We want employees that work for free!
No, what he wants is to allow paying users the ability to have a lot of the benefits of open source, while not reducing the company's downstream cashflow. It might come as a surprise to you, but not every project can be open sourced and still make money. In fact, I always wondered about the pay-for-support model - why should I make my software easy to use and maintain (eve at large-scales) if my main source of income requires users to come and pay me to help with the product?
Also, this is a scientific computing software - the target market is small as it is. Very likely the core is something that is highly mathematical, and not something the average programmer can work on. I wouldn't be surprised if there were several statisticians and researchers on the payroll. People like these don't necessarily write high quality code - see the R library for example (yes, there are many excellent packages, but a huge number are written sloppily by academics). The customers who use it might need highly specific tweaks for their application - something they can only do with the source. I myself would have loved to "fix" some of Matlab's functions for my specific use case. But if the customers don't have the source, there isn't much they can do.
This type of license should actually become the norm - but it is unlikely to happen. There is always the risk that a customer who bought software might give a copy of the source to their friend, and before long I lost all control of the product. While binaries are still copied today, companies are trying to crack down on it through registration and DRM. If the source is out, there is even less they can do to stop it.