When would you want lossy encoding of lots of data bundled together with your reasoning? If it is true that reasoning can be done efficiently with fewer parameters it seems like you would always want it operating normal data searching and retrieval tools to access knowledge rather than risk hallucination.
And re: this discussion of large data centers versus local models, do recall that we already know it's possible to make a pretty darn clever reasoning model that's small and portable and made out of meat.
There's is a problem though: we know that it is possible, but we don't know how to (at least not yet and as far as I am aware). So we know the answer to "what?" question, but we don't know the answer to "how?" question.
So I think it's useful to have an imprecise-but-fairly-accurate set of world knowledge as part of an otherwise reasoning-heavy model. It's a cache.
And if the it's an LLM, or something like that, I think it basically has to have world-knowledge built in, because what is natural language if not communication about the world?
Once the difficult problem of figuring out what the input is supposed to mean was somewhat solved, bolting on reasoning was easy in comparison. It basically fell out with just a bit of prompting, "let's think step by step."
If you want to remove that knowledge to shrink the model, we're back to contorting our input into a restricted language to get the output we want, i.e. programming.
The minimal size limits of reasoning abilities are not clear at all. It could be that you don't need all that many parameters. In which case the door is open for small focused models to converge to parity with larger models in reasoning ability.
If that happens we may end up with people using small local models most of the time, and only calling out to large models when they actually need the extra knowledge.