The economics of that don't work out. Government is a small market and can't drive frontier innovation at the scale it's happening today, let alone in the future.

Look at the defense industry: The Big 5 contractors (Boeing, RTX, General Dynamics, Lockheed Martin, Northrop Grumman) capture most of the discretionary military budget, and the largest of them is in the $300B valuation range (Boeing, which has substantial non-government revenue). Fine businesses but nowhere near Anthropic's valuation.

Bottom line, the government doesn't have deep enough pockets.

I disagree. I think it does make sense the way it was described; top models for governments or industrial players with deep pockets, and "normal" models for the general public. None of the big 5 defense contractors sells directly to the wider public.

In fact, I'd assume this direction has been widely discussed and considered at Anthropic. I think Fable's release was an experiment to test this.

The biggest risks though are China and Moore's law. In the short term, if you don't offer a competitive model as the market grows, you fall behind in marketshare. Anthropic's edge is that it's offering is still better than Chinese offerings. If they offer anything less than that, something not better but just comparable for example, they lose on price. In the long term, as computing capacity continues to increase, local models potentially pose the same challenge.

So there's plenty of pressure for Anthropic to keep widely offering the best model they can.