The Think-Act-Observe loop has a natural enemy: the context window is finite.

Every loop iteration burns tokens — the model’s thinking, the tool-call requests, the tool results. Reading one large file can cost thousands of tokens; a single test run’s output can cost tens of thousands. A dozen rounds in, the context window is stuffed full.

What happens when the window fills? The model says “sorry, this conversation exceeds my context limit”. For casual chat, who cares — open a new window. For a coding assistant, it means amnesia — it forgets the project structure, the changes already made, the user’s preferences.