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Q:
Russia is
increasingly in the news these days, both for its
high-flying economy and its controversial politics.
What’s your take on the situation there? Daniel
Steinbock,
Helsinki,
Finland
A:
All you
have to do is stand in the middle of Red Square with your back to Lenin’s Tomb to understand why a billionaire
entrepreneur we recently met in
Moscow would
proudly declare, “Anything is possible in
Russia right
now.” There, where bread lines once wound around the
corner, stands a long row of luxury stores.
What a
difference 16 years—and vast oil reserves—make.
Indeed,
the scene right now in
Moscow,
with its glitzy hotels and Bentley and Lamborghini
dealerships, is enough to make you think that Russia’s
post-Glasnost era of limping along and irrelevance is
over and its future as a resurgent superpower has
arrived.
With
their swelling national pride, the Russians would be
delighted with that shiny impression. Reality, however,
would cloud it somewhat.
Shortly
after the entrepreneur made his bold statement, the CEO
of a technology company told us that government
officials regularly call him to “place” managers—that
is, well-connected know-nothings—into his ranks.
Of such
interference, he sighed, “You don’t like it but you
can’t fight it.”
Our
point is that
Russia
is a riddle. Without doubt, it is filled with economic
promise and has reentered the global marketplace with
renewed clout. But the biggest threats to that
promise—and there are several—lie within. And for the
time being, it is anyone’s guess how that internal
contradiction will play out.
One
thing is certain, though:
Russia
is currently brimming with self-confidence. It’s as if
its people, emboldened by oil money, have collectively
decided to shake off the “has-been” mantle the country
has carried for more than a decade.
You can
see the change in the authoritative demeanor of hotel
clerks, street vendors and cab drivers. And it’s on the
faces of the young people everywhere wearing T-shirts
bearing the image of President Vladimir Putin, who, with
an approval rating of more than 80 percent, is the
embodiment of Russia’s nationalist mood.
Several
Nordic and Eastern European executives doing business in
Russia told us that the country’s self-confidence has
morphed into a worrisome arrogance. Maybe that’s true;
it likely is. But we also saw that self-confidence
express itself in positive ways.
A new
business school named the Skolkovo Moscow School of
Management is slated to open next year, with the primary
purpose of inspiring new business formation. We met
dozens of entrepreneurs whose faith in Russia’s economic
future has sparked a new interest in management
practices, such as developing leaders and motivating
teams—and even human resources!
Similarly, Russia’s new wealth has created a number of
oligarchs who have become “angel investors” for many
start-ups. Indeed, when we asked a room of 250
entrepreneurs if anyone considered venture-capital
funding a problem, not a single hand went up.
But it
was the same people in that room who were quick to
underscore Russia’s biggest challenges.
For
instance, one CEO estimated that it would be hard to
fill a second or third room of the same size with
Russian entrepreneurs. Most businesspeople
gravitate—understandably, given the rewards and
security—toward the state-run oil, gas and mineral
companies and the industrial factories that dominate the
GDP. Yes, Putin has called for economic diversification,
but robust oil revenues sap any meaningful sense of
urgency toward achieving that goal.
Even if
Russia were adequately diversified, it would still have
the problem of its corruption and its work force.
Corruption in
Russia,
of course, is an old story, but even with the economic
upturn, it shows no sign of a rewrite.
As for
the work force, again, it’s a legacy issue. Russia still
lacks that critical mass of young people filled with
passion and ambition required to help it seize economic
opportunities. Summarizing countless stories we heard,
one Russian CEO put it, “Once young people here have a
good car, that is enough. After that, they are happy to
work in a bureaucracy for the rest of their days.”
Finally,
there is the prickly problem of Russian politics. Or
more precisely, Putin’s recent crackdown on internal
dissent and his harsh criticism of the many countries
that have challenged him, including Estonia, Poland,
Germany, the United Kingdom and the United States.
He has
his reasons—boldly stated in terms of national
interests—but the trend still increases
Russia’s
business risks. Maybe that won’t scare off foreign oil
companies. But any non-oil company should probably think
twice before making major capital investments.
Which
brings us back to the riddle. Will the promise of Russia
trump its challenges, or the other way around?
Russia
itself holds the answer, but the whole world will feel
its impact. |
