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Oleg Tinkov «I’m Just Like Anyone Else» (published in 2010; full text in English)

Dedicated to my father, Yury Timofeyevich Tinkov (1937‑2002), miner in the Kuznetsk Basin and to Rina Vosman’s father, Valentin Avgustovich Vosman (1935‑2006), Estonian miner

Just like anyone else

Dear reader, this book has been written from my heart and soul. I don’t mean to tell you what to do or to show off, but to tell you the story of my journey of the last 42 years.

Those of us who were born between the end of the 1960s and the start of the 1970s are very fortunate. Our time fell within a time of revolution—on the boundary between socialism and capitalism. I’d like to use my biography to give an account of this dramatic period in our country’s history. This book is not meant to be educational, then; you would be mistaken to see it as such. I had no such goal in writing it.

But to him who has ears: let him hear. I’ll be happy if my experiences are helpful too. Smart people always learn from the mistakes of others; they seek out what other people’s lives have to offer. Please learn, then, and find answers to your questions.

I repeat, though: this isn’t a book on how to create a successful business. It’s not a self-help book and it isn’t a set of teachings—it’s just my life described.

Oleg Tinkov

 

I initially agreed to write this blurb for Oleg’s book because I like him and his family enormously. Having read it I can see how useful it would be for aspiring entrepreneurs in Russia to read. Here’s a man who literally built an empire from scratch without the help of handouts from Russian residents or family! He shows the way for the new entrepreneurs of the future!

Richard Branson, Virgin

From the Editor

When I was working as a journalist in St. Petersburg, I covered financial topics only. Thus my work never brought me into contact with Oleg Tinkov, who was an electronics salesman, frozen food producer, and owner of a restaurant on Kazanskaya Street. Sometime around 1995, however, I was made aware of this ambitious businessman and was amazed at how rapidly he was changing the game.

In 2002, I moved to Moscow and began working as Editor in Chief for Finance magazine. Having made its entry into the financial markets, the company Tinkoff now posed a business-related interest. This restaurant chain, with nine million dollars in revenue, had somehow managed to release 13 million in stock, with the goal of expanding its bottled-beer production. Hype was built up through the company’s ingenious advertising campaign—with the slogan “One of a kind”. I began to follow Oleg’s actions closely and in early 2004 asked him for an interview. He agreed, and that’s how we met.

At this point Oleg was already involved in what he refers to, in this book, as “speculation.” He began construction on a large brewery. The beer market was already fully saturated, however, and so not an easy place for a small player to stay alive. At the same time there were powerful players that would be able to buy out a new factory. What if they didn’t buy? Intriguing. I was interested to see what Oleg Tinkov would do next.

When I found out in 2005 that Tinkov had sold his company to Belgian InBev for over 200 million dollars, I immediately thought that the history of such a success was worthy of a book. At that time Oleg was busy with his cycling team and, in 2006, he told be he was starting a bank, Tinkoff Credit Systems. His business model was an original one. At that time there were no exclusively Russian credit card companies. To be honest, I didn’t believe the project would be a success (you can’t be successful every time you enter a new market). The fact remains, however, that by 2009 the bank’s net profit had reached nearly 20 million dollars.

In 2007, I offered Oleg a weekly column in Finance magazine. He agreed to write it. At the same time I reminded Oleg about the book idea. I even sent him a first paragraph: “On the 14th of September, Oleg Tinkov came back from a two-month international tour where he had enjoyed his status as the owner of a cycling team. When he arrived at his office, the first thing he did was go to the massive aquarium by reception to find out how his fish were doing. He was sad to discover that one of the babies had been eaten by one of the larger fish. There were still grounds for optimism, though: after all, the rest of the babies had reached maturity and this meant their safety was now all but secured. Tinkoff Credit Systems was like a little fish in the credit card market.”

After reading the paragraph, Oleg commented that it was an “intriguing opening,” but said that he wasn’t worthy of a book yet. If, somehow, he should sell the bank for a billion dollars, then that would merit a book. There is no point in writing about a businessman without his participation in the project: there could be little exclusive material. Appreciation goes to Virgin founder Richard Branson who, on more than one occasion, pushed Oleg to write his autobiography. One way or another, in the summer of 2009, Oleg saw the light. By the end of August, in the first instance by asking for my help, he had started working on the book. Six months later work drew to a close and in March we submitted I’m Just Like Anyone Else for publication. Here it is. I’m sure that every reader will find something of value in it.

Oleg Anisimov

Oleg Tinkov and Oleg Anisimov working on I’m Just Like Anyone Else on the island of Elba

Chapter 1

Between the Beer and the Bank

I spent the summer of 2005 happy as a puppy, in Tuscany, cycling and relaxing. I felt pretty pleasant—removed from it all—as I had just sold my Tinkoff beer business to the Belgian company InBev for 260 million dollars. At 37, I had become a true multimillionaire.

My life offered an interesting vantage point on the evolution of Russian consciousness. When I sold my Tekhnoshok chain of stores in 1998 and my Darya business in 2002, people felt sorry for me. It was as though the sales meant I lost the businesses and that, therefore, I was a loser. When I closed the Tinkoff deal, however, I was praised. This was a sign of rapid evolution in the business world: people now realized that selling your business can be cool. Fortunately, I understood this 10 years before everyone else did. I knew that there is nothing like selling. It’s the only thing that puts your business, your investments, and your talent into monetary terms. And it provides you with both the time and the resources to get started on something new.

After our vacation on Italy’s Tyrrhenian Sea we returned to Moscow. Next, our whole household, nanny included, packed our things and took a Lufthansa flight to San Francisco. Our destination was our home in Marine County, which is made up of a dozen or so small towns just on the far side of the famous Golden Gate Bridge.

In terms of infrastructure this is the best place in the world. Downtown San Francisco is only twenty minutes away. At the same time, however, you’re basically living in the forest with deer nearby. The schools are amazing—and I’m talking about the public schools, not the private ones. My eldest son Pasha went to first grade, and my daughter Dasha started seventh grade at the most ordinary of public schools in Mill Valley. The town is well-known as the birthplace of Timothy Leary, the famous LSD enthusiast, and although my feelings towards drugs are negative, the fact is worthy of note.

I like to spend a year in America once every five years (at least this has usually been the case in my life). The children go to local school and spend time with their peers; I look for new ideas and enjoy the freedoms, so to speak, that America has to offer. To tell the truth, it only takes about a year for me to get tired of it—there’s an awful lot of stupidity in America. The country has a few things in common with the Soviet Union. Its best features are worthy of detailed study and analysis, beyond anything that I can provide in this book.

America has an interesting array of people and a fascinating mindset and it is a very good place for learning about life and business. Of course, I’m not talking about a two-week trip, but rather a longer period—a year or two. Things are starting to change, but in the nineties, many successful people in Russia, from those in show business to entrepreneurs, were connected in one way or another to the States and came from there. Some examples from show business include Alexander Gordon, Vladimir Solovyov, Tatyana Tolstaya and Oxana Pushkina. Many Russian businesses, such as Don-Story, Unimilk, and Wimm-Bill-Dann, are connected to people who lived in the States and who, upon their return, were able to successfully conduct business in Russia. It was in America that their first steps were taken.

The statements that follow may seem ungrounded; they constitute my own opinion. America has the highest level of competition of any country. And it’s the only country where business has been elevated to the level of a science. In Russia, we have sociology, political science, physics, and math; in America, they have another science—business. There are massive universities, faculties, schools, and colleges where business is approached from a scientific viewpoint. For this reason competing with American businessmen proves a great challenge indeed. They are the most aggressive, strongest, and at times the most cynical of them all, but they are very effective in their work. They get what they want. They are capable of sharing and of coming to compromises, but they do so with only one goal in mind: to make more money.

In America, business is gutted, cleaned, and sorted. This is partially due to the American mindset and Protestantism, but it is also a result of the way the nation is structured. Our early education involves counting apples, but little Americans learn their numbers in dollars and cents. Everything boils down to money and its accumulation. There is a deep understanding that if you have no money, you’re a loser, and that if you do, then you and your family are doing well. This is what the American dream boils down to.

At the same time the Americans have managed to create a society where businesspeople don’t just talk about their social responsibility; they take an active stance on the latter. They cannot be bought by a phone call from the Kremlin; rather, they do as their hearts lead them to do. Feel the difference!

In general, Americans make interesting and shrewd businesspeople. This may not apply to all of them, but it is true as a general guideline. Due to the recent crisis, however, capitalism has suffered more and more attacks. Every couple of days, people on the radio and television remind us of Marx’s claim (I’m not sure he actually said this) that any businessman is willing to commit a crime to double his profits and willing to kill in order to triple them. It may be true that nineteenth-century mores were much baser, and society less civilized than it is today, but the businessmen of today display high moral standards.

Is it profitable to invest in Russia? Yes, of course! Would it be more profitable than investing in India, China, or Brazil—not to mention Europe? Yes, probably. You could earn twice as much in Russia than in these other places, but a number of American businesspeople feel that the rules of the game that have become established here are incompatible with their social and religious convictions. They have been brought up differently and how they live their lives is different. They feel no need for the extreme profit margins—which helps us answer the question of whether a capitalist is indeed capable of a crime to double his profits. The answer is: not always, by any means. One of America’s richest businessmen, for example, the deeply rational Warren Buffet, would not be.

In America I prefer to hang out with Russians and other expatriates, because it’s hard for us to understand Americans. They are strange people. Immigrants try to stick together. My neighbor John, an Australian, helped me to hook up my home phone. Within a week of our arrival, without having to leave the house, I had opened a bank account, got my TV working, set up insurance policies, connected to the Internet, enrolled my children in school, and bought a car at a nearby dealership. The paperwork was all done over the phone, quickly. This was the land of the telephone!

But don’t think that all I did was play sports and mess around. My main focus was to get a new business up and running. My thoughts were drawn to the idea of a credit card business, and it was in America that this notion was born.

I had been in every database since 1993, when I first came to America and bought a house in Santa Rosa. There is no privacy or secrecy once you’ve filled out a form for a purchase or in order to get something for free, be it diapers or ballpoint pens. It’s not surprising that you start getting mail as soon as you provide someone with your personal information. There is nothing strange or unlawful about it. The form usually states that by default you are releasing your personal information for transfer to third parties. Sometimes you don’t even notice it. This is how your information gets out there, into the world.

The same thing happened to me. After I bought the house, I began getting letters personally addressed to Oleg Tinkov, 21 Little River Avenue. In particular, I was bombarded with credit card offers. I got a couple and started to think that this would be a good idea for Russia, a massive country just like the U.S.. Russia’s roads and airports may be sub-par, but you can send mail anywhere. Sending offers to clients through the mail! This was not a bad idea that had come into my head.

When I was studying marketing at Berkeley in 1999, I started to become more interested in how the system worked. Of course I realized that in order to open a bank I would have to have a huge sum of money and, in this respect, I didn’t picture myself as a banker.

Having sold my beer business, however, I found myself in a position where I had enough liquidity to turn my dream of opening a bank into a reality. I’ve always revered banks. Walking by, you see a massive building, and imagine the safe inside, full of cash, and you’re moved. When I talked to bank owners and clerks, trying to get business development loans, I always wondered what it would be like if the tables were turned. Were they really that smart? Not really; they were just like me. But for some reason it was they who were giving me money and not the other way around. On top of that, it wasn’t even their money; they were attracting it from someplace. I thought about it for a while and decided that things needed to change, that I should be the one lending the money.

Everything came together: my desire to be a banker, on the one hand, and my love of plastic, on the other. Some uninformed people now accuse me of copying Russian Standard Bank. I hope Rustam Tariko reads this book (or this page, at least). He can confirm the accuracy of my next story. It happened in 2004, one of the times we met at my office. He had come to discuss selling his company’s vodka in our restaurants. The purchasing departments at our restaurants wouldn’t accept his offers and he was ambitious, keen to get what he wanted. The Tinkoff chain in Moscow and in the regions was made up of some of Russia’s leading restaurants, and he wanted to know why he was not allowed in.

Rustam and I quickly came to an agreement with respect to selling his vodka. After all, he is a rational and competent businessman. There has been talk that he foolishly gets himself into trouble, along with other negative publicity. As for me, I know him well and greatly respect his business talents. His lifestyle and love of luxury and glamour do not correspond to my values, but that is his private life and has no bearing on his effectiveness as a businessman. It is possible that he is one of the smartest businessmen in Russia. He, along with Andrei Rogachov, Sergei Galitsky, and a couple others conceived of business ventures that are now worth billions of dollars and created these from the ground up.

During that meeting I said:

“Rustam, why don’t you start making plastic cards? It would be fantastic! It’s profitable, simple, and sexy. What’s the point of these consumer loans stores are giving out?”

“What makes you think we don’t make them? I have three million bank cards.”

“Are you kidding? I’ve never seen any. How come I don’t have even one?”

“Oleg, you aren’t part of the target market for my credit cards. We need people a little poorer than you,” joked Rustam.

“You know, the credit card business is really neat. I’ve watched Americans using them for a long time, and wouldn’t mind getting into it myself.”

“Yes, it’s a serious business, but it would require major investments in both infrastructure and loans.”

“Well, we’ll see. Once I’m done building the brewery works, maybe I’ll sell them…”

The subject was dropped. Now I understand how funny I must have looked then and what sorts of things must have been going through Rustam’s head. At least I found out that Rustam wasn’t just giving out consumer loans at stores, though, but also offering credit cards—and also that he was working in the sub-prime market, that is, with the most ordinary of people.

The scheme he followed was simple: if a person took out a loan at Russian Standard for a fridge or TV and paid it back, the bank would issue a credit card in the client’s name and send it to the person in the mail. The client would then make his or her own decision whether or not to activate the card. Of course a large percentage of the cards were unwanted and a lot of people felt the bank was pressuring them. After all, they hadn’t asked, themselves, for the card to be sent. Some, however, liked the fact that the bank had sent them the card and that it was left up to the customer whether it would be put to use: if you don’t want to use it, don’t activate the card—it is your choice.

Naturally, I analyzed the experiences of Russian Standard as well as Home Credit Bank and decided that my bank’s distribution model would be different, closer to what’s done in America.

* * *

Early in the Autumn of 2005, I met with Stephan Dertnig, chief at the Moscow office of Boston Consulting Group, and asked him to do a feasibility study examining how realistic it would be to turn my idea into an operating business. The document cost several hundred thousand dollars. It embodied a very thorough approach to the analysis, however, since I was potentially going to invest tens of millions in the proposed venture. I asked Stephan to develop a concept and to offer an answer to the question whether it would it be possible to market credit cards, directly, in Russia.

In November, Stephan traveled to San Francisco to present the final version of the study. Along with Alex Koretsky, a Russian American from San Francisco, I came to a classy hotel in downtown San Francisco and listened to what Stefan had to say. Should the venture be undertaken? Stefan’s presentation offered a solid “yes.” What had to be done in order to get things under way, however, was not really discussed.

I already had some sense of the matter though. Not long before, we had met with MasterCard’s Russian head, Andrei Korolyov, and Visa’s top representative, Lou Naumovsky. They told us they were ready to work with a new bank. Korolyov gave us the contact information for MasterCard Advisors, the department responsible for helping banks with technology and with setting up a credit card IT platform.

Everything was coming together. I could see that this business was a real possibility. I took some of the key staff members from my beer business for a week-long trip to Necker Island, which is owned by Richard Branson, founder of the Virgin brand. All of the Tinkoff people who were working in my restaurant chain, temporarily, following the sale of my beer business were there. Unfortunately, I had not been able to sell the chain to the Belgians. In essence, I was paying my staff in order to keep the team together, which I continued to do for a year and a half so as not to lose valuable human resources. Ultimately, however, I could not offer a job in the bank to some of the good folks who had worked in my beer business, although I provided a bridge for some of them to continue working in their respective fields. These included Regional Sales Manager Stanislav Podolsky, Advertising Manager Mikhail Gorbuntsov, Logistics Manager Igor Belov (who was later in charge of the construction of the Graf Orlov complex on Moskovsky Prospect in St. Petersburg), and production worker Andrei Mezgiryov. All of us were on Necker together. The trip served as an additional bonus for excellent work in the beer industry. We spent the whole week having fun and goofing off. On the very last day, however, I asked for a projector, set it up on a table, pointed it at the wall, and started going through the report from Boston Consulting Group, with commentary as needed.

I asked those present if they believed in the idea, and all of them said they did. In the end we all shook hands, there at the table, drank some rum, and decided that my next business would be in credit cards.

When Rustam Tariko flew to San Francisco in his Boeing I gave him a frank account of my decision. I took him to the wonderful Mihael Mina Restaurant in The Westin St. Francis hotel at Union Square.

“Rustam, I’ve decided to start a credit card bank…”

“Are you sure? You’re getting yourself involved in a serious fight. It’s a complicated technology business.”

“Well what else can I do? I fear new developments may destroy the real estate market [which is probably what happened – O.T.]. I have another idea. It would involve building an oil processing plant near the border and exporting gasoline. But we’d need a lot of money and the industry is very politicized. You know I’m not one to get involved with politics. Vodka might be another possibility, but I’m tired of the consumer market after the beer and Daria.”

Rustam paused to reflect before saying,

“When I first started working on the bank I met with Mikhail Freedman [chief at Alpha-Group – O.T.] and he asked me,

‘What do you think you’re doing? This is big business. There’s no place for you here.’

Now my share of the consumer loan market is several times larger than Alpha-Bank’s, and my credit card business is at least ten times larger than theirs.”

“Listen, Rustam, you were just trying to talk me out of it—and then suddenly you’re talking about Freedman. What makes you think I won’t be able to do it?”

“Oleg, it’s your decision. Give it a shot! But you should know that it won’t be easy.”

I think that Rustam just didn’t fully believe I would actually start the project. Maybe he still doesn’t believe in what I’m doing. Nevertheless, I can say that a little while later, in 2009, his bank suffered losses, while my bank’s profit exceeded 18 million dollars.

Funnier still, was a conversation I had with Mikhail Freedman. Alexander Kosyanenko, the General Director of Perekryostok, the grocery store chain, had invited me to his company’s ten-year anniversary. It was there that I bumped into Mr. Freedman. All the managers of Perekryostok sat with us at the table. I shared my idea concerning the credit card bank.

“I’ve been thinking about opening a bank like Capital One in Russia for a long time,” was the reply given by the Chairman of the Board of Directors of Perekryostok, Lev Khasis.

“It’s a fine idea, but it would need some thorough reworking,” added Mikhail Freedman.

“There’s just one thing I’m unsure about. If the bank doesn’t have any branches, how will people pay them off?” I asked.

“What’s the post office for? They can pay at the post office.”

I think that deep down Mikhail Freedman didn’t believe in me either. I had never worked in the financial industry. How was I to compete with Alpha-Bank, which had been established in 1990?

But it wasn’t as though this was the first time my ideas had been met with skepticism. “What are you thinking? You’re too late. The market’s completely saturated with experienced professionals. You’re being ridiculous.” I had heard these words every time I had started a new business. It is what I heard when I was opening Tekhnoshok, Daria, the Tinkoff restaurants and breweries, and when I was starting up Tinkoff Credit Systems too. But conversations like these just left me more excited. I love achieving what others think impossible. At the same time, though, I don’t consider myself more gifted than anyone else.

I’m just like anyone else. If you don’t believe me, listen to the story of my childhood.

This is what a person who has just sold his beer company for 260 million dollars looks like. Here I am in San Francisco in 2005 with the Golden Gate Bridge in the background.

Chapter 2

The Tinkov Homestead in Leninsk-Kuznetsky

The Tinkov family is descended from nobility who lived near Tambov. There is still a village in the area called Tinkovo. I even managed to find my family’s coat of arms in the St. Petersburg Public Library. My grandparents, escaping political repression during the dekulakization period, or because of the famine, perhaps, boarded a train and left their home in 1921. They disembarked at Kolchugino Station (as Leninsk-Kuznetsky was then known) and settled there. When my grandfather Timofey started working in the mines he was provided with housing—half of a cabin, that is, thirty-two square meters in house #16 on Kooperativnaya Street, 300 meters from the mine.

It was in this house that my father, Yury Timofeyevich Tinkov, was born in 1937, the second youngest of eight brothers and sisters. The eldest, Vasily Timofeyevich, was 15 years older than my father. He manned a tank in the war and is still alive, thank God. After the elder brothers had grown up and married, they began moving their wives into the cabin too. They had to sleep on bunk beds so that everyone would fit. As though this weren’t enough, they started having children. In these Tinkov breeding grounds three generations were born. In time, the family members went their separate ways. But my father remained to live in the cabin.

My grandfather spent his entire life working in the mines. In 1953, he died of acute poisonous gas inhalation after helping to put out a fire.

My mother’s parents were also nobility. They moved from the Far East, from close to Samara, to Khabarovsk Krai. It was there, in 1938, in the city of Dalneperechensk (known as Iman, prior to 1972), that my mother was born. The family had three daughters and no sons. My grandmother was a capable seamstress. She also kept a farm with a cow and some pigs. My maternal grandfather, Volodya, served as Building Superintendent in Iman during World War II. Afterwards he ran a sawmill. Vladimir Petrovich, as they called him, was feared and respected by all. They say I look like him. He passed away not so long ago, in 2001. A portrait of Stalin hung above his bed until the day he died. It always made me feel a little uncomfortable, but I loved my grandpa.

In 1966, my mother, Valentina Vladimirovna, made a trip to Leninsk-Kuznetsky, to visit her sister Nina. She met my father there. So my mother remained there with her eldest son Yura.

As one of my favorite poets, Vladimir Vysotsky, once sang, “I’m not quite sure of the hour I was conceived”. I do know, however, that I was born at 2:45 p.m. on December 25, 1967. I weighed 4 kilograms. The maternity clinic was 15 kilometers away from Leninsk-Kuznetsky, in Polysayevo. That’s where I was born, although my passport says I was born in the city of Leninsk-Kuznetsky, in Kemerovo Province—which is where I spent the first 18 years of my life, in any case.

Leninsk-Kuznetsky was a typical Soviet-era industrial city. In 1928 the Communists began to enact their policy of industrialization and for that you had to have coal. Coal was required, not just for energy production (the Russian State Electrification Plan was already well underway), but also for metallurgy and railroad-construction. The Kuznetsk Basin field became a prime focus. The first mine in Leninsk-Kuznetsky was commissioned on November 7, 1931. Komsomolets Mine was opened in 1933 and Kirov Mine, where my father worked his entire life, in 1935.

My father was a very bright man. Both of his older brothers, Uncle Vasya and Uncle Vanya, held degrees and lived quite comfortably. Also wanting an education, my dad spent two years studying at Tomsk University. With a family came the need to make money, however, and he went to work at the mines in the transport section. His job was to operate the wagon dump, a machine used to unload coal coming in from the backwall. Father retired from the mine when he was 50 years old, following an accident where he suffered a head injury. Two of his friends died.

This turn of events ended in Yury Timofeyevich’s untimely death from a stroke in 2002. He was a month shy of his 65th birthday.

I’ll be ever grateful to my father for giving me my main character traits. He taught me to be honest and to be myself, straightforward and resilient. He also taught me to love freedom and to hate totalitarianism in all its forms.

For a miner he was very sophisticated and articulate, an intellectual. After all, he was descended from blue blood. His genes showed! From the time I was a child, my father implanted in me a hatred of the establishment. Even relative to the current regime in Russia, I remain a nonconformist. And I don’t like what’s been going on around us, especially the recent movement to reinstate the USSR.

I remember the 26th Convention of the Communist Party of the Soviet Union well. It was in 1981 and it was the last convention of Leonid Brezhnev’s tenure. In Siberia there was only one channel, Channel One, and to get Channel Two you had to hook up a special, enormous antenna. From morning to night all that was broadcast on the only available channel was Brezhnev and the 26th Convention. Mother turned on the television and Dad pulled out the cord.

“Enough listening to this nonsense!” he exclaimed.

The sun was setting on Communism.

* * *

Thanks to my Father, I was raised with ill feelings towards the Soviet government. Nevertheless, in the eighth grade I was accepted into the Young Communist League. I started at the very bottom of the ranks as a good for nothing. I couldn’t have cared less. I recognized that it was all a sham. My thinking with regard to Communism was fairly lucid. I wrote an application letter to the Communist Party while in the army for the sole purpose of becoming a warrant officer. (Thank God, I changed my mind afterwards, but more on that later.) The story was different when it came to the Pioneers, the Communist government’s children’s organization. It was in an atmosphere of great celebration that they tied the scarf around my neck and pinned the badge to my shirt. I was quite worried when it took me two attempts before I was accepted.

My father, unlike most in the Soviet Union, loved America. He was a miner from a city of 130,000 and had never been abroad. He had only been to Moscow and Leningrad. He called America a “good country.” For him this love was a kind of protest. According to what was always said on television, it was a bad place, but he claimed it was good. In 2001 I completed my mission and brought my 65-year-old father to this country. As it turned out, this was shortly before his death. He lived for a month in California. He was not doing well at the time and was a bit depressed. Of course he liked America, but his emotions didn’t appear to be that strong.

Many of my positive qualities were developed in me by my father. My Pa means everything to me! Of course my involvement in sports and my education at the Mining Institute also had their impact. But it was my father who laid the foundation for how I see myself today. He always pressed me to be constructive and to respect others in order to become an upstanding member of society.

I was not instilled with any special values; nor did my parents carry on philosophical conversations with me. We weren’t even a reading family. My mother didn’t read at all and my father would only read periodicals. He liked the newspapers Trud and Sovyetsky Sport. He listened to Mayak (“Lighthouse”) Radio and followed sports news in particular, since he had played basketball in the past.

An unquestionable authority in our family was Grandma Senya, my father’s mom, whose full was name Xenia Tinkova. She was a unique woman. In addition to my father and his seven siblings, she gave birth to several other children who passed away. This was in the twenties and thirties, after all, and medical science was still underdeveloped.

Calling me a heretic, Grandma Senya tried to get me involved in the Orthodox Church. It was only when I was twenty and had moved to Leningrad that I began to think seriously about it and was baptized.

Grandma Senya taught me important life lessons:

“You little dummy. Who puts their sugar in the cup?”

“What are you talking about, Grandma Senya?”

“You should eat bits of sugar while you drink. That’s the only way to smell and taste it.”

When she was young, sugar was the only delicacy available and people tried to savor it. People today are worried about how to lose weight; in those days, the problem was different. People were preoccupied with their survival. I was reminded of this when I was in the army. Shortly after we had been drafted we were spreading butter on our bread and the dischargees laughed at us:

“What kind of person eats like that?” After a couple of weeks we understood them perfectly and found ourselves dipping frozen pieces of meat in salt and eating it without bread so as to taste it better. Until the day that I was discharged, twenty-three and a half months later, I never spread butter on my bread. If you served in the army, you’ll know what I’m talking about.

Grandma Senya stocked up on bags of salt, grain, and peas and kept them hidden in the house. This was surprising to me:

“Grandma Senya, why are you hiding those?”

“You’d be hiding some too, if you’d been through a famine.”

Grandma and Grandpa were alive in the twenties, during the civil war. It was a time of great hunger. Grandma Senya died in the winter of 1980. As a twelve-year-old, I was astonished by the funeral, with the incense wafting from the censer, and by the prayers.

My mother, Valentina Vladimirovna, worked as a seamstress at the local tailor’s shop, sewing and ironing. She led a prudent life. Now she’s over seventy and in good health; she remains active and looks her age. I inherited limitless energy and the seeds of my entrepreneurial qualities from my mother: even during Soviet times she tried to make extra money by doing sewing work from home.

For my parents, discipline and routine meant everything. It was a well-established pattern in our family that I would be home by 9 o’clock in the evening, when the TV programme Vremya started. My friends would laugh at me when I would stop playing and head home—even in the long days of the Siberian summer. This was what we called “making a break for home.” We played hide-and-seek. We fought battles with machine guns cut out of wooden panels. We would play soccer in the middle of the street, in the dirt, sometimes with no shoes on. Each of us got only one pair of sneakers for the season and these quickly wore out if they were not torn in half first.

“Mom, why do you come to get me to go home? None of the other children’s parents look for them and it’s embarrassing!”

“I feel better that way. You never know what could happen…”

I would go home, while my friends would keep playing soccer till midnight. Who knows what they did afterwards? As for me, I never hung around. Indeed, it was unheard of for me to spend the night away from home. Only when I was 18 and about to start military service did I finally do so. The first time my parents let me ring in the New Year at a friend’s place was when I was in sixth grade and 16 years old.

I’m very grateful to my parents for all that they invested in me. After all, I grew up in a depressing part of the country. Many of my neighbors were in prison; some remain there to this day. The people I lived among were miners and former inmates and you’d often find them drunk and stoned. After spending time with such people, the St. Petersburg gangsters in their tracksuits seemed like pathetic caricatures.

The Siberian environment is harsh and there are very strict cultural norms to follow. Say the wrong thing and you might get hit. The rules to which one had to adhere came close to what is demanded in prison. There are three penitentiaries around Leninsk-Kuznetsky, two for adults and one for juveniles. This fact left its mark on the city—to the point where, in Leninsk, it’s shameful to call the police. You have to be able to resolve issues on your own, otherwise you will lose respect. You have to be a real man. You have to put your money where your mouth is. I’m still in the habit of not making extra promises.

Many people still remember the infamous scandal involving the mayor of Leninsk-Kuznetsky, Gennady Konyakhin. (Konyakhin and I went to the same school—No. 33.) There was a lot in the press and on the news saying gangsters had taken over the city. The magazine Izvestiya called its publication on this matter the Bullheaded Times. President Boris Yeltsin fired the mayor himself.

The eighties saw a rise in street fighting, neighborhood against neighborhood, both in Leninsk as well as in other cities throughout the USSR. Compared to the mass fighting in Kazan, the fights in Leninsk were not quite as bloody and got less coverage. Nevertheless, there were a few dozen guys per side. Sticks, knives, and metal bars were the weapons of choice. The teenagers injured and sometimes killed one another. An eighth grade classmate, for instance, was shot through the leg. Sometimes you’d wake up in the morning and the fence outside would be missing, the stakes pulled out during the night to be used in the fights. There was even an article (The Sweater Thieves) in the Komsmolskaya Pravda about these bloody fights in Leninsk-Kuznetsky.

The park where the municipal discotheque was held was in District 4. If anyone came from a different neighborhood, they’d be beaten up because they were in the minority. Central kids weren’t allowed to go there and neither were the Bazaar kids (of which I was one). I did go to the disco a couple of times. On the first occasion I had to run away though; on the second I got my head smashed in. I tried to avoid showing my face there after that. I’ve never been one to pick a fight—neither on the streets, then, nor in business, now. My experiences in Leninsk gave me a sense of where I ought not to go and a sense of when I ought not to go there.

One day, for example, I went ice-skating at the stadium. These huge punks came up to me. One of them asked,

“Where are you from?”

“From the Bazaar.”

“I see. You’re from the Bazaar.”

Then he socked me in the face.

I fell flat on the ice, blood gushing from my nose. To make a long story short: they beat the crap out of me. I couldn’t run away in the skates and I couldn’t hit those big losers back. What was I to do? I packed up my skates and went home. I never went back there, but instead skated exclusively at my local stadium next to Kirov Mine.

After I finished eighth grade, I changed schools, enrolling at School No. 2 in another part of town. But things got so bad there that I had to switch schools again. I could not study at all because of the emotional and physical torment. Why were they doing this?

Still, these experiences made my self-preservation instinct what it is today. On the one hand, given what I suffered, I’m not afraid of anyone. On the other hand, nowadays, I can see gangsters or tough guys from afar and know exactly how to maneuver away from them.

When people tell me that the Soviet era was a good time, I can’t help but smirk. This is because I remember all the bullshit—and I remember it well. What was good about those times? Maybe you could make a case if you were talking about Moscow or Leningrad—but in our city it was neighborhood against neighborhood, stolen clothes, ex-cons, crime lords, fights, and murder.

The mass fighting stopped in the late eighties, as drugs became more widespread. Getting high brought people together; it rendered them friends and brothers. At first, grass started to circulate; later on, heroin came on the market. In the early nineties, a lot of my peers and some younger kids died. They say that the youth of today saw what was going on back then and are afraid of drugs. From what I can tell, though, drug abuse remains a serious problem.

Strange things were always happening in Leninsk. People would go missing on a regular basis (and still do). When my parents lived in Polysayevo and I was serving in the army, their neighbor’s husband Slava disappeared. The last that anyone saw of him was one day in Kuznetsk Mine. He was gone, after that, for two weeks. As it turned out, three of the miners were standing at the bus stop, waiting for their bus, which was late. A car drove up and three jock types jumped out. They shoved the miners inside and drove away. The three were taken into the wilderness where they were made to do slave labor, hauling cement, bootlegging vodka, and making marijuana products. Somehow Slava managed to escape. Making his way home, he would walk only at night, hiding out during the day. He returned two weeks after his disappearance, all scraped up, wearing clothes he had found in a dumpster. Before he could get inside his apartment he collapsed from exhaustion in front of the elevator.

In the eighties fat women started to go missing. The public said they we were being cut up for ravioli. There was a serial killer in our town too. During the day he worked in the mines; by night he would kill young women in the park.

Our neighbors in the duplex were constantly getting drunk. At night, arguments would develop into screaming matches. Once, as I was falling asleep, I could hear fighting on the other side of the wall—the usual. In the morning, we found out that our neighbor had killed his wife, Auntie Valya. When the police came, I looked in the room. She was still lying on the bed with a knife sticking out of her. My neighbor was sentenced to prison and his son became a virtual orphan.

It is scary to think about it, but a significant number of my childhood classmates have passed away. Some of them died in jail, others were murdered, and still others drank themselves to death. Strict discipline, routine, and sport were my salvation. Now I’m trying to raise my kids the same way. God forbid they should ever know what it is like to lose their freedom. My daughter Daria is 16; I never let her stay over at her girlfriends’ places, even though she asks.

Of course, I tried to do things my parents did not allow me to do. I tried alcohol for the first time in the eighth grade, at a party on March 8—Women’s Day. I was with my friends Slava Zuyov (who died from pneumonia in 2009) and Misha Artamanov (who was shot five years ago under stupid circumstances on a hunting trip). We drank a bottle of Cahors wine and went to the disco to dance with girls. As though puking all night wasn’t enough, my dad beat me with his belt for disobeying. My classmates, on the other hand, came home drunk and their parents closed their eyes to it.

Later, when I was in the ninth and tenth grades, I drank, of course, but rarely. And I always kept it a secret from my parents. At the same time, though, I was getting into cycling—and sports and alcohol, as you know, are incompatible. Although I messed around with booze that last year before military training, it was mostly out of boredom. We would chip in and buy a bottle of wine for 3 rubles 42 kopeks—or sometimes vodka—and would sit drinking it in the playhouse outside the daycare.

My father almost never drank and I guess he passed those genes on to me. I like to relax with a drink, but I wouldn’t do so more than once or twice a month, to be honest. Large amounts of alcohol make me sick, just like my dad.

In the summer the boys and I would go swimming in Inya creek, a tributary of the Ob river. It was against my parents’ rules, so I had to dry my hair and take measures to prevent them from finding out. Sometimes, though, they figured it out nevertheless and would punish me. But really there was nothing to worry about. We had a blast, daring each other to jump off rocks and cliffs three or four meters high. The creek was small and you had to come straight back out of the water as soon as you dove in if you didn’t want to break your neck. It is true that a lot of people drowned there, so my parents’ worries were not completely unfounded. Now, at least, I can dive head first, five meters down off a yacht with no problem!

One day I smoked a little, and when I came home I smelled like smoke. Once again dad got out his belt. This was a common punishment in our family.

A belt is a handy thing. My father’s was brown and hung in his wardrobe. I was whipped a lot. The worst part was the buckle. It was only when I was 16 or 17 and getting bigger that I grabbed the belt and stopped him from hitting me—and my dad ended the practice.

I feel no resentment towards my father. No, I am thankful for what he taught me. Otherwise I would not have made it, considering what was going on around me as a child. Everything you are comes from your family, from how you were raised. We Tinkovs stood apart. My parents made their living honestly and were not drinkers and this gave me a strong foundation. Up until I left for the army, my parents kept me on a tight leash. I had no choice but to behave myself.

I’m almost three in this 1970 photo. At that time, Leonid Brezhnev ruled the country, which would remain at a standstill for a long time afterwards.

From left to right: Marfa Yefanova, Timofey Vasilyevich, and Xenia Evstafyevna Tinkov (my grandparents); Evstafy and Anna Yefanov (my great grandparents) and Praskovya Yefanova

My grandfather Timofey Tinkov worked in the mines his whole life. He died in 1953 from inhaling poisonous gases while trying to put out a fire.

My father, Yury Timofeyevich, loved to read the newspaper Trud. Smokey the cat helped him with this.

This honor roll certificate from when I was in the first grade shows how well behaved I was. It was also the last time I made the honor roll.

My father and grandfather ruined their health in Kirov Mine

Valentina Vladimirovna, Oleg Tinkov’s mother:

Oleg was born on December 25, 1967, at 2:35 p.m., weighing 4 kilos. He was always a healthy, active, good boy. He started walking at nine and a half months. We enrolled him in preschool at two and a half. He sang songs there and played on spoons made of wood.

Oleg learned the letters of the alphabet from his older brother Yura. At five, he could read and count and even knew a few English words. The newspaper Leninsky Shakhtyor [Leninsk Miner] was published in the city and he would read lines from it.

Our eldest son would slack off at times. Oleg, on the other hand, always helped his mom and dad. I remember once when he was still a toddler, when we were renovating our home, we were building an embankment and we had to carry in bucketfuls of sand. Oleg got his toy dump truck and started hauling sand with us.

I raised my children with a firm hand. Who knows what would have become of them otherwise? At some level they may even have feared me.

My eldest, Yura, brought a friend over one day with some nuts and a little money.

“Mom, some idiots at the market left their spot and asked us to guard their nuts.” We carefully took 30 kopeks each, and when they came back they gave us some more money and these nuts,” he told me. I took the money and the nuts and brought everything back—we don’t need what doesn’t belong to us. I struck him on the hand then and there. Later, when Oleg and I came across an army belt lying on the ground with the name Slava inscribed on it, he told me, “Mom, it’s not ours, so we aren’t taking it.”

Vyacheslav Sitnikov, Oleg Tinkov’s neighbor:

I clearly remember an episode involving a swing. I must have been around five, so Oleg would have been four. My father had set up a swing in the courtyard. What a celebration! We would swing until we were sick to our stomachs and Oleg and I would always argue over who would go first. It got so serious that one day we got in a fight. It was a huge scandal. In the end my dad cut the ropes on the swing. You cannot imagine what it felt like looking at the frame where that breathtaking swing used to hang!

Oleg was stubborn from a young age and he always got his way. Apparently it was his stubbornness that helped him become what he is today. This is not surprising, given that he is a Siberian and that his character was hardened from the time he was a child. It gets really cold back home, but we’d run and play outside and not get sick.

Edward Sozinov, Oleg Tinkov’s friend from school:

Oleg started at our school when he had finished eighth grade. Consequently, we spent only the ninth and tenth grades together. We met through a fight. About what? Far from the Russian heartland, neighborhood brawls were constant. Those were tough times. It was better not to be seen in someone else’s neighborhood—you were bound to get beaten up. Oleg was not from around the school, so we bullied him, wanting to show the new kid who was boss. A meaningless fight—common enough among young people. We turned out to be one another’s worthy match. We remained close from that moment on.

It was clear then that Oleg was unique. Not your average cookie-cutter Joe. He stood apart from the crowd. He was well read, articulate, and it was always a pleasure to converse with him. At the same time he was in professional sports, even though athletes aren’t usually thought of as people who care much about intellectual development.

The quality of the education in districts like our District No. 10 was low. Because of this, we had to educate ourselves. If you liked to read, you would gain knowledge by reading books, newspapers, and magazines. If you did not enjoy reading, it meant you weren’t studying at school either, and that you were unlikely to succeed. Somehow I always knew Oleg would come up with something and succeed. It was clear his money situation would be in order.

Lidia Irincheyevna Baturova, Oleg Tinkov’s homeroom teacher:

Oleg lived in a small mining town. His wooden house was near Kirov Mine. In this town everyone’s life seemed to follow the same pattern. You were born into a family of miners, you grow up around miners, all you would see your whole life were miners—and so you were destined to become a miner yourself. And it is true that most of the city’s residents either worked in the mines or supported the mining industry by working in mechanical trades or as electricians. At that time the school operated on an extended daily schedule. Why does Oleg remember the first to eighth grades? This is because the kids were at school from 7:30 in the morning until 5:00 at night. They grew up as a team. They would go home only to change, spend some time with their parents, and sleep. School was truly their second home. The first half of the day was spent on lessons, while the second half was taken up by self-directed study, homework, and physical education. It was in school that the children would become independent and that their characters developed. There were 36 students in Oleg’s class: 20 boys and 16 girls. This class in particular was made up of good kids, interested in self-expression, self-determination, and in proving themselves to each other. In schools today, it’s different. One kid does the work and the rest copy it. In those days, each student would find his or her own solution to each problem, even in difficult subjects like physics. In class Oleg found it hard to sit still and could be a bit obnoxious, but he was not completely out of control. Or, well, sometimes you’d turn your head for a moment and he’d have hidden under the desk. He’d be pulling at the legs and spinning around and then he’d come up his hair in a mess. But strangely enough, he still knew all the answers. He would pick everything up on the fly, but he was no nerd. He never turned down an opportunity to participate in school events. The teachers treated him quite well, although, truth be told, they would at times compare Oleg to his older brother—with the latter winning out in these comparisons. I was his brother’s homeroom teacher as well. They have completely different personalities. Oleg may have had a short fuse, but he was forgiving. No one can remember him making digs at his schoolmates or hurting their feelings or acting spitefully.

Chapter 3

I was the “Poor Relation”

Our simple mining family lived humbly, but quite well by Leninsk standards. Most of the cabins housed eight families each, but ours only had two families. We also had a vegetable garden where we grew cucumbers, tomatoes, radishes, herbs, and the sweetest strawberries I have ever eaten.

We lived under normal conditions, but there were no amenities: no running water, no drainage system, and a wooden outhouse that stood 20 meters from the house. There was an entranceway near the door, with a hall and a pantry. Beyond this was a wardrobe. In the corner stood a washstand. We would pour water into it by hand. Below there was a dirty bucket to catch the drain-water. When the bucket was full we would dump it down the outhouse. The outhouse was a wooden structure with two receptacle holes. One for our family and the other for the neighbors. Everything died in the deep pit below, whether my secret notes, or the crap which, as far as I can recall, was never pumped out. I still can’t figure out where it all went. At night, especially in the winter when it was 30 degrees below zero—or colder—we would use the bucket from the washstand and cover it with a rug. Then in the morning it was my job to dump it in the outhouse before school.

Once a week my mother would heat some water on the stove so that I could wash my upper body. I did, however, bathe in a zinc tub until I was around twelve and could not fit in it any more. I would have a thorough washing at our neighbors’ sauna only about once per month.

The water pump was 100 meters from the house. We would fetch the water from there with two buckets attached to a yoke. It is possible that some of my younger readers do not know what a yoke is. It is a crossbeam that one would balance on one’s shoulders, with one bucket hanging from each end so as to distribute the weight evenly. At first it was my brother Yura who fetched the water; but then I did it too, once I got older. In my laziness, I would often complain that I wasn’t in the mood, but they forced me to do it. This was our drinking water—once it had been boiled.

The cabin consisted of a parlor and a kitchen, 20 and 12 meters long respectively. My brother and I slept in the kitchen by the stove on a wire-mesh bed with an iron frame, while our parents slept in the parlor. There was a table in the kitchen, as well as an old Soviet Biryusa refrigerator, which would rattle and hum loudly at night.

During the coldest winter nights, when temperatures would fall to minus 30 — 40 degrees, my brother and I would take turns getting up and stoking the fire with more coal. In the evening we would bring in enough from the coal shed to last for the whole night. We had to get up every hour so that the fire would not go out. We would sleep with our feet to the stove. It was warmer that way and quicker to throw in more coal. Like the other miners, my father was entitled to two truckloads of free heating coal per year. Once, when I took my children to visit Leninsk (it was summertime) my son Pasha saw a coal shed and was surprised. He could not figure out what it was for.

In the parlor there was a black-and-white glossy TV set, a table (in the center of the room), and a chest of drawers. The latter was also glossy and made at the local Leninsk-Kuznetsky furniture factory, where I made some of my first money after the sixth grade. To the right there was a couch and to the left was my parents’ double bed. When my father would beat me with his belt, I’d crawl under that bed. There were no doors between the rooms, so we could hear everything our parents did.

As I mentioned earlier, our TV received a single channel: Channel 1. To get Channel 2 you had to set up a massive antenna. Our neighbors had one, but my dad was never much of a handyman. He would spend the day in the mine and come home to relax; he wouldn’t touch a screwdriver. My hands, as they say, grew out of my backside; I could not put in a screw and there was no other way to put up an antenna. Ultimately, then, we had to watch whatever they were showing on Channel 1. I remember a lot of the shows well. I especially liked White Beem Black Ear, a movie about a dog. Watching it made me cry into my pillow. Probably all of us Soviet kids cried. Tikhonov was an excellent actor. After watching this movie I fell madly in love with dogs.

Next to our house there was a huge poplar tree, which had been planted by Grandpa Timofey. All of us Tinkovs loved that tree. Unfortunately it was chopped down when the cabin was demolished in 1986. Between the garden and the house there was a bit of bare ground where my brother and I erected a chin-up bar, which we used for working out. This was a great help to me once I joined the army: being able to do pull-ups and pull-overs was essential to your reputation.

In summer, Leninsk-Kuznetsky was a great place to be, but the winters and springs were hell on earth. Few districts had central heating; coal was used instead. A gray carpet of smoke was spread over the city, visibility was low, and the snow was layered with gray. Akin to tree rings, the streaks of soot in the snow banks left a record of snowfall. Once, before New Year’s (I was in tenth grade at the time), a friend, Edik Sozinov, and I decided to have a steam bath. We ran out of the sauna and jumped into a snow bank. But the snow was only white on top. Underneath it was layered with black. We went back into the sauna all dirty. Quite the washing!

In the spring everything would start to melt. There were dirty black puddles all around. You could not wear your dress shoes out. If you put on a white shirt in the morning, by evening the collar was so dark that you would have to put it straight into the laundry.

We had to whitewash the house twice a year. What the hell! First, we would move everything into the parlor and whitewash the kitchen; then we would move everything into the kitchen and do the parlor. Finally, we would have to wash the lime and chalk off the floors. What a nightmare!

* * *

Even as a child, I began to understand that money was a good thing. My mom did not give me much pocket money and there were plenty of temptations around.

“Mom, you must love Yura more than me because you only ever send him to get the milk!”

“Okay, Oleg, I’ll let you go next time.”

My brother and I would argue over who would get to go buy the milk. You could fill a three-liter canister for 86 kopeks. Whoever went could use the change to buy something small—like a chocolate—or, as I would do, save it to buy something bigger and better later.

I earned my first 50 rubles after the sixth grade. The mother of my friend Slava Kosolapov was the director of the furniture factory. Some of the machines there were used for gluing pieces together. The glue smelled terrible. Slava and I were hired as helpers—gophers—at the factory. We also ended up working at the local pasta factory, which for some reason also produced mineral water. The crates, which were meant to hold twelve bottles, were always coming apart and it was our job to nail them back together. The pay for that job was also 50 rubles.

I could have bought pet fish or pigeons with the money; instead, I spent most of the money on food straightaway. Every morning I would go to the bazaar and buy walnuts, peanuts, deep-fried meat pasties, and fruit from the Uzbeks (they were knows as “Pita-Breads” to us Siberians). Pomegranates cost one ruble each, and raised-dough meat pasties 16 kopeks. Mother never bought any of these delicacies, which were sold only at the market and not in the store. I loved and still love to treat myself to good food.

In terms of food, the shops in Leninsk looked very sad—with rare exceptions. Younger readers can have no idea what these shortages were like. Goods could be bought if you knew someone in the store. “Make me some red fish” or “take out your boots” were expressions that meant “help me buy something”. Slang expressions like these were born out of the Soviet system of distribution.

There was a shortage of sausage throughout the USSR, but not in the Kuznetsk Basin! Miners would take a thermos, some bread, sausage, and garlic underground for lunch. The Soviet leaders understood this and kept coal-producing regions well stocked with sausage. It didn’t taste too good, but at least you could find it in the stores. The Kuznetsk Basin is an explosive region. It’s no coincidence that miners played an important role in Yeltsin’s victory. Later, however, they opposed him, thumping their hardhats on Gorbaty Bridge in Moscow. And under Putin they came out to protest against low (and late) pay more than once.

Indeed, people would come to Leninsk all the way from Novosibirsk, over 200 kilometers away, to buy sausage and butter. We, on the other hand, would make the trip to Novosibirsk for junk food like corn curls, candy, cream soda, and Pepsi-Cola, which was our favorite. In 1971 the Americans convinced our communists to start importing it and in 1974 the first Pepsi bottling plant opened in Novorosiysk. Plants were opened in Moscow, Leningrad, Kiev, Tashkent, Alma-Ata, Tallinn and Sukhumi. Later, the Novosibirsk Beer and Wine Brewery started making Pepsi too. The bottles were labeled “Pepsi-Cola Strongly Sparkling Beverage. Manufactured in the USSR using Concentrate and Technology from the Company PepsiCo”. It cost 45 kopeks for a 330-ml bottle. Soviet pop cost 30 kopeks for 500 ml, but everyone wanted to drink cola. Some smartass decided that the miners in Leninsk-Kuznetsky had no need for it, and none was delivered to the stores from Novosibirsk. Some profiteers tried to sell it for one ruble per bottle, but the SPTCD (Social Property Theft Control Department) clamped down on that. People were of the opinion that selling imported clothing was okay, but profiteering in food and beverages from the stores was somehow unseemly.

Even today I prefer Pepsi to Coke. Pepsi symbolized freedom and sparked an interest in life in the West: if American soda pop was so delicious, then maybe the country was not so bad after all…

A good business to be involved in during Soviet times was bottle collection. Between 1983 and 1985 I was actively engaged in this line of work. When the miners got their bonuses, all the money would go into a pool, either by default (or by code). The money was used to buy cases of vodka, bread, and sausage. The whole gang would sit in the park and drink until they could not stand up. They would vomit and a third of them would stay until morning, passed out on the benches. I would pick up the bottles after them and take them to the bottle depot, where they were worth 12 kopeks each. As with a lot of other places at the time, there was always a line-up at the depot and we had to wait for empty cases.

In the summer, I would stay home while my parents were at work. Workout started at 5:00 in the evening and I would need to eat. The only food in the fridge was butter and rendered pork fat. I would tie fishing gear to my bike and ride to the river to catch minnows. At home I would clean the fish, fry them up, and, by way of dinner, would eat them with cucumbers and tomatoes from the garden. I cannot say I went hungry, but we never ate pickles and I often had to find my own food.

My father instilled in me a love of fishing. We often spent the whole day at the river. He would wake me up at 5:00 in the morning—and those were the only days on which I was happy to get up so early (nowadays, the only time I can get up at 5:00 am is if I have a flight to the Maldives at 7:00). Father and I would take the 6:00 am No. 10 bus to Dachnoye village and, from there, would walk another 5 km. The amount of carp we would catch was commercial in scale—sometimes we would leave with 8 or 10 kilos. Dad taught me how to put the worm on the hook, how to cast the line and to sit quietly, focusing so as not to scare away the fish. I was not a bad fisherman. Nevertheless, I later I abandoned the pastime. I hope to get into it again when I retire.

* * *

We always had some sort of animal around the house. We went through almost every pet you can imagine: we had a hedgehog, white rats, pigeons, dogs, and cats. One cat, a Siamese, followed us home from a fishing trip and stayed. Another cat, a grey Tartar, went missing while we were on vacation in the south.

Over the years we had three different dogs. I would take one of them—a white one—with me when I would go to get mom from work after dark. Two of them went missing and never came back. I would not be surprised if they had been stolen and eaten by drunks. This was a common occurrence in Leninsk. We did not tell the police, because we were afraid that our house might be burnt down. The third dog—a sheep dog—was stolen. We got her back, however.

Above all, my father and I loved pigeons. In Siberia these birds were traditionally kept by ex-convicts—“trusties” as they were called. (On a side-note: in Moscow and St. Petersburg, the word “trusties” has a different meaning. It refers to drunken rich kids with connections.) Good pigeons were highly valued. The higher one of these birds could fly, the more expensive it was. The most expensive ones were those that could fly so high that all one could see of them was a dot in the sky. A pigeon’s value was also based on whether it could do flips. Front-flipping birds were higher-priced than ones that could do back flips only.

In Soviet times pigeons cost anywhere from 3 to 30 rubles. Ex-cons earned an income breeding them, and there were twenty to thirty pigeoneers around the city. My father wasn’t a “trustie,” but he still loved pigeons and, by taking them as pets, we entered a fairly closed circle.

The trusties would sell the pigeons and, as a rule, if a bird flew back to its seller, it was not returned—the idea being that this was your own fault for letting it escape. There were cases where pigeons were sold in Kemerovo, only to fly the 80 km back to Leninsk. You would have to get the pigeon to stay put by clipping its wings and then letting the bird get accustomed to its new home before the feathers grew back. A few times our pigeons flew back to the trusties; I went to ask for them back, but they would not return them.

“Look, you screwed up,” they said. This was my first experience with ex-cons, their methods and their principles. Later I started raising my own pigeons. I tried to sell them at the bazaar, but the local mafia would not let me do it. They bought the birds from me for 3 rubles apiece and said, “Get out of here, kid.”

People would fly their pigeons in the evening before dinner. The keeper whose flock flew the highest was the coolest. That is how we entertained ourselves. Once, some friends of my father’s brought us pigeons from Poltava in the Ukraine, birds that were thought to be of very high pedigree. Our Poltavian pigeons flew so high that all you could see of them were points, up in the sky. Some people did not like this.

The pigeons lived in the attic, getting in from outside through our storage area. One night our mother heard a scuffle and started screaming, thinking that we were being robbed. It turned out that some burglars had broken in, prying open our door to look for our Poltavian pigeons. My father grabbed the ax and opened the door. One of the criminals had taken a pick out of the coal shed (we used it in the winter to break up ice and coal) and threw it at my dad. It missed his face—but not by much—and got stuck in the floor.

There was a fight, but we did not call the police. The next day, while I was at school and my father at work, my mom, who has always been feisty and on the ball, put the pigeons in a basket and sold them. We could not figure out to whom she had sold them and none of them ever came back. Thus our pigeon-keeping days came to an end. Sometimes I still dream of setting up a pigeon-house in my father’s memory, when I have the time.

* * *

We certainly did not have a telephone in those days. Thus, when I wanted to talk to my friend Edik Sozinov, I would go to his house, which was five kilometers distant, following the railway embankment most of the way. When I got there I would knock on the door.

His grandma would open the door and say,

“Edik’s not home.”

“Well, when’s he getting back?”

“In the evening, probably.”

“Thanks.”

What could I do? I would walk the five kilometers back home again. When I arrived Mom would say,

“Oleg, Edik was by to see you.”

That was our mobile network.

The closest telephone was at the mine. When my father’s health first took a turn for the worse, I ran there to call the ambulance. This was a city with a population of 130,000 and there were only a couple thousand phone lines. My uncle Vanya, for example, a section director at the mine, had one. There were payphones that cost 2 kopeks, but these were usually broken, the receivers torn off.

I really was a kind of “poor relative,” then. I remember the envy I felt when, as a child, I visited my cousin, Volodya Tinkov. Again, his father, my uncle Vanya, was a section director at Kirov Mine. He earned 700 rubles, which was crazy money at that time. My father earned 250 rubles. Volodya owned the coveted game, At the Wheel, which cost 10 rubles. I asked if I could play, but usually he would not let me. This felt unfair to me. Why could he play with it, but not me?

Twenty years later, he asked me for a job. I got him a position in my Novosibirsk restaurant. I reminded him of this story. He asked,

“Oleg, can’t you pay me more? I’m your cousin, after all.”

“Come on, Volodya. Remember At the Wheel; remember how you never let me play?”

Here is my advice, then: Always let your relatives play with your toys!

I often took trips to Tyumen. At first my parents would take me, but later, in my pre-teen and teenage years, I would go alone. Mom would put me on the train in Leninsk-Kuznetsky, the steward would look after me on the way, and Grandma would meet me in Tyumen. I spent several entire summers there and, consequently, I know the city very well. You might call me a “Tyumensky kid.” My cousin, Sergei Abakumov, six months my junior, lives there. His parents were quite well off. They had a Lada 1600 car and a garage, lived in a co-op apartment building and had a summer cottage. They were in the uppermost strata of the middle class. Back then, Soviet people would head north to make extra money on the side and Sergei’s parents did the same, earning piles of money in Chekurdakh, a village in Yakutia. I thought, how could this be? Why does he have everything? He had his own room and a stereo system and my uncle used to let him drive the blue Lada. At first my cousin would sit on his dad’s lap and steer. By age 13, however, he was driving by himself, with me sitting in the back. For me, the smells in the car were amazing—particularly as I never rode in a car in Leninsk. Poor relative! Of course no one was trying to make me feel bad—not at all—but when Sergei parked that car all by himself, I could not help but be jealous.

I remember the first time we sat at Grandma’s place and waited for Uncle Vitya, Sergei’s dad. He pulled up in the car and when he said, “Hop in, let’s go!” a shiver went down my spine. I was getting into a car? As we drove away I realized that I wanted more than the back seat of that Lada 1600 with its Tyumen license plate. People often ask me what got me started. It was the will to live and not just to wander about, aimlessly.

I did not dream of much though. As a teenager I wanted to buy a parka jacket so that I would look good. I wanted cologne so that I would smell good. Everything was connected with sexual desire. I wanted girls to like me. It even happened that, a couple of times, my father was called in to my school because I was harassing the girls. Once, I pulled a girl’s skirt up and half the class saw her panties. To this day, I cannot stop myself from checking out women. In order to get female attention I would put on my dad’s red, pointy shoes, which were two sizes too big, and go to the disco at Gorky Park. The shoes had heels, though, and it was (nearly) impossible to walk in them.

All of us wanted a better, brighter life in those days. In school we would draw Adidas and Sony logos in our notebooks. Mere money, just as such, was no attraction; it was the West in general, which was associated with a life of excess. Money was only a tool.

In the highly popular Soviet movie, Crew, there is a scene involving а sound and light system set up in the apartment of а flight engineer named Skvortsov. Leonid Filatov played this character. After I saw the film, I began dreaming of discoballs and strobe lights.

I always knew how to spend my money. There was food, but also imported jeans and shirts, vinyl records, mohair scarves, and mink hats. Although I was born in a small town—or rather a village—I was attracted to the good life. I do not know where I get that quality.

Once every couple of years my parents would save up 1000 rubles and we would get on the squeaky iron Novokuznetsk-Simferopol train. We would board at Leninsk-Kuznetsky station and ride for four days to the Crimea. Before we left, mother would go to the savings bank and get a letter of credit for the money so that it could not be stolen en route. We would get cash once we arrived in the south.

I liked trains a lot. We would boil chicken at home and eat that on the way, along with eggs and cream soda. After each of our three daily meals, we would drink tea with lumps of sugar given to us by the steward. We passed through Novosibirsk, Omsk, and Tyumen. In Volgograd you could see the massive Motherland sculpture through the window. At the stations we would jump out of the train and buy sunflower seeds and grapes.

Upon our arrival at the resort town of Yevpatoria, the local grannies would pounce on us, offering accommodation for 10 rubles per night. Later we started going to the same elderly Ukrainian lady every time. We would pay 300 rubles in advance for the 30 days! The guesthouse accommodated 5-6 families. The south is an extravaganza for a Siberian boy. It is hot when you wake up in the morning. Fruit and berries grow outside, in the garden. We would get up, breakfast, and then go to the beach for the whole day. We would eat lunch on the beach or in town. The sea in Yevpatoria is very clean and warm. I fell in love with the town; it is no surprise that when I was in university and made some cash, I went straight to Yevpatoria with my girlfriend.

At my villa in Forte Dei Marmi, Italy, I have a picture of Rina and I on the beach with the kids. It is just like another photo, this time of my parents, my brother, and I, taken in the eighties in Yevpatoria. The sand, the sea, the folks. I associate both towns with childhood, the sea, and good times.

A miner’s son, in a town like Leninsk-Kuznetsky, grew up assuming that he too would work in the mines one day.

 

Literature and Geography

My behavior at school was always rated as ‘unsatisfactory.’ I took first place when it came to the number of times my parents were called to the school. I was a terrible student—although I got okay grades, especially in the humanities. One of my favorite subjects was literature. I liked Russian less so, a fact that readers of my blog can confirm.

My favorite literary hero was Chatsky from Wit Works Woe. I shared his world-view and approach to life. “The silent enjoy bliss in the world”: I understood this perfectly. It was as though Chatsky’s words were mine. It is true, after all, that wit works woe, that ignorance is indeed bliss. Russia does not need or want wit. It is a country of silent people. Perhaps, to some extent, everyone on the planet is. Chatsky, though, is sublime, a fantasy…

In one of my school essays I wrote that Chatsky’s words could be applied, easily, to the situation in the Soviet Union. My reasoning went like this: Chatsky was not like others, he wanted to effect change in the country and in the end society rejected him. Like him, I did not want to be like anyone else. If the rebel Chatsky was a literary hero, then why did I have to agree with everything that people said?

I told my teacher “You teach us to follow the example shown us by true heroes. At the same time, you tell us that we have to be the same dull individuals that these heroes fought against.”

She did not argue. She only reminded us, sometimes, of the letters K-G-B and, once or twice, kicked me out of class for my freethinking. One way or another, Chatsky is still my hero.

Of course I felt great respect for Pushkin too, who also fought the system. I’m really fond of Lermontov’s lines about him:

A poet has died! Captive of honor.

He fell, slandered by rumor.

Nonconformism, battle, protest. A young man must be a revolutionary. I liked Bazarov from Turgenev’s Fathers and Sons and Rakhmetov who slept on nails in Chernyshevsky’s What is to be Done?. I liked all the revolutionaries and Decembrists. Later, after I had finished school, I realized that the socialist revolution was wrong.

The first book I read in earnest was The Adventures of Tom Sawyer. I related to Tom Sawyer and Huckleberry Finn, because they were both slackers, just like me. These are my heroes. I enjoyed Mark Twain and Jack London and, to a lesser extent, the Russian classics—Chekhov’s short stories, for example. Later, when I was 14, I listened to Vysotsky. I thought his lyrics were amazing; I got him. Only a great person and poet can write in a way that is accessible to a teenager.

My fondest memories are of my homeroom teacher, Lidia Irincheyevna Baturova. She was also our chemistry teacher. Consequently, I was fond of chemistry, too, and of concoctions.

My favorite class was geography. I would even draw maps of the Soviet Union. And I always used to watch the TV show, Travelers’ Club, created by Yury Senkevich. Traveling is something I do an awful lot of now. I cannot sit still in Moscow for more than a couple weeks before I want to go someplace else.

I must have loved geography—it felt like my heart was coming out of my chest at the thought of freedom of movement through space. Were it not for Perestroika, I would have gone crazy from being stuck in the Soviet Union. When I served with the border guard, I wanted to jump on a foreign ship and sail away, which would have been a violation of national border laws. I wanted to see the world through my own eyes and not through the eyes of Senkevich only. I loved to look at maps and read the names of faraway countries. I dreamt of going to Africa, America, and Australia.

Our school was limited to grades one through eight; thus 1983 was the last year Lidia Irincheyevna Baturova was my homeroom teacher.

Chapter 4

How Cycling Saved Me

For a long time I had been asking my parents to buy me a Voskhod moped. It was essentially a bicycle with a small motor attached and cost 105 rubles at the local store. Our family budget would not allow it, supposedly—although I think it came down to my mother’s fear that I would get hurt, that I would become one of the many people in our town that ended up crashing these mopeds (some of whom did not survive).

When I turned 12, my mother bought me a bicycle. Mid-sized bikes cost 30 rubles, but I was given an adult-sized Ural. It cost us 50, but it would last longer. The bicycle was huge and I rode it seated sideways, with one leg stuck through the frame. Regardless of the discomfort this caused, cycling took possession of me. Once—I was 14 at the time—my classmate Volodya Fomin told me he had joined the school’s cycling team. If you joined, they would give you a big sports bike. It was not new, but it was free. The coach even let you take it home. I was sold on the idea and decided to join the team too. I signed up in 1982, the year chairman Brezhnev died. (I can still picture the day: I was walking home, dodging the puddles, which were glazed over with a thin layer of ice, and I heard Mother calling me to come quickly. We all sat and watched the news on TV.)

That same Fall we had our first cross-country racing try-outs. I very nearly came in last, which bothered me a great deal.

It made me angry, so I started hard-core training and continued through the winter and spring. On May 9, 1983, I won the Victory Day city bike race. Our coach, Ivan Stepanovich Rasskazov, was really surprised. After all, I had trained less than the others. In October he lined up the whole team and said, “Tinkov, step forward!” I took two steps forward. Apart from the bicycle I was holding onto, the scene resembled something you might see in the army. “Comrade athletes!” the coach said, “I just want to say, Tinkov is a person that didn’t miss one training session. Follow his lead.”

There was nowhere to go but up. I started winning at the municipal and then at the regional level. I took part in races beyond the Kuznetsk Basin. It was then that I caught my travel bug. I flew everywhere: Sochi, Alushta, Anapa, Dushanbe, Alma-Ata, Tashkent, Fergana, Novorossiysk, Kaliningrad…

My first business was connected to cycling too. Before leaving for training in Leninabad, the second largest city (after Dushanbe) in Tajikistan, my old friend, Master of Sport Alexei Stepchenko, came up to me and said, “Bring as much money with you as you can. They have a lot of good products.” Regional airlines were common then and we flew on An-24 prop planes. Two hours to Tashkent, then two more to Leninabad. The first training session was in the mountains, followed by another 30-kilometer run-in. We rode into Druzhba village, went into the store, and saw that they had mohair scarves and Montana jeans on the counter. The price tags read 35 rubles.

“Hello,” I said to the Tajik salesman. “We’ll take these jeans.”

“Fifty rubles!” he replied.

“Fifty, what? It says thirty-five!”

“We don’t have jeans,” said the Tajik, and hid them under the counter.

There was no use arguing. The Tajiks needed to make an extra buck too. In the end, I spent all the money I had brought on four pairs—for 50 rubles each. Back home I sold them for 200 rubles apiece. Four times as much! So too, mohair scarves, which cost 35 rubles in Leninabad, sold for 120-150 at home. Leninsk-Kuznetsky was, after all, a mining town and by the country’s standards people made good money there.

That is how it went: I would take money, go to training camp, and bring stuff back. That went on for two years. Later, we stopped going to the retail stores and went directly to the warehouse instead, where we got boxfuls of jeans. At that time the Social Property Theft Control Department (SPTCD) was cracking down on profiteers, but athletes, as a rule, were left alone. There was nothing strange about our having lots of luggage. After all, we were traveling with our uniforms and bikes. As a consequence we had no problem moving stuff around. Or we did, but just once—when Lyokha sent some product by mail and, upon coming to pick it up, found that it had been “confiscated” by the SPTCD. He was sentenced to two years probation.

In fact, though, athletes were simply able to get away with more than the carefully managed Soviet system allowed others to do. Why would a hot, Muslim republic like Tajikistan need mohair scarves and jeans and sneakers? None of the locals bought them. In Siberia, however, we needed such things. I brought hockey sticks back from Tajikistan as well: there was a deficit in Siberia! The wooden ones sold well, but the plastic Czech ones did not. If you walked into a department store in Tashkent, the place would be full of them. What Uzbek needs a hockey stick, though? That is how the ridiculous Soviet distribution system operated. Certain quotas were given to each region. While Gorbachev was trying to figure out how to change things and preparing to initiate Perestroika, we athletes were creating the market with our own hands.

Professional athletes in the Soviet Union did a lot of traveling and were businessmen a priori. It was a given that we were profiteers, especially those of us that traveled abroad. Cyclists would bring back water bottles from France and Italy and runners would bring back running shoes. Some of us were caught on occasion, as happened with Lyokha Stepchenko, but they could not eliminate the phenomenon.

Mom was worried about my speculation:

“Where did you get that?” she asked, referring to goods that I had brought home from Tajikistan.

“I bought it, Mom,” I told her.

“Where did you get that? It isn’t stolen, is it?”

“No, no. I got it at a store in Leninabad.”

“Won’t the SPTCD catch you for speculating?”

“Don’t worry, Mom. I was careful.”

“That redhead will be your ruin!” she said, referring to Lyokha—who she took to be the instigator of my business activities. In true Soviet fashion, she was against them and was afraid for me, but she eventually got used to the fact that her son was a speculator.

We rode Start-Shossé bicycles, which were manufactured in the Kharkovsk bike factory, but we longed to get bikes with the Champion-Shossé label, which were available only by special order. Their advantages included aluminum pedals. I dreamt of getting into the Army Sports Club, instead of normal military service. I bought an old Italian Colnago bike, which was about thirty years old. I hoped to use it to win entry into the ASC. It was a heavy, blue bicycle. It looked like it had seen about ten coats of paint and cost 1100 rubles, which was five times more than my dad made in a month. I could have got a new Czech Yawa or Chezet motorbike in the store, for the same price. But I bought a pushbike! My parents thought I was crazy, “Look at Tinkov go! His bike costs as much as a new Yawa!” They really thought I was an idiot.

When I started my tour of duty in the Border Troops, Mom asked me in a letter if she could sell the bike. She ended up getting a thousand rubles for it, which she put into a savings account. When I came back from the army, I withdrew the money and was able to buy new clothes. Basically, the bike was used to launder the money I had earned through my speculation.

Many years later, in the year 2000, I was walking down the street in San Francisco and saw a Colnago bicycle in a store window. I felt a pang in my heart. I asked the clerk,

“How much is this bicycle?”

“Well, this is a very souped-up model. It costs $3500.”

“Wow! I’ll take it!”

I bought the bike, along with 1500 dollars worth of accessories. Later I met Ernesto Colnago, the man who founded the manufacturing company. He founded his bike-manufacturing business in 1954 when he was 22 years old. He must have run his business well because thirty years later all the cyclists in far-off Siberia would fall asleep wanting a Colnago! Ernesto thought the story about my first Colnago was hilarious and gave me a Colnago Ferrari as a present. This is a limited edition red model, only 200 of which were made to celebrate Ferrari’s sixtieth anniversary. Today, the bike is in my Moscow office. I started with a vintage Colnago, worth 1100 rubles, and ended up with a Colnago Ferrari, which sells for 10,000 pounds sterling at Harrods.

* * *

Cycling was the source, not only of my first business experiences, but also of my first sexual ones. One time, when we were in Leninabad, our Kemerovo Province team had accommodations on the second flour of the airport hostel. They put the Kazakhstan National Women’s Team on the third floor. Ethnic Kazakh girls were not valued very highly as cyclists; hence the team included only ethnic Russians. On a side note, they had better food and supplies than us, because their team was national, while ours was only regional.

We trained on the same mountains. In the evening the coach would come, close the door, and say, “All right boys, time for bed!” But the girls would lower a sheet down to us from the third floor and everyone in our room would climb up, bringing champagne along. Quite the athletes! That is when I had my first sexual experience—with Ira from Alma-Ata. She was 16, and taught me how to kiss and introduced me to a number of sexual techniques. Athletes love debauchery.

Ira, hi! You were the best—my first sexual partner.

Later she moved to Moscow and took up track racing. One day I opened the paper and there she was! Ira had become the Junior Cycling Champion of the USSR!

* * *

Basically, because of the training camps, I did not attend school between the eighth and tenth grades. My high school diploma is filed away someplace at the Mining Institute. I got straight C’s. My report cards were filled out behind my back; I didn’t even take my final exams. Strangely enough, I got a C in Physical Education as well, even though I was a candidate for master of sport.

Every year, bicycle racers from all over the USSR would meet in Alma-Ata to take the tests required to become Candidate Masters of Sport and Masters of Sport. In order to pass, we had to complete a two-man timed relay, where we’d take turns racing 300-500 meters. The goal was to run 25 km in 33 minutes. There was a team race where the whole group had to beat a certain time and where you had to be one of the front-runners; the start was staggered. I was awarded the rank of CMS in 1984. In the autumn of 1985, I passed the tests to become a Master of Sport. But because I later changed my coach and team, the documents were lost in a bureaucratic mess.

As both an athlete and a businessman I developed a compulsion to succeed: I needed to win, to conquer. Because I am tall and heavy, I am best qualified as a sprinter. Sprinters are often more likely to win than the normal mountain racers or those competing in individual races. The whole pack closes in on the finish line and then the sprint starts. If you want to accelerate quickly, your muscles have to have a particular structure. The race is decided in the final 500-meter stretch. You need to end up in front and you must not be afraid to squeeze your way into the spaces between the other racers. It is scary: 20-30 people moving at these immense speeds, knocking into each other with their handle bars and bodies. Some fall. If you do not fight your fear, you will lose. Sometimes I would get scared too—you would have to be an idiot not to—and when I did not win it was because I was afraid.

If you watch the Tour De France on TV, where more than half the stages are sprints, you can see the chaos. The racers cross the finish line at 70 km per hour. It is craziness. And of course there are the falls and crashes.

Winning changed my character. The races were for juniors, around 120 km long, but sometimes as short as 80. Among juniors, as opposed to the pros, your overall strength has a lot of bearing on the result: if a person is physically stronger than most, then he is likely to win. I started in a total of over one hundred races and won more than thirty of them—which is quite a lot. The best was when you were among five or so cyclists that broke away from the main pack: if you beat all those dozens of racers, then the last five were not a problem.

After tenth grade I had to get some kind of job. While I was still going to school at the Work Training Centre, I more or less learned the ropes of being a lathe operator. And so I was hired to work at the Kuznetsk Basin Element Factory. There was a bicycle section at the factory, and I was transferred there in the summer of 1985. I manned the lathe for three or four hours a day, with training taking place after work. My pay was 60-70 rubles. Officially, I was a lathe operator, but in reality I was a professional athlete!

Towards the end of 1985, I returned to the cycling team at Kirov Mine under coach Ivan Stepanovich Rasskazov. He got me a job at the mine as an electrician’s helper in the electrical equipment repair shop. This was a real job. Until you were 18, you were not allowed to work in the mine itself; you could only work at the surface, near the entrance. We would get starting boxes and other broken electrical devices from the cage (a kind of open elevator which delivered the miners and other loads underground) and we would take them in carts to the shop for repairs. I would work a full shift, from seven in the morning till three in the afternoon, then shower and head to practice.

Beginning in January 1986, I was allowed to go down into the mine. I was not allowed to go to the backwall, however. Instead, I remained near the cage, collecting broken equipment that needed to be fixed. More often than not, though, I slept in the starting boxes. Even so, I did not get into too much trouble because everyone knew that I had three or four hours of training after my shift. In any case, I earned 90-120 rubles in the mine, depending on how much the boss, Auntie Nina, would sign for.

I remember buying Adidas Moscow sneakers with my earnings. These were the product of one of a few joint ventures with foreign companies. In the 1980s the USSR bought a license from Adidas for the manufacture of one—and only one—type of footwear. These blue shoes were made at an experimental sport shoe factory in Moscow, called “Sport”. Here was yet another testimony to the failure of the Soviet system. The bureaucrats signed a document stating, basically, that quality footwear could not be made under the project. Friends who worked the black market used to bring used shoes in from Leningrad. They cost 90 rubles, which was 30 rubles cheaper than new ones. Can you imagine? There I was, working an entire month in the mines to get a pair of sneakers that were not even new! But I bought some anyway because I was making a great deal of profit on the contraband I brought to the Kuznetsk Basin from Central Asia. At that point I was worth a couple thousand rubles.

During my last summer before joining the army, my hormones kicked in and I bought a parka, like Roman Abramovich’s, and started looking for a girlfriend. They say that Ivanovo is the town for finding a bride, but for us that town was Leninsk-Kuznetsky. There were two women’s boarding houses next to the famous yarn factory. In one of them I met a weaver named Sveta. She was the second girl with whom I had a sexual experience.

I would come into her dorm through the front door. We would have sex, then in the morning I would climb out through the third-storey window. It was a five-kilometer walk from the dormitory to our cabin on Kooperativnaya Street and I had to walk fast.

For what it is was worth, the USSR succeeded in creating a good sports infrastructure. Near the outskirts of Leninsk-Kuznetsky there is a massive Olympic Reserve School for artistic gymnastics. Incidentally, when our Russian athletes were training for the Beijing Olympics, the tryouts were held there since Leninsk is in the same time zone as Beijing.

Our athletic gymnasts were some of the best. Two-time Olympic champion Maria Filatova came from Leninsk-Kuznetsky. So too did European gymnastics champion Maxim Devyatovsky. Others excelled in cycling, skiing, ice racing with motorcycles, and weightlifting. Both Konstantin Pavlov, who was power-lifting world champion more than once, and Valery Korobkov, who took first place a few times at the Russia Motorcycle Ice-Racing Championships in the under 125-cc class, were from Leninsk-Kuznetsky.

And it was thanks to the same infrastructure that I was able to take up cycling. The sport still plays a significant role in my life. My deepest gratitude goes out to coach Ivan Stepanovich Rasskazov. He imparted a great deal to me and I still remember him well. If it was not for cycling, who knows who I might have become? When my friends were fighting, getting drunk, and chasing girls, I chose sports. As a direct result, I learned what business is all about. No matter how you look at it, cycling was where everything started for me.

New members of the team would get a Start-Shossé bicycle, made in the Kharkovsk bike factory. We all dreamt of getting a custom Champion-Shossé, however.

 

In May 1985, I made it to the finals in the first All-Russia Youth Games, held in Novorossiysk.

Ivan Rasskazov, cycling coach:

Sixty applicants tried out, but in the end 10-15 would remain. Oleg was determined. He wanted to win and he wanted to improve his results. He didn’t miss a practice, unlike the other guys. He was good at the finish, which is why he won races in both Leninsk-Kuznetsky and at the regional level.

He was always smiling and upbeat. He liked pulling pranks, too: he might loosen someone’s brakes or let the air out of their tires. No one’s feelings were hurt though. I’m happy that he grew up to be a normal man. He doesn’t shoot up or mooch, like the others.

Andrei Maximets, cyclist:

I first met Oleg in 1985. I was already a Master of Sport and a respected champion—a leader in the field. We both came to the Regional Championship. It was the 100-kilometer race on an extensive alpine course. We pulled and pushed and that gangling kid, Oleg, eight years younger than me, broke into the lead. We were furious that this young guy was neck and neck with us pacemakers.

The following spring we met Oleg again at training camp. He was with his local team and I was with the national team. We had already developed business qualities, working the black market. We spent two or three months in Central Asia where, in those Soviet times, there was a surplus of jeans and sneakers. We managed to get into shape and stock up on goods. Then, when we got back to the Kuznetsk Basin, we resold them. Our mining region was relatively wealthy; the locals had money to burn. We made gains where there were deficits. It was a completely healthy lifestyle though: just sport and commerce, even if it was a little risky back then.

Eduard Sozinov, Oleg Tinkov’s school friend:

Oleg’s parents lived modestly in a one room cabin with no amenities. They did not get their apartment in Polysayevo until just before he went off to the army. Prior to that he lived under Spartan conditions. Oleg slept in the kitchen on a couch, while his parents slept in the living room. He always wanted bigger and better things. He dreamt of an Italian Colnago bicycle, which cost an arm and a leg. Thanks to his sheer determination, though, he managed to save up for one. The newspaper declared him the Kuznetsk Basin’s “first wheel.” Even though he was a junior, he overtook even the grown-ups. He was very strong physically, never smoked, and hardly ever drank.

It was sport that developed his business acumen. He often traveled around the USSR and had the opportunity to bring something home. For instance, he would buy mohair scarves in Central Asia, where they were completely useless, and then sell them in Leninsk. Once, he brought back some blue oil-silk coats, which were completely unheard of in town. Another time he brought me some fantastic boots! He was always respectable; he never tried to make money off his friends.

His head always worked in the right direction. When a neighbor brought some winter sneakers back from Leningrad, he discovered that they had different colored soles—one black and one white. He hadn’t noticed because it had been dark in the station. Oleg bartered with him, bought them for around 100 rubles, painted the soles, and sold them for 250.

Lidia Irincheyevna Baturova, Oleg Tinkov’s homeroom teacher:

Our class had its own hockey and soccer teams. The kids who took part learned all about team spirit. Later they would go on to work in the mines. They grew up as a group and many of them are still friends. Oleg was the only one in the class that chose cycling. There’s a lot he can’t remember about the classroom drama because he spent all his time training. He would often travel to compete and, when he came back, he’d tell the other kids where he’d been, what he’d seen, and what he’d done. Bicycle racing gave Oleg his leadership qualities and gave him his sense of responsibility for himself and for his actions. For the most part, the kids stuck together, whether in soccer, hockey or dancing. Oleg, however, was an individual. There was only one group “sport” in which he would participate: he would join the other boys in trying to impress, kiss, and pinch the girls.

If he had fallen in with the others, playing on the soccer or hockey team, odds are he would not have amounted to anything. Sports helped him to get started. I remember how, one February 23[1], the girls wrote a poem for Oleg that went something like this: “Oleg rode far away from us on his bicycle.”

He really did hit the ground running. I worked for 48 years at the school and saw many interesting students graduate. Among them were some that went on to become scientists and arctic explorers. None of them ended up as a successful as Oleg, however.

By eighth grade, some of the kids were trying vodka. Oleg was doing business. My students told me about how Oleg had brought cosmetics back from the Baltics to sell. Oleg traded, exported and imported. At the time, neither his fellow students nor we teachers took these activities seriously.

Chapter 5

The Border Guard, not the Sports Club

When I was working at the mine, all I could think about was the coming Spring—because I hoped to be accepted, then, into the Army Sports Club. If I could not achieve that, then I would have to be a soldier. It was now that my coach Ivan Stepanovich failed me, for the first and probably the last time. I do not resent him for it now. Everything always works out fine in the end. He promised that he would get me a spot in the ASC, but there was only one vacancy. During the 1986 spring draft, it turned out I was not the only athlete born in 1967. There was another, the son of the director of the Novosibirsk ASC. Instead of selecting me, Oleg Tinkov, then—champion of the city and of the Kuznetsk Basin, winner of more than one competition—this son was admitted to the Novosibirsk ASC. He was admitted, too, even though I could have out-pedaled him with one leg.

The strong arm of the old-boy network has always held sway in Russia and always will. Thus I missed out. In April 1986, I was taken into the army and, instead of getting into the ASC, I ended up among the border troops, under the control of the USSR’s KGB. My career as a cyclist, which had held such great promise, ground to a halt. Everything that I did later—my return to sports in 2005-2006, my participation in races, the creation of the Tinkoff cycling team, and the cycling trips to Italy where we cover 4000 km in a month—is connected with the fact that my career was cut short at that time.

As we were being loaded into the railway coach, I looked out the window and saw the new spring growth. It reminded me of a song written by Vladimir Semyonovich Vysotsky:

Spring has just begun,

Most of the people are still indoors,

But I had to get out there, –

Then two arrived suddenly,

With a convoy, with a convoy.

“Get dressed,” they say, “come out!”

I begged the sergeant:

“Let me stay with the Spring!”

But the sergeant took me away. First, we took the train to Krasnoyarsk. From there we flew to Vladivostok and then took the bus to Nakhodka.

When we arrived at the unit, the dischargees took all our food from us. We did not resist. At first we were brisk with them. But they replied: “Let’s get you shaved, then we’ll talk”. We had our hair cut and then were sent to the sauna. Afterwards we were given submachine guns and then mounted Kalashnikov machine guns. This type of gun is very heavy but fires better than the others. It is hard to miss when using it, in contrast to the hand-held variety. We ran cross-country, but the 3-km sprints were easy for me: when I was cycling, after all, we would run 15-20 km during our winter practices.

We would sweat so hard from the heat and the pressure that the fabric of our uniforms would start to dissolve. Within three months they would tear. According to regulations we were supposed to get new clothing every six months, but ours had to be replaced more often. We had to run, jump, and blow things up. Explosions rumbled from all sides—flash! Bang! It is depressing to read about what goes on in the army nowadays. Serious training has been replaced by hazing. The goal then, was to make us into real border guards. If there had been a war we really would have protected our country. The army—or at least the border guard—was really and truly combat-ready.

The rumors about hazing in the Soviet army are highly exaggerated. Things were not all that bad. Believe it or not, we had nothing of the sort in the border guard. It all depended on your officers, their qualifications, and their approach to training. Sure, the army has its hierarchy: I washed the floors, of course, and the senior officers did not. But I was never—not once—punched in the two years that I was there. The worst I suffered was a shove or a minor kick in the butt if I was moving to slow. I was never beat up.

A lot of my friends ended up in the Afghan war and I might have been sent there myself. It was a choice between Afghanistan and the border. Our Fatherland decided that, being 190 cm (6′ 4″) in height, I would be of more use at the border. Three of my classmates who served in Afghanistan came home ruined men. The war taught them how to smoke marijuana and how to do a lot of other things. Up until 1986, when I was in Siberia, I did not know what drugs were. When I got back from the army, though, pot had become commonplace, distributed by veterans of that war. Heroin was next.

* * *

Healthy, young Siberian men were sent in bundles to the border and into Afghanistan. Less were taken from St. Petersburg and Moscow. I have heard terrible stories from friends about how much they were beaten and about how much they drank. The border guard was completely different. Everything was done with precision and exactitude.

I was admitted to the sergeant training school. For six months, from April to October 1986, I trained to become junior sergeant. These were some of the most trying times of my life, taxing both physically and psychologically. I even considered suicide at one point. After that—until, perhaps, I was training for a race in 2005 (of which more later)—life was never so hard again.

A sergeant lives the good life: no washing floors, no kitchen duty and therefore no dirty dishwater. One day, though, I was stupid and told an officer to screw off. I had my sergeant’s badges ripped off and had to wash the kitchen floors and deal with the trash. This was unpleasant, to say the least, considering that I was in my second and last year of mandatory service. I did get my badges back, though, before being discharged.

Some of you may remember Mikhail Gorbachev’s famous trip to the Far East, to Nakhodka, Vladivostok, in June 1986. He even came to our unit, although I did not see him myself. Our unit was considered an elite one. It was called Nakhodka Independent Identity Check Point and was at the border at Vostochny Port. Because the country’s top official was coming, our combat training all but stopped for two months. Instead, we practiced for Gorbachev’s arrival. What did this involve?

In Soviet times we did this stupid thing (it is probably still done today): we got in trucks and we were taken out and lined up along the road. We would stay in the bushes and chase away mushroom hunters and other passersby. After a couple of hours, an officer would come along and pick us up. Of course it is nicer to lie in the bushes and sleep for two hours than to do jumping jacks and learn dumb things from the training manual. The idea was that if Gorbachev happened to take the road along which we were stationed, then his safety would be assured. We trained for this exercise for two months. I do not know why. Lying by the roadside is not rocket science. Maybe they do the same now, for Medvedev.

I am not sure how things are today, but in the Soviet Army I was emotionally tormented. It was really a hard thing to take. One would get up in the morning and the clock would be ticking. Instead of socks, you would wrap cloth around your feet and pull on your boots. The blisters would burst and they would have to cut of the wrapping in the medical station. This happened to everyone. Stand, squat, get on the ground, push up! Silence, soldier! Shut up! My calluses got so thick from the binding and the canvas boots that today I can wear new shoes without the slightest discomfort.

My friend Oleg Kakovin, a guy from Leninsk, just could not let go. For three months, he kept fighting with the warrant officers. He would swear at them, but it was pointless. The system was built on the oppression and destruction of the individual. Soldiers are rivets. The goal is to make the person into nothing. When there is no “I,” the color khaki pervades all. As the Soviet rock group Nautilus Pompilius sang: “I haven’t seen a scarier crowd than a crowd dressed in khaki.” Perhaps the same thing happens in western armies.

If my friend Oleg argued or told the sergeant to screw himself, the command would ring out: “Line up, platoon! Three kilometers running. March!” We’d all start running and tell Oleg to cut it out. Or we would be given the order to get up and all of us—except Oleg—would be on our feet. The punishment would be the same: a three-kilometer battle march. But when he refused to obey a third time and we were all forced to run three kilometers as a result, that made us angry. Everyone ran up to him and started kicking him. So you would give up resisting whether you liked it or not. We were disciplined as a group. You simply could not be mouthy or 30 people would get punished on your account. In the end you would suffer. This was very effective psychology. Thank God, I never used this approach in my business relations.

My responsibilities as a border guard included inspecting foreign ships as they were coming into port. We made sure that no one crossed the state border unnoticed and undocumented. It never happened. How crazy would you have to be to want to come illegally into the USSR? There were some that wanted to leave without permission, of course, but it was absurd to think that anyone would want to sneak in! Some Koreans, Japanese, and Chinese did come in legally. We would conduct a formal inspection. Going through the cabins, we saw foreign objects—jeans and magazines—and examined them closely.

This was how I learned my first few words in English:

“Open this.”

Please, go one by one.”

“Show me your passport, please.”

Please, open the door.

In our unit there were two brothers from Bryansk, one of which was a snitch. I beat him up for tattling to our superior, Colonel Zubr, who was scary as hell. If you let one word slip, he would make you dig shit out of the toilet all day long. It was terror: you had to keep your mouth shut and your eyes on the floor. I left the army twenty-two years ago. But if I bumped into Zubr today, I would punch that pig’s face in. Imagine what you would have to put a person through to make him want to kick your head in, twenty years later? And I am not even a resentful guy. I have no hard feelings towards people who have screwed me over, once a year or so has gone by.

* * *

My second year of service was easier, but more hectic too. For the two years I was there I took a break from speculation. After all, it was impossible to sell stuff in the army. My military service marks the only period, two years in all, when I have no memory of doing business. My green shoulder marks kept me barricaded from it. I suddenly had new priorities. I wanted a border guard marks of excellence: level one, level two… The army sucked me in and I found myself working to build my military career, even considering staying on as a warrant officer.

Before I was discharged in April 1988, three of my friends and I applied to serve further. Later, I was even summoned. One of the officers convinced us: what was there to do as civilians? A wide-scale restructuring of the system had begun while we were gone. Everything was a mess. Factory workers were not getting their pay. By contrast, the army meant stability. We were promised full government support, food, and a monthly salary of 200‑250 rubles. Imagine how things would have gone if I had signed that contract! I would be a moron now, a senior warrant officer or captain, stationed in a place like Nikolayevsk-on-Amur.

Border guard captain Tinkov!

But the hand of God was at work. A voice inside me said, “No, Oleg. Go home.” I came to Captain Sayakhov and told him,

“Comrade Captain, I want to take back my application.”

“What! Are you nuts? We’ve already sent everything to Vladivostok and you’ve been approved.”

“I don’t want to be a warrant officer.”

The captain called me an idiot and I was dismissed.

At the same time, Providence protected me from membership in the Communist Party. If you wanted to become a warrant officer you had to be a communist. I even wrote a membership application.

After my discharge, two friends and I flew from Khabarovsk to Kemerovo. From there I needed to make my way home to Leninsk. Gorbachev’s battle with alcoholism was in full swing and it was nearly impossible to buy vodka. We waited in line, bought a bottle, and shared it between the three of us. I got sick, collapsed, and fell asleep right at the station in Kemerovo. I did not manage to get home that night. It was a strange picture: a soldier in full parade uniform with regalia, asleep under a bench in a puddle of vomit. Having slept it off, I went to the house of one of my co-dischargees who lived in Kemerovo. I got a brush from him, cleaned off my clothes, and left for Leninsk.

The army is simply bad, but I am happy that I enlisted. The experience hardened me physically and emotionally. The army is not for the faint-hearted and it is not for little girls. On the whole it was a negative experience and I would rather not go into too many details. Still, I would recommend military service to anyone: you really gain a lot from it and return, ultimately, a new person. It is easy for me to say this, I suppose, since I have already been through it myself. Believe it or not, I can discern to a high degree of accuracy if someone has been in the army—just by having a conversation with him. People who have served have a soundness of mind at their core. In a similar way, I can tell that a young woman is Russian based on a number of factors, no matter how well she speaks another language. I wrote about this in my blog once, which led to a lot of heated discussion.

Let me tell you an interesting story. On February 23, Fatherland Defenders’ day, which is, traditionally, a holiday when women congratulate men for being—well, men—about 200 people filed into our auditorium. I opened the event in the customary way, with a speech. I started with the words “A display of prowess.” I spoke to those gathered about the army, but they seemed perplexed or oblivious. So I asked: “Which of you guys served in the army, anyway?” There were about 150 men present. I was expecting half of them to raise their hands—or maybe twenty, fifteen percent at least. Imagine how shocked I was when only three hands went up. I felt sick, quickly wrapped up my speech and left.

We have a lot of double standards in Russia. The spectacle of white-collar workers, none of whom served in the army, celebrating February 23 in Moscow offices—and with a bang—brings the word duplicity to mind. Either refrain from celebrating the holiday at all, or just call it “Men’s Day,” as though it were the male counterpart of Women’s Day on March 8. These days hardly anyone serves in the army. Who knows if this is good or bad?

One way or another, on May 28—Border Guard Day—I arrived back in Leninsk-Kuznetsky. This holiday is celebrated completely differently now than it was then. You can see crazy drunks in green berets running down the streets of Moscow and St. Petersburg, yelling, singing, and jumping in the fountains.

Dear reader, I solemnly declare that I am not one of them!

Even though I remember well our battle song:

A border guard must follow cruel laws,

We can’t sleep when others are asleep,

You and I, pal, we’re back on duty.

A border guard must follow cruel laws.

We were taught that the USSR border was sacred and untouchable.

We had been warned about the hazing, but none of it happened in our unit. Sure, we washed the floors, while our senior officers did not, but I never got beat up in the two years that I was there.

This letter contains the phrase “the doors of any educational institution are open to you.” I didn’t take it seriously.

 

Oleg Ikonnikov, cyclist:

Oleg and I practiced together, went to training camps, and passed the qualifiers for Master of Sport candidacy. He was a very strong finisher. He’d win the criterium and the group races. He could keep a good pace and hold his own in a team when we went to Russia-wide competitions. Even though his age ought to have put him in the juniors he competed with the grown men. He could have won among the juniors, but he was put into a more senior team to fill in the gaps. If he had stuck to it, he would have achieved great heights. The conditions would have to have been different and the coaches more professional, like in Omsk or Kuibyshev. Whoever got into the Army Sports Club (in Omsk) ended up succeeding. If Oleg hadn’t stopped training, he could have been a champion. He has the talent.

It was hard to get into the ASC. You had to get to Omsk, first, then fall on your knees in front of the coach and beg him to take you. Apparently Oleg wasn’t too interested. The team in Omsk was strong. From there you would get into the Central ASC or into the All-Union team. Once the nineties came, getting into the Omsk ASC was your ticket into professional teams. Of course, back when Oleg and I were training, there was no such opportunity. The ASC in Novosibirsk, though, was run like in a village. There really was no good reason to go there, except as an excuse not to join the army. Coaches should do all they can to keep a hold of and promote athletes like Oleg. But we had to promote ourselves, otherwise nothing would work. But that’s supposed to be the coach’s job.

Chapter 6

There Will Be No Wildfire

I came home from the army certain that I would work in the mines.

I got a call from the Committee for State Security (KGB) immediately. They wanted to recruit me. Because the Border Guard was administered by the committee they told me, “You’re already one of us!” If you paid attention to what I said about the values my father instilled in me, however, you will understand why I politely declined.

I was going to be a miner like my dad! He had just retired, so I figured I could take his place in Kirov Mine. I went and put in an application to work there. But I also thought about how nice it would be to take a vacation beforehand.

I happened to bump into my homeroom teacher from school. She told me she was going to work as director of a Pioneers Camp and asked me if I would like to go with her to get some rest. There was a teachers’ college in our town, which prepared future preschool and primary school teachers. Before placement, the teachers had to complete internships as Pioneers’ counselors at a Young Builder camp belonging to a construction trust located in Leninsk-Kuznetsky. “You’re an athlete. Why not come teach phys ed?” my homeroom teacher asked. I agreed and worked there all summer. I would go to work in the mines in September.

Looking back, I think that June 1988 was the happiest month of my life. It turned out that there were only two men in the whole camp: myself and the art director. The artist painted posters with logos along the lines of “Pioneers ahead!” Unlike me, a good-looking chap recently “emancipated” from the border guard, he enjoyed no success of any kind among the women. If you count all the medics, management, and counselors, the male-to-female ratio at the camp was around 1 to 50. The impact was obvious. I felt like king of the camp! The gains in sexual experience were—fantastic! There were even catfights over me. I had money: that same thousand I had earned from selling the Colnago bike. I bought Hungarian champagne by the caseful—paying 5 rubles 50 kopeks per bottle—and kept it in my room, where we drank. I would get up in the morning to do my workout and the whole camp would laugh at me. The team-leaders understood everything and shouted at me: “Oleg, get some sleep!” They had heard me getting wasted with the girls all night. But I would yell back, “Do some push-ups!”

One day they asked me to lead a game called “Wildfire.” I did not know the rules. In order to get out of it, I had to have an affair with the senior camp counselor. She relented: “Fine. You don’t have to lead the game. Who even cares?” The Pioneers asked me,

“When are we gonna play wildfire, Mr. PE teacher?”

“There will be no wildfire,” I answered with confidence.

The sun, the river, wild berries, girls—what else does a recently discharged soldier need? I’d recommend that everyone coming home from the army work a summer as physical education teacher at a camp. For a soldier, it is as entertaining and romantic as it gets.

While I was at the camp I met a girl named Zhanna Pechorkina. She was doing her internship, working part time in the cafeteria as she prepared for medical school. When I saw her in the cafeteria, about three weeks after I had started working, I knew that my days of fooling around were over. It was love at first sight. She turned 17 that June. Given today’s standards, that seems very young, but this was not so in Soviet-era Siberia. At the time, it was considered normal to have your first child at 18. We went on walks in the forest holding hands. Ah, the romance! An innocent girl—my first true love.

We were inseparable and went to the city together to visit my parents. On June 28, 1988, we got on a yellow Ikarus bus departing from the central market in Leninsk-Kuznetsky and went to the village of Yegozovo. Everyone took a seat; we stood on the floor near the back and kissed. The bus drove at an immense speed and bumped wildly up and down. I wondered why the driver was going so fast. Suddenly there was a crash and a grating sound. I blacked out. The next thing I knew, I was lying on the steps of the bus, which had spun to a stop. Getting up, I saw that half of the bus was missing. The back part of the roof was torn off and the windows shattered. The bus sort of resembled one of those tourist buses in London or Paris. In a state of shock, I started calling for Zhanna. I climbed through the hole in the back of the bus where the window had been. I landed on the road and started looking for her. I found her in the ditch, her dress pulled up over her head so that all I could see were her bare legs and underwear. I told her, “What are you thinking? People can see everything.” I pulled her dress down from her face. And then I saw something that I hope never ever to see again in my life—my beloved girl with no head, in effect. Her casket stayed closed at the funeral.

I grabbed her hand, choked with memory. Then I felt hands grabbing me from behind and I heard someone say, “Get this one to the ambulance immediately!” My head started spinning once I got to the car. I spit and saw eight teeth fall onto the pavement.

What had happened in that fateful moment? As we were standing there, kissing, a KamAZ truck, driving too fast, hit the side of our bus. A pole broke loose from the force of the impact and I was thrown to the floor and onto the steps. I did not fly out of the bus and that saved me. Zhanna had been standing with her back to the pole, while I faced her. The pole just ripped through her head. She got the brunt of the blow, while I was hit with less force. Because Zhanna was six inches shorter than me, she got hit in the head, while I was struck in the teeth. Essentially, she saved my life by blocking the blow with her head. It is ironic that this happened just as we were kissing.

This was the first time that my life was spared. The Lord protected me… I was taken to the hospital. I underwent multiple surgeries. Investigators came and got information from me. I was totally devastated by this tragedy. What a thing for a twenty-year old man to suffer…

I could not look our mutual friends in the eye; I could not look at her parents or at buses or at the town. As Nautilus Pompilius sings: “I looked at these faces and couldn’t forgive them for being able to live without you.”

I had to leave Leninsk-Kuznetsky.

One day I ran into my friend and neighbor Yura, who lived across the way from me on Kooperativnaya Street. He told me that my other neighbor Vitya Starodubtsev had moved to Leningrad in order to attend school at the Mining Institute. Yura and Vitya explained that it was not that complicated. All I had to do was to get a paper from the mine saying that I had worked there. On top of that, I had already completed my military service. I was fascinated and inquired as to when they were accepting applications. It turned out that I had only one week left. My friend Edik Sozinov, who was still living in Leninsk, helped me. Quickly, we gathered all of the required doctor’s notes and I got a letter from the mine stating that I had worked there for nine months. Once I had all of my documents together and had put on my junior sergeant’s uniform, I got on the train and left for St. Petersburg to start school. To stay in Leninsk would have been unbearable.

About ten years ago, I met up with Edik. He told me,

“I remember how we took you to the train station. But no one believed you’d finish what you set out to do.”

I am not so sure that I believed it myself. I was absent for almost all of my last two years of high school. I then served two years in the border guard, which most likely did nothing for my intellectual capabilities. Who knows what kind of impudence it took to think that I could get into the Leningrad Mining Institute, the top university in Russia, established during the reign of Catherine the Great!

I returned from the army in 1988, grown up and hungry for sex.

Looking back, I think that the happiest time of my life was spent working at the Pioneers’ Camp in June 1988

Lidia Irincheyevna Baturova, Oleg Tinkov’s homeroom teacher:

I met with Oleg’s class twenty-five years after their graduation. The kids told me what they had achieved. Fourteen of the students finished school with B’s and A’s, but none of them managed to achieve Oleg’s level of success.

When Oleg Tinkov’s generation was growing up, there were eleven mines and factories operating in Leninsk-Kuznetsky. Later, everything shut down. Circumstances during the stagnant Soviet period were stable at least: you finished school, attended an institute or technical school, got an education, and then went to work. Now these kids had taken their first grown-up steps at the end of the eighties, when the country was in turmoil. Few had managed to stand up to the revolution in our way of life.

All of the social facilities that existed then have closed down: the schools, preschools, and stadiums. The stadium and gym where Oleg grew up and trained as a cyclist have been demolished. There are only five mines in the city now and five of the other larger enterprises have been closed as well: the yarn plant, the light bulb plant, Kuzbasselement, Khimprom, and the clothing factory. Thousands of people were thrown overboard, in a manner of speaking. As a consequence, these people were unable to provide a good education for their children. The tragedy in small towns today consists in the fact that children have no opportunities for development and nowhere to go. I’m already teaching the children of my former students and I can say that it’s a rare thing to see someone achieve a level of education higher than trade or technical school. Only a very few individuals are capable of breaking free and going further. The children lack the finances and the motivation. Once Oleg had gotten on his feet, he came to Leninsk-Kuznetsky with his kids and brought them to see the school. His daughter Dasha, who had just returned from America, asked,

“Dad, I can’t believe kids actually go here.” The school is small, poorly maintained and has no funds. So Oleg decided to help. He was the first graduate of the school to donate money for repairs and equipment for his class. He wanted the kids to see that you can succeed through knowledge and schooling. I’m grateful to him for using gifts to encourage people in the right direction. His charity gave rise to a conundrum in the graduates’ minds: why is he able, but we are not? A whole movement was started. Everyone wanted to help out as much as they could.

The municipal school board received an official charitable donation in the amount of 150 thousand rubles. The bureaucrats decided to hold on to the money for a while in order to profit from it. I received a call from Oleg, who was in Italy at the time:

“Did you get the money?” My answer was,

“No.” He started swearing,

“Don’t just gape, find it!” He gets like that sometimes. I got in contact with the local criminal authorities, some of whom I had taught in school. Immediately, the money was found.

The municipal school board accounted for every kopek. And I had to keep Oleg just as informed as I was. I know my student. He can be very nice, but when it comes to money, he’s incredibly strict.

We ordered new furniture for the classroom, but it was taking forever for the delivery to come. September 1 was just around the corner. Once again, I had to involve the criminal element. These guys like Oleg a lot and respect him for helping the school. They drove to Kemerovo, where the furniture manufacturer is located. As a result, the furniture arrived the following day. Everything was assembled and set up over night.

When Oleg came, I showed him everything: the new windows, the newly laid linoleum floors, the desks and chairs, the board, the TV-VCR combo, the video camera and the audio library for geography class. It seemed like his mind was elsewhere, but he took note of everything and was interested in the details. He hadn’t just doled out the money like an aristocrat—he wanted to be sure that his money had been put to good use.

The next time he came to see what we’d done, everything had been set up. We reminisced about the new furniture that was brought to the school in the summer of 1980. We workers at the school, as well as the kids and parents, assembled everything ourselves. All of the chairs were still in tact, including the one that Oleg had put together and signed with his name over 20 years ago. We had his son Pasha sit on that chair.

This wasn’t the only time that Oleg helped the school board. We really wanted him to build a school, but he decided to build a playground instead, along with Natalya Vodyanova and Alexei Prilepsky. Good for him! I value his humanity. When he comes to visit, you never get the impression that he’s stuck up or seeking attention. He always asks about everyone and takes an interest in how things are going and who needs help.

That last time we got together as a class, we noted with great sadness that six of the students have now passed away. All of them were Oleg’s good friends. Each of them went down a different path. Some got involved with organized crime and two girls drank themselves to death. Their male classmates can’t believe it.

Some of my earlier graduates fought in Afghanistan, and some of my more recent ones served in Chechnya. The have found it difficult to readjust to normal life.

To tell the truth, some of the groups of kids I’ve seen through to graduation ended up much worse off than Oleg’s class. In one class, for example, all but one of the boys served time. Many have died. The neighborhood where Oleg grew up became a hotbed of drugs. Thanks to sport, Oleg was able to catch hold of life and get further than these others.

My memories of Oleg are all good ones. He can be harsh and severe, but he always keeps his head about him. I really hope that he retained his grasp of, and sensitivity to, the situation at hand. This is a skill we lack. May everything be good for him.

Young people are living a modern life. You are insiders. We stand at the curb and can do little to affect what’s going on—except through you. Students are smarter than their teachers. We provide a base; we lay a foundation. What grows from this is up to the child. Every student, no matter who he or she is, is unique. As long as you don’t put too much pressure on kids, they will rise by themselves. My motto is “Teachers should bring up children so they can be learned from.”

Chapter 7

Change! We Wait for Change!

When I applied to the Leningrad Mining Institute, the physics professor took pity on me. At the exam I could not explain Newton’s second law. He looked at my sergeant’s shoulder marks, and my badges of excellence from the border guard and said,

“Do you promise to bring your physics up to snuff before the start of the semester?”

“I promise!”

“Okay, I’m giving you a C.”

“Thank you!”

I was really pleased, considering that I had already been given B’s in composition and math. I got in! It was a good thing that I had come dressed in uniform. Otherwise I would have ended up at Moskovsky Station waiting for a train to Leninsk-Kuznetsky—something I did not want at all. I cannot remember what that professor’s name was, but I would thank him, if I were to see him again, for offering me the chance to give life in Leningrad a shot.

Strangely enough, I did well in school. Because I had barely made it into the program, I had to promise myself that I would study hard. I sat in the first row, the best place for absorbing knowledge. I can still remember our math professor, Lobazin, and our physics professor, Mezentsev. If I could not understand something, I would come up to the teacher after class and ask him to explain further. My studies bore fruit: I was the first in my class to write my final exams and I was even one of only four students who passed physics on the first try.

At the institute I met the most cultured intellectual people. The best people in the country. The professors were the embodiment of intelligence. Their speech, their approach to the material, their love of liberty, and their ambition captivated me. It amazes me to think that such obviously anti-Soviet figures could end up teaching in a state-run university in the USSR. They criticized Soviet authority—some of them doing so indirectly, but the more courageous ones just telling it like it was. Some of them would make post-lecture announcements such as, “Remember, Nautilus Pompilius has a concert tonight.” The professors at the Mining Institute planted the seeds of nonconformism and inner freedom in me.

I do not know how things were in Moscow at that time, but in St. Petersburg everything was light and color. After its founding in 1703, the city was originally the freethinking capital of Russia. The Decembrist uprising of December 14, 1825, the workers’ revolt of January 9, 1905, and the 1917 revolution all happened there. It is not surprising that the years 1988-1990 saw an intensification of anti-Soviet sentiment in Leningrad. I just cannot understand why there has been no protest in St. Petersburg during the current stagnant period in our country.

Back then, freedom was in the air. I was really excited about all of it. I remember buying a badge reading, “Yegor, you’re wrong!” The slogan referred to Yegor Ligachev, who had interrupted one of Boris Yeltsin’s speeches, saying, “Boris, you’re wrong. It’s not just tactics that make us different now. Boris, you possess a great deal of energy, but it’s not creative energy. Rather, it’s destructive.” People decided that Yegor was wrong. We supported Yeltsin because we believed that he would save the country from communism.

Of course, it was Mikhail Sergeyevich Gorbachev who got the ball rolling. He had the strength and courage to take down the Soviet system from the inside. Of all the leaders of the USSR and Russia in the twentieth century, I respect him the most. He was a member of the communist mafia—there’s no other way to put it—and decided to fight against it. He was a rule-breaker. He broke down the very organization of which he was a part, in order to offer us freedom.

A lot of people say that Gorbachev had no choice—that everything would have unfolded exactly as it did regardless of his involvement, but I disagree. I think he had a choice. He could have tightened the bolts, as Andropov did in 1982-1983. But this was a person who had been elected as the General Secretary of the only political party in the country—and it turned out that he held democratic and liberal views. Gorbachev is the sharpest and greatest Russian politician ever. It is not for nothing that he has garnered praise and respect in the West. The only thing that he did wrong was the alcohol reform. Without a doubt, he will go down in history as the man who put an end to communism. Yeltsin will be remembered as Russia’s first president. Lenin and Stalin will be remembered too, but with the least fondness. As for the others, my gut feeling is that their memory will be all but erased.

It is a shame that Mikhail Gorbachev is now isolated—both from political decision-making and from the media. It really is too bad that we see and hear almost nothing of Mikhail Sergeyevich. Sometimes you see him in advertisements for Louis Vuitton and Pizza Hut, but that is just silliness. A politician of his repute should not have to go to such lengths.

When he dies, we will cry. We will pay him our respects and remember what a good person he was. For now though, as long as he is still with us, I would like to express my gratitude to him for conquering the communist dragon.

Mikhail Sergeyevich, THANK YOU! My deepest respect!

We still hear the voices of those idiots that praise the Soviet Union. What is there to praise, anyway? It is unfortunate that those in power in Russia today often appeal to the USSR. Some even anticipate its restoration. But that is something that I would most certainly not want to see. I would not want to see a specific quota of mohair scarves allocated to Dushanbe, Tajikistan, where the coldest it gets is plus 10. Nor would I want to see big shipments of plastic ice hockey sticks being sent to Tashkent, Uzbekistan. The Soviet economy was inoperable. The system’s collapse was just a matter of time. And then there was America dragging us into the arms race. But even if that had not happened, the crash would have been inevitable.

In the last few years we have seen a governmentalization of the economy; once again, today, we see socialism baring its teeth. Half of the economy now hangs on Gazprom, along with some soccer and hockey teams. We are treading water, in spite of Gorbachev’s breakthroughs and in spite of the work that Yeltsin did towards accelerating our country’s development. We have strayed from the path. We have taken one step forward and two steps back.

I would stress that my argument must be understood from an economic standpoint. I am no political scientist or politician. I do not know how many parties there are in the country. But I am certain that there are more than one. The economy must operate in accordance with capitalist mechanisms. It is the best approach that we have thought of. Take, for example, communist China’s economic successes. They are based on market principles. In this respect, their approach has not been socialist in the least.

In the summer of 1988, before I started my studies at the Mining Institute, the nineteenth Party Conference was held. At this conference, changes were announced, changes bearing on the Communist Party of the Soviet Union. It had become clear that communism was weak and could not last. The wind of change was blowing from the Baltic Sea, the Bay of Finland, and from Europe. The Scorpions would sing about the wind of change in the nineties. In Russia, the rock group Kino was already singing about it:

Change! Our hearts require it.

Change! Our eyes need it.

In our laughter and tears and in our pulsing veins:

Change! We wait for change!

Thanks to the new policy of openness, or Glasnost, we were now able to discuss politics openly. Alexander Nevzorov hosted his edgy show, 600 Seconds, and the movie Assa by Sergei Solovyov was a hit like no other. The contemporary music scene fed the fire as well, by bands like Alisa, Kino, Nautilus Pompilius, Televizor, Brigada C, and Pop-Mekhanika. I went to Kazan Cathedral, where the punks gathered. I saw Viktor Tsoi playing hacky-sack; I hung out with Boris Grebenshchikov in the street and met Sergei Kuryokhin on Nevsky Prospect.

During my very first semester at the institute, our trigonometry professor told us about Anatoly Sobchak, a teacher at a nearby university. Sobchak’s star was only starting to rise. He was fighting for the most basic of western values: democracy, individual liberty, and private property.

At the end of the 1980s, we believed that everything would change and we would be the ones to make it happen. There is a reason why university students are considered key to revolutions. In spring 1989, a miracle happened: we elected Anatoly Alexandrovich Sobchak to the USSR parliament, representing the Vasilievsky Island District 47. I am glad that my vote played a part in that victory. Sobchak could not win in the first round, even though he had a majority of votes. But in the second round his win was unequivocal. One of the voting stations was in our dormitory in Building 5, Shkipersky Stream.

I fell in love with St. Petersburg. Vasilievsky Island, the buses full of foreigners, the imported goods, the colored lights, the wide prospects, the steamships—it was a country boy’s dream come true, especially after I had come so close to becoming a warrant officer. I just went crazy. I was in awe of the wealth of knowledge available at the mining institute, the statues by the entrance, the huge staircase leading down to the Neva River, the neighboring Baltic factory, where a reconstruction of the icebreaker Lenin was on display. I had only ever seen such things on TV. I would call my state upon arrival in Leningrad euphoric. It was as though I was high all time.

Ever since, I have had my own special relationship with the city. It was in this great, beautiful city that I grew up and became the person and the businessman I am today. It is disappointing to have to say it, but I am not a native Leningrader. And yet I am probably more of a patriot than many who were born there. Of course I consider myself Siberian, but after thirteen happy years in St. Petersburg, I am a most genuine Petersburger.

I went to university in this city, I met my future wife there, and this is where I started nearly all of my businesses. No city in the world has given me anything remotely like what this city has.

So I’ll quote Iosif Brodskoi:

There’s no country or graveyard,

Which I would prefer.

It’s on Vasilievsky Island

That I’ll be interred.

I associate the Leningrad of the late nineteen-eighties with the rock band Kino and its lead singer Viktor Tsoi.

My Baptism

In December 1988, I went to Nikolsky Church to be baptized. The priest asked me,

“Do you know the Lord’s Prayer?”

“No.”

“Then I can’t baptize you. Go learn it.”

I memorized the prayer on the plane on one of my trips to Siberia. I still remember it:

“Our father, who art in heaven. Hallowed be thy name. Thy kingdom come, thy will be done on Earth, as it is in Heaven. Give us this day our daily bread. And forgive us our trespasses, as we forgive those who trespass against us. Lead us not into temptation, but deliver us from evil. Amen.”

On December 25, 1988—my birthday—the priest baptized me.

Chapter 8

The Mining Trade Institute

The Leningrad Mining Institute is the oldest technical school in Russia and is, for all intents and purposes, where international mining science originated. Because of this, at the end of the eighties, the Institute’s student body included people, not just from the socialist camp, but Americans and Western Germans as well. For the most part though, international students came, naturally, from “third-world” countries in Asia and Africa.

When they came back from holidays, they would bring merchandise with them. A lot of them flew through Berlin, while students from former French colonies (Algeria, Burkina Faso, Côte d’Ivoire) had stopovers in Paris. They all wanted to earn some extra cash. They came to Russia with jeans, perfume, and cassette tapes. After exams were over they would return home with their money in foreign currency—dollars, marks, or francs.

The foreigners were not good at selling on the street. Maybe they were just scared to do it. Instead they sold their goods to Russian speculators, like me. On the street, my profit would reach fifty to one hundred percent. I lived off this margin. To tell the truth, though, I did not save much as we loved to party in the dorms.

I soon realized that, in Siberia, goods that were in short supply could be sold for twice as much again. For instance, I could sell cosmetics kits in Leningrad for 25 rubles, while in Leninsk-Kuznetsky they sold for 50. Lipstick was 15 rubles in the city, but 25 in Siberia. Of course, when I could, then, I tried to sell in Siberia.

In Leninsk I would come to the shoe or yarn factory, which were staffed mostly by women. Because they would not let me in through reception, I had to climb through a window. The workers already knew that there was this guy named Oleg from Leningrad and that he traded in scarce, imported products. I was able to make even more money there than I would have if I had sold the stuff at the local market. This was because the women liked the idea of making their purchases from the comfort of their own place of employment. This is just another example of the importance of service in business.

(I still remember the lessons that I learned then. In particular, the savings program launched in 2010 by Tinkoff Credit Systems is based on the same principle: a bank representative comes to where you are when you want to open an account.)

Of course, sometimes, the merchandise turned out to be complete crap. Once I bought lipstick with glitter in it from some Gypsies on Staronevsky Prospect. Later I saw how they made it. They would take shiny chocolate wrappers, cut them into tiny pieces, and add them to the lipstick.

In the main, I sourced my merchandise from foreigners. Another source, however, was a fellow student at the Mining Institute, Igor Spiridonov. He was from Prokopyevsk in Kemerovo Province. Igor sold in small bulk: cosmetic kits came in full boxes; lipstick in blocks of 100 each; VHS cassettes in packs. I bought my first consignment in cash and sold the goods individually in Siberia. A week later, I bought more. Because Igor and I were fellow Siberians, he offered me a larger consignment and said I could pay him back after I had sold the product. In this way I made money off the difference with no investment.

At one point I was flying three or four times a month. I would load up a couple bags, buy a ticket to Kemerovo for 60 rubles, and then sell the goods in Siberia for twice as much or more than they would have cost in St. Petersburg. Of course my trips were not just about business. I also spent time with my friends, Edik Sozinov, Alexei Smirnov, Zhenya Brekhov, and Alexei Prilepsky. I even convinced the latter two to apply for university in Leningrad.

Later, I started bringing stuff back to sell. A group of Yugoslavian construction workers were building a hospital in Leninsk-Kuznetsky. They lived in what was called the Yugoslavian Village, in trailers. They brought German marks with them from Europe. You could not buy anything in Soviet stores with foreign currency, however—be it vodka or treats for the girls. Because the Siberians had no need for foreign money, I bought the marks from them at a ludicrously low price and sold them to speculators on Vasilievsky Island. If I remember correctly, they cost me five rubles each and I sold them for nine. Such was the Soviet Forex!

Most of the people studying at the Mining Institute were from regions where there was an active extraction industry. There were a lot of students from the Kuznetsk Basin, Don Basin (Donetsk, Chervonograd and Shakhty), Vorkuty, and Ukhty. There were a few students, too, from Slantsy and Yakutia, where diamonds are mined. I tried to stick with guys from Kemerovo Province; we were from the same area and I was used to trusting my own. I considered them more reliable and understanding.

But this approach almost backfired. Vitalik from Kemerovo, who was about five years older than me, got me involved in some shady dealings having to do with gold. And I crossed a few lines. I am ashamed to admit it, but it got to the point where I was taking part in some straight-up thievery. Thank God, I had the strength and soundness of mind to get away from these people. The Lord led me away. They wanted to expel me from the Institute. I lost so much. Worst of all, I lost my good name in the dormitory. The most important thing, though, is that I stopped hanging out with that crowd.

So why am I writing about this? None of us is perfect. Young men arriving in a new city are bound to get mixed up with bad apples. You have to try your best to avoid them, but if it is too late for that, then you have to have the strength to walk away. Now, I never judge people for their mistakes—remember that even Pinocchio got mixed up with the wrong crowd. But he showed what his character was like by breaking away. I was like Pinocchio in that story. I was led astray by their high life: the restaurants, discos, and strip clubs…it was all so tempting. After all, before I came to Leningrad I had not even seen the inside of a restaurant, really.

One way or another, I decided that I would never become involved with crime. And although the article against speculation was only removed from the Criminal Code in 1991, it had been largely unenforced for a long while before then. Undoubtedly, I should have been more careful, but I was afraid of nothing in pursuit of the good life. I had to keep speculating.

Every day, during our long break after second period, we speculators would meet at the Mining Institute, in a wide square hall, which we called the “meeting spot.” People could get onto campus without documents and speculators from various neighborhoods, from places like Aprashka (Appraising Door) and Galyora (Gusting Door), came to the Institute to buy product. The meeting spot was a place of intense commercial activity. Items for sale included clothing, appliances, and electronics. Currency was also exchanged. Trade was evolving. At first clothing and perfume were the most sought after items; later, demand for electronic gear grew. For two years dual-cassette tape recorders were all the rage. We called them soapboxes.

The Mining Institute speculators were famous far and wide. Even though the large Leningrad State University was also located on Vasilievsky Island, our speculators put theirs out of business. In essence all of the city’s dormitories were controlled by people from our Institute. Some of our students came to school in 2107 and 2109 model cars made by AvtoVAZ, which were considered fancy at the time. Just imagine: these were students who were receiving a stipend of 50 rubles and they were driving new cars that cost 20-25 thousand rubles on the black market!

Looking back, I can say that it was at the Mining Institute that trade in St. Petersburg made its start. Now, the city is full of businesspeople that attended my school. I am sure that for all of us, our thoughts take us back, now and then, to that long break, to the meeting spot, where we grew up. There are people in the highest echelons of business, today, that were there with us in the beginning, with us early speculators—including the founder of the retail chains Lenta and Norma, Oleg Zherebtsov. He came from the Kabardino-Balkarian town of Tyrnyauz to study at the Mining Institute. We met right after moving into the dorm, when both of us came to the laundry room to wash our socks. My deepest gratitude goes to Oleg because he advised me to use the Soviet Regional Supply system in my sales. But more about that later.

We students made money any way we could. I would buy vodka at the store, during the day, and then sell it in the dorm, at night, for 20 rubles. Some people accused me of being an animal for this, but I disagree. If you do not go to the store, during the day, to get your vodka—and you want some at night—then you have to pay up. Nothing is free, including drink, when a sudden urge to have some sets in. My fellow students would get mad about it, but they would buy the vodka. One kid got a VCR from his parents and he used to charge a ruble to anyone who wanted to watch a movie in his room. All was right and fair: the VCR was an asset and assets should bring you profit. We would stay up all night watching movies starring Sylvester Stallone, Bruce Lee, and Arnold Schwarzenegger. We thought action movies were the height of cinematography.

* * *

I liked it in Leningrad, but I missed my friends in Leninsk dearly. In the winter after I had finished my first midterms, I almost made the biggest mistake of my life. There was a university transfer system in the Soviet Union, which allowed you to transfer to a more prestigious school after you had been accepted to a lesser one. In the winter of 1989 I went to the Kuznetsk Basin Polytechnical Institute in Kemerovo. Like the Mining Institute in Leningrad, it trained future mineworkers.

The young woman in the transfer department looked at me like I was an idiot.

“What! Are you stupid?”

“I’m sorry. What do you mean?”

“We have fifty students waiting on transfers from Kemerovo to Leningrad. What are you doing, man? Don’t screw around.”

She changed my mind; I withdrew my transfer documents. I feel like God was at work here too. That girl at the Institute could have taken all my papers without saying anything. I probably would have ended up working as an engineer or something in the mines in Leninsk!

Cosmetic kits cost 25 rubles in Leningrad. In Siberia, their price was double.

One of my first investors, Oleg Korostelev, his wife Vera, Rina, and I in Morskoi Restaurant.

 

Eduard Sozinov, a friend of Oleg’s from school:

Every time Oleg came to Leninsk-Kuznetsky, he would bring something to sell. It was the simplest way to make extra money. Before, this was called speculation; now we call it business. At the time, though, I thought it was a completely normal thing to do. He’d bring jeans and coats people had ordered—in small amounts, though. Mostly he sold cosmetics, however. Women go crazy over things like that and the stores didn’t carry anything. Lipstick and perfume sold like hotcakes, because the price was reasonable. Jeans, on the other hand, were something very few people could afford…

Igor Spiridonov, Oleg’s business partner during his university years:

I lived in a dormitory on Maly Prospect (Oleg lived on Shkipersky Stream). Oleg had good connections when it came to sales in Siberia. I knew where you could get stuff cheap in Leningrad. During our early days of speculation, the main products were clothing and toiletries. Later we started speculating on currency and electronics and started making grown-up money.

The first time Oleg came to my dorm on Maly Prospect, he told me that he was from Leninsk-Kuznetsky (we were practically neighbors, as I was born in Prokopyevsk in Kemerovo Province). He had heard from someone that I had merchandise for sale. A week later he came back and said he had sold everything. “Nice turnover,” I thought. Mostly Oleg bought cosmetic kits, VHS cassettes, and lipstick. Later on, like good neighbors, we agreed that he would take a bigger shipment of merchandise to Siberia and pay me when he got back.

Chapter 9

Gangster Stories

In Leninsk-Kuznetsky I saw some real tough gangsters. When I moved to Leningrad, I came into contact with athletes who called themselves gangsters. They were from Tambov, Kazan, and Vokruty, and because they did not know how to do anything else, they took up hustling. You would join a gang based on what part of the country you came from. Unlike in other cities, in St. Petersburg there were few people from the south. Chechens and Dagestanis played only a minor role there. The top guns were from Slavic gangs, which were dominated by former athletes. They were not really gangsters in an ordinary sense.

At the end of the eighties in St. Petersburg, if you were doing business then gangsters would inevitably become involved. This happened, for the first time, when I managed to sell a can of black caviar to some foreigners at the Pribaltiyskaya Hotel for fifty dollars—an insane amount of money at the time. It was the first time I had ever held a fifty-dollar bill in my hand. I nearly went nuts. To my dismay, the in-house gangsters saw me making the sale and decided that they deserved a cut. I had to escape through the restaurant kitchen, running past the frying pans with food cooking in them, just like in mafia movies.

The Mining Institute was under the protection of some guys from Vorkuty. They were big and aggressive and liked to rock it out at nightclubs. You would not say that they were well-structured, but they sure had biomass. The prostitutes on Vasilievsky Ostrov paid them for protection, as did the currency dealers and rich kids who sold matryoshka dolls. This was nothing serious, just old-fashioned racketeering. Now I realize that the gangsters did not make all that much money, but at the time they seemed super-rich, driving 2109 Ladas and eating out at restaurants.

My first encounter with the Vorkutians came when I was in my first year of university. I and our Komsomol rep, Vitya Cherkashin, were returning home from the pub across from Kazan Cathedral. We were a little tipsy when we got back to the dorm. We noticed the Vorkutians loitering there, as they often did. Their boxer, Igor, was harassing people and a few of the others stood nearby watching and laughing. Vitya and I were walking down the hall. They were walking towards us. I was certain that we were going to get punched and possibly kicked. If we pushed up against the wall, they would take exception; if we walked straight towards them, they would get mad. They would get pissed no matter what. Once we had reached them, the boxer took his stance.

“Whatchya gonna do, Tinky?” he sneered.

What was I to do? The beer and lack of options gave me the guts to act. I had nowhere to turn. I remember that I had been taking boxing at the Mining Institute for six months, at that point, and we had only worked through one punch—the right straight. I did not think about matters for long. I took up my position and followed through with the punch. It was a good hit, for me, but not so much for Igor. I got him in the jaw. Boxers know that this is the worse place to be hit—you can fall down immediately. I thought it was over, that they would kill me. Contrary to what I expected, though, his buddies, who were standing close by, opted not to get involved. None of them wanted to go down second. They just shit themselves! I shouted something along the lines of,

“That’s what’ll happen to every one of you!”—and withdrew.

Realizing I would be screwed if I stayed around, I ran out of the dormitory five minutes later, caught a cab, and went to my girlfriend’s place. She was studying economics and lived on Bolshaya Morskaya Street. The next day, after class, I came back to my room. I sat waiting, knowing they would be coming. The ringleader entered and said,

“Oleg, I think we need to talk.” As we went out, I took the jack-knife that Andrei Pavlov and I used to cut up potatoes with me. On the way I opened it in my pocket. I would not have had any qualms about using it. Thank God, I did not need to in the end. Igor had not yet completely recovered from the blow. He started getting aggressive. “Well, what are we going to do? You hit me first, and that’s just inexcusable.” Then he started babbling. They must have realized what they had come up against and wanted to somehow save face by turning the tables. In the end though, we made up. Later, whenever we met in the hallway, Igor would instinctively step out of my way. It must have been quite the punch. My advice is that it is always better to have the first strike. It is the best way to make yourself understood. Otherwise you will be hit first.

Suddenly, I was recognized all over and my reputation inched upward. One fine day during the long break, some strong men from Vorkuty, wearing black leather jackets, approached me.

“We’re going outside. We need to talk,” one of them said.

We went outside and stopped on the staircase in front of the chemistry department.

“So, you’re selling here?” one asked.

“Yeah, I’ve been trying to earn some money.”

“You’re going to have to pay us. You’ve got to feed the bros.”

“What does this have to do with me?”

“Listen, you! Are you looking for trouble?”

Of course I was already prepared for this moment.

“I couldn’t care less who you need to feed. I have a dad, mom and brother. They’re the only ones I owe anything to—no one else. If you harass me again, I’m writing a police statement.”

“Listen, what the hell is your problem? Don’t you know the rules?”

“I’m not interested in your rules. I set my own.”

“Okay, fine. What point is there talking to this piece of trash?” They threatened me and left.

Naturally, I never had to deal with them again and I kept on working.

Ever since then, I have understood that the dumb underdog gangsters are easily scared, while their leaders should be used; you might borrow money from them. They are rich and they have their head on their shoulders. Later on, I borrowed money from certain organizations, understanding clearly that they were controlled by people whose names were often mentioned in criminal histories. I took loans from them rather than from banks, at interest rates that were reasonable—to say the least. Should it make a difference where I get my loans? They had capital and I did not have the money I needed for various projects. And you would never hurt someone who owes you. No one would. They thought they were using me, but, in my view, they were the ones being used. Not many of those people are still alive today, although now and then I do see some of them around St. Petersburg. Now they have realized who was using who. After all, I was paying them at a fixed interest rate, but in the end their money earned me much, much more.

In the 1990s gangsters liked to follow a scheme called “raising hogs.” They would give money to an entrepreneur, would get a share in the business, and then, when the company started to go under, they would milk the owner dry. Or kill him. I would never give gangsters a share in my business, because it always ended badly.

During those times, I had to be on guard, constantly, and I had strategies for ensuring my safety. Think, think, think! I had to watch every step to myself keep on track. Now, I make good use of the know-how I acquired while working with the Leningrad mob. One of the things I know well is how to write a police statement. If someone bothers me, I will write everyone, starting with the president. I earn my money honestly. Let them deal with the drug dealers, tax evaders, and traffickers. Thieves rob other thieves. That is not my problem. Here is my advice to those just starting out in business: do not be afraid to voice your concerns when you have a problem.

As long as he has something to hide, a businessman will always fall victim to extortion. For the moment, unfortunately, law-abiding businessmen are few and far between. A lot of people want to get rich in six months, buy a yacht and plane, and move to Monaco. In order to achieve this, they avoid paying taxes, or customs duty, and they bribe officials. They give extortionists something to work with.

My situation is different. I have been laboring hard for 20 years and yet I have not acquired anything extraordinary for myself. Compared to the average man, I am very rich, to be sure. But from the point of view of the richest, I am poverty-stricken. I am not accustomed to fast money and I am not willing to break the law in order to make a profit. I will not go against my own conscience. That is why I will not let anyone make my life difficult. It would be unfair. I will protect my rights by whatever means possible. As for those who steal from their country or from others, their lives should be made difficult. You must not forget, I have a home in St. Petersburg and a lot of my friends are high up now. I am respected. I receive offers of help as soon as I have a problem. A lot of people might say, “Well, I haven’t got any influential friends from St. Petersburg!” I am just saying that you must use your head and act in a way that protects you from harassment.

Again, I never got involved in any business with a really high profit margin that would be of interest to the mafia. A lot of my friends and other acquaintances have been killed, sometimes for no apparent reason. But I have never had bullets flying by my head—not even during those dark and dreary days when human life had lost nearly all its value.

I do have one story involving bullets, actually, but it has nothing to do with business. It was December 25, 1992, and I was celebrating my birthday in the Pribaltiyskaya Hotel. After dinner I invited all of my guests (there were eight or ten of us) to the dance club Eldorado in Karelia Hotel. It was controlled by thugs from the town of Tambov. A few of them sat a couple of tables away, giving us dirty looks. As the night wore on, most of the girls left the club. Finally, our wives were the only women left. One of the smaller thugs, who wore a cap, came up to Rina, pulled at her hand and said,

“Come on. Don’t ya wanna dance?”

I took hold of his hat, pulled it down over his face, and told him to you-know-what off. He hit me first, I hit back, and so the fight started. There were five of us and nine of them. The police put an end to the fight, but the gangsters went outside, got in their cars, and waited for us. The cops that worked at Karelia enjoyed some kind of relationship with the gangsters and maybe even got money from them. The policemen told us straight up,

“Guys, you’re screwed. You’ve got no chance. Get whoever protects you in here, otherwise you’re dead.”

The cops were slow to understand their predicament. Half an hour later they realized that if we were killed, they would get in trouble too. In view of this, they offered to take us to the station. They backed a police van up to the exit and one by one we jumped inside. When they saw that we were going to get away with our offensive behavior, the gangsters drew their guns and jumped out of their BMWs.

The cops started shooting into the air.

“Everyone in your vehicles!”

When the van started moving, the mob cars followed us. They followed us all the way to the station. I was on the edge of my seat, as though I were in a movie. When we got to the police station, we were put in a cell. The police told us to wait until morning and then to call whoever it was that protected us to come pick us up. I really value my freedom, but I was totally fine with spending that night behind bars. By morning, the thugs had gone. We all went back to our homes and for the next couple of weeks tried not to stray outside.

 

Eduard Sozinov, a friend of Oleg’s from school:

The street fighting in Leninsk-Kuznetsky stopped after we were discharged from the army in 1988. The reason was the rising popularity of drugs. Within what seemed like moments, everyone united and became friends and brothers. At first grass and bud were the mainstay, but later on heroin made an appearance. During the early nineties, the shit infected the city and a lot of our peers died. Practically every single young adult used. No one tried to avoid it. At least everyone tried it once. I’m not sure about Moscow and St. Petersburg, but I think that drug-use thrives to this day across the country.

During those terrible, dark times, Oleg tried his best to stay away. The place was a cesspool of drugs and murder. For several years the shootings and funerals were incessant.

Oleg took pains to be careful. He made sure no one knew he was coming. One day, we were told some people were looking for him; it sounded as though they wanted to kill him. The boys had found out that he had money. They wanted to take everything they could from him. Probably the first order of business was to track him down, harass him for money, and then, based on his reaction, decide whether to put the squeeze on him further.

Oleg used to say that you could actually talk to the gangsters in St. Pete’s, but the ones back home wouldn’t listen, no matter what you said. He never even tried talking to them. Still, his trips were frequent, because he had to keep up his business in Leninsk. And he had to visit his parents. For safety’s sake, he avoided spending the night there. We found him a rental each time he came.

After the collapse of 1991, Oleg brought a large consignment back home. There was wine, vodka, and some kind of clothing—denim skirts, perhaps. The city bomb shelter was stuffed full. But there was a robbery and a lot was stolen. Oleg even went to the police, but they ended up finding nothing. It’s a good thing that Zhenya Brekhov and I had sold off some of the vodka and wine to various stores the day before.

Chapter 10

The Girl from Estonia

The dorm on Nalichnaya Street housed students from various faculties of the Mining Institute. I met an awesome girl there, at a dance, in April 1989. Here name was Ira. We danced and I fell in love. I always try to bring things to their logical conclusion. That night, though, it did not work out. The night was nearing its climax and I noticed that she had disappeared. She must have gone to her room. My search turned up nothing.

The next day I was walking by the math department and saw her (or was it someone else?).

“Ira! Hey!” I said with a start.

“I’m not Ira, I’m Rina.”

That is how, thanks to a random dance with a girl named Ira, I met my future wife, Rina. It was not until twenty years later that we were officially married—but more on that later. The next time we met was two months later, in June. I had gone into the grocery store at the corner of Gavanskaya Street and Shkipersky Stream to buy some sausage. As I stood in line, I noticed the same girl that I’d seen before, as I was walking by the math department—Rina.

I bought her a birch beverage for 11 kopeks and she had the indiscretion to tell me her room number. The following Saturday, I and my friend Edik, from Vorkutia, grabbed a bottle of wine and went to visit Rina on Nalichnaya Street. She had two female roommates and so Edik and I were happily outnumbered.

The Gavan Hotel had recently opened on Maly Prospect on Vasilievsky Island. It was not long before I took Rina there. We paid three rubles for entrance to the Hotel because it was part of the Intourist system and was not technically intended for Soviet citizens. You had to walk up to the glass door and show the doorman your open palm with a bill in it. He would open the door, take your money slyly, so that no one would notice, and let you into the hotel. There was a bar on the top floor. The barman Albert was an enterprising man in glasses. According to the menu, beer cost 55 kopeks, but everyone paid a ruble. Some people asked for change. When they came back for more beer, Albert would say, matter-of-factly,

“We haven’t got any beer.”

The cost of this visit to the Gavan Hotel, including entry fee, beer, and crispy roast chicken, was 10 rubles, which was a fifth of my monthly stipend.

On this occasion, I got Rina really drunk and brought her back to my dorm. She gave in immediately, of course. It was not just anybody that could show a girl the kind of good time that I had. The moral of the story is simple: without money, you can accomplish nothing with women. I am kidding, of course. Rina is not materialistic. I took her to some cooperative restaurants, a few times, but later my money ran out. So Rina started taking me out! My sense was that she had money because she was from a fairly well-to-do Estonian family. According to her, however, it was because she was careful about how she spent her stipend. Whatever the case might have been, a girl paying my way was unacceptable. I started feeling shabby about it. I realized that the time had come to start making real money. I started putting twice the energy into my speculation business. My motive was simple: I wanted to take this beautiful girl to restaurants. The size of my consignments grew.

But I proved unable to get rich quick. I remained in the dorm and Rina moved in with me. It was we two, plus Andrei Pavlov from Kingisepp. Hungry days ensued. Andrei’s mom would bring him a sack of potatoes once a month and that is how we fed ourselves. I cannot stand potatoes to this day.

One day I stepped out of the kitchen to get some salt. When I came back, I discovered that someone had taken the whole pan of potatoes. There was an unwritten rule that said: make sure you stay with your potatoes during the last five minutes of frying—otherwise they will be stolen and later you will find your empty pan back in the kitchen. Sometimes people’s soup even went missing. There was no point in looking for it as 150 students lived on our floor alone.

There were bedbugs in the rooms. We would poison them, but they were never gone for long. Moving the beds away from the wall and into the center of the room afforded us some protection, but they would still climb up the walls, along the ceiling, and then fall on us from above, feeding on us once more. All of these domestic annoyances pushed me to do greater things. After all, I’d seen fortunate speculators who rented or bought their own apartments, drove their own cars, and were always going from restaurant to restaurant.

Sometime after I had finished my first term, I went to a regular store and bought some cans of red caviar at government prices. I got into a commuter train at Finlyandsky Station and got a ticket to Repino. I walked to Penaty Estate Museum where the Finnish tourists were filing out of the buses. I simply repeated the phrase “sata marka,” which means a hundred marks in Finnish. I quickly sold all the caviar for ten times what I had paid for it at the store.

After I pulled that off, I felt incredible. The business was easy and the profits huge. I told a kid in my dorm, Volodya, that there was money to be made. The next morning, we bought two whole cases of caviar and made the trip to Repino. After a couple days business with the Finns we found ourselves surrounded with 2106 Ladas with tinted windows. We did not know if it was the mob or the cops. Either way, since nothing good would come of us sticking around, Volodya and I started running in opposite directions. I raced along the tree line, tossing caviar into the bushes as I went. My hands were empty of cash. Even though I was an athlete, I could not outrun the officer, who wore a leather jacket. He caught up and twisted my arm behind my back, told me to pick up the jars that I had discarded, and took me to the Repino police department.

He took me to the special cases section, wrote me up, and confiscated my caviar. I sat across from that overstuffed cop, filling out the papers.

“You know what makes you lucky?” he asked

“What?”

“These problems you had today, they’re minor.”

“Minor? You caught me, didn’t you?”

“If you had been caught by the mobsters that control that spot, your problems would be much more significant. You were only here briefly. Now don’t come back.”

It seemed the cops were more afraid of the gangsters than I was. Maybe they were even getting a cut for protecting people that were essentially their superior officers. After these events, the Mining Institute received a letter saying that I was involved in the black market. For the second time they wanted to expel me. I’m not sure how they could let me leave to Poland with a service record like this: it must have been the lack of a unified information system.

I never again made the trip to Repino after this. In July, though, I received invaluable work experience in Soviet commerce. Nikolai Nikolayevich, the manager of the produce store on the Corner of Havana Street and Little Avenue, gave me a job selling fruit and vegetables at the stand. The kiosk still stands on that corner, next to the dairy store.

Our business was unique. You would weigh a kilogram of tomatoes. Then, before putting them in the bag, you would throw one of them under the table. Bananas, being both heavy and expensive, were especially profitable to tip in this way. Not stealing was not an option here. For instance, when a delivery would come in, they would tell us, “Here are a hundred kilos of tomatoes” and you would weigh them and there would be only ninety. But when you would say that some were missing they would always ask the same question: “Do you want to keep working here?” So really, you had to cheat—just another feature internal to the socialist system. To this day, when I go to the market, I always keep close watch on the shopkeepers’ fingers.

In August, Rina and I headed south with the money that I had “earned.”

Because I was only ever taken to Yevpatoria as a child, it was with pleasure that I took my love to the same small Crimean town. Memories of beach sex have blotted out all other recollections from the trip. Not surprising? Maybe not—except that we had sex during the crowded part of the day. We just covered ourselves with a blanket and assumed that nobody would notice what we were doing. As it turned out, we were mistaken.

Upon our return from Yevpatoria, I redoubled my efforts as a man of trade. I started bringing VCR’s, TV’s, and fridges from Siberia. The miners got these appliances from the Japanese in exchange for coal. Because the miners got all of these items at what were known as government prices, they were completely fine with selling them at retail prices. But, you may ask, what is the point of buying at retail? The answer is simply that prices in Leningrad were twice, if not three times, higher than in Siberia.

At the same time, merchants from Moscow and Leningrad started sweeping up chainsaws and other electrical appliances and exporting them to eastern European countries. These products were still available for sale in the towns and villages of Kemerovo Province. I scooped them up with a view to selling them in Poland.

Rina came from Estonia to study at the Mining Institute. Estonia, though part of the USSR, was more like a foreign country.

 

Rina Vosman, Oleg Tinkov’s wife:

Oleg was a Siberian guy, different from the others, unique. Life in Siberia is tough. I’m softer, more intelligent (laughs).

He was always different from the others—from the moment I met him. He wasn’t like anyone else. When I came to St. Petersburg, I was 20, a young, cute girl. And I knew a lot of people. But everything changed as soon as Tinkov came into my life. The last twenty years have flown by. Oleg has said that I’m from a rich family and that that’s why I had money kicking around. But it really was because I saved bit by bit. He loved to have a good time. When Tinkov got his stipend, everyone would have a good time. Every girl in the dorm would be in his room. He really loved girls (laughs). There were girls named Mashka and Svetka and Lenka—all different kinds. He’d spend his whole stipend on champagne, then he’d eat fried potatoes or go hungry all month. But that’s how he’s always been: he has a big heart. As soon as I started coming to his dorm, the girls stayed away. It was the easiest thing in the world for me to achieve. Slowly I started moving my stuff in. When we lived in the dorm, we were poor. We had nothing to eat. After the third period in the day, we’d skip school and stand for three hours waiting in line to buy “blue birds.” That’s what we called the Soviet chickens due to their peculiar coloration. Fried potatoes and a three-liter jar of tomato juice—now that was a hearty meal! So we thought in those days, at least.

Chapter 11

Hello, Europe!

Rina’s parents lived in Estonia, while here maternal grandparents were in Szczecin, Poland. This made it easy for her to get into Poland. As for me, I had to get approval from various offices, the trade-union committee, the Communist youth league, and so on. Since Poland was still part of the Soviet bloc, the first time we went there, in 1989, we did not even have to apply for a foreign travel passport. Our Soviet ones were enough.

After we arrived at the home of Rina’s relatives in Warsaw, the first thing we did was head to Voskhodny Market, which means “Eastern Market” in English. We made the acquaintance of a Polish man there—Juliusz. He told us which goods from the USSR were in highest demand and so we started to bring these in.

In Poland, the price on anything with a power chord was three times higher than in the USSR. We would buy Raduga television sets in the Kozitsky Union Store on Maly Prospect on Vasilievsky Island. I would load them onto the train, disembark in Warsaw, sell them for 200 dollars apiece, and come home. Rina transported TV’s too. I would load them on the train in Leningrad and Juliusz would unload them in Warsaw.

In 1990, we made things more complicated. Rina spent the whole summer in Warsaw and I traveled back and forth. I flew to Siberia, bought Taiga chainsaws at various general stores for 200 rubles each, brought them with me to the airport in Kemerovo, paid for the excess baggage, and then flew on to Leningrad. From the station, I brought the saws to the room we rented in a co-op apartment on Gavanskaya Street. The next day, I was off to the station and, a twenty-four-hour train-ride later, I was in Warsaw. The logistics took up an awful lot of time. But it was totally worth it: in Poland we sold the saws for 200 dollars each, which was enough to buy another six or seven of them back in Russia.

On Saturdays and Sundays, we would sell the saws at Warsaw Stadium. I would walk against the flow of pedestrian traffic and shout out “I sell for cheap!” in Polish. My asking price was 200 dollars. Some of my friends could not get even 180. This was one of my first lessons in marketing: low prices are not always required to achieve high sales volume, assuming that your advertising model is sound.

From time to time, I’d fly in to Novosibirsk, hire a cab, and drive around to general and co-op stores, buying every electric appliance they had. In the cities, speculators had bought everything up, while in the villages, the stores were still stocked. Sometimes I would drop by my mom’s place in Leninsk-Kuznetsky for five minutes or so. She was always surprised because she thought I was in class.

* * *

One day Juliusz told us about a particular kind of business that the Poles liked conducting: taking cigarettes to Berlin. A pack cost one mark there, which was twice as much as in Poland. My Soviet passport allowed me to go to Poland, but not Germany. I took the risk and went with him anyway. I simply handed my passport to the German border guard, who decided he would not trouble me and put a red stamp in it.

The Germans knew that the Poles were selling cigarettes and they would walk up and down the train car, asking, “Zigaretten. Zigaretten?” It was difficult to transport cigarettes in the Polish trains. I came up with the idea of getting on the Soviet Leningrad-Warsaw-Berlin train in Warsaw. I came to an agreement with the stewards: they let me fill the coal box with big loads of cigarettes. The Germans never checked the coal box.

In Berlin I was surprised by the stark contrast between capitalism and socialism, between West and East Berlin. It was at that time that they began tearing down the famous Berlin wall. I got on the S-Bahn train, which connected East Berlin with the West. It was like some crazy dream: like moving from a black and white movie into a colored one.

I got off the train at the Zoologische Garten Station, and found myself surrounded by the most delicious of aromas. There were little lights and flashing signs all around. In stalls along the street, you could buy all kinds of exotic fruit: kiwis, bananas, and pineapples. There was nothing like it in the USSR, nor in Poland. There, in West Berlin, I was finally set completely free from the illusions of communism and my father’s words—that capitalism is cool—were confirmed once and for all.

I want to go to Berlin again, to go to that ridiculous zoo. In the late eighties it was something I could not afford. After all, the ticket cost several marks. Now, I want to see the signs outside the zoo again. Those advertisements inspired me and gave me strength to overcome the feeling that we had it so bad. They made me want to be rich.

In Berlin, Rina and I had to sleep at the station. Once, while we were walking along the street, I saw a hotel with a sign out front stating that they charged 50 marks per night for a room. This may sound cheesy now, but I said,

“Trust me, Rina. A day will come when I will be making money and we’ll be able to stay in that hotel.”

Later, I stopped taking the risk of going to Berlin without a foreign travel passport. Rina started to go instead. Apart from cigarettes, skirts and shirts were big sellers. At the open-air market in Warsaw, we bought black Turkish skirts with belts as well as military shirts (faux denim) with tags reading, “US Army.” Rina is thin, so she would put on five or seven layers of shirts and skirts.

At the station in Berlin, Gypsies would spend mark upon mark to buy this crappy junk. It is a mystery where they sold it. After all, the quality was revolting. In any case, though, we made good money selling it. Within 15-20 minutes, the Gypsies would gobble everything up and Rina would board the train heading back to Warsaw.

Some of our imports from Europe included gas canisters, pistols, and cartridges. All of these things sold well in St. Petersburg. By the end of summer 1990, we had made a few thousand marks. I used the money to buy a computer, which I took with me on an LOT airlines flight to Leningrad. At Pulkovo airport everything might have come crashing down. A customs official took one look at my suspicious facial expression and said,

“Would you mind stopping, sir?” I pretended I did not understand what it was he wanted. He was distracted and I managed to slip through.

After I sold the computer, I flew to Tyumen and bought my first Lada 2109. The color was called “wet asphalt.” It cost me somewhere in the range of 25,000 to 35,000 rubles. Lada aficionados will know what I mean when I say it had “long fenders.” The license plate had “TYU” on it, which meant that I was Tyumenian, automatically. I barely knew how to drive and so my friend Sergei Abakumov helped me to get the car back to Leningrad. As we were coming into the city he said that he was tired, so I got behind the wheel. You had to see my steering as we drove past Moskovsky Department Store to believe it! Somehow, though, I made it back to Vasilievsky Island.

Rina was not pleased:

“I slaved away all summer long and wore ten dresses at a time for you—and you went and bought a car?” And she was right. While we were in Europe we pinched pennies everywhere and we often went hungry. We did not want to spend our foreign currency. In Germany, for example, a kebab would cost a mark, while in the Soviet Union you could survive for a whole week on the same money. We would skip dinner and have sex instead. We went hungry so that we could make money. After all that—pig that I was—I went and bought a 2109. I am sorry, Rina! Remember, though, how it took us a mere three hours to drive that 2109 from Vasilievsky Island to your home in Kohtla-Jarve?

Estonia, which was already trying to get out of the Soviet Union, finally succeeded in doing so in August 1991. Within a few short months, the gleeful Estonians unilaterally implemented a new visa regime for Russians, which meant that the trip to Kohtla-Jarve now required a long wait at the border. Starting in the middle of 1993, too, one was no longer allowed to get a visa upon entry. You had to get your visa at the Estonian consulate on Bolshaya Monetnaya Street. Relations between the two countries continued to spiral downward—the Estonians accusing the Russians of occupation and the Russians accusing the Estonians of using apartheid measures against the Russian-speaking population in their country. Rina and I, however, continued to demonstrate that it was entirely possible for Russians and Estonians to get along fine.

I spent all of our money on the car because I was sure that I would make more soon—which I did. In 1990 I met a man named Andrei Rogochov, who later started the Pyatyorochka retail chain and became the richest person in St. Petersburg. We started as equals, opening a company called LEK-kontakt. He held a 50 percent stake, while I shared the other fifty percent with the Pakhomov brothers (better known as the Ilyiches). My trips to Germany became more serious. I got a foreign travel passport. Rina now stayed home, happy to get treats, such as pineapples, from Europe.

At the same time, fate brought me into contact with Nikolai Nikitich Zhuravlev, chairman of the board of Kuzbassprombank, which developed out of the Kemerovo Provincial Branch of the Soviet Promstroibank. He gave me my first bank loan. We got four million rubles for LEK-kontakt at an annual interest rate of over 30 percent. We withdrew the money immediately, in cash, and brought it to St. Petersburg, where we exchanged it for German marks.

I brought cash into Germany, but not altogether legally. I would hide it in a mattress or—no need to fret—in my own ass. I would then buy fairly large batches of printer cartridges and toner. Andrei was in charge of selling these in St. Petersburg.

Once, when I was taking our assets to Germany, I came close to losing everything. One night on the train, after the other passengers in my compartment had fallen asleep, I carefully opened a stretch of seam on the mattress, put the money inside, and sewed it back up. At customs, I had to roll up the mattress and wait for the officer. He caught me off guard when he said,

“All right, take out your money.”

“What money?”

“In the mattress.”

Catastrophe. I broke out in a cold sweat. The problem was not just that I might lose all the money. There would surely be a criminal investigation, as well, and I might even end up behind bars.

“I don’t have any money.”

“What do you mean, you don’t have any money? You do…”

The official started pinching and pulling at the mattress—touching the very place where the money was hidden. But he did not feel anything! He rolled the mattress up again and said, “You’re right, there’s nothing.”

What was that all about? Had one of the other passengers snitched? Was the officer bluffing?

You know what I think: it was God, protecting me once again from very serious trouble.

In Poland and Germany I honed my mastery of business.

I bought Xerox toner in this store in Germany.

 

On Meeting a Polish Man

One day, I wanted to get some zloty, but the currency exchange was already closed. An elderly Pole came up to me, and asked,

“Did you need something?”

“I wanted to changed some money. I have some German marks, but I need some zloty so that I can get something to eat.

I must have looked a bit unkempt, so the man took me into a bar and bought a sandwich and some tea.

“Are you Russian?” he asked

“Yes,” I replied.

He began telling me the story of the emancipation of Poland by Soviet forces. In 1944 the Poles revolted, but they could not get the support of the Red Army and the Germans crushed the revolt. According to his version of events, the Russians declined to help the Poles on purpose, in order to get rid of the dissidents of the day. He also talked of the violence committed by Russians against the local population. I had been raised to believe that we saved Europe, so this was a shock to me. Here I was, sitting in Europe, hungry; one of our “emancipated” Poles was feeding me and telling me about how evil we were.

“So why did you feed me?”

“I have no prejudice against you. You’re a poor hungry student. But you must know these facts.”

Now I understood that the same historical events may be interpreted differently by different people. The Soviet version of these events was very different from the Polish one: Konstantin Rokossovsky, the commanding officer of the First Belorussian Front, who later became Poland’s National Defense Minister, asserted that the Polish uprising was in no way supported by the Red Army.

Rina Vosman, Oleg Tinkov’s wife:

We trekked to Poland to make money. Time after time, I made the trip from Warsaw to Berlin wearing military-style shirts that were supposed to look like they were made out of faded denim and ugly black skirts with gold-colored buckles and elastic waistbands. Oleg could not do it, because he did not have a foreign travel passport. The Gypsies would scoop everything up within 20 minutes of my arrival at the station and I would have to keep my wits about me to make sure that I was not ripped off in the frenzy. I failed to understand the business. Did someone need this junk somehow? The Gypsies paid in marks. I could not get my head around the fact that people in Germany paid two Deutschmarks for a Pepsi. To me, that seemed like crazy money. In Russia you could survive for quite a few days on two marks. That is why we packed sandwiches and water. We would do anything to hold onto those marks. One day I found myself in a stressful situation. Usually, the customs officers were men. They would simply look the other way, as it were, when faced with a women bundled up in clothes for sale. This time, however, the officer was a woman and she started to strip search me. The next thing I knew, they had taken Juliusz and me off the train. We had to spend the whole night on the platform. Some Germans walked by with dogs that sniffed at us. We had this uncanny feeling—as though it were 1943 again. We sat there until the sun came up. Then we took the next train back to Warsaw. We were lucky not to have had everything confiscated. We escaped with minor bruises, so to speak.

After our first trip to Europe, Oleg got a photocopier to bring home and sell. After our second trip, he brought back two of them. After our third, he was driving a “wet asphalt” colored number 9 Lada with long fenders.

Nikolai Nikitich Zhuravlev, former president of Kuzbassprombank:

I met with a huge number of clients during my time at the bank. Oleg Tinkov left the best impression of any of them. He came to me, told me what his business was about, and asked for a loan. I liked his reasoning, so we gave him a million rubles. He bought various goods with the money and then sold them individually. He even came to our bank to sell stuff. The girls loved that kind of shopping. So we started giving him more. Oleg was always careful to pay back his debts. Later he got into more serious business. He started opening stores that sold household appliances. In spite of our forty-year age difference, we became friends. I watched Oleg as he worked. He had clear and specific goals and he always got right down to business. He can talk to anyone and is good at building strong relationships, qualities that were given to him by nature.

It is amazing how good a worker he is. He is highly energetic and picks everything up as he goes along. That is why I was not surprised in the least when I heard that he had opened a pasta factory and later a brewery in St. Petersburg. He is curious. I have been with him at different meetings in the Central Bank and he always showed a keen interest in the inner workings of the financial industry.

To tell the truth, if there were fifty people like him in Russia, then they could keep the economy growing. I think Oleg would make a fine Minister of Finance.

Chapter 12

From the Soviet Union to Singapore

One rainy autumn day in 1990, I parked my No. 9, once again, across from the Institute. Our drilling-and-blasting professor parked his No. 1 in the next spot over. He looked at me and we went together into the lecture hall. What could he teach me? Well he could teach me about drilling and blasting. But when it came to making money, there was nothing he knew that I did not. In the end, I never wrote my final exams. I never crossed the finish line at the Institute.

This decision followed logically from my priorities at the time. Why had I started my studies? Well, my goal at the time had been to return later to Leninsk-Kuznetsky and to work as a section superintendent in one of the mines.

The peak of my career, then, would have been becoming mine director. If that had happened, my pay would have been 1000 rubles a month and I would have been given a Volga to drive. In my third year of university, however, I was already earning 10,000-15,000 rubles each month and the prospect of becoming a mine director held no attraction for me whatsoever.

Everything I do is based on economics. Sometimes, of course, I am motivated by charity, care, a desire to help, but I believe that if a person spends dozens of hours a month on something, he should reap the rewards. From that perspective, it seemed there was no point at all in continuing my studies at the Mining Institute. Moreover, with the help of the widely respected Novosibirsk businessman, Voldemar Basalayev, I and the Ilyiches had gotten into the car business. This business was nothing out of the ordinary, but the potential profits were huge and it would take some time to achieve them.

Usually, we would fly to Novosibirsk and go to the flea market on Gusino-Brodskoye Shossé. The price of cars there was 50,000 rubles, whereas in St. Petersburg we could sell them for 80,000. All we had to do was to get them there. To tell the truth, though, we did not move a single car. Russian roads are not designed for long trips. Two hundred kilometers is the furthest that you would ever want to travel. I first realized this when I and my cousin, Sergei Abakumov, were moving my first 2109 from Tyumen. The ditches, the dead bodies… It was a risk to your life and to your car.

We came up with the idea of delivering cars by air. At the Chkalov factory we got soldiers to agree to take our cars on flights to Moscow or, less often, directly to Leningrad. Two cars could fit in an An-26. We paid the soldiers 5,000 rubles cash for each car and then drove them into the cargo hold. We stayed in them during the flight, which included a refueling stop in Chelyabinsk.

Every few days, my neighbors would be shocked to see me driving up to my building on Nakhimov Street (nearby the Pribaltiyskaya Hotel)—where Rina and I paid 500 rubles rent per month for an apartment with just one room and a kitchen—in a brand new car, either a 2108 or a 2109. We did not worry in the least about selling the cars at the market. Instead, we would just sell them at a slightly reduced price to people we knew—people who would actually go to the market and sell the cars there. I had around twenty cars registered under my name at the Department of Motor Vehicles.

Just think how ineffective the economic policies of the Soviet Union were. They would assemble a car in Tolyatti and ship it 2500 kilometers to Novosibirsk, via Ufa, Chelyabinsk, and Omsk. From there we would fly the car to Moscow and then drive the seven hundred kilometers from there to Leningrad. But we would still manage a huge profit margin. That is how inefficient the system was!

And I was not the least bit surprised that 1991 was the year in which the USSR collapsed. Events were unfolding rapidly. It was hard for me to keep on top of it all. Starting on August 19, a group of Communist Party hardliners put Gorbachev under house arrest at his summer cottage in Foros. Then they announced the creation of the USSR State Emergency Committee. The committee was made up of Vice President Gennady Yanayev, Prime Minister Valentin Pavlov, KGB chairman Vladimir Kryuchkov, Minister of Defense Dmitry Yazov, Minister of Internal Affairs Boris Pugo, First Deputy Chairman of the Defense Soviet Oleg Baklanov, Chairman of the Farmers’ Union Vasily Starodubtsev, and the President of the Association of State Enterprises and Industrial, Construction, Transport and Communication Facilities, Alexander Tizyakov. I remember how Yanayev’s hands were shaking when the state of emergency was declared. I could already see that the people who were trying to seize power had no control. None of them were particularly enthusiastic about their cause.

The people involved in the coup really believed that somehow the USSR could be saved. All they accomplished, however, was to ensure that its downfall was irreversible. The people were already taking big gulps of freedom and no one liked the bans that the SEC was trying to introduce. No one took to the streets in support of the committee. In contrast, the President of the RSFSR, Boris Yeltsin, who was leading the fight against the coup, garnered the support of hundreds of thousands. Thank heavens, the coup was over soon enough: on August 22 the members of the SEC were arrested and Mikhail Gorbachev returned to Moscow. Real power in Moscow had been transferred to Yeltsin though. The “parade of sovereign states” began: on August 24, Ukraine declared its independence, on 27 August, Moldova declared its sovereignty, Kyrgyzstan did so on August 31, and so on.

On September 6, the Presidium of the Supreme Soviet of the RSFSR issued an order, renaming Leningrad Saint Petersburg. Of course, I was happy with this decision, as I had a clear understanding of the role Lenin played in Russia’s history.

It so happens that I spent my childhood in Leninsk-Kuznetsky, went to cycling camp in Leninabad, and later moved to Leningrad. Both my childhood and my youth, then, were connected to Lenin. When I was young, Soviet propaganda encouraged us to deify him. It was only at the end of the eighties, when I was in Leningrad, that I realized he was simply a Jewish weirdo who had made an agreement with the Petrograd bankers of the time and plunged the country into poverty, essentially destroying Russia and the Russians. He brought suffering upon the Russian people. We are still suffering. I would have had him burnt at the stake.

The last nail was hammered into the USSR’s coffin in Bialowieza Forest on December 8. Boris Yeltsin, Stanislav Shushkevich, and Leonid Kravchuk signed an agreement: “We, the Republic of Belarus, the Russian Federation (RSFSR), and the Ukraine, as founding states of the Union of Soviet Socialist Republics, hereinafter called the Supreme Parties to the Agreement, having signed the Union Agreement of 1922, hereby declare the dissolution of the USSR as a subject of international law and as a geopolitical reality.”

Thus Gorbachev became the president of a non-existent country. On December 25—on my birthday to be precise—he retired.

By that time, the country’s economy was faltering badly and had reached a dead end: the government kept issuing unsecured money, which led to major deficits and a massive rate of inflation against the US dollar. The government simply could not go on regulating prices; regulation had bled itself dry. As we looked on, the ruble lost its value and respectability. Everyone was trying to get rid of any rubles that they had, buying foreign currency or goods. The shelves were empty. The whole country was collapsing. What was there to do? On November 6, Boris Yeltsin appointed Yegor Gaidar as deputy chairman of the economic policy committee of the RSFSR. Mr. Gaidar decided that shock tactics were the best medicine for the economy. On January 2, 1992, shoppers discovered that prices had increased enormously.

To tell the truth, however, these problems were no worry of mine. I kept my savings in dollars, but constantly turned them over. The value of the ruble against the dollar was shrinking faster than the prices of goods were growing. In January 2002, I was worth a ten thousand dollar wad of cash. I took that same pack of money with me on my first trip to Singapore. I really started making big money on that trip and, at the same time, my Tekhnoshok retail chain put down its roots.

Igor Sukhanov let me in on the Singapore idea. This man was a renowned speculator who went by the nickname Dushny, which means “soulful.” I bought computers and fax machines, which I was able to sell for a total of 30,000 dollars on the day of my return. I really liked this three-to-one business model and my trips to Singapore became very frequent indeed.

Each trip took a few days and a visa was required, but we had our tricks. I got some people at Aeroflot to give us a few stickers that were normally used to change the dates on tickets. In Singapore, we would stick them on our tickets to make it look like we were leaving the next day. They would let us into the country and then we would throw the stickers away. When our day of departure arrived, the customs officials would sometime noticed that we had exceeded the twenty-four hour visa-free period. They would put a red stamp in our passports, indicating our violation. Never once, however, did this lead to further problems. The officials in Singapore had the right to arrest us at the airport upon our third violation. In view of this fact, we always got new foreign travel passports after our second warning.

The idiocy of the Soviet system played into our hands. First of all, when one was leaving the country, it was possible to exchange 300 rubles for dollars at the government rate. In order to do that, we would have to stand in line for two or three hours at the Vneshekonombank on Gertsen Street. But it was not quite so simple. The wait-time was only two to three hours if you bought your place in line (another widespread phenomenon of the early nineties). Basically, there were people who made money by waiting in line outside, all night, in order to sell you their spot in line in the morning.

Secondly, because of the low dollar-exchange rate, business class tickets turned out to be incredibly cheap. In the West they would cost 1000 dollars, but in Russia you could get them for around 600 rubles. In other words, at the black market exchange rate of 15 rubles on the dollar, the cost of a business class ticket would work out to 40 bucks.

Igor Sukhanov gave me lessons on how to transport cash. Using Mr. Taya’s company, Future Systems Electronics, we would hand it over in Russia, then picked it up again upon our arrival in Singapore. This was an ideal method—particularly because it meant that I did not have to shove the bills through my back door as I had done on those earlier trips to Germany. We bought calculators, toner, photocopiers, computer parts, and even fax paper from Mr. Taya. If you could sell it in Russia, for a profit, we got it.

On the way back, I did not want to pay five dollars for every kilo in excess weight, so I would raise the scale from underneath with my foot. The important thing was to make sure that the needle remained stationary and did not jump around. One time, after I had held it up so carefully, the airline worker decided he was going to re-weigh the bag. I had no idea how hard I had been pushing up the first time. I cannot deny that, now and then, we would be asked to take a couple of steps back from the scale.

Russian customs did not care about electronics, as long as you were accompanying your own luggage. That gave the impression that the gear was for your own personal use—although only an idiot could fail to see that the hardware was for sale and that whoever was bringing it in was not planning on using it themselves. People started making enormous fortunes bringing stuff from Singapore. I remember arriving at Sheremetyevo Airport with my few small boxes labeled “Tinkoff,” while next to me there was a whole wall of boxes with “Svetakov” written on them. Alexander Svetakov and I still maintain about the same ratio of wealth. Now, he is a very successful entrepreneur. In Spring 2007, he sold his Absolut Bank to the Belgian KBC group at a pre-recession price. KBC valued his bank at one billion dollars. Now Absolut Group’s annual revenue has reached three billion.

My approach to business was different from his. I always liked long cycles: because the prices there were much higher, I would sell my product in Kemerovo, Novokuznetsk, and Leninsk-Kuznetsky. For instance, I could get 2000 dollars in St. Petersburg for a computer that cost me 1000, while in Siberia the same computer cost 3000. Svetakov, however, liked fast cycles: he would pay 1000 for a computer in Singapore and sell it directly in Moscow for 1500. Each of us has our own approach. I do not like fast wholesale money, but try to squeeze every penny I can out of the process. Big markups are my weakness.

I got the highest profit margin on calculators. We would buy thousands of them for five to eight dollars each and then sell them for 40-50 dollars apiece in cashless transactions using the Regional Reserve Bank system, which was a holdover in Russia from Soviet times (institutions in the system included the Novosibirsk Reserve Bank, Kemerovo Reserve Bank, and Omsk Reserve Bank). Using the reserve banks for sales transactions was Oleg Zherebtsov’s idea and I am really thankful to him for it.

To be honest, it took some small kickbacks to get it done. The price depended on what you negotiated and on the amount of digits the calculators displayed (8, 10, 12 or 16). I did not like having to pay 14-25 percent just to get the money out. Plus, it was really risky business. I had to go to Moscow to get the rubles, in cash. Then, I would carry the bags with me on the train to St. Petersburg, on edge the whole way. Next, I would go to Vasilievsky Island and buy dollars from rich kids at the Gavan and Pribaltiyskaya Hotels. It was a pretty hodge-podge procedure! But I managed to find a way around it soon enough. I learned how to buy non-cash dollars for non-cash rubles, which I would then transfer directly to Singapore to pay for the hardware through joint ventures that were entitled to carry out wire transfers.

Before too much time had passed, I managed to close a very large calculator deal. Procurements at the yarn factory in Leninsk-Kuznetsky were done through a rather strange character. He contacted me himself and said he was looking to buy three thousand Aurora calculators. The record remains silent on the question why these yarn-spinning women needed such a massive number of calculators. But the enterprise was state-run, which meant that it did not really belong to anyone. This procurement worker was accountable to no one. I sold the calculators to him and earned a hundred grand in the process. I think it was purchases of this kind that led to the plant’s ultimate bankruptcy.

In those days, the sums I earned selling calculators were colossal. I was able to buy a two-bedroom apartment in a modern 137 series building on Korolyov Street, near Kommendant Airport. In order to establish my residency in St. Petersburg, I had to marry a local woman, Nina Iosifovna. Born in 1927, she was 40 years my senior. At the marriage office, everyone looked at us like we were crazy. When I gave a bouquet to the female marriage registrar, though, she smiled and said,

“I’ve got you guys figured out.”

Later I found a fake Leningrader husband for Rina as well. Here was another holdover from the Soviet system: even if you had money, you could not buy an apartment in a city unless you were registered there.

We bought a dog, a boxer, and started thinking about having kids. Every seven to ten days I would fly to Singapore. When possible, I would make two trips a week. It worked out, then, that I was in the air for fifty-six hours each week. And with every excursion, I doubled my capital.

My business grew by leaps and bounds. I could not fly to Singapore anymore, so I started shipping my merchandise on cargo planes. I would do the receiving and customs paperwork at Pulkovo Airport in St. Petersburg. Because of the immense pressure, my business methods became more civilized. In September 1992, Rina and I went to the Municipal Executive Committee to register a limited liability partnership, Petrosib. We chose a transparently honest name: I shipped electronics from St. Petersburg to Siberia. At the entrance to the building, which once housed the Kalininsky District Party Committee, we were told that, “You can register one of those businesses upstairs.”

After the failed coup, Yeltsin had outlawed the Soviet Communist Party and now big wax seals, labeled “sealed,” hung on the door. It was a criminal offense to tear off one of those seals. It is a real shame that, later on, Yeltsin betrayed himself by allowing the Communist Party to come into existence again. It would be better if those doors were still sealed and if people like Gennady Zyuganov, the current Communist Party leader, never had any say. Germany had forbidden Nazism; in consideration of its history, Russia should have made communism illegal as well. I am not really all that interested in politics, because it is irrational to bother about things that you have no control over. As a citizen, though, I am obliged to state my opinion.

* * *

Nikolai Nikitich Zhuravlev made a phone call from Kemerovo to Promstroibank in St. Petersburg and helped us to open both a US dollar and a rubles account for Petrosib. I hired an accountant, Nadezhda Ivanovna Turukhina. In this way, in the autumn of 1992, my operations became completely legal.

I had begun to get my bearings in Singapore and I switched suppliers, abandoning Future Systems Electronics for Cut Rate Electronics. This new company was headed up by an ethical Indian businessman, Ashok Vasmani, who everyone called Andy. Mister Andy. The stuff he sold may have been of slightly lower quality, but it was still cheaper.

One day, when I was buying yet another consignment of Record televisions, he asked me,

“Oleg, why don’t you get a container?”

“A container? How many TV’s is that?”

“Three hundred and twenty.”

“But that’s over sixteen thousand dollars. Plus you have to pay five thousand for the container. And then you have to wait forty days. I can’t take that much money out of circulation.”

“Correct, but when you send it by cargo, you’re paying five dollars per kilo. If you send them in a container, it’ll cost you almost half as much.”

I paid for half the container and convinced Andy to loan me the money for the other half. Forty days later, I was doing customs clearance at the St. Petersburg port. My partner, Andrei Surkov, and I unloaded the container and stored the 320 television sets at the Petrosib office at 10 Sadovaya Street. We put some on display in one of the rooms, set up some fake trees, and hung a digital clock on the wall.

We hung up a banner reading “Cheap Televisions” and instantly people started coming, asking questions and making purchases. The turnover was slow, of course, but our sales volumes increased and our profits grew with each TV that we sold.

The calculators made me tons of money and now, too, these TV sets. We got more of them, but it was getting harder and harder to sell them in St. Petersburg—even at a low price of $350. We started having them delivered to other regions. In Siberia, a TV cost 500 dollars. We registered more companies: Petrosib-Novosibirsk and Petrosib-Omsk. We used the Regional Supplier system for warehousing. This was highly profitable, as small-scale retailers from the district centers usually went to the Regional Suppliers—and our TV’s were right there. Two years later we did a count and were shocked: we had sold 300 containers of televisions!

By taking advantage of the existing Soviet distribution system, we had made a smart marketing move. Instead of selling our goods cheaply, in St. Petersburg, we were able to make that much more by selling them in Siberia—just as I had done when I sold lipstick, which cost 15 rubles in St. Petersburg, for 25 in Siberia. I understood all too well that if there were markets where people were willing to pay more for a product and the cost of transportation was low, then it was better to sell in those markets.

Nikolai Nikitich Zhuravlev had given me my first money loan; Andy loaned me product worth much more. At one point, I owed him a million dollars. But he took the risk and trusted me and, in the end, both of us earned a good chunk of money in electronics sales.

Andy left the electronics business and is now the owner of one of Singapore’s biggest Indian restaurants. We remain close. My wife, some friends, and I flew to Indonesia recently via Singapore. We dropped by Andy’s place, tried his different dishes, and listened to eastern music.

Andy is a person who believed in me and helped me to build my career. He is another gift that fate bestowed upon my life. Everyone needs to meet someone along the way that believes in you. There is no other way to become a businessman. I sincerely hope that every person finds his or her own Andy.

* * *

1992 was a very difficult year for the country and a simply fantastic one for me. I was exhausted from the constant running around and now had the money to take a little break. Vyacheslav Butusov, a Russian singer, sings a song about America. Part of it goes like this: “It took a long time for us to learn to love your forbidden fruit.” As it turns out, he was absolutely right. As soon as I had the time to do it, I took off to the states.

I bought my first imported car, a Ford Orient, in 1992.

 

The Petrosib team next to the famous fake trees that I had purchased in Hong Kong.

Ashok Vasmani, nicknamed Andy, and Nikolai Nikitich Zhuravlev are people who helped me so much to do business in the early nineties.

St. Pete’s speculators in Amsterdam: Igor Sukhanov, nicknamed Dushny, Igor Spiridonov, myself, and Oleg Korostelev.

At first, San Francisco made no impression on me.

 

Valentina Vladimirovna, Oleg Tinkov’s mother:

When Oleg was training in the cycling team, he’d sometimes bring some stuff home with him, like scarves and arm warmers. I was worried, because I didn’t know where he was getting it. I got on his case. When he started doing business at the Institute, I didn’t get in his way. He was an adult now. He met Rina, studied, and made money on the side. One day he borrowed 150 rubles from me; he said he wanted to buy something. Later he made it back and sent me a wire transfer. But I sent him the money back. He needed it more because he was far from home. But in the end he dropped out of school after his third year and dedicated himself completely to business.

On fake trees

One of my clearest memories of my business in those days involved my trip to Hong Kong. Sankin introduced me to a former classmate, Max, who lived in Beijing. Max told me I should look into selling fake flowers and trees. I flew to Hong Kong to buy some. At that time it was still administered by Great Britain. All we did there was to buy a copy of the Yellow Pages, find a manufacturer, dial his number from a payphone, arrange an appointment, and go straight to the factory. It was not far from the airport. Leafing through the catalog, we called Moscow and found out that the same stuff cost five or six times as much there. My greed was my ruin. When I saw the potential for a huge net profit—sixfold!—I bought not one, but three containers. A fully loaded forty-foot container cost around twenty grand, so I paid sixty for the three.

On the one hand, I made the sixty back quickly, covering my investment. On the other hand, though, I had a lot to sell! So I started doing away with the plants in other ways. I took some to my house, sold some to my friends, and gave them to my employees as bonuses. Two years passed, but I just could not get rid of those trees and flowers!

So I called the head of our Kemerovo office, Svetlana Alexandrovna, and told her,

“Do something with these flowers!” A natural-borne salesperson, she had worked as commercial director at the Regional Supplier and she could sell just about anything. She is best described with a metaphor:

She will stop a horse in mid-gallop, enter a burning house, and convince someone inside to buy something!

She sold a bunch of the plants at a good price and then said,

“Oleg, I found a client that’s willing to buy everything we have.”

“How much?”

“They want a 60% discount.”

“Sold!” I did not want to have to deal with those stupid trees anymore. “Who’s buying, anyway?”

“The Kemerovo Funeral Home.”

There were so many flowers that, to this day, they are probably making wreaths from them for funerals in Kemerovo Province. On a side note, there is always good money to be made in the funeral business. A client who is under intense emotional pressure and on a very tight schedule will not try to talk you down. That is why funeral businesses drive their prices up.

Thus my business portfolio includes two strange deals in Kemerovo Oblast: the sale of three thousand calculators to a yarn factory and a truckload of fake flowers to a last-rites business. It is hard to know whether to laugh or cry.

Andrei Surkov, Oleg Tinkov’s partner at Tekhnoshok:

Our meeting was based on speculation. Oleg lived in a Mining Institute dorm on Shkipersky Stream, while my dorm was on Nalichnaya Street. We students would buy here, sell there. On this basis, some of us became business partners or even friends.

Later I got a job in a company, so I could understand what goes on when you don’t have to do all the running around the city with bags yourself. I wanted to see what it was like to run a more or less civilized business, in an office, with other people and some kind of organization. It was at that time that Oleg started actively pursuing business in Singapore. He would fly there to buy ink, toner, photocopiers, and calculators. He called me in 1991. We met up and went to the bathhouse, where he offered me a position as his junior partner, working with electronics. I agreed immediately, because I considered Oleg a good person and a competent businessman. At the beginning, our work at Petrosib consisted in the following: once a week Oleg would fly to Singapore for office supplies, calculators, and toner. Then he’d come back. A few days later, he would leave for Singapore again…

 

On selling liquor

For around a year Igor Spiridonov and I imported liquor into Russia. For around two years there was no extra fee for alcohol. One of the best products in those days was Royal, a type of hard liquor from Holland, but we did not know anyone there. There was, however, a small-scale plant in Hungary with which we knew how to do business. We ordered the liquor in Budapest and, once in Siberia, it sold well. Igor placed the orders and I was in charge of sales and payments. A half-liter bottle of liquor cost us between sixty and sixty-two cents, including delivery to Russia. A container held twenty-two thousand 500-mL bottles or seventeen 700-mL ones.

At first we got five thousand bottles, then ten thousand, then a container, then two, until we reached a maximum of ten containers. A funny thing happened with that last contract. We ordered five containers of 500-mL bottles of Dolce Vita and another five containing 700-mL bottles. The bottling plant mixed up the labels, but it did not matter. We sold the liquor with the wrong labels.

Chapter 13

Why Hello, America!

In the early nineties, in Russia, if you were a foreigner it was as if you had blue blood. It did not matter if you were a simple Italian plumber or an American mover. From our point of view, even foreigners coming to Russia on a tour package that cost them all they had seemed like billionaires. They wore Reebok or Nike sneakers and leather jackets, signs of great wealth during the breakup of the USSR. We called them businessmen. Now I understand that these were low-budget tourists, but in the midst of the rampant poverty, they seemed super rich. That is why everyone wanted to hang out with foreigners. Male university students chased after them, hoping to make a buck; women followed them around so that they could get into US-dollar bars like the ones at the Pribaltiyskaya or the Gavan Hotel. If they were really lucky, they might be taken to the Grand Hotel Yevropa. Better yet, they would get married and move away. Not that every story had a happy ending.

Every Wednesday at the Kirov Cultural Center there was a party for people over thirty. Those parties seemed really lame at the time and now, too, when I am over forty myself, they still seem like a silly idea. I do not know what possessed my classmate Sasha Sankin to go there. Maybe it seemed like it would be easier to meet a woman there and take her to a hotel—because people over thirty are more easy-going. What actually happened though was that he met an American woman over forty years old, they had sex at the dormitory—and she fell in love with him!

She was in love with a poor student twenty years her junior, who had moved to St. Petersburg from Tashkent! In the end she invited him to move to a small town called Santa Rosa, 30 miles from San Francisco, a typical Californian town with a population of about one hundred thousand. Not far away is the famous Wine Country, where there are thousands of wineries dotting the valleys of Napa, Sonoma, Alexander, Bennett, Dry Creek, and Russian River.

Santa Rosa lies along the Russian River; at its mouth, on the Pacific Ocean, stands the town of Fort Ross; it was the southernmost Russian colony during the early 19th century. It was at Fort Ross that the Russian ships Yunona and Avos, made famous by Andrei Boznesensky’s and Alexei Rybnikov’s opera, made landfall. It is not a made-up story: in 1806, according to official records, the Russian aristocrat Nikolai Rezanov actually met and fell in love with Concepción Argüello, the daughter of the Spanish Governor.

The Russians left Fort Ross in 1841. From an economic point of view, there was no reason for them to stay there. In 1867, Alexander II sold Alaska to the Americans for 7.2 million dollars in gold, but the Russian colonies on the Pacific coast were not included in the transaction.

By a twist of fate, then, Sankin ended up in a place that had been historically Russian. He had been living there for a year already, but I had no idea; I was simply sitting in my Petrosib office, wearing a raspberry-red blazer. As soon as I found out he had moved there, I got hold of his telephone number. At that time, it was not easy to place a phone call to America. I went to the Central Post Office, waited in line, and got through to Sankin. It seemed miraculous—just as placing a phone call to Mars would now.

“Hi, Sasha! This is Oleg Tinkov. So you’re really in America? That’s awesome!”

“Hey, Oleg! Yeah, I’m slowly getting settled in here.”

“How’s your American wife?”

“We recently got divorced…I got a Green Card and am official here now. I brought my dad here from Tashkent. I’m renting an apartment. I work a power lift at Friedman Brothers. We sell home hardware.”

“No way! Can I come visit you?”

“Fly on over. I’ll help you out when you first get here. You can stay at my place.”

Getting my visa was a headache and a half. I tried everything. For a small fee—or maybe out of the kindness of his heart (I don’t quite remember the details)—a friend from the Leningrad Army Sports Club hockey team set things up to appear as though I had been hired as support staff. My height, at six feet, four inches made me convincing. In December 1992, I came to the consulate for an interview.

“Okay, we’ll give you the visa, but how are you going to pay for living expenses?”

“I have a credit card.”

When I was in Singapore, I broke Russian law by opening an account at Citibank. I got a Visa Gold card. By then, my credit card history went back 18 years. This made an impression on the consul: in St. Petersburg, out of a population of five million, there were perhaps a thousand people who had a card like that. How did someone who worked as part of a hockey team’s support staff end up with a Gold Visa? The consul refrained from asking and gave me another visa—in this case an American one.

I partied over New Year’s Eve. Then, in January 1993 I got into an Il-86 airplane on an Aeroflot flight from Sheremetyevo airport in Moscow to San Francisco via Anchorage. My surroundings shocked me: there were Jewish refugees, crying children, and a bunch of mesh bags. I was stunned by the smell of the San Francisco airport. Anyone who has flown in America knows that unique airport smell. There were a lot of iron doors and police shouting into megaphones:

“Go right!”

“Go left!”

The movie Gangs of New York with Leonardo Dicaprio reminds me of the imposing feeling I had then, at the beginning—the sense that America resembles a big prison. At the airport, if you are an outsider, they immediately make sure you know that everything is serious, that everything is under the government’s control. Big Brother is watching you! Sasha Sankin met me and drove me around San Francisco in an old Toyota. I was sleepy because of jetlag, but nevertheless we went to a bar to have a beer. At first glance, I did not like the city. It seemed strange, unintelligible, and unkempt. Today I think that it is the most European and the most beautiful city in the US. I spent close to 5 years there. If I ever decided to move to America permanently, I would settle in San Francisco.

We drove thirty miles to Sasha’s small house in Santa Rosa, past the famous Golden Gate Bridge, which I had often seen in Hollywood movies. The house really did look like it was made of cardboard, which is something people usually say about American houses. I was also surprised to note that Sasha’s father was very angry, aggressive, and bitter. Towards himself, towards Sasha, towards me—he resented everyone. They would get up at six in the morning and leave the house, making sure the heater was turned off, because they wanted to save money. The intense cold would wake me up. I realized I would not be able to sleep, so I got up right after they did. Welcome to capitalism!

But these were minor details, and they did not bother me. I had come to America for new experiences. I did not find America as shocking as I had West Berlin, even though I was awestruck by a lot of things. First of all, the infrastructure was astounding: the roads, bridges, airport, and transit system. Secondly: there were the prices. The market system works in America: everything is really cheap. Now that is capitalism! That is the West!

When I arrived in America, I knew practically no English. I gawked at my surroundings, dumbfounded. It was hard to learn the language. Now, though, my speaking and writing skills are not all that bad. I make mistakes, but I doubt that my written Russian is much better.

Now, naturally, simply having a good time was not my only reason for being in America. I wanted to start something. That same January I went to a government office in Santa Rosa and registered a company, California Siberia Enterprise. Between the paperwork and getting a stamp made, the procedure took about an hour. Next I went to Kinko’s, where you can pay for office services. I leafed through the free templates and found an image of a Siberian Bear, which I decided to use as my company logo. Everything fell together: the bear symbolized Siberia and the yellow and green motif represented California. I had a bunch of business cards printed, right away, which read:

California Siberia Enterprise

Oleg Tinkov

President

I began sending all kinds of goods to Russia—fireproof safes, for example. At first, Sankin and I sent them as cargo. Later on, however, we started began sending full containers. My junior partner and general director of Petrosib, Andrei Surkov, would receive the freight in St. Petersburg. To this day he continues to sell electronics in St. Petersburg—Bang & Olufsen and Loewe brands, among others. I had met him on Nalichnaya Street, in the dormitory where Rina lived. I always saw this young, enterprising man wearing glasses. He always had some kind of offer for me, whether it was cosmetics kits or cases of cassettes. During the day, the little shit would buy the cases cheaply, in the store, and then he would try to sell them to me the same evening. Even so, I was able to get still more for them in Siberia and so I used him as a supplier. We got to know one other in the course of these speculations and, when the time came to appoint a general director for Petrosib, I of course chose Andrei. He fit in: with his glasses and suit, the bankers trusted him.

In 1993, for my part, I had a lot more than business on my mind. I was trying to find a way to stay in America. In order to get a Green Card (i.e. permanent residence), I had to go often to the INS (the United States Immigration and Naturalization Service), the authority that handled immigration.

* * *

In America, I became authentically Orthodox. I had already been baptized in Leningrad on December 25, my birthday, in 1988, but I seldom attended church. In Santa Rosa, a lot of local Russians gathered together at church. I found that I enjoyed going there as well. It was an outlet, the only place where I could speak Russian. The priest, congregants, and I would drink tea and eat crêpes after the service. I fell even deeper in love with Russian culture, the Orthodox religion, and the church. I was drawn to it.

Through the church I met a lot of “Old Russians,” descendents of White émigré families. Like me, most of them traced their roots to Siberia. Their ancestors had escaped the Bolsheviks by moving to Harbin, China. When China had its own revolution, they left by ship, traveling to Brazil and Venezuela, eventually settling in California. I hung out with these old timers who spoke three languages: Russian, Chinese, and English. I saw Russian ladies wearing veils. There, in the USA, in church, from the mouths of these old Russian immigrants, I heard the most articulate and beautiful Russian I had ever heard. In that atmosphere, I came to be even more convinced that Orthodoxy was my religion. Most importantly, however, I was able to meet a “different” kind of Russian, people that had not been affected by the Soviet system. They counseled me on how to adapt and took pity on me. One even gave me a mattress so that I could sleep better on Sankin’s floor. It was in America that I realized what Russia had lost.

In reality, the Russians had no relation whatsoever to the Russian Mafia—a popular topic of conversation in the States. There was a gang, for instance, active in San Francisco, that had been responsible for several murders. After they were caught, the newspaper printed a picture showing them with the Russian church in the background. The headline read, “Russian Mafia finally decapitated.” The article featured surnames such as Zimmerman and Lerner. This was offensive and insulting to the Old Russian intellectuals. Between the late eighties and early nineties, members of the noveau riche began immigrating to the US from the USSR, including Jews, Ukrainians and Moldovans, among others. Their Russian was grammatically incorrect and they hated the Russians, but the Americans still referred to them as Russians. The public automatically attributed all of their unsightly actions the “Russians” in general and the “Russian Mafia” in particular.

Let me talk a bit more about the so-called Russian Mafia. In 1993, shortly after I arrived, I went to the Russian restaurant StageCoach, which was a dance club on Saturdays. As usual, some of the local big-shots tried to pick a fight with me. They had watched a lot of post-Soviet movies were trying to look like the gangster characters in them. Really, they were trying to look like “brothers in arms” from their historical homeland, but in San Francisco they just looked cartoonish. There were some serious types there, mind you, like Pasha Ulder, whose brother was shot dead by the Chinese the night before I first met him.

When they started harassing me verbally at the bar, I was wearing black Versace from head to toe. I wore a diamond signet on my little finger and I had a scar on my face. In other words, by their standards I was a “dude” and maybe even a big-timer. I played along. I started talking like an ex-con. They decided I was one of them, befriended me and, in the end, they did not touch me.

And of course His Majesty Luck helped me out. A fellow Siberian, Nikolai Nikitich Zhuravlev, had come to visit me and, in accordance with Siberian tradition we decided that we wanted to visit a bathhouse. We found out that some Jewish immigrants ran a Sauna in downtown San Francisco, which was supposedly similar to a real Russian bathhouse. So off we went. The service was revolting, though, the place was a sanitary train-wreck, the temperature only reached 50 degrees, and so forth. It was a scandal. I started making demands and got into a battle of words with the owner’s wife. She turned out to be the sister of that same Pasha Ulder I mentioned above. On top of that, she was the girlfriend of my good friend from Odessa, the legendary Zorik. Zorik is an interesting specimen in that, even after having spent 25 years in the States, he still could not speak English at all. He is also well known for some interesting stories involving drunkenness and experimentation with drugs.

At the same time, however, Zorik is the most talented barber I have met in my entire life. He cuts hair without looking, very fast and with great confidence. I have known him for fifteen years and have never heard of him having an unsatisfied customer, man or woman. His shaving skills are to die for. If you are ever in San Francisco, make sure to visit him at the Backstage Salon on Green Street.

But let us get back to the sauna. After we left, the place burnt to the ground. The next morning, Pasha called me and said that, bro-to-bro, he realized that the proprietors had been in the wrong, but that he thought my reaction over the top. This was really and truly funny, but I did not try to set him straight. In the end I became a legend in San Francisco, and I never had any trouble with the local gangsters again.

* * *

Between January and March, 1993, I was madly in love with Rina. I missed her and called her constantly. She simply could not get a visa through the same hockey team—not even as a nurse or some such thing. It was hard enough to get into the country as a man; they were especially reluctant to issue visas to women. Dozens of other men were waiting for their women, just as I was. A lot of them were from Vladivostok. (On a side note, I would strongly advise Vitaly Savelyov, Aeroflot’s director, to resume service on the Vladivostok-San Francisco route, in consideration of the fact that a lot of immigrants from Siberia and the Far East live there and given that traveling via Moscow is inconvenient.)

In April, the long-awaited day arrived: I arrived at the airport in the ten-year-old red Ford that I had bought for four thousand, shaking with anticipation. I do not know how I drove her back to Santa Rosa. Can you imagine? Three months with no sex. We had a most authentic Parisian wedding and, 9 months later, on December 31, 1993, our first little miracle, Daria Tinkova, entered the world.

In the morning Sankin’s dad came into the room and told us with anger in his voice,

“We couldn’t sleep all night. Our walls are like cardboard. It’s over, get out of here.” He was also waiting for his wife. He was a very strong man somewhere between fifty and fifty-five years old, and his heart and other organs could not handle our sex—so he just kicked us out. There we were: Rina and I, the mattress, the fax machine, the Ford, and couple thousand dollars in our pocket. Where did we go? To the church of course. We only spent one night in the home of an acquaintance. Immediately, they helped us to rent a room for 300 dollars a month. Sankin and I stopped talking to each other because he had not stuck up for me when his dad kicked us out. Later he admitted that he had been in the wrong: sure we had kept everybody up, but that was not the right way to react… Without his help, I had been left with no interpreter, in any case, and, as a result, my skill in English began to grow more quickly.

In the summer of 1993, I bought a house in Santa Rosa. An Armenian guy named Dzhavayan sold it to me. Like the Armenian he was, he just had to sell me something. So he sold me his house, which cost 120 thousand dollars. I paid 20 thousand up front and borrowed the rest from a bank. My monthly payment was 600 dollars. I bought a massive two-storey house that I really had no need for at all. I sold it later for less than I had paid for it and so lost money—but no matter. The important thing to notice is that this dark-skinned Armenian managed somehow to dump the place on me. I still cannot figure out how he pulled it off.

* * *

While we were trying to get our bearings in America, things in Russia began to turn sour once again. President Yeltsin got into trouble with the Supreme Soviet. The deputies were displeased with Yegor Gaidar’s reforms and blocked the initiatives attempted by the president and government. The president felt that, as guarantor of the Constitution, he did not have sufficient power to actually guarantee it. In the end, the banal power struggle stretched on for a year. On September 21, Yeltsin signed a decree Concerning Gradual Constitutional Reform in the Russian Federation, whereby parliament was dissolved and elections to the State Duma were set for December 11-12. The Supreme Soviet, however, staged a protest, which ended with the White House being stormed on October 3-4. Soviet Chairman Ruslan Khasbulatov, Vice President Alexander Rutskoy, and some of Yeltsin’s other opponents were arrested.

We flew into Moscow on the very day that tanks were shooting at the White House. We watched the events live on CNN at the Olympic Penta Hotel where Andy, my partner from Singapore, had gotten a room. He got phone-call after phone-call from his friends that day, asking if he was okay. After a couple of days, Andy left, saying that he would never come to Russia again.

“It’s better if I send you containers. You guys have tanks shooting at houses there,” he explained.

The country was suffering true political and economic ruin. The quality of health care was on the decline and we just could not risk dealing with a Russian maternity clinic. An acquaintance recommended a clinic in downtown Prague. We took a train to Lviv, Ukraine, which turned out to be just as messed up as St. Petersburg. I was surprised to find that all of the restaurants there were closed, but that for a small bribe we were nevertheless allowed in for something to eat. We got back on the train, rode to Prague, and rented a small apartment, for pennies, not far from the maternity clinic.

Right before the New Year, on December 31 at 8 p.m. local time (10 p.m. in St. Petersburg), Rina gave birth to Daria Olegovna Tinkova. The end of yet another fortuitous year was marked by true happiness.

Zorik, from San Francisco, is the best hairdresser on the planet Earth.

In this photograph, Daria Olegovna Tinkova is only 5 days old.

Chapter 14

This is not a Dream—this is Tekhnoshok!

At a certain point I realized that retail electronics sales had become more interesting. Selling televisions in bulk in Kemerovo, Novosibirsk, and Omsk brought in less and less money. Finally, I closed my branches in those cities. I simply had to have my own retail chain!

In early 1994, I bought a store on Mayakovsky Street in St. Petersburg for 200 thousand dollars. It had belonged to Uni-Land, a company owned by Oleg Leonov. Two hundred grand was an enormous sum. In those days the purchase or sale of a business was unreal, particularly in a place like St. Petersburg. Our deal bears witness to the kind of forward-thinking person that Oleg Leonov was. We have remained friends. He had decided to focus on the cosmetics business, so he got rid of the store. Oleg would subsequently create the retail chain Diski, which he later sold for a billion dollars to Igor Kesayev of the Merkury Group. Oleg Leonov’s potential was already apparent at that time. He is a year and a half younger than me, but at little more than 20 years old, he was already doing really serious business. He contributed to the backbone of business in St. Petersburg, if not in all of Russia.

Around the same time, we opened a Sony store on Maly Prospect on Vasilievsky Island. Sony’s management was skeptical about the idea at first, but had no choice but to come to terms with it. First of all, at that time there were no legal grounds for complaints: after all, we would actually be selling Sony products. Secondly, we were buying the equipment from Sony’s official distribution network, but got it on the gray market, in Singapore. The Sony dealers were not happy about us opening the store: they felt that they were Sony, and we were not. In essence, we undermined the dealer system. Because Sony had no other choice, though, they actually helped us out in the end, providing design elements for the store, brochures, and slides.

On March 23, 1994 the newspaper Delovoy Peterburg (“St. Petersburg in Business”) published an article that ran as follows:

The first dedicated Sony store has opened in St. Petersburg. The company that opened it, Petrosib, a dealer for the Japanese Sony Corporation, estimates that its 1994 revenue will amount to three million dollars. The prices on the products, according to 26-year-old Petrosib president, Oleg Tinkov, will be higher than European prices by the amount paid in taxes and customs fees. Sales representatives at Petrosib’s new store have completed preliminary training, which was provided by specialists from the corporation. Oleg Tinkov is determined to succeed with his customers by way of the service his store will provide.

Andy came to the grand opening in spite of his fear over those shots fired at the White House.

“You are very ambitious,” he told me as we sat in a restaurant celebrating the store opening. At the time, the word “ambitious” had negative connotations in Russia. I asked,

“Andy, what do you mean?”

“You’ll go a long way.”

I liked this wording much better. Andy explained clarified his use of “ambition” and I realized that it actually denoted a really positive quality. Thank God, to be ambitious in Russia is no longer equivalent to being a scoundrel.

The Sony store sold twenty thousand dollars worth of product every day and the profit was phenomenal! Management’s main task was to sew money bags!

In Singapore, not only did I encounter delicious food, I also learned new ways of doing business. I discovered that many people could use a single phone number. This was incredibly apparent at Future Systems Electronics. I bought a Panasonic phone station. It had three lines for incoming calls as well as eight outgoing lines. We had grown used to Soviet calls, which all sounded exactly the same. Consequently, I particularly enjoyed changing my tone every day. And of course I made the secretary say “Hello, how may I be of service?” as secretaries did in Singapore where, for example, Future Systems’ secretary always answered the phone, saying “May I help you?” It is quite possible that we were the first company in St. Petersburg to offer assistance to our clients. In the chaotic nineties, people would be bowled over by this kind of treatment. Some just hung up the phone.

The office was up and running and I did not have to be present constantly, so in the summer of 1994 we took little Dasha and flew to Santa Rosa, to our house on Little River Avenue. Soon afterwards, I met Alexander Koretsky, a descendent of the old-time Russian immigrants. Sasha helped me with my English and I gave him tips on Russian. Together we opened the Petrosib USA office. The office fulfilled the same function as Sankin’s home had done, back in 1993. We would find an interesting product and sent large shipments to my retail stores in St. Petersburg. We even hired a secretary and a couple of workers.

I liked America and did not rule out the possibility of settling there for good. I found an apartment in San Francisco, on famous Lombard Street, with an excellent view of the Golden Gate Bridge and of the whole city. Rina and I really felt at home in the flat and we decided to sell the house in Santa Rosa and buy the apartment.

But we did not end up being able to settle in the States. My retail business was growing and starting to bring in good profits. We had no choice but to work on it directly in Russia.

Realizing the prospects, in late 1994 (believe it or not) I decided to hire a lawyer and a marketing specialist. I had read someplace that the best way to go about recruiting this type of staff was through an agency, a head hunter, as such organizations were still know back then. I decided to give it a try.

My first experience exceeded my expectations. I got in contact with the company BusinessLink Personnel and put in a request for personnel to fill the two positions. This company had been founded right at the beginning of the nineties. When Procter and Gamble first entered the St. Petersburg market, staff at St. Petersburg University did a lot of the recruiting. The experience was a success and so the same people registered a business. They continue to achieve big things to this day. Working with the agency was unlike anything I had ever done before: I went to their office and they brought the candidates, one by one, into a special conference room where I interviewed each of them.

I was immediately impressed by a young guy who had just completed his law degree with honors at the university, in the same department where Putin and Medvedev had studied. The kid’s name was Sasha Kotin.

He turned out to be a diligent student. We began to restructure the company, borrowing money and doing up contracts according to correct protocol. This really helped me out in the end. If it had not been for Sasha and his astute legal moves, I really would have been screwed during the first crisis in 1998. It is likely that some very bad people would have taken our business away from us. Sasha fought for every penny, for every dollar, and for our company’s reputation. He was incredibly loyal, even though he did not have partner status. He was very conscientious, sharp, intelligent, intellectually astute, and an effective manager. Later, tragedy befell Sasha—but I will talk about that in a bit.

As with Sasha, I was incredibly lucky with the marketing specialist that I hired. BusinessLink secured the services of Samvel Avetisyan on our behalf. He had been working as a science consultant at the State Public Library on Fontanka River and was earning around 200 rubles per month. I believed he was the right person for the job and so offered him three hundred dollars a month—really good money at the time. Today, Samvel is a marketing hero. He has his own company, Arkhideya, which develops marketing concepts.

My first experience with hiring through the agency turned out to be a huge success. Prior to that, in accordance with Russian tradition, I had hired my friends, or acquaintances, or people that had been recommended to me. Both Samvel and Sasha demonstrated insane levels of efficiency, skill, and knowledge. This was especially clear when you compare their work with that of the managers I had hired on the strength of word of mouth endorsements. If you are serious about being a businessman, then sooner or later you are going to have to turn to a recruitment agency. This is because hiring strictly from among the people that you actually know is a surefire way of destroying your business. If you want to derail your work and lose your investment, do exactly that!

As soon as I had two stores, I started thinking about a single name for my chain. After all, it was a chain. We took a survey among the staff, asking them what they thought the chain should be called. Andrei Ryazantsev, one of our sales managers suggested we call the chain Electroshok. People liked the ring of that name, but it also sounded a bit negative, even scary. In the end we decided to call our company Tekhnoshok. Various people have tried to take credit for the name; it is better to say that it was chosen by the group as a whole.

Just finding the right name was not enough, however; we had to promote the business as well. I called Samvel from the States all the time, asking him how our advertising campaign was going. At that time—oh my God!—I did not even know what the endeavor that we were involved was called. Four years later, when I was studying at Berkeley, I found out that what we had been planning, then, was known as an integrated marketing campaign. It was the first time that this tool had been used in St. Petersburg, indeed, perhaps, the first time in all of Russia. Both Alexander Mineyev, for example, of the company Partiya, and Igor Yakovlev, of Eldorado, have admitted as much. The guys from Tekhnosila told us later that they took inspiration for their own name from Tekhnoshok. Even their yellow and green color scheme is the same as ours.

It all started on September 1, 1995. The city was drenched in Tekhnoshok. We booked as many billboards as well could and called all of the radio stations in order to secure as many spots as they would give us. We hung banners across Maly Prospect and Mayakovsky Street. Oleg Gusev filmed a commercial that was shown on the St. Petersburg TV station. This was around the time that Gusev was filming music videos for Pugachova and Kirkorov—most notably for the latter’s hit song, “Zaika Moya” (“My Baby”).

The song in our ad went like this:

There’s simply no need to bring a shopping bag when you come,

Tekhnoshok will deliver anything you need, straight to your home.

It was utter nonsense, but within an hour everyone knew about us. There were line-ups outside the stores. We kept running out of product. The store’s daily revenue was 20 to 50 thousand dollars. It was as though we were printing money. Armored cars with men in bulletproof vests came and went, to and from the bank, picking up our cash. My thanks go out to Promstroibank and Vladimir Kogan, who believed in me and gave me a seven million dollar line of credit. This was serious money in Russia at the time: in 1995 our two stores achieved sales volume to the tune of 20 million dollars.

Business was going well and so we began to expand. We rented more space and opened a third store at Kommendantsky Airport, with a fourth on Moskovsky Prospect. By the beginning of 1996, we had a full-fledged chain: five stores in St. Petersburg, two each in Omsk and Kemerovo, and one in Novosibirsk.

We dominated St. Petersburg, but our prices were higher than anyone else’s. We had better customer service and higher quality product. Our salespeople wore white-collared shirts and were trained in the American chain Good Guys (which, incidentally, went bankrupt in 2006). The service was shocking for a Russian store: the workers would advise people on what stereo to buy or which television to choose. I can say with a straight face that we brought civilization to our country’s retail industry. I would remind you that the next chain of similar size was Andrei Rogochov’s Pyatyorochka, which was only opened in 1999.

How did we make this breakthrough? Well, it is all quite simple. I was on vacation on Lake Tahoe, in California, and I took a thick book with me—Philip Kotler’s Principles of Marketing (which I highly recommend). In it I read about the marketing campaigns of giants like Procter & Gamble, Unilever, and others. We simply followed their example in Russia. The brand’s recognizability was maximized, which made it possible for us to charge more in view of our customer service—the brand created added value for the company. Samvel Avetisyan contributed a lot towards this goal. He did not have a degree in the field, but he followed his intuition and built a reputation as a talented marketer and advertiser.

* * *

I had undergone a metamorphosis. Beginning as a black-market speculator, flying all over the place, I had now been transformed into a legitimate retail businessman. I now wore a tie. I stopped flying to Singapore all the time. The containers filled with electronics made their own way to us. We became official dealers for Indesit, Panasonic, Aiwa, JVC, Siemens, Bosch and other leading brands and received their products directly in Russia. This was serious business. The staff at our central office on Sadovaya Street expanded from 10 to 50 employees. I would fly to Moscow—to meet with our personnel there—or I would fly elsewhere, in order to attend industry-related exhibitions such as the Consumer Electronics Show in Las Vegas, where the latest developments in electronics are presented every January. I also went to exhibitions in Germany and Japan to search out new product for our stores.

It is not surprising that, at this point, I was not actually acquainted with all of the people who worked for me. In this respect, one interesting story concerns something that happened in October 1995, when I dialed an internal number and an unfamiliar voice answered the phone. Naturally I asked,

“Who is this?”

“Who are you?”

“I don’t quite get it. Come to my office, we should talk.”

It turns out I had been speaking to our new marketing manager, Vadim Stasovsky, who had been discovered and hired by Samvel. He had met everyone in the office, but did not know all that much about me. Vadim probably thought that this encounter would end badly for him. But we got acquainted and had a straightforward conversation.

As a marketing specialist, Vadim’s achievements were huge. We would send him to nearby stores and he would count the boxes our competitors were selling. He would stand for two hours in the freezing cold outside one store, then another two outside another, counting boxes and trying to get an idea of their price. Then he would prepare enormous analytical reports on their sales volume. We realized that Vadim was good with numbers, so we transferred him to finance. At that time corporate finance was a different world than it is today. For the most part there were two elementary types of calculation: addition and multiplication. Whoever was strongest in this regard would get into finance. Vadim has been on my team now for 15 years. He was involved in all my businesses and he has an enormous reservoir of experience. Today he works at Tinkoff Credit Systems.

* * *

In the meantime, business went well. At the end of 1995, Rina, Dasha, and I were able to move into a new apartment on Kamennostrovskoy Prospect. The apartment, which was located in that majestic building where the son of St. Petersburg Governor Yakovlev would later buy a flat, cost 250 thousand dollars. That was a giant leap for me at the time. When we started remodeling, we took our designer with us to San Francisco. We brought everything—from furniture and drywall to plates and spoons—from the USA. We filled three containers!

On December 31, we flew to Chamonix with Uniland’s Oleg Leonov. His wife came along too. Oleg was already a very adept skier. I, on the other hand, had only gotten started at 28 (do not think that 28 is too old). I simply fell in love with the mountains at that time and since then have made good progress. I also remember well a call that I received from Andrei Surkov on January 1, 1996. He wished us a happy New Year and told us the he had sold 100 thousand worth of product the day before—on New Year’s Eve. People bought presents and I grew richer.

The business flourished and I decided to hire a professional manager, one with experience in the West. We ran an ad in the San Francisco Chronicle and, together with Alex Koretsky, found Sergio Gutsalenko, a Russian-speaking American who had experience working for Procter & Gamble and Woolworths. I hired him and for a while he held the position of president of Petrosib. Sergei looked very presentable and spoke three languages. In order to consolidate our image, then, I appointed him president of the company.

From left to right: I, Igor Spiridonov, Andrei Surkov, and Alex Koretsky at the Hungarian stage of Formula 1 in 1995. That summer I decided to be a blonde.

My 28th birthday celebration with the Tekhnoshok team on December 25, 1995.

The first big publication on me was published on August 13, 1996 in the newspaper Delovoy Peterburg.

Vadim Stasovsky, member of the board of directors at Tinkoff Credit Systems:

I started working at Petrosib in early October 1995 as a marketing manager. I was hired by Samvel Avetisyan. At that time Oleg spent most of his time in America and only came to Russia for six months of the year.

The Oleg of 15 years ago was very different from the Oleg that we know today. Back then, you could see him coming to the office from a mile away: he’s here! Everyone started running around and panicking. The situation changed by leaps and bounds. Now people still react to him in a particular way (especially those who’ve only known him for 2 or 3 or 5 years). As compared to the Oleg I knew 10 or 15 years ago, however, the change is very significant.

It was like a whirlwind. He did not shout—he just had a certain way of talking. He had a natural manner of speaking.

The six-month periods when that he was in the office had a very different feel to them than the six when he was away. He managed to maintain pressure on everyone though, too, even when he was a thousand miles away.

Interacting with Oleg outside the office, on the one hand, and interacting with him at work, on the other, leaves the impression that you are dealing with two completely different people. At the same time, though, you have to keep in mind (and I only realized this many years after I had met him), that much of the time he is just messing around. He can shout and stomp his feet, but afterwards you realize that the emotions he had been expressing were simply not there. Oleg was just a good actor.

Vladimir Malyshov, editor of Delovoy Peterburg (St. Petersburg Business) in the 1990’s:

Tinkov is an unusual and fascinating Russian business figure. He wants to be unique, attractive, and creative. And, without a doubt, he succeeds in these respects.

We first met at his first official event—the opening of the Sony store in St. Petersburg. Petrosib, his company at the time, had been selling mostly wholesale electronics. Then his priorities changed and Oleg opened the first store in the city that represented a Japanese corporation. That evening, in a basement store on Vasilievsky Island, around 20-30 guests gathered. Oleg was really nervous. He was running around the room with orders, scolding his employees as well as the caterers. He greeting the guests, smiled at the press, and, now and again, hid in the back offices with important ladies and gentlemen from the district administration. It was clear that the man wanted to stand before his guests and before the assembled journalists, in all his fame and glory, as the “owner of the first brand name Sony store in St. Petersburg.” In order to get the material that I needed, all I had to do was to ask him a few typical questions about his business (investments, return, Sony’s terms, etc.). But I did not want him to experience the nervousness that interviewees usually feel and I did not want journalists from competing publications to eavesdrop on our conversation.

The situation was so stressful I almost got into an argument with him. I introduced myself in the normal manner, saying,

“I’m Vladimir Malyshov, business editor for the newspaper Delovoy Peterburg.” Then I asked him, “When can we talk quietly?” He replied gladly,

“Let’s talk right now.” And then he turned, suddenly, to greet another guest, who took him off to talk with some other characters. They chatted boisterously as they walked quickly into one of the back rooms.

I was tired of it: time was passing and I hadn’t gotten a single snippet of information.

“You said you’d talk to me—and now you’re running around like a chicken with its head cut off. We’re both working here. It’s my job to ask you questions and you’re supposed to answer them truthfully. Let’s appreciate the value of our time and work here.” The next time he tried to slip way, I spoke to him sternly. Tinkov froze, looked at me in surprise, and realized, finally, that this was no joke—that my severe tone was unlike that of a mass advertising agent. He promised to answer all of my questions just as soon as he had dealt with the most important guests. “But let’s just not do it here,” I said, “otherwise you’ll be easily distracted,” still applying pressure. People never stop this man from talking. To the contrary, they inspire him to be an ever more charismatic orator. And now he had agreed to an interview with a journalist, possibly for the first time in his life.

He was 26 then and had only just begun his difficult journey into the business elite.

Chapter 15

Premonitions of the Crisis

While I was busy at Tekhnoshok, a barely noticeable, but seminal change was occurring in ownership in the country: loans-for-shares auctions. Under this scheme and often with help from government funding, banks were taking ownership of massive enterprises that had been created, originally, by the labor of the people of the Soviet Union. The idea was proposed by Vladimir Potanin, the head of Oneksimbank. The bank ended up with quite the juicy tidbit: Norilsky Nickel. Their controlling stake was valued at 170 million dollars. Boris Berezovsky and Roman Abramovich gained control over Sibneft (Siberian Oil) for 100 million, Mikhail Khodorkovsky and his partners picked up Yukos for 150 million—and so on. The best enterprises, which took decades for our fathers to build, were taken away by young financiers. Abramovich, for example, was 29 then and Khodorkovsky 32. It goes without saying that I did not—and still do not—consider this to have been fair.

In 1996, political instability returned. The communists’ prospects for returning to power looked very realistic, particularly in consideration of Boris Yeltsin’s extremely low popularity ratings. But the state’s machinery worked solely towards getting him reelected as president. The idea was simple: the message was not so much in favor of Yeltsin, but rather against Zyuganov, who was associated with the return of the Soviet Union. The slogans that arose in this context are still well-known today—“Vote with your heart!” “Vote or lose!” The Kremlin needed to get younger voters out to the polling stations, voters that would not want the communists back in power. And the Kremlin achieved its objectives. Young people started to worry about a communist victory. Just prior to the 1996 election, Anatoly Sobchak, mayor of St. Petersburg, told me,

“Two locomotives are flying at full speed towards one another. If they hit head on it will be a tragedy for the country. We need to redirect them. We can’t give the communists their revenge. Everyone must vote!”

To tell the truth, however, Sobchak did not emerge victorious in the municipal elections. In the first round of voting, on May 19, he defeated his former deputy, Vladimir Yakovlev (garnering 29% versus 21.6% of votes). But prior to the second round, the losing candidates had came out and spoke strongly against Sobchak. On Monday, June 3, I woke up and heard on the radio that Yakovlev had won the election by 1.7% of the vote. I immediately imagined how crushed Sobchak, who was such a stately and aristocratic person, must have felt. What state must he have been in as he left his house, got in his car, and drove to the Smolny? He would have been crushed, not because he had to turn of his blinker, surrender the government-owned Volvo 740, and get into a private car; he would have been crushed by the defeat of his liberal ideals.

Anatoly Alexandrovich Sobchak: a great man; a true democrat; a true patriot of his country; a man with truly righteous convictions. Indeed, I do not understand how he became the person that he is—in the context of the Soviet Union. Only freethinking St. Petersburg could have produced such a person in those times. In 1989, when I was still a student at the Mining Institute, I voted for him in the elections for the Supreme Soviet of the USSR and, on June 12, 1991, I voted for him as mayor.

I met Anatoly Alexandrovich for the first time in 1996, at an Alla Pugachova concert. Afterwards we went to the Pribaltiyskaya Hotel and sat at the same table. We met a few times after that, too, and probably conversed for a total of ten minutes. On one occasion he even held Dasha. A real politician should always take kids in his arms and hold them: for every kid he picks up, he gets two votes, one from the dad and one from the mom. For my part, I know Sobchak’s daughter Xenia quite well. This might not please her too much, but I have to say that everything that is good in her, everything that I like about her, she got from her father. I can say for certain that he is one of only a few people whose depiction in the media has been completely true to what they are in reality—as with Richard Branson, for example, or myself.

It is such a pity that Sobchak was hounded after his defeat, with his sudden death in 2000, under suspicious circumstances, being the inevitable conclusion. Otherwise, he might still be alive today, continuing to bring much good to the country.

In 1996 Sobchak campaigned convincingly, so we voted for Yeltsin. On June 16, during the first round of votes, Yeltsin took 35.3% of the vote—3.3% more than Zyuganov. General Alexander Lebed came in third at 14.5%. In view of this achievement he was immediately granted the position of Secretary of Defense. Thus, in the second round of voting, the votes he would have received went to Yeltsin instead. That is how it worked out. On July 3, Zyuganov took 40.3%, while 53.8% voted for Yeltsin. Later on, it came out that Yeltsin had survived a heart attack in June, but they managed to keep this fact a secret until the elections were over.

Of course, I voted for Yeltsin, not just because of what Sobchak had to say about him, but also because of my hatred for communists and my respect towards Russia’s first president. My feelings about him are deeply positive because he gave us the opportunity to at least try a taste of freedom. What Gorbachev started, Yeltsin deepened.

I recall the feelings I experienced between 1993 and 1998. Some might say that it was a time of anarchy and chaos. In my opinion, however, it was a time of freedom. My complaint against Yeltsin concerns a different matter entirely: he came under the influence of his daughter, as a result of which he went too far, distributing state property among people close to his family.

I, on the other hand, privatized nothing, but rather strived to develop my own businesses. By August 1996, I had garnered a lengthy article in the “My Business” column of Delovoy Peterburg. The article was written by journalist Volodya Malyshov. A number of quotes from it are still current today.

One example pertains to structuring a business:

It is impossible to operate successfully over the long term without structure—without people sitting in offices, filling out paperwork, holding meetings, working in the warehouse, working at the counter. That is why we build our structure—we hire the best specialists, we equip them with everything they need to work, and we open new stores. Right now people do not get us, but in 10 years, we will see what has become of the “two friends selling cordless phones” and what has become of us. They are moving fast, but who knows where they are going.

Another quote concerns professionalism:

If you can find the people, you will find the money. Unfortunately there are not very many genuine people out there. Now we only look for professionals. We need people with healthy ambitions, people whose goal is not simply to make a thousand dollars or more a month, but who really want to grow their career. When we manage to find people of that sort, then we see them grow up within a year… Often we have to say good-bye to friends—if they are not professional.

Or on business objectives:

Our original business philosophy was to work for profit. I am more impressed, not by the amount of product we sold, but by the amount that the company earned from these sales. For me, the indicator of a business’ success is net profit.

This publication, accompanied by a photo of me trying to jump up and reach a Tekhnoshok sign, had resonated enormously. Some people were even suspicious of Volodya, thinking that perhaps he had taken money for the article. But the article did not have exclusively good things to say. There were also some negative facts; for example, the fact that our Bang & Olufsen store had suffered losses. This case was a perfect example of how stubbornly narrow of vision our nation was back then. Volodya had come to me to investigate an interesting individual in a small start-up. This fact speaks to his farsightedness and talent. I want people to know about our heroes (Volodya—hi!). I want people to know who our heroes were. I have met a lot of good journalists along the way, since then: honest and principled. I have encountered an equal number of bullshit journalists: envious, soulless idiots, trying to coerce money out of me or writing dirt about me. But let us forget about them. I will remember the good ones in any case—Sergei Rybak and Anton Saraikin from Vedomosti, for example. Another example, without qualification, would have to be Oleg Anisimov of Finance magazine, who convinced me start a blog and to do a TV show. Indeed, it was he that told me I should write this book. There are many other talented, honest, high-quality, and very bright (the key adjective) Russian journalists out there. My apologies to any that I left out. We are not short on trash, though, either.

It was not for nothing that Volodya Malyshov wrote about Tekhnoshok and me. Between 1995 and 1996 our revenue had grown from 20 million to 40 million dollars. The competition, however, had grown fiercer. The chain Eldorado had come to St. Petersburg and commenced some severe low-balling. They offered incomprehensible prices. How did they manage to survive? On the basis of which profit? On some driving-force items, the profit margin fell to 5-7%. This is next to nothing in retail, where the overhead—everything from salaries to rent—is so high.

Eldorado’s low-balling was not limited to St. Petersburg. They used the same tactic in Novosibirsk, Kemerovo, and Omsk, cities where Tekhnoshok had stores as well. It is possible that the Moscow company had cheaper financial resources. Everything else aside, the banks in St. Petersburg had higher interest rates on loans with shorter terms. Anyway you look at it, St. Petersburg was a regional center then. The retail profit margin fell drastically and my wholesale company Petrosib Nord West (which, since 1994, had been selling wholesale electronics everywhere, from Krasnoyarsk to Krasnodar to Vladivostok to Murmansk) became even more profitable than Tekhnoshok.

In 1997, I felt the slowdown and began looking for opportunities to sell the chain. The company’s annual revenue had reached 60 million dollars and we were always hiring. At the end of the year, I threw a corporate party at the Olympia Club on Liteiny Prospect. I did not know half the people there and this made me afraid. I felt really big, but it was a scary feeling. Now I have my fifth business and I can say for certain that if I am in my office and find that I am faced with a bunch of people that I do not know, that I cannot feel, as it were, then that means it is about time to sell the business. In any case, I had already made up my mind to leave the electronics retail business and to start a pelmeni[2] and restaurant business, which would require money.

I was in talks with Partiya, but could not come to a pricing agreement with the company’s founder, Alexander Mineyev. Partiya’s annual revenue was 600 million at the time, while ours had had not yet reached a hundred million. Even today, that would be a lot for an electronics chain. Meetings with the Zaitsev brothers, Vyacheslav and Viktor, who were the owners of the Moscow chain Tekhnosila, were fruitless too. I also met with management at Eldorado.

I came to an agreement with Andrei Surkov and transferred the whole Petrosib stock package to him. In actuality, we had completed what is known as a “management buy‑out.” In other words, the company had been bought out by its management. Andrei paid cash for my stake and I left to start making pelmeni, having foreseen that profits would cover more than 100% of the investment. For the first time I realized how cool manufacturing could be, even though I had not believed in it before and was a constant critic. In my view, Russia still needed to grow up a bit before it could really manufacture anything. After a visit to my friend Alexander Sabadasha’s vodka plant, however, and upon realizing how much he was making, I realized that the time had come!

After the August crisis, a new company, Simteks, entered the scene, owned by Viktor Gordeichuk. Simteks took Petrosib under its wing. The complex deal was brokered by Promstroibank, our creditor. The end result was that I left Petrosib with seven million dollars—all of which I invested in my new company, Daria. If it had not been for the crisis, I would have gotten a great deal more.

As profits from my electronics sales became intangible, I began to consider other types of business.

On Russia’s National Anthem

In December 2000, a decision was made to bring back the Soviet national anthem. Yeltsin came out against it, but Putin decided that the anthem should be set to Alexandrov’s music. Mikhalkov wrote new words. The old lyrics had praised Lenin and Stalin; the new ones spoke of God. I cannot figure out how a person could be so self-contradictory. It seems to be that after the Soviet anthem was reinstated (albeit with new words) the situation in the country turned downward and backward. Things began reverting to the way they had been during the Soviet era, towards that empire of evil. The foundations of liberty were laid under Yeltsin during the 1990s. Now that liberty was gone. I am also ill at ease with public perceptions of Stalin. A lot of people portray him in too positive a light. There is only one accurate perspective on this man, however, and that is to concede that he murdered a ton of Russians and is therefore worthy of curses only and not of praise. As far as the victory of 1945 is concerned, the Russian people achieved that, not thanks to Stalin, but in spite of him.

Chapter 16

Musical Shock

Before I start talking about my new projects, I should tell you about my music business—the MusicShok stores—and about my recording company Shok Records.

In Siberia, music is one of very few available types of entertainment. Even before I enlisted in the army, I had become a true “melomaniac.” We listened to every album released by the firm Melodiya, which sometimes released alternative music, such as Bravo with Zhanna Aguzarova, as well as the bands Avgust and Kruiz.

Sometimes European music made its way to us too. One of my older friends, Sergei, went to Budapest and brought back some records with him, including albums by Pink Floyd and Ottawan. This was shocking music. In 1986, when I left for the army, it was to the tunes of Bad Boys Blue and Modern Talking…

In the service, in addition to a strict limit on the amount of chocolate you could have, we were not allowed to have tape recorders on which to listen to music. Sometimes you could hear music coming in from somewhere over the barricade—for instance Yury Loza’s new album—and you would stand listening to it, dreaming of freedom and a better life. At the same time, though, there were some guys who served with me who were expert guitar players and could play all kinds of songs by famous bands like Kino (one song they played often was “Aluminum Cucumbers on a Canvas Field”) and Akvarium. We loved to sing a song by Forum (with Viktor Saltykov) called “Little Island”. Before bed would have an hour of free time during which guitar playing would subdue our need for a tape player.

When I arrived in St. Petersburg, I immediately immersed myself in the musical culture. I went to concerts featuring Kino, Nautilus Pompilius, Brigada-S, and Pop-Mekhanika. On occasion I was able to talk to the band members. Once in the early nineties, I got into a brawl in the subway after a show at a disco called LIS’S (I would like to give a shout out to proprietor Sergei Lisovsky).

The point is that I have always felt an intimate connection to music. Thus, after we had established Tekhnoshok, one of our salesmen, music addict Kostya, told me,

“Oleg, people buy DVD players and stereos from us, but we do not sell discs.” I thought about this and decided to open a music store. What to call it though? “MusicShok” was an obvious choice. We found an apartment on Vosstanie Street and did not leave the Smolny alone until they had changed the zoning from residential to commercial. We brought all the best equipment from America, bought software and a bunch of CDs, and set a date for the store’s grand opening on March 23, 1996.

That day Alla Pugachova and Phillip Kirkorov came to St. Petersburg. At the time they were at the peak of their popularity. I negotiated honoraria for them, which would be ridiculously small today, through Emma Vasilyevna Lavrinovich, director of Oktyabrsky Concert Hall. After the store opening, Phillip gave a concert at the Pribaltiyskaya Hotel. At the table sat mayor Anatoly Sobchak, Alla, Phillip, Oleg Gusev from the band Avgust, and I, Oleg Tinkov, a 28-year-old punk. Imagine the nerve I had to work up, not just to open a record store, but to invite Alla Pugachova, the mother of all of Russian show business, to the opening! For five years or so afterwards, Alla and I remained close; Phil and I are still good friends.

Apart from Kostya, Jean-Jacques, a black man from the Mining Institute, also worked in the store. He spoke French and rounded out the entourage. I made a lot of new friends among local music aficionados. Their respect for me was rooted in the fact that they no longer had to go overseas to find rare discs. The atmosphere in the store was excellent: posters covered the walls and we gave free coffee to returning customers.

We had come on the scene, however, a little ahead of our time. Because we sold only licensed music, the prices were high. This meant that only high-income customers could afford to buy it all the time. Other people had to make do with discs acquired by pirates, overseas, for a buck fifty each. The market turned out to be very tight.

Apart from Western music, we also sold Russian discs. As you know, I do not like sharing my profits and so I came up with the following idea: why overpay the Russian music recording companies, when we could record and sell albums ourselves? The demand for local St. Petersburg talent was low, in any case, and it was hard for homegrown musicians to find the money to record albums.

We had already released one disc: for the grand opening of MusicShok, we made a souvenir compilation called Tekhno Para-Shok. Producer Ilya Bortnyuk assisted us in putting it together, as did Valery Alakhov from the band Novye Kompozitory (“New Composers”). The disc turned out “all right.” When I ran into Ilya at a disco, my friend Yevgeny Finkelshtein at Planetarium, told him,

“Let’s start a record label.” Ilya reacted very positively to the idea and began taking me around to clubs such as Fish Fabrique, TaMtAm and Griboyedov. I dove right into the St. Petersburg underground scene. In particular, I made the acquaintance of Vasya Vasin from the band Kirpichi, Oleg Gitarkin of Nozh Dlya Frau Müller, and Seryoga Shnurov of Leningrad.

For starters we decided to release an album by the band Kirpichi, under the title Kirpichi Tyazholy. The first run was about a thousand copies. They turned out to be defective though. There was a track missing, but we managed to turn this inconvenience to our advantage. We got them to do another run and it took us a long time to give away the other discs for free to people we met—we were not about to throw them out.

What we did for Kirpichi continues to serve them well to this day. We promoted the group really actively: for instance there was a spot on the TV show A on the channel Rossiya, plus a publication in the press. The most interesting part is that we ended up profiting from the Kirpichi project—even if it was just dimes and nickels. I think I invested seven thousand dollars and pulled out eleven.

Kirpichi were the first Russian rappers! It was just that they had come on the scene too early. If Vasya Vasin, a huge talent, had started his career five years later, in Moscow, rappers like Timati would be taking it easy. Now rap and R&B are popular, but back then people had little interest in these genres. Kirpichi’s lyrics are notable for their brutality and are still relevant fifteen years after they were written:

I’m rolling around town today, got kicked out of my job;

They didn’t pay me and I want a drink.

They screwed me, they screwed me, they screwed me for money.

They ripped me off and roundhoused me in the face.

Or:

There’s one person who’ll never betray me,

Who’ll be faithful till the end.

This person believes in me even when it’s crazy

And would never say anything stupid about me behind my back.

He’ll never hand me over to you. This person is me!!!

I’m happy for the difference that we made in the fight against drugs—even if our contribution was a mere drop in the bucket. Vasya composed these lyrics for the song “Loiter, Fool, Loiter”:

The bottom, now I’m talking about the lowest point.

Drugs are Satan’s best invention.

“Lowlife” in this case is not an insulting word;

It’s a literal definition…every druggie has it written on his forehead:

“666,” the number of the Beast.

Every druggie already sees himself in a coffin.

And he thinks he’ll quit his loitering—I don’t believe it!

Loiter, fool, loiter and you’ll perish.

Kirpichi promises you this.

Loiter! Loiter!

Loiter, fool, loiter!

As you can see from these lyrics, we strived with all we had to live up to our name—“Shok Records”. In 1997, we released the album Invisible Man by the group Nozh Dlya Frau Müller. This crazy electronic music, which made use of retro samples from Soviet and German songs, offered an original sound. The names of the songs were crazy as well: “Intravenous Curator”, “Insulin Candy”, “Lie Stick”, “Voldemar’s Fingers”, “Ozverin, Go!”, “Plasmagothic”, etc.

Oleg Kostrov and Oleg Gitarkin initiated some solo projects. Both of them are quite popular abroad. Gitarkin’s Messer Chups, for example, is one of a handful of Russian projects for which there has been significant demand in the West. The band tours often throughout Europe.

Shok Records released more than merely alternative music. For example, we released Vladimir Dashkevich’s soundtrack for Sherlock Holmes and Doctor Watson. We took all the music from the movie, as well as other music that had been written for it, but which had not been included. We gave the disc a very attractive design in a collector’s edition format. The project turned out to be a great financial success: we sold the distribution rights to Soyuz and one of the songs ended up in an advertisement for some kind of cookie.

Another thing that I am proud of was our publication of a book entitled (and also about) Viktor Tsoi, which we printed in an edition of twenty thousand copies and which consists of recollections from the famous Soviet rocker’s widow, Mariana Tsoi, and from Alexei Rybin, Viktor’s bandmate from the first lineup of the band Kino. The 320-page book included Tsoi’s previously published story Romance, written by the musician in Kamchatka Boiler House in 1987, a story by Mariana called Starting Point, Rybin’s story, Kino from the Very Start, and lyrics by the band Garin and the Hyperboloids, Tsoi’s pre-Kino band. At the time of publication, seven years had passed since Tsoi had died in a car crash. As a personality, though, he still sparked widespread interest (which persists to this day). Today we would really benefit from a new Tsoi, someone to sing songs like “Change!” and “We’ll Take it from Here”.

And of course I am really happy to have had a hand in building the popularity of the band Leningrad. I should say that the band was a somewhat different entity at that time: they were something between Billy’s Band and the Leningrad of later on, when the wind section from St. Petersburg Ska-Jazz Review came on board. I helped Shnur, as Seryoga is known, to release the first album—and he still remembers it. He has given me some huge discounts since then and even played at a company party once for free! He also performed on my 30th birthday in 1997. We signed a contract with Leningrad and financed the recording of their first album. It was never released though. Even though Shnur’s song “New Year” was included in our spring 2008 compilation Disco, Disco, which also included songs from the bands Kolibri, Pepsi, Nozh Dlya Frau Müller, Chugunny Skorokhod, Pilotage, Prepinaki, and others. On the whole everything was going fine with Leningrad, but after a few successful concerts in Moscow, Y, a band from the city, decided that they wanted to buy the group out. And so, if I remember correctly, I decided to hand over the rights for 20 thousand dollars.

By 1998, I had already come to a realization of the precariousness of the sound recording business. First of all, St. Petersburg had never been at the center of show business. After all, the bulk of sales were still done through Moscow. At some point I stopped financing Shok Records and sold the company to some Muscovites from Gala Records (by this point, Tekhnoshok and MusicShok already had new owners as well). I do not have any regrets, however. I was in the music recording and sales business, not for the profit, but for my heart, my soul, and for the networking. For instance, Zhanna Aguzarova, who, like me, is from Siberia, came to the grand opening of the second MusicShok store on Bolshoy Prospect on the Petrograd side. In the end, I was spending more time at MusicShok than at Tekhnoshok—even though electronics sales were earning me incomparably more.

So, friends, business does not always have to be about money. Sometimes you can and you should do it for your soul (and that does not necessarily have to entail anything major). It is actually the case, in general, that you should do what your soul leads you to do. I have always followed this rule.

But as a business, music turned out to have low prospects. The industry works under specific standards and, as we are seeing already today, these do not work on a global scale: digital music has killed everything. The problem with the Russian music industry is not so much the piracy (which is a problem everywhere), but rather the economy. In order for the music industry to function a record has to be priced at 20 dollars. The cost of the disc itself is around one dollar, promotion costs another five dollars, five dollars go to the artist, and then more again to the wholesaler, distributor, and retailer. If the artist is getting 5 dollars per CD, that works fine with sales of, say, one of Madonna’s albums. But in Russia the retail price of a CD rarely goes above 10 dollars and so the system simply does not work. People do not want to pay 20 dollars for an album that they will only listen to two or three times.

Then the deceit started: either they would pay artists less or they would release huge numbers of albums—and only pay commission on a fraction of them. The recording companies could not make as much money either, because sales were low and because pirates started copying albums as soon as they were released. Not one single Russian CD has ever sold a million copies—not even Zemfira or Mumiy Troll or Pugachova could sell that many. Then digital formats appeared. The music industry had already been brought to its knees and now it was shot in the head. Now I am selling my book on the Internet and I feel that the traditional publishing industry, including retail publishing, will also be brought to its knees—with the inevitable coup de grâce just around the corner. Of course, retail book sales will go on, in the same way that vinyl record stores are still around overseas, but the industry will have to make some serious changes. I hope to play a part in this as well.

With respect to the future of sound recording, I think that we need to start selling singles online, which is, in any case, already a global practice. Zemfira, for example, might put out a new single, which could then be downloaded for ten cents. A million downloads and you would have earned a hundred thousand dollars. The idea is that the time spent searching for a pirated copy of the song would be worth more than the song’s official price and a normal person would find it easier to pay up than to search pirate sites where they would likely be forced to view trashy ads.

If I were a musician, I would also move away from the practice of writing and selling albums. Instead, I would put singles up on my site—once a month say. This would be more interesting for listeners and more profitable for artists. The album is an anachronism—a twentieth-century phenomenon.

I did not end up hitting it big by recording songs and selling records, but I would not say that MusicShok and Shok Records were failures either.

It was prestigious work; I met a lot of good people and, most importantly, it was both a business that I liked and a hobby that I thoroughly enjoyed.

It is gratifying to know that I helped to establish bands like Nozh Dlya Frau Müller, Leningrad, and Kirpichi. I never planned to get rich from music and it would not be right to say that we achieved anything extraordinary. But I am proud of the fact that we released intelligent music! Ilya Bortnyuk was the business’ manager, but I consider him a partner, because all of the ideas were his. Now Ilya has become a very famous producer. His company, Svetlaya Muzyka (“Bright Music”) strives to popularize truly bright music. Every year, his company holds a festival in St. Petersburg—Stereosummer—which brings in artists like Air, Royksopp, The Chemical Brothers, Franz Ferdinand, PJ Harvey, Dead Can Dance, and Tricky, among others.

I am still a music addict and buy a lot of CDs. I like to hold a disc in my hand and examine its design. My children, on the other hand, will only accept digital music if it is in MP3 format and I have grown accustomed to downloading MP3’s legally—and sometimes illegally. Some might find this is a strange admission from a businessman: more of my hard drive is taken up by music, though, than by financial reports or banking documents.

That is how I was born.

Promoter Yevgeny Finkelshtein, Depeche Mode vocalist David Gahan, and I.

Ilya Bortnyuk, music producer:

I can say about Oleg that he’s purpose-driven. Striving for goals without looking left or right is a very good quality. Another of his qualities is his ambition. For Oleg, it was always important to be in the public eye. On the one hand, he always tried to act in accordance with the laws of business, while on the other hand, there was always an element of big risk-taking—that is, a kind of combination of Russian and Western methods. This has ultimately paid off. Of course he has intuition. He always knows where money can be made. Now that’s talent. His main businesses have been successful. In reality he’s a fairly complex person. I don’t understand how people can work for him for decades on end. In reality, actually, there are very few who have been able to do so—maybe one or two.

But his huge inner energy attracts people. Even when people don’t understand the value in every thing he’s doing. He captivates with his ideas, with his personality, and people get on board. This is important for a lot of people. I’ve seen him around some that seem very profoundly captivated.

Oleg is quite progressive. I haven’t interacted with businessmen too much, but I can say that, as a fairly well known businessman, doing business that wasn’t particularly artistic; he strove towards music, towards the arts. This is an honor to him. America played a big part in it.

Chapter 17

My Favorite Pelmeni

In later autumn, 1997, I had the meeting of a lifetime. One Saturday I got completely smashed and on Sunday morning my head was pounding. I had no clue what to do about it. Someone suggested that I go to the sauna. I went up to the fifth floor of the Grand Hotel Europe on Nevsky Prospect and started going back and forth between the steam room and the cool pool. An elderly, gray-haired man sat in the sauna. Because both of us wore crosses and because he did not look Russian, I asked,

“You’re Orthodox, but from what country?”

“I’m Greek, and yes, I’m Orthodox. My name is Athanasius.”

“A pleasure; I’m Oleg.”

We got to speaking—in English. By that time I was fairly fluent, as I was in America often. Athanasius told me that he imported food production equipment to Russia and that he was now trying to sell ravioli machines. Why would we need such things in our country though? Few people ate real Italian ravioli and most people made their own pelmeni by hand, or on semi-automated equipment.

Athanasius and I traded contact information. When I got home, I asked my wife:

“Rina, do you ever buy pelmeni?”

“Of course I do.”

“How many packets a week?”

“Two.”

All right then, I thought, there seems to be a market for these things. Next, I proposed to Igor Spiridonov that he work on the project with me and we began sizing things up. To begin with, we called the St. Petersburg company Ravioli:

“Hello, we trade in food products. Could we buy a metric ton of pelmeni from you?”

“Are you kidding? The smallest amount we’ll sell to a distributor is 20 tons.”

I nearly lost it. It turned out this market dealt in much higher volume than I had expected. So I said to Igor,

“Wow, this is interesting.” Next we found out how much the raw materials would cost and threw together estimates for other expenses—pay for workers, for example. Once the market research was done, I decided to buy some equipment from Athanasius.

One ravioli machine, with a production capacity of 300 kilograms an hour, together with a refrigerator, cost around 50 thousand dollars, which entailed a total investment of about 250 thousand dollars. Igor got us some space behind the palace, in the old czars’ stables, and we equipped our storage and production facilities.

While the plant was under construction, I could not stop thinking about what kind of pelmeni we would make. One day I went to Moscow on business. While I was there, I went to the première of a film shot by Garik Sukachov. In front of me in the cinema I saw a man with a familiar thatch of hair. It was Andrei Makarevich from the band Mashina Vremeni (“Time Machine”). He was not so bald back then as he is now. I tapped him on the shoulder and asked, without the slightest hesitation,

“Andrei, you have a show named Smak. Is there any way that we could buy the Smak trademark for our pelmeni line?”

“Here, take my director’s phone number. His name is Nikolai Bilyk.”

I called this Kolya and he soon agreed. It turned out that Makarevich’s production company had not actually registered the name “Smak”. Attention! What would a normal, beginning Russian entrepreneur do? Right, he would register the “Smak” trademark for pelmeni and he would have nothing more to do with Makarevich. My friend and lawyer Sasha Kotin had suggested we do just that:

“Come on, let’s just register it. TV is one thing and pelmeni is another thing altogether.” But my kindheartedness, good habits, and conscientiousness are sometimes boundless. I decided that this approach would not be right and so told Nikolai about the situation with the trademark. We waited for them to register the name, then bought a license and started producing “Smak” pelmeni.

The fundamental difference between Italian ravioli and Russian pelmeni is that while they put pre-cooked meat in the pasta, we enclose raw meat in raw dough and then cook the whole package at once. Given this difference in procedure, as it turned out, the Italian machine would not work for pelmeni. It could not handle the raw meat, was constantly breaking down, and, instead of a producing one hundred kilograms a day, it only managed fifty. We brought an engineer in from Italy and asked him to re-design the machine for Russian needs. Once they had made the upgrade (they even added the letter “R”, for Russian, to the machine’s name), we bought two more machines. I ordered them when I was in Austria over the New Year, skiing. I rented a car and drove to Italy, where I signed a contract with Dominioni worth a half million dollars. I could only pay 400 thousand up front, so I still owed a hundred. But in exchange for this deferral, I offered to write “Made on Dominioni Equipment” on every package of pelmeni. The loan was interest and collateral free. In the end, though, the Italians made up for that with flair.

What did they gain? The advertising on our packages helped to earn them millions in sales all across the CIS. Today, Russia accounts for 80% of Dominioni’s sales. The last time that I met with Fabrizio Dominioni (son of the company’s founder, Pietro Dominioni) on Sardinia, he was driving a red Ferrari. Ordinarily, you would not ask someone driving that sort of car, “How are you?”—because the answer would be obvious—but I decided that I would like to know how he was doing in any case. Fabrizio said that the Russian market had really helped the company’s business and that the majority of pelmeni, tortellini, and ravioli sold in Russia are made on Dominioni equipment. In business you can never be sure what will lead to what. In this case, thanks to a strange encounter between a Greek, Athanasius, and a Russian, Oleg, Dominioni, a small family-owned company founded in Italy in 1966, was able to expand its business substantially. My favorite concept, the notion of a “win-win” situation, is exemplified here perfectly: in any deal, both parties must win something. This is a Western approach and it is right. In contrast, in Russia, it is a question of “who breaks whom,” so that, in principle, every deal has to have a winner and a loser. Always strive to make it so that both sides win.

* * *

Thus, in the winter of 1998 we set up two newly purchased production lines. I was completely consumed by the pelmeni and stopped showing up at the Tekhnoshok office. We were still making money there, of course, but the return on investment was nowhere near the results we achieved in the pelmeni business. Andrei Surkov remained in charge across the board. I was so immersed in my new business that, on one occasion, having recently returned from America—where Rina and Dasha were living at the time—instead of going home, I drove my Mercedes 600 to the pelmeni factory in Peterhoff. For some reason there were not enough people there and so, while my driver slept in the car, I worked all night in the plant—feeding, receiving, packaging pelmeni. All the while, of course, I was also examining the machinery, to see how it was made, how it operated, and trying to see if there was any room for improvement.

At first the three production lines, which were not operating at full capacity, made 300 kilograms an hour. Later we accelerated production on the machines and, in mid 1998, just before the crisis started, we were making one ton per hour. The total cost of the finished pelmeni, including raw materials, was a dollar per kilo. We would sell them for three dollars a kilogram. I selected two exclusive distributors, Foodline and MBK. Because the “Smak” name was well established—thanks to Makarevich’s shows on ORT (All Russia Television)—we earned quite a bit. Net profit amounted to around half of our total turnover of 700 thousand dollars a month.

Thanks to two new technologies that we had implemented, our pelmeni began flying off the shelves. First, we were able to produce tons’ worth of pelmeni every day, something that you could never do if you had people working by hand. Second, we used shock freezing, which gives the pelmeni a long shelf life—even at zero degrees.

With the help of a loan from Promstroibank, we bought out Tekhnoshok’s warehouse on Predportovaya Street. Inside, we built a factory. We poured polymer floors, set up massive processing lines, and installed shock-freezing equipment. We invested nearly three million dollars. It is still Daria’s main production facility. We were some of the first people in Russia to create a grocery production plant that complied, across the board, with Western hygiene standards. The inspectors were shocked: stainless steel, white coats, gloves, and even masks, which were worn by workers in the meat department.

Suddenly Igor Spiridonov wanted fast money and decided to put a stop to his investments. I bought his share for 100 thousand dollars and he departed, not realizing that the business had a big future ahead of it.

On June 1, 1998, I started up the factory, counting on massive profits. Two and a half months later, though, the crisis hit. The dollar’s value expanded to many multiples of what it had been worth before. Prior to mid August, my most important unit of currency had cost around six rubles. Suddenly, however, its value started expanded: seven, ten, twelve, fourteen…our pelmeni were everywhere, but no one was willing to buy them for three dollars anymore. Lowering the price was torturous: with production costing one dollar per kilo, we had to sell the pelmeni for the same amount—but at the new ruble exchange rate, which meant that we were just covering costs.

The crisis created a reserve for expansion in production. Starting with a small profit margin, we quickly started gaining market share. It was a good thing that our factory’s five lines made a ton and a half of pelmeni per hour! We made almost 30 metric tons a day. The country was being buried, virtually, in pelmeni. In order to truly cover the country with them, however, the “Smak” brand alone would not suffice. I would have to create my own brand.

I had often heard my wife call my daughter:

“Daria, come here! Daria, time to eat!” At the same time, our five-year old Dasha really loved pelmeni. I though about it and decided that ‘Daria’ was an awesome idea. Why not call our pelmeni brand that? We registered the trademark, and ordered a logo and company motif from the St. Petersburg company Coruna. A red-green color combination was rare then; the brand looked fresh and appealing.

Promotion requires advertising though. There is no other way. Another stroke of genius came into my head: why not make a provocative, sexy advertising campaign. Nothing sells like sex, I thought. And I was right. I remembered an incident from my own life, where a man had grabbed his wife by the tits and said, “Now these are quite the pelmeni” Well—why not get hold of a woman’s butt for the ad?

We found a university student, covered in goose bumps. It was winter, after all. Andrei Kattsov, a designer who had worked in three companies—Petrosib, Daria, and even in Tinkoff—called a photographer friend, sprinkled the woman’s buttocks with flour, took a picture. All that remained to do was to write the words, “Your Favorite Pelmeni!” and the ad would be ready to run!

We put up a total of five posters in St. Petersburg and two in Moscow, where we concluded dealers’ agreements with major distributors. You should have seen what happened next. A breakthrough. Our finest hour! We really got everyone going, so to speak. To this day, people still remember that photo of the naked bum. Moreover, the expression “favorite pelmenies” became a catchphrase. Even during the crisis, our huge factory worked at full capacity, then, not only producing Daria pelmeni, but varenniki, a vegetarian equivalent, as well.

* * *

The plant in Peterhoff kept producing Smak, but things started to turn sour with Makarevich. His director, Nikolai, seeing our results, started choking us, pressuring us, raising his royalty fees. Our little love affair came to an end. On top of that, they started assigning the “Smak” name to other manufacturers. They even gave other companies the right to make pelmeni under the same name, which, in our view, was unacceptable. In any case, the quality of the pelmenies being produced by so-called ‘Smak’ number two left much to be desired. Consumers, seeing the two types of Smak in the store, asked for the ones from St. Petersburg. Makarevich plied and pestered us so badly that, in mid 1999, we registered our own trademark, “Pitersky Smak”. We even began staging direct attacks on the Smak TV show (with the help of Yevgeny Arievich of Baker & McKenzie), which were a real headache for Makarevich. And it was all because of their unseemly behavior. With all due respect to Andrei Makarevich the artist, I cannot say anything good about his qualities as a businessman—although maybe he was simply going along with whatever his conniving boss thought up.

Everything works out in the end though. Thanks to the muddled situation with Smak, I invested more in my own brand. You are never stingy with your own business, so we started an aggressive marketing campaign for Daria.

We rented illuminated signs in Moscow, on Novy Arbat, purchased space on billboards, shot commercials, and paid for TV spots, all of which were noticed by consumers.

I’ll feast as I did in the good ol’ days.

I made ‘em myself. Daria.

I imagine that many of my readers will still remember that slogan. Perhaps someone still remembers another provocative piece of advertising—“Meat inside”—with a logo reminiscent of Intel’s, and our United Colours of Daria, where we parodied Benetton’s slogan.

The consumer asked for—indeed demanded—our pelmeni. We worked according to the book with our distributors as well. I have to give credit to Igor Pastukhov, who transferred from Petrosib to Daria. He had our partner relations down pat.

What is a distributor? If your business has some relation to retail sales, you must not forget that your success lies with your partner. If he is not motivated, then nothing will work. He has to take a big cut; then he will be interested in working hard, selling well. In relation to all of my businesses, I have always preached that the profit margin must be large. If there is no profit, there is no margin. You cannot earn, in your own right, and not share with your distributors. That would be irresponsible, both towards yourself and towards your partners.

For instance, we paid twenty cents per kilogram, while my competitors (e.g. Talosto, Kolpin or Ravioli) were able to pay only five cents. Our distributors were therefore wholly motivated to sell our pelmeni and varenniki. Now, naturally, with this approach, the retail price will be higher than the competition’s, but you cannot simply set a higher price “out of thin air.” There has to be some justification for doing so. We had a high-quality, talent-driven, concise marketing strategy based on the real state of affairs. You might consider our pelmeni an innovative product. What made Daria an innovation? It was because we used shock-freezing. The pelmeni were never touched by human hands in the course of the production process and everything was produced on imported stainless steel machines. At Soviet-era meat-packing plants, product was put in the freezer for about an hour. Our product was frozen within 5-10 minutes, so that the pelmeni did not stick together and could be stored at zero degrees for twenty-four hours. We had all of the four P’s of marketing—Product, Place, Price, and Promotion. With all of these elements in place, the finished product’s high quality meant that we could sell for more. We had a really good team and were soon making big money.

We grew very quickly, building momentum aggressively. In 1999 we sold three thousand tons of product every month. Net monthly profits amounted to 300 thousand dollars.

We experimented with our selection often. Apart from Daria and Pitersky Smak, we sold products under the names Tolsty Kok, Dobry Produkt, and Tsar-Batyushka—all kinds of pelmeni, varenniki, meat-filled pastries, and so on. Our best-selling product, however, was the most run-of-the-mill pelmeni, filled with “the meat of young bulls.” I do not remember who thought up that ingenious phrase, but it is still used by a number of manufacturers. It sounds pretty, but in reality, it was, of course, normal beef.

On weekends, I would take Rina and Dasha shopping. I would look at what the market had to offer and what was lacking. Rina would shout,

“I’m sick and tired of your pelmeni and your market research!” For my part, though, I was happy to mix family time with market analysis.

When I traveled abroad, I took note of what sold well in other countries. From the West I got the idea for canned pelmeni. But it did not work! In Russia, we cannot sell the same types of canned goods as in the West. For instance, canned soup, which is very popular in the USA has not caught on here in Russia, even though it’s a multi-billion dollar industry led by the Campbell’s brand.

With my pelmeni business, I made an important step in the field of distribution. I entered into a partnership with a major distributor, Sergei Rukin’s company, MBK. I first met him at a party at the Planetarium. He was Yevgeny Finkelshtein’s junior partner. A few years later he called me and informed me that he was selling frozen food products. He offered to sell our Smak pelmeni.

At first I did not believe him: how could a dance party organizer sell pelmeni. But Sergei is a true businessman. His company, MBK, became our largest distributor. In the end, we gave them better prices because of the volume that they were buying. At points, MBK accounted for 40% of our sales. In order to motivate MBK even more and in order to tie things up, in a word, with Daria, I cleverly offered Sergei a partnership. He agreed. Together, we commenced construction of a small factory in Pushkin, investing something like three million dollars in it. Two years later we succeeded in selling it for six or seven million.

At the new factory we produced pelmeni and cutlets under the Tri Porosyonka (“Three Piglets”) brand. Sergei’s loyalty to Daria was at its maximum, as he was now my business partner, and his share in our sales grew.

How does one climb a tall tree? By befriending the birds. You must always think of ways to hold your partner’s interest and take measures to insure that things unfold in accordance with the “win-win” principle. That is what I did and, as a result, Sergei Rukin was very highly motivated—motivated to sell the product that we made together, but motivated as well to sell the main product that I was making. After all, we were making big money together.

I will now conclude the pelmeni stage of my life story. Daria was my first project involving food production and the first to have a ridiculously high profit margin. While we sold electronics through Tekhnoshok and Petrosib for prices that were only slightly above cost, I had now learned from experience what a high mark-up—100 to 200 percent—was really like.

Food product manufacturing involves fairly simple processes, but it is important to have the right technology and the right recipe or, rather, utilization of the former and adherence to the latter. If you can manufacture a product with the same stable quality, day in and day out, then you win. Fluctuations in quality are the scourge of young Russian enterprises in the grocery market.

I learned first hand what it takes to create and control a brand and, for the first time, tried out aggressive promotional tactics—specifically the use of sex in advertising. We do most of our work on the basis of hunches. I came to be even more convinced of this after I spent the second half of 1999 studying marketing at the University of California at Berkeley.

We opened a new line at Daria on December 25, 1998 with a bottle of Champagne.

 

Igor Spiridonov, Oleg’s commercial partner during his university years:

Oleg never paid protection money. It ends badly for half or more of the entrepreneurs who have done so. Some people have been killed, while others have had everything taken away from them. At first, everything seemed to be going fine for them, but in 1995, the trouble started. Business became more legal and the police and court system started functioning better. A lot of people started turning down the “services” provided by the mafia, which made things more acute. Organized crime felt the trend (“we’re gonna be screwed”), and started pushing for share ownership on top of their normal fees. Being in a partnership with a criminal is always dangerous. After reinvesting its profits, a company can simply be taken away.

I’m very impressed by how Oleg always leaves a business at the right time. He doesn’t squeeze everything out of it, like some people who think that their business is their career. I’m more in tune with Oleg’s position: make a business into a serious operation and sell it. I still remember what Oleg said when Daria sharply grew in scale: “I’ve been doing electronics for seven or eight years now and in that time the market has become very competitive. So I moved to a less competitive market and here’s the result.”

Anton Bolshakov, former deputy chairman of the board of Zenit Bank:

We operated on a project-financing scheme and this is an approach involving serious trust and serious risk on the part of the creditor. If you have assets that you can invest at a discount of fifty percent and make money, then you’ll build everything yourself. You don’t need a bank. But project financing is always a fairly complex affair. You have to take risks, but the bank’s earnings are higher. Oleg was able to work like that. He’s an active person and invested a lot in marketing. We started with a small plant at Daria. We completed one project with a fair degree of success, started a second, finished it, and started on a third. Every time there was a little more money than the collateral was worth. But we never ran into trouble. When you have full mutual understanding with your client, there are no problems.

Yevgeny Finkelshtein, promoter:

In the early nineties I lived in The Netherlands. A friend of mine came to visit and Oleg came with him. At that time, you might say Oleg was still a beginner in business. He made a good impression, was full of enthusiasm, and went around looking for something new to do. When he came into my house the first thing he noticed was my Bang & Olufsen sound system. The brand was unknown in Russia and Oleg happened to be just starting up his electronics business. I was surprised when he quickly opened a Bang & Olufsen store in St. Petersburg.

Oleg is always purpose-driven, creative, and innovative. I’ve been in awe of everything he has done, from the sensational advertising campaign with the slogan, “my favorite pelmeni,” to the music, and the brand creativity. I wouldn’t want to make a business with Oleg. He’s very emotional, authoritarian, and ruthless in his work. I’m not like that. Starting a business with someone is a surefire way to end your friendship. Maybe that’s why we’re still friends.

Samvel Avetisyan, marketing director at Petrosib, Daria, and Tinkoff:

In April 1995, I read an ad for a marketing director position in the paper. I got called in for an interview, which lasted about forty minutes. In the summer of 1997, I left Petrosib and, in February 2000, Oleg called me up and said,

“Come on. Come back. We need to work on Daria’s pelmeni.” After a month or so, I realized that he was talking about getting the company ready for sale.

As a result of the repositioning, Daria’s image was changed. The cartoony package approach shifted to an image of “convenience food.”

Unfortunately, about a month after the new Daria came out, it was announced that the project had been sold to Roman Abramovich, even though we had big plans for promoting the product. I had handed over the job completely by April 2002. We staff members had to decide if we were staying with Daria, or transferring to the beer project. As for me, I felt the beer was closer to my heart.

Chapter 18

Yet another Year in America

I watched most of what you have read about Daria in the foregoing from America in 1999. In January of that year I flew there to be with my family. Getting on the plane, yet again, at Pulkovo airport, the thought even crossed my mind that I would not return to Russia. The crisis had thrown me off balance. On the one hand, I had managed to wrap up my foray into electronics with a profit in hand and I had invested all of that money in two new businesses: the Daria factory and a restaurant, which I named Tinkoff. How soon would the market rebound? Would there be enough demand for expensive pelmeni, expensive beer, and expensive restaurant food? There were no answers to such questions in early 1999. If the crisis had stretched on, I could have lost everything. At least I did not exclude the possibility of such an outcome.

I was so crushed, discouraged, and scared that I started living differently. I started to take everything more seriously, both in business and in life.

It was a period of widespread general depression and pessimism. People abandoned their apartments, houses, and businesses in St. Petersburg and emigrated overseas. While the most recent crisis—in 2008—was global, the crisis of 1998 was purely Russian. The government had neglected to repay its government short-term bonds and the value of the dollar grew several times over. People lost their jobs and demand for consumer goods fell. It just so happened that I was working in the consumer sector and a lot of my expenses were in US dollars: meat at Daria, malt, hops, and groceries for the restaurant. I started getting nervous. It looked like Russia might not be able to climb out of this pit.

I began counting every penny, keeping track of expenses, maintaining reserves in our bank accounts, and stopped counting on future growth. For the whole decade up until the crisis of 2008, I lived the same way: I didn’t spend, I saved up, stored away. As a result I met the most recent crisis fully armed, and survived it much better.

The crisis of 1998 resulted in a lot of free time and I realized that I needed a real education in business. So, at 31 years old, I enrolled in UC Berkeley’s Marketing Diploma Program. Before applying, I spent a long time getting my English up to snuff, ultimately sitting the TOEFL (Test of English as a Foreign Language). The six-month course of studies cost me ten thousand dollars.

It was a very difficult half-year. I have terrible memories of that time. We were in class from morning until evening and then I did so much homework that I turned purple. I still had enough time to ride my bike though. On top of it all, I could not get a normal night’s sleep because of our little son Pasha, who shares a birthday with Dasha, save that he was born in 1998. Pasha was the most unsettled of our three children. If it was not his ears, something else was hurting him and he screamed bloody murder all night, letting neither Rina nor me get any sleep! Some Americans advised that we take the kid for a ride in the car. So that is what we did. We took turns getting up and driving around the neighborhood. It would appear that Pasha was asleep, but then you would bring him inside and he would start screaming again.

As if this was not enough, the summer of 1999 was searing hot in San Francisco, with temperatures reaching 40-45 degrees Celsius. There were no air conditioners. I had to wake up at seven in the morning and make the hour-long trip to Berkeley in order to be there by nine, when classes started. I would get home again at six, rest a bit, go for a bike ride, and then do my homework. The kid starts screaming again. You barely manage to get him down by two in morning and then you are back at it at seven. I really enjoy sleeping, so getting by on five to six hours was terrible. My head was all fuzzy, so I drank enough coffee from Starbucks to kill a horse (I have liked their coffee ever since) and went to class. I was in a state of utter shock. I agonized and suffered. For the first two months I had to push so hard that I did not really believe that I would ever be able to finish. But I was so pre-occupied with and interested in my studies that I made it through.

My classmates came from all over the world—they were Swiss, Italian, South Korean, Japanese, Brazilian, Argentinean—all creatures great and small, but there were no Russians and not even any Russian speakers apart from me. The students were dumbfounded: I was already a millionaire, I had a house in California, and I came to class in an Audi A8 or a Mercedes coupe. I talked with the other foreigners and learned that they had had to work for several years in order to save up the ten thousand dollars they needed for tuition. They had come there to study, so that they could use their knowledge to earn more in the future. Their education was an investment they were making, just as it was for me. A lot of Russians view education as a waste. There was not a single Russian on the whole Berkeley Campus who had come to America for the express purpose of studying there. There were only some Russian-speaking immigrants. And yet the Walter Haas Business School at Berkeley is considered one of the best in the world.

* * *

Before I started my studies I was lucky to meet a man named Kostya Aristarkhov. We were both from Siberia. Kostya had been born in Krasnoyarsk, but grew up in Vladivostok. After high school he finished a degree at the University of Maryland and, in 1996, won an American Green Card lottery. Nevertheless, he continued to live in the Far East. Now, however, when the 1998 crisis began to unfold, he decided to move.

“It was dark times. It was hard to see what was happening in the country and I wanted to have citizenship someplace else,” he explained. At that time a lot of people in Russia were inclined to feel the same.

Because all of San Francisco’s Russian-speaking residents more or less know one another, we ended up hanging out together on a ski trip to Lake Tahoe in Squaw Valley, along with a mutual friend, Marik from Kiev. I took a liking to Kostya immediately—we had a similar build and exactly the same interests. There are not too many newly arrived Russians in America and the ones you do meet are mostly old Jewish migrants, totally distinct people, even if they do speak Russian. They have different interests and a different mindset and they still call Russia the “Union.” It is better to call them Russian-speakers. You could call them “compatriots,” but you would have to leave the scare quotes in place.

Kostya and I understood each other perfectly and he showed himself a true comrade, gentlemen, and friend—and in America friendship is a special thing indeed. A year of friendship counts as three ordinary years elsewhere. Everything is concentrated. I do not support the building of businesses on friendship, but Kostya is a rare exception. He plays a key role in the bank, being in charge of the collection department and collecting bad loans.

Kostya helped me beat my homesickness for Russia. There is not enough Russian-language interaction in America. No matter how good your English is, you still want to talk in your own language. Language is part of a person’s mentality. It is not just a matter of words, it is expressions, movie quotes, and slang. For this reason, although my children go to an English-language school, I am all for them knowing Russian well. I do not believe you can learn a language without being immersed in it. This only happened in a fairy tale about Stierlitz[3], where Isayev speaks German with no accent whatsoever. That is why we always speak Russian at home, even though we could speak English or Italian. Dasha is also strong in French.

Let me get back to my studies at Berkeley. They were incredibly difficult for me. Kostya, who knew English better than I, helped me to get the gist of a few assignments, but I completed them myself. My studies—and maybe even my life—however, were nearly cut short due to an accident that happened about a month after I started.

I had driven from Berkeley, riding my new Ducati Monster motorcycle, and I went to Kostya’s place for his birthday. We hung out and I had a couple drinks. I wanted to park the bike, but later decided that I would drive back carefully. In fact, I almost made it back, but on the second to last turn, coming along the winding road, I lost track of my speed and wiped out. The bike’s footrest hit the pavement at an enormous speed and I flew, spread like a butterfly, towards the ocean. I got to my feet and saw my pinky dangling in my glove. Full of adrenaline, I drove home and woke Rina. She was in shock. I myself dialed 911 and found out first-hand how terrifically well that system works.

They asked me to stay on the line, talked to me, and kept me psychologically stable. The ambulance, fire truck, and police car came flying in a mere five minutes later. They loaded me in and took me away. The police officer could smell the alcohol on my breath and tried to do some analyses for his report, but the young paramedic insisted that that should not be done: I was in critical condition and had to be taken to the operating room. The officer asked me how much I had had to drink and I replied with my usual answer,

“Two beers.”

Back home, they would have chopped off my finger, but in America two doctors spent the whole day restoring it. Today my fingers are all crooked and I am missing a knuckle on my left pinky. Thanks are due to the doctors and the young paramedic though. Once again, I was saved by my guardian angel. If it were not for him, a 36-hour jail sentence would have been waiting for me upon my exit from the hospital, for driving under the influence. I would have lost my insurance, my license, and so forth. Welcome to American democracy!

Please, never drive if you have been drinking alcohol!

Bound and mended, I quickly got back to my studies. I was afraid of falling behind the rest of the class. That would have been dangerous, too, since in America knowledge is acquired in a group setting. I had studied for two and a half years at the Mining Institute and I spent a mere six months at Berkeley. You cannot come close to comparing the two educational models. I officially declare that Russian educational institutions are kindergartens. It is all a matter of copying answers and bringing notes into exams. It has nothing to do with anything. In America, though, very serious work awaits the student. Grueling labor. In a word, I had to bust my ass. The exams were very difficult and I barely passed them, getting C’s. Still, I am proud to have my diploma hanging in my office. The most important thing, in any case, was that I soaked everything up like a sponge and came out of the experience well prepared for my next breakthrough—my beer business. After Berkeley, I knew precisely what to do, how to do it, and why to do it. When advertising and marketing agencies tried to rip me off, then, I would talk to them with a cool, calm, professional tone. They knew immediately that I would not be settling for crap.

* * *

So guys, go to the States to go to school. It is of the essence that you do so. Go for a few months, at least, like I did—but for intensive study—because business education is better there. For Americans business is like mother’s milk. It is a nation of salespeople, a country of entrepreneurs. Americans understand business better than anyone else. So do not think twice about it: go to Berkeley or someplace else, but make sure it is in America. And, too, your education will enhance your knowledge of the English language immensely—another reason to chose the States.

In total, between January 1993 and June 2006, I lived in America for six years. And I realized that Americans and Russians are two of the closest nations around. If two poles are the same, they repel each other; consequently, we love and hate one another. It really is true that Russians are very similar to Americans!—even more so than they are to the British or Germans who live closer to us, in Europe.

Of course America never became my second home country, but it has had more influence on me than any other country, apart from Russia. It was there that I learned how to understand business, entrepreneurship, and liberty—each of which is so lacking in Russia. In June 2009, I wrote in my blog that “I don’t like Americans, I don’t like America, but at the same time I love Americans. I don’t like Russia, I don’t like Russians, but at the same time I love Russians and I love Russia. These are two countries that have melded together, in me, in a contradictory way.”

If you want to become a true entrepreneur, I would really advise that you visit America, whether to work, to attend university, or simply to see what is going on there. It is a country where entrepreneurship has achieved a cult-like status. It is a place where business is neither an art nor a hobby, but a science. Back in Russia, business education is a toy, kind of like chemistry in America. Business has to be transformed into a science—it needs to be studied, broken down into molecules, and re-formulated. For now, though, when our education system is not operating at a very high level, we need our young people to really try to go there to study, just as Brazilian, Argentinean, and Korean young people do.

If we do not study business, how can we become effective in it? On the one hand, it is a bad thing that there are so few professional businesspeople in our country. But on the other hand, you always have to look for opportunities where things are negative. If someone is not doing their job correctly, do it better and win out over him! Russia still has a lot of niches where you can develop a business. If Russian businesses were only 20 twenty percent as effective and smart as American businesses, then, considering our natural resources and our talented people (Yes! Russians are a lot smarter and more talented than Americans), ours would be the number one country in the world instead of theirs.

* * *

While I was living in America, I attempted to get into forestry. Andrei Surkov became my minority partner. He was to work in Russia and I in the States.

What was the idea? I found out by chance that a cubic meter of our round timber cost ten dollars if you bought it directly from a forestry agency, while the Finns would pay thirty dollars for the same amount. Later I found out how much timber cost in America. It turned out that you could not import round timber, only sawn, dry lumber. Americans are very concerned about the environment and their country’s wild places and so they are worried about the introduction of beetles and other bugs.

In America the price for hard lumber—the oak and elm grown in the south of Russia, for example, in Krasnodar Krai—ranged from 1500 to 2000 dollars per cubic meter. In Russia, taking into account the procurement, transport from the south, milling and drying, shipping, fees, and delivery to America, the cost was 200 dollars per cubic meter. Wow!

We created a partnership with Nikolai Vladimirovich Kozlovsky, the owner of the St. Petersburg bank Finansovy Kapital, with a 50/50 split of ownership. He allotted us some land in Tosno and gave us a bank loan; we bought three American drying machines. Andrei’s job was to fly to Krasnodar and buy choice timber. It was cut at the factory and then he had it loaded into containers and sent to San Francisco.

It seemed like the perfect scheme, but we miscalculated with one thing—the Wild West, which bared its ugly teeth.

The lumber market in the States is very structured and has evolved in the course of many decades. As a rule, hardwood is used for kitchens in America. In California, for example there are around twenty manufacturers that use it. There are wholesale suppliers that import sawn lumber from the northern States or from Canada. At the same time, too, it is hard to tell where the Canadian company ends and the American one begins. They have an Anglo-Saxon friendship.

I immediately sold my first consignment of lumber for something close to twelve hundred dollars per cubic meter. Percentage-wise, the profit was colossal. But because the container did not hold very much, the profit was not so high in monetary terms. In order make a lot, you had to sell a lot. Naturally, being your run-of-the-mill greedy capitalist, I called Andrei and said: “Come on! Let’s see some normal volume!” But Andrei let me down a bit. He stopped controlling the quality—and Americans count the number of knots in a cubic meter very meticulously. As a result, the value can fall by ninety percent, from fifteen hundred to a hundred and fifty. At first he was sending top-grade lumber, which sold well. But then everyone realized that there was this new player on the market who was offering huge quantities at far lower prices. This made people very nervous. These distributors were just like the mafia. They came to an agreement with the kitchen-cabinet makers, who in turn stopped buying lumber from me directly. They said they did not need so much and that it would be better for us to go to the wholesalers. Now, when I went to the wholesalers, they complained about the quality, which really was not the best. They really got me down when they said they would not be buying my lumber anymore. Now I was really upset! In the end they offered to buy the wood, but at a price that was basically equal to cost. They made a rough estimate of what I had paid and started offering me two hundred dollars per cubic meter. Now I had fifty containers sitting in the port. At some point I realized that the cost of storing the containers was about the same as what they were offering me. In the end I managed to sell around ten containers. The other forty I just had to abandon. It was easier to simply leave them than to pay for their storage, reloading, and warehousing. I made a note of the loss. Nothing worked out in the States and we could not find any other market to sell in.

I still wonder if Russia exports sawn lumber overseas. But no: we have always exported round timber and we go on doing it. The European markets are under the protection of the state and the traders keep doing it against the wishes of foreigners, even though the governments of the importing countries continue to insist that the wood needs to be processed and not transported as timber. In Sweden and Finland the infrastructure already exists, the forestry business has been around for centuries, and the last thing they need is for the Russians to import product that would cost two to three times less. They are ready to buy the raw material and make things themselves. They will not even import our half-finished goods or products; thus completely finished products are absolutely out of the question—unless of course we built our own furniture stores there, as IKEA has done in Russia.

Neither the governments, nor the businessmen themselves want the Russians to come onto the scene because this puts pressure on prices and they lose their margin, income, and jobs. Even now there are no countries where it is possible to export any substantially processed wood product.

I have run businesses of varying degrees of success, but I always made money on them. Even in my restaurant business, which I do not consider to be particularly successful, I made good money. But probably every businessman has to live through one failure. This episode involving the lumber was probably my biggest failure. Taking into account the drying costs and the abandoned product, I lost somewhere in the range of one and a half to two million. Ten years ago that was a huge sum and even today it would be a lot.

It turned out to be hard to do business in America. I know that our oligarchs, like Mordashov, Deripaska, and Alekperov do not find it easy to work there either. Even Branson complained that America was the most difficult country for him. I was once again reminded of this in a far more personal way when I was selling my Tinkov beer in the U.S.A. For the American market, I changed the double “ff” to “v,” because surnames ending in two f’s look German, rather than Russian, to Americans. We bottled the beer behind our store in St. Petersburg and sold it in retail stores in California. I really understood then that the market was very difficult.

From that point on, Andrei Surkov and I stopped doing business together. We decided we would just stay friends and, thank goodness, we still are. If we had kept doing business together, we would have probably killed one other by now.

I was the only Russian in my Berkeley marketing class.

My American friend, Jack Smith.

This is the Ducati motorcycle that I crashed in 1999.

In America they make a business out of everything, even when it comes to pictures of your kid in the maternity ward. These photos show Pasha, who was born on December 31, 1998.

This diploma lists all nine courses that I completed at Berkeley.

Konstantin Aristarkhov, member of the board of directors of Tinkov Credit Systems:

I first met Oleg in 1999 when we went skiing with a group of people near Lake Tahoe in Squaw Valley. There weren’t many recently arrived Russians, so we got to talking and it turned out that we had a lot of the same interests. We were both born in Siberia, I in Krasnoyarsk and Oleg in Kemerovo Province. We both skied. Oleg had served in Primorskoi Krai and I had served in Vladivostok.

I had come to the States to study, sponsored by Primorsklesprom, a forestry company where I had already worked for a while. So I helped Oleg a bit when he was involved in wood sales, when he and Andrei Surkov bought the saw and started processing lumber.

One day I ended up staying late at his house. He lived across the bay, while I lived downtown.

“Oleg, the boats aren’t running anymore. Let me borrow a car,” I asked him. He let me take his Porsche, which he had first taken to Russia, then brought back to America to sell. I drove home in it, parked it, and fell asleep. I live in a good neighborhood, but someone slashed the convertible roof during the night. It was probably a drunk or one of the bums that live under bridges in cardboard boxes. The car was empty; there was nothing in it. They just cut a hole in the roof, the morons. I was supposed to pay Oleg for the damage, but he acted nobly, saying,

“I see that you came and you’re trying to fix things yourself. I’m not taking money from you.”

Chapter 19

Abramovich’s First Daria

In 2001, a day came when Andrei Beskhmelnitsky, who managed Roman Abramovich’s food assets, along with Andrei Blokh (one of Abramovich’s first and main partners from back in his toy co-op days), were busy creating a holding company called Planet Management. The highly profitable but small business with the pretty name, Daria, sounded appealing to the oligarch.

Andrei Beskhmelnitsky is a unique individual. He is one of the most hardworking and meticulous managers that I have ever met. They hounded me for nearly six months, but in the end they gave me no other choice—there is no other way to put it—I simply had to sell this fast growing and high quality business.

On the one hand, the business brought in hundreds of thousands of dollars every day and so I was fine with it. On the other hand, though, the pelmeni market was worth a couple of million dollars a year and our share in it was already high. After I finished studying at Berkeley, I realized what market volume and share really are. If a market is large, then you can make good money even if your share is only three percent. But if the market is small, you have to be a powerful player. Now, naturally, it is really hard to grow your share if you are already the biggest player—the competition will always try to pinch a little piece of the pie. And here they were, in this case, talking me into selling my business for a couple tens of millions of dollars…

By December 2001, the deal on the sale of my Daria pelmeni business was almost ready to be closed. I could not believe that I would meet Abramovich, but it was a condition I made during the negotiations with Planet. We came to the famous Sibneft office on Sadovnicheskaya Street, directly across from Balchug, with windows opening on the Kremlin. We came up to Abramovich’s severe office. The secretary was surrounded by presents: a lot of people wanted to wish the influential businessman an early happy New Year.

Abramovich came out to meet us and personally led us into his beautiful guest room. I could not help but stare at a massive black and white portrait hanging behind him in which Putin was wearing a kimono. The picture had obviously been retouched. On the table there was another photo of Putin, which was also quite strange. It seemed to me that this was some kind of sign or signal. Why did he have a picture of Putin in a kimono at work? Was it an expression of respect for the president or an implication that he, the 35-year-old Roman Arkadyevich Abramovich, was on joking terms with Putin? After all, it has been said that Abramovich is among the people who selected Yeltsin’s successor. At the same time, though, there was a certain degree of provocation in the photos. I still have not figured out the answer to this riddle.

I am a businessman and, as such, I have to have good intuition. There are a lot of incredibly unpleasant types among the oligarchy, but Abramovich made a very decent impression on me. He is certainly no tool, as some are. But I cannot say that he is smart and scholarly. The saying, “be quiet and you’ll pass for smart,” describes him. In the half hour that we were there he said about four phrases: “Alright, okay. So what are you gonna do with the money once you’ve sold?” And his last words were, “All right guys, get him paid up.” That was it! Ellochka Lyudoyedka[4] had a more expansive vocabulary. When I spoke, he listened and took notes of some kind. This seemed strange to me: he speaks little, but he takes note of everything. We were around the same age and I never took notes. He was uneducated—just like me. What was he writing then?

When we left the room, Blokh and Beskhmelnitsky looked unhappy. They wanted to pay less, but Abramovich decided not to talk me down and I agreed to the price. It was a huge deal for me: the company had been valued at 21 million dollars, seven million of which consisted in debt owed by Daria, which Planet Management took upon itself. I had fourteen million dollars to spend. This was colossal money, especially considering that the ruble had recently lost a lot of value. But when you consider that Sibneft’s net profit in 2001 was 1.3 billion dollars, it is no surprise that Abramovich did not bother negotiating. A couple of million here, a couple there: who cares? For a billionaire that is just pocket money.

In the 1990’s the oligarchs got used to taking—from the state and from each other—based on the principle of “whoever’s strongest.” You know the names of the participants in these events. But this was a paradigm shift: the oligarchs were starting to pay. Abramovich, as always, was following the trend—he needed to somehow allocate some of his oil money, which had flowed like a river after he had managed to buy a controlling stake in Sibneft in late 1995 for very cheap, in partnership with Berezovsky. And this happened in spite of the fact that Inkombank had offered a lot more money to the government, but was barred from the auction. You can probably guess why this took place without any help from me.

People often ask me why Roman bought my Daria pelmeni company. I always answer the same way: he probably already had special feelings about the name Daria. I would like to take this opportunity to congratulate Roman Abramovich and Daria Zhukova, whose son Aaron was born on December 5, 2009. Children are the most important thing in our life!

On a side note, Roman Abramovich had the perfect chance to become a leader in the production of a truly feminine product, something that Daria Zhukova, as well the six children he already has, would definitely have liked. In 2000 I bought unique, high-technology ice-cream production lines for Daria, but Planet Management decided to end this product line, liquidating the damages in the contract. I think that “Daria” is the perfect name for ice-cream. Moreover I had bought Italian recipes. Why did I do it? Well, I just really love Italian ice-cream: particularly coconut, watermelon, and pineapple.

Well, Roman Abramovich did not manage to maintain momentum in the frozen foods business. In 2001, Daria recorded profits, but in 2002 the company lost money. Then they tried to sell the company, but it ended up remaining with the Prodo Group, which is under Abramovich’s control. Now Prodo is managed by David Davydovich, another of Abramovich’s associates. In addition to Daria, Prodo includes 23 enterprises, including major ones such as Omsk Bacon and the Klinsky Meat-Packing Plant. Due to the crisis, Prodo ended up in a difficult position and spent a lot of time in court, in negotiations with creditor banks that were still waiting for their money after deadlines had already passed.

I would not be surprised if Abramovich and Davydovich regret buying Daria now. Maybe I regret selling it too. If I had retained ownership, the company would probably be doing a lot better. After all, we had really created a high-powered brand. Maybe the day will come when I will buy back the company and get it back on its feet.

I was sad to sell Daria, but the money I got for it helped me suck it up. I had a huge amount of cash and did not know what to do with it. First, I transferred it to the Latvian bank Parex Banka, then to Volodya Kogan at the St. Petersburg bank Promstroibank, and from there to Zenit Bank. Finally I could start working on my dream—to build a beer factory in Pushkin. By that time my restaurant in St. Petersburg was more than popular and everyone wanted bottled beer. But that is another story.

In finishing my story about Daria, I cannot help but recall someone who did not manage to stay with me through thick and thin. I am talking about Igor Pastukhov, to whom I had given a small share in the business (around five percent). We had met back at the Mining Institute. He lived with me in the dorm on Shkipersky Stream and wrote my term papers for me: minor ones for five rubles and major ones for twenty-five. I showed him the ropes in business and told him about where he could get stuff for cheap. In essence, he was my gopher, running around on my leads. In the mornings he keep a spot in line at the stores. I raised him, told him how to dress, talked him out of different marriages (he was always trying to marry his secretary or some such thing).

Igor worked as general director at Daria. At first I did not sell the whole company, but only ninety-five percent of it. I held the remaining shares and, according to the contract, I still had to work there for six more months. But entrepreneurs cannot cooperate with big bureaucratic structures. I got tired of flying to Moscow for meetings, conferences, and negotiations. So Igor did the flying. I do not know if it was a couple of phrases that Abramovich relayed to him, or if it was something else that happened, but he decided that he had caught God by the beard. He realized that the power had shifted: I was only a partner with 5%, while he was Daria’s director.

Pastukhov got his bonus from the Daria deal and I offered him a partnership in the beer project. He was supposed to invest five percent, but he played the cheapskate. I invest, say, ten million in a new business—now you invest your fifty thousand! But he could not afford it. A lot of people would say that I need to forgive like a good Christian. On the one hand, I did forgive him. I do not hold it against him. On the other hand, I just wanted to speak my mind.

I sold Daria to Roman Abramovich for twenty-one million dollars, seven million of which went to pay back debts.

Chapter 20

Our Beer? Tinkoff.

I had long dreamt of building a brewery. In 1997, even before the creation of the Daria restaurant chain, we discussed the idea with a rather well known St. Petersburg businessman by the name of Alexander Sabadash. All the bad press he gets aside—claiming for example, that he is a raider and a bad man—he is a very intelligent and intuitive businessman. He has got a sixth sense. Around ten years ago he controlled virtually the entire alcohol market in the northwest, having gained control over Liviz. Next he became a senator. But he also has his weaknesses, which have led him to the state he is in now.

When we met, Sasha’s main brand was Our Vodka. He bottled it in Leningrad Province at the AFB11 factory. He said that he would not be opposed to selling Our Beer as well. I liked the idea and so began developing a business-plan for the factory. Sabadash was to be the main investor. I wanted to invest something as well, but I did not have the necessary funds just then—like many of you reading this book. What was I to do? I connected with Sergio Gutsalenko, a colleague from Petrosib and an American of Russian heritage. Together we went to Moscow, found a hotel to stay in, and, for two weeks, went to bank after bank. Inkombank (I met with the deputy of Inkombank’s now late president Vladimir Vinogradov), Alfa-Bank, International Moscow Bank, Tveruniversalbank, Tokobank

We met with practically everyone. It is clear now why so many of those banks no longer exist. I came to them and said,

“Organize some financing for me. I’ll buy some beer-making equipment, which we’ll use as collateral, and I’ll pay off the loan.” They looked at me with condescending surprise.

“Listen, kid. Have you lost your mind? You’re an electronics salesman. Go sell ‘em. TVs and beer are like apples and oranges.”

In the end, every bank in Moscow refused me.

That is when I went to the well-known St. Petersburg businessman and banker, Vladimir Kogan, who had been a creditor for my Tekhnoshok chain.

“Listen Volodya, give me a loan. I need ten million. I’ll pay everything off in a year. You’ll make good money.”

“Oleg, you sell electronics. Why did the idea of beer production suddenly pop into your head?”

I think that Volodya never became a true oligarch because he did not like to take risks. He did not give loans to entrepreneurs like me and he did not want to get into the ownership sector. Instead he remained a creditor. I think that he should have gotten into the economy in the 1990s. He should not have given out loans, but rather bought out big companies. But I think his mind was more at ease giving loans to giants like the Kirovsky Factory.

At that time, in 1997, the only large beer company in Russia was Baltika. If Kogan had given me money then, I am sure that today Tinkoff would be the second or third largest company on Russia’s beer market, earning billions of dollars in revenue. Sun Interbrew, which now holds second place, had only just started developing. Having entered the market really late, in 2003, I still managed to get a whole lot done. Just imagine what would have happened if I had gotten the factory up and running five years earlier.

We would have shipped in a second hand factory, set it up, and destroyed everyone. I was shown a factory in northern England belonging to the bankrupt producers of Greene King. The equipment was worth fifty million, but was being sold for only ten million! I could not pull together even this small sum though. Tekhnoshok was not bringing in much profit and, at that point, I had not started my pelmeni business. Apart from the Russian banks, I also ran around to Western ones. I tried to get the manufacturers to give me the equipment up front—to be paid off later—or a loan, but they would not help me either. In the end my old Icelandic friend, Thor Bjorgolfsson, along with his partner Magnus Torstensson, bought the equipment from an English factory that had produced low alcohol-content cocktails under the name Bravo. They brought in the equipment, installed it on Dalnevostochny Prospect, and began making Bochkaryov beer. This was another trend that I helped to spur along—using a surname for your product. We opened the restaurant on August 1, 1998, and we could not get Thor to leave it alone—not for a moment. He would even bring his girlfriend there. He opened the Bravo International brewery in the spring of 1999. And so I decided to see if I could come up with something new. If the Russian people really liked Tinkoff so much, then we had to have a Russian surname. Why not make it Bochkaryov? Later he made a cheap brand Okhota, and began producing the Bavarian beer Löwenbräu under license. The business gained momentum quickly and, in 2002, Thor and Magnus passed the whole thing on to the Dutch company Heineken for 400 million dollars. That could have been me. But—mundane fact that it is—I had not been able to find the money.

Thor invested the money he made in the Icelandic bank Landsbanki, which has suffered immensely during the current crisis. It is too bad. Nevertheless he remains an influential person and a highly intelligent and talented businessman. He did a good job! To come from Iceland to Russia in the turbid nineties and to build an honest, legal and transparent business—especially in the beer industry, which was highly criminalized at the time—must have been no easy feat. Ilya Vaisman, for instance, Baltika’s financial director, was simply murdered in January 2000.

I always say that, to achieve success, a businessman needs strong motivation. Thor wanted to assert his family’s honor. His father, Bjorgolfura Gudmundsson (yes, in Iceland one’s surname is a patronymic), went through some very difficult times in the eighties: his firm Hafskip went bankrupt and, at one point, he was threatened with a jail sentence. Thanks to the riches that Thor earned, however, his father was able to get back into business, in a big way, in the first decade of the millennium.

If I had found money for the construction, then, my life would have gone rather differently—maybe better, maybe worse. The important thing is to have no regrets. I must say, though, that I was very disappointed at first. My plans for the construction of the Our Beer factory remained unrealized. I still have them someplace in my files: those beautiful, in-depth plans for the brewery. But I continued tracking the beer industry. The idea of building a factory did not leave my thoughts.

In October 1997, when the Icelanders had agreed to buy the plant in England, I flew to the Drinktec exhibition, which is held in Munich during Oktoberfest once every four years. I walked around the stands, trying to find a manufacturer that would sell me equipment in installments. I came across a small stand set up by the company Wachsmann. I got to talking with the company’s owner, Joost Wachsmann, and told him about my dream of building a beer factory. He put me on the right path, when he said,

“Listen, Oleg. Don’t get frustrated if you don’t have enough money now. Build a restaurant with a brewery in it, create the brand, and then start working on a big factory.”

Joost took me to a few beer breweries in Munich, where we discussed the details over lunch and dinner. The equipment cost somewhere in the ballpark of half a million Deutschmarks, with the remainder of investment in the project costing about the same again. I had a million, so I decided to get building!

Joost told me that the Gordon Biersch restaurant chain was using Wachsmann equipment. This was the straw the broke the camel’s back—my decision to use their equipment was final. I really loved the Gordon Biersch restaurant in San Francisco. I was taken there by Alex Koretsky, an American of Russian heritage, who I first met back in 1993, during my first trip to the States. The restaurant is situated not far from the Bay Bridge, close to the business center, and I really liked sipping their fresh, unfiltered beer. The restaurant’s patrons were mainly rich kids and the atmosphere was noisy and fun. American food is not particularly renowned for its good flavor, but this restaurant always served excellent food. The whole thing worked, thanks to the business duo that had started the venture. Dan Gordon was the only American to have completed a program at the Weihenstephan beer school in Munich, an institution where classes are held exclusively in German. Dean Biersch, whom I never had the privilege of meeting, was chef. This was the perfect combination. In 1987 Dean decided to open a restaurant/brewery and learned of Dan through a mutual friend. Their meeting at a pub led to the creation of a serious restaurant chain. They opened their first location in Palo Alto in 1988, followed by a few dozen more around the States and abroad. In the nineties, control of the company was sold to the Fertitta family, which owns casinos in Las Vegas.

I knew that there was demand in St. Petersburg for good restaurants. At Petrosib, my colleagues and I would often go out for beers on Fridays or Saturdays. We usually went to Mollies Irish Pub on Rubinshtein Street. There was often a line-up there, as the pub was a favorite among expats. One night, Andrei Mezgiryov, who would later work as director of the Tinkoff brewery, asked me,

“Oleg, what if we opened a similar bar?”

At first I favored the name that we had discussed with Sabadash: “Our Beer”. But when one of our German suppliers got some documents with Our Beer written on them, he said,

“Oleg, what do you mean, ‘Our Beer’? That sounds ridiculous! You’re the owner. In Germany the owner’s name is always on the beer.”

“No, no, no. It would be embarrassing. I’m a humble guy. It’s dangerous in Russia, what with the mafia. And I don’t think there’s any reason to attract the attention of the authorities either…”

“That’s rubbish! Aren’t you responsible for the quality of your product? It’ll be the best beer in Russia, brewed completely to Bavarian standards, using Bavarian malt.”

I paused for a minute, thinking, and my ambition came into play. I wanted to bring fame to my family name! Why are Gordon and Biersch allowed to, while I am not? So I decided: all right then, let’s change the “v” to a double “ff”. And that is how the Tinkoff brand came into existence.

While the equipment was being made—a process that takes about six months—we looked for a location. At first I called the former chairman of the St. Petersburg CPMC (City Property Management Committee), Alexander Utevsky. Leonid Davydovich Blat, a full Cavalier of the Order of Glory and the only Jew in the world that bears the insignia, referred me to him. He worked for me at Petrosib. Alexander Utevsky (another legendary St. Petersburger who, as head of the company SevZapProm,[5] was involved in the socio-economic crisis in Pikalyova) told me about an empty property on Kazanskaya Street, in building 7, where there used to be a Zarya factory. The property was perfect for a fancy restaurant. It was 200 meters from Kazan Cathedral and 250 meters from Nevsky Prospect. It was on a quiet side street where it would be easy to park your car. Long ago it had been a Nobility Hall, but on January 1, 1842, the first savings bank in Russia was established there by Nicholas I, “with the goal of providing low income people of all professions with a means of saving in a reliable and profitable way.” If I had been in German Gref’s shoes, I would have bought the building for Sberbank. He is quite aware of it, as he helped me to rent it for use as a restaurant when he was chairman of the CPMC.

At the same time, the company Stanley, owned by Stanislav Bushnev, was also looking to get into the place. This kid is way behind the times. We all remember the turbid nineties. That is when he was born. Unfortunately, the mindset in the regions has changed at a much slower rate than in Moscow. I saw Bushnev in St. Petersburg recently, and he still walks around all grim and surrounded by bodyguards.

When I was trying to secure the property, Stas proclaimed,

“That place is mine.”

“But the papers show that it’s mine,” I replied.

It developed into a conflict and I told my friend Emma Vasilyevna Lavrinovich about the situation. She is still the director of Oktyabrsky Big Concert Hall. She knows all the politicians and businessmen in St. Petersburg. If she charged them a commission for everyone she knows, she would be one of the richest people in Russia. In 1996, she had introduced me to Alla Borisovna Pugachova. Now, however, she told me to get in touch with German Gref and to explain the situation to him.

Andrei Surkov attended the meeting. Gref finished listening to our story about how we wanted to build a restaurant, with a microbrewery attached, and signed a ten-year lease agreement, with far better terms than one usually sees in the city. We offered several times more than Stanley had offered. It is not enough to offer the government more money. You have to talk to a high-ranking official as well if you want to see the issue resolved.

I will tell you more: even today, the building’s fate has not been sealed. People are still arguing about it. I created and sold four businesses and fought to keep the restaurant in the same building the whole time. For the most part, however, the conflict does not concern the part of the building where the restaurant is located, but rather the Zarya Defense Plant. On March 17, 2004, Anatoly Ivanov, the plant’s director, was shot dead, along with his bodyguard. Ivanov had had lunch in my restaurant. Then, in the courtyard of his building, a contract killer opened fire on him with a Kalashnikov.

In downtown St. Petersburg the most fantastic things can occur within a few thousand square meters of real estate. In St. Petersburg, unfortunately, in contrast to Moscow, the legal mechanics of regulating real estate are very complicated. In the end it is still difficult to establish who the landlord of the building on Kazanskaya Street actually is. Currently a trust management institute is used for real estate objects, along with some other complex bureaucracies. Every building should have an owner though—either the city or a private owner. You cannot reinvent the wheel.

* * *

By spring the Germans had finished making the equipment and in May it arrived in St. Petersburg. Installation began. The question now arose of what kind of beer we would be making. Joost suggested a line-up of six standard varieties, along with four seasonal beers. This is a widespread scheme in German beer restaurants. I suggested that we name the beers according to color, however, as Russians have little sense of what terms like “pilsner,” “lager,” “porter,” and so forth actually mean.

– Platinum non-filtered (original gravity: 13%, alcohol content: 4.7%; light and caramel malt, hops, yeast, and water). I expressly asked Wachsmann to begin with pilsner, as it is my favorite kind of beer. Given a choice, I always buy either German or Czech pilsner (Budweiser, Pilsner Urquell, or the identical Plzensky Prazdroj).

– Platinum filtered (original gravity: 13%, alcohol content: 4.7%; light and caramel malt, hops, yeast, and water). We did not have much in the way of filtered beer—because I do not understand why anyone would want to drink filtered beer when non-filtered is available.

– White unfiltered (original gravity: 13%, alcohol content: 4.7%; light and wheat malt, hops, yeast, and water). I like wheat beer as well.

– Light unfiltered (original gravity: 11%, alcohol content: 4.0%; light, caramel and dark malt, hops, yeast, and water). This is a lager.

– Dark unfiltered (original gravity: 14%, alcohol content: 4.7%; light, melanoidin, dark and caramel malt). Porter.

– Non-alcoholic filtered (original gravity: 6%, alcohol content: 0.5%). It should be clear what we did here. We made a beer for people who like the taste, but cannot drink because they are behind the wheel, or for some other reason. The beer turned out to have pleasant bready notes and a hoppy aroma.

In order to offer more variety, we introduced a few seasonal beers. Two of them were:

– White Nights. I like this wheat beer even more than our usual “White”. We brewed it for the first time in St. Petersburg, which is famous for its long summer days with short “white nights” when the sun barely dips below the horizon. The beer was created especially for the summer: it is really light and, unlike traditional wheat beer, it is brewed using a top fermentation process, where the yeast is put on top instead of at the bottom.

– Winter Bock or Red (original gravity: 18%, alcohol content: 5.9 %). A beer with a wine-like flavor. For the strong at heart!

The next challenge was to find people who could brew these wonderful types of beer. A brewer is a person who works ten-hour days with water and heavy metal objects. He requires strength and stamina. For a long time I thought about whom I wanted to hire. Suddenly it dawned on me: our miners spend eight hours a day doing back-breaking labor in the mines, under much worse conditions and with the same humidity levels. Eureka! I got in contact with Oleg Sandakov, foreman at Yaroslavsky Mine in Leninsk-Kuznetsky. He was recommended to me because he was not a drinker. I had him and his family moved to St. Petersburg. Then I sent him for training in Germany. He was personally involved in the installation work at the restaurant as he was familiar with all of the devices and mechanisms from the mine. The difference was that he was now working at the surface instead of two hundred meters underground and earning three times as much money. Of course he was happy—and he still works amazingly hard. He ended up settling in St. Petersburg and buying an apartment. We followed the same “mining” practice for our Moscow restaurant.

Sasha Kotin and I personally picked out the elements for the interior in San Francisco based on the principle that whatever we wanted, we would have. We designed the menu based on gut feelings about food we had tried in Germany or America. Our first chef, Maxim Sokolov, contributed a lot as well. Prior to the restaurant’s opening I sent him to the city of Ulm, in Bavaria, for a two-week internship, to a beer restaurant run by the son the engineer who had installed our equipment. As a result the menu included Nuremberg sausages with potato salad and stewed cabbage, Bavarian sausages, pork shank—and the list goes on. Our famous “meter of sausage” was based on a similar dish that Igor Sukhanov had encountered in Germany. This dish is still a mainstay at Tinkoff restaurants. He also suggested that we pour our beer into bizarre one-liter flasks, but the idea never took hold. We were not able to resist the classics: chicken wings with celery and carrots, deep-fried cheese, fried calamari, Greek and Caesar Salads, as well as Russian dishes (borsht, salt herring, tongue, etc.).

I set the opening for August 1, 1998. To promote the restaurant we gave away free food and drink for an entire day and night to all of our guests—something that was audacious for St. Petersburg at the time. A large number of the city’s restaurateurs came and were surprised to hear that I was anticipating daily revenue of ten to twenty thousand dollars. They thought that this would be impossible, given that their highly sophisticated restaurants only managed to pull in three or four grand. Supposedly, the record for the highest one-day sales volume, eight thousand dollars, was set by the Senate-Bar on Galernaya Street, where groups of foreigners were often taken and which U.S. President Bill Clinton himself visited in 1996.

From among the city’s administration came first vice governor Ilya Klebanov along with German Gref. German Oskarovich drank some beer, congratulated me, and said that he was moving to Moscow for work. On August 12, I heard on the news that he had been appointed first deputy to the Minister of State Property. When Vladimir Putin became acting president, following the historic voluntary resignation of Boris Yeltsin on December 31, 1999, Gref was appointed head of the Center for Strategic Development, a body that was to come up with economic ideas for the new president. As it turned out, Vladimir Putin must have felt that these ideas worked very well, considering that he appointed Gref Minister of Economic Development and Trade immediately following his election. He worked in that post for over seven years, until he managed to convince the president that he would be better off working at Sberbank. The only minister to maintain his position longer was Alexei Kudrin, who had also started out in the St. Petersburg mayor’s office.

On one occasion, Vladimir Putin himself visited my restaurant, along with Vladimir Yakovlev. We drank some beer with them and they liked it. Putin said that he had had some beer in Germany and that Tinkoff was crap. But really, Tinkoff is a person and the beer is delicious! Thank goodness, Putin considers me a person. Bureaucrats, listen! Write this down! He drank my beer and he liked it. So you had better not cut me off on the road! This applies to law enforcement in particular. Think about it!

Now, my plans, in spite of the skepticism of the professionals, had been realized. People simply poured into the restaurant—in spite of the August crisis. From October through December our restaurant was always full and we were pulling in fifteen to twenty thousand dollars every day!—and this, in spite of the fact that the ruble was worth three times less. In one year, we paid off the million that we had invested. And all this took place during the crisis. That is why I will say it again: in times of crisis you can and you should find a niche and start a business. If consumers need something they will pay for it. But someone may argue that in 1998 there were few unoccupied niches.

This is simply not true!

You can always find a niche. And you can do this yourself. After all, an entrepreneur is a person who sees opportunities, a person who can ascertain what others cannot, who can perceive the positive in what seems at first glance to be a negative situation.

An entrepreneur is an optimist by nature! Of course luck plays a significant role and, without a doubt, I am a lucky man. I always have been. But in order to make your luck work for you, you have to do something. Bear in mind that merely finding a good niche is not sufficient. You also need to choose the right people and motivate them in the right ways—materially and emotionally.

In St. Petersburg, in 1998, to have an in-house microbrewery attached to a restaurant was revolutionary.

 

The slogan “It’s one of a kind” was not yet on the drawing board, but Tinkoff bottled beer was already my brainchild.

 

Valentina Vladimirovna, my mother, visiting in 1999 after Pasha was born.

Here I am in San Francisco with Dan Gordon, one of the co-founders of the Gordon Biersch chain of restaurants and microbreweries.

 

On Sushi

After beer, the second most profitable product in my restaurants has always been sushi. In the late nineties, sushi was becoming more and more popular. I decided to equip my restaurants for Japanese cuisine. In 1999, a recruitment agency helped me to find Henry Nomoto at a sushi academy in Los Angeles. This legendary man worked for us nearly full-time over a span of ten years. Not only did he perfect the Japanese cuisine at the Tinkoff Restaurant in St. Petersburg, but he was essentially the father of Japanese food in the city as a whole. No matter which restaurant I eat at today, the cooks and servers often walk up to my table and thank me for the education they received while working under Henry at Tinkoff. With time, Henry became the Executive Chef of the chain and traveled extensively throughout Russia, developing menus and, most importantly, instructing young cooks. Often, when I’m in cities where there is a Tinkoff Restaurant, I see rolls with familiar names, presented in a familiar way. After the beer, we made more money from Japanese food than from any of our other menu items. You’re essentially selling rice and a bit of fish. It’s profitable!

I saw it done in San Francisco and I just copied the practice. For Arkady Novikov, however, the idea did not work in St. Petersburg. And it did not work in the Moscow restaurant Sushi Vyosla, either. The assembly line approach is an option only for business lunches and for restaurants with a large output capacity.

Chapter 21

Moscow Sausage

Originally, I had not intended to create a restaurant chain. I had opened the St. Petersburg restaurant, in part to promote my beer brand, while dreaming of opening a full-fledged factory later on, and in part for myself—so that I would have someplace to go with my colleagues and friends after work. Randomly enough, I soon realized that this was not such a bad business after all. I started meeting lots of Muscovites who had fallen in love with the Restaurant on Kazanskaya Street in St. Petersburg. Of course, opening a restaurant in Moscow would be scary and expensive. The business world of St. Petersburg was not accustomed to paying forty thousand dollars a month for a property, when you could get the same place for eight thousand back home. I had my doubts, but the more praise I heard from Muscovites, the more I thought about opening a restaurant in Moscow. In 2000, then, when the crisis had eased slightly, I decided to enter this new territory.

Immediately, I felt the contrast between Moscow and St. Petersburg. There was extortion everywhere. Gimme, gimme, gimme! I can only imagine what goes on in big investment projects. Moscow is structured completely differently from St. Petersburg. Every step you take costs money; you have to pay tribute on everything. That is what you call the Byzantine Empire, my friends—Moscow, the capital of our homeland. Nothing of the sort ever happened in any of the other cities where we opened restaurants. But what can you expect from a city where the blood has already curdled? It is a city that has been ruled by the same man for 20 years now, a man whose wife, one of the richest people in Russia, is the only female billionaire (in dollars) in the country. This scenario would be impossible in any other civilized nation. An office-holder in a position like that would have stepped down from his post, at least. At most, he would have put a bullet in his own forehead.

Let me get back to the restaurant. We opened in Moscow in late 2001. All together the restaurant cost me two million dollars. In addition, we bought the property a year into our lease, which, as you can understand, ended up a very good investment, considering the growth in real estate prices.

People came to Protochny Alley, drank beer, and liked it. Everyone from Vladimir Zhirinovsky to Vagita Alekperova came to check it out.

I started coming to Moscow more often. You might say that I moved to the city, if you could say such a thing about a person who tries to spend no more than a few days at a time in any given country.

After all these years, though, I still do not feel like I love the city. Consequently, I agree with Bogdan Titomir’s song about Moscow: “Moscow is shit”.

I do not like the city at all. For me Moscow is one big office: huge, comfortable in places—an office, but not a home. When I fly into Sheremetyevo or Vnukovo airport, an interior switch flips to “work” position. When I am leaving Moscow, as soon as I get into the plane, it flips back to “rest.”

The city is not designed for family life; it is not pro-children. I realized this in 2001, when I took Rina and the kids to a restaurant, aptly called Hole in the Wall. Everyone looked at us as though we were enemies of the people. A hooker sat there with her legs crossed. Her facial expression seemed to say: “Why in the world did you show up here with your kids?” It is not just that, though. The city, in general, was simply not built for living in.

There is always an issue about where to go for a stroll on the weekends. Do you leave town? It takes hours to get out of the city and the same amount of time to get back. The suburbs? Everything has been overhauled. They have not kept any of the old buildings and estates. The only decent place to go for a walk, perhaps, is Pokrovskoye-Streshnevo Park and only in winter. Overall, though, there is nowhere in Moscow that you can do it. You can do a lap around the Patriarch’s or Clear ponds, but no more.

Moscow is a city with completely bizarre architecture. Look at Khodynskoye Field. It is eclectic: round, square, tacky buildings (built, by the way, by Russia’s richest woman). It is totally absurd—it was an empty field. Why could they not have done what people do everywhere else in the world, constructing perpendicular and parallel streets, nice humane housing, and parks where you can go for a walk?

I went there to visit someone and it took me forever to find my way. All of the new Khodynskoye buildings, which were built five years ago, look as though they have been standing there for fifty. Alexander Kuzmin, the Chief Architect behind the project, is quite the character. Why does he not simply resign? What he has done is totally out of line, to put it mildly.

In St. Petersburg people are asking whether the Gazprom Tower might disturb the city’s harmony. Compare this with Moscow. The city has been snapped down the middle, trampled, and spat on.

Sure, Moscow reminds one of New York and, sure, it is a dynamic city. It is a good place to make some money too—I agree. But to live there is simply unbearable. That is why a lot of people send their children overseas to study, including the Moscow bureaucrats who do not believe in the city themselves. It is a dying city. Bulgakov wrote that Muscovites are good folk, but the apartment issue ruined them. After all, Woland (the Satan-figure in Bulgakov’s The Master and Margarita) came to neither St. Petersburg, nor to Novosibirsk, but to Moscow—City of the Devil.

Why am I being so mean? It is because, when I wrote the foregoing, I had already been in Moscow for four weeks. Luckily I flew to Dubai the following day. A normal person has a home and an office. All of Moscow is my office. Unfortunately Luzhkov and his associates have made it so that you cannot stay in Moscow for long. How can you blame businesspeople, or the bureaucrats themselves, for sending their kids to other countries, if normal living conditions are completely lacking here? Sure, a big-time bureaucrat may be able to make himself a little Singapore in the suburbs, a gated 100-hectare estate with fields, woods, and animals. But what of the common man?

I love St. Pete’s; I dislike Moscow. And on the whole I feel okay about other major Russian cities. Novosibirsk, for example, is a very cozy city, even if it is big. There are problems with the infrastructure there, of course, but the city is interesting and suitable for living. I like it there, even though attempts were made to prevent me from opening a restaurant there in January 2003.

My restaurant in Samara, seating 275, opened in November 2002, a little earlier than the one in Novosibirsk. I created it in partnership with a local restaurateur, Alexander Terentyev, offering him a twenty-five percent share in exchange for his help in finding my way around the city and introducing me to the upper class.

It quickly became one of our most successful locations. Apparently this was because, although the city’s infrastructure is a complete wreck, its people are good.

For some reason the people of Samara and St. Petersburg are similar, like brothers. They have the exact same mindset. People befriend one another and entertain in their homes. In Moscow it is not common for people to go to one another’s houses. If you are invited, it means that there is going to be some kind of business-related standoff. A Muscovite is consequently a special kind of person, a severe type.

And the best, the most beautiful girls in the country live in Samara too. I do not know what caused it, but there appears to have been some kind of explosion there—environmental or demographic—and now every one of them is gorgeous. There are so many! It is a case where quantity and quality are not mutually exclusive.

By early 2003, we already had four restaurants. I went around to other cities, looking at how their markets were developing, trying to discern whether they were ready for us to come open a restaurant.

My memories of Nizhny Novgorod are very warm. The city is interesting and so are the people. I always enjoy my time there.

Kazan is a distinctive city. I can say a lot of nice things about its management. Despite a few Eastern frills, when it comes to attracting investment, everything is done there rationally and at a high quality. Dubai was taken as a reference point for Kazan. Even though there are some financial problems in Dubai, it would be stupid to deny that what they have done with their infrastructure is revolutionary—even if they did go a bit overboard.

Both Rustam Minnikhanov, the prime minister of Tatarstan, and the people at the mayor’s office in Kazan are on the right track. They have created an investor-friendly environment. Everything is understandable and predictable, two critically important factors for investors. It is a good thing that Minnikhanov was appointed president of Tatarstan in early 2010, rather than Mintimer Shaimiev.

The feelings I associate with the neighboring city of Ufa, where we also opened a restaurant, are less positive. There is more of a mess there. At least, that is how it was in 2003. Perhaps now, in 2010, Murtaza Rakhimov, the president of Bashkiria, has done something to improve the investment climate.

I have bright memories of Yekaterinburg. Opening our restaurant there was a lot of fun. The governor of Sverdlovsk Province, Eduard Rossel, introduced me to his deputy and we assumed that we would not have any problems with the local authorities. But wait! Welcome to modern Russia! Who could have predicted that relations between the municipal and regional administrations would be so tense? Our manager made a mistake by failing to hold any talks with the mayor at all. We brought in a bunch of musicians—Mikhail Boyarsky, Leonid Yarmolnik, Igor Kornelyuk, Mumiy Troll, De Phazz. Right at the climax of the performances there was a power failure and, in the meantime, the director of the power network was off at his summer cottage.

We could not simply disperse the crowd. At first we lit a bunch of candles. Then we worked things out with some military men, who pulled two generators up to the building. Everything worked out well end. The moral of this story is: never give up, always look for a solution and build a good team that will help you in the battle. People still remember the opening of our restaurant well, which is better promotion than we could have hoped for. It is not for nothing that the restaurant in Yekaterinburg is one of the best in our chain.

I have fond memories of Chuvashia as well. In 2003, I wanted to buy a brewery in Chebosary (which I will discuss in more detail in the next chapter). As Nikolai Fyodorov, the brewery’s president, and I rode in the car, I experienced something that I had never experienced before and would never feel again. As we drove by some traffic cops, they saluted us.

I would also like to highlight Vladivostok. I never thought that I would open a restaurant there. It is a city of free people. Although, in external appearance, the city is similar to San Francisco, it is more comparable to St. Petersburg, based on the emotions I felt there and the mindset of its people. I am happy that they are building bridges, roads, and the Palace of Congresses there for the 2012 APEC summit.

By developing this most beautiful of cities, it can be made into a Mecca, both for Asian and Russian tourists.

With typical frankness, I declare that Kamchatka is the best place in Russia, if not in the whole world. I have never seen anything like it: volcanoes, geysers, bald mountains, snow, sudden weather changes. I went with a group of French, Germans, and Americans on a freeride skiing trip. Everyone was pleasantly surprised by the Jacuzzi-like hot springs that winter. It is a completely one-of-a-kind place. Thank God we did not sell it when we sold Alaska.

I like spending time in Sochi at Krasnaya Polyana. I do not recommend taking the chairlift, but as far as freeride skiing goes, it is one of the best places in the world, both in terms of snow quality the steep inclines. No wonder one of the stages of the freeride world cup is held there; even the best athletes are dumbstruck by it.

“Yes this really is an awesome place.” It is probable that Sochi will be the infrastructure capital of Russia now. After all, it is simply mandatory that we do everything really well in preparation for the 2014 Olympics.

There are a lot of beautiful, scenic places in Russia, inhabited by beautiful people. But our economy is upside-down. Everything flows to the center, to Moscow. This is very unfair and it is not right. So I am not in the least bit surprised that Muscovites are some of the least liked people in Russia. What does it mean that even St. Petersburg is more critically short of money than Moscow? This is especially apparent in the ambitions of Muscovite managers: they want salaries running to figures that their counterparts in St. Petersburg would never dream of demanding.

At the same time, managers in St. Petersburg are often more effective than those in Moscow. People from St. Petersburg are better workers. We are more effective, less narrow-minded. You can find examples in the business world, the political landscape, and in show business. We can see how St. Pete’s is at the top of its game in every category. The reasons are straightforward ones: on the one hand, it is the northern capital; on the other hand, there is less money there and consequently one has to put in more effort to make it. There is a parallel here with how boxers train: some use weights and others do not. That is why we are more effective managers than those one might find in other cities.

The same can be said with respect to artists. Shnur used to sing for a hundred dollars. He has seen it all. Or there is Mumiy Troll from Vladivostok who came, saw, and conquered. In my opinion, regional ambitions are always good. In Moscow, though, you can sing one song, or sell a mediocre product for 20 years straight, and still be successful. The market is like that; it is like a spoiled kid.

The competition in Moscow is very specific and in some areas there is none at all. Here I am judging from my own restaurant: at one point we had barely any competition and the restaurant made really good money. After a few years, though, our profits began to fall off and, by the time the most recent crisis rolled around, the restaurant was suffering. First of all, people started going out to eat less often. Second, there were now many similar restaurants all around Moscow. The Moscow public is easier to sway and tends to be less loyal than in a lot of places. The people love novelty. They are always looking for something better and so it can be quite hard to find and keep loyal customers. Whereas Muscovites are all about the new and the better, people in St. Petersburg visit the same restaurants decade after decade. That’s small-town Europe mentality for you! My favorite place is the best that there is, period!

Furthermore, the restaurant economy in Moscow is not market-based at all. A lot of restaurants were opened, but guest numbers did not grow, especially given the crisis. At the same time, millions of dollars were invested in these ventures. In America or Europe, eateries with such large investment volumes are doomed. In short, there, the market works.

Every day in San Francisco one restaurant opens and another closes. In other words, it would be impossible to eat at every restaurant that there is, even if you went to a new one every day. And if you see a restaurant at eighty percent capacity, in the evening, it means that it is going to shut down soon. Overhead is so high that you simply cannot keep a restaurant running unless it is packed all the time.

But in Russia, you see restaurants that remain virtually empty year after year. Why? Because the owner does not regard the place as a business. Rather, it is a status symbol. Or it is a way of keeping his wife busy. Or it is a place where he can sit in peace and quiet. Restaurants are designed with flaws built into them. And when a lot of the players do not play by the rules of the market, it is easy to see why a normal businessman, wanting to make some money, will have a hard time. That is why I do not recommend opening restaurants in Moscow at this time.

In the autumn of 2009, Aras and Emin Alagorov opened a restaurant called Nobu (the original Nobu was opened way back when by Nobu Matsuhisa and Robert De Niro) in Moscow. My family and I came there one day for lunch and we were the only guests in the whole place. It seems like that ought to have been a wake-up call, but this happened in the gorged Moscow of today. Back in the late nineties and in the early years of the new century, my restaurants were met with cheers across nearly all of Russia.

In 2001, I set up a Tinkoff restaurant in Moscow, investing unsparingly, because I wanted to keep the satiated public happy.

I opened a 1300 square meter restaurant in Nizhny Novgorod on September 26, 2003. To the left is Joost Wachsmann, who sold me beer-making equipment for my restaurants.

Sergei Kirienko, the president’s authorized representative, came, along with his wife, to the opening of the restaurant in Nizhny Novgorod.

Chapter 22

Like No Other

The equipment at the St. Petersburg restaurant turned out to produce in such high volume that it was impossible to sell all of the beer that we had on tap. Thus Igor Sukhanov and I decided to buy a beer bottling line. I flew to Italy and ordered it, at a cost of a few hundred thousand dollars. A little later I bought out the twenty-five percent held by Igor and so became the restaurant’s sole owner. He left to work as a big boss then, as the deputy general director at Mezhregiongas.

Oleg Gusev shot the great-looking advertisement, In the Museum, which features some Chinese people walking around a museum and taking pictures. Among the exhibits is a Tinkoff beer. We ran it on two or three channels, paid a hundred thousand dollars for it and…our bottled beer started selling well. Off course the brand was not for sale nation-wide, but people started finding out about it. Even Moscow’s Ramstore mall had our beer. What a leap I had taken!

The demand for bottled beer exceeded the supply. We could make a couple thousand bottles a day, but we needed ten times that. A bottle cost us thirty cents to produce and we sold them at wholesale for a dollar apiece. The price reflected a stock factor: if there was none left in the warehouse, we would raise the price, but if we had some, we would leave it alone. That is marketing in a nutshell.

We had insufficient product and so I started thinking about constructing a factory. I had some extra money at that point since I had recently sold my Daria pelmeni business. But I did not want to invest all of the proceeds in a factory, having decided to leave some for my family. So I approached Anton Bolshakov with the idea of building a factory. We had met back in 1999 and it still brings a smile to my face to remember how that came about.

When I was studying at Berkeley Igor Pastukhov called me and said,

“There are some interesting guys from Zenit who are looking to give us some loans for Daria.” On Friday I told the professor that I would be absent for the day, jumped in my car, flew via Frankfurt from San Francisco to Moscow and, by Saturday morning, was already meeting with Anton Bolshakov, the deputy chairman of the board of Zenit Bank. We talked about the new loans for Daria. It is normal for bankers to want to meet a business owner face to face when discussing extending the business’s line of credit.

In the evening, I got on an overnight train to St. Petersburg, saw how things were going at the Daria factory, and, immediately after that, went on to Pulkovo airport. When you are flying to America, it is as though you are going back in time. So I landed in San Francisco on Sunday evening, and on Monday morning went to school.

Every Monday we would talk about what we had done on the weekend. One of the students related how he had bought the Saturday edition of The Wall Street Journal and read it while sitting in a Starbucks. Someone else talked about skiing in Squaw Valley. The professor asked me,

“Oleg, where did you go?”

“I took a trip to Russia—to Moscow and St. Petersburg.”

“Are you kidding?”

“No, I had a business meeting in Moscow and then I checked in on my factory in St. Petersburg.”

It was pretty funny. The students and the professor were shocked by this Russian weirdo. But it was a good thing that I took that plane trip to Moscow and St. Petersburg. The fact that I knew Anton Bolshakov served me well in 2002.

He was the one I came to when I decided to build the beer factory.

“Anton, I have a beer restaurant in St. Petersburg, with a small bottling line. The beer is really taking off! We get several times more orders than our plant can fill—even though I have invested hardly anything so far in promoting the brand!”

“Interesting. Now what did you want?”

“I want to build a small brewery for twenty million dollars. I need a four million dollar loan. A factory of the size I envision would be able to brew twelve and a half million liters of beer per year. That’s three million bottles a month. It’s an intermediate option between a big plant and a microbrewery. I’ve got the blueprints.”

Anton believed in the idea and opened a line of credit for us. I have to give him credit: the man was able to distinguish between trash and treasure, grain and grass. And I am not the only one he has helped. On his initiative the bank started working with other capable businessmen.

So I started construction on the plant in Pushkin—next to our old Daria factory. Sergei Rukin from MBK found our abandoned, incomplete warehouse. We took those two thousand square meters. It was a time of torment, akin to labor pains. It took us what seemed an age to finish the construction. I was always on site. I called the contractors. I took planes to Germany. I went to Zenit Bank over and over again. I expended all my effort on the project. At first I had planned the commissioning of the factory for October 2002, but in Russia one never meets deadlines. There are too many unknowns to take into account. The builders might slack off. Equipment might come in the wrong configuration from the manufacturer. There is no telling how long it will be delayed at customs. It takes time to get approvals from different bureaucrats. The list goes on. You will lose six months either way. And if you run into problems with financing, then a year can fly by like nothing at all. Sometimes construction projects drag on for years.

Such considerations did not make me feel too much better though. I was doing the construction with borrowed money and every month the bill kept growing. I was really nervous. For the first time in my life I suffered from insomnia. It took me forever to fall asleep and I would wake up after two or three hours. If you do not sleep well, then during the day you feel like a piece of shit. In January 2003, just before the opening of the restaurant in Novosibirsk, I did not sleep for a night and a day. I felt so terrible that I left while the party was in full swing, right when Leningrad were starting their set. After I left, I wandered around the hotel. I could not sleep. I tried everything from hot milk to a warm bath. The birth of our third son Roma, on February 23, 2003, did not make matters any better. The only thing that worked was vodka. I could sleep normally after having some. I ended up having to go to a doctor specializing in sleep problems.

“What’s bothering you? What’s putting you on edge?”

“I’ll never finish building the brewery. I am afraid I’ll break the bank.”

“Once you’ve built it, then you’ll be able to sleep.”

The delay might have been even longer, if the construction had not been conducted at Stakhanovite[6] speeds—thanks to Georgy Alyev from the construction company Advance. It is a good company and I recommend it. A country must know its heroes. The guys at the German company Steinecker are also great. They reached a compromise with me and came up with a synthetic product (loans, installments, and a price mark-up) to make it easier to finance the project. If it were not for my partners, there is no way that I could have finished by summer 2003. Almost everyone working on the project was someone I had never worked with before. Pastukhov had already left me and Surkov was busy working on the lumber business.

Sasha Kotin was a great help to me. It was he who took the first bottle of beer off the conveyor at the new factory. He was killed the following day.

I have always been lucky enough to meet good people. I have met a lot of them in my life. Thanks to them I evolved as a person and as a businessman. One of them, without a doubt, was Sasha, whose departure, to our great despair, was untimely. I have already talked about how I hired him as a lawyer for Petrosib in 1994, just after he had finished university. Sasha single-handedly organized the Daria sale so that we never had to invoke the services of a law firm of any kind. In 2001, to close a deal for twenty-one million dollars was equivalent to what closing one today for two hundred million would be. He did it all on his own, independently, and I gave him a C-class Mercedes for it.

Sasha really liked to dress up. He bought expensive clothes, went to clubs, and danced hard. He lived. It was as though he felt that he did not have much time left and he needed to enjoy life. At the same time, he was an unbelievable genius, workaholic, and talented lawyer.

In his luxurious black leather jacket and gelled hair, looking like a St. Petersburg version of an Italian, he drew attention. I told him about it,

“Sasha, be careful. You’re a really flashy guy in a wicked ride.”

For the good work he did at Daria, as part of his bonus, I signed one of my first apartments, a two-bedroom place at 26 Korolyov Street, over to him at half-price. Sasha moved into the apartment with his wife and two children.

When I lived in that flat myself, I would always carry an air pistol on my way from my car upstairs. When I would go inside, I would kick the entry door open, first, keeping the pistol charged and ready to fire. Then I would go in. As it turned out, I had good reason to take these precautions.

When Sasha went into the entryway, he was hit in the head with some sort of pipe, had his keys and valuables taken off him. They drove away in the car. Later it was revealed that the offenders were junkies who wanted to rob him, but had not intended to kill him. Maybe he would still be alive, if it had not been for our famous medical system. He lay for thirty to forty minutes on the landing before being found. It took another half hour for the ambulance to arrive. He died on the way to the hospital. Thus Sasha passed. He and my wife Rina were really close friends.

It is crazy, but around six months before his death, we had a conversation.

“Oleg, do not worry, you’re a business man. These are tough years. The crisis ended only a short while ago. But no matter what happens to you, we’ll always take care of your family. We’ll look after your kids—I give you my word. I’ll work it all out so that your family does not suffer. No partners or corporate raiders will come close to your fortune.

“Thank you, Sasha.”

Who could have known that, six months later, I would have to do the same. Sasha was a key figure in all of my businesses—in Daria, in the brewery, in the restaurants. Seven years have passed since his death and I still really miss him. If I had a lawyer like him around today, we could move mountains. I am sure that Tinkoff Credit Systems’ market position would be a little better. It would be a little more balanced in terms of corporate management and the documents would be in better order.

We will always cherish Sasha’s memory. May he rest in peace and may his wife and kids, Gosha (whom I had baptized after his dad died) and his oldest, Red, stay in the best of health. We care about them and always will.

Sasha, I am honored to help raise your kids and give them an education.

Thank you.

Russia has lost so many good people like that. It is stupid to have to die at 29, to have to leave two little kids and a wife behind. It is complete idiocy. But the morons live on and do not bring any good to our country, only problems. And the good people leave. It is a total mess.

* * *

I was so upset over it that I had to turn down a very interesting business proposition. Let me tell the story.

It all began in 2001, at an economics conference in New York. I approached Sergei Generalov in the elevator. At the time he was a deputy in the State Duma and prior to that he had been Minister of Fuel and Energy. He was a big boss and was often seen on television.

“Hell. I know—you’re Sergei Generalov. My name is Oleg Tinkov. I am a businessman.”

“Nice to meet you, Oleg”

Sergei and I clicked and the wheels started rolling.

When I sold Daria and came up with the idea for the brewery, Sergei suggested I get into vodka. In summer 2002, he bought a factory producing Topaz-brand vodka just outside of Moscow for eighteen million dollars, which seemed like crazy money at the time. The story was that the previous owner had moved to France and bought a vineyard. Everyone thought he was a billionaire.

At that time Sergei had a partner, Siman Povaryonkin, a guy whose physical appearance is reminiscent of Napoleon Bonaparte. Apparently he was Russian, but he looked and acted like Napoleon. Sergei offered me a twenty-five percent stake in his alcohol business. Siman, who headed up the vodka operation also held a quarter, while Sergei held the remaining fifty percent. This was a man who always owned a controlling stake in his ventures, but I stress his willingness to own no more than half of the company!

Sergei wanted to create a premium vodka, as I had done with another product, the Daria pelmeni. We even registered a few brands (I have forgotten the particular names) and ordered a bottle design. It never got off the ground though.

When I was building the factory in Pushkin, I knew that I was falling apart. I was not dedicating enough time to my business (but nurturing my business until it finds its wings is my obligation). It was not that I did not believe in the vodka. It is just that I did not have the time. But I could not be a slacker if I was a partner. I called Sergei six months later and told him the honest truth.

“Sergei, I do not have the time to work on this anymore. You give me my money back, and I’ll give you back your shares. I do not need anything else. I have to leave the business. I do not want to just mess around.”

Sergei and Siman understood what I was going through and I left the partnership with them peacefully and painlessly. I wished them luck. Sergei Generalov and I still have an excellent relationship. We still meet now and then for lunch. I consider him a great entrepreneur. When he sold Russian Alcohol for four hundred million, six years later, I thought about the one hundred million that might have been mine. But I was not sorry, because I had achieved success in my beer business. It is just another example of how important focus and decision-making are in business.

Did I do the right thing from a logical standpoint? No, of course not. I missed out on a huge chunk of money. Was I true to myself? Did I do the right thing and act according to my convictions? Of course I did. I have no regrets. I acted in complete sincerity. I did not make money in one business, but I earned a lot in the course of what I did do instead. I acted honestly in relation to my partners and toward myself. My dear readers, whether you are already businessmen or plan to be in the future, this is something you have to implement in your own lives. You have to find the courage to leave a business if it is preventing you from concentrating on something in which you believe more deeply, or on what your heart’s pushing you to do. At that moment beer was where it was at for me.

I’ve had a difficult history with vodka. Sergei Generalov offered me a stake in his vodka business. At one point Rustam Tariko called me and offered me a position as head of his huge Russian Standard vodka business. In the former case, I said I was busy with beer and in the latter case I said that I would be getting into banking. Doing something half-heartedly or applying half the effort is not my thing. In cases like these, it is not about the money. What is important is to work on a project that is in line with my heart, so that I can work on it seriously and not just for the hell of it.

“Big” businessmen often offer me businesses, seeing me as a process manager of some kind, a lead manager with a minority stake. Sometimes they even say that I need to invest money. These are good proposals, but they are out of tune with my principles, convictions, and mindset. I always refuse. As a result I miss out on making some money, but I do not regret it.

* * *

The small brewery’s official opening took place on June 6, 2003. It had actually been operational for two months already at that point. St. Petersburg governor Vladimir Yakovlev came, along with the mayor of Pushkin, Mikhail Karatuyev, and even the beer czar Taimuraz Bolloyev, president of Baltika. Legend has it that the first bottle was taken off the conveyor belt by Yakovlev.

At the ceremony he probably already knew that he had only a few more days of work as governor. Ten days later, on June 16, 2003, Putin signed an order making him the Vice Premier for Housing and Communal Property. The post was a political death sentence, like the position of Minister of Agriculture in Soviet times. Maybe it was Putin’s way of taking revenge on Yakovlev for the fact that, in 1996, he left Sobchak’s team and beat him at the polls. Former first vice-mayor Putin suddenly had to find himself a new job in Moscow. On the other hand, though, if Sobchak had not lost the election, then Putin may never have become the country’s president. By 2003 Putin had come into his own as president and had decided to remove Yakovlev from the strategically important post of top-dog in St. Petersburg.

Now, I must say that my feelings toward Mr. Yakovlev are positive ones. He is a truly strong economist, but he is not a politician. He lacks the charisma that a true politician requires. He laid the foundations for St. Petersburg’s development—but of course the city has really spread its wings and flown under Valentina Ivanovna Matvienko. During the days of Yakovlev, she worked as the president’s authorized representative in the Northwest Federal District. On October 5, 2003, she won the gubernatorial election in the second round. Of course the economic boom gave her a boost and the “cloudy” years before did not hurt either. I will talk about my interactions with Valentina Matvienko, when I was building the beer plant, a little later.

And so I now had a plant capable of producing thirty-seven million bottles a year. But what was I going to do with all of them? This was totally different volume from what our bottling facility on Kazanskaya Street produced. We needed a breakthrough. When the construction was drawing to a close, I realized that we could not just start producing at full steam. We needed a sudden shortage. In order to create it, we had to have a unique product, a unique price, and the right distribution. Our bottle design was developed by the company Koruna. It was original, reminiscent of a woman’s curves, which made it really popular among the girls, later on. The bottle was engraved and non-returnable. Once you had finished the beer, it had to be thrown away. Twist-off caps and six packs also became our hallmarks—a German recipe, too, using quality Bavarian hops. What should the price be? We understood that we could charge whatever we wanted, really. And that is what happened. We started at seventy cents per bottle, eventually reaching a price point of $1.20, at a cost per bottle of twenty-nine cents. I remember writing in my blog about the two to three hundred percent markup and I was attacked from all sides. But whether it was Daria pelmeni or Tinkoff beer, my margin was always the same. There was no other way to earn the money that I needed to buy modern equipment, pay the workers, or to cover our highest expense: advertising. Marketing, in the fast-moving consumer goods market, is very expensive—and much depends on it. The marketing that we commissioned for the Tinkoff beer brand worked out perfectly.

As fate would have it, prior to the factory’s commissioning I made the acquaintance of Oleg Kompasov, a director who lived in America. I had lived in the U.S. for six years altogether and very rarely met Russian men who had married American women. We are accustomed to taking the easy way out and it is a lot simpler to live with a Russian woman. Somehow, Oleg lived just fine with an American. I liked that; I knew that there must be something special about him.

Of course we put the advertising out to tender. A lot of agencies approached us with ideas that, in my opinion, were toothless. And they left with hurt feelings. Oleg, however, proposed three ideas that were just nuts in their composition, impressiveness, and the feelings they evoked. If an advertisement fails to trigger feelings toward a product, who in the world needs it? It does not necessarily have to shock, but it has to provoke emotion. And Oleg Kompasov’s idea was absolutely ingenious.

A man lies in a yacht. To his left is a young white woman and to his right a black one.

Everyone else dreams in color,

But his are black and white.

He’s not like the others.

Everyone else is drinking beer; he’s sipping a Tinkoff.

He’s one of a kind.

Tinkoff.

My brain’s right hemisphere is more developed than the left. I am a man of action and an extravert and I never see my dreams in color—only in black and white. I have always envied people who can clearly and accurately recount their dreams. I can never remember much—never the whole thing, only fragments. If I were to describe them, you would think I was crazy. That would probably be the truth.

So I liked the advertising concept involving the yacht. We used the accompaniment from the song “Good Morning, Planet”, which Ilya Lagutenko wrote for his band Mumiy Troll. Next, Oleg Kompasov and Samvel Avetisyan flew to Portugal to shoot the clip. They got a blonde girl from Moscow, found a black one in Portugal, and rented a helicopter. The whole thing did not cost all that much. In May we showed it on television and immediately it created a furor. The most important thing was that we were able to provoke feelings towards the product. We had some insight into the current generation and people still remember that commercial. Everyone thinks that we spent a huge amount. In fact, we spent only ten million dollars over three years advertising Tinkoff beer. This is pennies compared to the amount that our competitors spent. It is just a small fraction of the marketing budget allocated by Baltika, for example. But we created a huge brand! Even now—and it has been five years since we sold the brewery business—people still think that I am a beer maker and that I am “one of a kind.” Even the title of this book addresses this same ingenious catchphrase. I am really proud of what we did. Let me list the heroes—there are not many of them.

Oleg Kompasov authored the idea. Oleg Tinkov was the one who took the idea and tweaked it just a little bit. Samvel Avetisyan, Marketing Director, is the man who did not accept the idea at first, but who, after working through it and making a few changes, implemented it. Without a doubt, nothing could have been done without Samvel. He took the most active stance through it all. Mikhail Gorbuntsov, our Advertising Director, showed a keen eye for good advertising space. Oxana Grigorova, our PR Director, provided information support.

These are the people that had central roles in the creation of the brand. I often hear and read in people’s resumes things like, “I built the Tinkoff brand,” or “I played a part in the creation of the Daria brand.” Perhaps so, I say, but I have listed the people who actually did it—and were not merely “playing a part.”

Oleg Kompasov always had three ideas. Samvel’s favorite creation among these was: a man drives into the Kremlin holding a bottle of Tinkoff beer, looks at the star on the top of the Kremlin and says, “Hmm, well I am screwed now: I am seeing stars.” This was followed by some other lines. That was another of our interesting, provocative ads. Another socially loaded ad was overdubbed with these words:

They have money; they think they have power.

They have guards; they think they are safe.

They have sex; they think they have love.

He’s not like the others.

He believes in himself. His inner freedom is what’s most important to him.

Tinkoff: one of a kind.

There were other advertisements. Each one highlighted the beers’ different advantages. For instance, we began bottling five distinct kinds of beer: “Platinum” (pilsner), “Gold” (lager), “Red” (bock), “Dark” (porter), and “White” (wheat). In order to get a message of diversity across to the consumer, we filmed an ad with slender girls of different races on a beach:

They’re all so different.

White and dark, red and gold

and even platinum.

Something to your taste, whatever that may be.

Tinkoff: one of a kind.

There was another special creation in the same series, which advertised the restaurant chain:

They come here.

The place is pulsing with a life of its own.

Tinkoff is handcrafted beer.

It’s one of a kind.

Tinkoff: private brewery.

Not all of our commercials enjoyed the same level of success. We never managed to produce another commercial that was nearly as eye-catching as the one with the yacht. The bar that it set was pretty high and tough to beat. That is how it usually works. You set a baseline and people demand more of the same, but it is hard to manage. It is not easy repeating the same ingenuity twice. The band Zemfira was never able to make a record as good as their debut. After his first book, Generation P, Viktor Pelevin would never be able to write such a masterpiece again. Zemfira’s later albums and Pelevin’s later books were good and so were the commercials that we did after our first one with the yacht. But nothing can compare to it. It was an extravaganza. And what it started was huge! Having shown it on only one channel, NTV, we got a lot of good press in other publications. Our competitors were in a state of shock. But their shock did not worry me much. The important thing was that distributors began to scoop up our product. They took out product loans, which were provided by Baltika, and bought our beer instead. We accepted cash only. Then we got so self-confident that we initiated a policy of accepting advance payment only—and doubled our prices. The factory could not keep up with all the orders. This is what advertising does for you. It is marketing in action!

When Tinkoff beer went into mass production, we changed the design of the bottle, giving it a more “premium” look.

Discussing the strategy for promoting the beer. The design on the table was conceived especially for the American market.

Members of the Tinkoff team having fun on a company trip. Left to right: Mikhail Gorbuntsov, Vadim Stasovsky, Alexei Yatsenko, Andrei Mezgiryov, Alexander Kotin, Oleg Tinkov, and Samvel Avetisyan.

St. Petersburg governor, Vladimir Yakovlev, speaking at the opening of my Pushkin brewery just before his resignation.

Our third child, Sasha, was born on February 23, 2003, when we were finishing the construction of the Tinkoff brewery outside of St. Petersburg.

We commissioned the Pushkin brewery in the spring of 2003.

Vladimir Dovgan, one of the first people in the country to use his own surname as a brand.

Beer production is a high-tech process.

Anton Bolshakov, former deputy chairman of the board at Zenit Bank:

After the crisis of 1998, I headed up project financing at Zenit Bank. I was looking for new financing opportunities and found out about Daria through our St. Petersburg branch. The company needed funds for expansion, for the construction of a new plant. We needed to meet with the higher-ups. So Oleg Tinkov, who was already quite well known for his beer restaurant, flew in.

Daria already had something of a share in the frozen meat product market. Oleg came for just one day, arriving by air in the morning and departing the same evening, which was surprising to me. That’s how we met. We talked and he gave me the impression that he knew full well what he was doing. Compared to other clients, he looked pretty fresh—an unusual young man.

Life has taught me to take the interests of others into account and he has the same ability—to understand and to take such interests into consideration. It was not a stupid attempt to get three kopeks, while letting three million fly right by. Later his colleagues sent in the required documents. The work began and, as a result, we built a new plant and later a brewery, followed by another bigger brewery, as well as beer restaurants in Moscow and Samara—basically we ended up in a long-term business relationship. We financed a lot of projects while I was working at the bank.

Yevgeny Finkelshtein, promoter:

Oleg is a flamboyant person, but he knows his limits. He knows how to slide along the edge without crossing it to the point where his flamboyancy would become annoying. He thinks through everything he does, really.

A lot of funny things happened. Soon after the Tinkoff “one of a kind” commercial aired, there was a Bosco di Ciliegi show. I saw Oleg wearing Bosco clothes, followed by another thirty wearing the same brand. So I joked,

“They say he’s ‘one of a kind,’ but it turns out that there’s a crap-load of him.” He heard the joke and shook his fist at me.

On Drugs and Alcohol

I have been known to have a toke of ganja once or twice a year. It relaxes me. Everything has its time and place. For instance, in 2004, I went with our managers to Jamaica and we smoked weed every day, because the setting and the atmosphere there were fitting. We watched how the locals did it and smoked with pleasure. When we were on Necker Island and I brought the subject up with Richard Branson, he asked me what the problem was, what the big deal was. He allows his own kids to smoke the stuff. I am not sure I would let my kids do it. I am no pothead. I may smoke now and then, but if I go twelve months without, I am fine. I could not care less. Now, hard drugs are a different story altogether. They are complete poison. They have to be rooted out immediately.

The situation with vodka is more complex. After all, I am Russian. Sometimes I drink; sometimes I stop drinking. In my view, I drink a lot, but in the view of my friends from Leninsk-Kuznetsky, I do not drink at all. When I’m getting in shape, cycling in Tuscany or freeriding in the French Alps, I lose fat. The better form I am in, the less susceptible I am to drinking. When I get back home, I get drunk very easily. Then I start gaining weight from the alcohol. I’m always trying to achieve a fine balance between sports and killing myself by drinking. Recently I haven’t been enjoying drinking and I try to do it less often.

The period between December 25 and 31 is a particularly difficult time for me. My birthday is on the 25th, while Dasha and Pasha’s birthdays are both on New Year’s Eve. And then there is the New Year, of course, and the western and Orthodox Christmases. You must understand why it is a difficult couple of weeks for me.

In general, I am more inclined to drink in the fall and winter. Alcohol is a good thing. In reasonable doses, it relaxes you. I am very suspicious of people who do not drink at all. In my opinion these people are dangerous. At the same time, I do not understand how a person can drink four nights out of the week. Even twice a week seems like a lot. The question is: where does one draw the line? Sure, it is a fine line, but it needs to be established.

Chapter 23

My Confidence Trick

At the same time that we were constructing the factory in 2003, we were getting ready to release phenomenal bonds into the market. Just imagine, a company with revenue of nineteen million dollars issuing bonds worth thirteen million. The interest rate was fairly high—seventeen percent annually—but these were completely unsecured bonds, to be paid off by 2005, on merit.

The idea’s instigator was Alexander Vinokurov, who had formerly owned the bank KIT Finance. In 2002, when his bank was still called Web-Invest, he and I had a few beers in the Moscow Tinkoff Restaurant. I told him about my dream of opening a big brewery and he said,

“Oleg, why don’t you issue bonds for the project?”

“Sasha, I do not think our revenue is high enough for bonds. We are unaudited. We’re not ready.”

“That can be fixed.”

My dear readers, we were right on the cusp of a dream, hovering between that and a stupid idea. Sasha’s words struck me as absurd. I have to thank him, though, because he was the one to suggest the idea, which at first seemed simply idiotic to me. He convinced me that we could implement it. From there everything started rolling along and I was on fire with the plan. In January we established a firm called “Tinkoff-Invest,” as it is easier to issue bonds from a legal entity with a blank slate. Sixty percent of the shares in this limited liability partnership belonged to New Technologies, LLP (the Tinkoff restaurant chain’s official name), while forty percent were held by InterBeer, LLP (the brewery in Pushkin). Both of the LLP’s belonged to me and were set up through the company William Technologies Inc. (located in the British Virgin Islands). New Technologies and InterBeer were the guarantors for the bond loan. On April 11, the Federal Securities Market Commission registered the issue of bonds in the amount of four hundred million rubles. Zenit Bank, my main financial partner, organized the deal. I could not hire Web-Invest for the job. The latter, however, along with Novikombank, joined us as co-organizers.

We decided to issue two-year bonds, with four warrant periods and a single put date. This meant that one year following the circulation, we were obligated to buy back the bonds at a rate of 1000 rubles from anyone that wanted us to do so. This made the bonds even more attractive. At the same time, the interest rate was fixed at a high level (20.5% annually). What was up for auction, really, was the rate for the first two warrants. The analysts expressed their skepticism.

Vladimir Tsuprov of National Development Bank, for example, averred that “an interesting issuer has been presented on the market. On the one hand, it’s a promising and growing business. It’s loan volume is huge, it’s got a lot of financial leverage (which will lead to low levels of financial sustainability and a high debt load on the company).”

Alexei Krivoshapko of United Financial Group asserted that “the Tinkoff case is a classic example of project financing. Bonds are an instrument that are good, in principle, for bringing all cash flow under a single currency, but the yield is far too high for serious consideration. If the value of the dollar does not increase, then the loan’s yield will stall at twenty percent, which is very costly.”

On April 30, for better or for worse, I issued the bonds. The interest rate for the first two warrants was at set at 12.95% annually. In view of the fact that the next warrant periods were higher, we issued the bonds at 17.1% annually. The market went crazy: a microscopic company had issued bonds in a value that was higher than its proceeds. An absurd idea, which had been dreamed up over a mug of beer, had become a business. We raised a ton of money—thirteen million dollars. I did not think that it was that much: my business had a good rate of return and I saw its prospects. In cases like that you do not pay attention to the interest rate. You have money for development.

I am grateful to Alexеi Karpentsev, at that time my Director of Corporate Finance, for the work he did on the bond circulation. He is a skydiver, freerider, yachtsman, and a person who likes to take long walks alone. It is hard for him to work in a structured way and he warned me about this as soon as he was hired—but we decided to try him out anyway. We still maintain good relations and sometimes run into each other on the slopes at Krasnaya Polyana in Sochi, where he currently resides.

I wanted to invest seven million dollars in order to double the output of the plant in Pushkin to twenty-five million liters by December 2003. In particular, I wanted to buy twenty cylinder-conic tanks and four aging tanks. In the summer, I wanted to open a production line making malt cocktails with an output of 8000 liters per day and costing close to a million euros. With our new production capacity, we would be able to make six million bottles a month and, in 2004, my plan was to earn revenue of 72 million dollars. In addition, several more restaurants were in the works. I wanted to use the remaining six million I had made on the bonds to pay off my debts to Zenit Bank.

At the same time, I understood that our beer production capacities were not enough for me. Even doubling them would not help that much. I needed to either buy or construct a new factory of the right size. But what kind? In 2001, the company Steinecker built the Bulgar-Khmel brewery in Cheboksary with a loan from the German government, in the amount of twenty-five million dollars and guaranteed by the government of Chuvashia. In 2003, it fell into the hands of Kakha Bendukidze and he decided to sell it. Somehow or other, Kakha was always squeezing his way into different enterprises. I do not understand at all how an individual was able to take ownership of such massive enterprises. The same thing happened with the Izhorsky factories, the biggest in St. Petersburg. How does that happen? How does it come about that an enterprise occupying a thousand hectares was owned, essentially, by one person. He owned Uralmash, too, the factory producing Krasnoye Sormovo submarines, as well as some other strategic enterprises. Thank God all of them have been transferred to state control, through Rostechnologies. Handing such factories over to private interests is never the right thing to do.

I went to Kakha’s office in Blagodatny Alley in the center of Moscow to discuss it. I went through the iron doors and Kaka came bumbling out of his office and started stretching his fingers backwards. What a cool guy! Kakha proved to be a good negotiator. He was tough and tenacious, but his eastern roots showed.

In the end, we concluded an agreement of intent, and I transferred two million dollars to him. We even delivered bottles to the factory in Cheboksary, where Andrei Mezgirov was practically living. We interacted closely with the president of Chuvashia, Nikolai Fyodorov, a good man, who treats investors well. But in August, Bendukidze’s manager called us and informed us that the factory had already been sold to InBev for thirty-six million dollars. How? Why? To what end? I was perplexed and called Kakha in for a meeting. He came to a Tinkoff Restaurant, ate a couple of sausages, and said,

“You know what, Oleg? Don’t be upset. Back in the day, I worked in the semiconductor department at the Scientific Research Institute. But I lost the tender for a factory. Like you, I was worried; for two weeks I could not sleep. Now when I tell you where the factory was you’ll understand everything”.

“Where?”

“In Grozny.”

“Okay, but you kept two million dollars and the money did not work for me.”

“I’ll give it back.”

“Of course you will, but I could have used that money for gain elsewhere.”

I am still mad at Kakha. He did the wrong thing. He paid me a low rate of interest (LIBOR, if I am not mistaken), which did not even compensate for inflation.

After the deal fell through I called Nikolai Fyodorov and he said,

“It’s private business. You must understand that there’s nothing I can do.” Well that was fine and dandy. There is a Russian saying that says: “There cannot be fortune without some help from misfortune.” It applies well to what happened with Bendukidze. If I had gotten on board with Bulgar-Khmel, I would have been stuck there and would have remained a small producer. After all, the plant was capable of only eighty million liters a year.

There were no other enterprises for sale, so I decided I would have to build my own. After Bendukidze failed me, I was more ready to rumble than before. I wanted to become a significant player in the beer market. I wanted to make lots of money. The problem, however, was that I did not have money to build the factory.

* * *

Then a confidence game of epic proportions began. This story is exclusive to this book. By that time we had bought all the land around the plant in Pushkin and fenced in a massive plot. In total we had close to ten hectares. We established the whole infrastructure required for a large factory: gas, electricity, and water. All we needed was the factory itself. Now a two hundred million-liter factory cost somewhere in the ballpark of eighty million dollars. I had no idea where to get the money so I decided to go all in.

I sent the money that had received from the debt securities, circulated with the help of Aton Financial Group, as pre-payment to all the suppliers, intending that they begin getting the equipment and construction machinery in order. I did not want to waste time on that later. I wanted to save time. Then I went to Zenit and said,

“We need to do something. This is how much I make; this much of it is profit. The small plant netted a million dollars a month, but that was not enough. It would have taken eighty months to pay for the new factory. The guys at Zenit were real dears and gave me a line of credit line, prepared synthetic loans for me, and provided guarantees to the German manufacturers. They even got me a loan from Slavinvestbank. The entire factory was built on credit.

On my blog, people often ask me questions about where to get money for a business if you have none to start with. Well here is an example. I am not saying that this operation will work for you. I was lucky. I always have been. But it is not just a matter of luck. I had a brand. I had a working business. I had a track record—I had successfully built and sold two businesses. And, incidentally, at Zenit’s credit committee meeting, Anton Bolshakov said the same thing:

“This guy just sold a business to Abramovich. He builds and sells, builds and sells. I have no doubt that this time again he’ll build this business and then sell it.”

The funny thing is that, in 2005, I really did sell the business—for 260 million dollars. It was yet another success story, which I will talk about later.

Even now, working at Tinkoff Credit Systems, I borrow money for development. Businesses all over the world develop on the basis of borrowed funds. Everyone wants to borrow, so it is impossible to build a large business using your own funds alone. Some portion is usually “your own,” but inevitably you will need to borrow. When I try to get bank loans today, a lot of people use the argument that I have bought and sold a lot of businesses, making the point that all of my undertakings succeed. But I still come up against bureaucrats. As a rule they are fat, bespectacled, and wear poorly-sewn, often English suits (a normal person would never wear an English suit; rather, such a person would wear an Italian one or—in a pinch—a German one). These bureaucrats say,

“No, it’s a pyramid scheme. It sucks.” I will be happy if at least one of these idiots buys my book and reads it. Maybe he will learn something from it. It is more likely, however, given the logic in accordance with which he lives his life, that he will decide once and for all never to give me a loan ever again. Well, screw him. He might as well shove his money up his ass. Let him sit at home jerking off to Fashion TV. What a bland, mediocre, space-holder of an individual. “He’s a man who keeps himself in a hard-shell case,” wrote Chekhov about such people. Alternatively, he is like the bureaucrat in Gogol’s Shinel. One day he will keel over and die because someone stole his worn out, double-breasted suit. He will die of worry. And so, guys, the moral of the story is this: it is hard to get hold of money; no one is going to give it to you for nothing, just like that, even if you have a track record like mine.

* * *

Let me get back to the plant. How did the financing scheme work out? At its first stage, Aton organized the circulation of notes worth 150 million rubles, making it possible for us to make pre-payments on the equipment. Beyond this, Aton did not participate in the project, as they had taken on the Afanasy brewery. In addition to our floating assets, we financed the plant from two other sources. The first was Zenit Bank, which paid for all of the construction and made pre-payments on equipment that was immediately signed over to the bank as collateral.

The second source was the German company Ziemann GmbH, which kindly gave us a reprieve of payment on the cylinder-conic tanks that are used in the fermentation process.

In addition, Zenit wrote three letters of credit for us. The first payment to the Germans was to be made four months following the start of production. The general payments to Zenit were expected to last until 2008. We bartered for four months and got them down to fifteen million dollars for the equipment. The price was not marked up in spite of the installment plan, but it is clear that the price included a premium. In other words, if we had paid in cash, up front, the price would have been even lower.

But I was completely fine with the terms, especially as compared with other, similar transactions. Krasny Vostok announced that they had built a 150,000,000-liter plant in Novosibirsk, at a cost of one hundred million dollars. Our factory, producing two hundred million liters, however, cost eighty million. On top of that, the plant was designed so that we could double the output for a low price-tag of fifteen million. I am not afraid to say that, in terms of investment, it is the most efficient beer plant in Russia. The reason? I was personally responsible for the negotiations. There were no kickbacks.

On October 14, we signed a contract with the German concern Krones AG. Rainulf Diepold, executive vice president at Krones, and Josef Koniger, managing director at Steinecker’s (the daughter company of Krones that executed the project), attended the ceremony.

We chose Krones, because the company had a good reputation as a developer of cutting edge technologies and held patents on a number of brewing equipment solutions. This had never happened before in Russia—German companies, that is, constructing a plant from start to finish, from the laying of the foundation to the installation of the bottling line.

While the big plant was under construction, I mostly hung around Moscow, working on financing and dealing with our creditors, a few dozen Germans from the companies Krones, Steinecker, and Ziemann. I called Andrei Mezgiryov, who was in charge of the process, eight times a day.

Andrei is another very talented manager from my team. I am happy that he has started his own venture now. As far as I know, the business is operating successfully. He is an example of a successful manager that evolved into an entrepreneur. Unfortunately, the percentage of managers that go on to become businessman is not too big—but he is one of those, in any case. Now he is doing successful construction work, cooperates with the Russian Railway, and has a few dozen people under him. He works for the good of the country.

Before I began negotiating with the Germans, I had been counting on getting the plant up and running in time for the summer of 2004. They convinced me that this would be unfeasible and we pushed the date to September 1, 2004. Upon signing the contract, we wrote in our press release,

“The plant will be built in 11 months then. This is an absolutely record time-frame, not only for Russia, but relative to global standards.” But life put everything in its right place and the plant’s construction dragged on for an additional nine months. It was not completed until the summer of 2005. That is why my advice would be for people to take time lag into consideration when preparing investment projects. You can be sure that things will inevitably go differently than you expected—especially in Russia, even if your contractors are from Germany.

In 2003 I decided to borrow money to build a big beer plant.

 

Anton Bolshakov, former deputy chairman of the board at Zenit Bank:

Oleg came to us asking for money for a small plant. It was not as though he were asking for money for the Dnieper Hydroelectric Dam. Before the plant, we had had a lot of joint projects. Over that time he had earned a positive credit history with our bank.

When you’re constructing and developing, money’s always needed—and always a bit more than your existing leverage. Oleg is a banker himself now, so he understands. We had three areas of cooperation: Daria, the restaurants, and the beer—two plants, a small one and a large one in Pushkin, just outside St. Petersburg. When we started working together he had one restaurant in St. Petersburg. The remaining restaurants in the chain were built with borrowed money. All of the loans for them have been repaid. Everyone’s pleased, everyone’s laughing. No one has any complaints.

I do not think that the risk was too high when we gave Oleg the loan for the brewery. The industry was consolidated and growing by twenty-five percent every year. It needed new capacities. The risk lay in the fact that St. Petersburg’s beer output is too high. But we also believed that everything would be okay. Of course, no one gives money based on belief alone. We discussed everything—how things would develop further, who would buy the business if need arose. Everything turned out as we planned though.

Chapter 24

No More Beer

Of course I was taking a risk by building the plant with borrowed money. The press asked all kinds of questions:

“With the plant’s commissioning, the company’s output will grow nine-fold. Aren’t you afraid that the market will not be able to absorb so much Tinkoff beer?”

“I am always afraid, but I act. That’s always been my fate as an entrepreneur and businessman. Only fools are fearless. I laugh, thinking about it, but a year ago we were afraid that we would not be able to sell 12.5 million liters.”

“Do you have the know-how required to get the plant up and running?”

“I have a spiked helmet. I put it on now and then. The secret of the Red Army, the thing that made them undefeatable, lay in their spiked helmets. So I put one on too and we win every battle.”

I took a risk, but I think that it was a reasonable one. First of all, the market’s big players did not have their own production plants in the Northwest. Essentially, then, all the power was in the hands of Baltika and Heineken, which not only bought the beer company Bravo, but Stepan Razin’s plant in St. Petersburg as well. Thus there was a potential for the big players to take an interest in buying the factory.

Alternatively, if we were to receive no attractive offers for the plant, we were prepared to start making beer with more of a mass appeal than Tinkoff had. It became clear that, with our beer’s price point, it would be impossible to run the plant at its full capacity. Moving the beer into a cheaper niche was not something that we wanted to do, however. So we came up with the brand T, targeted at college students. In addition, I held negotiations with Western manufacturers, seeking licenses to bottle their brands.

At the same time, we experimented with products that were new to the Russian market—wondering how things might go if they took off. In 2003, we released a new beer, Tekiza, that was made with tequila and lime. It was a light drink with low alcohol content, a good thirst quencher. We were persuaded to do this when some of us were visiting the director of The San Francisco Chronicle at his villa in San Francisco. The temperature was high and, for an entire week, we drank Tequiza beer, a brand made by Anheuser‑Busch. We decided that we ought to make a similar product in Russia. Later we found out that the name had not been registered in Russia. So we adopted a similar name, Tekiza, and began selling the drink when the new production capacity was in place. Tekiza made a successful entry into the market and became popular, especially among young women. The advertising for it used the slogan, “It’s not sex, it’s love.” We hit the target straight on: girls like it when men take that approach.

We attempted another product that did not go as well. In 2004, we started selling a malt drink called Zooom. Technically, it was a so-called “special beer,” but in reality it was a “summer liquor”—a beer, essentially, that had not undergone full fermentation. I copied the idea for Zooom from Smirnoff Malt Liquor, which is sold in the States in enormous volumes by the concern Diageo.

But Zooom did not take off in the Russian market. It turned out to be too exotic for our tastes. It is by no means the case that every idea that succeeds in the West can take hold in Russia. Rustam Tariko proved as much, later on, when he got into the malt cocktail business. He started bottling the low-alcohol Russian Standard Cool at his Vena plant in St. Petersburg. This beverage was also a flop.

In the autumn of 2004, Sun Interbrew expressed their interest in the still incomplete plant and in October we signed a non-binding agreement, according to which Sun Interbrew expressed their intent to buy the plant for three hundred million dollars. We signed it—which was no big deal. In March 2005, when the kids were out of school, we took a trip to Dubai. As I sat by the pool at the Ritz Carlton, my cell phone rang. It was Joseph Strella, president of Sun Interbrew and a well-known manager in Russia. He is very aggressive, but pragmatic at the same time. He invited me to a meeting; he wanted to talk:

“Oleg, we’re interested in buying your company. You’re growing, you’re building a factory, and our engineers say that it’s one of the best, one of the most modern plants in Russia.”

“Joe, let’s meet.”

“Okay Oleg, but I cannot offer you the price you were asking. You know we’ve suffered enormously from Alfa’s attack. We can buy your business, but for less money.”

And Joe named the price.

“Joe, what’s going on? That’s a whole lot less than we discussed in the fall!”

“That’s the deal. Either we do it, or we don’t.”

Strella was right about how modern the plant was. The newest enterprise in any industry is always its most modern. I had not bought an old, Soviet-era plant, after all, but rather leveled the land in Pushkin and started construction in an open field. Undertakings like that are referred to as “green field” projects. Now, at that time Sun Interbrew was short on output capacity. Building breweries from the ground up is something that foreigners in Russia do not really like to do (with the exception of Baltika, which is owned by the Danish company Carlsberg). So when the Belgians were deciding what to buy, they gave preference to the plant with the newest technology.

But Alfa Group threw a wrench into our plans, as usual. They started to beat hard on InBev. In July 2004, Alfa-Eko bought ten percent of Sun Interbrew’s shares and declared their “intent to take an active part in the company’s management.” No one was in control: the Indian Sun Group held a 37.5% stake, while the Belgians from InBev held the same amount. When they created the joint venture in 1999 they had agreed that they would not seek an increase in their shares. The Belgians got scared and, in August, bought out the Indians’ stake for a really high price: 530 million Euros. It looked like Alfa’s plan had fallen through. The group distinguishes itself, however, by the way that it maintains pressure on its enemies—especially when they are easily frightened foreigners.

In November, Nikolai Filatov, a resident of the city of Safonovo, challenged the Federal Anti-Monopoly Administration’s decision concerning the approval of a deal involving the Belgians’ buy-out of the Indians’ share. In his opinion, the deal “will give InBev a monopoly and allow them to fix prices on Sun Interbrew‘s beer products, which will lead to a decline in quality.” Of course Alfa denied any involvement in the lawsuit, but the Belgians decided that it would be better for them to come to an agreement with the latter, at which point the complaints magically disappeared. Alfa-Eko received 260 million Euros and a twenty-three percent stake in the company Patry, in exchange for twenty percent of Sun Interbrew. InBev paid to maintain control over its Russian assets, which were valued at about one billion dollars. In consequence of all this, InBev paid me less.

Imagine my state. In the course of four months I had lost virtually tens of millions of dollars. I agreed to the deal, though, which turned out to be the right move. When you are offered less than you were counting on, accept the offer. It is appropriate to regret it, but sell. Yes, sell—regret it, but sell. There is no need to be clingy. Still, pay close attention if you want to sell. If you have lost your emotional engagement with a business or asset, make sure that you sell it.

It took us just three months to get the deal together. In May and June we finished our final negotiations, had them reviewed by the lawyers, and prepared the contract. We closed the deal in June. Because some of the work had already been taken care of back in the autumn, when we were working on the preliminary agreement, everything happened really fast. June 2005 saw the closing of a truly sensational deal. I ended up on the front page of Kommersant. This was unexpected, awesome, and surprising for me. I had become accustomed to opening two newspapers every morning: Kommersant and Vedomosti. I experienced a strange sensation that day, when I unfolded the newspaper and saw myself on the front page! One day I hope to end up on the front page of Vedomosti, which I also respect deeply.

I could have blamed Freedman for ruining my deal. Mikhail Maratovich and I are neighbors and we spend time together now and then, but I have not once mentioned this story to him. In that situation, after all, he could not have taken my interests into account. What if I had opened the Tinkoff restaurant in Samara and, as a result, a small bar called Petrovich’s was forced to shut down. What would I have been able to say to Petrovich? “Sorry, man.” That is it. I did not intend him any harm, though, and did not even know that Petrovich’s bar existed. In the same way, when Freedman was waging war with InBev, he could not have known that he was going to buy my beer plant. He was doing his own thing and I was busy with my things. So I do not hold a grudge against him and there is no point in holding a grudge against a big shark. Freedman is one of those oligarchs that do not take part in the loans-for-shares auctions and this is one of his good qualities. In comparison with Potanin and Abramovich, he is a commercial, market-based oligarch.

I would never go into partnership with Freedman, though, as I might do with other oligarchs. But of course they would never enter into a partnership with me, knowing how complex my personality is. For them, partnership means being on top. Take Freedman’s role in Wimpelkom or TNK-VR, for instance. Alfa does not hold a controlling share in either of those companies, but it wants to control their business activities. They know how to dominate and they like it. But it is impossible to control me. They are big sharks, while I am a small one. Good luck, though, trying to catch and bite me.

The deal was complicated, not only by Alfa, but by problems with the documents, as often happens in Russia. Ivan Ivanovich Ivanov’s documents for the land where his summer cottage is are not in order; neither are oligarch Petrov’s documents for his oil company. In Russia this is a constant pain in the ass, which creates a breeding-ground for bribery and a lack of confidence in the future on the part of entrepreneurs. I am not afraid to use the word “fundamental” to describe this problem.

The same thing happened in the present case. The Belgians said that they would not buy my factory until they had some kind of decisive document in hand. Following my normal procedure, I went to the mayor’s office, got in line to see Yury Molchanov, the vice governor, and explained the situation to him. He told me,

“Do not worry, you’ll close the deal. We’ll prepare the necessary documents. The project is important to the city. It’ll create new employment.”

Time went on, but we still did not get the documents. Then, in April, the London Economic Forum took place.

After Valentina Matvienko gave her speech, I walked up to her.

“Hello, I am Oleg Tinkov.”

“Of course I know you. We worked on your plant. Is everything okay?”

“No it’s not okay. We still have not gotten the documents.”

Valentina Ivanovna took out her cell phone:

“What’s going on? The investors are waiting and you cannot get the documents ready? I thought the matter was already settled.”

I do not know whom she called, but in three days we had the permits. What does this mean? It means that there are people out there who are concerned about the city, who are really working hard for it. Sometimes I hear people talk about the Smolny and the bribery that takes place there, and I say,

“Keep your mouth shut, I have not paid them a penny.”

Would I have paid a couple million dollars for a paper allowing me to close a deal for 260 million? Of course I would have, I am a businessman. But no one ever asked me for such a thing, nor even hinted at it. Everything was above board.

People reading this might think that Tinkov wants to make excuses for his buddies in the St. Petersburg administration, or that he is trying to kiss Valentina Ivanovna’s ass. To be honest, though, I do not really care. I appreciate the way that Matvienko’s administration has worked all these years. I travel to St. Petersburg only occasionally these days, but I can see that the city is flourishing. When I see politicians, I say, “You guys are awesome, we should set up a statue in your honor.” Not only have they gotten money for their budget, they spend it really well.

* * *

At the same time that we were preparing the deal, we were getting our youth-oriented T brand ready. The slogan, “We’re switching to T,” was developed by IQ Marketing. The brand’s theme was the idea of making new acquaintances—with the opposite sex, of course. The idea was that, by drinking T, you could switch to the familiar form of address in Russian—when speaking with the best girl in the room. We decided to create a meme geared to young people. It worked. The expression, “We’re switching to T caught on as a catchphrase: when a guy would tell his friends, “I’ve switched to T with her,” that would mean that, at the very least, he had spent the night with the girl. We started the advertising campaign on May 16, running TV, outdoor, and Internet ads. The ads were shot by Peter Kovach, a director from Hollywood. The voice-work was provided by news anchor Tutta Larsen and actor Marat Basharov. The music was taken from Mumiy Troll’s most recent album (Merging and Absorption). We also used a remix by Viktor Sologub (from the band Deadushki). The ad featured no actors since, on January 1, 2005, an advertising law had come into effect that forbade the use of images of people or animals in beer ads. We could not use pretty girls, therefore, as we had in the Tinkoff commercials. We did use a pair of panties, however, with a daisy pattern and plush bears.

The rest of the advertising campaign used concepts based on the phrase, “We’re switching to T,” presented in various ways—lipstick on a windshield, graffiti on the Kremlin wall, contrails, and a petroglyph. We also ran a promotion connected to the brand’s release. It involved an SMS game that allowed consumers to download a ringtone, or an image from the commercial, or to win brand-themed prizes such as a two-seater Peugeot 206 convertible, a hot air balloon-ride for two above London, daisy-patterned underwear, and so on.

In support of the T brand and in order to extend our restaurant business, we came up with the idea of opening a chain of T Bars. In 2007, we were planning to open one hundred locations, but we opened one only, on Myasnitskaya Street in Moscow. When we eventually sold the plant, the brand went with it, and we decided that there was no reason to continue the project.

After we closed the deal, I was happy, even though I could have earned a lot more on the beer. If only Sabadash had financed the purchase of that plant in 1997… If only Kogan had given me that loan… If only Sun Interbrew had paid the original asking price… If only I had… But there is no subjunctive mood in business. I was happy in spite of all these “if onlys.” For the first time in a long time, I had no debts. It was as though a mountain-sized burden had been lifted from my shoulders. In addition to that, I was in possession of an enormous amount of honestly earned money.

I would describe my condition at the time as euphoric. As I rode my bike in Forte dei Marmi, I realized with pleasure that I had no holdings, but that I had many, many millions of Euros in my bank account. Moreover, I was cycling around Tuscany and chatting with other cyclists. It was a pleasure to my soul—not just because I had a lot of money, but because of the sense of work completed, of a mission accomplished. That is why I like to build and sell businesses. A lot of people criticize me and ask why I sell them. Zhenya Chichvarkin said once,

“You sold too soon.” But I like the sense of completion, that is for sure! Grow your capital for fifteen years, until your company is worth ten billion: I do not care because it is an endless process.

A sale, in contrast, is a fair evaluation of your work, your abilities, your sleepless nights—these things do not come cheap. The important thing is not how much money I earned and it does not matter that someone else could have earned twenty times as much, by keeping the business. The important thing is that this other person remains bound by obligations. As for me, I have none!

I really liked the tingly feeling I got just from knowing that I was free from obligations, the happiness I felt at having closed the deal. I just rested, ate frutti di mare, and wore a smile.

When I was building the factory, I understood that I was making a good product for large brewing companies. It turned out I was right.

I sold my bottle production to the Belgians, but I still own the microbreweries in the Tinkoff restaurants.

Attempts to bring Oliviero Toscani on board for the creation of Tinkoff’s image fell short of the goal.

Tinkoff beer was profitable for both its producers and its retailers.

(The caption reads: This product guarantees increased revenue and profitability for every square meter of retail space.)

The slogan, “We’re switching to T,” became firmly fixed in the minds of young people.

 

Anton Bolshakov, former deputy chairman of the board at Zenit Bank:

Oleg, without a doubt, is an unusual individual. He stands out. He’s self-made. He’s charismatic and tough-skinned. At times he can be a dictator. Nevertheless, he knows how to work with people. His intuition and charisma help him. His intuition helps him to choose the right path. His charisma enables him to captivate and direct people. He’s a leader. His assertiveness and his belief in what he’s doing allow him to attract resources and create something.

Getting a loan from a bank is a matter of presentation. If a person believes in what he’s saying and knows what he’s doing and if he has experience and a track record of some kind, I do not see any problems. Quite often, people come in who are unsure of themselves—they do not know their way around the world of commerce and it’s as though they have just showed up on the scene out of thin air. It’s hard for such people to get a loan. A businessman must be a professional, first and foremost. Oleg had no other choice but become a professional. He could do nothing else; he had to understand the processes involved in pelmeni and beer production and in the sale of banking products.

From the start, Oleg’s business style has been very economical. His businesses derive their forward momentum from their people rather than from the price of commodities. You can’t mess around too much if you want to work with him.

Oxana Grigorova, former PR director for Daria and Tinkoff:

In my opinion, one of Oleg’s strongest and most distinguishing qualities is his ability to generate opportunities—for himself and for others. He has a simply astounding knack for breaking down barriers. He loses sight of the shore—but in a good way. Thanks to him, the phrases “I cannot,” “I do not know,” and “that’s impossible” have completely fallen out of my lexicon. I can do anything and I can figure anything out—absolutely everything that pertains to business in any case. Oleg’s energy is staggering. He’s everywhere at once. And if you’re not lazy and not stupid then you’ll feed on this energy. You’ll learn, you’ll make mistakes, but you’ll move forward, doing the impossible, and you’ll find it terribly interesting. It’s not like working the nine-to-five grind. We are always at work.

Oleg is a good chief. He knows how to infect, charge up, and captivate. He also knows how be appreciative and show gratitude. But, like any chief, he’s authoritative.

It’s hard to work with Oleg. The bar is set too high. Not everyone can handle the pressure, the rhythm. Oleg works a lot himself and demands a lot of others—a whole lot, a whole hell of a lot. Working with Oleg is no walk in the park. But the result is worth it. Satisfaction with the work you’ve completed is like euphoria. After all it’s not a job at Coca‑Cola or Mars, which operated for a century before you came on the scene and will operate for a century after you’re gone. We, by contrast, started from scratch, we worked a lot, and created something that sparked a lot of interest and emotion among people, both of which are things that people are willing to pay for.

Abdel Belkhadzh, freeriding coach:

I’ve been teaching people how to downhill ski for 20 years, but I’ve never met a guy like Oleg. I’ve seen real motivation in him, which has made it possible for him to achieve very great heights. He had to work long and hard. Oleg likes to compete, to prove to himself that he can do it. He’s a very tough athlete, which is why he was able to establish himself on the slopes, even though he started skiing later on in his life. Oleg follows the principle of “No pain, no gain”—and he does not mind suffering. I’m not his teacher any more. I’m his partner and there’s a big difference. During the Ski Safari in 2010 he was so tireless that I told him he needed a clone of me.

Freeriding is much more than a hobby. It’s a passion that only grows stronger with time. You have to be very careful. From among the freeriders we know, someone dies every year. For example, in the winter of 2010, Daniella died in an avalanche. Oleg knew her well. It’s part of the game. The show must go on. When you’re skiing off-piste, no one can give you a 100% guarantee that you’ll survive. Oleg loves to takes risks, but he does so intelligently. I’d love to see Oleg become an elderly freerider.

Samvel Avetisyan, former marketing director at Tinkoff:

In the summer of 2004, Oleg got nervous. The beer business was not developing at the rate it had been in the beginning. He blamed everything on our marketing. I started to get worried and said,

“If this is about me, about the bad marketing indicators, I can leave if you want.” He threatened me all the time, saying,

“I’m going to hire a professional.” I would tell him that I’d be happy to see our team strengthened by the addition of such a person. I was not being sarcastic. I even met and interviewed a new person. In the end, though, this new hire began copying me, instead of doing market analysis and strategizing. He meddled in communications and creative ideas. It was soon clear that we would not get along. In October 2004, I had to leave—and it was no voluntary resignation. In late January, though, Oleg asked me to come back and help him with T beer. This was because in my absence, the project had not progressed one iota. The work was completed at an intense pace with no days off. A couple weeks later Oleg called me and said, “My number came up. Should I place a bet on a color?” Knowing him, I understood that someone had made an offer and he was wondering if he should keep negotiating or look for another buyer so he could sell for more. I replied that it was his decision but that I would sell, if I were him.

On our Flat in Paris:

My first trip to France was with Nikolai Nikitich Zhuravlev in 1992. He invited me to come to Paris with a group of bankers who were going there to exchange stock-trading experience. We lived in Porte-de-Clichy, in a very cheap and shitty hotel. We rode the bus around Paris and, of course, we visited the Eiffel Tower. After we had descended, I pointed to the first building to the left and asked the Russian-speaking guide if people lived there. He said that yes, it was a residential building. I was shocked that people could live fifty meters from the Eiffel Tower. Later my wife and I took a trip to Paris. Oh, the romance! And when I sold my beer business, I bought an apartment in that same building. I hardly ever go there, even though the interior has been executed in fine Parisian style. Nika Belotserkovskaya came over once and said,

“Wow, you must be crazy, not living here.” Why did I buy it, if I do not live there? I made my childhood dream a reality. Guys, the place is useless to me. But that is my weakness, my hang-up.

Chapter 25

The Cyclist and the Businessman are Twin Brothers

Recall that in 1986 I had to leave athletic cycling in order to serve in the border guard. While I was doing my service, my mother sold my old Colnago bike. I found the money safe and sound, however, upon my return from the army. I had nearly forgotten about cycling completely. In a way I was hurt, angry at having been wronged in this way. My athletic ability had been destroyed. Now and then, in the paper or on TV I would see something out of the corner of my eye about the stages of the Tour de France. Then in 1999 my interest returned, unexpectedly, while I was living in San Francisco, after having become an established businessman. I had sold Tekhnoshok and commenced work on Daria and Tinkoff. One day, in a store window I saw my childhood dream—a Colnago bicycle. My heart leapt. I bought it immediately, along with an extra large jersey and shorts, which barely fit me.

The bike stood in my living room for two weeks like a kind of symbol.

“Get it out of here!” Rina demanded.

“Dad, why did you buy it?” Dasha laughed.

“What’s your problem? Look how beautiful it is,” I replied.

I had never seen an aluminum bike before. I feasted my eyes on it for two weeks, but eventually reflected that there really was no justification for simply letting it stand there. There are a lot of pretty roads in California. Maybe I’d take it for a spin. I had met a cyclist at church, Misha Zabelin. His background is Old Russian. He is phenomenal, not just because he speaks Russian without an accent—despite the fact he was born in the States and has never been to Russia—but because his parents were born in San Francisco as well. His Russian is better than mine. To know the language like that after three generations is unique. Unfortunately, though, his children speak our language terribly.

I asked Misha to come cycling with me and to show me the roads. I rode twenty kilometers and felt like a hero. I was fat; my hands hurt, as did my legs, feet, and back. I felt terrible. Little by little, though, I started to train. I rode along the coast, not far from famous Freeway 1, where a lot of car commercials have been shot. The ocean, the hairpin turns: it is all there, just outside of San Francisco.

In 2001 and 2002 I did not cycle that much. I started riding more in 2004 when I bought a house in Tuscany and saw large numbers of cyclists in the district, at which point I became completely immersed in cycling. I lost weight and fell in with some professional athletes. I could not understand why the Italians had a team when we Russians did not. Thus, after I successfully sold my beer-making business, I decided to create the Tinkoff Restaurants team.

The team was based in Spain, at the huge estate of Alexander Anatolievich Kuznetsov, the famous cycling coach and father of tennis player Svetlana Kuznetsova. The core of the team consisted of members of the Russian national track-based cycling team. The twelve team members included nine who had already been trained up by Kuznetsov, including such cyclists as Alexander Serov, Nikolai Trusov, Sergei Klimov, and Olympic champion Mikhail Ignatyev. I persuaded Siberia Airlines, which was in the midst of switching to the S7 brand, to come on board as partners.

Given that I now had a team, what was to stop me taking part in a race as a team member? I got really excited about the idea and started training. Two-time Olympic champion Vyacheslav Yekimov designed a six-month training program aimed at getting this old man of 38 ready for the race. And I got going with it. In the mornings I rode my bike; in the evening I would spend time with my family or studying the credit card market. The Tinkoff Credit Systems project had only just begun.

Only Rina knows how much I suffered. The weather was rainy, but I had to be out of the house for five to six hours per day. I would get completely soaked, but I persisted. I ended up with massive boils on my backside, which I treated with antibiotics. What a deal! It was torture. I twisted on the seat, alternating the pressure on my left and right buttocks because I could not sit normally.

I called Yekimov,

“Slava, what kinds of steps will I have to take to get a team started?”

He gave me some answers over the phone from Spain, but then asked,

“Listen, Oleg, why do you need to know all this?”

“I just want to.”

“But why?”

I did not have an answer to that question then, nor do I now. Let the reader decide. It is just that I had made a promise to myself to get it done. As Alex Koretsky told me then, “I know… Once you’ve set your mind on something…” I needed to do it—and so I made preparations.

I was bound and determined. It was incredibly difficult. The scariest part is the first two weeks, when you are hit by a wave a fatigue. One day I had been riding and I lay down right next to the highway, my strength drained. Some other cyclists stopped and asked if they could help. I replied,

“Everything’s all right, let me just lie here for a while.”

Every day I would burn at least four thousand calories. Some days I would burn six or seven thousand. That is a crazy amount of work. I would bike five or six hours at a time and on Sundays I would do seven. In the evenings I swam with a coach for thirty minutes and spent another hour in the gym. Essentially, my complete workout consisted of five hours on the bike and another two at the recreation center. No dinners could have made up for the energy burned and I was dieting in any case. For six months I constantly wanted to gorge myself. I did not drink any alcohol at all. These were serious sacrifices for me. On the other hand, when I was getting ready for the race, I read a lot, watched movies every night, and spent time with the kids.

When I started the program I weighed ninety-five kilos; by the end I weighed seventy-five. In six months I had lost twenty kilos and I was ready to start.

The Race!

In May 2006, at the ages of 38, twenty-two years after I had quit my school’s cycling team, I stood at the starting line of the international race, Five Rings. It was held in Moscow in honor of Victory Day.

It was a 140-km long, 4.5-hour race through the Vorobyov Mountains, at speeds averaging over forty kilometers per hour. I overcame each kilometer with difficulty, at one point even falling behind and nearly leaving the track as I rode among the cars. As I pedaled along, though, I thought,

“I worked my ass off for six months to get here. I suffered. I lost sleep. I am not giving up now!” I gathered all the strength that I had in me, caught up with the pack again, and finished the race.

It is in moments like that that your character shows. That is how your character develops too. It would be easier to simply quit the race—when you look at your speedometer and you see that your pulse is 180 and you do not fully understand what is happening, but you realize that you are screwed. My field of vision was blurry: the cyclists ahead of me were a mere smear of color; the pain in my legs, my head—my whole body—was so intense that I was simply out of it. But at times like that you just squeeze the handlebars even tighter, you push your feet into the pedals, and you catch up. I even broke away for a lap. It was unrealistic of course to think that I could beat the professionals in the race, but I did try. The athletes appreciated this. I simply could not backtrack—if I had, I would not be able to respect myself now.

Journalists often ask me what my greatest achievement in life has been and they expect that I will tell them about one of my business achievements. I always answer,

“Of course there are my three kids, Dasha, Pasha, and my biggest achievement Roma. But after them, it would have to be my return to international sport—not to mention the fact that I accomplished that at 38 years of age.”

Now I am uniquely placed to relate to Lance Armstrong, that stuck-up Texan, with whom I am personally acquainted. A seven-time Tour de France champion, he returned to cycling when he was 37 years old and, although he took only third place in 2009, he is still a shining example of how sheer ambition can work miracles. After all, he did not return to the sport for the money, but for the victories, emotions, and ambitions.

* * *

The Tinkoff Restaurants team existed for one year. Kuznetsov is a very talented and professional coach. He trained more than a few Olympic champions, but he offers a perfect example of the Soviet mindset. To him an athlete is biomass. With my liberal democrat principles, I could not share this view and, in 2006, suggested to the guys that we leave him and start a new team built upon the Western principles. When it comes to cycling, the best-functioning principles are derived from Italian developments in the field. By that time we had already settled on a name for my bank and so we created the Tinkoff Credit Systems team, which created a furor in professional cycling with its daring, guts, and victories.

The wins started happening at the beginning of the 2007 season. Our first champion was Pavel Brutt, who won the ninth stage of the Tour de Langkawi in Malaysia on February 10. It was a dream come true! We called each other late into the night due to the difference in time zones.

On February 15, Mikhail Ignatyev won the third stage of the Tour Mediterranéen (in France) and took the Trofeo Laigueglia (in Italy) five days later. On March 3, Pavel Brutt won the GP Chiasso. And so on: Jörg Jaksche won the Circuit de Lorraine in May of the same year; in August, Mikhail Ignatyev and Vasily Kirienko won a stage each in the Vuelta a Burgos in Spain. We wrapped up the season well too: Nikolai Trusov and Alexander Serov each won a stage in the Tour of Great Britain. In total we achieved fifteen victories that season, which is better than merely good for a rookie team with a modest budget of three million dollars.

In 2008 we enjoyed fewer victories, but the ones we did achieve were greater in stature. The Tinkoff Credit Systems team took two stages in the Giro d’ Italia! This is a major international race, on par with the Tour de France. A cyclist does not need to win the whole race to go down in the history of cycling, one stage is enough.

On May 14, the team was to race the Giro’s fifth stage, a 203-kilometer route running from Belvedere Marittimo to Contursi Terme. From among our five cyclists, Pavel Brutt broke away about twenty kilometers into the race and managed to sustain his position until the finish line, something that happens only rarely. The pack usually catches up to breakaway cyclists eventually. On the last stretch, Johannes Frelinger from team Gerolsteiner almost caught Brutt, but he still managed to hold onto a four-second advantage. I had long wanted to win a stage at the Giro—that is how much I love Italy—and now, after that victory, I feel like the Italians look at me differently, with respect. On May 30, we were fortunate enough to win another stage at the Giro. It was on a 238-kilometer mountainous stretch between Legnano and Presolano. Right after the start, Kirienko joined seven breakaways, who by the middle of the race were leading the others by almost twenty minutes. After the ascent over Passo Del Vivione, Vasily, along with Nicki Sørensen (team CSC) and Alexander Yefimkin (Quick Step), broke away from the rest. It was then that Kirienko decided to go on the offensive against his followers. He finished the stage in six hours, thirty-seven minutes, and thirty-two seconds, beating Danilo Di Luka (LPR), who came in second, by four minutes and twenty-six seconds!

I was happy for Vasya, who took second place as well in the seventh and fourteenth stages and was declared second best alpine cyclist overall. The breakaways got away from the main group because there was no one in the latter that could affect the final outcome. But just try riding 238 kilometers and winning with an advantage of twenty to thirty minutes over the remaining racers!

In the course of two years, team Tinkoff Credit Systems was victorious many times over and achieved it all on a budget five times less than the international grand prize winners. My sense that a financial crisis was around the corner and the non-feasibility of financing the team at a higher pro-tour level led me to feel that it might be better to create a good Russian team with help from the government. At first I ran up and down the halls of places like Gazprom and Valyut Tranzit Bank, proposing the creation of a serious, big Russian team, which would clearly have demanded a lot more money than I had. Igor Makarov, owner of the gas company Itera, and I were of one mind. Being a former cyclist himself, he liked the idea. Tinkov, a small-time businessman, was putting together a team that would rock the world—and he rides himself—but Igor Makarov was not? That just did not fly! Igor did the right thing, though, by deciding to use the team that I had already established rather than starting from scratch.

In October 2008, using money from Itera and with help from Gazprom and Rostechnologies (I do not know what their share was in the project), we established Team Katyusha. To this day, a lot of people do not understand why we chose that name. To tell you the truth, I am not quite sure myself. There are different opinions going around. Some claim that it was in honor of the famous artillery mount, others say that it was in honor of the wife of Sergei Chemezov, general director of Rostechnologies. But the fact remains: the name’s origin is obscure. I once tried to work there as president. But if you have read this book to the present point, then you understand my principles. First, I do not enjoy working for someone else; second, I would never enjoying working for such a bureaucratic corporation. The company’s owners were always around and it would have been against my rules to submit to any of them.

The decision-making process there seemed unprofessional, difficult to understand and politicized. Professional cycling is a business, but there were always political maneuvers going on in the background. No one asked me to leave or forced me to do so: I made the decision myself, feeling that the choice was in everyone’s best interest. On the plus side, I have not had to pay off the huge bills that the current financial crisis would have entailed for me, had I stayed. Team Katyusha’s budget is now twenty million Euros a year. By way of comparison, I spent three million per year on the Tinkoff Credit Systems team. Nevertheless, I am truly proud that it was I, Oleg Tinkov, and no one else, who managed to create a Russian team. Russia had re-entered professional cycling for the first time since Team Sportloto had left it.

On a side note, Katyusha performs quite well. They won a lot of competitions in their first season and the team acquired some good racers. To say it is the most effective entity in the world of cycling would be incorrect, obviously. Does it make a contribution to national cycling though? It certainly does.

I am proud of the fact that I initiated the creation of the team. As usual, I felt like I was venturing outside my usual market niche, entering a new field: premium beer, pelmeni that would not stick to one another, and now a new Russian cycling team. I am happy to have set the pace in these areas and I thank the good Lord that he moved me to do these things. I hope that I’ll start more than one or two or three trends in my work.

* * *

I continue to ride. In the 2009 season I cycled six thousand kilometers—which is not a lot, of course. But given that my riding season lasts for only two months, July and August, plus a couple of weeks in the spring and fall, I think that this is not bad. As a result, too, I am in excellent shape. Riding a bike helps a lot. Riding for five hours with an average pulse-rate of 130-140 beats per minute or working in an office for twelve hours with a pulse of sixty-five (ninety when you are nervous) are nothing to shake a stick at. The sport gave me endurance, patience, and the ability to overcome obstacles.

Bicycle racing is a sport that requires great intelligence. Some people would not agree. No degree of mere strength, however, entails that you will be a winner. As in business, you need tactics. You have to know your own strength and when to use it. You have to see who has broken away in the course of a race, strategize among your teammates, know how to pace yourself, and be able to attack at the right moment. It was not for nothing that Lance Armstrong once compared cycling to mining. There are a lot of cyclists out there who left the sport to pursue business: the owners, co-owners, and top management of many companies are former cyclists.

A good cyclist cannot be stupid. Cycling, in addition to its benefits for physical well being, is a source of mental development as well. The sport taught me that competition is key and that, if you do not care about winning, if you do not want to finish faster, push harder, and jump higher than everyone else, you are a bad athlete. For me, the important thing is to win. Cycling hardened me. It gave me endurance and diligence. Having trained for and participated in races lasting five to six hours, I can patiently repeat the same motions over and over. Of course you need to win. If you can do it in sports, then you can do it in business. My beer must be the highest selling beer. My blog must be the top-rated blog. It is not enough that my TV show be on the air. It has to have the highest rating. My bank must have the highest share of the market and earn the most profit. This is an absolutely normal human desire, as far as I can tell. If you think that it is not normal, then you are not an entrepreneur and this book has nothing to offer you.

Above all, you have to have ambition. You have to prove to everyone that you are the best in the business. If that is not true, then there is no reason to do anything in the first place. It is a bad soldier that does not dream of achieving the rank of General. If a journalist does not dream of becoming the best journalist in Russia, or a driver does not dream of becoming the best driver, or a carpenter does not care about becoming better than all the other carpenters out there—then they are worthless.

Cycling gave me the ability to bear inhuman burdens. The pain that you feel during a bicycle race is quite difficult to describe: sweat pours into your eyes; your head, legs, heart, and liver hurt. But in spite of all that, you rise off your seat and make your counter attack. When your heart is pumping at 190 beats per minute and you are trying to overtake your adversary, pushing uphill the whole time, the effort required is nearly superhuman. But it is not merely a matter of physical exertion; it is mental as well. You push on because you want to win, because you want to stand on the winners’ podium. (In any sport, by the way, the desire for glory makes up eighty percent of the motivation.)

The most ambitious person I know is probably Alexei Panfyorov, co-owner of Volga River One Capital Partners Fund. He is superhuman. He runs marathons and participates in triathlon competitions—which consist of swimming, cycling, and running. The most difficult of these events is the Ironman competition, which includes 3.8 kilometers of swimming, 180 kilometers of cycling, and a classic marathon (i.e., one that is 42.195 kilometers long). In the summer of 2009, Alexei was getting ready for the event at Forte dei Marmi. As we rode together on our bicycles, he was always trying to attack me. I said to him,

“Alex, I am sorry to say this, but even though you could win any race out there, you would not stand a chance if I was there.” Why though? It was because I have been turning these pedals since I was twelve years old and have ridden in a lot of races. In cycling, training alone does not enable you to win. Only in real races, when you are in overdrive, can you really become a strong fighter. I have met a lot of cyclists who are physically stronger than I am, but they cannot really challenge me because they have never participated in real races.

When you can think of nothing else, when you go on the offensive, attacking with a heart rate of 190 beats per minute, that is when you get your second wind. As coach Kuznetsov said, you take a loan from your body and it is then that you start hardening up. I have often been in overdrive like that and it has hardened me physically. The hardening has passed into my soul. Even athletes in other sports agree that cycling is for masochists, for people who like to dominate themselves. The sport has taught me how to be patient in business, both physically and emotionally.

* * *

In addition to cycling, I have one other passion related to sports: freeride skiing. I first took up traditional downhill in 1996, at the age of 28, which is very old in downhill-skiing terms. Then, in December 2003, I met Abdel Belkhadzh. He is a Frenchman of Tunisian origin. He used to be a member of the French national Judo team, but has now become a very competent freerider. I have never seen a more athletic, technical, nimble person in my life. He is a great guy and a wonderful coach. When he saw me, he sensed my potential:

“I see that you ski. How many years have you been into it?”

“It’s the eighth year,” I replied.

“You’re like a cow on the ice. How about if I start training you? I am a downhill and freeriding coach.”

In my opinion, Abdel is the happiest person alive: he does what he loves to do and gets paid to do it.

Let me tell you a parable. Once upon a time there was a fisherman who sailed in his boat, caught some fish, and afterwards rested. Later he had the idea to buy a second boat, then a third and so forth. His fleet grew to be the biggest in the world and he became very rich by selling fish. For many years he worked a lot and rested little. Towards the end of his life, however, he came back to his village, got into his boat, dropped a line in the water, and was happy. In other words, he returned to his origins and, in view of this, it is hard to understand why he had bothered to work so hard in the course of all those years.

Abdel illustrates this story perfectly. He lives in the mountains from December to May and then lives with his mother for a month, before heading to Biarritz to teach surfing until October. Next he spends a month in Paris, before heading to Indonesia to surf the big waves. Come December he is back on his skis. That is all he does. Riding the waves and the snow is his whole life. He is made of bones, skin, and muscles. He has no body fat at all. He is forty-five years old, but he looks like he is twenty. He is a unique and fearless man.

Freeriders put their lives at risk more almost than participants in any other sport. It is a lot more dangerous than cycling, where there might be blood and broken bones from time to time. Abdel and I have faced some big challenges. He has pulled me out of crevasses and I have done the same for him. In our six years of skiing together we have seen quite a number of very scary situations, but Abdel has turned me into a true freerider. I am proud of the fact that, when I went to the Kamchatka with Russia’s best freeriders in my age group, we were riding at the same level.

Abdel’s instruction lifted me to these heights. As I always do, I made up my mind. Seeing how others were skiing, I started training. At the same time my cycling helped me to keep me fit.

First, I began spending at least five weeks a year in the mountains. Second, when I am there, I ski nonstop between breakfast and last lift. Abdel says,

“You’re the only person I’ve trained that is crazy enough to spend eight hours a day on the slopes.”

In March we do a “safari,” which involves a daily change of mountains. We start on Alp d’Huez, in the south of France (which also happens to be a legendary mountain for cycling—as a rule the winner of the Tour de France is determined there), and finish at Chamonix, La Graffe, Chevalier, Val d’Isère, Val Torans, Méribel, Courchevel or Tignes. Afterwards (and it is already a tradition) we bank managers go to Verbier, to Richard Branson’s chalet, Virgin Lodge, for a week.

During our safari we do every valley in France. There is no place like France for freeriding.

I am proud of the fact that, once, we made three descents of La Graffe Mountain in one day. La Graffe is a freedrider’s Mecca. There is nothing steeper. The record for descents from this mountain is nine, but we were doing it in bad weather. In 2009 we rode two of Chamonix’s famous corridors: Ensa and Rectilin. Every freerider dreams of passing through these corridors.

Today we have conquered the best peaks in the world—we have been nearly everywhere. The only place that we have not yet been is Alaska. Abdel thinks he is not quite ready for that yet. Alaska is the most difficult and dangerous place for freeriding. The slopes there are steep, there are a lot of drop offs, and the snow moves more, which results in drifts and avalanches.

Our group is usually made up of French freeriding coaches and myself. At first they treated me with suspicion. They even told Abdel off on my account. Now, though, they know that the crazy Russian will always be with them and they keep their mouths shut. After all, I am pretty good at keeping up.

What I really like about skiing is the fact that I do not see anyone else up there, or only rarely—or at least I do not have to talk to anyone. Skiing from nine in the morning until five in the evening, I practically switched off. I am in a different world. The only exception is lunchtime, when I check my email. But given that we do not have lunch every day, I am switched off sometimes for the entire day. Why do I ski the backcountry? One encounters fewer people there—and more adrenaline. I like sliding through the wild, over the powder and hummocks, instead of skiing like a sheep in a herd down slopes marked off by resort owners. Only when you go off the groomed slopes do you really feel the mountains, nature, the wildness of it all. There are no people, no smells or sounds. And the views are phenomenal! Your energy level is astounding: your batteries are juiced to the max. Of course it is dangerous and your chances of being injured or killed are a lot higher than on a bicycle. But it is worth it, believe me! Backcountry skiing requires special techniques that you acquire, as a rule, over three or four seasons. Generally, as a skier, you have to be strong physically. It is even more important to be mentally prepared when it comes to freeriding. To say that it is scary, especially at the beginning, would be an understatement. The scariest part is being in the corridors (couloirs), especially when they are icy and the slope is more than thirty degrees. Sometimes the width of the corridor is less than the length of your skis. It is really difficult and scary. I have nearly shit myself on several occasions. Afterwards I have often told my friend and coach Abdel that I will kill him,

“What the fuck are you doing, man? I’ve got three kids. Do you want them to lose their father? Please stop fucking bringing me to places like this. You’re nuts! Fuck you!” Of course I come to my senses, shortly afterwards, and we keep going like nothing happened. To be fair, though, in recent seasons we have been trying to take fewer risks. We are getting older. To tell the truth, I have started taking my kids skiing off-piste as well and Pasha has seen me ride an avalanche. Dasha was buried once herself and I had to pull her up and out by her hood. I have wondered for a long time why it is that I need to do such things. Apart from the fact that I drink rarely, though, do not do drugs and relax only rarely, I cannot come up with an explanation.

Freeriding gives you an adrenaline rush and adrenaline has drug-like properties. I need that drug. Do not think that I do everything like the New Russian boys (so-called “peppers,” as classified by Finance magazine) from Chicago, though, who might do it to look cool at the Giro D’Italia, or for the PR, or even just for the hell of it. Unfortunately, ninety percent of them made fast money by the age of thirty and are going nuts trying to figure out a creative way to stay entertained. My reasons are different. It is with great consideration and—I am not afraid to say it—professionalism that have taken up this sport. And I take it no less seriously than I do cycling. That is how my brain is wired. In the winter I lose track of everything related to cycling. I even forget the names of the competitions. It works out, though, that I am in the mountains in both winter and summer. The Alps have become my home. Rina once asked,

“Couldn’t you have chosen something a little less dangerous?” But it is too late. I like sports that require endurance and involve high doses of adrenaline.

Cycling teaches patience, something you also need in business.

Official portrait of Team Tinkoff Credit Systems before the start of the 2007 season.

I lost twenty kilos while training for the race and ended up weighing a mere seventy-five.

With two-time Olympic champion Vyacheslav Yekimov and seven-time Tour de France winner Lance Armstrong

 

With Olympic champion Mikhail Ignatyev, member of Team Tinkoff Credit Systems.

Team Tinkoff Credit Systems after we won a stage.

 

Andrei Maximets, cyclist:

At 37 years old, Oleg wanted to take part in a race. He worked hard at it and everything worked out. His purpose-driven approach took root when he was still young. I remember how I got some female fans, who were also my friends, to stand along the route during the race on Physical Education Day in August—because I was supposed to win. A friend and I fought over the prizes: five points for third place and three for second. Whoever got more was supposed to win. While he and I battled, Oleg broke away from us and took all the points. I did not get it. What was going on here? Who was this young guy? He received the prize with grace. He had good powers of concentration. Probably he still does not know that there were big plans for him. He could concentrate during the race, put everything into it. There were not many like him. A lot of our guys show good results during training, but once they are at the race, they’re suddenly fidgeting with worry. The psychological aspects of the competition affect them and they ended up losing. With Oleg, though, the opposite holds. I’m not so sure about his performance during training, but in a competition he concentrates to the max.

Abdel Belkhadzh, freeriding coach:

In April 2005, Oleg Tinkov stopped by my small flat in Val Torans, the highest point in the three valleys. Usually he stays in hotels, but because he was here for only one day to pick up Dasha, he decided that he did not have adequate travel-time. Oleg and Dasha spent the whole day skiing. In the meantime, a fax came through, saying that InBev wanted to buy Tinkoff beer for 170 million Euros. When Oleg came back I asked him,

“Oleg, is Tinkoff Beer your company?”

“Yeah, why?”

“You got a fax.”

“Oh, right. Thanks Abdel. I gave your fax number to my people in case anything came.”

I was shocked. This was a normal guy, a skier, sleeping in a small bed in my small room, preferring to save money on food by eating at Val Torans rather than Courchevelle, a guy that never leaves big tips—and here he was receiving an offer for 170 million Euros!

Chapter 26

I’m not a “Russian Branson”

I had long dreamt of a personal meeting with Richard Branson, founder of the legendary Virgin brand. We had known each other indirectly since 1994, when I was living in the States and Virgin Atlantic began making flights to San Francisco. Alex Koretsky told me about Richard, whom he had met one night in a jazz bar, drinking with his stewardesses. Richard really loves his champagne, as we found out later.

Now, on August 17, 1995, at the corner of Stockton Street and Market Street, a massive Virgin Megastore held its grand opening. Cyndi Lauper, Jill Sobule, Rosie Gains, and The Beggars all performed. Cyndi signed a record for me. The store blew my mind. There were 125 thousand titles on compact disc and cassette, fifteen thousand videos, five hundred stations for listening to music, a café… Being the music addict that I am, I spent thousands of dollars scooping up legal DVDs and CDs. I even remember buying a Russian movie, Vor (“Thief”), which I found in the Foreign Film section.

I simply fell in love with the guy, went to virgin.com and found out everything I could about him. I could not stop thinking about opening a Virgin Megastore in Russia. At the time, I already had the MusicShok store. We started sending letters to Virgin, written in proper English, and we were invited for a meeting. Alex and I flew to London and checked into a budget hotel on the outskirts of town. We began looking for the Virgin Megastore office and found it. It was really tiny and also near the edge of town. Branson always has small offices. I recently visited the Virgin Mobile office, which is also small and sits on the outskirts of Edinburgh. Richard has always taken a sensible approach to overhead and I am happy to say that we have this in common.

We came to the meeting, hoping to see Richard. I did not understand then how many companies he owns—which is why he rarely comes to London. I came into the office and asked,

“Where’s Richard Branson?” It is likely that every visitor to each of the three hundred Virgin offices around the world hopes to get a glimpse of Branson himself. He really is a unique individual.

Because of serious piracy issues rampant in Russia, the Virgin Megastore manager with whom we met did not take our idea seriously. He had a point and we never came to an agreement about cooperation. Having been to that office, though, I had come a little closer to Branson. I started following news concerning the Virgin brand. When I had the chance, I tried different Virgin products and I analyzed Richard’s successes.

In 2004, we collaborated with NTV on the production of a show called Fear Factor. Tinkoff Beer was the sponsor. The show achieved great success, garnered high ratings, and did a lot to promote our brand among our target audience—young, modern people. Land Rover wanted to join us as co-sponsor of one of the episodes, an episode that was to be shot in South Africa, just outside Johannesburg, where the automaker has its engineering test center. Rina and I flew there with NTV producer Nikita Klebanov and his team.

We looked everything over and reached our conclusions, but we still had a couple of days before our return flight. Suddenly I remembered that Richard Branson has a private game reserve, Ulusaba, in Kruger Park, an hour’s flight away from Johannesburg. There you can see the “big five” wild animals—elephants, rhinoceroses, leopards, lions, and buffalo. We flew there and were able to see all of the animals. Richard is always good at organizing things. None of the regular rooms in the hotel were available, but Richard Branson’s own room was empty—although it cost a lot more than the normal ones. Of course we took it. It was an honor for me. Rina and I slept in Richard Branson’s bed and I told her that we had no choice but to engage in sexual intercourse in honor of Richard, which we succeeded in doing. We left on the morning of the third day. The director of the chalet came up to us and said that Richard was flying in around noon with his father, who was 90 years old at the time. His father is elderly, but loves to be out and about. He is just as restless as his son. We had to go, however, and so once again Richard and I missed each other.

Later, in 2005, we rented out Necker Island, which belongs to Richard Branson, for the managers. Of course I took all the measures necessary to insure that I stayed in his room and slept in his bed. By that time, I had already written an introduction for his autobiographical Losing my Virginity. We flew out again on a Sunday. The managers told us that he would be coming the next day (along with Maria Sharapova). I signed and left behind a few of Richard’s books, in Russian, along with a Khui Zabei CD. I still wonder what Maria’s reaction was.

Returning after three years, I saw the books and CDs that we had left, as well as the huge matryoshka doll that I had given Richard for his birthday. At one and a half meters tall, it might well be the biggest in the world. Inside is all of Branson’s history, from Student magazine, to his space tourism project, Virgin Galactic. The matryoshka stands right at the entrance to the house with “From Russia with Love” written on it. So Necker also has a little piece of Russia on it.

On that occasion, again, Richard and I did not end up meeting in person, but he knew about me. Then, in February 2008, Ruben Vardanyan of Troika Dialog invited me to speak at his famous forum in Moscow in the entrepreneurial section. I represented Russia, while Branson represented the international community. Good for Ruben that he managed to invite a speaker of that caliber. The presentations were excellent. Of course my skills as an orator do not compare with his, but I tried my best to represent Russia. I remember Sergei Polonsky asking questions from the audience.

Afterwards, the two of us were invited to a press conference where we answered questions. Later, over tea, we got to talking. I told him about my trips to Ulusaba and Necker, about the beds, the books, and the Matryoshka. He sat there smiling. That evening around fifteen of us had dinner at the Ararat Park Hyatt Moscow: Grigory Beryozkin (ECH), Sergei Polonsky (Mirax Group), Artur Kirilenko (Stroimontazh), Elizaveta Osetinskaya (Vedomosti), Ruben Vardanyan, Pavel Teplukhin, Zhak-Der Mergedichyan (Troika Dialog), and others. We had an interesting, open conversation about entrepreneurship and about Russia and its problems. We ate and got drunk on good wine. After dinner, I approached Branson,

“Richard, when’s your flight?”

“Tomorrow morning I fly to Geneva. The plane is waiting for me at the airport.”

“Surely you don’t want to leave without having experienced the Moscow nightlife—with its famous Russian girls?”

“Wow, that would be awesome!”

And so we walked from the hotel to Most Night Club, owned by Alexander Mamut. It was February, but the roads were slushy. We talked about global warming, which really worries Richard. Unrecognized along the way, we made it to Most, where Richard’s appearance of course caused the energy levels to sour. “Richard, wow!” people screamed. After all, no one expected that he would be at the party. Our group kept growing, people kept joining us, and we drank several bottles of champagne. I am Siberian and strong, but he turned out to be a good drinker too and kept up fine with the champagne drinking. We became buddies for good and realized we were cut from the same cloth. He gave me his cell phone number and email address and, between February and August, we corresponded incessantly.

I have visited nearly all of Richard’s hotels (Virgin Limited), including the one in Morocco. I wrote him a letter saying that I would really like to take my family to Morocco to celebrate Rina’s birthday (August 29). I asked him whether his hotel would be a good place to rest and have a birthday dinner. I asked for the manager’s phone number. To my surprise, Richard replied,

“A birthday is the perfect occasion for a holiday. My family and I always spend the last week of August on Necker Island. The only people there would be people that we know well: in this case, our relatives and fifteen of my daughter’s friends from Oxford. Why don’t you join us?”

I was stunned. It felt a little awkward, but he insisted. Richard gave us a separate villa for the entire week. On top of that, when we first got there, we were the only guests on the island for two days (not counting the thirty-member service staff). We did whatever we wanted! These were probably the best days of our lives. I do not know if anyone else enjoyed this privilege before we did. Even the manager of the hotel said,

“You guys are so lucky. I do not know of any other family that has stayed on this huge, private island alone before.” Later, Richard arrived and we spent five days together. We ate breakfast and dinner together and enjoyed a lot of good conversation with Richard, his wife Joan, sister Vanessa, and her husband Jim. The kids, 22-year-old Holly and her friends, sat at the other end of the table.

On a side note, Richard was finishing up his book, Business Stripped Bare, and on the last day of our stay he brought a newspaper to the breakfast table. “Look. It says that my book’s coming out.” He was proud. Of course I agreed to write the introduction to the Russian version of the book, which was published in 2009, and even presented it at a book fair. My thanks go out to Richard for returning the favor by writing the introduction to this book.

Richard is notorious for his inability to sit still. He was always playing tennis and even held a swimming race around the island—which he won. He was 58 then, hardly a boy anymore. We swam for two hours. I came in second to last, while Dasha, who has really excelled at all kinds of sports, including tennis, took second place. She is also very talented when it comes to languages. Richard took a liking to her immediately. After we got home, he asked us,

“Why is she studying in Russia? Why not get her into the college where Holly went?” He wrote her a letter of recommendation, for which I am most grateful.

It may be an awesome thing to approach a college with a letter of recommendation from Richard Branson. Nevertheless, Dasha had to sit the five-hour entrance exam, which she managed successfully. She is now in her second year at Oxford.

After speaking for awhile with Richard, Rina said,

“God, you guys are so alike! Twin engines!” We are outwardly similar, considering my gray hair (I thank my dad for the genes: his hair also turned gray when he was forty), but I hate it when people in the Russian media compare me to Branson. I am torn, like one of Dostoyevsky’s heroes. On the one hand, I am flattered by the comparison, but on the other hand, I do not like it at all. I do not want to be Richard Branson, I want to be Oleg Tinkov. I share a lot of his values, we are close in spirit, but I am not sure that he shares all of mine. I am who I am.

Half a loaf is better than none though. If there is no other candidate in Russia itself, then go ahead—compare me to him and call me the Russian Richard Branson. I do not really like it, though, and sometimes I will be annoyed. I do not want to be a copy of someone else; I am my own person. And, as God is my witness, I have never tried to copy Richard. It is just that, as it turned out, I was involved in music too. I had my own recording company and I also buy and sell businesses. Overall, though, our approaches are different: he exploits a brand, while I exploit ideas. I respect him, but we differ in many ways.

In December 2008, Richard came to Moscow once more to speak at a conference. He called me and we met for lunch at the Pushkin Café. Later, Sergei Nedoroslev of Kaskol and Lukas Lundin of Vostok Nafta joined us. I personally interviewed Richard and it was published later in Finance magazine.

Richard likes my sons a lot. Pasha is older and his English is excellent. He and Richard have a good relationship. So when Richard came to Moscow he wanted to see the boys first thing. It was December and you know what goes on in the city then. He spent two hours trying to get from downtown to Dinamo through the traffic jams. I put on an old Russian samovar; we were really looking forward to seeing our guest. But the traffic that day was even worse than usual. For another hour he inched towards us, but in the end I had to call him and tell him to go to the airport where his plane was waiting.

Our relationship is not really a great friendship. I would not say that we are close friends, exactly, but I do have all of his contact information. And I have to give him credit. He is always sending me invitations to different events.

“Oleg, you can go to any resort you want. If you’re ever in London, my house there is always empty. Keep in mind that I have a small house in Oxford as well, which I bought when my kids were in school there.” I’ve never taken him up on these invitations, although I am in Oxford often to visit my daughter. I do not like to be intrusive and I advise you not to be either. Someone may offer you things out of the kindness of his or her heart, but that does not mean that you have to take advantage of it. Richard does not have very many Russian friends, though, and I am glad to be among them. There are Gorbachev, a couple of cosmonauts, and I. This really flatters my ego: I am in good company.

Richard and I met another time, in May 2009, at the Formula 1 races in Monaco. He got involved in the races and Virgin sponsored a team. We keep in touch by email and I follow him on Twitter. His life is of course full and rich. I am happy that he has found a place in it for me.

As I said before, Richard and I are very similar, but there are some substantive differences. For example, he is interested in politics, whereas I am not. That might have something to do with our respective ages—after all he is older than me. Maybe in twenty years or so I will be just as deeply interested in politics as he is now, but for the moment I do not get involved. I can be critical, but I am not ready to make my own suggestions. People may say that I am not involved because it would not be trendy. And yet, in 1994 it was trendy and I was just as uninterested then. During my first interview with Volodya Malyshov from Delovoy Peterburg, I said that I would never get involved with oil or the government. Sixteen years have passed and I have stayed true to my word. Politics is either calculus or a study in average domains—I still have not figured it out. More often than not, politics is the latter.

So it does not work for me. I like building businesses and doing great things. I like the color yellow, while politicians do not like bright colors. I am ambitious and love publicity, but I am totally indifferent when it comes to high office. It is not my thing. Some people would never work in a garden, even on pain of death. For my part, I do not want to get involved in politics. It would go against my inner being and contradict my worldview.

If they called me from the Kremlin today and asked me to become governor of Kemerovo Province, where I grew up, I would not assent. Even if they offered me ten million dollars a month I would not go. I am simply not interested. I have no feel for politics and I do not pursue what I cannot feel.

They say that politics is a concentrated expression of economics. But I hope that my business never gets to be that concentrated. If your business is too big, if you no longer know all of your employees, then it is time to sell. My bank is not yet at that point, but it is still how I live. I sell a business as soon as it becomes too big.

Politics are of no interest whatsoever to me for rational reasons as well. It is just that I do not know the answers to the questions that politicians aim to answer. I do not know how to conquer social inequality. If I knew how to make people happy and make life more dignified, I would tell Putin or Medvedev what steps to take. As it is, our country has some super rich people and then a lot of desperately poor ones—when there should be moderately rich people, on the hand, and a middle class, on the other. I really do not know how this might be achieved. I stay clear of politics, not because I am afraid or because is not worth my time or because it makes me feel uncomfortable, but because I can only do things that I really believe in. I can tell you about business and entrepreneurship and about how awesome capitalism is. I believe in it and would die for it. I was confident, too, of the quality of my pelmeni. I knew that I was selling the best electronics—Sony and Panasonic—and offering the best value for money. I knew that I sold the best, the most refreshing beer in all of Russia. I believed in those things and so I did them.

Richard and I are different, too, in that I am used to expending all of my strength on a single project, while he is able to run multiple businesses simultaneously. I cannot do that. I feel that a very important quality in an entrepreneur is the ability to decide on a strategy, separate the wheat from the chaff, determine what you want, and move forward. It is key to keep hitting the same spot over and over. A laser is concentrated light. It will cut through anything and everything. It is like a diamond, which will even cut glass. By focusing, you become super powerful. You achieve maximum synergy. Earlier, when I was working on Tekhnoshok, Daria, and Tinkoff Beer, as much as today, as I work on TCS Bank, I received a lot of recommendations, which, if followed, could have earned me a whole lot of money. I still receive such advice today. Now that I have a blog, people keep offering me their ideas, some of which show a high profit potential. But I turn them down. I always concentrate on one thing at a time, whether that is producing Russia’s best pelmeni, or Russia’s best beer, or providing the best service in electronics sales, or the best servicing and distribution of credit cards. I am sure that in every case I reach my objectives.

Now, guys, I do not mean to hurt your feelings by not responding to your proposals. It is just that I am giving all of my attention to what I consider to be the most important thing to do right now. If I have set a goal, I must reach it. If I decide to take part in a race, then I commit myself completely to it. It is a hard thing to do: setting goals and reaching them, moving from point A to point B. One example would be my refusing to succumb to the temptation to make ten thousand dollars in cookie production, as an entrepreneur from St. Petersburg suggested I do. It is a good idea. Make the money yourself then. Why do you need me? The only thing that I can do is to try to franchise the Tinkoff brand. I registered it for every product category—so please, feel free to apply for a license! You might approach me for technological support as well. These are some areas where I would be willing to cooperate. But the proposals must be serious and financially substantiated. There will not be any free rides. I need to understand clearly what my material gain will be. I cannot simply exploit my brand even if, emotionally speaking, I am ready to do this. It is possible that my next business will be related to the selling of brands, brand-building technologies, and strategy-development for companies. If this is of interest to any one, feel free to contact me.

But I will only help people who are focused on brand creation. I cannot help people who are in the meat, herring, and chair business. I will only assist people who are making chairs and only chairs. Settle on a single idea, put your head down, and keep hitting the same spot. If you want to hammer in a nail, after all, that is exactly what you have to do.

At the beginning of this book, I said that I did not want to present myself as a mentor or instructor. From time to time, though, I have nevertheless included some small pieces of advice, some little tips. Here is some more advice then: do not fritter away your time doing little things. This is based on an important and correct observation. Unfortunately, people waste their effort by doing three things at once. Instead, one should start with one small thing and push, push, push. Some people do ten things at a time and end up disappointed. This does not happen to me. Do the same thing. Do it over and over. Work at it for two or three years. I am confident that you will see results. I am convinced that if you do something and invest yourself fully in it with confidence and professionalism, your efforts will bear fruit.

Concentrate or die!

I hate it when people in the Russian media compare me to Branson.

 

Here I am with Alex Koretsky. I always find Richard Branson’s books interesting.

 

Alexei Prilepsky, entrepreneur:

In 1992, around the time that Oleg started doing serious business, I moved from Leninsk-Kuznetsky to St. Petersburg. His first company was Petrosib, followed by Tekhnoshok. I observed that an average Siberian dude had achieved serious heights and this stimulated me. I started getting into commerce myself. In 1997‑1998 Oleg and I were very close. He taught me a lot of things and introduced me to some interesting people. I learned my ruthlessness in business from him. Now and then I’d look at him and say, “you’re going overboard.” But I could see from the results that he had been doing the right thing all along. I took this article of faith from Oleg: depend on no one and make of yourself whatever you want to make.

Chapter 27

All the Best to the Oligarchy

I sincerely believe that there are not enough entrepreneurs in our country. I also think a lot about our oligarchs. It is probably because I am their exact opposite. I have never privatized anything, but built my businesses on my own, from the ground up. They received ready-made enterprises, fruit of the labor of the Soviet people. It was not because of their talents that they came into possession of these enterprises, but because, back in the nineties, they happened to know the right people. They are smart, enterprising people and if one of them offered me a profitable industrial giant for cheap, I would not turn it down. I was never given such an opportunity, however.

I have hung out with the richest people in the country, but not too often. In the chapter on the sale of Daria, you will have read about my amusing encounter with Roman Abramovich on Sadovnicheskaya Nabrezhnaya, when he sat there with some odd photographs of Putin in the background. During that meeting I realized that his lexicon was not so different from Ellochka-Ludoyedka’s. The next time I met him was at Courchevelle. Andrei Beskhmelnitsky, Unimilk’s General Director, was playing arcade games and, as I was watching him, Roman Abramovich walked into the room with Andrei Gorodilov, son of Viktor Gorodilov, ex-general director of Noyabrskneftegaz. They walked up and commented on Beskhmelnitsky’s game. Apart from us, no one recognized them. Abramovich was wearing a parka and people did not take any notice of him. Abramovich is really fond of parkas and of the children of big bosses. As far as I can tell, he has built his businesses upon this fondness.

Once, on Christmas Day, we went to the famous Prokhorov Disco. Using my connections, I got us into the same box as Roman. I saw him a couple of other times, briefly. On those occasions, though, we simply said hello. He came to my Samara restaurant once for a beer. He is a normal man with a good memory and probably remembers buying the Daria plant from me.

These encounters enabled me to reach a few conclusions. You can think as you please about how Abramovich got rich, but you cannot deny that he is a unique person with a unique media strategy. Of course his strategy has been deployed in the world before, but he was the first Russia to use it successfully.

His strategy turns on the fact that he does not give interviews or make comments. This is why he is of particular interest to everyone. A lot is written and said about him. If you think that Abramovich simply wants people to refrain from talking about him, then you are totally lost. Roman is a conceited guy—that much is certain—but that is just part of his strategy. He is a man of mystery; he is always hiding from everyone. But by buying Chelsea in 2003 he laid a cornerstone in the foundation of his media image.

In his abruptness, Abramovich is similar to Prokhorov. The latter is another oligarch that got rich in loans-for-shares auctions, a “borrowing billionaire,” as I like to call such people. I have met Mikhail at nightclubs a number of times and I can confirm that he is capable of dancing for three hours in a row.

To tell the truth, though, our conversations have been more like monologues on my part. Knowing that Prokhorov is an athlete, I told him about my cycling and freeriding. He said he thought that this was cool. We danced in the crowd, a head above everyone else. Mikhail is 6’10», while I am 6″4″.

I have the sense that Mikhail is constantly playing the field. After all, he is an unmarried athlete. People like him always draw attention—and pity. Was he lucky to have sold his Norilsky Nickel shares to Rusal when the market was at its peak? Of course he was lucky. Intelligent people always are. Prokhorov has twenty years of successful experience in business and has shown, in practice, that he is a smart and rational businessman. That is why I would not say that his fortune is derived purely from luck.

I have mentioned another Mikhail more than once—that would be Mikhail Freedman—and I will mention him again in this book. It turned out that our children are friends. My Pasha and his Sasha hang out a lot and play tennis together.

Misha is a uniquely talented businessman, a very professional strategist—indeed, he is the one who should be writing a book. I know that he reads a lot and maybe that is why he knows more than other people. Enough with the reading, Mikhail, it is time to share what you have learned. Get to writing! Of course, if you were to write a book, it would not be as frank and open as this one is—but write something, share your secrets. You cannot keep them bottled up or you will explode. Look: all of the great entrepreneurs—and you are certainly great—have written something. There is no time to lose.

At the same time, I would note that Misha is a competent, but overly aggressive guy. If wolves are the keepers of the forest, then Freedman is the keeper of Russian business. You cannot relax for a minute, or else you’re screwed. Freedman even kicked Deripaska when he was down, not to mention what happened to poor Polonsky.

Freedman is the most diversified of the oligarchs, which lowers his risk. Among others, for example, he has assets in oil (TNC‑BP), in finance (Alfa Bank and others), in telecom (Altimo), and in media (CTC). This diversity protects him from failures in any particular industry. I think that in the medium term he will be the richest among his brethren. He will gobble up Lisin, Prokhorov and Abramovich. But no matter what happens, he needs to watch out for his Achilles’ heel. I will tell him about that in person, however, and not in this book.

Another interesting oligarch is Andrei Melnichenko, co-owner of the coal energy company SUEK and of EuroChem. We met at Metropol when the newspaper Vedomosti was celebrating its fifth anniversary. Vladimir Rashevsky, the general director of SUEK, introduced us to one another. I already knew that SUEK had bought Kirov Mine—the mine where my grandfather, father, and I had worked. Everyone was sucking up to him, thinking he was an oligarch and that maybe they could get a piece of the pie. As usual, I went against the grain and, with no desire to be flamboyant, said,

“Andrei, I heard that you bought Kirov Mine. Well—I worked there for 18 years!”

“Yeah, that’s one of our bigger coke mines.”

“You’d better treat your miners well. You’re the oligarch; you should raise the workers’ wages. Mining is a very dangerous and difficult job.”

Some of my friends work in his mines. They have told me how things are going. On the whole, Andrei and his partner Sergei Popov have done a good job: they replaced the old equipment and installed some new tunneling systems. In terms of the social dimension, however, they have not done much. We cannot really get into the details of whether a business should be socially responsible here. I have a sneaking suspicion that this matter would take up an entire chapter.

If you yourself built a business from the ground up, then questions of social responsibility are not so pressing. I think that if it is a privatized, formerly state-run enterprise, however, created by the efforts of people living in the enormous USSR, then such considerations are a must.

Andrei did a double take. He did not counter in a meaningful way and slowly walked away. Everyone standing there was taken aback,

“What are you, crazy?”

But I am still proud of the fact that I spoke to him as I did. And I am sure that he remembers what I said. Maybe the next time he was in a meeting and someone raised the matter of workers’ wages, he agreed to give them a raise. I worked up the nerve to speak my mind and I was not afraid to tell him to pay more—because he was not paying enough. What is wrong with that? If he raised each miner’s wage at Kirov Mine by even three dollars, say, then my mission was accomplished. I spoke to him as I did in behalf of my bros, the earthworms.

Perhaps if I had curbed the unpleasant tone of that conversation with Melnichenko, I might have befriended him. But that was never my goal. From a commercial point of view, it might not have been the best move, but I always speak my mind. At least my conscience is clear and I sleep as soundly as a baby.

To repeat, I am fairly well-disposed towards these oligarchs. If I had been presented with an opportunity to buy a mine in the Kuznetsk Basin, I would have done so as well. By no means do I call for the seizure and division of a businessman’s property—assuming that he knows how to manage it effectively. In our country, though, everything is upside down.

One example of this is Oleg Deripaska, who accumulated a huge amount of debt prior to the financial crisis. I wrote about situations like this in my column in Finance magazine in fall 2009:

In the past few months, we have clearly seen that private interests are incapable of managing the massive, formerly state-owned companies on which single-industry towns depend.

Our fathers and grandfathers built industrial giants such as Norilsky Nickel and Rusal. Huge amounts of state funding were fed into them. These enterprises were not established in a free market; rather, they were constructed with patriotic or propagandistic goals in mind.

For some reason, though, these enterprises were given over, later on, into the ownership of a small group of private individuals. I will not give their surnames. The owners and managers of these companies turned out to be ineffective: they accumulated vast amounts of debt—figures running to billions of dollars. In addition, they helped themselves to the same figures—if not twice as much—in dividends, immediately following loans-for-shares auctions or privatization. Clearly, this is massively unjust. They pumped money out, are deep in debt, and are now appealing to the state for help.

And I do think, in fact, that the state must help them, but not for nothing. Government assistance ought to be meted out in exchange for shares. As a result of such share offerings (it would not matter if this were a primary or secondary distribution), these companies would become joint-stock companies with state participation. I am not against the oligarchs continuing on as major shareholders. Instead of allowing them to hold ninety or fifty-seven percent of the shares (as in the cases of Rusal and Oleg Deripaska), let them have five to ten percent. It is possible, then, that their holdings will still amount to the largest private share. Let them retain some capital and remain US-dollar billionaires, but let the company pass into state control, just as the state controls Sberbank and VTB. The present is the perfect time for such changes, changes that would be, in my view, very smart ones and the right thing to do.

Look at France, Germany, and other civilized countries. In such places large concerns are not in the control of single individuals. As a rule, capital in these joint-stock companies is widely distributed so that the risk of mistakes is significantly lower than otherwise. The problem with our enormous Russian enterprises lies in the fact that each one has a single owner—someone in particular, some young fellow, perhaps, aged 35-42 years, who makes decisions that benefit him, but that are not necessarily beneficial to the enterprise that he controls.

Things did not develop as I had proposed. Rusal, for instance, made its IPO, but the shares were so expensive that Deripaska’s share was not significantly decreased and so he maintained control of the company.

Now, naturally, I am more sympathetic towards entrepreneurs who have built their businesses from the ground up. I have even ranked a number of them, as follows:

  1. Andrei Rogachov (Pyatyorochka, Karusel, Makromir)
  2. Rustam Tariko (Russian Standard Vodka and Bank)
  3. Sergei Galitsky (Magnit)
  4. Ruben Vardanyan (Troika Dialog)
  5. Dmitry Troitsky (O’Kei)
  6. Igor Kesayev (Megapolis)
  7. Yevgeny Chichvarkin (Euroset)
  8. Mikhail Slipenchuk (Metropol)
  9. Oleg Leonov (Uniland, Diksi)
  10. Oleg Zherebtsov (Lenta, Norma)

These people differ from the businessmen in the Forbes list to the extent that each one of them got into commerce when they were university students, dreamt of creating new enterprises, and then did so, creating new jobs in the process. Subsequently, they developed their businesses further. They did not take part in redistribution, nor did they buy pre-existing companies. These people are true heroes. Most importantly, though, they are an inexhaustible source of inspiration for all—precisely because each of them is one of us.

Andrei Rogachov taught me many things. I will be satisfied if my book gives you different perspective on life or, as Americans say, enables you to get out of your box and look things from the outside.

In the early nineties, Rogachov and I ran a business together. It collapsed on its own, but we have remained good friends. Sometimes we have lunch (the last time we did, it was in one of my favorite Moscow restaurants, Noa, which belongs to entrepreneur Andrei Zaitsev), reminisce, and laugh. How can we not laugh, really? I remember reading our company’s charter (which, incidentally, was no small feat—it was the first and last time that I read a charter) and I encountered a word that I did not know.

“Andrei, what’s ‘know-how’?”

“It means to ‘know how.’”

Every meeting with Rogachov was mentally stimulating. I love the unique, special sense I have with him of looking at things from a new angle and so, too, of learning.

Andrei is one of the smartest and greatest businessmen out there. He is probably the only person who has outsmarted Freedman in a corporate context. Rogachov received funds from Freedman for Pyatyorochka and later for Karusel. Interestingly enough, I was also involved in the merger between Pyatyorochka and Perekryostok that resulted in the creation of X5 Retail Group. It was I who introduced Rogachov to Alexander Kosyanenko, Perekryostok’s general director, at the table in my apartment on Admiralteisky Prospect in St. Petersburg. One result of this meeting was a very high-profile transaction bearing on the Russian retail industry. In May 2006, the companies merged. Control went to the Alfa Group, while Andrei Rogachov and Alexander Gidra, along with minor Pyatyorochka shareholders Igor Vidyayev and Tatyana Franus, ended up, not only with shares, but with a nice chunk of cash.

To tell the truth, though, this was a big mistake, even for a businessman with Rogachov’s genius. He had gotten into business with Pavel Andreyev in the early nineties, organizing the company LEK. Each of them held a fifty-percent stake. I told him then that he trusted his partner too much and that he needed to exert more control over the company. Andrei probably thought that I was hoping to take Pavel’s place, though, since I had also discussed some developer’s projects with him and offered my partnership. He did not believe me, however, and now he and Pavel are in deep trouble. Nevertheless, they worked together for eighteen years and LEK grew to be St. Petersburg’s biggest development company. War broke out between them, though, followed by the crisis.

I have the deepest and utmost respect for Sergei Galitsky. For one thing, he has created a Russia-wide chain of over three thousand stores. This was a costly endeavor. For another, he continues to live in Krasnodar, his hometown.

We first met at the Sochi airport, where we had a chat. At the time, I realized that I was dealing with a true entrepreneur. In February 2010, he was on my show Oleg Tinkov’s Business Secrets, which runs on russia.ru, and we had a heart-to-heart talk. I will not rehearse the contents of that conversation. Go online and see for yourselves. It was one of our best shows ever.

Sergei Galitsky is worthy of everyone’s respect, not because he is the richest self-made Russian, but because he works incredibly hard and has an extraordinary mind. It is no surprise to learn that he played chess as a kid. You would think that a person with a fortune worth three billion dollars could relax, move far away, and rest. Galitsky is still the general director of Magnit though. When you consider the repetitive character of the work he does there, it is amazing that he sticks around.

Oleg Zherebtsov: I made his acquaintance immediately after I moved to St. Petersburg and took up residence in the Mining Institute dormitory on Shkipersky Stream. I was washing my socks. I turned my head to the right, looked over, and saw another guy washing his socks as well. I said,

“Hi! What’s your name?”

“Oleg.”

“Oh, my name’s Oleg too.”

That is how I met one of Russia’s most talented retailers. If Oleg Zherebtsov had made his move in Moscow, in the early 2000s, then maybe Lenta would be the country’s largest retail chain—rather than X5. But he stayed in St. Petersburg. Later he fought with Avgust Meyer, one of Lenta’s shareholders. Internal conflicts are never good for a corporation. As a result, Zherebtsov was unable to sell Lenta before the financial crisis hit, even though the company had been valued at up to two billion dollars and some Finns from Kesko wanted to buy it. After the crisis, Oleg sold his stake in the company for far less than that.

Yevgeny Chichvarkin was cheerful when we first met, but as history would have it, things are a lot sadder for him now. We first met in London at the 2004 Russian Economic Forum. The next time we met was in 2005, after I sold my beer business. Zhenya was dumbfounded:

“Oleg, why did you sell your business? It was too early. I’ve been offered a billion dollars for Euroset, but I don’t want to sell it. There’s still room for growth.”

“Zhenya, if I were you, I’d sell it for a billion.” It is a real shame that he did not take my advice.

Later he became one of the first fanboys of my new bank project.

“Oleg, people keep telling me that you’re going to screw it all up, but I tell them they’re more likely to screw up than you are. I believe in your project. If a person developed and then sold four businesses, it’s highly unlikely that he’ll screw up the fifth.”

We discussed the idea for the bank on three or four occasions. We wanted to offer the cards in Euroset stores. We even launched a test project in Yaroslavl. The last of these meetings was on September 2, 2008. Having just returned from a holiday at Forte dei Marmi, I received a text message from Zhenya that read,

“Oleg, hi. You should come over.”

Wearing his usual get-up—torn jeans and a printed T-shirt—he met me, along with Oliver Hughes, the president of Tinkoff Credit Systems Bank, at his office near Savyolovsky Station. We went into the conference room, sat down in the soft armchairs, and began our final negotiations. Basically, Chichvarkin and his partner Timur Artemyev gave us the green light to take our project nation-wide.

In the middle of our negotiations a security guard came running into the room,

“Yevgeny, they’ve locked down all the exits—guys from the prosecutor’s office—and they’re looking for you.” A small man in a leather jacket appeared just behind the guard. He looked a lot like Shvonder, the character from A Dog’s Heart. He yelled,

“Where’s Chichvarkin?” It was obvious that “Shvonder” never watched TV and did not read the paper. If he had, he would have recognized Yevgeny, who was sitting right there in the room, immediately.

“Nobody move,” commanded Shvonder.

Poor Oliver turned pale and, with his English mindset, looked like he was ready to lie down on the floor. People ran around the office. The workers were made to stand with their faces to the wall. It was a theater of the absurd, unfolding before our eyes. About five minutes passed in this way. Then the guard came back and said,

“Everyone follow me.” Descending in the back-up elevator, we exited into the office building’s back yard via the mess of boxes in the warehouse.

“Oleg, I’m sorry that things turned out like this,” Zhenya said, shaking my hand.

“Take care of yourself, Zhenya.”

That is how Oliver had his first encounter with siloviki[7]—and how I was once again caught up in a story of great national significance.

Zhenya now lives in London and continues to fight for his reputation. I believe that he will come home again one day and continue his work of developing enterprises for the good of Russia. The country must not throw people like him away.

Sergei Polonsky’s and my shared history is equally amazing. We got in quite the fight back in 2008. I took serious exception to something he about how “people who don’t have a billion can go to hell.” In September 2008, I reacted in a video column for Finance magazine, saying,

There are too many people in development. Who do you call? The phone book has twelve hundred names and six hundred of them belong to developers. That’s a lot, so a crisis is around the corner.

Everyone invests in development and some of them have quickly become billionaires. Take Sergei Polonsky for example. Three years ago, as I recall, he was a mere boy running around St. Petersburg. And he kept being a good boy. The other day though, at a party he was throwing, he said that if you’re not a billionaire you can go to hell. He should go to hell! He became a billionaire in two years; he will go bankrupt in another two [which is exactly what happened — O.T.]. We’re already seeing this in the defaults that are just beginning to pile up.

Sergei answered me indirectly at a meeting with some journalists,

“I don’t know this man and I don’t want to know him, to tell you the truth. He makes strange claims and tells people to go places. Look at the clip. He told all developers to go someplace far away. For me that’s a strange position. There’s no one like him on the map. What has he done with his life? He has made Tinkoff Beer and that’s it.”

I could not resist the urge to respond to him—because it was a lie: I had done a lot more than just produce beer. We shot another video column in which I explained to Sergei that he was mistaken. After that, we did not attack one another again—particularly given Sergei’s problems with paying back his loans.

In the summer of 2009, when the Mirax Group found itself in a tough situation, they were attacked by the Alfa Group, which bought the debt that Mirax owed to Credit Suisse and started putting pressure on Sergei Polonsky. I wanted to offer him some moral support and so shot another video column:

I’ve known Sergei for a long time and, no matter what’s gone between us, I think of him as a good guy. He is talented. Sometimes he goes a little too far, but on the whole he deserves credit. There was a huge pit in the middle of Moscow for years and years and monsters like Abramovich, Kerimov, and Luzhkov could not build anything there. When Sergei came to St. Petersburg as a young man, though, even if he was rude and obnoxious and not quite like everyone else, he just did what needed to be done.

From the point of view of business logic and common sense he did the wrong thing. He took out too many loans. And yet this is a problem that all developers face. They do not understand that sometimes we have stability, but that there are other times when we are faced with collapse. They simply follow the same formula, assuming that the price of a square meter will keep going up and up. If you build your business on such a formula, then sooner our later you’ll reap lamentable results.

That’s why, Sergei, I hope you return from Elba one day. For now, though, I’m afraid I have to say that your card is trumped. It’s as though you’re out in the ocean somewhere: if a shark swims past you, you’re safe, but once it’s circled you once, it’s all over. Freedman made his circle and this shark’s teeth are very sharp. You’ve fallen into his circle of interests. I can only sympathize. And I am not looking to dance on Sergei’s grave here. I really do feel bad for him. The more talented entrepreneurs there are, the faster the economy will grow, which means that things will get a little better and life will become more pleasant. That’s why, Sergei, I wish you a triumphant return from Elba.

Of course, you’re going through tough times now, but hold tight. We business people are all waiting for you; we love you and we forgive all your foolish mistakes. We know that nobody’s perfect. At the end of the day everyone has his or her minuses and each of us has a skeleton in our closet.

And so, Seryoga, I wish you the best of luck!

Miracles never happen: you have to start with something small and push, push, push.

Like me, Andrei Korkunov, got into the banking business after spending time in the food industry.

With Leonid Shutov, who opened Bob Bob Ricard—one of the best restaurants in London.

 

Andrei Rogachov, entrepreneur:

Oleg is without a doubt one of the brightest entrepreneurs in contemporary Russia. Entire generations of young risk-takers follow his example. Oleg Tinkov is our Richard Branson. He’s had a lot of successful projects. He knows how to choose one good idea from among a thousand. And then, too, he is able to bring the project to serious capitalization. He exhibits a rare combination of traits: he’s a charismatic leader, but at the same time he’s capable of bringing together team with technological savvy. I’m sure that we will see him undertaking more interesting projects in the future.

Around 1994, I went to visit Oleg on Sadovaya Street and was greeted by an unexpected scene. Oleg was scolding a foreigner. He was explaining to the man—I think he was American—that he had no idea how to run a business in Russia. “Stupid” was one of the milder epithets that he used. I asked Oleg whether he mightn’t be offending the American, but he optimistically replied that the American didn’t understand Russian and so it didn’t matter. I figured that Oleg had the American there as a stress reliever.

Why don’t Oleg and I take up joint-partnership on a project? Partners should supplement each other so that their team has stability. Maybe when I’m a little older—Oleg remains eternally young—we’ll start something together. He’d be the motor and I’d be the brakes.

 

Chapter 28

Once a Miner, Now a Banker

I started this book with a story about how our banking business was born. Recall that the final decision was made on November 18, 2005, on Necker Island. Little did I know the difficulties that awaited me after that.

In December, in the Ritz Hotel in San Francisco, I met with Camal Bouchie, the vice president of MasterCard Advisors. Ordinarily, MasterCard Advisors works with existing banks rather than startups. In the end, however, Bouchie and I agreed on a contract for technological assistance in building our business from the ground up.

On January 1, 2006, while I was spending the holidays with my family in New York before returning to San Francisco, Alex Koretsky flew from San Francisco to Moscow for the bank’s opening. Alex proved unable to work at anything like the miraculous rate that was required and, in the end, I had to go to Moscow myself to give the business a shove.

I hired old friends from Coruna (a company that I mentioned earlier), including general director Sergei Kim, to do the branding for the bank. Their price/idea/quality ratio is unparalleled in Russia. I gave them a few tasks: to develop a credit card and logo, to make a brand book, and so forth. Things progressed slowly but surely. We met sometime in June. On that occasion Sergei said,

“Oleg, we don’t think that ‘T-Bank’ is right. I understand that you’ll be doing direct mail marketing and you aren’t going to need advertising. There has to be some immediate recognizability though. No one understands what T means, but everyone knows Tinkoff. We propose that we call the bank ‘Tinkoff Credit Systems.’”

At first I was surprised by this name, but then I realized that “Tinkoff” is a recognizable name, while “Credit Systems” sounds solid and would leave open the possibility of our offering services in addition to credit cards.

Back in September 2006 we had closed a deal on the purchase of Khimmashbank. Essentially, we bought an empty bank with a clean license and renamed it Tinkoff Credit Systems. At the same time I moved back from the States for good and started putting together a team. The market showed signs of awareness that Tinkov had been developing a bank for a few months already. First of all, we were in negotiations for the purchase of a license and, second, I had enlisted the services of headhunting agency Egon Zehnder, who were slowly beginning to seek people out for us.

In the meantime, I almost hired Camal from MasterCard Advisors. We were in discussions concerning the time frame for his transition to the bank. One day, I was eating lunch with Rustam Tariko. We sat in Galereya restaurant and relaxed as we drank some Gaia & Rei, which in my opinion is the best white wine in the world. I said,

“Rustam, you know Camal very well. He’s going to head up my credit card business.” Rustam’s eyes nearly popped out of their sockets.

“I’ve invited Camal to work for me in Russia more than a couple times and he’s always refused. I can’t believe that he’ll come.”

For the next two weeks I waited for Camal Bouchie to develop and send me a business plan, but ultimately he called and declined our partnership. Rustam, who had realized that Camal was now willing to work in Russia, made him an offer that he could not refuse. According to my information, Rustam offered him more than twice as much as I had. But everything has worked out well in the end. I am glad that Rustam intercepted him and I understand why they ended up working together so effectively: they both love Eastern luxuries.

In the summer of 2006 I met with Maxim Chernushchenko, the deputy chairman of the board of Investsberbank, as well as with some other bank managers. Alexander Ponomarenko was already preparing the bank for sale to the Hungarian OTP Bank and the managers kept surveying the room. I suppose that is a normal reaction to outside threats because acquisitions always put management at risk.

But things did not work out with Chernushchenko. On the one hand, he was skeptical about the use of direct marketing in the credit card business; he did not believe that the mail system could handle it. On the other hand, Rustam Tariko was upset with Chernushchenko for having resigned from Russian Standard, a move that Rustam considered unethical, and for having “borrowed” some of the bank’s ideas on his way out. I did not want strain my relationship with Tariko because he had, after all, given me a lot of advice in his time. Chernushchenko was therefore no longer a candidate. Maxim then told Egon Zehnder’s Artyom Avdeyev about a certain Georgy Chesakov at Investsberbank, who, due to a conflict with management, had been temporarily laid off.

In August, Alex Koretsky met with Georgy at Egon Zehnder’s offices. Alex liked him:

“The guy knows the trade. He’s into the idea of a model similar to Capital One. He said that we’d best not even think of buying IT-systems until we’ve hired either him or someone else with knowledge of the field.”

“That guy has pride issues, which is just what we need. How about I fly in to meet with him immediately?”

On September 18, 2006, Alex and I came to Egon Zehnder’s offices. Artyom Avdeyev said,

“Oleg, this is Georgy Chesakov. He’s worked for McKinsey, Russian Standard, and Investsberbank.”

“Damn, Artyom, didn’t I ask you not to bring in people from Russian Standard? What are you, dumb?”

“Oleg, apart from people who’ve worked at Russian Standard, I couldn’t find anyone who met the requirements.”

“Why the hell have you brought me another person from Russian Standard? Is there really no one else available?”

“Georgy wasn’t a top manager at Russian Standard, so I think there’s nothing personal between him and Rustam, as there was with Chernushchenko.”

“Okay, I’ll call Rustam to talk about it.”

“Oleg, let’s not waste time,” said Georgy. “If I don’t fit into your plans because of my connection to Russian Standard, that’s no problem. If you need to talk to Rustam first, then let’s reschedule this meeting.”

I dialed Rustam’s number. He was unavailable and we continued the interview by getting into the details of the business. Chesakov had been under Chernushchenko at Russian Standard and they left together to work for Investsberbank. But it was clear that Tariko held no grudge against him. The fact that he had work experience at McKinsey helped to further sell Georgy. I like people from there. They have sharp minds. It is a really good training ground. Overall, I think that McKinsey and Goldman Sachs are the best companies in the world in terms of human resource management. When you meet people from there, they seem a little different somehow: they exhibit a slightly higher quality and they are a little smarter, a little better at doing the right thing, and a little more interesting to be around.

“But why did you leave Investsberbank?”

“I got into an argument with a shareholder and he made the decision.”

“So you think it’s okay to fight with shareholders? A shareholder is God and King!”

“I learned my lesson.”

At the end of the meeting, I invited Georgy to come to our offices the following evening. We met in the conference room with Alex Koretsky, Kostya Aristarkhov, Ulyana Antonova, and Vadim Stasovsky, head of the legal department and the only person to work with me on running four of my businesses, beginning with Tekhnoshok. A consultant from MasterCard Advisors stood at the flip chart and talked about how payment systems are structured and how the cards work. I invited Georgy to sit at the table and, at the end of the presentation, all the managers started asking him questions. It was the same grilling that all of our key personnel had to submit to subsequently as well.

I hired him to work at the bank, which shared its offices—located on 1st Street in Yamskoye Polye, directly across from where Golden Palace Casino now stands—with the Tinkoff Restaurant chain. We had just bought the license, so all we had was a desk, a chair, and an idea. That was it. We hired people to work exclusively on that idea. I am very grateful to our first ten employees. They had it harder than anyone else. Of course they worked to maintain my good name and they believed in me, but they still took a risk. Some had to give up old positions that they could not have back if their new jobs fell through. Others risked their own reputations.

The autumn of 2006 saw the most overheated labor market ever. People came, I would offer them a salary, they would call back two weeks later and tell me that they had been offered a better deal elsewhere. Nevertheless, in order to work with us, Artyom Yamanov and Stas Bliznyuk left the successful Raffeisenbank, which is one of the best run and most fortunate foreign banks in Russia. Kostya Aristarkhov was the head of a difficult department—debt collection. I had brought him with me from America. I have already mentioned that I am not keen on doing business with friends. I believe in friendships based on business, though, even if things do not work the other way around. But I would have to say that Kostya is the exception that proves the rule. We have been friends for many years—since 1999. In America, Russians hold each other close. In the States, we had spent some great times together and Kostya had shown his best qualities. Over the ten years of our friendship he has never once let me down. I hope that he can say the same thing about me.

He had gone through Far East University and has an American education. He is a fast learner and, most importantly, he has an enterprising spirit. He owned a construction company in the States, which sold and installed windows. He has everything we needed—loyalty, understanding of the market, and experience with the American business system. Moreover, he picks up new skills quickly. In the course of the three years that he has worked at the bank, he has built a good reputation for himself. He has built an incredibly effective, high quality, and technologically sophisticated debt collection department (one whose work draws on statistics, information volumes, and IT). The numbers speak for themselves. We know how difficult the market is at present. There are more and more overdue payments, people are losing their jobs, or are simply inept at making their payments on time. At our bank, these indicators have remained relatively stable. In fact, they are the best in the industry.

Georgy Chesakov got to work on the IT platform immediately, building the network and guiding principles, and later got to work on the products. The rest of our staff began learning the ropes. We hired some high-end technicians, including Anatoly Makeshina from Zenit Bank. In this way we began to assemble the company—in our laps, essentially. I remember Georgy coming to me and saying,

“When we were putting Investsberbank together, the boss gave me three million dollars for the IT department. It was an advanced bank; we had a Siebel CRM system. Technologically speaking, we were way in advance of any other Russian bank. You gave me a budget of twenty million. Why?”

He does not ask me that question any more.

We spent twenty million dollars on IT alone. A lot of people still do not understand how we are able to grow so quickly. If it had not been for the crisis, we would have taken control of twenty or even thirty percent of the Russian credit card market—for no other reason than that we managed to acquire and integrate the credit card market’s latest international technological advances: in addition to the Siebel, we have an SAS business analysis complex and a Cardtech card block.

What is wrong with big banks? They are often held hostage by the existing system. It is often more expensive to rebuild than to build from scratch. Because we were building our bank from the ground up, everything that we bought was the latest and the greatest: the newest servers, the most powerful data center (which enables massive information flow), dedicated fiber-optic lines, and so forth. In the main, our business does not involve banking per se, but rather pure math. Why are more than half of our employees are mathematicians and analysts hailing from the Physics and Engineering Departments at Moscow State University? In essence, our business is science. It consists in the processing of massive chunks of information, their comparison, analysis, and testing. Our bank’s motto is “Test, test, test.” We take nothing at face value; we check everything. We are never satisfied simply to establish that something is one of two ways (that it might be). I have even shut off my famous intuition. All of our decision-making is based on mathematical models that have been constructed and tested in advance. Intuition is fine and we use it in strategic decision-making. But all of our tactical, concrete steps are taken on the basis of tests, mathematical models, and accumulated data alone. That is what we do. I am quite certain that our database is one of the best in the business. But on top of the quantitative information it contains, it also holds qualitative information—which is far more important.

You may have noticed that each of my undertakings has taken nine me months to complete—like a pregnancy. There is a good reason for this. You cannot build anything worthwhile in less than nine months. When we commenced our first integrated advertising campaign for Tekhnoshok with Samvel, it also took us nine months to prepare. This time, however, after we hired our staff, it took us seven rather than nine months (October 2006 to May 2007) to get everything ready and to issue our first test card.

The idea of issuing credit cards came to me in America, where the industry is highly developed.

On June 18, 2007, Alexei Prilepsky, a friend from back home, Natalya Vodyanova and I opened a playground in Leninsk-Kuznetsky.

 

We issued the first Tinkoff Platinum test cards in May 2007. That fall we began distributing them en masse.

Georgy Chesakov, chairman of the board of Tinkoff Credit Systems Bank:

Oleg is tough-skinned, explosive, and exuberant. But at the same time, he’s a lot more tolerant of resistance and complaints than my previous employers, Rustam Tariko (Russian Standard) and Alexander Ponomarenko (Investsberbank)—even if, at first glance, it might seem like the opposite would be true.

I got a good impression of Oleg back at the beginning of the banking project, in 2006, when he gathered the whole team together in his office. He pointed at the glass desk and said,

“I put my own money into this project and I’m ready to chew on this glass to ensure its success.” Later I quoted these words to candidates who asked if Oleg might shut down the project if it wasn’t working out. Another quote: “You need to have balls of steel to put 50 million dollars of your own money into a project like this.” I’m in awe of Oleg’s ability to think about what seem like completely unrelated things in business and in life and to make nontrivial, deep conclusions based on subtle observations. In those moments, you can’t help but think that you’d never thought about it before, but that his observation really was true. Oleg always remembers the basic economics of the industry and the project, quickly and correctly, and he is able to distinguish between important details and unimportant ones—and to disregard the latter. He’s not bound by ruling assumptions concerning the market. He’s able to attract and hold on to good people. He also knows how choose business ventures that have high margins of profit.

I learned from him how to be tougher, how to count pennies, and how to focus on and think about what’s actually important at a given moment in time.

Konstantin Aristarkhov, member of the board of directors at Tinkoff Credit Systems Bank:

I continued living my life, while Oleg returned to Russia to build a brewery. I felt a little awkward calling him: he’s always busy. But Oleg called me himself to find out how I was doing. Later he came back to America for a year. By that time I had my own businesses and I’d become more free and independent. We even had the time to take a trip together to Russia when he was closing a deal.

One day, when September was in full swing, we went to the Sanduny Bathhouse in Moscow. This was after Oleg had sold his beer company. Oleg said,

“Let’s go to Yalta right now. So we left straight away from the sauna and, wearing what we had on, flew to Yalta to swim in the Black Sea. We were back in Moscow two days later. In 2005 and 2006 we took quite a few trips together—around America as well as throughout Europe. Later Oleg offered me a job at the bank and I came. I had wanted him to hire me and had been waiting for it when he invited me. I sold my real estate and business before I left.

Chapter 29

Non-Standard Bankers

In early 2007 I began to realize that we needed someone to take responsibility for the bank’s management overall. I started looking and, as usual, I hired a recruitment agency, interviewing the candidates that they sent me. I probably met with ten hopefuls, which was not very many people and expensive. A lot of them were fairly strange. For instance, one particular nut job showed up—from Binbank I think—and asked for a salary of 1.5 million dollars.

In March I sat in the office and thought,

“Man—who will it be? Who will it be?” Suddenly I remembered an Englishman who worked at Visa. What was his name? John? Richard? Oliver? Yes: Oliver. Oliver Hughes. But he is a serious guy, I thought, the head of Visa. He’ll be a tough sell. Would he come to work at a bank that’s still taking losses? I started recalling the history of our relationship—which was not a simple one.”

As I have already written, I had approached Visa for the first time in the autumn of 2005, when I talked with Lou Naumovsky, the lead vice president of Visa for Russia and the CIS. He is a Canadian of Russian heritage.

“Guys, I want to get into the credit card business.”

“What do you mean?” Lou glared at me.

“I’m totally serious. I want to distribute plastic cards and offer people credit.”

“Have you ever been in the business before?”

“No, but if you take Rustam Tariko as an example, he wasn’t in the business a few years ago and now he controls eighty percent of the market,” I replied.

They started taking me more seriously than they had been. But Visa is a highly bureaucratized company and it turned out that MasterCard offered much more marketing, sales, and technological support. Visa, in contrast, could offer me nothing concrete. After our conversation had ended, we simply went our separate ways.

But in early 2007, we had another meeting. We were already issuing MasterCard cards and I thought that we might begin offering Visa cards as well—just to give our clients more options. Oliver Hughes was at the meeting, along with his deputy, Igor Gaidarzhi, as well as Georgy Chesakov and Artyom Yamanov. As usual, I started badmouthing them aggressively, telling them that they were losers, that they were losing to MasterCard in the credit card sector, and so forth. Oliver and I ended up having a heated argument with raised voices. It is rare for anyone to get on my case like that—and even rarer for a foreigner to do so, especially in Russia, in good Russian! The experience is burned into my memory. We did not come to an agreement then, but we became better acquainted and he became completely convinced that I was ambitious and reckless.

I highly doubted that he would agree to work for someone as high-handed as me. I thought that he would not, but here is another piece of advice: do not be shy. As one of the greats once said, “Be careful: if you really want something, it might just happen.” I would rephrase that: If you want something, make sure you give it a try. And so I picked up the phone, called Oliver, and suggested that we meet. Honestly, though, before I did that, I called a couple of other people with similar qualifications. They told me to stuff it and, finally, I made that third call—to Oliver. I expected him to react as the others had done, but instead he asked:

“Oleg, why do you want to meet?”

“I want to offer you a job.”

“You know what? That sounds interesting. Let’s meet.”

I nearly fell off my chair. I thought he was joking. But another thought flashed through my mind: this Oliver Hughes is going to ask for ten million dollars a year.

We met at my office and came to an agreement really quickly. Maybe he was already planning on leaving Visa, which would explain why he was so quick to make a decision. He had worked there for nine years at that point, which is quite a long time. Or maybe there was something about me that he liked. Doubtless, he was attracted to the project itself and the people involved in it. He agreed immediately, in any case, at our first meeting. He said that he would be ready to start working in two months and he named his price. Oddly enough, I did not negotiate with him. Twenty minutes later we had our top manager.

On April 27, Oliver left his post as Visa representative for Russia and in June he started working at the bank. Prior obligations to his previous employer entailed that he was not able to start working for us right away.

The news caused a storm in the market: people did not understand and are still unable to comprehend why he left Visa and came to work with us. People often ask about it. In all honesty, though, people question it less, now that three years have gone by. Our results speak for themselves. At the time, however, everyone was shocked. A man who had worked for eight years as the head of Visa switched jobs to work at a small bank under the management of some sort of crazy person.

I agree with Marx’s assertion in Das Kapital that English managers are in charge in Russia. They were already in charge back in the nineteenth century. And it is true that if you see a good manager, he is usually an Englishman. The Russian people need Englishmen. There is still so much to do before our own managers reach maturity. I do not know what Skolkovo and other schools are up to but, objectively speaking, our achievements in the area of management are still mediocre. In the twenty years that I have been in business, I have seen a lot of managers and entrepreneurs and I can make comparisons and discuss the issue. Anglo-Saxons—the British, Americans, and Canadians—are the best of the best. I like everything to have its own place on the shelf. In my cabinet, the vodka must be Russian, the cars German, the businessmen American, and the managers British.

Oliver’s wife is named Valmay. She was born in Wales. They have an interesting daughter, Maggie. Oliver used to be a punk. I even have a picture of him with a mullet. As I got to know him better, I realized that I had made the right decision: he is my kind of person. Just imagine: here was a foreigner who had spent 10 years in Russia with his British wife. I do not know very many foreigners who have spent that much time in Moscow without trading their foreign wife for a Russian one. I do not want to give a detailed account of why this happens. I am just stating a fact. I once told New Zealander Steven Jennings, head of Renaissance Capital (and I do not mean to jinx Oliver here) that he was the only foreigner living in Russia who lacked a Russian wife. Three months later he had divorced his Canadian wife, Tina. I respect Oliver though. It is easy to come to Russia and find a Russian girl, aged twenty years, say, with long legs—a blonde or a brunette—who is simpler, more compliant, and easier to control than women back home. Oliver never took the easy path, however. He is a very conscientious, principled person. I liked him for his punk convictions and the fact that he is alive and real and not some kind of British bourgeois with a golden spoon in his mouth. I had been a nonconformist in my own youth, too—back when I had strange haircuts and wore badges with pictures of Viktor Tsoi on them and hung around the meeting place near the Kazan Cathedral in St. Petersburg. Oliver had traveled the world. He had lived in cheap motels, been to Vietnam, Uzbekistan, Azerbaijan, and Afghanistan. When I went to Morocco, he recommended a number of sights that I simply had to see. It seems like he has been everywhere. He does not choose the Maldives or Hawaii, either, but prefers places that are somewhat dangerous. He is interested in artifacts and has been on archeological digs in search of sphinxes in the Crimea. He is a very interesting individual. I am very happy and grateful to God that he has brought such good people into my life.

Oliver and I still work and grow together. There have been a couple of difficult moments over the past two years, but on the whole everything has run smoothly. I am pleased with him and think he is also pleased with our cooperation. Oliver is my partner, just like the other upper management at our bank. One of the conditions for growth in a company consists in having your top management as partners and so keeping them interested in growing capitalization and profits. Our top ten people are all shareholders in the company and this makes our model more sustainable. It is one of our strong points.

The Human Resources Department at Ernst & Young helped us develop this approach. In particular, Tim Carthy is a very talented HR specialist. I recommend him. We are very pleased with the results of our cooperation.

Guys, you have got to motivate your staff. Russian businessmen, entrepreneurs, and managers are some of the most talented that there are. I have lived in America and in Italy, but I have never seen more talent than in Russia. Ours is a problem of motivation. Power is not correctly distributed and priorities are not set as they ought to be. A Russian, properly motivated, is priceless. You can look at many successful companies—Yandex, Kaspersky Laboratories, 1C, Magnit and others. As a rule their success derives from the fact that management and staff are appropriately motivated. It takes more than big sums of money to motivate people. I know some companies in the oil industry with partial state ownership, where the top manager earns fifty thousand per month, but where people nevertheless do not give a shit about the company or about the work that they do. Money is not everything. You need comprehensive motivation. I have already talked about office trips in this connection. There is no need to view such things as certificates of achievement or the practice of displaying photos of top-performing staff as mere relics of passé socialism. The need for morale-building and job evaluation is still with us. All of us are vain and like to have our egos stroked.

On May 15, 2007, all the bank’s systems were up and running. In terms of technology, we were ready to seize the credit card market. In May, we did a test mailing of 75,000 invitations to potential clients, most of whom were from Volgograd. The first response consisted in 1,500 card applications, some of which we approved. In the summer, we started mass mailings, sending out about 200,000 letters per month.

* * *

At the same time that I was searching for managers, I was also looking for investors, understanding that I could not lift the bank by myself. I could build it and invest an initial fifty to sixty million, but a business requires funding and needs to attract money from the market, the very money that is then to be dispersed via the credit cards. For this, we would need major partners. I talked to everyone in the market: Citibank, Morgan Stanley, and JP Morgan, for example, but I could not find anyone better than Goldman Sachs.

For some reason, their managing director, Julian Salisbury (who is now in charge of all of Europe and Asia), believed in me from the start. We met for the first time in February 2007 and in April we were already signing the Term Sheet, which consisted of preliminary agreements for the transaction. Next, they had lawyers review the document and, in September, just as the mortgage crisis was starting in the States, we closed the deal.

Goldman Sachs made a proposal for the purchase of a stake in a bank that had not yet issued a single card. That is to say, we were essentially nonexistent. They invested in our technology, in the team, and in our own faith. Indeed, ours is the only bank in Russia in which Goldman Sachs, the largest and most successful investment bank in the world, holds a stake. Julian said,

“We’ve been in the Russian market for a while and I look at five or six projects a day—and not just in the financial sector. But this is the first time that I have seen a project with not only a business plan, but a feasibility study as well (ours was done by Boston Consulting Group)—all this in addition to MasterCard Advisors’ involvement, a strategic plan, a team, the technology, and the know-how.” This was inspiring to hear. They were basically investing in a startup. It was a venture investment in a paper-and-pencil company. The people at Goldman Sachs are very careful about their reputation and they spent the whole summer doing due diligence on us. In the end, Goldman Sachs offered to buy a fifteen percent share in the bank for fifteen million dollars. In short, our bank, which had not even commenced operations, was already valued at one hundred million dollars.

On September 1, 2007, I ended my vacation in Forte dei Marmi, boarded a plane, and flew to London. I attended a very brief meeting at Julian Salisbury’s office. He was very busy and Ion Dyagtoglu was the main person in charge of the transaction. We sat in the conference room and looked out the window. Ion said,

“The crisis has started.” When people talk about the crisis in Russia, for some reason they take 2008 as the starting point. For me, though, it is absolutely clear that it all began in the summer of 2007.

Ion said, “What’s going on in the States is a nightmare. Everyone’s defaulting on securities. The markets are falling. And so we can’t buy the stake for the amount we discussed before. You’ll have to lower the price.” I was furious. We fought intensely. But rage is useless in negotiations. Then Julian came in. I had brought Valentin Morozov, our financial director, with me. Six months later he ran away and joined the staff at Sberbank (he literally ran away—there is no other way to describe it). Valentin tried to bring the conversation around to a more rational tone, but I grew even more infuriated. What a waste of time!

I jumped in a cab and rode to the other side of the Thames, to the Baglioni Hotel, where I had lunch with Nicholas Jordan, at that time the managing director of Lehman Brothers in Russia. Nicholas is brother of the famous Boris Jordan, who organized Renaissance Capital in 1995 and now heads up the Sputnik Group.

While Nick and I ate lunch, he said,

“Listen, you have a good proposal, but I think that we’ll give you a little more and we’ll close this deal. We cannot do so, however, until closer to the New Year. If you want to move faster, you’ll have to accept their offer.” I appreciated Nicholas’ honesty. It was the professional approach to take.

Two hours later I returned to the Goldman Sachs office. I said to Ion,

“Let’s make the deal—at the price you’re offering—but let’s break it into two payments. Ten percent now and five percent next June. If all the indicators line up with the business plan, then you’ll buy the rest and the price will compensate for the discount that I’m giving you today.”

He agreed.

Dear ladies and gentlemen! My fellow businesspeople! Remember that there is no such thing as a dead-end situation. There is always a way out. You have to offer an original proposal and usually you will find the approval you need. Of course you cannot disregard the role played by my meeting with Lehman Brothers. You must understand that I orchestrated a leak of that information. I still made a compromise though.

We signed the deal right inside the Goldman Sachs office at 133 Fleet Street. Then we went down to the bar and the rational Ion did not buy the most expensive champagne. Thus Goldman Sachs became my partner. Two and a half years have passed and I am still proud to be working with this bank. I am also very happy that providence and intuition did not desert me that day. Praise God. Imagine how things would have been had I made a deal with Lehman Brothers, considering that they were to collapse little more than a year later. It was after this giant’s bankruptcy that, in September 2008, markets all around the world began crashing and Russia really began to feel the global crisis.

Goldman Sachs did not bring a significant amount of material resources to the company, but they gave us technological and methodological help. They’ve been a support to us. I always feel a lot more confident at meetings, too, when our Goldman Sachs representative, Maxim Klimov, is with me. We look more serious and presentable. It is as though the bank has been stamped “Approved by Goldman Sachs.”

Why did the others not believe in us? Well, it is probably because the people at Goldman Sachs are smarter than most. Or maybe it was in the stars. I am very thankful to them and I know that they will earn huge money on their investment. Their stake is already worth much more than it was at the outset, in spite of the crisis. I am simply angry that the other companies I approached did not even want to talk to me.

I am often asked for advice via my blog. My story, from beginning to end, is made up of pieces of advice. But if you want something more explicit, then here you go: you ought to associate with the wise and not with foolish people!

In September, immediately following the closing of the deal, we began to send out mass invitations in earnest—in the millions. The response to our mail-outs was meager. People returned their applications incomplete or completed the forms incorrectly. Some included profanities, directed at me personally, in their applications. People tried to insert the cardboard mock-ups of the cards into bank machines; bankers from all across Russia called us and asked that we not send out any more of these “cards,” as they were getting stuck in ABM’s. Some clients, after getting the card, would go to the bank machine, withdraw the entire credit limit, and then throw the card in the nearest trashcan. It appeared that our direct marketing approach was connecting us with the most financially irresponsible people in the country.

Gradually, we began to acquire more clients. It was obvious that the money we had would not last long. The bank’s business consists of buying money, cheaply, and then selling it for more. Where could we borrow more though? We do not have offices. Consequently, we could not serve clients like a full-service bank. The capital markets left us with no options. We had to issue bonds. In the fall, though, it became clear that people with money preferred to keep it to themselves and that the Western markets had closed their doors to Russian borrowers entirely. The last few months of 2007 became a waking nightmare for us.

We had planned to issue bonds prior to the U.S. mortgage crisis, but the offering was only made in the fall. On September 13, the Central Bank registered the circulation of bonds worth 1.4 billion rubles. I selected Deutsche Bank and KIT Finance as the placement organizers.

We set a date for October 23. Prior to the crisis, every time bonds were issued there was always a high level of oversubscription. It just looked bad if a company was unable to place an issue. We were able to sell only eighteen percent of the issue, in spite of a really attractive interest rate at eighteen percent annually. Objectively, the market situation was poor and it is unlikely that someone else could have sold bonds with greater success than we did. Nevertheless, our reputation took a hard blow. It was as if the investors did not believe in Tinkov.

We decided to complete the circulation at a later date. I called all of the financial workers that I knew and tried to convince them to take part in the circulation, but this achieved little. All together, we placed four hundred million rubles worth of bonds. The remaining six hundred million had to be placed on our own books, that is, we had to buy them out. The investors simply scattered.

This was a serious blow. I sat in the office at my round table, just crushed, and I cried. Of course, I am Siberian, a strong man, but I had tears running down my face. Why the hell were these bitches willing to buy shit? I did not understand it. A year later we saw all these shit retail and shit construction companies, which had been built on debt defaults.

An acquaintance of mine bought one hundred million dollars in bonds from each of ten companies, including mine. Out of the billion he invested, nine hundred million ended up in default. We were the only ones to return his money. Why were they buying from others, but not from us? What was with this attitude towards me? Why does everyone hate me? Why do people think that Tinkov is worthless? I did not understand and so I sat there and cried. The only person from the office who came in to see me was Oliver Hughes and I saw that his eyes were wet too. We just embraced and I said,

“Fuck it, we’ll win this war!” From that moment on I have always felt Oliver’s support and I hope that he feels mine as well—and we will continue this goddamn fight. We will prove to everyone out there that we are not in this business for nothing.

That fall I lost some friends. One of these was Alexander Vinokurov. Not only had he organized the bonds for me, he was also my friend and we had spent a lot of good times together. In London I had introduced him to Natalya Sindeyeva, co-owner of the radio station Seryebranaya Dozhd. I was at their wedding. They have a good family and I am happy for them, but my personal relationship with Sasha is unlikely to become friendly.

He called me once at one o’clock in the afternoon, when the trading day was wrapping up at 4 p.m., so I asked him:

“Sasha, buy a hundred million from us, or at least fifty. The investors are calling the brokers and telling them that KIT Finance, who organized the circulation, is not looking to buy, so they certainly do not want to buy any.”

“Oleg, I have a mortgage, you know that we put all our money into it.”

“Please, can’t you at least support us from a PR viewpoint. You can sell the bonds later.”

“Listen, I don’t believe in your idea. Credit cards are shit. You’re lying. You love to lie, but in reality things are not going well with you. And Goldman Sachs isn’t your partner, they’re just fronting you.”

When I heard this complete bullshit I hung up the phone. So I would like to say something here to Sasha: You were unable to buy fifty million rubles in bonds, but now you are broke and you owe the bank tens of billions. The problem was not that you failed to help out a friend. The problem is that you did not buy those bonds, when they were being sold by your bank.

During that circulation I lost another two or three people that had been friends, but I am thankful to the people that helped me. Anton Bolshakov bought one hundred million in bonds. Troika Dialog approached the issue professionally and Boris Jordan did as well. They believed in us, earned their annual eighteen percent, and received their money back exactly one year later. We were one of very few companies that borrowed money in 2006-2007 and then perfectly fulfilled our obligations on the one-year offer.

I was worried. The surname Vinokurov had become a red flag for me. A year later, in September 2008, justice was served. I opened the newspaper and read that he had lost it all. Did I gloat? To be honest, I did. At that moment it was really happy news for me.

The idea behind entrepreneurship is a simple one: if you do not take risks, you will never drink champagne.

Here I am at the wedding of Alexander Vinokurov and Natalya Sindeyeva, whom I had introduced to one another in London. To my left are St. Petersburg entrepreneur Alexander Aladushkin and actress Alla Dovlatova.

Oliver Hughes, president of Tinkoff Credit Systems Bank:

The fact that Oleg approached this project as though it was normal, non-financial business was really the right thing to do. What difference does it make if your business is a bank or not? A bank is very much like any other business. The international and universal principles underlying the creation of businesses are the same: common sense, strategy, tactics, organizational structure, recruitment, and execution.

The original concept was to attract money from the debt markets and put that into our portfolio. It’s a totally normal task. But it became our Achilles’ heel, because the debt markets had died. This was a global problem. Even so, our very small startup attracted over two hundred million dollars during the deepest crisis since the Great Depression. Huge sharks and small fish crashed and burned during the crisis, but we’re alive. We are an absolutely unique project. There are similar banks in the world, but the specifics of the countries, the legal requirements, the quality of the consumers, and the level of development of the banking sector, all play very important roles. Other projects may bear some superficial resemblance to ours, but they still differ. In my view, we are a bit like Capital One in its early stages, both in our approach and with respect to the technologies we use.

Konstantin Aristarkhov, member of the board of directors of Tinkoff Credit Systems Bank:

The fact that Oleg is able to organize, establish, fine tune, and give a burst of energy is indisputable. What’s unique about him is his meticulousness. If he enters into any sort of relationship, in any business, he’s always at the crest of the wave; he knows everything about it, he pays close attention to detail and he’s always aware of what’s going on. This is so, not just in his own work, but in everything that’s involved with the business he’s trying to build. It takes him only a moment to perceive every facet of a situation. I’ve never seen these one-of-a-kind qualities in anyone else. Plus, his mindset is undoubtedly Western, an awe-inspiring trait in a guy from Leninsk-Kuznetsky— notwithstanding the fact that he lived in St. Petersburg and worked the black market there. He picks up on everything in the blink of an eye and he correctly and appropriately evaluates and understands what is going on in the world—and why. A lot Russians that have spent time with foreigners have a habit of sucking up to them. Not so with Oleg. He’s straightforward and simple and has never sucked up to anyone in his life. He always judges people fairly, regardless of their gender, race, or ethnicity. He sees them through to the core. This quality also helps him in business. And if you look closely at him, you’ll see he doesn’t offend people. Sometimes he says things that may seem offensive, but on the whole, if he doesn’t have anything else against a person and sees his good qualities, he’ll never say an unkind word. If he does, in any case, instead of being offended, you need to listen to what he’s said and think about it and you’ll find there’s truth to his words.

For instance, he might say something sharply to his wife Rina, but she doesn’t even notice it any more. And even if he says something hurtful, you try, as you might with anyone, to imagine yourself in his shoes; you analyze what he said and realize that there was no offence in it at all. Usually it’s deserved. But if it wasn’t and you answer him constructively, staying on topic, and he agrees and admits he was wrong, then he might even apologize—if discreetly—ten times over. Because he knows his own personality and knows that he can flare up. He won’t keep fighting with you. He’s too classy to go on and on about something. If he’s at odds with you on some point of substance, all you can do is ask for an explanation. But if he himself is wrong, he backs down and doesn’t seem to find it difficult to admit that he’s made a mistake.

Chapter 30

How to Grow in a Crisis

We were barely able to place the bonds and things were still very bad. Late 2007 was the most difficult period that we have gone through to date. I had very little money left in the bank. We did not have money for operating costs or for expanding our portfolio. Through all kinds of craftiness and careful liquidity management, we got through that stage. But for a while the management were not getting their salaries.

We met constantly with investors, hoping to get some debt financing. In the end we managed to secure a syndicated loan in the amount of sixty millions dollars. A Goldman Sachs shareholder provided twenty million, the Swedish Vostok Nafta fund supplied thirty million, and the American hedge fund Blue Crest offered an additional ten million. We started negotiating with the latter two on a sale of stakes in the bank as well.

In late December, Julian Salisbury of Goldman Sachs sent us a famous letter that is still kept in our office.

“We’re giving you more money. Use it as you have the other money we’ve given you. We believe in you, but it’s quite possible that this is the last money the bank will be able to attract. A serious crisis is coming.” That was the gist of the letter.

A lot of people ask me what it was that made TCS ready for the crisis. It is because we have partners who send us letters like that one. We never lived for today, but always lived for tomorrow. We saved money, penny by penny.

At the end of a nerve-wracking 2007, things eased up. The bank received money to feed into our credit card portfolio. Having skied through the holidays, we returned to the office at 1 Volokolamsky Proyezd, close to Pokrovskoye-Streshnevo Park. What did the year have in store for us? First of all, we needed to fulfill our obligations so that Goldman Sachs would buy the remaining five percent of the bank—at the highest option possible. Secondly, we needed to find more money and keep growing.

We could talk to Western partners with confidence, but the Russian market did not understand us. “Tinkov’s got a Bank? Ha ha ha! You’ll see what happens to them in a year.” “They don’t understand the banking business. You’re not stuffing pelmeni anymore!” “Sending cards in the mail is so last century. People don’t want to activate cards that they didn’t order.”

In one sense, we did not even try to prove the skeptics wrong. There are a lot of bankers out there that are still convinced that we hand out our cards to anyone and everyone. In reality we have never done anything of the kind. We have always sent out proposals, inviting people to become a client and then, only when the person has filled out and sent in the application, will he receive a card—and only if he is approved for it by the bank.

The press did not help us either. I hope that this was due to misunderstanding and not for any other reason. On March 24, 2008, the newspaper Kommersant published an article called Tinkoff: Overdue Loans. The piece claimed that TCS had more overdue debt than any other bank, amounting to nearly thirty percent of money owed the bank. The journalist wrote:

According to data registered in the turnover balance sheet of the bookkeeping accounts (form 101) of Tinkoff Credit Systems Bank, as of February 1, 2008, the bank’s total corporate credit portfolio amounted to 339 million rubles, while overdue debt on credits to legal entities amounted to 94.95 million rubles. These data are available on the Bank of Russia’s website. The percentage of corporate credits overdue as of February 1 was 28%, while overdue retail credits made up 1.58% of the total loans given out to individuals (886 million rubles).

Analysts note that these results are doubly surprising, given that Oleg Tinkov’s bank still presents itself as an exclusively retail-level institution. Now, however, it has been revealed that a third of TCS’s credit portfolio is made up of loans to legal entities. On top of this, the value of their overdue loans has beaten all records set in the consumer loan segment, where the levels of return have traditionally been high.

Hogwash! The story was not worth the paper it was printed on. In reality we had bought Khimmashbank, which had offered credit to companies and had begun expanding our portfolio with physical entities. Accordingly, the share of corporate credit in our portfolio had begun to shrink and, as a result, we were left with three bad loans, amounting to around one hundred million rubles—and so they remained unpaid. But when we bought the bank we knew that there were some problem loans and that legally speaking they were on the balance sheet. As far as the bank’s actual business went, this was not a problem at all. You must understand, however, that people read things diagonally; the see a negative headline and the words “30% of loans overdue” and think that things are not going well for the bank. In reality, though, the amount of overdue loans relative to the value of our entire portfolio was insignificant.

It is a good thing that foreigners do not read Russian newspapers. In the spring we held talks with a number of creditors. The money we had received from the syndicated loan was put into our credit portfolio. We wanted to keep growing. The proposals that we received from a few of the investment banks were quite ludicrous. They wanted a lot of shares at a low valuation of the bank and enormous interest rates on the debt instruments.

But Vostok Nafta investment fund offered us an interesting proposal: namely, to place Eurobonds on the Stockholm Exchange. Vostok Nafta is a very serious structure, run by one of the richest families in Sweden, the Lundins. I made Lukas Lundin’s acquaintance through Goldman Sachs. Our relationship has turned out to be a friendly one.

We did not have any audited statements though. We did not have any in 2003 either, when we issued bonds for the expansion of the beer company. I remembered those ruble-denominated securities and I started hoping for a miracle. At first we hired super talented people for the development and execution of the idea. Then we agreed with Goldman Sachs on their purchase of a stake in the bank. And now, in a state of ongoing losses and during the global financial crisis, we decided to issue Eurobonds. The crisis started in the summer of 2007. The capital markets were closed for Russian borrowers in particular. Was this craziness? Absolutely. But let me explain what Eurobonds are. They are not necessarily bonds issued in Euros, they are any bonds issued in a currency other than that of the issuing company’s home country. So yuan bonds from Gazprom or ruble bonds from Barclays count as Eurobonds. In our case we wanted to attract money in euros—and why not?

In June 2008, there was a so-called “window,” a moment when the market temporarily started to function again. Why did it happen? Do not ask me. I do not know. When it happened, though, a number of banks—attention!—issued Eurobonds: VTB, Rosselkhozbank, Sberbank, Bank of Moscow (all of which are under state control), Home Credit (owned by the Czech billionaire Peter Kellner) and…Tinkoff Credit Systems.

Vedomosti features a column entitled “Company of the Week.” In late June 2008, my bank was profiled as one such a company. Vasily Kudinov wrote in the column:

A lot of Russian banks and companies don’t even attempt to offer their debts to foreigners. That’s why the most recent loan acquired by TCS-Bank is doubly important. It would be unseemly for a bank not to have its own expressive credit history when the credit histories of its clients are what it falls back on.

Now TCS-Bank will have to work from the funds that it has attracted. It needs to find clients, send them credit cards, and convince them, not only to use them, but also to pay the bank back in a timely fashion. TCS-Bank has been working on this for nearly a year already and to this point its credit portfolio has barely topped one hundred million dollars. This is not much for a bank that hopes to become one of the top three in the Russian credit card market. However, Tinkoff has managed to stand shoulder to shoulder with Sberbank, which also issued Eurobonds just last week. We will have to wait and see whether TCS-Bank can hold out in the same weight class with the largest bank in the country, which has also begun mailing out credit cards.

It is truly a phenomenal story: this infant bank pulled up alongside Sberbank and VTB. Of course Lukas Lundin and Vostok Nafta fund helped us out. They believed in us so strongly that they valued our business at more than two hundred million dollars and bought a fifteen percent stake. And since Vostok Nafta is respected in the business world, their participation in the circulation also attracted other investors.

Of course, credit should not go to the Swedes alone, but to Oliver as well. All of the capital-attracting deals came about by way of a kind of road show. Oliver and I toured America extensively and then he traveled all around Europe on his own. Imagine telling the same story for two weeks, five or six times a day! You might wonder what the big deal is. Believe me, though, by the third day, even I, sitting beside him, was shocked. I did not speak much. Oliver gave the presentation in English, but even I got sick of listening to it. It is an exhausting and very serious job.

Having successfully placed the Eurobonds, we faced the crisis fully armed. In September 2008, when the banks were collapsing like houses of cards, we had around 130 million dollars in our accounts! Everyone was whining and complaining, but we tightened our belts as effectively as we could and kept on working. What had we done? Because we have no branches and therefore none of the associated costs, we simply scaled back our overhead for the mailings and cut other costs.

We started placing the money we made into our portfolio. On July 1, 2008 our credit portfolio was worth 2.5 billion rubles; by the first of October it had grown to 3.9 billion; and, as of January first, it had reached 4.8 billion rubles. In other words, we nearly doubled our portfolio at the peak of the crisis, thanks to the Eurobonds we had circulated.

Beginning in November 2008, the bank became profitable, which the market did not expect. Between the purchase of the bank and our first profit, exactly two years had passed, which can be considered a good result. That is how life goes for us: we keep fighting and a few more people believe in us—but even more have yet to start believing. Their unbelief has filled me with anger, strength, and a desire to fight to prove them wrong. People do not believe in me? Well good for them. Now let me keep doing what I think needs to be done.

Tinkoff Credit Systems expanded its credit portfolio in 2009 and earned nearly twenty million dollars in net profit.

In addition to our usual credit cards, we have also begun issuing co-branded cards and debit cards.

 

My lifelong dream has come true. I am a banker now.

Sicily trip 2008: the Bank Tinkoff Credit Systems watched Team Tinkoff Credit Systems race live.

 

On Corporate Culture

Once a year, I take our key team members on a trip abroad. We started the tradition back in the days of Daria, when we took trips to Bali and Hawaii. Usually we rent a huge villa so that we do not have to stay in a hotel. We rub elbows and feel the camaraderie. We take our wives and sometimes—less often—our children. The company pays for everything. In 2004 we took a memorable trip to Jamaica. We rented the villa where Ian Fleming lived and wrote James Bond. It’s a massive villa. (By the way, it’s not too expensive, and I’d recommend it; it was a lot cheaper than getting ten hotel rooms; there are housekeeping and food services.) Our wives spend time together and see who it is that their husbands spend time at work with, why they spend long nights away from home, and who they spend those nights with. Nothing brings a team closer together than company trips like these. We all have a rest and let our brains air out—although in the evenings we do sometimes do some business brainstorming. In all five of my businesses we’ve come up with good ideas while smoking cigars at villas or on our trip to Necker Island, after we sold the beer business in 2005.

In 2008 we went to Sicily and in 2009-2010 we went skiing in Verbier, where we rented out Richard Branson’s chalet. The last three trips have been with Tinkoff Credit Systems.

I like the expressions “There’s time for business and an hour for pleasure” and “He who rests well, works well.”

But company holidays should not be abused. There are companies that organize trips like these two or three times a year, trying to develop staff loyalty. When I was running Petrosib I did the same thing, taking my top managers and their wives all over the place. When I was skiing, so were they; when I was sailing, they were there with me. That’s not right, though. People need their personal space.

Chapter 31

Get out of the Restaurant!

After I sold my brewing business, I lost nearly all interest in my restaurant chain. In fact, I had wanted to sell the chain to the Belgians, but InBev, huge company that they are, had no need for it. In 2005, the restaurants reached their seventh year—which is quite old when you considered that I am typically interested in a business for between four and six years before I tire of it.

I began studying the market to see if it would be possible to sell the restaurants. I wanted to get twenty-five million dollars for them. In my opinion, this was a fair asking price. In 2004, the chain’s turnover was twenty million dollars. In the same year the chain had grown by fifty-four percent. It is clear that some of this growth was connected with two new restaurants that we had opened in Yekaterinburg and Sochi. Nevertheless, though, I sincerely believed that the chain’s revenue would reach one hundred million dollars within a few years, which is a significant number no matter what business you are running.

By early 2005, my chain consisted of eight restaurants: one each in Moscow, St. Petersburg, Samara, Novosibirsk, Ufa, Nizhniy Novgorod, Yekaterinburg, and Sochi. Two more locations were in development.

On March 21, 2005, we became an international chain when we sold a franchise in Almaty. The restaurant covered two thousand square meters and the brewery’s output capacity was 50,000 liters per month. Taken together, the three main floors and the summer veranda on the roof could seat three hundred guests at once! There were only 150 staff in this huge restaurant.

On June 11, Tinkoff Kazan opened. We rented a 1000-square-meter space in the former home of merchant Leonty Kekin, a significant historical site that was built in the early twentieth century. It took us five months and 1.7 million dollars to remodel the premises and install equipment capable of producing 120,000 liters of beer per year.

As we were preparing the deal with InBev, I was holding talks with Troika Dialog aimed at persuading them to buy our premises and then rent them back to us. In the West this kind of deal is known as a sale‑lease‑back. In September, the real estate investment trust Kommercheskaya Nedvizhimost (“Commercial Real Estate”), under the management of Troika, bought the building on Protochny Alley in Moscow. In October we came to a similar agreement concerning the Yekaterinburg restaurant at 64 Krasnoarmeiskaya Street, which was completed in December.

Yekaterina Konstantinova, Troika’s real estate fund director, said then, “This is the first investment from the fund in a rapidly developing high-potential regional real estate market. We’re actively reviewing other real estate in other major Russian cities.” And they really were looking over our properties! In January 2006, we sold our building in Samara to the same fund and, in August, Troika bought our Ufa restaurant property from Uralsib Bank.

Essentially, by selling the properties, I was pumping money out of the business. As a rule, I was selling for three times as much as I had paid in 2001-2004. I put all the money into dividends. Some people might say that it is not good policy to drain money like this, but I disagree. It is bad if it hurts the other shareholders, or if the company is carrying debt. I was the chain’s sole owner, however, and so I acted as I saw fit. The company leased back these same buildings, immediately. Our customers felt no change at all. At the same time, though, I was pulling cash out of the business.

In 2006, we expanded the chain by a mere two restaurants. These were different in that, instead of my being the investor, someone else was involved. Thus, for instance, the owner of the Tolyatti Restaurant in Rostov-on-Don was Restoria, which belongs to Samar businessman Alexander Terentyev.

Jumping ahead a bit, I will say that later on both franchises had to be closed. Franchising does not work in Russia—not for now at least—and we did not prove to be an exception in this regard. Moreover, these restaurants’ owners failed to fulfill their contracts. In short: the whole thing was a nightmare. This was so with Terentyev in particular: although our work together had always gone well at the Samara location, the Tolyatti Restaurant did not function well at all. He got some politicians involved and ended up in a difficult financial situation.

In the same year I turned down an offer from Iskandar Makhmudov and Mikhail Zelman of Arpikom Holdings. Dmitry Gerkusov of KIT Finance Investment Bank had found these two for me after I had given him a mandate to search for a buyer for the restaurant chain. Arpikom offered me twenty-two million dollars for the chain, but in the end we simply did not click with Zelman. He was acting strange and, at times, provocative, so I turned them down. Did I lose? Of course I did; I lost a lot. Do I regret my actions? No, I do not. My principle is to do business with people that I like and to keep my word—or, as people in Leninsk-Kuznetsky would put it, to swear by what I say. If I had been more rational, I would have closed the deal. But if I think about whether, in the future, I would act differently in similar circumstances, the answer would definitely be no. Since the financial business was now my top priority, I began to look for another buyer and no longer worked at trying to expand the chain. In 2006 I began developing Tinkoff Credit Systems.

From the viewpoint of financial indicators, 2007 turned out to be the best in the chain’s history. Turnover amounted to 800 million rubles. The restaurants in Kazan, Sochi, Moscow, Samara, and Yekaterinburg were doing well.

Since then, only one new Tinkoff restaurant has been opened—at 23 Varshavsksaya Street in St. Petersburg. We invested close to forty million rubles in the project: a 1000-square-meter space seating 300. Of course, the idea was to have it designed in such a way as give it a different look and feel from the restaurant on Kazanskaya Street. The walls were finished in Cumaru wood, the bar in aged natural marble with brass ceramic fixtures. Tabletops were made of oak, and we hung projectors from the ceiling. We used crimped wire mesh, semi-transparent material, beer kegs, and faux gold. The restaurant ended up being beautiful and modern, but the financial indicators connected with it did not make us happy.

* * *

In 2007, Oliver Hughes, the president of our bank, introduced me to his friend Gleb Davidyuk, a partner at the Mint Capital fund. Funds like this one deal in private equity; that is, they buy shares from non-public companies, help the companies to grow, and then sell their stake in an initial public offering or to a strategic investor.

At this point, Mint Capital had already invested in a number of Russian companies. These included, for example, UCMS, Fruzhé, Moné, A-Dept, Verysell, Maratex, Eleksnet, Gameland, ABBYY, Studio 2B, Advakom, ParallelGraphics, and jNetX. Mint Capital chooses companies that are undergoing active development, companies with annual revenue of ten to one hundred million dollars. Tinkoff met their criteria and they began to consider a partnership.

In August 2008, after having reviewed the idea, Mint Capital invested ten million dollars in the restaurant chain, buying twenty-six percent of the company’s shares for regional expansion. Maxim Sokov, who worked for Oleg Deripaska, became a minor partner. Valentin Morozov, the bank’s financial director, had introduced me to Maxim. What happened next, however, resembles a Great Septembrist Revolution affecting the consumer sphere as a whole and the restaurant industry in particular. In autumn 2008, the financial crisis began in the country. Companies began firing people and people began spending less—as a result of which other companies had to fire people as well. Of course, it is not as though everything got underway all at once: the crisis had been developing for a long time in the global economy. Already in 2007, we saw that it was becoming more and more difficult to borrow money from banks, both overseas and in Russia. The sector itself only began to feel the effects of the crisis domestically closer to the end of 2008.

The crisis put pressure on the company’s weak points. All of the management’s mistakes began coming to light. In the preceding years, I had stopped active involvement in the company and, in my absence, the managers did not do their jobs well. They began to get wrapped up in new construction projects, which remained at a standstill for long periods and which were undertaken in locales where restaurants were not supposed to have been built in the first place. They prepaid suppliers when they should not have done so. The quality of the food did not always meet Tinkoff’s standards. Servers began treating guests poorly.

Gleb and I decided to replace Alexei Yatsenko, the general director. The first candidate for the position was a guy from McDonald’s, while the second, Yevgeny Shalaginov, was already in the beer industry. After the interviews, I was more inclined towards the first candidate, while Gleb felt that, because his entrepreneurial qualities were more highly developed, the second would be a better choice. In the end I gave in and we hired Shalaginov.

Later, we perceived that the company was in no state to rent properties at the old rates, so Gleb and I went to Troika Dialog to talk with Pavel Teplukhin.

“Pavel, you must understand that we won’t be able to continue suffering losses for long. Look at what’s happening in the world and in the country. It’s had a big impact on the restaurants. We’re losing money. If we close the chain, you’ll lose out on the rent we’re paying entirely. Let’s lower the rates.”

The negotiations ended with Troika agreeing to a substantial reduction in rent beginning on January 1, 2009. This enabled us to save money for the whole year, which is as it should be: in a crisis, property owners should be able to come to a compromise with their clients.

In February 2009, we were forced to close the restaurant in Rostov-on-Don. Why? After I had sold the beer business you could not find me in Russia. Consequently, it was not until much later that I learned of Alexei Yatsenko’s bad decision to open the restaurant in June 2006. The service industry has three rules: location, location, and location. Where a restaurant is located is of primary concern. The Don River’s north bank is the traditional recreational area for Rostovites, but we were renting 1500 square meters on the south bank. To make matters worse, the property was located in the commercial and office complex on Buyonovsky Prospect, in a district where the man in charge does not know how to do his job. Financial results there were mediocre at the best of times. They were even worse now that we were in the midst of a crisis.

In March 2009, we sold the Novosibirsk restaurant franchise, with all related equipment, to the investment company Blok, which is headed up by Voldemar Basalayev, the same man I had worked with in 1991, bringing cars to St. Petersburg from Siberia. The restaurant owed money to the landlord. Hence, we came out of the deal, basically, with nothing apart from income amounting to five or six percent of turnover, being the price paid by the franchisee for the use of the brand.

At various meetings of our board of directors we took these unpopular decisions: to close restaurants, to move our central offices from St. Petersburg to Moscow, and to cancel the construction of new restaurants in Moscow and Samara.

The company was in crisis mode. This was apparent, not only from the falling numbers, but from the flavor of our steaks, the smiles of our waitresses, and other small details. Russian consumers are extremely spoiled and so they immediately let us know what they thought of all this—by taking their rubles elsewhere.

I had had enough and I very nearly gave up. I did not know how to dig us out of this hole. At that moment it was all or nothing. It turned out that our confidence in Yevgeny Shalaginov as the man who would pull the restaurants out of the crisis was misplaced. In spring 2009 we decided to replace him. With whom would we replace him though? Our country does not have enough good managers. I began asking other restaurateurs for advice. Rostislav Ordovsky-Tanayevsky-Blanco, the founder of the Rosinter restaurant chain (featuring such brands as Il Patio, Planet Sushi, American Bar and Grill, and T.G.I. Friday’s), came to my assistance. He suggested that I talk to Marala Chariyeva, a former general director at Rosinter.

Gleb, Marala, and I went to the Moscow restaurant on Protochny Alley to introduce them to their new director. Basically, what I said to them was,

“So you’re dissatisfied. Some people are on strike, but look at you. Where will the money come from to pay you guys if no one is eating in the restaurant? And why aren’t they coming? Because our food is shit. It used to be delicious, but now it’s shit. You’re the only ones who can earn a living for yourselves; I am not going to invest any more in the company; if it goes under, it goes under. Whoever is unwilling or unable to work can get the hell out.”

The food really had started to taste bad. On top of that, we were faced with delivery interruptions, as a result of which certain menu items were unavailable. Unhappy customers began tipping their servers less. The servers, in turn, stopped smiling and no longer made an effort to create a pleasant atmosphere in the restaurant. Basically, a crisis had descended upon the company.

In order to get out of it, the first thing we had to do was to pay all outstanding salaries, which we did. We also brought Andrei Shinkarenko of Deloitte on board as financial director. It was clear that our staff was back on track, but it was uncertain whether the business would survive. For my part, I grew more and more weary of the restaurants. They were taking up a lot of time and effort and that was taking a toll on my main business, Tinkoff Credit Systems. It sapped my strength and wore down my nerve-endings. Several times, Gleb Davidyuk and I came close to fighting in a manner from which there would have been no recovery.

In June, I was ready to leave the business once and for all. I offered my stake to Gleb. He turned me down. But then I talked with Maxim Sokov and he and Gleb came to an agreement. We ironed out all of the formalities between July and September and, on September 24, 2009, I published this entry in my blog:

Friends, I’m pleased to inform you with satisfaction and some slight nostalgia that I’ve sold my Tinkoff restaurant chain. A week ago, when I wrote about the chain in my journal, I talked about how every business has it’s temporal cycle (period). I think that in the case of this business the period has ended. In reality, there was no reason to sell the chain, particularly at a time when the price is low and the company’s profit generating capacity is high—although currently it is barely breaking even. A good team of managers has been brought in, headed up by Maralа Chariyeva (formerly of Rostik’s). The shareholders, headed up by Gleb Davidyuk (Mint Capital Partners), are strong and brave.

But I have always had a fondness for acting irrationally. I think that I will feel more calm and balanced emotionally now, though, which is a lot more important than money to me. I’m tired of this business and, in reality, it never really belonged to me. The restaurants were supplementary to my factory and beer project—part of my marketing strategy.

I sold the brewery business long ago. I made a mistake by not selling it to the Makhmudov-Bokarev team two years ago, when its value was significantly higher. But we all make mistakes and I am no exception. I never considered myself a restaurateur and I couldn’t stand how detailed and procedural the business was. It wasn’t for me. So now I’ll feel good; I will not have to think about it anymore. I can concentrate on new things. Nevertheless, though, we really built one of the best chains in all of Russia. And this chain, headquartered in Moscow, had eleven locations, each of which adhered to the standards set in St. Petersburg back in 1998, and all of which were owned in their entirety by a single person! We covered four time zones and eleven provinces. I do not know of any other examples like that; but nothing is unique. The industry essentially consists of franchising and local partnerships. Times have changed now; there has been a paradigm shift, so to speak. The chain needs a new strategy, new strength, and new ideas. The new guys have all of these things.

I’d like to thank everyone who worked with me in building this chain! I remember you all and love you and I hate those who stole from me. I remember you too!

I still believe, in all sincerity, that the Tinkoff beer brewed in the restaurants—especially the unfiltered and unpasteurized varieties—is the best Russian beer there is.

I will continue to eat at my (?) restaurants. I wish all the best of luck to Gleb and Maxim. Guys, support them with your rubles.

Having sold the restaurants, I was finally able to breathe easy and focus all of my attention on the bank. The second St. Petersburg restaurant was closed after I had already left. As things turned out, its location was all wrong; the company was forced to write off its investment there. There was no electricity in the neighborhood and when a restaurant runs off a diesel generator its operational costs are huge.

My history in the restaurant industry taught me a great deal. I am convinced now that, in accordance with the laws of marketing, every business has its own life cycle. Perhaps you you’ve hear of “morning star,” “milking cow,” and “sunset.” Now the life cycle of my restaurant business was winding down. Of course, that does not mean that the new owners will not manage to breathe new life into it. They might well go on to introduce new ideas and marketing approaches, to freshen things up—as they say in the West.

I came to be convinced that the restaurant business was simply not for me. The business is a pain in the ass, consisting of a bunch of tiny details. Restaurateurs are a breed of their own, too. I respect them, but I feel sorry for them as well. Look at how famous and not-so-famous restaurateurs act and talk when they are in their own restaurants. Look at how they are constantly observing everything that is going on, how they do not really see you when they are talking to you, but rather see the kitchen, the service, and the tables being filled. These are sick people…

Nevertheless, the Tinkoff Restaurants experience was a real landmark episode in my story. This is so for a couple of reasons. First, in spite of the unfortunate way in which it all ended, I did do first rate work on the restaurants. Strangely enough, this was my most profitable business venture. I sold the buildings, used the net profits as dividends, and then closed the deals with Mint Capital. I put in two hundred thousand dollars, and got twenty million back! Any entrepreneur would envy me for this return on my investment. If the deal had gone through with Arpikom, then it would have probably been a world record return.

Second, the restaurants played a foundational role in the creation of the Tinkoff and Oleg Tinkov brands. People came to my restaurants, ate and drank beer, and so found out about me. Some people liked me and some did not; few were completely indifferent. This really helped us to grow. This was also key for our successful sale of the bottled beer business. I hope that this heightened profile will enable me to earn more in the future too.

I will never agree with those who say that the beer made in the restaurants is shitty. I would be willing to discuss this in connection with the bottled Tinkoff beer. I might even agree with some of the people who criticize it. But I think that the restaurants make some of the tastier, if not the tastiest, unfiltered, non-pasteurized beer in Russia—today as much as in the past. After all, Tinkoff brews their beer using very expensive Bavarian malt, which insures a very high level of quality. Even now that I have sold them, Tinkoff restaurants are the only place where I will drink beer.

If I want to drink some lively beer, then I go to Tinkoff, buy some “unfiltered platinum,” and order one of my three favorite dishes: dried smelt, calamari rings, or a meter of sausage.

The restaurant business demands attention to countless small details. This was not my thing, even though I made good money off the restaurants in the end.

In 2009, I decided to “turn off the tap” and put an end to my involvement in the restaurant industry.

With the girls at the opening of the restaurant in Sochi in 2004.

With Konstantin Aristarkhov and Otar Kushanashvili at the opening of the restaurant in Tolyatti.

Gleb Davidyuk, partner at Mint Capital:

This man has made a name for himself. He has created and sold a number of businesses. This is a man whose story is worthy of a book. He’s a living being with a head, two arms, and two legs that personifies a certain lifestyle. Does he fit in with Russian society’s social model? Not always, in my view. When society fails to see the behavior from you that it expects, then it becomes volatile in relation to you. So you have to learn how to control society’s attitude towards you, how to make it work for you and not against you. Oleg has recently spent a lot of time working to influence society’s feelings towards him—to render these favorable rather than harmful. Tinkov is a public businessman, which is a very rare thing in our country. When there is very little of some particular commodity in the market, then people’s interest in it is always great. There’s a deficit, to speak in Soviet terms. And you always want that thing of which there’s a deficit.

Oleg is at a crossroads. He is a product of a period of transition. He’s both a businessman from the Soviet Union and a twenty-first century entrepreneur. It is one hundred percent clear that Oleg is not part of the Soviet business elite, but neither does he completely fit in among younger entrepreneurs. This makes him interesting. He has a wide-ranging outlook on life—all the more so given his childhood in the USSR, which is a recipe for uniqueness.

Our businessmen are outsiders in the western world. They are misunderstood as though they are aliens. But people try to understand Oleg and he does a lot to enable them to do so. I’m sure that Abramovich has not been completely understood, although he has recently come much closer to that. Abramovich just bought England, but he has not proven able to completely integrate into Western society—regardless of how much money he has. Oleg has a sportsman-like approach to business. On the one hand, it is a matter of constant forward movement until the end, until victory is achieved. On the other hand, if things are not working out it is better to leave the track. He’s a tall, strong athletic person. He’s always confident in himself. It is always easier to do business with assets like these. Oleg tries to mold circumstances to his favor, rather than depending on them.

We had the best possible dialog when, just as the crisis was starting in 2008, we went to Troika Dialog to talk about the lease agreement. Pavel Teplukhin probably remembers the conversation to this day. Oleg shone. A normal twenty-first century businessman would have slacked off and not known what to say. But Oleg explained the trends in the restaurant industry in a clear and straightforward manner, in layman’s terms, showing Pavel the prospects for his real estate trust if we came to an agreement.

Chapter 32

Patriarchy Forever!

Rina, Dasha, Pasha, and Roma are my family. They are a big motivator for me, as they would be for any normal person. Indeed, sometimes, they are my reason for getting up in the morning. But it would be false and stupid to claim that concern for my family is my only incentive. A normal man should be motivated by three things: sex, family, and ambition. If a person does not have these three motives, then he is not a man.

My kids are growing up to be good people. Anyone who knows them personally can attest to this. Of course, it is still hard to say what they will become. When your kids are little, their problems are little, but when they are big, their problems are big—this I know for a fact. Dasha is 16 and, from time to time, she does things that make our challenges with Pasha and Roma pale in comparison. Nevertheless, I am proud of my children. And I am very happy that I live with Rina, in particular, because she is the perfect mother.

They say sometimes that if a woman stays at home she does nothing and does not develop. This is a complete lie. Xenia Sobchak once told me that she does not like children. I think that this is the most horrible thing that a woman can say. Now, Xenia is still young, of course, and silly (in the good sense of the word), so it is forgivable.

A woman must love children. It is not a must that she remain at home. To force her to do so would also be extreme. In our case, though, that is just how things turned out: I have always been the one to earn the money and bring it home. Rina was pregnant once, a second time, and a third. We lived in America for a while and then in Italy, so that she simply never had an opportunity to work. But it would be silly to do as some of my friends have done, who purchased businesses for their wives and imagined that, in this way, they were taking care of them. There are so many examples of this sort of thing. She might be an architect-wife or PR-director-wife. We know all of these companies where people’s wives and lovers work.

Our family is self-sufficient; we have no reason to take an artificial approach to life. Of course, I could buy Rina 500 square meters in ZUM and build a clothing store for her. I would not need such a thing, though, and neither would she. It is better not to get involved in stupidity. If she wants to be a designer, she has many homes all over the world: let her work on their designs. In fact, however, she does not really like interior decorating. I have to do that myself. So she is a mother first and foremost. I respect her for that. She takes care of the kids and herself and she reads a lot. And I pray that God might bestow looks like hers on all women of forty. I meet young girls—eighteen years old, say (not to mention thirty-year-olds)—and they are such cows. Women have lost something that they once had. They have become too lazy to look after themselves. That is work too, after all.

I am very pleased with my wife and children. We spend our best times together. We spend the two summer months in Forte dei Marmi, Italy. It is our favorite place to be. Rina likes it less there than the rest of us, though. This is because she has to put in more work around the house there than elsewhere. For the kids and me, though, it is a kind of Mecca. We always wait with impatience for the day of our departure, whether in the spring, for a weekend away, or in the last sunny days of October—and all the more so when we go there for the whole of July and August. We ride bikes, eat the sweetest and juiciest fruits in Tuscany, lie in the sand, and swim in the sea. Of course, the water there is not the cleanest in the world, but if we want that then we take a boat offshore and swim further from land. We attend a variety of cultural events—the Giacomo Puccini Festival, for instance, where audiences can take in famous operas such as Madame Butterfly, La Bohème, and Princess Turandot. The great composer wrote all of his epic works just a few dozen kilometers from our house, eighteen kilometers from Lucca and Pisa in a small community called Torre del Lago on the shores of Lake Massaciuccoli. The festival takes place outdoors a few paces from the house where Puccini lived and worked.

Our whole family rides ordinary bicycles. We ride them along the seashore and make our way, like that, to crazy, phenomenal restaurants. We study Italian and horse around in the pool and on the beach. It is basically a normal family vacation. Sometimes, when we go to dinner, though, I run into acquaintances from Moscow.

“Oh, Oleg. We haven’t seen you for the whole month,” they say. But I think to myself,

“I’d go another month without seeing you. I was already sick of you in Moscow. I’m here with my family. I’m resting and I feel good.”

I want to spend time with Roma, who is growing up as I write this. He will be an interesting person and athlete. His physical characteristics are first rate. Pasha, who is blond, is a real individual, one of a kind, with a very analytical mind. And Dasha, well, she is for all intents and purposes already a fully developed person. She studies in Oxford at a good school, speaks four languages fluently, and is learning a fifth, German. But she does not merely speak—she also reads and writes in these languages. I, on the other hand, know only one language—Russian—and poorly at that. But my daughter knows four! Thank God for this new generation, for children who differ from oneself. It is impossible to compete with them linguistically.

A businessman’s wife is of the utmost importance to him. Things have not changed since ancient times: the mother is the keeper of the hearth and must always keep the fire burning. In the beginning, we brought mammoth meat home and now it is cash—that is the only difference. I am very grateful to fate and God for having set me on the path to meeting Rina and for the fact that I live with her. Our example shows that Russians can get along with Estonians, even though relations between the two nations following the USSR’s collapse suggest the contrary. Not only has Rina always maintained the hearth, she has allowed me the freedom to take care of my businesses. She has never been burdensome. A man is free to act decisively when his home front is secure. When he knows that everything is well at home and that his family is there, waiting for him, he can leave and head out to the battlefield.

A lot of businessmen trade their old wives and lovers for new ones. Some of the oligarchs from Forbes magazine were never married at all. From my point of view, this is unhealthy. You have to have a wife. There has to be a hearth and a woman/mother guarding it. A woman is your home front. She is your salvation. She makes you what you are. I do not believe in doing big business without the support of a wife. Mikhail Prokhorov is an exception, but he is a talented and unique person.

Some may say that this emphasis on family is old-fashioned, but I could not care less about what is in fashion I associate the cave and the fire with women and the man with hunting and patriarchy. If things are not like that, then you have nothing. I believe in eternal values.

When I start cooperating with someone in business, I always look at what kind of wife he has. If he does not have a wife, then he has no base, no roots. I try to avoid doing business with such people. They are half-wits, as far as I am concerned. But if there is a woman in the picture, someone for whom everything is being done, then I see the person as reliable and orderly. There must be a clear, balanced structure.

A man’s family must love him and forgive his shortcomings. I am not a perfect person. But since I have no intention of getting into politics, I do not need to be perfect.

I am a person with many positive and many negative traits.

The latter entail various inconveniences and problems, but without them I would not be Oleg Tinkov. I am not superhuman. You only see superhuman people on television. If I were a lot richer, I would have a big villa with guards, a hundred-meter yacht, and a big airplane. I have all of that, though—only on a smaller scale. I prefer to be free and to live as I please. I do not want to watch my every step and bend to the strong of this world in order to increase my financial standing by a percentage point.

It is more important to me to spend time with my kids, to race up and down the passes of the Apuan Alps, and to ski down the wild slopes of the Savoy Alps. I do not enjoy thinking about what I ought to be saying to whom, or to worry about whether or not I am acquiring enemies. That would be too rational a life. And that is not my thing. I would go completely nuts if I thought like that. As it is, though, I sleep as soundly as can be. I do not owe anyone anything. I do not need to lie, nor to keep track of what my last lie consisted in. I live by my emotions. We only live once, after all. You do not get a second chance.

My problem is that I am a perfectionist. Some might say that by 42 years of age I should have calmed down and stopped seeing the world in black and white. But I have not calmed down. It might be because I am not as rich as I would like. I remain a maximalist. I do not like compromises and gray areas. My easily triggered temper does not make my life any easier either. If it was not for these demons, if I were more thoughtful, calm, and rational, I would have become a billionaire, in dollars, long ago—and I would have left Vladimir Lisin in the dust. But these things have always hindered me. I repent, I repent, I repent, but I am still this way.

It is not easy to say this, but I need to make another difficult statement: I have no friends in the literal sense of the word. If you have friends like that, then I envy you. Of course, in reality I do have somewhere between ten and fifteen friends, but these are not the sorts of friendship that you read about in books. Friendship is first and foremost a matter of self-sacrifice. I, however, am not ready to make sacrifices, nor would I accept the sacrifices of other people. Friendship requires time. But I am an entrepreneur whose business is his life and so I only have enough time remaining for my family and for sports. Friendships are formed in the course of a lifetime and my constant movement around the world is not conducive to that.

But maybe having “friends at all costs” is not a necessity after all. In Russia, friendship has taken on an absolute value, thanks to our classics. In the Anglo-Saxon model, friendship is something more rational. I do not know which model is better. But I know that one only allows another into his or her inner world if that accords with the person’s own desire. If you do not let someone into your soul, then that person will not let you into his or hers either. This is a process of mutual exchange. In the same way, friendship that is one-sided ends quickly.

I probably only have one real friend—my wife Rina. It is a friendship that has been tested by time. We have been together since 1989—over twenty years. Our relationship is so honest that for a long time the thought of signing a marriage contract and having a wedding did not even cross our minds. But in order to protect the family economically, I decided it was time to get married and legalize our relationship.

The idea of having a wedding entered my mind in the winter of 2009, while I was turning the pedals of my Colnago Ferrari bicycle at the gym (I turned it into an exercise bike by attaching a cylinder under the back wheel). As I pedaled, I thought,

“In June, it will have been twenty years since I met Rina. We need to celebrate! Rina always wanted a white dress, but we never ended up having a wedding. If we wait much longer, we’ll actually be old before it happens. While the kids are little and while we’re young, we’ll look good in the photos. It’s time to get married!”

Instantly, other thoughts began popping up madly in my mind: Where? How? I have a lot of Italian friends, including Francesco and Patricia Gioffred, who own the huge castle Castello Di Tornano. I thought about the castle and about America. I thought about France, where we have a small flat with a view of the Eiffel Tower. No, it would not work. Forget it!

I kept pushing the pedals and the solution came all by itself. Why not make it Lake Baikal? I had never been there myself, but had heard a lot about it. I started talking with my friends. None of them had been there.

A lot of people ask where ideas come from. I was at the gym, riding an exercise bike; I got to thinking and then—Baikal.

All right, great!

The next morning I was already worried. I looked online. I called my friend Mikhail Slipenchuk (head of Metropol group). I had been introduced to him in 2008 by Oleg Anisimov, who then worked for Finance magazine, at a forum in Dubai. Now Oleg works in my bank as vice president for marketing. Mikhail had mentioned that he had a few mining operations in Eastern Siberia, so I called him and he recommended Baikal’s Buryat shore.

The wedding was organized by Lena Surkova and Sveta Podolskaya. They own a party planning organization in St. Petersburg called Amusement City. (By the way, they are the best event organizers in the country!) Sveta Podolskaya’s husband, Stas, worked in my beer business and Lena’s husband, Andrei Surkov, worked with me to build the Tekhnoshok chain and also on our (unsuccessful) wood business. I called Sveta and Lena and said, “No one will do a better job. We’re old buddies.”

Ulan-Ude, the capital of Buryatia, lies 5500 kilometers from Moscow, a six-hour flight away.

The most important thing, friends, is to not grow old in heart,

To sing the song we wrote until we reach its end.

We have started on a long road, to a part of the taiga

You can only reach by plane.

Dear airplane, as you fly away,

Protect what is in your heart…

And under the airplane’s wings you can hear a song

Being sung by the green sea of the taiga.

We flew there together on a reconnaissance mission. It was winter and Lake Baikal was still covered in ice. Later, Sveta and Lena went there without me. The revelry took place in June at Enkhaluk resort (which means “grace” in Buryat). The base is located 170 kilometers from Ulan Ude, along the northern arm of the famous Proval Bay. The base’s director, Alexander Ivanovich Yerko, is a true patriot in these parts and a hospitable host. I recommend that you go there: the taiga air, unforgettable fishing for Baikal omul, the purest water, directly from the lake, and native Buryat traditions. Not far from Ulan Ude there is a Buddhist shrine, the Ivolginsky Datsan, where the uncorrupted body of Habo Lama Itegelov has lain since 1927, a phenomenon which science has failed to explain.

On our way to Ulan Ude we stopped in Kemerovo, in my homeland. Aman Tuleyev gave us a cordial reception at the gubernatorial residence. My friend Alexei Prilepsky organized the reception. At one time I had encouraged Alexei to move to St. Petersburg. Now he is one of the major suppliers of mining equipment in the Kuznetsk Basin, constantly flying back and forth between Kemerovo and St. Petersburg.

While the guests were resting, I took Oliver Hughes and Stefano Feltrin, along with some other Italians, to my hometown of Leninsk-Kuznetsky. After this outing they came to understand me a lot better.

At Enkhaluk resort, we felt young again. We had everything: shish kebabs in the great outdoors, Buryat pozas (which are actually like big pelmeni, similar to manty, though their name sounds like the Russian word for “positions”), fishing and catching omul, a evening of ballads, an eighties disco, and swimming in Lake Baikal, in water with a temperature of eight degrees.

For five days, I was missing from the face of the earth. For Rina and I it was a true fairy tale. The wedding itself took place on June 12, 2009 and conformed to the usual Russian traditions—the matchmakers, the dowry, the guises, and all kinds of amusements. Rina’s dream came true: our children carried the train of her huge white dress down the aisle. We walked, holding hands, over the sand and rocks, since the wedding was in a marquee only a few meters from the Holy Baikal. We threw quite the party!

I was simply happy. My guests created a truly warm and sincere atmosphere. I would like to express particular thanks to Valera Syutkin for hosting the event (for free!) and to my favorite Englishman, Bryan Ferry (I am happy that I invited him, rather than Valery Miladze, as I had originally wanted to do). I remembered—just in time—that his song, “Slave to Love,” from the movie 9 1/2 Weeks with Mickey Rourke and Kim Basinger, was a hit back when Rina and I first met. So twenty years later I decided that it would be our wedding tango.

I did everything I could (and I thank Richard Branson for his help too) to book Bryan Ferry. He came, sang “Slave to Love,” the love anthem, and Rina and I, wearing white, danced a beautiful dance on the shore of Lake Baikal. Yes, the dream came true.

It was unbelievably fun. And yet, even so, we were sad at times. It was a bona fide May 32nd. Smile, gentlemen, smile! And think up holidays for yourselves, especially now, during this crisis!

A wedding, twenty years later, is awesome, I think. It is for real.

The lyrics to Yury Antonov’s song, “Twenty Year’s Later,” composed by Leonid Fadeyev, reflect my emotions perfectly:

I am thankful to fate

For the love that is given us.

I know I’ll need you,

Always you alone,

Just you alone.

I want us to be close,

In spite of all the years.

I want us to be close

Twenty years from now…

Dasha, Pasha, and Roma: my children and my hope.

Gucci spent 10 years with us before dying in March 2010.

In 2001 I introduced my father and mother to America, a country that my father had respected during the Soviet era.

I will not leave a fortune to them. I will pay for whatever level of education they choose to pursue. Beyond that, they should develop on their own.

My children and I love our Villa Le Palme in Forte Dei Marmi. Rina has mixed feelings about it, however, since when we are there she has to do more housework than usual.

About my Favorite Cities

Of course, I am a rootless cosmopolitan. Where else would you find such a weirdo: born in Leninsk-Kuznetsky; lived there for eighteen years; spent two years in the Far East (a year in Nakohdka, in Primorsky Krai, plus another in Nikolayevsk-on-Amur in Khabarovsk Krai); thirteen years in St. Petersburg; six in the U.S.A.; a year in Italy; and now I reside mainly in Moscow. No wonder, then, that I am a man without roots. No wonder that the idea of a fatherland is foreign to me. I have a spot of homeland in Leninsk-Kuznetsky; my father’s grave is there on its ten-meter plot. But I am a man of the world. I like Americans, Italians, Frenchmen, and Russians. I like ordinary, good, capable people. I chose Forte Dei Marmi for one simple reason—the people there are pleasant and they feed us well.

I do not understand why people go to France—where you pay people to be rude to you, offend you, and spit in your oysters. Only gluttons for punishment go there. There are two types of Russian people: those who like France and those who like Italy. I have noticed that I am usually friends with people of the second kind. And I do not really understand people who prefer France. My Italian friends are Patricia and Francesco who own the Castello di Tornano. I first met Patricia in the early nineties when she was head of Whirlpool and Petrosib was their dealer. We are still friends after all these years. She suggested that I get a home in Forte dei Marmi. It was important that an Italian make this suggestion and not a Russian. I love the place. It has come to be one of the most important places in my life. St. Petersburg, Forte dei Marmi, Leninsk-Kuznetsky, and San Francisco—I can draw a box around these four.

Rina Vosman, Oleg Tinkov’s wife:

Oleg’s business successes are his achievements alone, but I played the part of guiding star, so to speak, his guiding force. I guess I have to say I motivated him. Or, to put it differently, he’d use me sometimes. I only found out after the fact that I was one of the stakeholders in Petrosib. He kept business information from me. Of course I was aware of what he was working on. For instance, when the factory was under construction, we drove to the site every Sunday to keep track of the progress. But he didn’t inform me of any problems. I think he did the right thing.

As the years passed he became calmer—much more so. In the nineties he was a total firework. There are still little bursts, now and then, but it is not a firework show. He’s always overflowing with energy; he did everything—and then some. Like Karlsson-on-the-Roof with his little motor! He was completely uncontrollable. I always tried to keep him in check. Maybe ours is the perfect marriage: opposites attract. He’s reliable and I didn’t make the wrong choice. He manages to keep his eye on me, on the children, and on his work. I never had to adapt to his needs. If there’s something that we don’t like, we always speak to each other frankly. Maybe that’s why we’ve been able to live together for twenty years. The first ten were really difficult, though; we’re completely different, after all. We celebrated our wedding in June 2009. By that time our other married friends had long since divorced.

One Italian lady asked me,

“How did you live with someone you weren’t married to for twenty years?” But I felt completely comfortable. I didn’t need anyone’s stamp of approval.

Yevgeny Brekhov, friend of Oleg Tinkov:

We went over to Seryozha Ufimtsev’s house and I saw a man just back from the army sitting there. How did I know this about him? His dress was peculiar. I invited him to the movies and he began by turning me down, saying there’d be a fight there. I insisted that if he came with me there wouldn’t be any. That’s how I met Oleg Tinkov—a good, kind, unusual guy. Since then he’s told me two stories. One was about his girlfriend who was killed. He told me the second story, about Rina Vosman, his second total love, when he was in university. He really is completely lucky in life. If Oleg had stayed with his first girlfriend and the tragedy hadn’t happened, he would be working and living today in Leninsk-Kuznetsky. He would still be a miner in love. And he would never have met Rina—his true other half. Rina is the most important part of his life. She has helped Oleg to take a completely different stance on life and she has helped him to build it. She gave him his family. With Oleg, everything that happens, happens for Rina Vosman, the best woman in the world. I’m lucky that I can bear witness to the happiness of two people at once. They are a beautiful and very good couple.

Chapter 33

The Call Online

I believe that our future lies on the Internet. Consequently, I am interested in development in this area and in deeper integration with it. I want to prove that online business can be profitable. For the moment, few people earn decent money on the Internet. At our bank we have gambled on the possibility of attracting clients that are looking to open an account via the Internet. It is possible, however, that I will eventually have some other kind of business on the Web. For now, though, the Internet has more entertainment value for me than it does anything else. I enjoy maintaining my blog, tweeting, and experimenting with social networks. Let me tell you about how my blog came to be one of the most popular in Russia.

On February 21, 2009, Rina and I went to visit Oleg Anisimov. He started my blog, then and there, right in front of me, on Livejournal. He showed me how to post new material and how to “cut” the text so that a continuation could be accessed by clicking on a special link. He also showed me how to attach videos and images to my posts. I immediately paid for an ad-free account using a TCS-Bank credit card. I then made a test post, from home, that read: “Hi, I’ve finally decided to have a blog. It’s under development—wait!” For some reason the date showing was February 20—I guess it must have been some kind of glitch. Then I asked designer Denis Melnikov to touch up the blog’s design by including my family’s coat of arms, for instance, and by better arranging my profile pictures and setting up links on my home page.

On February 26, I experimented with the medium. First, I posted a video entitled Tinkov on the Businessman’s Image, in which I spoke about the difficult lot of Russian entrepreneurs. Second, I lifted a special code from SmartMoney magazine’s site and created a nice looking link to the article, Playing with Credit Cards—a piece about our bank. I called the post: At last! A More or Less Intelligent Article about my Bank. But no one had seen any of this yet; no one knew that the blog existed. Next I flew to Krasnaya Polyana to ski and, when I came back on March 3, I wrote this post (I cite the original):

Hi!

Today I’m officially letting everyone know that I’ve started a blog. How do I see it?

Oleg Anisimov from Finance magazine advised me not to do it myself, not to write on my own—better to avoid grammatical errors and being laughed at. No, Oleg, I’m doing it! Let this be an ego trip for someone

  1. I’m not afraid of mistakes. I’m from a small provincial town and I didn’t finish university.
  2. I don’t want to do as my colleagues have done (you know who I mean), who brag about themselves in their blogs—in spite of the fact that their blogs are actually written by their assistant or a hired PR agency (respect, Yulia!).
  3. This won’t be a blog; it will be my diary.

I’m not aiming for pulp fiction. Instead I’ll just write a couple lines here and there. A little of something good is best. :)

I hope you’ll forgive me if I don’t write all my silent letters, or if I leave them out entirely—it’s not that important.

Oleg

When someone famous starts a journal, some bloggers inform their readers of this. Famous Web personalities that wrote about my new journal included Artemy Lebedev (nickname tema), Anton Nosik (dolboeb), and Nika Belotserkovskaya (belonika). This attention helped me to accumulate a few thousand friends quickly. A few weeks later my numbers had exceeded those of Mikhail Prokhorov, Russia’s richest man, and of developer Sergei Polonsky combined—and all because I wrote on my own, with sincerity. Because he did not write very often, I even overtook Zhenya Chichvarkin.

I wrote regularly and about everything: business, sex, music, politics, food, architecture, and so on. A year later, in spite of the odd errors in my writing, I had 15,000 friends and I was ranked in the top thirty in Yandex’s blog ratings, which is typically a very difficult thing for new bloggers to achieve.

In the course of the year I had been caught up in a number of Internet scandals. For instance, on September 29, 2009, I wrote a post in support of the construction of the Gazprom skyscraper in St. Petersburg. I had never had so much shit dumped on me before! People accused me of anything and everything: of stupidity, of poor taste, of brown-nosing… I will repeat my position though: I just like the tower. Both of my apartments in St. Petersburg have nice views. The first looks out on the Admiralteystvo, the second looks over the whole city. Once it is built, one will be able to see Okhta Center from there as well. I did not speak out in favor of the tower because I had been asked to by Matvienko, whom I had not seen since 2005, or by Miller, whom I have never seen in my life. I spoke out because I sincerely feel and—I am not afraid to say it—hold, from an aesthetic point of view, that building is beautiful. The project contributes to the development of a depressed part of the city, too, and will create jobs for local residents.

St. Petersburg is an excellent city, but it does have its weaknesses—that pseudo-intellectual arrogance that says: we will live in shit and we will not allow anyone to do anything about it.

Why not let them clean up the Okhta neighborhood, free the place from the rats and dirt? Why not let them build a pretty glass building, run the utilities and make a beautiful spire that I will be able to see from my building. Once upon a time a White Russian General who had immigrated to New York was asked why he was renting an apartment rather than buying one. His answer was that he already had an apartment—in St. Petersburg. I say the exact same thing. From my St. Petersburg apartment I can see everything from the mosque to St. Isaac’s Cathedral. I will look upon the tower at Okhta Center with pleasure too.

Some people felt that I had spoken out in favor of the tower because my business was not going well and because I therefore wanted to pay my respects to the city’s politicians. What a load of crap! I have never sucked up to politicians. Judge for yourselves: all those people you see on TV are accessible to me—all it would take would be a phone call. I know all of them and I feel no need to prove anything to them. I express my own opinion on matters civil and aesthetic. I have never used political connections; I do not need to.

I cannot abide being wrongfully accused: I react sharply. Oleg Anisimov scolds me for this: why reply to an anonymous online user who has only five friends? And sometimes it fails to help at all. I lose my temper and write nasty things. I cannot stand to read bullshit.

People addressed a lot of crap to me after I invited Xenia Sobchak to the first episode of my Internet show, Business Secrets with Oleg Tinkov. They accused me of reducing the whole discussion to a conversation about sex. They complained that the program turned out to be mere sensationalism. They said that I was stupid. Few understood, however, that we opened the series with a scandal on purpose in order to make ourselves known. The people who were most offended were the first to watch subsequent episodes, which were devoted to business.

Our show has featured numerous guests: Mikhail Slipenchuk (Metropol), Igor Ponomaryov (Genser [to our great sadness Igor passed away in January 2010]), Nadezhda Kopytino (Lyodovo), Sergei Minayev (MVG), Boris Belotserkovsky (Ritzio), Alexander Yegorov (Reksoft), Sergei Chernikov (Petrotek), Oleg Zherebtsov (Lenta and Norma), Sergei Nedoroslev (Kaskol), Viktor Remsha (Finam), Irina Razumova (Planet Fitness), Andrei Korkunov (Ankor Bank), David Yakobashvili (Wimm-Bill-Dann), Timati, Gleb Davidyuk (Mint Capital), Ruben Vardanyan (Troika Dialog), Dmitry Agarunov (Gameland), Sergei Galitsky (Magnit), Eduard Tiktinsky (RBI), Oleg Leonov (Diksi), Yevgeny Kaspersky (Kaspersky Laboratories), Alexander Mechetin (Sinergiya), Sergei Vykhodtsev (Velle), Philipp Ilyin-Adayev and Yelena Ishcheyeva (Banki.ru), David Ian (ABBYY and iiko), and Arkady Novikov (restaurant owner).

In addition, beginning in December 2009, we started inviting little-known, beginner entrepreneurs on a regular basis. These guests included Yegor Uvarov, who created an online store selling baby strollers; Philipp Gribanov, who was constructing the Ekokemika cleaning product plant just outside Moscow; and Renat Khamidulin, who opened the cycling store Velosport.

I consider it my mission to popularize entrepreneurship in Russia, where people generally view businessmen unfavorably. An economy cannot thrive unless entrepreneurship is developed—unless there is a healthy level of competition. Barring that, we get low-quality products and terrible service. We need entrepreneurs rather than bureaucrats to pull Russia out of the swamp of natural resources it is stuck in. And I know that a lot of young people will watch our program and decide to go into business instead of filing papers at Gazprom or relying on bribery at the tax office. I would like to call on Channel 1’s Konstantin Ernst, half-jokingly, to develop a normal program that tells the truth about entrepreneurs and dispels myths rampant in our country about the ways in which businessmen rip people off to make a buck. To this point, neither Konstantin, Vladimir Kulistikov from NTV, Oleg Dobrodeyev from Rossiya, nor Alexander Rodyansky from the National Media Group has expressed an interest in this. We are actually doing just fine on the Internet though. People can watch all the episodes and, because there is no schedule, they can be watched whenever one sees fit.

I have replied to a lot of questions from my readers on my blog. I have saved some of the questions and answers for this book. Here they are.

Oleg, what do you think about Russia’s advertising industry?

The advertising business is passing through a strange phase all over the world as money shifts to online contexts. We are witnessing a revolution. That is why, in the advertising sector, added value will go to whoever learns to work with the new technologies. Creativity is a good thing, of course, but people need to understand how to place advertising effectively and in a way that fits with the latest technological developments. There are few such specialists in the world and virtually none in Russia. The battle for advertising and marketing will be won by whichever company has access to such specialists. As a bank, we have been keeping this in mind.

If you could meet yourself at 15 years of age in Leninsk-Kuznetsky, knowing what you know now, what advice would you give to yourself?

If you’re from Leninsk-Kuznetsky, get yourself to the station, buy a ticket, and get out of there. You need to strive for greater things. Maybe you will not go to Moscow; go to New York instead.

What is more important in business: money or connections? I am under the impression that it is money? Is this true?

In Russia, unfortunately, connections and money are of equal importance. For the Anglo-Saxon mentality, money is more important. We have a lot of the East in us and so connections mean a lot too—connections involving money. But I would prefer that business connections were based on money.

Have you ever been in difficult, uncertain situations that would have been hard to predict in advance, that came as something of a surprise, and that made you pull your thinking cap over your ears and make quick, non-standard decisions?

It’s like when a fried rooster is pecking at your butt: you put on your thinking cap and you run away. There isn’t anything good about the situation. You’re stressed and anxious. I’ve been in all kinds of situations—with the government and with the mob. What can you do, though, except try to be mature and maintain your composure rather than speaking out bluntly? It will pay off in the end.

Which are the most reckless acts you’ve committed?

The greatest thing I’ve done in my life was to prepare for and compete in the international Five Rings of Moscow race. The most reckless thing I’ve done, something for which I still respect myself, was to invest in Russian athletic cycling. I put ten million dollars into my team and I got absolutely zilch back. It was my social mission.

My wife always supported me. But this time, she might well have gotten on my case. I spent a ton of money and time on it. Essentially, it was and is my hobby. But I still went a little overboard at the time. It was a reckless act.

You have an interesting way of thinking. You have your own moves and techniques. How did you deal with failures in your own mind? How did you allay all doubts and continue to move forward. How did you maintain your self-confidence? What did you do when you felt like you might be overcome by a desire to drop everything and give up?

The technology is simple—the quickest approach is simply to forget. I always forget my successes and failures very quickly—especially my successes, actually. If I start to get worked up over them, thinking that I’m something special, it numbs my brain. That’s why I recommend that, first of all, you don’t pay attention to praise and, secondly, that you forget about the past and live for today. When it comes to problems, I step over them and move forward. I bar failures from my life. I forget what happened and move ahead more rationally and productively than before. Swallow the pill, suffer through it, grunt, let the tears come out of your eyes, and keep going. It’s not worth beating yourself up. Negative emotions are destructive.

Oleg, do you agree that if you or Chichvarkin or Polonsky had all your money taken away and you were dropped in a city where you knew no one, that given the current situation, without any money at all, in a few months each of you would have a car and some kind of business? Why is this? I think that’s the point: that your brain works differently from other people’s brains. But what’s different about it? It would be interesting to find out. I’d like to read a book about it. It might be titled Entrepreneur’s Syndrome.

I’m not so sure about Polonsky. Of course, given the experiences we’ve had, we’d come up with something. A true entrepreneur will always find a way out. At the very least, I’d ask people for spare change. I’ve enough nerve for that. Entrepreneurs make up less than five percent of the population. Our brains do work differently. I’ve been fortunate enough to be part of those five percent. This fact would enable me to survive in any city and to do things that others would not be able to do.

Tell us why you aren’t afraid of the stupidity that’s all around us now? After all, if it’s decided that you are going to be run over by a car tomorrow, it will happen. Just like it could happen to Chichvarkin or to any of a hundred thousand other people that are trying to do something. I’m sorry but you will never be like Khodorkovsky. You aren’t really a fighter with a cause. Maybe the sole reason that you are unafraid is that there is room for you yet on the London meadows. But it would hurt to leave. How do you feel, now that you’ve become an integral part of the system?

That’s a rhetorical question. I haven’t integrated myself into anyone’s system. Of course I live in society and can’t be completely free from society. I don’t like what’s going on right now. I don’t like it that the siloviki are gaining power. It isn’t really good for the country in the medium or long term. We’ve let our millionaires go. We’ve seen the case of Denis Yevsyukov,[8] which did not lead to anything good. I am a little afraid because of these things.

Will I fight it? I never tried to twist myself into a Khodorkovsky caricature. I have great respect for the man, given what he did. I do not know whether he is guilty or not. Did the company he kept kill anyone? Possibly. Up until the moment he got on the plane he said that he didn’t care about anything and that he would fight. That’s why I consider him a great man and a hero. I admit that, like all the oligarchs, he did some shady things. But really, he suffered for what he did. And he acts nobly; he even spent six years in jail. And you should hear the interviews he gives! He never gets mad at anyone!

When people tell me that I will never be like Khodorkovsky, I reply that, of course, I won’t be. He’s a monster of a man, a boulder with a big personality. I could never do what he has done. There are strong people and weak ones. Unfortunately, I am weak in this respect. That doesn’t mean that I am integrated into the system. To the contrary, I’m fighting it. I am a businessman and an entrepreneur. I do my thing; I feed my family. Russia is my fatherland. Everyone knows that you do not chose where you come from. I am certainly not planning on getting involved in politics, creating a party and fighting—just as I do not plan on joining the United Russia political party.

I would like to know for myself how you make decisions and take risks. It would be really interesting to see a discussion in the book concerning Russia’s business situation, its problems and ways of solving them. This won’t just be a biography, I hope, but a book that looks forward to the future.

It’s a tough question. We are talking about metaphysics here, so we have no material. It’s impossible after all to know why you fell in love with a particular girl. Something happened to you on a chemical or physical level and suddenly you were in love.

In order to make a decision, you have to make a quick analysis. Our brains are not fit with Pentiums but with much more awesome processors. We analyze quickly and make decisions quickly. I took a Socionics test and ended up in the Huxley category for intuition, my tendency to make fast choices and to find the right people.

I’m not ready to speculate on Russia’s future, as I am not a politician. To me the future looks fairly clear and steady. But I don’t expect there will be any major shifts to either side. Unfortunately, we will remain the earth’s source for natural resources. But at the same time our citizens’ prosperity will grow and maybe in the foreseeable future we will catch up to Eastern Europe. Realistically, though, there will be no breakthrough. Why? Because we just don’t have the education. More importantly, we don’t have any business education. We need to make substantive changes to our system for training personnel. The Soviet educational system has outlived its usefulness. The switch to innovative technologies is also important, but that’s not fundamental. The key is education.

When a person comes to an interview, how do you assess him or her?

I look the candidate in the eye. Of course I am not the Lord God and I can make mistakes, but I’m right most of the time. I choose people. If he’s a good person and, in addition to that, a good worker and manager (like Oliver Hughes, Georgy Chesakov, and Artyom Yamanov), you’ve achieved a success. All of our guys are supermen. On average I select three out of every ten. I evaluate people based on their human qualities. The most important thing is that they share my values—rebelliousness and joy in business.

Have you made mistakes?

Of course I have—though not very often. As a rule, I’ve made mistakes when I thought bad things about people and they turned out to be good. I’ve never had that happen to me the other way around. I don’t know if it’s a matter of stereotyping or what.

A lot of stereotypes are circulating in connection with me. “Now Tinkov, he’s a—” and the list starts. Damn! You guys don’t know me. Maybe when you finish reading this book you will have finally learned something about me. Guys, we don’t need stereotypes. Chichvarkin is a clown. Abramovich is a billionaire. All of these are stereotypes.

Forgive me Lord. I repent. I was mistaken!

How do you feel about criticism?

Just like any normal person: negatively. It is normal for a person to be averse to criticism. He may recognize that the criticism is fair, but on a subconscious level he will not like it. Nevertheless, criticism is a good thing and I like constructive criticism.

For example, if people tell me, “Oleg you’re such and such” and they back up their claim, then whether I reply or not, I give it some thought. But if they straight out insult me, then I just block them. I do not like it either when people write that I’m looking to win Matvienko’s favor just because I am in favor of the tower. It drives me up the wall because it is not true. I just like the tower project and I want to be able to see it out my window.

I welcome criticism. Please criticize me. I am a living person and not the God Almighty. I have so many shortcomings. …

But I’m 42 years old and it would be impossible to reform me. I don’t have a media strategy. If I could be reformed, then I would long ago have become like Roman Abramovich or Xenia Sobchak. I might even have outdone them. I have always followed my gut, so things will turn out as they might. I’m a simple, Siberian felt boot. Oleg Anisimov—and my intuition—suggested I start a blog and so I did. My intuition, Oleg Anisimov, and Richard Branson suggested that I write a book and so I’m writing it. Sometimes I turn down offers to appear on TV, but there are other times when I agree. There is no strategy in any of this though.

Would you want to buy an island?

To tell you the truth, yes. I have thought about it for a while. Branson influenced me in this regard as well. As with this book, Branson simply hammered the last nail in the coffin. I have always dreamt of acquiring my own island and creating a micro-state there with its own rules. Elsewhere people are always loading me down with all kinds of futility, a constitution and a passport. On the island, however, there would be 500, or better 200, of my citizens living there and I would create the Republic of Liberty. We would do as we pleased. Communism. I would be an emperor with no crown. I would buy the island only in order to make these people the happiest people ever.

Do you want your children to be in business?

Probably yes, but not necessarily. I would want my kids to be people, first and foremost. I like my sixteen-year-old daughter Dasha’s grasp of business. She’s very sensible. When it comes to Pasha it’s hard to say and the answer for Roma is no. The boys are doing their own thing. If they end up in business that would be great, but I won’t be discouraged if they don’t.

What quality has hampered your life and your business?

Life and business are one and the same thing for me. The only thing that has hampered me has been my short temper. Unfortunately my mother, Valentina Vladimirovna, passed this trait along to me. She was a poorly educated woman, hot tempered, provocative, and high strung. But I love her nonetheless, obviously…

What do you like to do in your free time?

I consider time “free” if I’m not spending it on business or on family. That said, my favorite pastime is sleep—or watching television. I feel that these are excellent hobbies. Sleep is a healthy thing to do. I don’t understand people who sleep three hours a night.

You want to become really rich. Why?

That is the hardest question you can ask a person. It involves higher philosophy. Do I want to become rich? Well, don’t you want to? Every normal person wants to be rich, healthy, and young.

Mezentsev, our great physics professor from the Mining Institute, asked one of my classmates to get up and he asked him,

“And how much money do you want?”

“Lots.” The professor replied,

“For some people a lot is not enough.” What a great answer. For some, having a villa and a pool in Tuscany would be their wildest dream come true. But for someone it would be jack squat—even if they had a villa on eight hectares with five pools and another ten villas scattered around the world. What does it mean to be rich? Who knows? Consider Bill Gates, Warren Buffet, and Abramovich. There is Polonsky. There is Tinkov. Each is rich in a different way. But the term is the same, “rich!” I became rich during my second year at the Mining Institute, after I moved from the dormitory into a room in a co-op flat for fifty rubles on the corner of Shkipersky Stream and Shevchenko Street. There were eight people in the apartment. Our drunken flat mates were constantly coming into our room. Once, our neighbor Auntie Masha stumbled and fell right into Rina’s and my bed. I got up and dragged her carefully back to her room. I was rich because all my friends lived in the dormitory, but I had my own room with my beloved girl. It is so important to have your own space. I got tired of living with—and banging my girlfriend in close proximity to—three other friends in our fifteen-meter room.

I do not want to do anything for free. It would not be right. It is White Anglo-Saxon Protestant logic—experience has shown that doing everything for money is the right thing to do. If people do something for free, based on friendship, then nothing will come of it. Or it will turn out poorly. But if it is done for money, then the result is different. I can do something for friendship’s sake once or twice, but then it does not work anymore. If a person spends more than an hour of his or her free time on something each day then it has to be paid for. Now, money is a tool. I need it in order to pay for my countless apartments all over the world and for my children’s clothing and education. My daughter’s education alone costs several tens of thousands of dollars a year and I have two more children growing up. My mission is to raise all three of them and send them on their way.

Perhaps I will disappoint someone by saying this, but I will not leave my fortune to my children. The most that I will do will be to fund whatever level of education they want to achieve—and then I will allow them to continue developing in whatever way they see fit.

In 2010, I set up the tinkov.com portal, where I will publish my most valuable information. In particular, this will include the book that you are now holding in your hands, but in an edition available exclusively through the portal. In September, a version of the book aimed at a broader audience will be published by Eksmo publishing house. At first, I did not want to work with a big publisher at all, as the royalties they offered were ridiculous. However, Eksmo’s founder, Oleg Novikov, turned out to be a competent entrepreneur and we were able to come to an agreement. I hope that the mainstream version of I’m Just Like Anyone will become a bestseller.

There are bankers who do not wear a suit. Here is an example.

 

Sergei Galitsky, founder of the Magnit store chain, is an entrepreneur whom I respect for the fact that he created a truly major business from scratch.

 

Oleg Anisimov, editor and founder of Finance magazine:

I suggested that Oleg Tinkov start a blog on Livejournal with a self-serving goal in mind: I wanted him to promote my magazine by publishing his columns and putting links on the site. I even told him we could post material on his behalf. But Oleg immediately rejected the offer and started writing himself.

He hasn’t always stepped too carefully, like any inexperienced blogger, but his sincerity has won people over: Oleg’s is one of the most popular blogs on the Internet. People see how he writes and communicates on his own, without the help of a blog secretary, so they’re willing to forgive his imperfections.

The bank’s blog has been a great help in 2010, when we started the deposit program at Tinkoff Credit Systems. At that time I already worked as the bank’s vice president for marketing.

Chapter 34

A Revolution is our Prerogative

Let me get back to the bank. Due to funding problems, growth in the bank’s credit portfolio slowed in 2009: we had 5.2 billion as of April 1, 5.4 billion as of July 1, and 5.1 billion as of October 1. There was nothing we could do but to work better with the portfolio we had, increasing the quality of our risk analysis and improving our interactions with people who were failing to make payments.

In the bank we used a test and learn approach, based on the experience of Capital One, testing all kinds of different approaches to getting through to the client. Our method is somewhat like Japanese kaizen: we are constantly looking for the smallest improvements that we can make, which taken together yield big results. Here is a banal example: originally my signature was at the bottom of the letters that we sent. Later we started testing other signatures—Oliver Hughes’, Georgy Chesakov’s, and so forth. Some people might say that it makes no difference whose signature is at the bottom of the form, but we had to do this test to see which one of them worked better in practice.

We strove to improve our offer package (which goes in the envelope that is sent to the client), to find an optimum balance between being under the weight limit and achieving maximum effect with the mailing. The package has to interest the client, as does the text of offer. A client might stop reading at any moment, so it was important to maintain her interest and—assuming that she was in was in need of credit—to get her to fill out the form. Since March 2007, we have sent out close to thirty million letters. As a result, we have one of the best databases in Russia.

While all of this was going on, I smoothed things out with the major players on the market. First, I anticipated that I might be able to reach agreements with them on funding. Second, we were able to offer them the use of our technologies. They would be in charge of sales, while we would provide technological support for the cards. Third and finally, it would be possible to sell the bank along with a fully developed system and client base. It is always better to get purchase offers than to get none. Moreover, there had been precedents where monoline banks had been bought out. In 2005 Bank of America bought MBNA for thirty-four billion dollars and Washington Mutual paid 6.5 billion for Providian.

The largest bank in Russia, Sberbank, had absolutely nothing on the credit card market until only recently, and I looked for areas where we could cooperate.

German Gref is one of only a few Russian politicians towards whom my feelings have not grown cold. He went through fire and water when he worked for the St. Petersburg administration and in the Ministry of Economic Development. Sberbank was one of his less momentous jobs. Will he be able to remain an ordinary person and not lose track of his liberal values? He has the same Siberian-Petersburger values that I do. The next few years will tell. It’s difficult. The bank is big and it is no simple matter to cross a hedgehog with a water snake—no more so than teaching an elephant to dance.

The first steps he made were the right ones. He got some competent guys on board, like Denis Bugrov from McKinsey and Anton Karamzin from Morgan Stanley. Bugrov, in turn, took away my financial director, Valentin Morozov, who had also worked at McKinsey, but is now in charge of increasing Sberbank’s efficiency.

Does Gref understand all of Sberbank’s problems? Of course he does. Will he be able to solve them? Nothing of the sort has ever happened in global practice, but maybe he will set a precedent. Sberbank is an enormous institution, spread over eleven time zones, with petty thieves in each place and with ass-kissers, most of whom surround German Gref. Doing something with this Soviet-era system is like coming to a village wearing Tod’s Italian shoes. At a minimum one would need gumboots.

Gref and I met, and I made a proposal aimed at securing his cooperation. In 2008, our credit card portfolio was bigger than Sberbank’s and the technology that we used was a generation ahead of theirs. More importantly, though, we knew how to attract customers and they didn’t. I said to him,

“Let’s cooperate. You know that magic word, ‘outsourcing’? We’ll candy-coat it for you. With our technology, if you don’t see the elephant dancing, at least it’ll be bouncing up and down.”

Gref said it was an excellent idea, and sent me to speak with his subordinates. But when I met with them, they bureaucratized everything. For now, his people do not understand a thing. If you look at huge banks like Citibank and the Royal Bank of Scotland, though, you will see that they are bigger than Sberbank, but that they have the courage, strength, and soundness of mind to cooperate with others. Take Richard Branson’s Virgin Money, for example. Many people think that this company is a bank, but in reality it does not even have a banking license. People react to the Virgin brand and get their red credit cards with the familiar logo. In fact, though, the fine print on the back of the card states that it was issued by MBNA, the card section of Bank of America. Richard Branson’s clients would not go to MBNA, in the same way that clients who find my bank appealing would not go to Sberbank.

Gref has another problem: he thinks that Sberbank can take everyone down. But it would be impossible for that one bank to serve 140 million people. It is a stupid fantasy. A huge number of Russians do not use banking services. There is enough market to go around, but Sberbank still wants to take everyone out.

Gref understands that he is a big boy who can do anything. The Royal Bank of Scotland acts more competently, however—they gave Branson the right to accept deposits under his brand and they do not divide the additional earnings. As far as I know, Virgin Money’s net profit amounts to 60 million pounds sterling a year, half of which goes to the partner banks and half of which remains with Richard.

In order to succeed at Sberbank, Gref and his people need to change their mindset. They need to accept the ideas of partnerships and outsourcing. Alexander Lifshits, former Finance Minister, told us that sharing is important. The approach that begins with the attitude that “I’m big and don’t need anyone else” is behind the times. If we keep thinking like this, then it is unlikely that the elephant will dance in the near future.

My personal relationship with Gref is a good one. He stood up for businessmen more than a few times when he worked in the ministry. For instance, he defended Yevgeny Chichvarkin when the cops were attacking him. He was always a spokesman for liberal values in the government. My wish for him is that he remain the man that he is today and that he not be spoiled by the enormous power he now has.

Our banks may cooperate yet, but as of the spring of 2010, none of the required conditions is in place. In one way or another, Sberbank is not the only fish in the sea. Without a doubt, my bank is a project that I plan to sell someday and there will be other interested players when that time comes. As I said in Kommersant magazine in March 2010:

I understand, as do my minor stakeholders, that we are in this project whole-heartedly and that in the end it will become part of a large, global bank in which we will simply be the credit card department.

There is a possibility, then, that you will join forces with one of the existing players?

Of course not; it will be a sale. We will sell it and then they can integrate it with their bank.

Are there any potential buyers? Who has expressed an interest in acquiring your bank?

Everyone you see are potential buyers—state-owned banks Sberbank and VTB, mid-level Russian banks like Alfa-Bank and MDM Bank, and Western banks that specialize in credit cards, institutions such as Bank of America, Santander, Barclays, and Standard Bank. Of course they have expressed an interest, but right now they simply do not have the liquidity. At the moment, everyone wants to buy everything for knockout prices, using the situation in Russia’s financial market to their advantage. We, however, have no use for that whatsoever.

But have there been any concrete purchase proposals?

There have been. I’ve listed a bunch of banks; we have received proposals from some of them.

In both 2009 and 2010, we were approached by major Western funds and investment banks that wanted to buy a stake in TCS. I turned them down, however, as I considered the bank’s rating to be too low and, not wanting to eat into my own stake, preferred to borrow money. Overall, though, I prefer to have business partners, especially ones like Goldman Sachs and Vostok Nafta. When no single shareholder holds a one-hundred-percent stake, that makes for a more balanced position. There are no absolutes then. When you are accountable to no one, on the other hand, you might end up with the impression than you are a great genius, which is very dangerous.

My bank currently controls close to five percent of Russia’s credit card market. I am often asked, “Where are your cards? I’ve never seen any.” In all probability, this means that you are not supposed to see them, precisely because you are not one of our target customers. Or you will see them soon: let us not forget that there are 140 million people living in Russia. I never saw Russian Standard cards either, when they were leading the market. Bear in mind, too, that Rustam and I work in the premium consumer market, which is not always the most successful platform when it comes to building a profitable large-scale business.

I have been accused of copying others—as though I had stolen Russian Standard’s model. But this is ridiculous. Their model involved offering consumer loans through banks and then offering cards to those clients who took out loans. We, on the other hand, give our cards out directly. The second—and most important—feature that distinguishes us from other credit card companies is that we work by way of direct mailing alone. Currently, we are the only financial institution in the country that does direct marketing exclusively. There are a variety of reasons why people do not go into the business that we are in today: they do not have faith in it, or they do not know how to run it. Mathematically speaking, it is a difficult business. This is why it is altogether wrong to talk about our copying others. If we did use a preexisting model, then it was that of the American bank Capital One. Indeed, theirs is the very model we are following; we had recourse to consultants from that bank, after all, and we always watched and continue to watch what they do—even though Capital One is no longer a monoliner, but has become a major commercial bank. They bought out a few banks and branches, accept deposits now and are among America’s largest banks.

So the model that my bank is following has been successfully implemented in a market as competitive as the States. In Russia, however, competition for customers is in its embryonic stage. How did our bank achieve serious success in the credit card market? This was thanks to our service. No one in our country, though, can imagine—or wants to imagine—providing customer service. Customers ought to find it convenient to use your services. If they do, then you will sell more—and for more money. People are always willing to pay for timesaving measures and for convenience. With these things in place, the bank’s profitability will line up with customer satisfaction.

The funniest thing is that no matter how well my bank is doing and irrespective of the profit that it is bringing in, there will always be people who say, “That Tinkov keeps popping up everywhere. Yes, he was lucky with the pelmeni and the beer, but what kind of a banker does he think he is? He doesn’t know the difference between stocks and bonds. There’s no way that anyone should be lending him money.” Let them say what they will. Let the competition drop its guard as a result. It would not hurt, however, for them to ask themselves this question: “If I’m so smart, why am I so poor?” Or this one: “Why have Goldman Sachs and Vostok Nafta invested in Tinkov’s bank, when I’m afraid to buy his bonds?”

It just so happens, I think, that my investors are smarter than those skeptics who bought up a bunch of securities before the crisis—securities, that is, which later defaulted. Why, then, am I the one that people write shit about online? These guys said, “I’d be better off buying securities from Yevrokommerts. They have a smart young president, Grigory Karpovsky. He’s a financier. Tinkov, on the other hand, is a brewer.” But the next thing you know, Yevrokommerts defaulted and these investors’ balance had a gaping hole in it. I use this factoring company as an example because we were in direct competition with them when we were looking for investors in the debt market.

Give me even a single instance where I did not fulfill my obligations on a loan. All of my partners and investors are more than happy—everyone from Promstroibank to Goldman Sachs. Even the bondholders, who were really worried during the ruble’s devaluation period, got two warrants each at eighteen percent annually. They too are happy. It is always the more reliable, higher quality companies that end up having to restructure their obligations.

In cases like these, we need to consider the person standing behind the company and have a look at the company’s credit history. Someone that has been in business since 1989, someone that has built and sold four companies—such a person is trustworthy. Those who are afraid to lend to him are idiots—and that is all there is to it. They do not know how to pursue treasure. They do not know how to separate the wheat from the chaff. They continue to lend money to phony companies. Let them have their defaults; let them restructure their debt for years afterward. Smart investors will work with people who have been proving their worth for the last twenty years—and they will earn their eighteen percent. Building a business, like living a life, is not equivalent to crossing a field.

As a banker I can confirm that one can invest confidently in someone that had his first business in 1989-1993. One can boldly loan money to such a person as well. People like this have gone through the toughest schooling out there—and their achievements speak for themselves. They survived in a time when a lot of businessmen dropped out of the race. They are the best of the best.

An entrepreneur must always be read to plunge into battle.

In March 2010, our company took a trip to Verbier. We did not merely ski, though. We also had business brainstorming sessions

In the Steps of David Bowie?

On November 7, 2009, I wrote all of the bank managers a letter. I give it in the original so that you can get in some English practice.

 

Hi there,

I have been thinking lately about issuing my own Ruble bonds @ Moscow.

At one point, David Bowie set a very good example of the kind of thing that I have in mind (see http://en.wikipedia.org/wiki/Bowie_Bonds).

I think my name has more fame and credibility in Russia than even TCS Bank. According to some studies, the name Oleg Tinkov is in the top five individuals who come to mind when people think of Russian businessmen, beating Abramovich, Khodorkovsky and Deripaska.

Oliver, could we check with RenCap or Troika to see if they would be interested in underwriting an issue of this kind?

I believe that I can issue from two to three billion rubles, backed by my existing real estate properties (etc.) and projected TCS revenue—and then put that cash toward TCS funding. I realize that these are very provocative and audacious ideas. However, I look forward to hearing your constructive comments on the above.

Oleg Tinkov, Chairman

Basically, I was seeking advice on whether to issue bonds in my own name, as David Bowie did—and then go on to invest the money in the bank. As you can see, we do not reject crazy ideas. We analyze them. And maybe, to date, I have not issued any personal bonds—but this is only for the moment. Their time will come and, when it does, I hope that some of my readers will be able to buy some.

Eduard Sozinov, Oleg Tinkov’s school friend:

Oleg deserves credit. In spite of all the hardship, he still visits Leninsk. He even helps out there. For example, he built a playground. Someone else might have said, “Who cares if this city collapses, anyway?” In the summer of 2009, at his wedding, he said that there were three important cities in his life: Leninsk-Kuznetsky, St. Petersburg, and Forte dei Marmi. Good for Oleg—he still cycles. He’s not an 18-year-old boy anymore. He’s a grown man—and in such good shape. He’s sponsored an athletic cycling team in Italy. He was a help to Kostya Pavlov, who had had numerous victories in weightlifting. We shared a desk at school. It is surprising that Oleg took an interest in weightlifting, given that cycling is his thing. Why give money to the boys from Leninsk-Kuznetsky, after all, so that they can go to overseas competitions? There’s a saying: the richer a man, the greater his greed. This doesn’t apply to Oleg.

He’s the only person from Leninsk-Kuznetsky that has achieved such heights. People there view him with uncertainty, but that is because of stupidity and human envy. Anyone who’s a bit smarter has good things to say about him. We’ve been friends since we were kids, but I can’t say anything bad about him.

Smart people leave cities like ours. The reason for this is that, if you don’t leave in time, the city sucks you in like a bog. In time, you can’t break free even if you want to. And it’s all for one simple reason: it’s impossible to sell a house in Leninsk—for decent money—and then buy one in Kemerovo, say. You can’t sell for even a tenth of the amount that you might get for a similar place in Kemerovo.

Chapter 35

Necessity is the Mother of Invention

After the Russian crisis began in September 2008, the markets completely shut down. You would have to have been Gazprom to place bonds or attract loans. We were not counting on it. Our bank’s model had assumed, initially, that we would buy cheap debt in bulk and then place it via the credit cards. But there was no wholesale financing available. We decided, therefore, that we needed to turn to the public investors’ market. We had inherited membership in the deposit insurance system from Khimmashbank. But how were we to attract deposits when we had no branches? Russian law requires that, upon acceptance of deposits, a representative of the bank must be present to confirm that each customer’s identity corresponds to his or her documents. Necessity is the mother of invention, however, and so we came up with the following model: we reached an agreement with Russia Post on a deposit-acceptance pilot project. We began with three regions: Permsky Krai, Chelyabinsk, and Kemerovo Provinces. And why these? Each of the three is very similar to the other two: all three are typically Russian in terms of population, GRP, and the number of post offices per capita. In November, too, in order to continue testing the concept in Russia’s central zone, we added Ulyanovsk Province to the list of regions.

We were geared towards ordinary Russian citizens, people who were tired of waiting in lines, of endless paperwork, and of the low interest rates in traditional banks. Our economics enabled us to pay the most attractive interest rates; our remote service technology allowed us to offer proven service at the highest level, without having to open cumbersome and expensive branches. We offered twenty-two percent annual interest on deposits, which was a little higher than that offered by other banks in 2009.

In the summer, the Central Bank began fighting excessively high interest rates on deposits. But we could not suddenly drop our rates. They were written into our standard client agreement forms and appeared in the marketing materials that we had sent out to two thousand post offices. We needed time to establish a new rate, to produce new documentation, take our new material to the postal branches, retrieve the leftover, outdated material, and so on.

Ultimately, in the fall, we lowered our interest rate by a couple percentage points. By then, though, our new rate was once again the highest on the market. And again this raised questions at the Central Bank. I trust that we have cleared up the details of our mail-based project with the regulator. Our rates certainly did not threaten the banking system’s stability. By the end of six months we had attracted no more than two hundred million rubles. This constituted only a few percent of our entire currency balance—which is laughable compared to banks where public deposits make up seventy to eighty percent of liabilities and equity.

Later the Central Bank set a target rate calculated as the average of the ten maximum bank rates, plus 1.5% annually. It became even harder to follow the rules. Obviously, if every bank changes its rate even once per month, and if there are ten such banks, then the average rate will change once every three days. In consequence, no retail-level bank will chase after such frequent changes. Given our model, in accordance with which changes in deposit terms take months to effect, this was a problem.

We are ready to work with the postal service in any way that we can, but the vulnerable aspect of this approach pertains to something that does not depend on the bank. Our model was very cumbersome and did not lead to any breakthroughs in funding. Thus we decided to develop a more technological approach to the problem of attracting deposits. I have no intention of giving up my commitment to remote client services though. In the long term, to create a network of offices in an age of new technologies seems wasteful and pointless. Nevertheless, if clients cannot come to the bank, then the bank must go to them!

How do things work now? Suppose that a client wants to make a high-interest deposit. He comes to the bank and he sees a line of people, waiting. He might stand in that line for an hour or two. People who value their time find this unacceptable. We have therefore devised a way for people to make deposits without leaving their office or home. All they have to do is to dial the number for our call-center or fill out a form on the bank’s website. Immediately, the bank issues a free, black MasterCard Platinum debit card to the client and, within twenty-four hours, a bank representative comes to where the client is, with the card. They then sign a deposit agreement with an annual rate of 14.5% (which, when you consider the capitalization of interest, amounts to an annual net rate of over 15%).

Clients can deposit additional money in more than one way: by bank transfer from another bank or through Cash-In machines, which have a well-developed network all across Russia. And how does one make withdrawals? This is possible through any bank machine, anywhere in the world (a service for which our bank charges no fees), or via electronic transfer to another bank. Representatives at our call-center make it easy to transfer money from the bankcard that we issue to a card from another bank.

Some clients may find this model complicated, but it really does save time. And, in a city like Moscow, where the enormous distances and traffic jams are a colossal problem, time is the most valuable resource that there is—something of which even Richard Branson was made aware, when he could not make it to my house in December 2008 due to Moscow traffic.

Our first clients in the online deposit program came on board in February and, judging from the dynamics of new arrivals, they like the product. We plan to set up a new online banking system too: not only will clients be able to maintain their high-interest accounts and make payments using their cards, they will also be able to conduct all of their financial operations via accounts at our bank—and they will be able to do all of this over the Internet. I am sure that our future lies on the Internet. It is crucial that we stake out territory there now. Ten years from now, it is unlikely that anyone will react with surprise when they hear that Tinkoff Credit Systems Bank does not have a single customer service branch; ten years after that, people will find it surprising that any bank has a large number of offices. Why waste time going to the bank and standing in line, when you can deal with everything online or over the phone?

It is possible that the Internet will be inextricably connected to my next business. To be continued…

In 2008, when I issued Eurobonds, I jumped on the back of a departing train.

I hope that my work in preparing this book is not in vain. I hope that, as a result, the number of entrepreneurs in our country will increase a little.

Every depositor gets a black MasterCard Platinum debit card, with which he or she can withdraw cash at any bank machine in the world—without paying a fee.

[1] Officially a holiday called the “Fatherland Defenders’ Day”, it was originally intended to honor males in military service or having completed it, but now, in most cases, any male will be wished a “Happy February 23rd!”

[2] Pelmeni are a type of Russian, meat-filled dumpling, similar to ravioli or gyoza.

[3] Max Otto van Stierlitz, a.k.a Maxim Maximovich Isayev, real name Vsevolod Vladimirovich Vladimirov, a Soviet analogue of James Bond.

[4] A character from the Russian novel (later a film), 12 Chairs, who manages to express all of her thoughts using a vocabulary of a mere 30 words.

[5] During 2008-2009, the economy of Pikalyova, an industrial town, suffered greatly when its three largest enterprises were shut down. Other companies suffered too, as a result—to the point where there was a failed attempt by the State Duma to transfer a number of firms, including SevZapProm, to State ownership.

[6] The Stakhanovite movement was a political maneuver in Stalin’s time that was intended to increase labor productivity by reorganizing labor management.

[7] Siloviki are politicians who started out in security or military forces before coming into power. These forces were more influential than the cabinet under presidents Yeltsin and Putin; some siloviki held and still hold high government posts.

[8] Denis Yevsyukov was a senior police officer who, after drinking on his birthday, blacked out and went on a shooting rampage that left two people dead. He did not remember the spree the following day, nor could he remember talking to an unknown man at the restaurant where his birthday party was thrown a short while before. The events gave rise to conspiracy theories concerning the real motives—possibly political—for the attack.

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