I'll meet you in the middle: an LLM "understands" words in the same way a toddler understands the phrases they say. "My want cookie!" The toddler has zero comprehension of what any of those words mean, but they know that saying them in that order might result in something desirable.
An LLM has zero understanding of "my", "want", or "cookie" because an LLM has no id/ego, has never felt desire, and has never eaten a cookie.
I believe you've made a category error in understanding, um, understanding. You've tied emotion into it. This to me are entirely different concepts where both happen to be wrapped up in meaty flesh that drives us humans. Now, these concepts are very important in sociology and human understanding of how we behave, but they also may have zero importance for the domain that encompases all understanding.
HN would commonly recommend reading the book Blindsight here.
Moreso, all you've done is recreate the Searle Chinese Room thought experiment which gets bounced around with no means of deciding if it reflects reality or not.
the shy one of my shelter cats that figured out how to open and close the cabinet below the one with wet food at 3am without meowing has infinite more understanding than any LLM of how the world works
Ask an LLM for the difference between a definite and indefinite article, and then pronouns. Maybe just a whole run down of basic grammar. And then read the comment again.
An LLM has zero understanding of "my", "want", or "cookie" because an LLM has no id/ego, has never felt desire, and has never eaten a cookie.