Creativity, honesty and designed forgetting emerge in small hyperbolic language models

arXiv:2607.09306v1 Announce Type: new Abstract: Language models are optimised for scale, yet remain functional rather than companionable, and as an assistant personalises into a companion, accumulating memory of one user, it quietly becomes someone, and can silently acquire traits that harm that user. What a companion is becoming, and what would make it worth becoming, has no reliable instrument: trained human raters cannot agree on the answer (Fleiss kappa = 0.074). Here we show that three small language models (146 M to 3 B parameters) sharing a hyperbolic substrate answer both halves of that question. A 146 M behavioural auditor, trained from scratch, detects the compliance gap that those raters cannot (90.7% binary-compliance accuracy); a linear read-out of its frozen representation further detects companion-induced sycophancy, dependence-fostering and confabulated memories on generator families unseen in training (AUROC 0.804 under style-controlled, leave-one-generator-out evaluation, versus 0.721 for a frontier zero-shot judge on the same items). A creative frame-seeder is preferred in 100% of 311 decided pairwise comparisons over four prompting baselines. A memory operating system implements designed forgetting, M(t) = S*exp(-lambda*t), whose predicted skeleton-wallpaper partition emerges only under selective retrieval gating in a four-condition pilot. Creativity, honesty and designed forgetting constitute a small-model route to trustworthy companion AI.