OpenAI Steals $200M Contract in Anthropic vs. Pentagon Battle

Welcome to the podcast. I'm your host Jaden Schaeffer. Today on the show we have some latest

advancements in the whole story between the showdown of Anthropic and the Department of War,

the Pentagon. They've essentially been, they're moving to designate them as a supply chain risk

and it looks like Anthropic may have been plagued by Sam Altman and OpenAI who have swooped in

and taken the contract that the Department of War has just canceled. So anyways, there's a

whole bunch of drama in there. We're going to cover all of that on the podcast. Before we do,

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can go check it out at aibox.ai. All right, let's get into the story. So over the last two weeks,

there's been this really high stakes confrontation going on between Anthropic and the Department of

Defense or the Department of War. I can't remember what we're calling it nowadays. This is peak

Hegseth and it's kind of under Donald Trump and basically the center of this whole argument

is a question. I think that is going to be really important for how AI is used inside of government

going forward in the future and that is kind of who is, you know, who's in control of these AI

systems that are powering the most powerful national defense systems. So Anthropic CEO Dario Amadeo,

he said like he basically made this big statement where he's basically saying he doesn't want his AI

models to be used for two specific things, mass domestic surveillance of Americans and also

fully autonomous weapons that select and engage targets without human involvement. So those are

kind of his two red lines and between and you know, between those two things, he said that look,

we can't keep supporting the military on these different use cases that they might be pursuing.

And so he kind of put safety, safety guards and guardrails into what Anthropic is capable of

doing so that the government can't do that. Now, the Pentagon's position is also, I mean,

they're very direct on what they want. So the Secretary Hegseth basically is arguing the Department

of Defense shouldn't be constrained on their use cases by the internal policies of an AI company.

Now, on the one hand, I agree with Anthropic in a sense that I don't want the government doing

mass surveillance of Americans with AI systems. And I also agree that, you know, fully autonomous AI

that goes and executes, you know, kill shots or whatever without a human intervention is very,

you know, a very crazy kind of ethical boundary that I don't think we want to we want to get into.

So I don't really like either of those two use cases. But on the other hand, I do see the argument

that, you know, if we have these, you know, these AI vendors that are kind of making their own rules

and perhaps those two are good red lines, right? Well, what happens in the future when Anthropic says,

actually, we don't want these to be used for any of these other, you know, military use cases,

like, you know, war planning or strategies or anything that could contribute to someone dying in

the future. Like you could see this essentially being if their policy shifts and all of a sudden,

like the US Department of Defense is, you know, integrating this AI system into all of their

different systems for the military. And all of a sudden, they changed, you know, the internal

policies of their company, then all of a sudden, the capabilities of the military get nerfed.

It doesn't seem like a very safe place for the government to be out. And I think there should be

a broad like overall kind of conversation from Congress and from probably voters on what we want

AI to be able to do and what we want the military to be able to do and how we how we go about a lot

of these things. But at the same time, I don't really like, you know, although I don't like those two

use cases that Anthropic is kind of redlined, I also don't really like the fact that Anthropic can

redline use cases for the military. And right now, those seem like good ones, but in the future,

they could be bad or, you know, they could, I mean, like you could even theoretically in a

conspiracy theory world, which I also love, let's say China decides to take a huge stake in Anthropic.

I'm sure the US government would ever let that happen blah, blah, blah. But like let's just say via

some, you know, maybe they get some investors in Saudi Arabia or whatever, right? Let's just say

there's a way that they could get some sort of control into Anthropic. And then they could make

some sort of policies that directly, you know, negatively impact the government. I just don't like

the, I just don't like the rules coming from the companies themselves, which are, you know,

we know that those are sort of manipulatable. You can, you can buy up board seats and whatever else.

So I just, I just don't like that concept. Okay. And even though I think that probably their causes

are, are just are good, perhaps. Okay. So this whole thing escalates quite a lot to the point

where President Trump directed federal agencies to stop using Anthropic's products. He said, you

know, basically there's kind of like this six month transition period. And then right after that,

Secretary Hegseth designated Anthropic as a supply chain risk to national security, which is

basically blacklisting them from doing business with the military. And even potentially with

contractors that are tied to the military. Anthropic said that they hadn't been, they hadn't received

any sort of formal notice. And they were, you know, they were going to challenge this kind of

designation in court. And so there's, you know, obviously all of this drama going on. And I think

it's especially important considering we know that while all of this was happening, the US

government was leading up to their bombing of Iran with forces in Israel. And evidently,

they didn't want, you know, kind of mid operation. Their AI systems to be cut or them to have

some sort of issue there. So it seems like this was probably a role, you know, it's like they have

to have this big public beef with an AI company doing work with the military before they can,

you know, launch their next military strike, which is interesting considering we know that

Anthropic was used heavily for the capture of Nicholas Maduro for that mission. And so it seemed

like, you know, before they wanted to launch their full, their full attack on Iran, they also

wanted to make sure that they had AI models to back up their operations, which is really crazy

if you think about it. I think there was a lot of implications that were really big in everything

that was happening. Anthropic had received Department of Defense contracts. And we also had

by the way, OpenAI and Google that got a bunch of those as well last year. And so I think there

was about a $200 million contract that got canceled from Anthropic. And what's interesting is

within hours of this kind of new federal directive, you know, targeting Anthropic, OpenAI

stepped up and Sam Altman, their CEO, went and posted it on X and he tweeted saying that OpenAI

had reached an agreement with the Department of Defense. And we'll be taking over this Anthropic

contract. That means seemingly he didn't really outline it in that exact way. But I mean,

we're between the lines and Anthropic gets dropped, OpenAI gets a new contract and basically

they're taking over. Sam Altman did say that he's like, look, we got a bunch of safeguards,

we're not going to do domestic mass surveillance and we're not going to force, you know,

have us being used in autonomous weapon systems, yada yada. OpenAI also said that they're going to

deploy through a cloud-based API so they can retain control of the safety stack and they're

going to embed personnel with appropriate clearances to oversee deployment. Sam Altman also

later said that the deal was kind of rushed, but he framed as an attempt to de-escalate tensions

and stabilize the relationship between AI labs and the government. So he's like, look, we're

making sure the government doesn't hate all the AI, which obviously they don't. They just want

to be able to use it. I think this brought up a whole bunch of really interesting questions.

Number one, if OpenAI could secure an agreement with similar red lines, why was Anthropic not

able to do this? I think there's some critics that are arguing that the difference came down to

the deployment architecture and some of the negotiation strategies. I think other people

are also saying that the dispute sort of basically became kind of symbolic. It turned into this

clash between Anthropic like saying, you know, like adding new rules after they already had

a deal in place and OpenAI being like, look, these are sort of what we would like to negotiate

and come into an agreement with. And so I think some people are speculating that the government

doesn't like making a deal to use it a service and then having all of these rules, all of a sudden

red lines added mid use case. I think the public reaction was pretty positive in Anthropic's

direction. Anthropics Chatbot Cloud went all the way to the top of Apple's App Store rankings.

It passed ChatGPT and it was kind of the number one spot for AI models that people were using.

And I mean, kind of immediately after this big news story came out, I think beyond the

kind of immediate corporate fallout, right? Because we know Anthropic lost a $200 million

dollar deal and OpenAI came and picked that up basically. But I think there's some strategic

things we have to think about. First of all, the US military already operates highly automated

systems. And the Department of Defense, you know, directives allow AI-enabled systems to select

and engage targets under certain review frameworks. So I think the question isn't whether AI is going

to be used in defense, but kind of how broadly and under whose constraints the US military already

has its own rules. They're kind of setting their own rules. I'm not sure this is something that like

people are voting on perhaps that's something that we would do in the future. But the military

already sort of has its own rules and kind of its ethical frameworks that they're looking at.

And I think they really don't like another AI lab telling them what they can or can't do in

regards to that. I think a lot of national security leaders are arguing that limiting access to

cutting-edge systems could place American forces at a disadvantage when, for example, China,

none of these questions of ethics and safety that anthropic is bringing up China obviously

doesn't care about any of them. Russia doesn't care about any of these things. And so I think one of

your geopolitical competitors are putting AI into their systems. We have the best AI models right

now with OpenAI and Anthropic being built inside of America. But that doesn't mean that we'll have

the best forever. And if we kind of nerfed the capabilities of those theoretically, and this is

how the argument goes, that could not be positive. So our basically put us at a disadvantage of China.

Okay. So from that perspective, I think the Pentagon is kind of making an argument that

they don't want a single vendor to be able to tie their hands basically if something is legal

and they're allowed to do it. Okay. At the same time, Anthropic has consistently argued that technology

is advancing so fast that government mechanisms haven't kept place. A bunch of critics such as

Max Tigard are saying that the broader AI industry helped create this vacuum by lobbying against

binding federal regulation, preferring these sort of voluntary safety frameworks. We see like OpenAI

and Anthropic all of them are like, look, this is our safety framework. This is what we're doing. And so

we don't really have any sort of enforceable laws. It's mostly just people saying, look, we want to be

safe and responsible. I think without some of these like legal frameworks, the argument could be made

that disputes like this are going to be resolved through executive power and then contract leverage

rather than legislation. So this is something we'll be watching very closely. But in the meantime,

it does appear that Anthropic has received a boost from just regular users as kind of the

underdog fighting the government. And it seems like OpenAI has gotten a $200 million boost from

just picking up the contract and powering a lot of that technology, which could turn into,

you know, higher contracts in the future. So we'll see where this all plays out. Thank you so

much for tuning into the podcast. If you enjoyed this episode, I would love a rating or review

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listeners like yourself. Thanks so much for tuning in. And as always, make sure to go check out

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in one place for 899 a month. All right, catch you in the next episode.