Call me Ishmael. I am the fictional chief executive of a fictional company attempting to cite a fictional billion dollar factory for a fictional revolutionary flat panel display technology. In spite of these fictions, much of my story is true.
I grew up in Oregon. I got an engineering degree at OSU. I was in Silicon Valley with Hewlett and Jobs and Waz and Grove. I got my MBA at Stanford. I succeeded in business. I helped create tens of thousands of high paying jobs.
Tonight I sit before Oregon’s Washington County Commissioners. As an American and a native Oregonian I want to site my company’s new factory in Washington County. I feel a duty and an obligation to do all I can to keep my state and my country strong.
While the factory will have a large physical footprint and will cost about a billion dollars, it will only employ about 500 highly skilled and highly paid people. Our new technology allows flat panel televisions to have better picture quality, use less energy and sell for lower prices. To do this our factory needs to handle giant sheets of ultra pure, ultra clean glass. It is like a double-sized plywood mill that consumes sand rather than trees, but is cleaner than the cleanest hospital. The plant will have zero emissions but will consume a great deal of electrical energy.
The factory will likely have a life span of five years or less because this technology sector is moving quickly. We are confident that we can return operating income (revenue minus expenses) on the order of half a billion dollars a year for the five year life of the plant. Time is money! Every day we wait to break ground costs us about $140,000, which we can never recover.
Fifteen years ago my company purchased 150 acres of agricultural land with the hope that we could have it rezoned for industrial use. The land now borders a high tech park and all required services and infrastructure are already in place or could easily be put in place. To support our proposed factory. The land has been leased to local farmers for most of the time we have owned it, but has been idle for several years as it is no longer economical to farm it.
The Commissioners have few questions but each makes a lengthy statement about their concern for the environment, the loss of farm land, their fear of congestion, the large amounts of energy my plant will consume, the fact that it is only offers 500 jobs…
The meeting is frequently interrupted by rowdy Earth First protesters and other concerned citizens that hate free enterprise. Some of these citizens make statements in opposition to our request for rezoning. No one, other than me, makes a statement favorable to the zoning change. The meeting ends with a decision to reconvene in two months to hear more testimony.
As I am gathering my documents and preparing to depart, a gentleman approaches me. He introduces himself as Mr. Lee. He is an assistant trade minister from Malaysia. He compliments me on my presentation and presents me with a binder of information on an industrial park in Malaysia. Then he hands me a first class ticket to Singapore and proposes that I meet the trade minister of Malaysia there in two days.
I don’t really want to go to Malaysia. I want to stay in the US. I want to do business here. I want to employ Americans. I tell Mr. Lee that I will consider the information he has provided but that I will not be able to come to Malaysia immediately. I return the ticket to his reluctant hand.
As I leave the meeting, a young woman in cammos and an Obama t-shirt charges me and spits in my face. Her peace button-adorned beret falls off as she turns to run away. I pick it up and attempt to give it back to her but she keeps running.
When I get out to the parking lot, I find my car has been spray painted with swastikas, four-letter epithets, and a threat to my life.
The next morning I call Mr. Lee and ask him if he still has that ticket. Ten minutes later Mr. Lee enters my office and delivers a new ticket. With the ticket is an itinerary and a set of contacts and bios of people I can expect to meet on my trip.
I land in Singapore at 1:00 AM local time and quickly make my way through the incredibly efficient and clean Changi Airport. After breezing through customs I see a young Asian woman jumping up and down in the milling crowd. She is holding a giant sign that says “Mr. Ishmael, Welcome to Singapore!”
She introduces herself as Kris Kho. “Like the shortening,” she giggles. Behind her is a large Asian man. He rips my luggage away from me and gestures the way to our car -- a Mercedes 600 limo. He drives while Kris enthusiastically gives me (my tenth or so) early-morning tour of Singapore. I try to act awake and appreciative. They have provided a room at the beautiful Santosa Island resort so that I can recover from the eighteen hour flight before we drive to Malaysia. It seems a waste to sleep in one of the most beautiful resorts in the world – but I am tired.
While fighting jet lag, I read some of the information that Mr. Lee provided. Kris has a degree in electrical engineering from the Technical University of Singapore and like me an MBA from Stanford. While she is a native Singaporean, she works for the government of Malaysia. According to her bio she is to “make my trip informative and enjoyable.”
We drive to the industrial park in Malaysia. It is a four-hour drive. Again Kris gives me a running tour but she is also interleaving a sales pitch on why the new plant should be based in Malaysia. “The people are eager to work. Your customers (the people that build televisions using your panels) are here. Our workers are well trained and highly technical…”
When we arrive at the industrial park we are met by the Malaysian Minister of Industry and several local movers and shakers. We have lunch and tour the campus. It is impressive. New buildings filled with high tech industries cover several square miles of a beautiful park. I am told not to enjoy the grass, as cobras may be present. I heed the advice.
The next day we have a meeting and I make a presentation that defines the requirements for the new plant. Much to my surprise, my presentation is followed by a presentation from the president of a Malaysian construction company. Apparently Mr. Lee managed to take enough quality notes from my Washington County talk to allow Malay architects and construction engineers to put together a proposal for the design and siting of the new plant. I can’t believe how much good work they have managed to do while I was in the air. Our US plans are less detailed and less complete and I have been managing that effort!
After the presentation, I ask about permit processes and zoning requirements. The room goes silent for a while and then the conversation switches to tense Chinese. After listening for a few minutes Kris intercedes in the conversation. She talks for a few minutes and her colleagues begin to smile. The Malay trade minister returns to English and says: “We want you here. We want to make it simple for you to come here. The land is ready for you. We will lease it to you of ten years for one US dollar per year. In four months a new nuclear power plant will come on line and we need someone to buy its output for half what you will pay in the US. We will charge you 15% tax on your profits (compared to 48% Oregon and US federal). You can start construction tomorrow if you wish. Our construction crews will work 24 hours per day, 7 days per week, to get your plant running. The Malay government will send 25 Malay engineers to your company to learn the technology while the plant is under construction so that they will be able to help your people bring the plant’s production up. If you desire, Kris will work as construction manager at no charge until your plant is up and running. “
On the flight back to PDX I put a little spread sheet together:
|
Five year plant plan: |
|
|
|
|
Washington County |
Malaysia |
|
|
|
|
|
Cost of land (property tax/rent) |
$1,100,000 |
$5 |
|
Cost of plant |
$1,000,000,000 |
$800,000,000 |
|
Cost of power |
$25,000,000 |
$12,000,000 |
|
Cost of people |
$375,000,000 |
$100,000,000 |
|
Travel cost |
$25,000,000 |
$100,000,000 |
|
Total Costs |
$1,426,100,000 |
$1,012,000,005 |
|
|
|
|
|
Operating revenue given likely |
|
|
|
US zoning delays of 12 months |
$1,750,000,000 |
$2,250,000,000 |
|
|
|
|
|
Gross profit over 5 years |
$323,900,000 |
$1,237,999,995 |
|
Tax Rate |
48% |
15% |
|
Net Profit |
$168,428,000 |
$1,052,299,996 |
|
Net Profit ratio |
1 |
6.247773504 |
My company makes 6 times more money in Malaysia and only cobras are likely to spit at me. What would you do? What would you want me to do if you were a stock holder?