Russian attitudes in business

[deccie]

One of the things that has often driven me mad here is  the Russian way of dealing with business.

Western ideas are very much around always improving and trying to be more efficient and reducing costs. If something doesn't work or sell we cut our losses and move on as fast as possible.

The numbers never lie.

I've touched on this before how we often see old electronics that haven't sold in many years still marked for sale at full price.

Currently my wife manages a high end clothing alteration shop. She often deals with the elite of the city and right now is making her boss in excess of $10, 000 profit a week. Just from clothing and shoe alterations. But, she could easily  triple that if she was allowed to do her own sales.  But her boss doesn't want to pay sales commission and my wife doesn't want to give away her skills for nothing. She could literally sell a half million rouble pair of shoes in an hour if only he would actually pay her to do it. He has actually closed one shop in the last week due to lack of sales - and my wife CAN do it for him but he would rather have less money in his own pocket than pay her. I just don't get it. My wife described it as him having an emotional rather than rational approach to money... But this idea seems very commonplace here. My wife is an incredibly good salesperson and probably could sell snow to eskimos...

[ML]

Deccie, I found some strange ideas also when dealing with FSU business people.

The concept of Net Present Value is not acceptable to them, even when fully explained.

i.e. You have an outflow of cash at time zero, and then for succeeding time periods you might have some more outflows but eventually the inflows will come (if you manage well) and the net will be positive when discounted back to present at required rate of return.

Their idea is that the inflows must come immediately and overwhelm the initial outflow.

But I know this is ingrained in Soviet (and perhaps even moreso in post-soviet collapse) mentality when the future was so uncertain that no one accounted for it.

Similar thinking with FSU gals who were not even involved in business.

i.e. If they became aware of a man's future pension inflow, they would say . . . you must try to get it all out right now because it will not be there in the future.

Even my intelligent wife was unhappy when she found the University would take money from her pay and put it in TIAA/CREF which is probably the most well managed and safest pension fund system in the world.

But she brightened up when I pointed out to her that the University would match dollar for dollar the amount taken from her pay.  Because that's like a 100% immediate return on your money.

[Maxx2]

Good thread deccie


There was a story I remember from way back in 2001-2002. There was this American who discovered a Russian door maker that carved beautiful wooden doors. He offered to sell these doors back in America. They negotiate a price that would make a tidy profit for the door maker. All was going well, lots of doors being made and sold. The volume of business was increasing leaps and bounds.  That is until the door maker discovered the price they sold for in America. Not counting the costs for shipping, taxes and other costs including the cost of living in expensive America for the seller he decided he was getting ripped off. That he as the craftsman should get the majority share of the money. Of course the American couldn't make a profit and of course the Russian would rather not sell any doors than become reasonable. It is that Russian male pride thing. 


From 1988 to 1990 I worked for 2 Russian business partners in Minneapolis Minnesota. They had a scrap metal business that was getting quite a lot of electronic scrap that was gold plated. Since I was a gold refiner I offered to set up an in-house gold refinery. They accepted my proposal. Soon I was refining their gold and selling it to jewelry manufactures. These two guys cheated at every opportunity to rip off their clients. I found this out from their American salesman. I got out of there shortly afterwards.


Back in 2001 when a lot of American entrepreneurs were looking at the FSU for business opportunities the American embassy in Moscow put out a warning on their website. The American embassy said Russian businessmen have a 'Win-Lose' way of doing business. They think they win by making you lose. Unlike American business men, with exceptions of course, wanting the steady long term business of having a 'Win-Win.' So they suggested to be very cautious in doing business and forming partnerships with Russians.


Again about the Russians I worked for. Their American salesman told me that Vladimir called Ed the American guy who he was doing business with. The salesman said he heard it over the speaker phone. Vladimir tells Ed that this time the amount of gold was "Twice less" (half as much). Ed said, "Twice less? Twice less?" then understanding they meant half-as-much slammed down the phone. Ed got for his company, Unysis about $100K. Vladimir and Gernady got about $200K. Of course they didn't get anymore business from Ed. But that didn't seem to bother them. Me and that salesman used to sit around and discuss what crazy ways they did business. Eventually the salesman and another American set up a shell business so that the salesman could sell electronic surplus to himself at a much lower price than what others would have paid. So all crookedness of the Russians rubbed off on their employees. Gosh the place came to resembled the FSU! They even offered bribes to government inspectors! Then when not accepted pretending they didn't know any better. The place was a zoo!

[deccie]

Deccie, I found some strange ideas also when dealing with FSU business people.

The concept of Net Present Value is not acceptable to them, even when fully explained.

Yeah I could see a lot would struggle with this..

i.e. If they became aware of a man's future pension inflow, they would say . . . you must try to get it all out right now because it will not be there in the future.

Even my intelligent wife was unhappy when she found the University would take money from her pay and put it in TIAA/CREF which is probably the most well managed and safest pension fund system in the world.
y.

This I can kind of understand given the crashes here. I mean people who had savings were crushed when that happened. Anna told me her grandfather had just managed to save for a car when the first collapse in the 1990's happened. Of course he lost the lot. That contributed to his rather rapid decline in health from then on.

[deccie]

Maax, I agree with everything you wrote.

Of course there is also the Russian idea to run multiple books.. One for the  tax office/pension office and one for "real". Of course one wonders if the real one is really correct...

Anna tells me the German partners she has worked with over the years struggle with that one in particular.
Yes, the win/lose attitude is incredibly prevalent here. The idea of roles in business being complimentary here doesn't seem to exist.

The tax office/pension office has joined the list of scammers recently.  They go back and re-open the books of businesses that closed 8-10 years ago and re-send tax bills/ pension obligations that were already paid relying on people having lost the paperwork.

[deccie]

Good thread deccie

From 1988 to 1990 I worked for 2 Russian business partners in Minneapolis Minnesota. They had a scrap metal business that was getting quite a lot of electronic scrap that was gold plated.

Whenever I hear of  "scrap" and the FSU I always think of all the stripped out apartments in Pripyat.. Who know where all that scrap ended up.

[ML]

Whenever I hear of  "scrap" and the FSU I always think of all the stripped out apartments in Pripyat.. Who know where all that scrap ended up.

This happens not infrequently in slum areas (and even elsewhere) in USA.
If a unit (or even an entire building) stays unoccupied for sometime; all of the electric wiring and copper tubing will be stripped out fairly quickly.

And I know of one case right near me where the lumber yard brought in almost a complete house worth of lumber and other items on a Friday . . . and by Monday . . . it was all gone.

[Sting23]

Basically it's a corrupt mentality from the top.  All the rich Russians got there by stealing from the government literally.  And they won't think twice about ripping you off blind.

[ML]

Basically it's a corrupt mentality from the top.  All the rich Russians got there by stealing from the government literally.  And they won't think twice about ripping you off blind.

Actually stealing from the Russian citizens.

[Sting23]

Actually stealing from the Russian citizens.

True,..funny enough the rich clients I had never ripped me off.  They paid me in full.  But the average joe in Russia will skim off anyone.

Another thing, some of the long term expats adopt this mentality too...I ran into some American and Brit business owners who didn't pay full wages.

[deccie]

True,..funny enough the rich clients I had never ripped me off.  They paid me in full.  But the average joe in Russia will skim off anyone.

Another thing, some of the long term expats adopt this mentality too...I ran into some American and Brit business owners who didn't pay full wages.

We have observed two types of stealing here. Those who steal to survive and those who steal because they have the power to do so. And you can guess which group is more likely to get caught. We have also observed those who are likely to share with others fall most often on the lower income group level. There are still people here who will give the last of what they have to others. We have met quite a few of them.  But they are by no means the majority.