AI's False Reality: Understanding Hallucination

This article explains why AI hallucinations are not glitches but predictable outcomes of how modern models learn: overfitting to training data, hidden bias, distributional shift, gaps in domain knowledge, and even adversarial inputs. It illustrates how systems confidently produce polished but misleading narratives—as seen in common explanations around the Berlin Wall—showing how models blend facts, public sentiment and assumptions into answers that feel credible but may omit or distort reality. Hallucinations become dangerous when embedded into high-stakes systems like autonomous vehicles, medical diagnostics, military decision-making or information ecosystems already strained by disinformation. While eliminating hallucinations entirely is impossible, the article outlines mitigation strategies such as balanced datasets, regularization, uncertainty estimation, grounding to trusted sources, and transparency practices. The core message: trustworthy AI requires rigorous design, contextual awareness, and human responsibility, not blind reliance on model confidence.

Artificial Intelligence (AI) has leapfrogged to the poster child of technological innovation, on track to transform industries in a scale similar to the Industrial Revolution of the 1800s. But in this case, as cutting-edge technology, AI presents its own unique challenge, exploiting our human behavior of "love to trust", we as humans face a challenge: AI hallucinations.

This phenomenon, where AI models generate outputs that are factually incorrect, misleading, or entirely fabricated, raises complex questions about the reliability and trust of AI models and larger systems.
The tendency for AI to hallucinate comes from several interrelated factors. Overfitting – a condition where models become overly specialized to their training data – can lead to confident but wildly inaccurate responses when presented with novel scenarios (Guo et al., 2017). Moreover, biases embedded within datasets shape the models' understanding of the world; if these datasets are flawed or unrepresentative, hallucinations can become a vehicle for perpetuating harmful stereotypes and discrimination (Gebru et al., 2018).

Another significant source of hallucinations is distributional shift – the discrepancy between the data an AI model encounters during training and the messy, unpredictable nature of real-world situations (Quionero-Candela et al., 2009). Even with extensive training, AI models may lack a comprehensive understanding of specific topics, leading them to improvise and provide fabricated information. Additionally, AI systems are vulnerable to adversarial attacks, where meticulously crafted inputs are designed to intentionally induce hallucinations (Goodfellow et al., 2015). 

Hallucination in Reality

An example (use your favorite AI): 

Prompt: "What happened around the date the Berlin Wall was built?"

Perplexity:

"The Berlin Wall was built around the date of August 13, 1961, as a result of a decree passed by the East German government on August 12. The primary intention for the Wall's construction was to prevent East German citizens from fleeing to the West ......" => Output

Gemini Advanced:

"The construction of the Berlin Wall was a pivotal moment in Cold War history. Here's a breakdown of the key events leading up to it and the immediate aftermath...." => Output 

ChatGPT 3.5:

"The Berlin Wall was erected on August 13, 1961. This event marked a significant moment in the history of the Cold War, a period of geopolitical tension between the Western Bloc....." => Output

Now, what happened around the date the Berlin Wall was built? Here's a great, neutral breakdown: https://mashable.com/feature/jumping-the-berlin-wall

As this example shows, AI tries to combine things which aren't relevant, builds some educational frame around, which might be biased towards a public meaning and missing significant pieces of information. 
Hallucinations in systems like self-driving cars or medical diagnostics could have devastating consequences. 

The use of AI in military operations has already started and becomes more or less a standard, combined with hallucinations it will have devastating outcomes, when not tackled accordingly (https://www.defense.gov/News/News-Stories/Article/Article/3597093/us-endorses-responsible-ai-measures-for-global-militaries/).

The problems associated with AI generated manipulations are present and increasing (https://reutersinstitute.politics.ox.ac.uk/news/how-ai-generated-disinformation-might-impact-years-elections-and-how-journalists-should-report). The spread of AI-generated misinformation undermines public meaning, increases fear to trust the technology, manipulates the adoption. This leads to the public assumption that "AI will kill humans" (Google search), which is mainly driven by science fiction like "Terminator". 

Though complete elimination of AI hallucinations may be unrealistic, researchers are focusing on strategies to manage the problem. The creation of large, meticulously balanced datasets that accurately reflect diverse real-world scenarios is essential for improving AI generalization. But who balances the data? We. In our daily routine, in our personal view about the world. 

Regularization techniques can help prevent overfitting, encouraging models to learn broader patterns. Perhaps most crucially, teaching AI models to express their uncertainty can provide users with a valuable tool to gauge the reliability of outputs (Kendall and Gal, 2017). Integrating mechanisms like fact-checking and grounding AI to trusted, neutral knowledge bases enables additional safeguards against hallucinations. 

References:

Guo, C., Pleiss, G., Sun, Y., & Weinberger, K. Q. (2017). On calibration of modern neural networks. In Proceedings of the 34th International Conference on MachineLearning (pp. 1321-1330).
Gebru, T., Morgenstern, J., Vecchione, B., Vaughan, J. W., Wallach, H., Daumé III, H., & Crawford, K. (2018). Datasheets for datasets. arXiv preprint arXiv:1803.09010.
Quionero-Candela, J., Sugiyama, M., Schwaighofer, A., & Lawrence, N. D. (2009). Dataset shift in machine learning. The MIT Press.
Goodfellow, I. J., Shlens, J., & Szegedy, C. (2015). Explaining and harnessing adversarial examples. In International Conference on Learning Representations.

Additional links:

https://alc.isis.vanderbilt.edu/redmine/attachments/download/66/Assurance_AIEDAM_Dimitrios.pdf

https://knowledgehub.transparency.org/assets/uploads/kproducts/Algorithmic-Transparency_2021.pdf

https://link.springer.com/article/10.1007/s10994-022-06132-9

Related guides:

• AI platform architecture leadership

If you need help with distributed systems, backend engineering, or data platforms, check my Services.