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Theory Is All You Need: AI, Human Cognition, and Causal Reasoning

Author

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  • Teppo Felin

    (Huntsman School of Business, Utah State University, Logan, Utah 84322; and Saïd Business School, University of Oxford, Oxford OX1 1HP, United Kingdom)

  • Matthias Holweg

    (Saïd Business School, University of Oxford, Oxford OX1 1HP, United Kingdom)

Abstract

Scholars argue that artificial intelligence (AI) can generate genuine novelty and new knowledge and, in turn, that AI and computational models of cognition will replace human decision making under uncertainty. We disagree. We argue that AI’s data-based prediction is different from human theory-based causal logic and reasoning. We highlight problems with the decades-old analogy between computers and minds as input–output devices, using large language models as an example. Human cognition is better conceptualized as a form of theory-based causal reasoning rather than AI’s emphasis on information processing and data-based prediction. AI uses a probability-based approach to knowledge and is largely backward looking and imitative, whereas human cognition is forward-looking and capable of generating genuine novelty. We introduce the idea of data–belief asymmetries to highlight the difference between AI and human cognition, using the example of heavier-than-air flight to illustrate our arguments. Theory-based causal reasoning provides a cognitive mechanism for humans to intervene in the world and to engage in directed experimentation to generate new data. Throughout the article, we discuss the implications of our argument for understanding the origins of novelty, new knowledge, and decision making under uncertainty.

Suggested Citation

  • Teppo Felin & Matthias Holweg, 2024. "Theory Is All You Need: AI, Human Cognition, and Causal Reasoning," Strategy Science, INFORMS, vol. 9(4), pages 346-371, December.
  • Handle: RePEc:inm:orstsc:v:9:y:2024:i:4:p:346-371
    DOI: 10.1287/stsc.2024.0189
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    References listed on IDEAS

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    8. Benjamin Davies & Anirudh Sankar, 2025. "The value of conceptual knowledge," Papers 2509.09170, arXiv.org, revised Feb 2026.
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