US, a design made from a prompt alone may not be protected by copyright. The US Copyright Office concluded that "prompts do not alone provide sufficient control."

What you can protect is your own work on top: your edits, and how you select and arrange what the AI made.

9. Marketing services

Businesses pay monthly for SEO, social media, email, ads and lead generation. AI now does much of that work faster.

With an AI OS, each client's recurring work runs as skills and automations, so the weekly report writes itself.

10. AI influencers and avatars

This is the one the top guides skip. You build an AI version of yourself, or a brand-new AI character, and it posts the content for you.

Iman Oubou does both. An AI avatar of her fronts the videos on her own Instagram, and she built a second, fully AI influencer called Amara.

She says her Instagram now brings in about $40,000 a month from digital products, brand deals and services, and that she has never filmed a single video for it (her Substack).

Tools like HeyGen and Higgsfield turn a script into a talking-head video. Your AI OS writes the scripts from your context, so the avatar says what you would say.

How to start using artificial intelligence (AI) in your business

The best way to start is to build your AI OS, 1 layer at a time. Here are the 8 steps from the how to build an AI OS guide:

Step 2 takes about 15 minutes. After it, a fresh session knows who you are, what you sell and how you write.

Your AI action checklist

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