The logic of saying "no"

Most negotiations are framed as tests of flexibility. One side asks for more. The other decides how much it is willing to surrender to keep the deal alive. Often this is the right approach. But sometimes a negotiation is not a test of flexibility at all. It is a test of whether you have any boundary that survives contact with money (or other resources).

This distinction is critical in markets built on trust. In a commodity business, saying no is usually just a fast way to lose the sale. If buyers can get roughly the same thing elsewhere, refusal sends them elsewhere. But when customers are choosing a system they cannot fully inspect, refusal carries information. It tells the market there are incentives this company will not obey. It turns principle from slogan into evidence (of a principled stand).

That is what made Anthropic's confrontation with the Pentagon more than a contract dispute. In late February 2026, the US Defense Department (DoW) wanted access to Claude for any lawful purpose. Anthropic objected to two uses in particular: fully autonomous weapons, which it argued current models are not reliable enough to control safely, and mass domestic surveillance, which it said violated the values the company was built around. Anthropic did not reject defense work outright. It said it was still willing to support narrower and safer uses. But on those two points, it refused to move. 1

The refusal was not invented for this fight. The company's constitutional AI project rests on a simple premise: model behavior should be shaped by explicit normative constraints, not only by capability gains and post-hoc policy. 2 This does not make Claude immune to misuse, and it does not remove the need for human oversight. But it does make the particular refusal feel less like improvisation and more like continuity of a core founding principle. The company negotiated the way it has said all along that its systems should be trained: with some lines drawn in advance.

The immediate cost looked brutal. The contract at stake was reportedly worth about $200 million. Defense Secretary Pete Hegseth responded by labeling Anthropic a supply-chain risk, language that sounded less like a reprimand than a near-death sentence. Some defense contractors began backing away from Claude in Pentagon-related work. 3 The first wave of coverage treated the episode as a plain business loss: a company chose principle, and principle handed the revenue to someone else.

That reading was too quick. The fallout appears more bounded than the first headlines implied. Anthropic argued that the supply-chain designation is tied to Defense Department (DoW) procurement and classified or sensitive systems, not to the company's entire commercial business. 4 If that interpretation holds, the designation may matter inside the DoW (previously DoD) while falling well short of poisoning Anthropic's enterprise business outside it. In other words, the company may have been shut out of one important market without being discredited in the much larger market it actually lives on.

The market Anthropic actually lives on is large enough to absorb the hit. Anthropic has said its run-rate revenue is about $14 billion, that more than 500 customers spend over $1 million a year with it, and that eight of the Fortune 10 are customers. 5 Those buyers are not purchasing raw intelligence in the abstract. They are buying judgment, reliability, and some assurance that the system entering their workflows will be governed by more than appetite. For buyers integrating AI into corporate systems, a refusal is not just a moral gesture. It is evidence about the kind of company on the other side of the table. The public response pointed in the same direction: Claude climbed to the top of the U.S. App Store rankings in the wake of the dispute, suggesting that at least some users read the refusal not as weakness but as a sign that the company meant what it said. 6

This is the strategic value of saying no. A company that treats every principle as negotiable may win more deals in the short run. It may also teach customers, regulators, and employees that its commitments are priced in, and therefore purchasable. In AI, that is an especially dangerous lesson. The systems are powerful, their failure modes are difficult to audit from the outside, and the worst mistakes may become visible only after they are costly to unwind. Under those conditions, character is not separate from the product. Character becomes one of the product's features.

I have some direct experience with this claim. In a collaborative work between Deakin AI Initiative & Dragonfly Thinking (Professors Anthea Roberts and Miranda Forsyth), I helped develop a behavioural auditing system that maps the value stances of AI models across dozens of languages and cultural contexts. 7 That research confirmed what the Anthropic episode illustrates from a different angle: models carry embedded behavioural patterns. These span cultural biases, value drifts, and inconsistent ethical postures that standard performance benchmarks do not capture. The gap between what a company says its model believes and how that model actually behaves is now something that can be measured. Which means a public refusal like Anthropic's is no longer just a signal. It is a testable commitment.

None of this guarantees that Anthropic will be proved right. The company may still lose defense-adjacent revenue, and some buyers may conclude that fighting with the Pentagon makes it less dependable, not more. Competitors that said yes may capture business Anthropic left on the table. Refusal is not magic. Principles do not spare anyone from tradeoffs.

But they do create a different kind of leverage. They clarify who you are before the market has to guess. They reassure the customers who fear mission creep more than they fear friction. And if the politics of AI move toward tighter expectations around autonomy, surveillance, and safety, then a refusal that looked expensive in one quarter may later look like prophetic foresight.

That is the deeper point. The power of saying no is not that it wins immediately. It is that a credible refusal can keep paying after the negotiation is over. In businesses where trust compounds, that may be worth more than the deal you declined.

Footnotes

Anthropic, "Statement on the comments from Secretary of War Pete Hegseth" (Feb. 27, 2026); Dario Amodei, "Statement from Dario Amodei on our discussions with the Department of War" (Feb. 26, 2026). ↩

Anthropic, "Constitutional AI: Harmlessness from AI Feedback" (Dec. 15, 2022); Anthropic, "Claude's Constitution" . ↩

Antonio Pequeno IV, "Hegseth Designates Anthropic As Supply Chain Risk" Forbes (Feb. 27, 2026); Tara Copp, "Pentagon says it is labeling AI company Anthropic a supply chain risk 'effective immediately'" AP News (Mar. 6, 2026). ↩

Anthropic, "Where things stand with the Department of War" (Mar. 5, 2026); 10 U.S.C. § 3252 , Legal Information Institute. ↩

Anthropic, "Anthropic raises $30 billion in Series G funding at $380 billion post-money valuation" (Feb. 12, 2026). ↩

Anthony Ha, "Anthropic's Claude rises to No. 1 in the App Store following Pentagon dispute" TechCrunch (Mar. 1, 2026). ↩

The Value Stance project was a collaboration between Dragonfly Thinking & Deakin University with support from CSIRO. The resulting platform maps AI behavioural fingerprints across 87 languages using established value frameworks including the World Values Survey. ↩