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Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

Greed is (not) good

Tuesday, the Dutch PM visited the US president to discuss (a.o.) the American export ban for ASML, a Dutch company that specializes in the development and manufacturing of high-tech machines, which are used to produce high-tech computer chips. This American export ban hurts ASML’s profits.

Several decades ago, Western companies moved production facilities to China following its cheap labour. Several of these companies suffered from IP theft in China. In the current geopolitical climate, production facilities in China are being moved to other Asian countries, or back home (ie, reshoring).

As a former CFO, I’ve never been a fan of outsourcing. My main concern is a lack of (future) control on the company’s business activities. Furthermore, outsourcing is often more rather than less expensive (eg, profit margin of new business partner). More recently, I’ve added moral arguments.

Notwithstanding my latter remark, I still believe that our social market economy is the best available economic model. In my view, the problem is that CEO’s of public companies (eg, ASML) have a short tenure and thus a short-term business view. Private companies tend to have a long-term business view.

ASML adheres to the sustainability criteria: People, Planet & Profit. Is the P of (geo) Politics missing??

Since several years, there has been a lot of American criticism on the political correctness of American businesses (eg, Disney, woke-Left). In my view, geopolitics is (very) different from political correctness. In my view, adding Politics to People, Planet & Profit would create more clarity for businesses.

So, why do some companies want to sell their products or services to dubious countries (eg, China, Iran, North Korea, Russia) in the current geopolitical climate (eg, China vs Taiwan, Ukraine vs Russia)? Is it greed, ignorance, shareholder activism, a general lack of a moral compass, or even more?

The quote below suggests it’s business as usual. I’m not convinced.

“The intention of the Americans is to hit the Chinese manufacturing industry, but it also affects an important supplier of ours, which has some parts made in China,” Wennink said. “Ultimately, the part that is made in China should end up in a chip machine; ASML is now also indirectly affected by those rules.”

A quote by ASML CEO in Dutch NRC interview, as translated by Bloomberg, 14 December 2022

Greed Is Good (2010) Wall Street: Money Never Sleeps
IMDb, quote below, video, Wiki

“Someone reminded me the other evening that I once said, greed is good.

Now, it seems, it’s legal!

But folks, you know it’s greed that makes my bartender buy three houses he cannot afford with no money down. And it is greed that makes your parents refinance their 200,000 dollar house for 250k, and then they take that extra 50k and they go down to the shopping mall and they buy a plasma TV, cell phones, computers and an SUV. And hey, why not a second home while we are at it. Because, gee whiz, I mean we all know the prices of houses in America always go up. Right?

And it’s greed that makes the government of this country cut the interest rates to 1% after 9/11 so we can all go shopping again.

They got all these fancy names for trillions of dollars of credit, CMOs, CDOs, SIVs, ABSes. You know I honestly think there’s maybe only 75 people in the world who know what they are.

But I’ll tell you what they are, they are WMDs. Weapons of mass destruction.”

Note: all markings (bolditalicunderlining) by LO unless in quotes or stated otherwise.

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