Some things are annoying… and some other things will slowly drive insanity… like a different behavior in your integrated terminal, i.e.

base ❯ conda activate py38 
py38 ❯ python --version 
Python 2.7.16 
py38 ❯ which python 
/usr/bin/python

The solution is given here:
https://github.com/microsoft/vscode-python/issues/7293