WEBVTT - Bill Browder 0:00:08.600 --> 0:00:12.240 Welcome, Welcome, Welcome back to the Bob Left Said Podcast. 0:00:12.520 --> 0:00:18.520 My guest today is author, investor Russia expert Bill Browner. Bill, 0:00:18.600 --> 0:00:20.800 good to have you on the podcast. Agree to be here. 0:00:21.000 --> 0:00:24.200 Can you please explain what the Magnitsky Act is? So, 0:00:24.239 --> 0:00:27.639 the Magnisky Act is a piece of legislation that was 0:00:27.680 --> 0:00:30.920 passed in two thousand twelve. It's named after my lawyer, 0:00:31.480 --> 0:00:37.120 Sergei Magnitsky. Serge was killed in a Russian prison in 0:00:37.200 --> 0:00:41.520 two thousand nine after he exposed a massive government corruption 0:00:41.560 --> 0:00:47.080 scheme and he testified against the officials involved, and in 0:00:47.080 --> 0:00:49.480 in retaliation, they had arrested him, put him in jail, 0:00:49.520 --> 0:00:51.479 tortured him for three or fifty eight days, and as 0:00:51.479 --> 0:00:56.080 I mentioned, they killed him on November six nine. I 0:00:56.120 --> 0:01:00.080 then went after the the Russian government and all of 0:01:00.080 --> 0:01:04.640 their officials who were involved in his murder. And the 0:01:04.680 --> 0:01:08.400 result of my efforts was this piece of legislation, which 0:01:08.480 --> 0:01:13.640 was past four and Congress in the Senate and the 0:01:13.640 --> 0:01:17.319 House of Representatives and signed into law on December four, 0:01:17.760 --> 0:01:20.840 two thousand and twelve by President Obama. Okay, now, are 0:01:20.840 --> 0:01:24.400 there Magnetsky Acts in other countries around the world. Indeed, 0:01:24.600 --> 0:01:28.680 after the US past the Magnetsky Act, Vladimir Putin went 0:01:28.680 --> 0:01:32.000 out of his mind and he banned the adoption of 0:01:32.080 --> 0:01:35.480 Russian orphans by American families. Um he made it his 0:01:35.560 --> 0:01:39.760 single largest foreign policy priority to repeal the Magnetskay Act. 0:01:40.840 --> 0:01:42.600 And it was clear that we had hit the Achilles 0:01:42.640 --> 0:01:45.880 heel of the Putin regime. So I then went out 0:01:46.120 --> 0:01:48.200 and tried to get it past in all other countries 0:01:48.200 --> 0:01:51.320 that I could. And so there's Magnetskay Act in Canada, 0:01:52.080 --> 0:01:55.080 there's one in Britain where I live. There's one in 0:01:55.080 --> 0:01:57.640 the European Union. Twenty seven members of the EU have 0:01:57.760 --> 0:02:02.400 Magnetsky Acts. When in Australia, one in Norway, one in Montenegro, 0:02:02.960 --> 0:02:06.600 when in Kosovo. We even have it in the all 0:02:06.680 --> 0:02:11.040 the British off overseas and offshore territories like the British 0:02:11.120 --> 0:02:15.040 Virsion Islands and the Cayman Islands and Jersey and Gibraltar, 0:02:15.520 --> 0:02:18.560 which may sound insignificant, but that's where a lot of 0:02:18.600 --> 0:02:21.400 the a lot of the bad guys stash their loot. 0:02:21.639 --> 0:02:25.160 As a practical matter, hottest Magnitsky Act work. Well, what 0:02:25.240 --> 0:02:30.200 happens is if somebody has done uh torture, murder like 0:02:30.240 --> 0:02:35.320 the what they've done to Serge magnitsky Um and the government, 0:02:35.360 --> 0:02:38.040 you can prove it to the government to a high 0:02:38.280 --> 0:02:41.640 standard of evidence, then they put that person on the 0:02:41.680 --> 0:02:45.400 Magnitsky List, and the Magniski Act will then freeze their assets, 0:02:45.639 --> 0:02:49.760 banned their visas, and publicly name their names. And it's 0:02:49.800 --> 0:02:52.600 quite devastating because anybody who gets put on the Magnisky 0:02:52.720 --> 0:02:56.079 List effectively can't open a bank account anywhere in the world. 0:02:56.600 --> 0:02:59.359 If you're on the U. S. Sanctions list, nobody wants 0:02:59.400 --> 0:03:02.400 to mess with you, as government makes it almost impossible 0:03:02.400 --> 0:03:06.240 for these people to get visas anymore. And in my mind, 0:03:06.480 --> 0:03:08.560 probably the best part about the whole thing is that 0:03:09.520 --> 0:03:13.000 all these regimes eventually crumble at one point or another, 0:03:13.680 --> 0:03:16.000 and all these people then can't go and flee to 0:03:16.160 --> 0:03:19.040 a civilized country when Russia gets taken over by the 0:03:19.080 --> 0:03:23.079 next guy, because all the civilized countries are gonna say, 0:03:23.080 --> 0:03:24.919 wait a second, you're on the Magniscy list, you're a 0:03:24.960 --> 0:03:28.200 human rights biler. We don't want you. So how often 0:03:28.360 --> 0:03:31.520 is someone on the list where it's just the fact 0:03:31.560 --> 0:03:34.720 that it exists a disincentive to try to go to 0:03:34.760 --> 0:03:37.760 another country. Well, I think that that it's it's a 0:03:37.800 --> 0:03:40.120 disincentive the moment that they get put on the list 0:03:40.480 --> 0:03:43.200 to try to go to another country because they know 0:03:43.240 --> 0:03:46.080 that they won't be welcomed. I mean, there's another interesting 0:03:46.120 --> 0:03:49.200 angle to the whole thing, which is that if somebody 0:03:49.480 --> 0:03:51.880 is put on the Magniscy list, there's probably a hundred 0:03:51.920 --> 0:03:53.640 other people who are terrified that they're going to be 0:03:53.680 --> 0:03:56.640 put on the Magniscy List. And so it creates almost 0:03:56.720 --> 0:03:59.760 like a reign of terror on all these bad guys 0:03:59.840 --> 0:04:02.520 in these dictatorships because they're all worried abou this is 0:04:02.560 --> 0:04:05.920 going to happen to them. Now, how much let's just 0:04:05.960 --> 0:04:09.680 call the illegal Russian assets are in the US? Can 0:04:09.720 --> 0:04:12.720 that be quantified? Can that be reached in light of 0:04:12.760 --> 0:04:16.400 the war going on in Ukraine? Should the US government 0:04:16.520 --> 0:04:21.120 attach and seize those assets? Well, the answer is absolutely yes. Um, 0:04:21.120 --> 0:04:24.760 the US government is trying. It's um, it's a tough 0:04:24.880 --> 0:04:28.120 it's a tough tough thing for them to do because 0:04:28.120 --> 0:04:33.760 the Russians who have m accumulated all these assets, has 0:04:33.800 --> 0:04:38.400 spent years, if not decades, preparing for this moment. So 0:04:38.440 --> 0:04:42.839 all these assets are held in the names of shell 0:04:42.960 --> 0:04:47.359 companies and trust companies and shell companies owning trust companies, 0:04:47.400 --> 0:04:50.760 and then trust companies looking after nominee arrangements and so 0:04:50.839 --> 0:04:53.480 on and and so forth. And so there's a whole layer 0:04:53.600 --> 0:04:55.400 and layer and layer of stuff that needs to be 0:04:55.440 --> 0:04:57.880 gone through. And so I think we're just getting started 0:04:57.880 --> 0:05:00.760 in this whole process right now. But that' the objective 0:05:00.839 --> 0:05:03.000 is to is to freeze the assets and seize the 0:05:03.040 --> 0:05:07.480 assets of these oligarchs and people close to Laderma and Putin, 0:05:07.560 --> 0:05:09.200 and they have a lot of assets. These people are 0:05:09.200 --> 0:05:14.080 extremely rich. The kleptocracy was really revealed to the general 0:05:14.200 --> 0:05:19.080 person in ten with all the graft and other expenses 0:05:19.080 --> 0:05:23.400 with the socio Olympics. So what don't we know Putin 0:05:23.600 --> 0:05:29.080 took power, he has a dominimous salary, yet he's considered 0:05:29.080 --> 0:05:32.680 to be the wealthiest person in the world. Explain how 0:05:32.760 --> 0:05:36.880 this works, how he and his cronies get the money, 0:05:36.920 --> 0:05:40.239 how he distributed to the understandings that it's his money, 0:05:40.240 --> 0:05:42.400 even though in name it may not be. So. The 0:05:42.400 --> 0:05:45.719 way it works is this. When you go into government 0:05:46.080 --> 0:05:49.599 in Russia, um, nobody does it to serve the public. 0:05:49.720 --> 0:05:52.240 If you if you're an American and you go into government, 0:05:52.279 --> 0:05:55.839 you want to do it to serve the people. In Russia, 0:05:55.960 --> 0:05:58.279 the only reason a person goes into government is to 0:05:58.320 --> 0:06:02.040 steal money. Um And the more the higher you are 0:06:02.040 --> 0:06:04.400 in the government, the more money you can steal. And 0:06:04.440 --> 0:06:06.240 the person who gets to steal the most money is 0:06:06.279 --> 0:06:10.560 the most powerful person, which is the President of Russia. 0:06:10.800 --> 0:06:14.200 And so over a long period of time, Vladimir Putin 0:06:14.680 --> 0:06:18.279 has stolen an enormous amount of money. I estimate these 0:06:18.320 --> 0:06:22.120 worth well north of two billion dollars personally. And if 0:06:22.120 --> 0:06:23.880 we had to quantify the amount of money that's been 0:06:23.920 --> 0:06:27.839 stolen in his twenty two years in power, he and 0:06:27.920 --> 0:06:30.400 all the people around him, the thousand or so other 0:06:30.440 --> 0:06:33.239 people who are involved in this thing, I would estimate 0:06:33.279 --> 0:06:37.880 they've stolen a trillion dollars a thousand billion dollars from 0:06:37.920 --> 0:06:41.599 the Russian state, from the Russian people. That's money that 0:06:41.640 --> 0:06:45.320 should have gone to how build hospitals and schools and 0:06:45.440 --> 0:06:48.320 phil potholes in the road, but instead it's gone to 0:06:49.320 --> 0:06:53.560 uh pay for villas and yachts and Swiss bank accounts 0:06:53.600 --> 0:06:57.320 and private jets. And and that's really the sort of 0:06:57.360 --> 0:07:00.599 tragedy of the whole thing, is that it's the definitely 0:07:00.920 --> 0:07:03.599 lots of victims of this crime, which are the people 0:07:03.640 --> 0:07:06.560 of Russia. Now we hear that these oligarchs who are 0:07:06.720 --> 0:07:10.800 named in the papers and other news media are really 0:07:11.200 --> 0:07:14.920 holding Putent money and trust it's really not their money, 0:07:14.960 --> 0:07:17.000 or most of it is not. Is that true? That's 0:07:17.040 --> 0:07:19.600 exactly right. And so the way it works is that 0:07:19.680 --> 0:07:22.800 there's no such thing as an independently wealthy person in Russia. 0:07:23.400 --> 0:07:28.160 Anybody who's wealthy is dependently wealthy, and they're dependent on 0:07:28.240 --> 0:07:34.760 Vladimir Putin and so um there. Their their whole arrangement 0:07:34.760 --> 0:07:37.160 with him is that he allows them to keep some 0:07:37.240 --> 0:07:41.640 of the money that they have stolen from wherever as 0:07:41.680 --> 0:07:44.880 long as they give him a cut. And I I 0:07:45.080 --> 0:07:49.040 estimate that he's a fifty shareholder and all this stuff. 0:07:49.320 --> 0:07:52.440 So when you see an oligarch who's worth billion dollars 0:07:52.440 --> 0:07:55.360 on paper, the reality is that he's only worth ten 0:07:56.240 --> 0:08:00.120 because the other ten belongs to Vladimir Putin. And and 0:08:00.160 --> 0:08:02.520 that's how the whole system works, is that these oligarchs, 0:08:02.560 --> 0:08:04.920 when you when you see them all out there and 0:08:04.920 --> 0:08:06.560 you want to go after Putin's money, you go after 0:08:06.640 --> 0:08:09.840 the oligarch's money. So drilled down a little bit deeper. 0:08:10.120 --> 0:08:13.160 Exactly how do they steal the money? Well, do we 0:08:13.200 --> 0:08:16.040 have about twelve hours, because I can tell you twelve 0:08:16.080 --> 0:08:17.880 hours worth of ways in which they steal the money. 0:08:17.880 --> 0:08:20.600 But let me give you a couple of good examples. 0:08:21.240 --> 0:08:24.440 There's the example of what Sergei Magniski discovered and what 0:08:24.480 --> 0:08:28.720 he was killed over. My company paid two million dollars 0:08:28.760 --> 0:08:32.120 of taxes to the Russian government and we were then 0:08:32.480 --> 0:08:35.920 my offices were then rated by the police, who then 0:08:36.000 --> 0:08:40.200 seized all of our corporate documents and those documents were 0:08:40.240 --> 0:08:45.840 then used to fraudulently reregister my companies that have paid 0:08:45.880 --> 0:08:49.480 the taxes. And then they went and applied for a 0:08:49.800 --> 0:08:54.360 illegal to thirty million dollar tax refund and it was 0:08:54.400 --> 0:08:57.240 approved by the tax authorities overnight and paid out the 0:08:57.280 --> 0:08:59.199 next day, and it was the largest tax refund in 0:08:59.240 --> 0:09:04.200 the history of Russia. UH. As one example, so you 0:09:04.240 --> 0:09:07.880 know complex scheme, and it's it's actually ten times more 0:09:07.880 --> 0:09:12.440 complicated than I've just explained it. Um. But that's one way. 0:09:12.480 --> 0:09:14.040 And then I mean I could give you so for 0:09:14.040 --> 0:09:17.960 example another one. UH they build a pipeline, an oil 0:09:17.960 --> 0:09:22.400 pipeline from Russia to Turkey. Normally, if you go out 0:09:22.440 --> 0:09:25.080 to a contractor and say how much does it cost 0:09:26.080 --> 0:09:29.760 to build a pipeline? That contractor will say a million 0:09:29.800 --> 0:09:34.040 dollars per kilometer, and of course the contractor is probably 0:09:34.040 --> 0:09:35.520 even giving you a high price so they can make 0:09:35.559 --> 0:09:40.000 a big margin. And then you look on the on 0:09:40.160 --> 0:09:44.000 the balance sheet of gas prom and they've spent ten 0:09:44.040 --> 0:09:47.960 million dollars per kilometer to build a pipeline, so they 0:09:48.040 --> 0:09:51.319 spent ten times the real the cost to the contractor 0:09:52.200 --> 0:09:55.400 um so nine million dollars per kilometer then goes as 0:09:55.520 --> 0:09:59.840 kickbacks to the people who organized the construction project for 0:10:00.080 --> 0:10:02.520 State Gas company. How do you get in on the action? 0:10:02.800 --> 0:10:04.160 The only way you can get in on the action 0:10:04.280 --> 0:10:06.800 is to be part of the criminal enterprise. And so 0:10:06.840 --> 0:10:08.720 it's like, how do you become a member of the 0:10:09.920 --> 0:10:11.880 New York mafia. You know, you have to be a 0:10:11.920 --> 0:10:15.079 made man. There's some special ways that people have become 0:10:15.400 --> 0:10:19.000 made men there, but the main ways you you work 0:10:19.000 --> 0:10:22.000 in government, and generally you work in part the part 0:10:22.040 --> 0:10:26.160 of the government that's the has the power to arrest people, 0:10:26.200 --> 0:10:28.880 to take people hostage. So you work in one of 0:10:28.920 --> 0:10:33.040 the security services, you work in the FSB, which is 0:10:33.080 --> 0:10:35.600 their secret police, or you work in the Interior ministry 0:10:35.679 --> 0:10:38.439 or which is the regular police, or you work in 0:10:38.480 --> 0:10:41.920 the prosecutor's office. And then what you do once you're 0:10:41.920 --> 0:10:44.280 in those places is you go around and arresting people 0:10:44.360 --> 0:10:47.600 until they hand over stuff to you, until they become 0:10:48.080 --> 0:10:52.520 a sort of client. And and so there's many many 0:10:52.520 --> 0:10:54.520 people in jail who shouldn't be in jail and Russia 0:10:54.520 --> 0:10:56.360 who are they put there so that all these crimes 0:10:56.400 --> 0:10:59.000 could be committed without any questions being asked? So what 0:10:59.200 --> 0:11:02.079 is the head space of the average Russian citizen? Are 0:11:02.080 --> 0:11:05.320 they aware of this? Do they go along? We have 0:11:05.440 --> 0:11:09.920 Nivali who's resisting, But generally what's the mindset? The mindset 0:11:09.960 --> 0:11:12.840 is this happens at every level of Russian society. It 0:11:12.920 --> 0:11:15.880 happens down to the local mayor and the local policeman 0:11:16.000 --> 0:11:19.480 right up to the President of Russia. Everybody accepts it. 0:11:19.520 --> 0:11:22.960 They know it happens, and they only think in wish 0:11:23.200 --> 0:11:25.040 that they could be so lucky as to be involved 0:11:25.040 --> 0:11:28.960 in this. And so it's a it's a weird cynical, 0:11:29.040 --> 0:11:32.120 almost defeatist attitude. And of course people at the same 0:11:32.160 --> 0:11:36.320 time are pretty piste off by it, because you know 0:11:36.360 --> 0:11:39.000 that somebody is getting something that they're not, and so 0:11:39.080 --> 0:11:42.240 that they they they wish they had it, but it's 0:11:42.240 --> 0:11:44.840 not like they're morally outraged. There's outraged that they're not, 0:11:45.160 --> 0:11:47.800 you know, the recipients when somebody else is what is 0:11:47.840 --> 0:11:51.640 the average quality of life in Russia? We have gross 0:11:51.960 --> 0:11:55.160 incommittee quality. In the United States, there's somewhat of the 0:11:55.200 --> 0:11:59.880 social safety net. What's the situation in Russia. It's just dramatic, 0:12:00.160 --> 0:12:03.440 worse than than any any place in the world in 0:12:03.559 --> 0:12:07.319 terms of incoming inequality. There's a thousand people that control 0:12:07.400 --> 0:12:09.760 like and I don't know the exact number, but like 0:12:09.800 --> 0:12:12.960 more than of all the assets in the country, and 0:12:13.000 --> 0:12:15.600 everybody else lives and lives in destitute poverty. It means 0:12:15.600 --> 0:12:18.559 a very very small middle class. And the average Russian 0:12:18.640 --> 0:12:20.880 is like, you know, living in a in a shack 0:12:21.320 --> 0:12:23.520 on an unpaved dirt road and they have to use 0:12:23.559 --> 0:12:26.280 an outhouse. I mean, it's just horrible. If we were 0:12:26.280 --> 0:12:28.839 to quiz these people were old enough to remember, would 0:12:28.840 --> 0:12:31.840 they say things were better or worse under communism? I 0:12:31.840 --> 0:12:34.000 think the average Russian would say that things were better 0:12:34.080 --> 0:12:38.240 under communism because at least in that period of time, 0:12:38.640 --> 0:12:42.360 there wasn't this whole sort of criminal regime running the country. 0:12:42.360 --> 0:12:44.360 It was you know, the people who are running the 0:12:44.360 --> 0:12:48.840 country were dictators and oppressive and and not not agreeing 0:12:48.880 --> 0:12:52.400 to freedom of speech and freedom of the press. But 0:12:52.400 --> 0:12:55.240 but it wasn't a criminal organization where they were taking 0:12:55.280 --> 0:12:59.360 all the money and spending on on on santrope villas. 0:12:59.600 --> 0:13:02.680 So how did you personally decide to move to Russian 0:13:02.800 --> 0:13:06.040 invest in Russian companies? So that's an interesting story. My 0:13:06.120 --> 0:13:11.560 grandfather was the general secretary of the American Communist Party 0:13:11.679 --> 0:13:18.240 between ninety and and so my family sort of followed 0:13:18.280 --> 0:13:21.080 in his footsteps. And we're extremely before you go there, 0:13:21.760 --> 0:13:25.120 where was he originally born? Was he American? Were there 0:13:25.160 --> 0:13:28.400 any roots here? So my grandfather was from Wichita, Kansas. 0:13:28.720 --> 0:13:33.400 He was a labor union organizer. In n seven, he 0:13:33.520 --> 0:13:36.800 was spotted by the Communists in the Soviet Union and 0:13:36.840 --> 0:13:39.360 they said, if you if you like labor unionism, you're 0:13:39.360 --> 0:13:41.760 gonna love communism when you come over here and check 0:13:41.800 --> 0:13:47.960 it out. So my grandfather moved to Moscow and he 0:13:48.000 --> 0:13:52.360 did what most other single, red blooded American men do 0:13:52.440 --> 0:13:55.199 when they get to Moscow. He found a Russian girl 0:13:55.920 --> 0:14:01.120 who became my grandmother. They had three sons, My father 0:14:01.280 --> 0:14:04.760 was one of them, who was born in Moscow, and 0:14:04.800 --> 0:14:09.760 then he returned to America to Yonkers, New York, and 0:14:09.800 --> 0:14:12.680 he became head of the American Communist Party. He ran 0:14:12.720 --> 0:14:17.240 for president against Roosevelt in nineteen thirty six and nineteen 0:14:17.280 --> 0:14:20.560 forty on the Communist ticket. He was actually imprisoned by 0:14:20.600 --> 0:14:25.920 Roosevelt in nine and then pardon in nineteen two. Eventually 0:14:26.000 --> 0:14:28.320 kicked out of the Communist Party in ninety five for 0:14:28.400 --> 0:14:32.640 being too much of a capitalist, and then persecuted viciously 0:14:32.720 --> 0:14:36.360 during the McCarthy era in the nineteen fifties. And so 0:14:36.440 --> 0:14:40.400 this was my family legacy. I was born in nineteen 0:14:40.400 --> 0:14:43.680 sixty four, fifty eight years old, and when I was 0:14:43.720 --> 0:14:46.080 going through my teenage rebellion, I tried to come up 0:14:46.120 --> 0:14:49.880 with a good way of rebelling from this family of communists, 0:14:50.760 --> 0:14:52.520 and I tried several things out. I grew my hair 0:14:52.560 --> 0:14:55.440 along can't you can't tell because we're in a podcast, 0:14:55.520 --> 0:14:58.320 but actually don't have any hair anymore. But it grew 0:14:58.320 --> 0:15:02.480 into an afro um. But that, strangely, that didn't upset 0:15:02.520 --> 0:15:05.520 my family. I followed the grateful dead around for a 0:15:05.560 --> 0:15:08.440 couple of months. That didn't upset my family. Then I 0:15:08.480 --> 0:15:10.920 came up with a perfect way of upsetting my family, 0:15:10.960 --> 0:15:13.280 which was to put on a student tie and become 0:15:13.320 --> 0:15:17.200 a capitalist, and that really upset them very much. So 0:15:17.240 --> 0:15:20.600 I became a capitalist. I went to Stanford Business School. 0:15:21.000 --> 0:15:23.720 I graduated business school in nine which is the year 0:15:23.720 --> 0:15:26.920 of the Berlin Wall came down. And as I was 0:15:26.920 --> 0:15:28.640 trying to figure out what to do with my life, 0:15:28.680 --> 0:15:30.520 I had this epiphany one day, which is that of 0:15:30.600 --> 0:15:34.600 my grandfather was the biggest communist in America, and the 0:15:34.640 --> 0:15:37.880 Berlin Wall has just come down. I'm gonna try to 0:15:37.880 --> 0:15:40.800 become the biggest capitalist in Eastern Europe. And that's what 0:15:40.880 --> 0:15:43.640 I set out to do. And I originally moved to London, 0:15:44.760 --> 0:15:48.080 and then I moved to Moscow and I set up 0:15:48.080 --> 0:15:50.760 an investment fund called the Hermitans. A little bit slower. 0:15:50.840 --> 0:15:56.720 You graduated from Stanford, Is this your first employment situation? 0:15:57.080 --> 0:15:59.760 What are the companies you work for before you become 0:15:59.800 --> 0:16:02.400 a dependent? So at first I went to the Boston 0:16:02.440 --> 0:16:06.920 Consulting Group. I was the My first job was in 0:16:07.000 --> 0:16:11.360 the East European practice of the Boston Consulting Group in London, 0:16:12.240 --> 0:16:15.600 and my very first assignment was to go out to Poland. 0:16:16.120 --> 0:16:18.320 They sent me out to a bus company, a failing 0:16:18.360 --> 0:16:22.160 bus company on the Polish Ukrainian border in a little 0:16:22.200 --> 0:16:26.880 town called Sanak, And the only there was a very 0:16:26.920 --> 0:16:29.280 low paying assignment. The World Bank was paying the fees 0:16:30.480 --> 0:16:33.120 and they could only afford to send out a first 0:16:33.240 --> 0:16:38.040 year associate like myself. So I go out to this 0:16:38.080 --> 0:16:42.320 little town, um and this bus factory is just in 0:16:42.360 --> 0:16:47.080 a horrific condition. The main problem was that the state company, 0:16:47.200 --> 0:16:49.760 state bus company that buys the buses from the factory, 0:16:50.440 --> 0:16:54.480 stopped their orders and they were responsible from their sales, 0:16:54.520 --> 0:16:59.200 and so all of a sudden they were down. And 0:16:59.240 --> 0:17:03.680 so it was kind of painful assignment because the main, uh, 0:17:04.080 --> 0:17:07.200 the obvious thing to do. If you've lost your sales, 0:17:07.240 --> 0:17:11.479 you've got to cut your costs, and that meant firing 0:17:11.480 --> 0:17:13.600 a lot of people in a town, which was effectively 0:17:13.600 --> 0:17:17.800 in one company town. So it was very depressing assignment. 0:17:17.800 --> 0:17:20.800 But while I was walking around sort of making lists 0:17:20.800 --> 0:17:24.959 of people that probably should be fired, I had this translator. 0:17:25.080 --> 0:17:29.159 His name was Lesk, and I noticed, and he was 0:17:29.200 --> 0:17:31.879 always following me around and translating wherever I need to be, 0:17:32.720 --> 0:17:35.880 wherever I need a translation, And he had this newspaper 0:17:35.920 --> 0:17:38.000 under his arm, and I noticed that all these financial 0:17:38.040 --> 0:17:42.679 figures on his newspaper and I I asked him what 0:17:42.720 --> 0:17:44.320 are those and he said, ah, these are the very 0:17:44.320 --> 0:17:49.439 first privatizations. I thought that that kind of piqued my interest, 0:17:49.480 --> 0:17:50.960 and I said, can you explain them to me? And 0:17:51.000 --> 0:17:53.920 so we went into a conference room and he laid 0:17:53.920 --> 0:17:57.320 out the paper on the table and I said, what's 0:17:57.359 --> 0:18:00.800 this number and he said, that's the number of shares 0:18:00.840 --> 0:18:03.960 outstanding of the company. And I said what's this number? 0:18:03.960 --> 0:18:06.920 He said, that's the the share price that the government's 0:18:06.920 --> 0:18:09.399 selling the shares. And I'm multiply the two numbers together 0:18:10.400 --> 0:18:13.280 and it got got to eighty million dollars, which is 0:18:13.280 --> 0:18:16.480 the value of the company. And then I said, what's 0:18:16.480 --> 0:18:20.800 this number, the one right below that? Uh? And he 0:18:20.880 --> 0:18:24.080 said this is the net income of the company, the earnings. 0:18:25.200 --> 0:18:26.719 I said, no, no, no, that that that must not 0:18:26.760 --> 0:18:29.400 be right. He said, I said, just read it, read 0:18:29.440 --> 0:18:31.960 it word for word, and it's like net income of company. 0:18:33.240 --> 0:18:37.280 And that number was a hundred and sixty million dollars. 0:18:37.280 --> 0:18:40.080 So you don't have to be a Stanford NBA or 0:18:40.080 --> 0:18:43.200 even a financial professional to understand that if you can 0:18:43.200 --> 0:18:46.399 buy a company for eighty million dollars and it earned 0:18:46.440 --> 0:18:51.800 a hundred and sixty million dollars in the previous year. Um. 0:18:52.400 --> 0:18:54.040 Then basically all you have to do is hold the 0:18:54.040 --> 0:18:55.600 shares for half a year and you've already got your 0:18:55.640 --> 0:19:00.119 money back. And so and this was this was not 0:19:00.200 --> 0:19:02.000 the bus company we're working at. It was another company. 0:19:02.320 --> 0:19:04.520 And so I said, well, how do we buy shares 0:19:04.520 --> 0:19:06.840 of it? And he said, oh, it's very easy. We 0:19:06.840 --> 0:19:09.640 we we can go to the post office and and 0:19:09.920 --> 0:19:14.000 fill out an application form. And I thought, God, this 0:19:14.040 --> 0:19:17.600 is like crazy. I I mean, I was very young, 0:19:17.640 --> 0:19:21.400 I didn't have much money, but I had I think 0:19:21.400 --> 0:19:25.720 I had like two thousand dollars of savings total life savings. 0:19:26.000 --> 0:19:28.600 And I converted my two thousand dollars of life savings 0:19:29.359 --> 0:19:32.800 to Polish lotty. UM. I went down to the post 0:19:32.840 --> 0:19:36.399 office with Leschek and I subscribed to the very first 0:19:36.480 --> 0:19:44.000 privatizations and and over the next year I made ten 0:19:44.040 --> 0:19:49.840 times my money. And there's this uh, weird chemical that 0:19:49.880 --> 0:19:51.880 gets released in your stomach when you make ten times 0:19:51.880 --> 0:19:54.480 your money on an investment. It's like crack cocaine. You 0:19:54.480 --> 0:19:57.000 want to you want to have, you want to do 0:19:57.040 --> 0:19:59.440 it again and again and again, And that was the 0:19:59.480 --> 0:20:01.119 moment I just I didn't. I didn't. I didn't want 0:20:01.119 --> 0:20:02.639 to be a consultant anymore. I wanted to be an 0:20:02.640 --> 0:20:04.960 investor in all this stuff. So what was the next step? 0:20:05.080 --> 0:20:07.679 Fast forward a little bit. UM. I ended up at 0:20:07.720 --> 0:20:13.320 Solomon Brothers. Solomon Brothers um is used to be one 0:20:13.359 --> 0:20:17.520 of the big investment banks made made famous by liars poker. 0:20:17.640 --> 0:20:21.399 You have a Michael Lewis book exactly. So I joined 0:20:21.400 --> 0:20:26.440 the East European investment banking team at Solomon Brothers. And 0:20:26.600 --> 0:20:31.520 my very first assignment at Solomon Brothers was to advise 0:20:31.600 --> 0:20:36.159 a fishing fleet called the Mermants Trawler Fleet located in 0:20:36.240 --> 0:20:39.040 mermantsk which is a hundred miles north of the Arctic Circle. 0:20:39.200 --> 0:20:42.560 I think it's the furthest north population center in the world. 0:20:44.200 --> 0:20:48.520 So I go up to murmansk Um to advise this 0:20:49.520 --> 0:20:52.640 management of this fishing fleet. And I get up there 0:20:53.200 --> 0:20:55.399 and the head of the fishing fleet meets me at 0:20:55.400 --> 0:20:58.800 the airport and he says, before we have our business meetings, 0:20:58.800 --> 0:21:00.000 so I just want to take you on a little 0:21:00.160 --> 0:21:03.000 tour so you can see what one of our trawlers 0:21:03.040 --> 0:21:07.320 looks like. So we go down to the docks, and 0:21:07.560 --> 0:21:10.000 in front of me is this enormous vessel. It's like 0:21:10.760 --> 0:21:14.280 four or five feet long and on the and it's 0:21:14.320 --> 0:21:16.760 on all multiple decks, and on the top deck there's 0:21:16.840 --> 0:21:20.720 this uh nets to catch the fish, and then the 0:21:20.800 --> 0:21:24.760 next level there's they separate the fish. Then the next 0:21:24.840 --> 0:21:27.080 level they treat the fish, and all the way down 0:21:27.080 --> 0:21:29.400 to the to the lowest level where they have these 0:21:29.720 --> 0:21:34.439 canning machines which they put the fish into cans. And 0:21:34.480 --> 0:21:36.639 so this wasn't just a fishing vessel. This was like 0:21:36.640 --> 0:21:41.359 an ocean going factory, ocean going fish factory. And I 0:21:41.520 --> 0:21:47.960 am I asked the guy, the management, the manager, the 0:21:47.960 --> 0:21:50.960 CEO of this of this fleet. I said, how much 0:21:51.000 --> 0:21:53.800 is one of these things cost? And he says twenty 0:21:53.800 --> 0:21:57.480 million dollars new? And then I say, how many do 0:21:57.520 --> 0:22:01.920 you have in your fleet? A hundred, So twenty million 0:22:01.960 --> 0:22:04.360 dollars times a hundred, because he has two billion dollars. 0:22:05.640 --> 0:22:07.919 And I said, what's the average age of your ships? 0:22:08.760 --> 0:22:11.040 He is his seven years. Now. I don't know anything 0:22:11.080 --> 0:22:13.040 about ships for fishing, but I figured that makes them 0:22:13.040 --> 0:22:16.399 maybe half depreciate it. So billion dollars with the ships, 0:22:17.720 --> 0:22:20.840 and the reason that this guy had hired me was 0:22:20.920 --> 0:22:26.080 to um advise him, revise him and his management team 0:22:26.160 --> 0:22:30.600 on whether to exercise their legitimate right under the privatization 0:22:30.680 --> 0:22:35.880 program of Russia to buy of the shares of this company. 0:22:37.200 --> 0:22:40.439 And so I asked him, at what price is the 0:22:40.480 --> 0:22:44.480 government selling you? And he said two and a half 0:22:44.520 --> 0:22:48.600 million dollars. So let me just repeat the math. So 0:22:48.840 --> 0:22:51.440 there's a billion dollars with the ships, and you can 0:22:51.440 --> 0:22:56.920 buy for two and a half million dollars. So I 0:22:57.400 --> 0:22:59.439 got that feeling in my stomach, you know, the one 0:22:59.520 --> 0:23:03.199 I had from the ten bagger in Poland. And I'm 0:23:03.240 --> 0:23:05.480 thinking to myself, I don't want to be advising on 0:23:05.520 --> 0:23:07.920 this stuff. I want I want to uh, I want 0:23:07.960 --> 0:23:12.320 to own this stuff. And so instead of going back 0:23:12.359 --> 0:23:16.080 to London, which was where I lived, I am flew 0:23:16.119 --> 0:23:20.160 to Moscow and I got a I bought a very 0:23:20.200 --> 0:23:22.800 thin English language yellow page directory that they sell at 0:23:22.800 --> 0:23:26.159 the airport, and I went to my hotel room at 0:23:26.160 --> 0:23:29.760 the Metropol Hotel and I started cold calling people in 0:23:29.800 --> 0:23:32.359 the yellow pages to see whether someone could explain to 0:23:32.400 --> 0:23:37.239