So now Russia wants $20 billion from the West, and I say: Give it to them. (Well, lend it to them.) Not to say $20 billion isn’t a good chunk of change. It is, for example, nearly a third the market cap of Dell Computer. If Europe split it with us (not a good time to ask Japan to chip in), it would be the equivalent of every U.S. and European household lending Russia a hundred bucks.
Nor would there be any guarantee of repayment or success. Russia could still go down the tubes. But Russia — like Mexico, which we recently helped with an even larger bailout that surprised the naysayers by working out well — is not going away. And a prosperous, more-or-less democratic Russia is spectacularly in our self-interest. Especially when you consider the alternative.
So what are things like in Russia these days?
I have this recent report from my wise and good Russian-born friend Gennady:
It is July 4th as I am writing, about 65 degrees and raining. Sounds lousy, but not too bad of a weather for Moscow. As I threatened, I will perform the cathartic process of expounding on paper (I mean Word 95) my take on this country and its people.
It has been 3 years since I moved back here, which in a country in upheaval is a very long time. Russia is a big subject to cover so I will try to break it up into somewhat more manageable subjects.
Russian pop music is very sappy. A typical male song will be a cry-fest to his beloved, extolling everything about her, vouching his love to the very end. The lyrics tend to be embarrassing. It is also common for a man to beat his beloved. In 1996 in this country, 40% of the murders were husband killing wife. Furthermore, since so many men are alcoholics, it is up to the women to provide for the family. This is a country with machismo turned upside down. The men claim all the perks that come with it but want none of the responsibilities.
Many times I have told my parents how grateful I am that they took my sister out of this country. It has often been pointed out that Russia is always represented by a woman’s figure, a Motherland, as opposed to, say, Germany, which is associated with a male, a Father. All the war victory statues have a woman representing Russia. Women are truly the sufferers and the heroes here. As much as the communists have been claiming equality for women, it is almost jarring how unequal the sexes are. The proverbial glass ceiling here is made of concrete. Bear children, clean, cook, repeat.
This is a very open society when it comes to sex. The puritan forbidden mystery of it so prevalent in the US is nonexistent here. Promiscuity reigns. People start having sex early and indiscriminately. Furthermore, it extends across all social circles. Sex between young teenagers is not limited to the inner-city youth. There is also a clear separation between sex and family. People marry young in Moscow, typically between the ages of 18 and 24. I imagine it’s even younger in the provinces. And then they start affairs. What is interesting is that the affairs are not too clandestine and there is never any feeling of remorse attached. Women cheat on their husbands quite a bit as well. The process is mechanical, devoid of any emotions and I suspect is mainly a way to deflate some of the boredom that surrounds. In all my years of working in the US, only once did I know of an office romance. Here it borders on ridiculous. In our organization, I have a feeling that all single people have gone through all possible boy-girl permutations. Since availability of apartments for these trysts is limited, they stay late and “do it” in the office. I am also aware of two married men who are cheating on their wives with girls who work in the office.
Trust No One
Pathological liars. This city is filled with them. Particularly, from what I hear from friends in financial circles, they reign in the government sector. Since the country never had a history of building structural business relationships, it is every man for himself and people don’t care what bridges may be burned in order to make (or steal) a fast buck. Here is a story from my friends at [an investment bank] of how George Soros lost on the order of half-a-billion paper dollars here: About a year ago he invested $1.2 billion for a 25% stake of a company called Svyazinvest, a holding from the old Soviet days that rules the Russian telecom industry. The jewel of the holding was a large (almost 50%) stake in the Moscow telephone system. Several months after the payment for Svyazinvest was made, it turned out that there was a small print in the regulations of the Moscow telephone system that allowed an investor who pumps $125 million into the company to force an issue of shares equal to the outstanding number. Out of nowhere, a company called Sistema (actually an arm of the Moscow mayor) appears which “invests” real estate “valued” at $180 million and forces the issuance of the stock. This dilution forced immediate plummeting of the Svyazinvest stock. My friends at [the investment bank] are screaming that it is obvious that due diligence by Soros’s Russian advisory firm was not performed. Furthermore, they are pointing out that now, even though they have been working with the Moscow telephone system for years, there is a new unwritten rule that all financial transactions are to be done through that advisor. Pretty, isn’t it? [I.e., might the advisor been in on the scheme from the beginning?] What is sad is that these “events” discourage new investment.
Nevertheless, there is a lot of direct investment going on. A client of ours, a system integrator, decided to build an ISP [Internet service provider] company. Before they opened an office and hired anyone, a Swiss investment company came in and bought a 50% stake for $10 million. It is commendable because I believe the brains to deliver high-tech solutions is where this country can excel. Lots and lots of smart geeks here.
When I got here three years ago, it was truly messy. Since we do niche marketing in a high-tech industry, that is the industry I was able to observe. Technology companies would form, haphazardly hire people, give them something to do and when the going got tough would randomly fire some employees to save on overhead. About a year-and-a-half ago I was sitting in the office of a co-owner of a network of computer stores. With 7 stores and an annual revenue of about $50 million, this company is easily the largest technology retailer in the city. This president pulls out an NEC annual report and tells me he would like us as their marketing agency to produce something similar. I ask him why he wants it; after all a financial report is something you produce for the market and the shareholders. He responds that it would be “nice” to show to prospective vendors, key clients, etc. I said, fine, let’s see the financials of the company and we will do something. At this point, the gentleman points at the safe standing in the corner and explains that his financials consist of three items: his list of outstanding bills, his list of outstanding invoices and the cash! To this day they are not sure what the profit margins of the company are.
In this country, since the days of communism, employee hiring has been a crucial task. Well, let me tell you, I have become resigned to the belief that it is next to impossible to find qualified help in the business environment. Incompetence reigns and not only in advertising. As I speak to people in various industries, I inevitably hear a complaint of how difficult it is to find anyone with drive and a self-starter spark. In every industry, from finance to store management, the boss always has to be there because the employee will slack off/not come to work/be unhelpful to customers, etc. After three years I am yet to find a native that I can hand an account over and be confident that the account is led appropriately. Even if the person is responsible, he will lack abilities to plan and initiate ideas. I believe that this is one of the major contributors to the fact that the country is held back. Whereas America was built by hordes of entrepreneurs, in Russia the trickle of such entrepreneurs is sneered at and held back by the lazy masses. I constantly compare our Russian clients versus the multinational ones. With the local clients, haphazard unplanned behavior reigns. If this week the business is down, let’s cut the advertising and cancel the seminars for the next month or two. This behavior shocked me two years ago when I first confronted it and it still does because the companies’ managers have hardly become more professional.
You have heard all about it and I have become pretty much inured to it. Last week, however, I was able to understand just a little more. People always wonder why no laws of any merit can pass the Duma and the Federation Council. Finally, a communist deputy explained: it is all vested interest, with a twist. For example, say someone wants to introduce a law that empowers tax inspectors to raid and collect taxes at the customs area. To do that, authority needs to be consolidated under the taxation department banner. Say it can be proven that this consolidation will triple the revenue intake. Well, supposedly such an arrangement can never pass because the customs authorities will have to give up their powers. What that means in real terms is that someone will be losing bribe revenues. That person will immediately run to his protection in the Duma, who are also on the payoff, and a way will be found to kill the initiative. It is truly every man for himself and a total Mexican standoff arises. As a result, the only time the Duma votes as a block is on highly political issues, like condemnation of government policies, etc. When it come to internal matters, it is all divide and conquer.
The New Russians
Almost everyone in this country is poor, but the “new Russians” are obscenely rich and decadent. Another toy for them opened about two months ago: a super-super expensive restaurant. A “tsar’s dinner” is prix fixe at $650.
At the same time, the country is broke. Here is one that just came up yesterday: Our organization rents space from MGU (Moscow State University). We rent two floors in a complex of buildings right in the center, a block from the Kremlin’s main entrance gates. It seems that the government and the city of Moscow have not been paying MGU the subsidies as provided by law. As a result MGU has been unable to pay the electric bills for several months now. Yesterday the city of Moscow cut the electricity off to the entire complex!!!!
This summarizes what I think about people in this country. You may have noticed as you have traveled that Europeans consider Americans a bit square and a bit naive. They think Americans are all alike, are not very astute, and are devoid of sarcastic spark. I must agree with that. I must also point out that at this point in time Americans are much more willing to listen to ideas, accept others and, more importantly, lack this idiotic European feeling of superiority. Here in Russia there is a dichotomy of values that are instilled in the young generation. On the one hand, people look around and, if they have any brains, can see they are living in a rat hole. On the other hand, they grow up firmly believing that they are the smartest, strongest, most powerful … The result is that people here totally lack in self-reflection. They refuse to acknowledge that they today cannot build the best cars, best rocket ships, fastest microchips. It is always “we have the smartest teachers, scientists, doctors… but they are not paid well enough to perform the miracles they are capable of.” It is never “we need a Marshall plan to rebuild our PEOPLE.” And until you admit that your country is covered in [filth] because the PEOPLE, ALL OF THEM, are [dumping] on it, you cannot come up with a comprehensive plan to give it a shower. So, my advice to the snobs who laugh at America, is to maybe try to learn a little. And maybe acquire the respect for hard work.
The Inscrutable Russian Soul
There is one thing that nobody understands: how can people work in horrible environments (miners, transportation workers) for 10-11-12 months, not get paid and not riot, or at least refrain from coming to work. As someone pointed out, when a trade union strikes, it is usually for wage increases. Only in Russia, they call a strike to protest wage non-payments. [So there may not be respect for hard work, but there has to be a lot of respect and compassion for the hardships average Russians have endured for … well, for centuries.]
What has changed and what do I think is coming? After three years I am finally starting to understand what Russians mean when they say that this country will never be built according to a Western model. They are probably correct when they say that it was wrong to build this country on the US model. American economic model extracts the highest price for success. It is probably true that the transition from the Soviet model should have been less harsh, more gradual, closer to the French or German systems. I hear frequent complaints of this nature. It is too late, however. I am at this point convinced that this country, if lucky, is due for a long painful transitional period. In my own experience everything here takes longer than planned or expected. I think the improvements will take a long time and I am convinced that before the factories start working the people will have to change. The cynicism and the laziness will have to be replaced by something else. People will have to develop a spark in their eyes and a bit of an optimism and enthusiasm. It is pretty funny, but I observe that even in the gym the people are going through the motions in a listless manner. This country does have a lot of extremely smart people who are not realizing their potential and are not benefiting the country. And that is sad. Hopefully, some day very, very soon they will start realizing that potential.
Quote of the Day
Markets are very good at what they do, in part because they harness greed and envy (in fact, all of the Seven Deadly Sins except sloth) and turn them into positive virtues.~Rocky Mountain Institute newsletter
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