It's best not to dwell on it
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If the standard is replicating human level intelligence and behavior, making up shit just to get you to go away about 40% of the time kind of checks out. In fact, I bet it hallucinates less and is wrong less often than most people you work with
And it just keeps improving over time. People shit all over ai to make themselves feel better because scary shit is happening.
My kid sometimes makes up shit and completely presents it as facts. It made me realize how many made up facts I learned from other kids.