AI’s Reasoning Problem Is a Data Strategy Issue

Unless Baymax or The Iron Giant come to life, machines will remain “soulless” robots, designed to do what they were programmed to do. They cannot feel, sense, or possess the quiet intuition that tells a human when something “does not feel right”. So why are we expecting artificial intelligence (AI) systems to start thinking logically?

In the past decade, the AI industry has convinced itself that intelligence is simply a matter of scale. More data, bigger models, more computers. But scaling brute-force pattern recognitions does not magically produce reasoning. A recent study led by Stanford School of Medicine professor James Zou found that even the best systems routinely fail to distinguish objective facts from what a human believes, especially when those beliefs are false. 

Instead of recognizing the user’s perspective, the models default to correcting the misconception, revealing a fundamental weakness in their ability to understand human intent. Scaling data and compute has not produced true reasoning, just bigger data sets for pattern matching.

However, these failures should not come as a surprise. The uncomfortable truth is that we have been treating data as a commodity rather than a source of intelligence. We prioritize volume over validity, scale over structure, and novelty over accuracy.

In doing so, we created systems that excel at producing fluent language but fail when asked to make sense of conflicting information or ambiguous context. If we want AI to reason, we need to rethink the entire data layer from the ground up. Only then can machines begin to move beyond pattern-matching and toward something closer to real judgment.

The Big Data Delusion 

For all the talk of model architectures and compute breakthroughs, the weakest link in AI today is the information it is built on. 

Training data is treated as a limitless resource: scrape everything, store everything, feed everything into the model. But reasoning does not emerge from volume; it emerges from structure. When the underlying data is contradictory, outdated, or unverifiable, the AI cannot build stable representations of reality. It can only infer patterns from noise, producing the illusion of intelligence without the substance of understanding.

Even recent attempts to “upgrade” AI into reasoning systems run into the same barrier. Apple’s Illusion of Thinking found that state-of-the-art reasoning models collapse once tasks become sufficiently complex, with accuracy dropping to zero. The models appear to show their work,  but underneath the chain-of-thought veneer, they are still relying on brittle pattern recall rather than generalizable problem-solving. In other words, the industry is trying to squeeze logic out of data that was never designed to support it. 

AI systems are only as good as the information they are trained on. While AI systems can essentially ingest more data than any human ever could, they still fail to understand in any meaningful way. Previously conducted independent benchmarking across 29 top models reported hallucination and factual error rates between 25-40% in open ended tasks, highlighting the limits of pattern-based generalization. 

Quantity is only part of the problem. The data feeding these models is often inaccurate, incomplete, biased, or contradictory. A messy mix of scraped text, outdated information, and unverified content that no reasoning system could reliably learn from. Moreover, many large language models (LLMs) are built on datasets missing huge portions of the world’s voices. A significant drawback to reasoning, because when entire communities are underrepresented, or even absent, AI ends up learning a distorted version of reality. The result is a system that reinforces existing biases, misinterprets context, and struggles to generalize beyond the narrow patterns it has seen before. 

In AI Reasoning, Less Is More 

If data cannot reason, why should we expect AI to develop judgment?

Our brains constantly filter new information. We prioritize relevant signals, discard noise, and constantly change our minds based on new information. Intelligence does not come from ingesting everything; it comes from knowing what to ignore. 

If AI is ever going to reason, it will need a data layer that mirrors this cognitive process. Not bigger datasets, but smarter ones. Information that is filtered, ranked, and evaluated in real time based on relevance and reliability. 

We are already seeing signs that a “less is more” approach works. Recent work in mathematical reasoning, for example, has shown that small models trained on highly curated, high-quality datasets can outperform systems trained on billions of noisy tokens. LIMO, an AI model trained on 817 hand-selected mathematical problems, achieved 57.1% accuracy on the American Invitational Mathematics Examination (AIME) and 94.8% accuracy on the MATH dataset, performance levels that highlight data efficiency and extreme generalisation. 

This shift toward smaller, cleaner datasets also exposes a wider opportunity: decentralized systems. Decentralized  physical infrastructure networks (DePINs), for example, allow participants to be rewarded for providing services like computing power, wireless connectivity, or storage space. DePIN networks offer an alternative distribution model; one where data is sourced from thousands or millions of independent contributors instead of a handful of corporations. That means more diversity, more context, and more real-world signals. It also means data can be validated, cross-checked, and weighted at the point of origin, producing streams of information that are naturally higher quality and less prone to distortion.