WEBVTT - Bill Browder on High Finance, Murder and Justice (Podcast) 0:00:02.080 --> 0:00:06.800 This is Master's in business with very renaults on Bluebird 0:00:06.920 --> 0:00:12.640 Radio this weekend on the podcast Strap Yourself In. This 0:00:12.720 --> 0:00:17.720 is just astonishing. Bill Browder, founder CEO of Hermitage Capital 0:00:17.760 --> 0:00:21.560 Management and the author of Red Notice, A true story 0:00:21.600 --> 0:00:24.560 of high finance, murder and one man's Fight for Justice, 0:00:25.280 --> 0:00:27.560 has a new book out about what's been going on 0:00:27.720 --> 0:00:31.920 with the Russians and the Magnitsky Act that he helped 0:00:31.960 --> 0:00:36.479 to pass in order to get justice for his Russian 0:00:36.520 --> 0:00:40.400 attorney who was tortured and murdered by the Russian government 0:00:40.440 --> 0:00:44.920 while in their custody in prison. This is just really 0:00:45.360 --> 0:00:50.800 astonishing stuff. I read all of Red Notice. It was 0:00:50.880 --> 0:00:52.919 like a spine novel. You plow right through it on 0:00:52.920 --> 0:00:55.280 the weekend. And then I did the same thing with 0:00:55.360 --> 0:00:58.400 Freezing Water, which is what's taken place in the five 0:00:58.480 --> 0:01:01.520 years since Red Notice came out out. So I felt 0:01:01.560 --> 0:01:04.680 like I knew everything he was gonna say, and even 0:01:04.800 --> 0:01:08.800 still he astonished me. I I spoke to him for 0:01:08.880 --> 0:01:12.039 nearly two hours, most of the time my job was 0:01:12.120 --> 0:01:17.160 on the desk. I just was shocked at how um 0:01:17.440 --> 0:01:22.680 just barbaric and you can't even call it corrupt. It's 0:01:22.760 --> 0:01:27.679 just next level illegality that seems to take place in Russia. 0:01:28.160 --> 0:01:33.520 Browder describes that nation as a country that doesn't have laws. 0:01:33.600 --> 0:01:37.160 It's the wild West, and it is a as he 0:01:37.240 --> 0:01:41.600 describes it, a kleptocracy and a fascist state, which doesn't 0:01:41.640 --> 0:01:44.959 sound like it's the sort of place where anybody would 0:01:45.040 --> 0:01:49.520 want to live. Uh. This is not just bad, it's 0:01:49.560 --> 0:01:54.440 bad and getting worse. Uh. And he describes both uh 0:01:54.520 --> 0:01:59.240 the invasion of Ukraine as a giant distraction um by 0:01:59.320 --> 0:02:02.840 Putin again people who would challenge his rule. Really just 0:02:03.520 --> 0:02:07.720 I don't even know what to say. A fascinating, shocking, 0:02:07.840 --> 0:02:12.640 horrifying conversation. Even if you read both the Browder's books, 0:02:12.720 --> 0:02:15.760 you will find something to be amazed at. With no 0:02:15.840 --> 0:02:20.640 further ado, my conversation with Bill Browner. So, so let's 0:02:20.680 --> 0:02:23.680 start out just with a little bit about your your background. 0:02:23.800 --> 0:02:26.160 You have a b a. In economics from Chicago and 0:02:26.320 --> 0:02:31.400 NBA from Stanford. You begin in Solomon Brothers in the 0:02:31.480 --> 0:02:35.080 ninety nineties early in your career, and you kind of 0:02:35.160 --> 0:02:42.000 successfully stumble into some privatization of government entities in Poland 0:02:42.120 --> 0:02:44.760 while you're at Solomon. Tell us a little bit about 0:02:44.800 --> 0:02:49.440 that early experience. Well, I should just back up one 0:02:49.560 --> 0:02:53.760 step further, which is a little bit on my family background, 0:02:53.800 --> 0:02:56.360 which is what got me interested in all this Eastern 0:02:56.360 --> 0:03:01.880 European stuff. And my grandfather was was an American communist 0:03:01.919 --> 0:03:05.680 who was head of the American Communist Party from ninety two. 0:03:07.639 --> 0:03:10.160 And so in my teenager and I decided to become 0:03:10.200 --> 0:03:13.400 a catalyst, which at Stanford Business schools you mentioned, and 0:03:13.440 --> 0:03:16.080 I finished business school in nineteen nine, the year the 0:03:16.080 --> 0:03:18.320 burn Wall came down, and I thought to myself, if 0:03:18.320 --> 0:03:21.640 my grandfather was the biggest communist in America and the 0:03:21.680 --> 0:03:23.520 Berlin Wall has come down, I'm going to become the 0:03:23.520 --> 0:03:26.880 biggest capitalist in Eastern Europe. And so I ended up 0:03:26.880 --> 0:03:31.160 in London on the East European desk of Solomon Brothers. 0:03:32.000 --> 0:03:34.760 And and this was at the right around the time 0:03:34.840 --> 0:03:39.120 that that all the countries of Eastern Europe or privatizing. 0:03:39.840 --> 0:03:43.200 And um, my, my very first experience was actually before 0:03:43.240 --> 0:03:46.360 I joined Solomon Brothers. UM, I had another job at 0:03:46.400 --> 0:03:48.800 the Boxing consulting group. They sent me out to Poland 0:03:49.160 --> 0:03:54.400 in um to work on a failing Polish bus factory, 0:03:54.560 --> 0:03:58.520 and I noticed my interpreter had a newspaper under his 0:03:58.600 --> 0:04:01.280 arms with a bunch of financial fig years. I asked 0:04:01.360 --> 0:04:03.000 him what those were and he said, these are the 0:04:03.080 --> 0:04:06.440 very first Polish privatizations, and I was I was kind 0:04:06.440 --> 0:04:08.280 of intrigued, and so I said, can we discuss it? 0:04:08.280 --> 0:04:10.600 And he laid it out on a conference table and 0:04:10.640 --> 0:04:12.760 I said, what's this number? He said, this is the 0:04:12.800 --> 0:04:15.840 number of shares outstanding of this one company that's being privatized. 0:04:16.720 --> 0:04:18.839 And I said, what's this numbers at the share price? 0:04:18.880 --> 0:04:21.960 I multiplied the two numbers together and that got you 0:04:22.040 --> 0:04:25.160 to a market cap of this company of eighty million dollars. 0:04:26.000 --> 0:04:28.400 And then I said, what's this number down here? And 0:04:28.400 --> 0:04:31.760 he said this is the last year's earnings. I said, no, 0:04:31.880 --> 0:04:35.120 that couldn't be right, so could just retranslating it, and 0:04:35.120 --> 0:04:38.760 it's the last year's earnings and that number was a 0:04:38.839 --> 0:04:42.320 hundred and sixty million dollars. So, but here's a company 0:04:42.440 --> 0:04:47.200 that's valued at eighty million dollars. The previous year's earnings 0:04:47.200 --> 0:04:49.320 were a hundred and sixty million dollars, so it's trading 0:04:49.360 --> 0:04:54.320 at one half a pe of one half and and uh, 0:04:54.360 --> 0:04:55.680 and I thought, well, this isn't this what I went 0:04:55.760 --> 0:04:58.279 to business school for, it to like invest in this 0:04:58.360 --> 0:05:00.279 kind of stuff and I had a total life savings 0:05:00.320 --> 0:05:03.280 at the time with two thousand dollars, and I converted 0:05:03.320 --> 0:05:06.560 my total life savings of two thousand dollars into Polish body, 0:05:06.600 --> 0:05:09.720 which is their currency, went down with my translator to 0:05:09.760 --> 0:05:12.760 the post office, and subscribed to the very first privatization 0:05:13.560 --> 0:05:17.040 in Poland. And over the course of the next twelve 0:05:17.080 --> 0:05:20.640 months it went up ten times. That's my two thousand 0:05:21.040 --> 0:05:24.880 turned into twenty and and there's a certain feeling that 0:05:25.000 --> 0:05:27.640 you get if you make ten times your money. It's 0:05:27.720 --> 0:05:32.080 like the financial equivalent of crack cocaine. And I just 0:05:32.080 --> 0:05:34.839 wanted to repeat the experience. And so I now knew 0:05:34.839 --> 0:05:36.200 what I wanted to do with my life. I didn't 0:05:36.200 --> 0:05:37.839 want to be a consultant. I wanted to be investing 0:05:37.880 --> 0:05:40.760 in these privatizations in East Europe. And that's what led 0:05:40.800 --> 0:05:44.279 me eventually as Solomon Brothers, and I was working on 0:05:44.320 --> 0:05:48.240 their proprietary trading desks, and that's when I discovered Russia. Yeah, 0:05:48.279 --> 0:05:51.880 the story in the book is quite fascinating. How really 0:05:52.040 --> 0:05:55.120 Solomon Brothers is a shark tank. They throw everybody in 0:05:55.160 --> 0:05:59.159 the pool. You either sink or swim, and you kind 0:05:59.160 --> 0:06:02.600 of stumbled and to Russia. By accident. They were not 0:06:03.279 --> 0:06:09.400 especially supportive until you found one champion who managed to 0:06:09.400 --> 0:06:13.440 get you a nice pool of capital. Invest tell us 0:06:13.440 --> 0:06:16.520 how that that progressed. What happened was my very first 0:06:16.520 --> 0:06:22.280 assignment at Solomon Brothers um was to advise the management 0:06:22.279 --> 0:06:26.320 of a of a fishing fleet in Mirmanskill on their privatization. 0:06:27.120 --> 0:06:30.520 And so I um uh fly up from Romance, which 0:06:30.520 --> 0:06:32.880 is two d miles north of the Arctic circles, the 0:06:32.920 --> 0:06:36.839 most farthest north place in the world. I go up 0:06:36.880 --> 0:06:39.200 there and the head of the fishing fleet meets me 0:06:39.240 --> 0:06:41.320 at the airport. He takes me down to the docks 0:06:41.560 --> 0:06:43.640 and he shows me one of their ships. And this 0:06:43.720 --> 0:06:46.719 ship was like four feet long. It was on five stories, 0:06:46.760 --> 0:06:48.840 and the top story they collected that they had the 0:06:48.920 --> 0:06:51.640 nets where they caught the fish, and they separate them 0:06:51.680 --> 0:06:53.640 and they worked their way down and eventually at the 0:06:53.640 --> 0:06:56.800 bottom story of the of the boat they have canning machines. 0:06:56.839 --> 0:06:59.680 And so it wasn't just a fishing boat, it was 0:06:59.720 --> 0:07:03.039 an ocean going factory. Very impressive. And I asked how 0:07:03.120 --> 0:07:04.960 much is one of these things cost? And he said 0:07:04.960 --> 0:07:07.159 twenty million dollars. New how many do you have in 0:07:07.160 --> 0:07:11.320 your fleet A hundred million times a hundred gets you 0:07:11.400 --> 0:07:13.480 to two billion dollars of the ships, and said, what's 0:07:13.520 --> 0:07:16.360 the average age of your fleet head? Seven years? So 0:07:16.800 --> 0:07:19.200 I don't know much about shipping or fishing or anything, 0:07:19.200 --> 0:07:21.640 but I figured that makes it maybe have to appreciate it. 0:07:21.720 --> 0:07:24.880 So a billion dollars with the ships. And these guys 0:07:24.920 --> 0:07:28.280 had hired me, the management of this troller fleet, to 0:07:28.400 --> 0:07:32.720 advise them on whether the management should exercise their legitimate 0:07:32.800 --> 0:07:37.040 right under the privatization program with Russia to buy and 0:07:37.080 --> 0:07:40.880 so I said, at what prices of government selling? And 0:07:40.920 --> 0:07:44.440 he said two and a half million dollars. So let 0:07:44.440 --> 0:07:46.600 me just repeat the math. A billion dollars of the 0:07:46.600 --> 0:07:49.600 ships for two or two and a half million dollars. 0:07:49.680 --> 0:07:53.000 And that's when I realized that that something really crazy 0:07:53.160 --> 0:07:55.160 was going on Russia, and if and if that situation 0:07:55.200 --> 0:07:58.360 in Poland had gotten my juices flowing, my god, this 0:07:58.440 --> 0:08:01.480 is even crazier. And so then I went to Moscow. 0:08:01.520 --> 0:08:03.280 I thought, I I said to myself, is this just 0:08:03.320 --> 0:08:06.480 something some weird anomaly with the fishing industry or is 0:08:06.480 --> 0:08:09.920 this something going on more widespread? And I went to Moscow, 0:08:09.960 --> 0:08:12.920 and I as I was going through the airport in Moscow. 0:08:13.160 --> 0:08:17.120 They were selling a little English language yellow page directory, 0:08:17.320 --> 0:08:19.360 and so I m I kind of didn't know anyone 0:08:19.360 --> 0:08:21.360 in Russia didn't speak the language, and so I bought 0:08:21.360 --> 0:08:23.960 this English language yellow page directory, and I just started 0:08:24.000 --> 0:08:26.320 cold calling people who might be able to explain to 0:08:26.360 --> 0:08:28.240 me what was going on. And over the course of 0:08:28.240 --> 0:08:30.080 a week I had about forty meetings. I met with 0:08:30.200 --> 0:08:32.000 all different types of people, and I was able to 0:08:32.040 --> 0:08:34.520 figure out what was going on more widespread, and this 0:08:34.600 --> 0:08:38.160 was the most incredible thing I've ever seen in my 0:08:38.160 --> 0:08:41.320 my professional life. But basically they be in order to 0:08:41.360 --> 0:08:44.920 go from communism to capitalism, the Russian government had given 0:08:44.960 --> 0:08:47.800 every citizen in the country a thing called a voucher, 0:08:48.240 --> 0:08:50.960 a physical certificate called voucher. And at the time, there's 0:08:50.960 --> 0:08:53.439 about hundred and fifty million people in the country. And 0:08:53.559 --> 0:08:56.320 these vouchers were freely tradeable, so you could you could 0:08:56.320 --> 0:08:58.160 buy them, you could sell them, and you can burn them, 0:08:58.160 --> 0:08:59.520 you can trade them, you can do anything he wanted 0:08:59.559 --> 0:09:02.120 with them, and so the vouchers developed a sort of 0:09:02.120 --> 0:09:04.760 secondary market, and they traded for about twenty dollars each 0:09:05.080 --> 0:09:06.760 and so again I went through the simple math. There's 0:09:06.760 --> 0:09:09.840 a hundred fifty million vouchers times twenty dollars gets you 0:09:09.960 --> 0:09:12.880 three billion dollars of vouchers in circulation. And these three 0:09:13.000 --> 0:09:17.200 three billion dollars of vouchers in circulation were exchangeable for 0:09:17.280 --> 0:09:20.160 thirty percent of the shaff capital of all Russian companies, 0:09:20.320 --> 0:09:22.960 which meant that the market cap of the entire country 0:09:22.960 --> 0:09:26.320 of Russia, everything, every every asset in the country was 0:09:26.400 --> 0:09:30.160 ten billion dollars. This is the country with the world's 0:09:30.240 --> 0:09:32.400 natural gas, and percent of the world's royal ti, percent 0:09:32.440 --> 0:09:36.720 of the world's aluminum, steel, fertilizer, car companies, telephone company, 0:09:36.760 --> 0:09:40.920 electricity company, banks, etcetera. The entire country ten billion dollars. 0:09:41.240 --> 0:09:43.920 At the time, you couldn't buy a mid sized Oklahoma 0:09:44.040 --> 0:09:46.199 oil company for ten billion dollars. Here, you could buy 0:09:46.200 --> 0:09:48.360 the whole country of Russia. So I rushed back to 0:09:48.400 --> 0:09:50.680 Solomon and I said, guys, we've got to stop doing 0:09:50.800 --> 0:09:53.360 everything else we're doing, and we've got to invest in Russia. 0:09:53.360 --> 0:09:56.320 They're like literally giving money away for free. And and 0:09:56.360 --> 0:09:58.880 the moment I met and mentioned Russia, people like just 0:09:59.120 --> 0:10:02.680 immediately just switched off. And I wasn't very good. I 0:10:02.720 --> 0:10:06.240 wasn't very good at at politics. Inside an organization. So 0:10:06.320 --> 0:10:07.960 if one person said no, I just went to the 0:10:07.960 --> 0:10:10.520 next person, and I'm just wide eyed and crazy. He said, 0:10:10.520 --> 0:10:12.560 We've got to stop doing everything in invest in Russia. 0:10:12.559 --> 0:10:14.400 And by the time I was done, I had completely 0:10:14.440 --> 0:10:17.720 burned my reputation with everybody in the whole company. Even 0:10:17.720 --> 0:10:19.600 the young guys who I was hanging out with stopped 0:10:19.600 --> 0:10:21.920 inviting me to lunches and drinks because nobody wanted to 0:10:21.960 --> 0:10:24.120 be seen with that crazy guy who was obsessed with 0:10:24.160 --> 0:10:26.880 investing in Russia. And and Solomon was a place where 0:10:26.880 --> 0:10:29.120 if you didn't earn five times when they were paying 0:10:29.120 --> 0:10:32.240 you within a year, fired And I wasn't earning anywhere 0:10:32.320 --> 0:10:35.360 near five times anything, and I was going to be fired. 0:10:35.360 --> 0:10:36.880 And so not only was I not gonna be able 0:10:36.880 --> 0:10:38.800 to invest in all this great stuff in Russia, I 0:10:38.840 --> 0:10:40.840 wasn't gonna be able to pay my rent. And so 0:10:41.440 --> 0:10:44.360 I was just sitting They're just totally demoralized. And one 0:10:44.400 --> 0:10:46.400 day my phone rang and it was the most one 0:10:46.440 --> 0:10:48.319 of the most senior guys in New York office of 0:10:48.360 --> 0:10:50.760 Solomon Brothers. I was in London, and he said, I 0:10:51.080 --> 0:10:54.120 hear you might be having some career troubles, but you've 0:10:54.160 --> 0:10:56.319 got something interesting to say about Russia. Can you come 0:10:56.320 --> 0:10:59.600 over and explain to me what's going on. So I 0:10:59.640 --> 0:11:02.760 spent a couple of days all night putting together the 0:11:02.800 --> 0:11:05.400 best power point presentation I could come up with explaining 0:11:05.400 --> 0:11:08.760 how cheap everything was in Russia. I go over to Solomon, 0:11:09.480 --> 0:11:12.079 I sit down with this guy. I take him through 0:11:12.080 --> 0:11:15.760 the presentation and he's he's not a very um uh 0:11:15.920 --> 0:11:19.680 sort of friendly or or community guy, and he sort 0:11:19.720 --> 0:11:22.360 of stares blankly. I mean, as I'm going through this presentation, 0:11:22.400 --> 0:11:24.960 and the halfway through the presentation, he just gets up 0:11:25.000 --> 0:11:27.760 and leaves, and I thought to myself, I'd like blown 0:11:27.800 --> 0:11:31.880 my chance and saving my career and um And I'm 0:11:31.880 --> 0:11:33.800 sitting there tapping my foot trying to figure out how 0:11:33.800 --> 0:11:36.280 long and retrieved this meeting. When he comes back and 0:11:36.280 --> 0:11:40.160 he's gone for ten minutes. He comes back like fifty 0:11:40.200 --> 0:11:42.480 two minutes later, and I'm about to blurt something out 0:11:42.480 --> 0:11:43.960 to try to save the meeting. But before I have 0:11:43.960 --> 0:11:46.400 a chance to say anything, he said, I just, uh, 0:11:46.800 --> 0:11:49.080 those slides you show me are the single most impressive 0:11:49.120 --> 0:11:51.800 thing I've ever seen in my investment career. I've just 0:11:51.840 --> 0:11:54.480 gone to the risk management committee I've got you twenty 0:11:54.720 --> 0:11:56.440 million dollars to invest in Russia. I want you to 0:11:56.480 --> 0:11:58.960 stop doing everything else you're doing and get over there 0:11:59.000 --> 0:12:02.120 and get this money invested. This is unbelievable. And that's 0:12:02.160 --> 0:12:05.120 what that's what, that's what's set me off of my career. 0:12:05.600 --> 0:12:11.040 I'm investing in Russia. Wow, amazing, amazing story. Um So, 0:12:11.040 --> 0:12:14.600 so now you set up this funds and it does 0:12:15.080 --> 0:12:19.360 really well, and you circle back to Sally and say, hey, 0:12:19.480 --> 0:12:24.079 let's really expand this, and suddenly everybody wants a piece 0:12:24.120 --> 0:12:26.800 of you. Tell us a little bit about that. So 0:12:26.800 --> 0:12:28.679 so I go into so this guy get sending me 0:12:28.720 --> 0:12:31.760 after Russia. I invest the million and for a while 0:12:31.840 --> 0:12:34.559 it's doing nothing. It's just sitting there, totally, tiny, little 0:12:34.600 --> 0:12:37.000 elquid market. Nobody knows anything about it. It's just starts 0:12:37.000 --> 0:12:39.599 sitting there. And I invest his money in in like 0:12:39.760 --> 0:12:45.920 the fall and going into December of and then the 0:12:45.960 --> 0:12:50.440 Economist magazine in England writes an article called Sale of 0:12:50.480 --> 0:12:52.520 the Century in which they described the same math that 0:12:52.559 --> 0:12:54.560 I've just shared with you. And all of a sudden, 0:12:55.000 --> 0:12:56.680 it's in that now it's in black and white and 0:12:56.720 --> 0:12:58.960 ink um. You know, all sorts of people reading it, 0:12:59.280 --> 0:13:01.600 and all of a sudden, I about twenty serious like 0:13:01.720 --> 0:13:07.080 major Western investors, hedge fund managers, billionaires, proprietary training desks 0:13:07.760 --> 0:13:11.120 all say all in unis and say, wow, how how 0:13:11.120 --> 0:13:13.040 come I didn't know? Why didn't I know about this? 0:13:13.080 --> 0:13:16.679 We gotta get involved. And so you know, when you 0:13:16.679 --> 0:13:19.400 take twenty huge investors and you try to go into 0:13:19.480 --> 0:13:24.959 a tiny, a liquid, almost untraded market and all at 0:13:24.960 --> 0:13:28.680 once try to buy it, what happens? Share price goes 0:13:28.760 --> 0:13:32.160 up and so over. In the course of a couple 0:13:32.200 --> 0:13:36.440 of weeks after this economist article, the Russian stock market 0:13:36.440 --> 0:13:42.720 goes up and our million dollars turns into a million dollars. 0:13:43.240 --> 0:13:44.559 And I should point out that this was back in 0:13:44.600 --> 0:13:47.240 the days when a hundred million dollars profit was real money, 0:13:48.200 --> 0:13:51.200 and so so so all of a sudden, I go 0:13:51.280 --> 0:13:53.800 from a total zero to like a hero on the 0:13:53.800 --> 0:13:56.320 trading floor. And all those guys who had stopped inviting 0:13:56.320 --> 0:13:58.800 me to lunch his drinks were all camped out around 0:13:58.800 --> 0:14:01.280 my desk when I had arrived in the morning, all 0:14:01.440 --> 0:14:03.880 just desperate for tips on how they can make five 0:14:03.880 --> 0:14:07.280 times their money on the on the Russian stock market. 0:14:07.760 --> 0:14:09.480 And then all of a sudden, some of the older 0:14:09.520 --> 0:14:12.280 fellows started coming around to my desk, and and old 0:14:12.440 --> 0:14:16.280 at Solomon was like forty years. You know, you couldn't 0:14:16.320 --> 0:14:19.560 survive past forty without having a heart attack or something 0:14:19.560 --> 0:14:22.440 like that. At Solomon, so forty was like the maximum age. 0:14:22.440 --> 0:14:24.800 But I was in my late twenties. So these older 0:14:24.800 --> 0:14:27.840 guys will come around, and Solomon is a very disrespectful place, 0:14:28.360 --> 0:14:30.400 and people were not very nice to each other. But 0:14:30.520 --> 0:14:32.960 they'll come by very and very deferentially saying, you know, 0:14:33.360 --> 0:14:36.440 excuse me, Mr Browder. I know you're very busy, but 0:14:36.720 --> 0:14:38.600 is there any chance I could convince you to come 0:14:38.640 --> 0:14:42.200 and spend a few minutes to brief my clients. Mr Soros, 0:14:42.520 --> 0:14:44.640 he would be so grateful for just a tiny bit 0:14:44.680 --> 0:14:49.360 of your time. Another guy came by, uh, Sir John Templeton, 0:14:49.640 --> 0:14:53.040 the founder of Templeton, which just he'ld be so appreciative 0:14:53.040 --> 0:14:54.320 if you could just be with him for a little 0:14:54.360 --> 0:14:56.560 bit of your time. And I was getting these invitations 0:14:56.600 --> 0:14:59.400 to like the the Royalty of Wall Street. Everybody wanted 0:14:59.400 --> 0:15:02.240 to meet me because nobody knew anything about investing in Russia. 0:15:02.320 --> 0:15:04.840 There is this one die and Renews and the Land 0:15:04.840 --> 0:15:06.480 of the Blind the one eyed man who was king. 0:15:07.200 --> 0:15:09.600 And so I went on this world tour of of 0:15:09.600 --> 0:15:12.200 of the Royalty of Wall Street and and they were 0:15:12.280 --> 0:15:15.640 much smarter than my colleagues as Solomon, And within moments 0:15:15.640 --> 0:15:18.280 when I showed them the data, they were saying, this 0:15:18.320 --> 0:15:20.720 is unbelievable. Can we give you some money to manage? 0:15:21.200 --> 0:15:22.960 So I don't know at the moment, we're just doing 0:15:22.960 --> 0:15:25.560 this for ourselves. But but let me go back to 0:15:25.560 --> 0:15:28.760 the bosses and see what I can I can do 0:15:28.840 --> 0:15:31.640 for you. And so I go back to the head 0:15:31.640 --> 0:15:33.920 of the trading floor in London and I say, you know, 0:15:33.920 --> 0:15:36.080 I was just with George Sorrows and he wants to 0:15:36.120 --> 0:15:38.000 give us some money to manage. What do you think 0:15:38.840 --> 0:15:40.600 and the and the guy said, I think that's a 0:15:40.720 --> 0:15:43.920 brilliant idea. Let's form a task force to study it. 0:15:44.880 --> 0:15:48.440 And say okay. So the first task force meeting was 0:15:48.480 --> 0:15:50.360 a week later. I show up in this room and 0:15:50.360 --> 0:15:54.280 there's like forty people in this room, like thirty five 0:15:54.320 --> 0:15:56.160 of them I've never seen in my life before. There 0:15:56.280 --> 0:16:00.240 was the vice chairman of the company, the senior managing directors, 0:16:00.360 --> 0:16:04.160 managing directors, senior directors, directors, vice presidents, and me I 0:16:04.200 --> 0:16:07.520 was the lowest ranking guy in the whole room, and 0:16:07.600 --> 0:16:11.160 within moments of the meeting starting, a fight broke out 0:16:11.760 --> 0:16:14.080 among all these different people about which who is going 0:16:14.080 --> 0:16:16.920 to get the economic credit for the business, and and 0:16:17.120 --> 0:16:21.080 investment bankers have an unbelievable skill and capacity for making 0:16:21.440 --> 0:16:24.480 plausible arguments for why they deserve money that they don't deserve, 0:16:25.120 --> 0:16:27.800 and and and these people were just I was watching, 0:16:28.280 --> 0:16:31.680 like like multidimensional Tennis is like the asset management group 0:16:31.760 --> 0:16:33.560 that had made an argument, and then the investment banks 0:16:33.560 --> 0:16:36.080 so he worked here, and then emerging markets people say 0:16:36.120 --> 0:16:38.360 what about us? And and it was going on on 0:16:38.600 --> 0:16:40.480 and on, and I didn't know who was going to 0:16:40.560 --> 0:16:43.040 win this argument, but I was a d percent sure 0:16:43.080 --> 0:16:44.920 of who wasn't going to get any economic credit for 0:16:44.960 --> 0:16:47.320 the business, and that was going to be me. And 0:16:47.360 --> 0:16:50.000 so I after three days of like not being able 0:16:50.040 --> 0:16:52.680 to sleep, I I walked into the head of the 0:16:52.720 --> 0:16:56.280 trading floor. I gave him my security badge and I say, 0:16:56.280 --> 0:16:59.160 I'm quitting. I'm going to start my own fund. And 0:16:59.160 --> 0:17:04.160 I went I moved to Oscow. This was early what 0:17:04.160 --> 0:17:08.480 what was became the Hermitage Fund. He told me, you're 0:17:08.480 --> 0:17:10.919 never going to succeed. But off I went and I 0:17:11.000 --> 0:17:12.560 ended up getting I went back to one of those 0:17:12.560 --> 0:17:14.760 guys from from those meetings that I went to on 0:17:14.760 --> 0:17:17.040 Wall Street. It was it was a guy named Edmund Saffra, 0:17:17.520 --> 0:17:20.240 who was the owner of Republic National Bank of New 0:17:20.320 --> 0:17:23.240 York and he was one of the largest and most 0:17:23.240 --> 0:17:25.480 successful private bankers in the world. He gave me twenty 0:17:25.480 --> 0:17:28.479 five million dollars to invest, he started the fund and 0:17:29.000 --> 0:17:33.920 it just went like unbelievably up within moments of starting. Amazing, 0:17:34.000 --> 0:17:37.840 really quite amazing. So it's a fascinating story, but it 0:17:38.200 --> 0:17:43.320 raises so many interesting questions, starting with you know, the 0:17:43.320 --> 0:17:48.320 companies you're investing in in Russia? Are these all formally 0:17:48.600 --> 0:17:51.199 state owned companies? Sort of the way things are up 0:17:51.240 --> 0:17:54.680 earning in China today? Um, did they still retain any 0:17:54.720 --> 0:17:58.120 sort of state ownership? And and and who were the 0:17:58.119 --> 0:18:01.919 private owners of these farms and so so, Um, what 0:18:02.000 --> 0:18:07.960 would happen is in most cases the companies became completely privatized. UM, 0:18:08.040 --> 0:18:10.280 and and the people who owned them. And these are 0:18:10.280 --> 0:18:13.440 big companies. And you've heard of these companies Luke Oils, 0:18:14.160 --> 0:18:18.040 Spare Bank Gas from UM through good Naphgace. These are 0:18:18.080 --> 0:18:20.919 companies than anyone who trades Russian stocks would know the 0:18:20.960 --> 0:18:25.120 names of these companies, big state company, big formerly state companies. 0:18:25.480 --> 0:18:28.960 Most of them were fully privatized, and the people who 0:18:29.119 --> 0:18:32.320 became the majority shareholders were these people who we now 0:18:32.400 --> 0:18:35.040 know as the oligarchs. A couple of them, like gas 0:18:35.040 --> 0:18:38.879 from the Spare Bank, remained um partially state owned or 0:18:39.119 --> 0:18:41.439 in some cases the majority stay owned, but the shares 0:18:42.040 --> 0:18:46.879 the would trade on the stock market. Um. But the 0:18:46.880 --> 0:18:51.199 big problem that we discovered and and um and this 0:18:51.400 --> 0:18:53.280 this was one of the reasons everything was so cheap, 0:18:53.920 --> 0:18:57.000 was that you might have owned a share of a 0:18:57.080 --> 0:18:59.760 Russian company, but you didn't really have a share of 0:18:59.800 --> 0:19:03.960 any thing because the oligarchs or in some cases the 0:19:04.280 --> 0:19:08.199 corrupt managers, we're basically stealing all the money out the 0:19:08.200 --> 0:19:10.760 back door there was. You might have had a share 0:19:10.800 --> 0:19:12.960 of company, you had no share of the economics because 0:19:13.320 --> 0:19:17.000 they were just literally stealing billions in every possible way. 0:19:17.040 --> 0:19:20.720 You can imagine that the kind of corruption that that 0:19:20.720 --> 0:19:24.119 that we got to see with our own eyes was 0:19:24.200 --> 0:19:27.719 just mind boggling. It was the biggest theft in the 0:19:27.800 --> 0:19:30.719 history of the world was being done that of these companies. 0:19:30.720 --> 0:19:34.040 And these companies are generating tens of billions of dollars 0:19:34.040 --> 0:19:37.320 of profits, but if you look at the financials, they 0:19:37.320 --> 0:19:42.520 were nonprofits and and so so it presented a terrible 0:19:42.560 --> 0:19:45.520 dilemma for me, because you know, I got out to 0:19:45.600 --> 0:19:48.080 the world and convinced all sorts of famous people to 0:19:48.080 --> 0:19:50.600 come and invest with me. I showed them all these 0:19:50.680 --> 0:19:53.520 graphs and charts about how cheap everything was, and it 0:19:53.680 --> 0:19:56.320 was on paper, but it wasn't in reality, because these 0:19:56.320 --> 0:19:58.200 guys were just stealing all the money out the back door. 0:19:58.240 --> 0:20:00.879 And it was and it created a real album. And 0:20:01.160 --> 0:20:03.959 it was also really infuriating, like why would these it 0:20:04.000 --> 0:20:06.440 was mostly these oligarchs doing it. Why would these people 0:20:06.680 --> 0:20:08.600 feel so entitled that they could do that and just 0:20:08.720 --> 0:20:13.000 at the expense of everybody else cheap for a reason? Right, So, 0:20:13.000 --> 0:20:17.919 so that raises a question. Russia is a unique place. 0:20:18.640 --> 0:20:23.640 Corruption is endemic. It's well known for a century. It's 0:20:23.720 --> 0:20:27.560 not the sort of geography that you really think of 0:20:27.640 --> 0:20:31.960 when you think of shareholder activism. What led you to 0:20:32.240 --> 0:20:37.040 that sort of approach in that sort of place. Well, 0:20:37.160 --> 0:20:41.280 so it was a combination of circumstances. So um I 0:20:41.320 --> 0:20:44.919 started out with twenty five million dollars of staffers of money, 0:20:45.080 --> 0:20:47.080 and and then it started going up and up and up. 0:20:47.200 --> 0:20:50.000 And this was this was a hedge fund structure where 0:20:50.040 --> 0:20:52.119 you could put your money in at any point in time. 0:20:52.640 --> 0:20:54.720 And everybody said, oh my god, this is unbelievable. So 0:20:54.720 --> 0:20:56.800 they'd started adding more and more money to the fund, 0:20:57.400 --> 0:21:02.520 and and by UM I had more than a billion 0:21:02.520 --> 0:21:06.199 dollars invested in the Russian stock market, which was you know, 0:21:06.280 --> 0:21:08.359 this is a tiny little market, so billion dollars was 0:21:08.400 --> 0:21:11.720 like the It was like the equivalent of fidelity in Russia, 0:21:12.200 --> 0:21:16.160 and in terms of the size of assets. And then 0:21:16.200 --> 0:21:18.959 all of a sudden, and for anyone listening to this 0:21:19.040 --> 0:21:23.840 is who's you know, my age or near um happened? 0:21:23.840 --> 0:21:26.680 This was the year that Russia defaulted and devalued their currency, 0:21:26.800 --> 0:21:30.760 and so they defaulted on the domestic bonds, the currency 0:21:30.800 --> 0:21:36.639 devalued by s and and and my portfolio, which was 0:21:37.240 --> 0:21:41.359