[Question] Why do we need an understanding of the real world to predict the next tokens in a body of text?

I want to start by saying that this is my first question on LessWrong, so I apologise if I am breaking some norms or not asking it properly.

The whole question is pretty much contained in the title. I see a lot of people, Zvi included that claim we have moved beyond the idea that LLMs “simply predict the next token” and that they have some understanding now.

How is this obvious? What is the relevant literature?

Is it possible that LLMs are just mathematical representations of language? (does this question even make sense?) For example, if I teach you to count sheep by adding the number of sheep in two herds, you will get a lot of rules in the form of X + Y = Z, and never see any information about sheep. If, after seeing a million examples you become pretty good at predicting the next token in the sequence “5 + 4 =”, does this imply that you have learned something about sheep?

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