“We exposed our business partners and government interlocutors to all these lavish things and they began to adopt them,” said the head of an American multinational who has been in Russia since 1992. “Then, in Russian fashion, they went to extremes and continued these traditions long after the Sarbanes-Oxley Act inhibited us.”
The infection went both ways. Western firms Russified. A generation of young Russians gained experience and now run most of those companies. The standard of living increased, people traveled abroad and the euphoria for all things foreign subsided. Business became routine.
That dynamic, combined with the current geopolitical situation, has led to an about-face in mindset. CoCom export controls and the Cold War have been replaced by sanctions, anti-sanctions and import substitution.
“In the 1990s, we were like a river of water seeking its path, picking up sediment from wherever, going with the flow, open…,” the entrepreneur said. “Now, it’s as if our state of matter has changed: We are ice. We say if you want to be friends with us, it’s up to you to try harder, make the best offer, consider our needs.”
Bureaucratic Evolution
Meanwhile, bureaucrats have multiplied and gained competence. However, big and small businesses have different views on the state of corruption.
“It’s out of control,” said the Russian entrepreneur. “There are more inspections and certifications. People used to say: ‘We’ll create something and then get rich!’ Now, there’s little enthusiasm. We only have the appearance of change. Instead of bandits there are lawyers.”
But the head of the American multinational feels more secure. “The ’90s were scary,” he said. “You had to have a krisha — or borrow your partner’s — to defend yourself from racketeers… Now, with the state in control, things seem much safer.”
“The bureaucrats are less corrupt, in part, because you hardly meet them anymore — obligatory reporting to ministries is mostly done online now,” the American businessman added. “On the rare occasion that I do go to them, they are often smiling, chatty…maybe they miss the human interaction, too?”
It Was Personal
In the ’90s, you got customers through your relationship with the decision maker.
In 1996, Pepsi paid hundreds of thousands of dollars to have cosmonauts aboard the space station display a giant soda can. About the same time, my colleagues and I at HP gave the Russian Mission Control Center a few amortized demo computers. In exchange, we were allowed to place our logo banner under the center’s main control screen for many years.
I got good advice early on. The deputy general director at a state company told me: “If you come to a meeting with a pen and note pad listing your agenda, you’re not likely to get what you want. If you come with some jokes, describe your philosophy of life, and tell stories about your family — saving the business for the end — you are bound to get what you need.”
The banya epitomized customer intimacy. Sitting in a room naked and sweating together, you were bound to bond — even if your note pad got soggy.