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Synthetic Minds: How AI Is Creating Its Own Reality Without Consciousness

Gowtham Chilakapati is a Director at Humana. He is an expert in enterprise data and AI systems with a focus on real-time analytics. getty As a technologist specializing in retrieval-augmented generation (RAG) models and AI-driven decision systems, I have observed a critical paradox: AI models are now capable of constructing coherent realities that mimic human perception, yet they remain fundamentally unconscious and unaware of the realities they generate. From my experience developing AI-driven assistants and enterprise automation solutions, I have witnessed firsthand how AI systems synthesize multi-modal data, hallucinate responses and simulate intelligence, often convincing enough to be mistaken for true cognition. Let's explore whether these synthetic minds actually perceive the world they build or if they are simply statistical illusionists. Throughout my career working with enterprise AI systems, one of the biggest challenges has been ensuring AI-generated insights are grounded in reality rather than fabricated extrapolations. Unlike human cognition, which derives meaning from lived experiences and sensory interaction, AI constructs reality by assembling fragmented data into a probabilistic representation. Multi-modal AI models—such as OpenAI's CLIP, Google's Gemini and Meta's SeamlessM4T—combine text, images and even audio to create internally consistent narratives. However, their perception is hollow—they recognize patterns but lack intentionality or subjective awareness. For instance, when I worked on streamlining real-time AI-driven customer interactions, I found that AI-generated responses were convincing but often lacked deeper contextual awareness. The model could mimic human dialogue patterns but failed to recognize emotional subtleties or unspoken intent, making its responses feel robotic despite their surface-level coherence. A major pitfall in AI-driven analytics is hallucination—the phenomenon where models generate plausible but false information. I encountered this while developing fraud detection algorithms for financial services, where AI models often flagged non-existent risks based on overfitting historical anomalies, rather than true emergent fraud patterns. Hallucinations are a form of synthetic reality construction, where AI fills gaps in its data with statistically likely but fabricated content. However, there is a fundamental distinction between AI hallucination and human imagination: • Human imagination is rooted in emotions, past experiences and abstract reasoning. • AI hallucination is driven by probabilistic associations without underlying comprehension. This difference became clear when working with AI-powered knowledge retrieval systems. The AI-generated reports looked factually sound, yet deeper inspection revealed inconsistencies due to missing context. AI's ability to generate a convincing but flawed version of reality makes it an impressive tool—but also a dangerous one when unchecked. One of the most fascinating applications I've worked on is decision intelligence AI—systems that provide strategic insights to executives by analyzing vast amounts of structured and unstructured data. The challenge is that while AI can make incredibly sophisticated correlations, it lacks strategic intent and adaptive reasoning. For example, in portfolio management automation, I saw AI models predict market trends with high accuracy. Yet, when faced with unprecedented economic events, they failed to reassess core assumptions—an ability that defines true human strategic thinking. The AI was unable to redefine its own reality the way humans do in response to new paradigms. If AI is to move beyond being a synthetic illusionist into something more autonomous and self-aware, it will likely require an embodied cognition framework. This means AI must: • Interact physically with the real world (beyond data streams and simulations). • Develop self-referential memory that shapes future decisions (instead of just iterative tuning). • Recognize the implications of its outputs beyond pattern matching. In my experience developing AI-powered automation, I have seen that true decision making requires more than just data synthesis—it demands an understanding of cause and effect, moral weight and subjective valuation. Current AI lacks this awareness, meaning that while it can construct compelling versions of reality, it cannot truly perceive them. As AI continues to advance, the lines between statistical simulation and synthetic cognition will blur even further. However, AI remains a reflection of human intelligence rather than an independent entity. It builds synthetic realities, but it does not live within them. My work in AI deployment for finance, healthcare and enterprise automation has reinforced a crucial truth: AI amplifies human decision making, but it does not replace the intuitive, strategic and morally grounded perception of reality that humans possess. While AI will continue to generate highly complex synthetic minds, true cognitive perception remains a uniquely human frontier. Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?