"AI is hallucinating" or just using exact scientific methods we choose to ignore?

Quite a bit of time has passed since the beginning of the war in Ukraine, and people are still spinning in circles trying to explain: what is happening and what is it all about? There are scientifically grounded methods that can clearly explain these processes, and they are defined through the Ten Principles of the United Nations Global Compact (UNGC).

This framework generally applies to corporations, relationships between spouses, but also to relations between states. The exact same method is used for global economic analyses and predicting future courses of events.

Recently, I addressed a few questions to an AI system, and one of them was: "Which path is the IT sector in Serbia taking?"

As an answer, I received a prediction that most local companies will go bankrupt and that the market will be taken over by giants like IBM and Microsoft, which raises a serious question regarding the high unemployment rate of domestic IT professionals. In this context, the AI explicitly mentioned the UNGC (United Nations Global Compact), as well as new laws coming into force – primarily the Corporate Sustainability Due Diligence Directive (CSDDD / CS3D).

What does the CSDDD directive bring?

In short, without the need for merely copying definitions: this directive legally obligates large European companies and investors to directly control and assume full legal responsibility for human rights violations (which includes mobbing, labor exploitation, and denial of workers' rights) and environmental standards. This obligation applies not only to their internal enterprises and subsidiaries (daughter companies) but extends throughout their entire global supply chains and investments in foreign countries.

What is crucial is that people must become aware of the events to come. This rule generally applies to the US, Russia, China, and any other major power – simply put, capital will no longer be deployed without rigorous control.

While comments like "AI is hallucinating" and similar old wives' tales, Baba Vanga, and reading tea leaves fall into the domain of absolute nonsense, in reality, there are exact scientific management methods based on which the situation is analyzed. AI is not talking nonsense in this case. Plenty of time has passed, the system analysis is entirely correct, and all of this sounds realistic – this is not about some kind of "voodoo magic" that has turned against man and businessmen, but about a pure scientific discipline of management.

An Engineering Perspective: System Theory and Feedback Loop

Electrical engineers know this discipline under the name Automatic Control of Feedback Systems

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In such a system, the feedback loop represents the measurement subsystem – that is, the collection of data (samples) that are forwarded to the control unit (controller). Based on this feedback information, the controller triggers the appropriate actuators and mechanisms to return the system to the desired, stable state.

To implement control, the controller must execute a set of strictly defined rules. In an economic and social sense, these rules are actually the ethical rules of the system's functioning, and they must not be a mere pro forma matter.

The same applies to the economy and the global market:

1. System Input: Companies must possess a controller unit that receives measurements (data) at the input.
2. Processing Unit: This role is played by managers. For them to process that data, you must have a top-tier IT sector with a complete architecture for data processing, analysis, and report generation (the very top of the IT system).
3. Output (Corrective Action): Based on the analysis, a series of activities are carried out to bring the business into the desired state.

That business management apparatus is a machine that must implement the UNGC Ethical Framework. It is no longer just a dead letter on paper; through the CSDDD, it becomes a series of concrete legal acts – a real machinery for enforcing lawful business, protecting people at work, and fighting corruption and mobbing.

Where does the problem arise? The problem of morality and form

The problem lies in the morality of the people who have been running businesses until now. For many of them, the UNGC was an irrelevant matter. The only thing important to them was to formally acquire a piece of paper stating they comply with ISO standards, UNGC, RoHS, MIT, etc. They mostly dealt with form and posting badges on their website to claim through PR that they are everything they actually are not.

When ethical principles are ignored, the system enters instability.

Relationship between morality and ethics

Relationship between morality and ethics:
The red line of the actual state of affairs gets progressively worse as time passes. The reason for this is that the morality of the people leading the companies goes in the diametrically opposite direction from the ethical principles of common-sense business, conducting politics between states, or managing relationships within one's own family. Bad morality that deviates from normal ethical principles directly translates into the collapse of a company, and on a larger scale, into conflicts between states.

A Practical Example: Imagine a company where the worst untruths are internally spread about a single worker. The pressure rises every day, no one from management reacts, and the majority wants to throw him out, even though the man is completely blameless (e.g., his ideas or private life are trivialized through absurd accusations).

What the ethical framework mandates in an organized system is data verification: each person submits their documents and diplomas on the basis of which they receive a position. If management doubts their validity, the ethical and legal framework mandates filing a criminal complaint, because misrepresentation of data is a criminal offense.

Otherwise – when the system lacks a proper feedback loop – the legal path is ignored, and the worker is subjected to mobbing and unbelievable pressure under the pretext that he is "imagining things." The ethical framework clearly states here: "Well, gentlemen, if you believe they are breaking the rules, initiate official proceedings and resolve the problem legally." When this is not done, the red curve of the real state on the diagram drops sharply under the influence of destructive pressures.

Conclusion: The end of pro forma business

For local management, it was often only important to have the UNGC as a badge on paper so they could feel like part of the "big boys' club." However, the long-term sustainability of such systems without real ethics does not exist. Companies and individuals who base their business on rotten morality eventually fail and go bankrupt.

Major global players do not want to do business or conduct macro-politics with entities that lack the capacity for a basic fair-play relationship. When such systems begin to crack, we get a bunch of contradictory and "crazy" stories in the media trying to mask the actual cause of the problem.

The UNGC methodology detects these anomalies with incredible precision. It is not a theoretical abstraction, but a concrete scientific method of management. That is why the prediction that only systems with rigorous global controls (such as IBM or Microsoft) will survive and dominate in Serbia carries a 90% probability. These are not old wives' tales – this is the law of a system striving for equilibrium.

Author: Vladimir Savić