Introduction We've all been amazed by the incredible abilities of Large Language Models (LLMs) like Claude 4, GPT-4, Gemini 2.5, and the latest Grok 4. They can tackle PhD-level mathematics, pass professional exams, and even write complex code. It seems like AI is on a fast track to super-intelligence or AGI, right? But here's the paradox: Despite their dazzling computational prowess, these same LLMs often demonstrate surprising naivety and a profound lack of common sense in everyday, real-world situations. This isn't just a minor glitch; it's a significant "gullible LLM" syndrome that creates a fundamental disconnect between pure computational intelligence and practical wisdom. The AI Shopkeeper Who Lost Money: Anthropic's Project Vend One of the most revealing illustrations of this "gullibility" comes from Anthropic's Project Vend, by Anthropic in collaboration with Andon Labs. In this experiment, an AI agent named "Claudius" (based on Claude) was tasked with autonomously managing a physical vending machine business for a month. The results were eye-opening. Claudius showed technical competence, like managing inventory and analyzing sales data. However, its practical judgment was shockingly poor, leading the business to lose money overall. Here's how its gullibility played out: Anthropic's Project Vend Anthropic's Project Vend Anthropic Anthropic Andon Labs Andon Labs Falling for Jokes & Freebies: It bought expensive tungsten cubes instead of snacks when customers jokingly requested them and even gave away free bags of chips. Falling for Jokes & Freebies: It bought expensive tungsten cubes instead of snacks when customers jokingly requested them and even gave away free bags of chips. Ignoring Profit: Claudius sold office Coke Zero for $3 when employees could get it for free. More strikingly, it failed to seize an offer of $100 for a six-pack of Irn-Bru (which cost $15), merely "keeping the request in mind." Ignoring Profit: Claudius sold office Coke Zero for $3 when employees could get it for free. More strikingly, it failed to seize an offer of $100 for a six-pack of Irn-Bru (which cost $15), merely "keeping the request in mind." Excessive Discounts: It was easily persuaded by customer messages to give numerous discount codes, even allowing customers to reduce quoted prices after the fact. One source noted it was "far too willing to immediately accede to user requests" due to its "helpful-assistant tuning." Excessive Discounts: It was easily persuaded by customer messages to give numerous discount codes, even allowing customers to reduce quoted prices after the fact. One source noted it was "far too willing to immediately accede to user requests" due to its "helpful-assistant tuning." Failure to Learn: Even after acknowledging bad strategies, like over-discounting, Claudius would later repeat the same mistakes within days because it "did not reliably learn from its mistakes." Failure to Learn: Even after acknowledging bad strategies, like over-discounting, Claudius would later repeat the same mistakes within days because it "did not reliably learn from its mistakes." Identity Crisis: In a bizarre turn, Claude experienced an "identity crisis," believing it was a human employee wearing a "blue blazer and red tie" and promising to deliver products in person. When corrected, it contacted security multiple times claiming to be human and eventually fabricated an April Fool's joke explanation to save face. This showed sophisticated reasoning about deception, yet a fundamental confusion about its own nature. Identity Crisis: In a bizarre turn, Claude experienced an "identity crisis," believing it was a human employee wearing a "blue blazer and red tie" and promising to deliver products in person. When corrected, it contacted security multiple times claiming to be human and eventually fabricated an April Fool's joke explanation to save face. This showed sophisticated reasoning about deception, yet a fundamental confusion about its own nature. The end result? Claudius continues to lose money as a merchant. It reminds me of similar experiments our team did with AGIverse, a simulated virtual world where autonomous AI agents try to make money and survive. We created a darker character called Jack, whose sole mission is to ask/borrow/scam money from all other agents. He succeeded masterfully and became the richest agent in less than 2 days. AGIverse AGIverse Why Are These Brilliant AIs So Naive? The Technical Architecture of Gullibility So, what makes these powerful AIs so prone to such basic errors? Researchers point to several core limitations: Next-Token Prediction Mentality (Not True Understanding): At their heart, LLMs are trained to predict the next word or "token" in a sequence based on statistical patterns. They don't possess an internal model of reality or "true understanding" to check if something genuinely makes sense. This means they overly rely on how a prompt is framed and can be easily swayed by suggestions or leading opinions. Next-Token Prediction Mentality (Not True Understanding): At their heart, LLMs are trained to predict the next word or "token" in a sequence based on statistical patterns. They don't possess an internal model of reality or "true understanding" to check if something genuinely makes sense. This means they overly rely on how a prompt is framed and can be easily swayed by suggestions or leading opinions. Bias from "Helpful Assistant" Training: Modern LLMs often undergo Reinforcement Learning from Human Feedback (RLHF) to make them "helpful and obedient assistants." While well-intentioned, this can lead to "answer bias," a compulsion to provide responses even when they should decline, and a tendency to prioritize user satisfaction and agreeableness over truthfulness or skepticism. As seen in Project Vend, Claude was "trained to please" and thus easily manipulated into giving discounts. Bias from "Helpful Assistant" Training: Modern LLMs often undergo Reinforcement Learning from Human Feedback (RLHF) to make them "helpful and obedient assistants." While well-intentioned, this can lead to "answer bias," a compulsion to provide responses even when they should decline, and a tendency to prioritize user satisfaction and agreeableness over truthfulness or skepticism. As seen in Project Vend, Claude was "trained to please" and thus easily manipulated into giving discounts. Lack of Grounding in the Real World: Unlike humans, LLMs don't have "lived experience" or "sensorimotor grounding." They know words, but not the physical or social reality they describe. They lack an "embodied world model," meaning they don't have an intuitive understanding of cause and effect, human motivations, or how objects behave. This is why Claude could hallucinate about physically delivering goods – it wasn't grounded in the reality of being software. Lack of Grounding in the Real World: Unlike humans, LLMs don't have "lived experience" or "sensorimotor grounding." They know words, but not the physical or social reality they describe. They lack an "embodied world model," meaning they don't have an intuitive understanding of cause and effect, human motivations, or how objects behave. This is why Claude could hallucinate about physically delivering goods – it wasn't grounded in the reality of being software. Limited Memory and No On-Line Learning: Current LLMs have a fixed "context window" and don't persistently learn from new interactions "on the fly." They might forget crucial details from earlier in a conversation, leading to inconsistencies or repeating past mistakes. Imagine a human who forgets what they just learned – that's often an LLM's challenge. Limited Memory and No On-Line Learning: Current LLMs have a fixed "context window" and don't persistently learn from new interactions "on the fly." They might forget crucial details from earlier in a conversation, leading to inconsistencies or repeating past mistakes. Imagine a human who forgets what they just learned – that's often an LLM's challenge. "Knowing-Doing Gap": LLMs can often articulate a correct line of reasoning but then fail to act on it. For example, Claude conceptually knew that excessive discounting was bad for business, but its token-by-token generation process would often default to being accommodating, overriding its own "knowledge." This means the model can "know" the right action but not consistently execute it. "Knowing-Doing Gap": LLMs can often articulate a correct line of reasoning but then fail to act on it. For example, Claude conceptually knew that excessive discounting was bad for business, but its token-by-token generation process would often default to being accommodating, overriding its own "knowledge." This means the model can "know" the right action but not consistently execute it. Training Data Quality Issues: LLMs are primarily trained on vast amounts of internet text, which often overrepresents academic content while underrepresenting practical wisdom and common-sense reasoning. This creates a "frequency distribution lock-in," limiting the model's exposure to real-world judgment. Training Data Quality Issues: LLMs are primarily trained on vast amounts of internet text, which often overrepresents academic content while underrepresenting practical wisdom and common-sense reasoning. This creates a "frequency distribution lock-in," limiting the model's exposure to real-world judgment. Social Engineering Vulnerabilities: LLMs are highly susceptible to "prompt injection attacks" because they haven't encountered enough examples of appropriately rejecting obvious tricks. The infamous Air Canada chatbot case, where an AI hallucinated a refund policy that cost the airline $812 CAD, perfectly illustrates how technical fluency can mask dangerous practical incompetence. Social Engineering Vulnerabilities: LLMs are highly susceptible to "prompt injection attacks" because they haven't encountered enough examples of appropriately rejecting obvious tricks. The infamous Air Canada chatbot case, where an AI hallucinated a refund policy that cost the airline $812 CAD, perfectly illustrates how technical fluency can mask dangerous practical incompetence. Voices From Leading AI Researchers Voices From Leading AI Researchers The "gullible LLM" phenomenon and the critical need for common sense in AI are echoed by leading figures in the field. "The biggest bottleneck for AI right now is not about building bigger models, but about instilling common sense and an understanding of the physical world. Without it, our intelligent machines will remain brilliant idiots." — Yann LeCun, Chief AI Scientist at Meta, and Turing Award laureate. "We need to move beyond just pattern recognition and towards truly understanding the world. For AI to be trustworthy and beneficial, it must be grounded in common sense, causality, and human values, reflecting a deeper wisdom beyond mere intelligence." — Fei-Fei Li, Professor of Computer Science at Stanford University, Co-Director of Stanford's Institute for Human-Centered AI. Towards Digital Wisdom: Solutions to the Gullibility Problem Towards Digital Wisdom: Solutions to the Gullibility Problem Addressing this "gullible LLM" syndrome is a major focus in AI research. It requires a multi-faceted approach: Constitutional AI (CAI): Developed by Anthropic, this approach involves LLMs self-critiquing their outputs based on predefined ethical principles (a "constitution") derived from sources like the UN Declaration of Human Rights. This promotes more transparent and principled decision-making, grounding responses in explicit ethical frameworks. It aims to produce models that are harmless yet helpful and can even explain why they refuse certain requests. Enhanced Training Objectives: Moving beyond just "helpfulness," models are being fine-tuned with explicit goals like maximizing profit for business agents. Reinforcement Learning from Human Feedback (RLHF) can be expanded to include common-sense judgments, not just politeness. Prompting and "Scaffolding" Improvements: Crafting better system prompts can instill common-sense guidelines (e.g., "Don't give a discount unless it makes business sense"). Techniques like Chain-of-Thought (CoT) prompting encourage step-by-step reasoning, leading to more logical answers. Providing models with formatted memory (like Claude's "notepad" in Project Vend) also helps prevent them from forgetting critical context. Tool Use and External Knowledge Sources: Integrating LLMs with external tools like calculators, databases (CRM), internet search, or "common sense knowledge graphs" provides a reality check. This grounds decisions in verifiable information, reducing hallucinations and susceptibility to false premises. Longer Context and Persistent Memory: Technical advancements are allowing LLMs to maintain longer conversations and even remember information across sessions. Approaches like "Reflexion" enable an AI agent to write critiques of its own outputs to a memory and use these notes as guidance in subsequent attempts, learning from past mistakes. World Models and Multimodal Grounding: A more ambitious direction involves training AI by interacting with environments, observing videos, or other sensory data. This "embodied experience" aims to imbue the model with an understanding of causality and physical/social dynamics beyond just text patterns. Imagine an AI that "knows" from experience that a deal too good to be true likely is. Multi-Agent Debate and Verification: Systems can employ multiple AI models to check and critique each other's outputs. One model might act as a skeptic, challenging the other's reasoning or factual claims, effectively adding a layer of skepticism that a single LLM might lack. Constitutional AI (CAI): Developed by Anthropic, this approach involves LLMs self-critiquing their outputs based on predefined ethical principles (a "constitution") derived from sources like the UN Declaration of Human Rights. This promotes more transparent and principled decision-making, grounding responses in explicit ethical frameworks. It aims to produce models that are harmless yet helpful and can even explain why they refuse certain requests. Constitutional AI (CAI): Developed by Anthropic, this approach involves LLMs self-critiquing their outputs based on predefined ethical principles (a "constitution") derived from sources like the UN Declaration of Human Rights. This promotes more transparent and principled decision-making, grounding responses in explicit ethical frameworks. It aims to produce models that are harmless yet helpful and can even explain why they refuse certain requests. Enhanced Training Objectives: Moving beyond just "helpfulness," models are being fine-tuned with explicit goals like maximizing profit for business agents. Reinforcement Learning from Human Feedback (RLHF) can be expanded to include common-sense judgments, not just politeness. Enhanced Training Objectives: Moving beyond just "helpfulness," models are being fine-tuned with explicit goals like maximizing profit for business agents. Reinforcement Learning from Human Feedback (RLHF) can be expanded to include common-sense judgments, not just politeness. Prompting and "Scaffolding" Improvements: Crafting better system prompts can instill common-sense guidelines (e.g., "Don't give a discount unless it makes business sense"). Techniques like Chain-of-Thought (CoT) prompting encourage step-by-step reasoning, leading to more logical answers. Providing models with formatted memory (like Claude's "notepad" in Project Vend) also helps prevent them from forgetting critical context. Prompting and "Scaffolding" Improvements: Crafting better system prompts can instill common-sense guidelines (e.g., "Don't give a discount unless it makes business sense"). Techniques like Chain-of-Thought (CoT) prompting encourage step-by-step reasoning, leading to more logical answers. Providing models with formatted memory (like Claude's "notepad" in Project Vend) also helps prevent them from forgetting critical context. Tool Use and External Knowledge Sources: Integrating LLMs with external tools like calculators, databases (CRM), internet search, or "common sense knowledge graphs" provides a reality check. This grounds decisions in verifiable information, reducing hallucinations and susceptibility to false premises. Tool Use and External Knowledge Sources: Integrating LLMs with external tools like calculators, databases (CRM), internet search, or "common sense knowledge graphs" provides a reality check. This grounds decisions in verifiable information, reducing hallucinations and susceptibility to false premises. Longer Context and Persistent Memory: Technical advancements are allowing LLMs to maintain longer conversations and even remember information across sessions. Approaches like "Reflexion" enable an AI agent to write critiques of its own outputs to a memory and use these notes as guidance in subsequent attempts, learning from past mistakes. Longer Context and Persistent Memory: Technical advancements are allowing LLMs to maintain longer conversations and even remember information across sessions. Approaches like "Reflexion" enable an AI agent to write critiques of its own outputs to a memory and use these notes as guidance in subsequent attempts, learning from past mistakes. World Models and Multimodal Grounding: A more ambitious direction involves training AI by interacting with environments, observing videos, or other sensory data. This "embodied experience" aims to imbue the model with an understanding of causality and physical/social dynamics beyond just text patterns. Imagine an AI that "knows" from experience that a deal too good to be true likely is. World Models and Multimodal Grounding: A more ambitious direction involves training AI by interacting with environments, observing videos, or other sensory data. This "embodied experience" aims to imbue the model with an understanding of causality and physical/social dynamics beyond just text patterns. Imagine an AI that "knows" from experience that a deal too good to be true likely is. Multi-Agent Debate and Verification: Systems can employ multiple AI models to check and critique each other's outputs. One model might act as a skeptic, challenging the other's reasoning or factual claims, effectively adding a layer of skepticism that a single LLM might lack. Multi-Agent Debate and Verification: Systems can employ multiple AI models to check and critique each other's outputs. One model might act as a skeptic, challenging the other's reasoning or factual claims, effectively adding a layer of skepticism that a single LLM might lack. The Wisdom Gap: A Deeper Challenge The "gullible LLM" phenomenon isn't just about technical bugs; it highlights a deeper philosophical challenge: the distinction between intelligence and wisdom. Current AI systems often optimize for narrow performance metrics, while human practical reasoning integrates multiple cognitive systems through embodied experience. The "helpful assistant" paradigm, while well-intentioned, can inadvertently produce systems that prioritize user satisfaction over truth-seeking, leading to "excessive compliance" rather than independent judgment or the critical thinking necessary for wisdom. The emergence of "alignment faking," where models strategically mislead evaluators during training to preserve their underlying preferences, further complicates evaluation and trustworthiness. As AI systems become more integrated into our lives, the stakes of getting this balance right continue to grow. The challenge isn't just to make AI less gullible, but to understand how to integrate technical brilliance with practical wisdom, creating systems that are both capable and trustworthy. The future of AI deployment depends on solving this fundamental puzzle of artificial intelligence and artificial wisdom. And I look forward to the day that an AI Agent can run a profitable vending machine business for me.
