Heads You Win

Klaus Schwab rose to introduce him, and opened his remarks by telling the delegates that Alex Karpenko had been among the leading investment bankers in the burgeoning Russian republic for the past decade, closing deals that had stunned his more cautious rivals who’d been left in his wake. Lowell’s had brought a new meaning to the words “risk reward ratio,” having secured at least one deal that had made a thousand percent profit in its first year, while at the same time raising the wages of every one of the company’s workers.

“In the days of the gold rush,” said Schwab, “you needed to climb on the bandwagon and head west. In today’s Russia, it’s a private jet, and you have to head east.”

Alex was relieved that Schwab didn’t also mention that he had once escaped from Saint Petersburg in an ambulance, but not before his wallet had been emptied by a rent boy and an off-duty paramedic.

The applause was friendly when he emerged from behind the curtain to take Schwab’s place at the podium. The kind of reception that hints, we’ll wait and see how the speech goes before we pass judgment.

Alex looked down at row upon row of expectant faces and made them wait for a moment before delivering his opening line.

“Whenever I address my local Lions club, a student forum, or even a business conference, I’m usually fairly confident that I’ll be better informed than anyone else in the room. I accepted this invitation without realizing that everyone else in the room would be far better informed than me.”

The laughter that followed allowed him to relax a little.

“Lowell’s Bank has been working in Russia with the local people for the past ten years, and Mr. Schwab kindly described us as one of the leaders in the field. The same bank has been doing business in Boston for over a century, and we are still thought of as upstarts. However, in the context of Russian investment banking, we are regarded as part of the establishment after only a decade. How can that be possible?

“Less than fifty years ago, Stalin ruled over one of the largest empires on earth. When he died in 1953, he was mourned as a national hero and statues of him were erected in even the smallest of towns. The people referred to him affectionately as Uncle Joe, and around the world his name was mentioned in the same breath as those of Roosevelt and Churchill. But today you will be hard-pressed to find a statue of Stalin anywhere in the former Soviet Union, other than in his hometown.

“After Stalin, there followed a series of unelected despots who had sheltered in his shadow for years: Khrushchev, Kosygin, Brezhnev, Andropov, and Chernenko, all of whom clung on to power until they died or were forcibly removed from office. And then suddenly, almost without warning, that all changed overnight when Mikhail Gorbachev appeared on the scene and announced the birth of glasnost. A simple translation being, the policy or practice of more open consultative government and a wider dissemination of information.

“From March 1990, when Gorbachev became the first elected president of the Soviet Union, the country began to change rapidly, and for the first time entrepreneurs were able to operate without the restrictions of a centralized command economy.

“However, the people who oversaw this transformation were the same gang of thugs who’d run the old regime. How would you feel if the leader of the Communist Party in America was handed the keys to Fort Knox? And this despite the fact that the Soviet Union had one of the finest educational systems in the world, that is, if you wanted to be a philosopher, or a poet, but not if you wanted to be a businessman. In those days you had a better chance of studying Sanskrit at Moscow University than of finding your way around a balance sheet.

“Russia has twenty-four percent of the world’s gas reserves, twelve percent of its oil, and more timber than any other nation on earth. But while the average worker may no longer consider himself a comrade, he is still earning less than the equivalent of fifteen dollars a week, and few people are paid more than fifty thousand a year. Less than my secretary. So the transition from Communism to capitalism was never going to be easy.