But how would you use words to explain the phenomenon?

I don't know, I've been struggling to find the right 'sound bite' for it myself. The problem is that all of the simplified explanations encourage people to anthropomorphize these things, which just further fuels the toxic hype cycle.

In the end, I'm unsure which does more damage.

Is it better to convince people the AI "lies", so they'll stop using it? Or is it better to convince people AI doesn't actually have the capacity to lie so that they'll stop shoveling money onto the datacenter altar like we've just created some bullshit techno-god?