27 November 2003

Ed Sim on Capital Efficent Investing

Ed Sim from Beyond VC on Nov 19 writes about what I have been wittering on about since I started this blog namely Capital Efficient Business Models : You will have to scroll down to find it as I cannot work out how to go straight to the place.

His point is absolutely correct. Marketing costs may stay the same, but if you can create a product for a few million, smartly get the first product to market whilst running a low cost organisation then hopefully the initial and most painful burn will be limited. Once the product has real "traction" (presumably its a car wheel) then people can be hired to really sell the product. Given that these are always the most expensive part of a team hopefully they will be brought in commensurate with real sales opportunities rather than hopeful hype. At the end of this year all our companies will be cash flow positive. Some will require more cash to grow more rapidly. But if we cannot find it then they should be able to grow organically. Given that none of them were that expensive to acquire even a low growth scenario should see a reasonable return.
More from Ed Sim, this time on the US IT market. The Economy and IT Spending : "
It looks like the economy in Q3 grew even faster than we initially thought, 8.2% annual rate versus 7.2%. It was not too long ago that the Department of Commerce released numbers showing 7.2% annualized GDP growth for Q3. If you take a closer look, 'equipment and software' spending was at a 15.4% annualized rate. I obviously have concerns about the revised 8.2% GDP growth and certainly do not believe that is sustainable due to one-time factors like tax cuts and mortgage refinancings. While it is nice to see a 15.4% annualized growth rate in 'equipment and spending' for Q3, let's not assume that this is the beginning of a huge ramp-up in IT Spending. To bolster my thinking, I like to look at a number of data points. For one, Goldman Sachs recently issued its October IT Spending Survey. Its latest survey calls for an increase of 2% spending for 2003 versus a December 2002 survey which forecasted a decline of 1.1% for 2003 spending. So it is nice to see that the trend reversed in terms of IT spending, and that it looks like there is a small rebound happening. That being said, the October 2003 survey forecasts spending growth of only 1.3% for 2004, down from an August 2003 spending survey forecast of 2.3% growth for 2004. That is a negative trend and does not promise earth-shattering returns to IT Spending in the bubble years. As Goldman Sachs mentions, hopefully there is just a lag in terms of how the economy performs and where each company is in its budgeting process. If this is the case, we shoud keep an eye out for data from future surveys.

Another data point that I look at is how the fund's 30+ portfolio companies are performing. We have a number of companies in the Enterprise IT space selling security, storage, network management, wireless, and other related software. Some companies are performing extraordinarily well "

26 November 2003

The gaps between my thoughts on technology have become embarassing; plenty of comment on the Khordokovsky affair, little on Russian technology won't pay any bills. What it does do is reflect my concerns as to the future of the country. Those who spend more time than I do thinking about these matters tell me I am being over-sensitive. I still respond that greed is greater than fear, and there will come a time when fear takes over and we will all wonder why we did not pay attention.

Back to technology; seems as though there are companies out there getting funded, and getting bought. Suse was a great relief to those of us investing outside the mainstream US that good companies will still get bought, and at good multiples. I hear that the main investors made 3-5x. Given the $'s ploughed in to the company to turn out software and the time that they first invested, its not a bad result. BTW the last sentence is a subtle dig European / US software companies failure to make use of inexpensive programming assets.

On the funding side the investing world must be looking up if social software companies are getting funded. I can see the point of what they are trying to do but....Don't we do this informally anyway? Why would I pay for what I do already, unless it really helps me to do it better. None of the companies that I have looked at really convince me that they do.

If strange companies are getting funded it means that strange companies are getting bought. At a personal level I am intrigued by the direction that Shwartz is taking Sun. From what I hear from portfolio companies they could not organise a piss up in a brewery - or sales people after commissions are driving the direction of the company. To be more precise; it does not matter what the strategy guys put together to improve the TCO, customer experience etc. the sales guys are selling boxes loaded with software that requires the most boxes to be sold. I like the approach that Shwartz seems to be taking - it puts Sun ahead of the crowd in working out where the future of software is going. If he can get control of his sales teams the strategy might even work.

16 November 2003

An interesting take on the reemergence of vlast (power) in Russia

NOVAYA GAZETA
No. 85, Thursday
November 13, 2003
Don�t go Visiting the President in a Sweater -- then there won�t be a Dictatorship Interview with an Anonymous Source
Translated by Luba Schwartzman

The following is an interview with an officer of the Federal Security Service who is involved in the investigation of the YUKOS Affair. Granted on the condition of anonymity, it is cited word for word, with no corrections. Despite the officer�s careful wording, we can still find answers to very important questions.

* Who can say �shush� in the YUKOS Affair?
* What fate awaits Chubais?
* Does the �national question� play a role in the Khodorkovsky Affair?
* Is there such a thing as a �good� oligarch?

Q: How will the story starring Khodorkovsky end? What does the government want? To jail him? To take away his property? Or just to make an example of him to make others obedient?
A: Yes. Khodorkovsky was asking for it. He annoyed everyone; he was a real jerk.

Q: What did he do that was annoying?
A: Did you see how he was dressed when he came to meet with the President? The �I don�t give a damn� attitude� He stuck his nose in all over the place, going way too far. The worst part was when he said that he would rather be a political prisoner than a political refugee.

Q: So how will he be pressured? Until he breaks?
A: We don�t make decisions about that. We only carry out orders. But we will keep going as long as they let us.

Q: And how long will they let you?
A: Until they stop us. Once they say �shush,� we�ll quietly step away. But for now, we�ll have some fun. Our boys are pretty angry, you know. Angry at him and angry at the unfairness of life.

Q: Who are the bosses who can let or stop you?
A: The bosses are different for everyone. But everything is decided at the very top.

Q: The very-very top?
A: Of course.

Q: Are there political motivations for this?
A: Well, we certainly don�t have any. What have we got to do with it? We just carry out orders. They said �go� and we did. If they say �stop,� we will.� You know how it is in Russia -- it�s enough to say �act in accordance with the law.� Then anyone can get in trouble -- you, me� For many years we weren�t allowed to follow the law. Now, with regard to YUKOS, they said: �ok, go ahead!� We cheered. (laughs) We know that we have to act carefully and precisely. The political environment could change and then we could get in trouble. So those who carry out orders cannot overdo it. The main thing is to follow the law to the letter, to conform to all of the procedural regulations. Well, we�ll make him [Khodorkovsky -editor] sweat as long as we can, and then we�ll let him go. Certainly we understand that, sooner or later, someone who has as much money as he does will buy his way out. But it will be a pity if they let him off so easy. After all, we�re really trying, really working hard�

Q: But, tell me, what are you really after?
A: Well, we�ll push him as far as we can� Of course it would be really great to kick him out of the country. After all, our boys used to do it back in Soviet times. �Out of sight, out of heart� you know! (laughs) �No person means no problem.� Although Stalinist methods don�t cut it now� and the jerk [Khodorkovsky -editor] said he doesn�t want to leave. Our boys got pretty mad about that. Look at him being brave! He really is going too far!

Q: So how far will you go? Are you going to kick all of the oligarchs out?
A: We take our cue from Zhirik [Zhirinovsky -editor]. He says it will happen soon. He told all the oligarchs recently: �You�re all going to jail soon!� So that�s what the oligarchs have coming. All of them have dirty hands. All of these �shares-for-loans auctions� are a questionable affair. I�m talking about the law here! Why didn�t they return the money for the stocks? They could have, you know�

Q: But it was the government that made the decision about the auction. Are you ready to open up cases against Chernomyrdin and Chubais?
A: That�s a very sensitive issue you�re bringing up. Many of our boys can�t wait to get their hands on Chubais. But there�s an obstacle there. You can�t touch the government. That�s why we�re keeping low and waiting. But the boys have been quietly gathering information all these years. We�ve got plenty of evidence. The problem lies elsewhere: the interests of the state are involved, the interests of the government. One needs to be very, very careful. Look who�s at the top now -- if you really think about it, theose people shouldn�t be at the top. We have information -- plenty of information, even way back from Yeltsin�s time� but let�s not talk about that� It�s better for you not to know� You�ll be able to sleep better.

Q: How about Aksenenko?
A: Oh, nothing�s going to happen to him. They�ll just let him know: sit and keep quiet. If you don�t -- you�ll be sorry.

Q: Do you like how things are going in Russia?
A: I was a little uneasy before. But then I understood -- things like that always happen when the rules of the game change. And the rules of the game are changing now. It�s just that we�ve adapted to them and you haven�t yet.

Q: Which rules are changing?
A: Well, you see -- back under Yeltsin, certain things came to be accepted as dogmas. The notion that private property is sacred, for example. That�s rubbish. Do you really believe that all of these liberal values are here to stay? Don�t get used to these illusions! All of the rules can still be reviewed -- and the will be reviewed. In the past, everything was predictable: If someone made a move against an oligarch, he would give some money to the media, and the journalists would rally around him. He would give some money and buy his way out. If he didn�t get out of trouble tight away, it only meant that he didn�t give enough money. Now, none of the oligarchs can predict all of the consequences. Everything has come into motion. The rules of the game are changing. Now they are afraid of us, because they don�t know what to expect.

Q: And now they cannot bribe you?
A: You know, for us, the main priority right now is to be on Putin�s team. That means more than a one-time pay-off. If you manage to stay on the team, you�ll get back everything and more. If, on the other hand, you take money now, you can get kicked out. Before was chaos. No one valued their positions, since they knew they could end up on the street tomorrow. That�s why everyone grabbed whatever they could get -- to get at least something out of the job. But now we value our jobs. Look at what happen to the cops. All of the Ministry of Internal Affairs guys got quite a fright� We don�t want to become �werewolves.� So we do everything according to the law! We keep our noses clean! But the main thing is not to stray too far from the �party and government line.� (laughs) We�re the servants of the state, you know!

Q: How do you tell apart the �good� oligarchs and the �bad� oligarchs?
A: Oh, it�s very simple. Those who have a national orientation are safe. But these oligarchs aren�t �home based� in Russia.

Q: Where then?
A: In the US, in Israel� They are a major threat to our nation. There is a danger that Russia will be turned into a source of natural resources, a danger that we will be subjugated to a different country. That�s why the oligarchs have to be pushed down or pressed out. Of course, only those who are internationalist in ideology. It�s obvious that Gus [Gusinsky -editor] worked for Israel, just like Bereza [Berezovsky -editor] did. We should only keep those who are thinking about the nation and not about their own wallets. Khodorkovsky is clearly oriented toward the United States. He shouldn�t be in Russia. This is a real fifth column we�re talking about. This is a very dangerous political wing. If it becomes stronger, Russia will lose its independence from the West. And if we don�t get rid of him now, Khodorkovsky will become invincible.

Q: So, are there any �good� oligarchs, who might be allowed to stay?
A: Sure. Mordashov, for example. He�s a Russian.

Q: Is nationality what counts?
A: Of course. All Jews are traitors. They all lean towards the West. This was always the case. Back at the �High� [Higher School of the Committee for State Security -editor] they taught us that all intelligence workers rely on Zionist lines, because the Jews have diasporas everywhere. You know, for them nationality is more important than citizenship. Zionists were always hostile towards Russia. And they had many ideas about how to use international capital against us. All of our achievements in intelligence work were based on Jews and their networks. Take the Rosenthal Affair, for example. We always worked along Jewish channels. So now we cannot allow in this Zionist capital�

Q: What about democracy?
A: Oh, democracy is a bluff. The only thing that counts is power. Remember how everyone was afraid of us when the USSR was strong? And now that we�re weak, everyone is trying to get at us. During the mess that the Yeltsin regime was, we created way too many of those� Well, the same thing that happened with Trotsky, basically.

Q: So what�s coming? Nationalization?
A: No, nationalization isn�t on the agenda. The main thing right now is redistribution in favor of nationally-oriented businessmen. Why the heck should Khodorkovsky have seven billion dollars? Who the heck is he?

Q: Perhaps he is smarter than other people and a better businessman?
A: How much brainpower does it take to pump oil? Just build some towers, and you�re set. All of the technology is purchased in the West. You don�t need to be smart for that.

Q: Do we need to get rid of LUKOIL as well?
A: No. LUKOIL protects out strategic interests on the borders, in disputed areas like Kazakhstan and Azerbaijan. This is �our� company. It�s nationally-geared. Alekperov never tried to stick his nose into politics.

Q: So politics is what counts?
A: Yes. You see, Khodorkovsky is driven by ambition. Just look how much money he gave to oppositionist parties! He must be quashed with no questions asked, before he becomes another Berezovsky.

Q: And what�s so dangerous about giving money to these parties -- Yabloko, Union of Right Forces?
A: Oh -- right now it may not seem dangerous. But they are just lying low and waiting for their hour. These are the same Zionists we were talking about. Under no circumstances should they be allowed to grow stronger. And Khodorkovsky? Let him run about and complain now. No Strasbourg Court can help him. After all -- they got their chance to live well, but quietly. But, no! That wasn�t enough! They wanted to get involved in politics! Well -- now they will have neither politics nor money.

Q: Is this also an example set for other oligarchs?
A: Of course. You see, Abramovich is the smartest of them. We�ve already made a deal with him. Once his gubernatorial term is up, he will leave quietly, without a scandal. He�s already sold everything here and bought everything there.

Q: So, who should leave? Just the Jews or others as well?
A: Whoever proves their loyalty can stay. We aren�t trying to ruin relations with large business. Hitler hadn�t revoked major holdings that helped him.

Q: So where are you taking the country? Towards totalitarianism?
A: Yes. But this is going to be a capitalist totalitarianism rather than a socialist totalitarianism. This is the kind of government we had after Catherine II. Nicholas I came to power and replaced the ruling class. Officials replaced the nobility. Officials should get property for their service to the state, instead of property getting handed down by birthright. Then we will have order in the country.

05 November 2003

The Entrepreneurial Mind: The Experience Myth Great comment from a bus school prof i have never heard of before.

Innovation will fail when the investing process is run by bus school grads with the entrepreneurial instincts of a dead slug and a tick board to fill in.
Yukos or Those Who Have vs Those Who Would Like to Have What Those Who Have, Have

It's difficult to write intelligently about the Khordokhovsky affair - to do so requires an understanding of what is going on. No one really does. There have been some very intelligent attempts to assess the impact. Most of them private; if you can get to read what Bernie Sucher and Eric Kraus are writing its worth doing so as they differ markedly from the newspapers.

However, both of them come from the buy/sell side of the asset management/ brokerage game. Their antennae are directed accordingly. As John Dizard put it in the most avertly cynical Make Money from the Crisis article; its probably only Khordokhovsky so buy in to a growing economy. Unfortunately its that greed that Putin and his advisors are banking on to get him through before we all forget.

They should sit for an hour and listen to young (immensely) educated Russians working for international companies before letting greed get to them. They are very concerned and have some understanding what it is to be in an overtly authoritarian regime. They hate it and hate the people who are pushing this policy - the ex-KGB.

Lets not paint Khordokhovsky as any kind of saint; as one of the few who has taken him on and come away with something I feel reasonably well placed to comment. He does not want a pluralistic democracy in Russia anymore than Putin. But he does need the rule of law so that he can hold onto what he took with the Government's money for nothing. But if that is a crime; they are all going to jail - Putin included.

For a good Russian take on this read Yulia Latynina in the Moscow Times Conspiracy Theories Abound
Article on Russia's breakthrough in to the nano tech world

Long break from the blogging thing - good article from Valerie; not that she has ever been to Russia. Pavel Lazarev is an extraoridinary guy and worth following - if only out of interest.

27 November 2003

Ed Sim on Capital Efficent Investing

Ed Sim from Beyond VC on Nov 19 writes about what I have been wittering on about since I started this blog namely Capital Efficient Business Models : You will have to scroll down to find it as I cannot work out how to go straight to the place.

His point is absolutely correct. Marketing costs may stay the same, but if you can create a product for a few million, smartly get the first product to market whilst running a low cost organisation then hopefully the initial and most painful burn will be limited. Once the product has real "traction" (presumably its a car wheel) then people can be hired to really sell the product. Given that these are always the most expensive part of a team hopefully they will be brought in commensurate with real sales opportunities rather than hopeful hype. At the end of this year all our companies will be cash flow positive. Some will require more cash to grow more rapidly. But if we cannot find it then they should be able to grow organically. Given that none of them were that expensive to acquire even a low growth scenario should see a reasonable return.

More from Ed Sim, this time on the US IT market. The Economy and IT Spending : "
It looks like the economy in Q3 grew even faster than we initially thought, 8.2% annual rate versus 7.2%. It was not too long ago that the Department of Commerce released numbers showing 7.2% annualized GDP growth for Q3. If you take a closer look, 'equipment and software' spending was at a 15.4% annualized rate. I obviously have concerns about the revised 8.2% GDP growth and certainly do not believe that is sustainable due to one-time factors like tax cuts and mortgage refinancings. While it is nice to see a 15.4% annualized growth rate in 'equipment and spending' for Q3, let's not assume that this is the beginning of a huge ramp-up in IT Spending. To bolster my thinking, I like to look at a number of data points. For one, Goldman Sachs recently issued its October IT Spending Survey. Its latest survey calls for an increase of 2% spending for 2003 versus a December 2002 survey which forecasted a decline of 1.1% for 2003 spending. So it is nice to see that the trend reversed in terms of IT spending, and that it looks like there is a small rebound happening. That being said, the October 2003 survey forecasts spending growth of only 1.3% for 2004, down from an August 2003 spending survey forecast of 2.3% growth for 2004. That is a negative trend and does not promise earth-shattering returns to IT Spending in the bubble years. As Goldman Sachs mentions, hopefully there is just a lag in terms of how the economy performs and where each company is in its budgeting process. If this is the case, we shoud keep an eye out for data from future surveys.

Another data point that I look at is how the fund's 30+ portfolio companies are performing. We have a number of companies in the Enterprise IT space selling security, storage, network management, wireless, and other related software. Some companies are performing extraordinarily well "

26 November 2003

The gaps between my thoughts on technology have become embarassing; plenty of comment on the Khordokovsky affair, little on Russian technology won't pay any bills. What it does do is reflect my concerns as to the future of the country. Those who spend more time than I do thinking about these matters tell me I am being over-sensitive. I still respond that greed is greater than fear, and there will come a time when fear takes over and we will all wonder why we did not pay attention.

Back to technology; seems as though there are companies out there getting funded, and getting bought. Suse was a great relief to those of us investing outside the mainstream US that good companies will still get bought, and at good multiples. I hear that the main investors made 3-5x. Given the $'s ploughed in to the company to turn out software and the time that they first invested, its not a bad result. BTW the last sentence is a subtle dig European / US software companies failure to make use of inexpensive programming assets.

On the funding side the investing world must be looking up if social software companies are getting funded. I can see the point of what they are trying to do but....Don't we do this informally anyway? Why would I pay for what I do already, unless it really helps me to do it better. None of the companies that I have looked at really convince me that they do.

If strange companies are getting funded it means that strange companies are getting bought. At a personal level I am intrigued by the direction that Shwartz is taking Sun. From what I hear from portfolio companies they could not organise a piss up in a brewery - or sales people after commissions are driving the direction of the company. To be more precise; it does not matter what the strategy guys put together to improve the TCO, customer experience etc. the sales guys are selling boxes loaded with software that requires the most boxes to be sold. I like the approach that Shwartz seems to be taking - it puts Sun ahead of the crowd in working out where the future of software is going. If he can get control of his sales teams the strategy might even work.

16 November 2003

An interesting take on the reemergence of vlast (power) in Russia

NOVAYA GAZETA
No. 85, Thursday
November 13, 2003
Don�t go Visiting the President in a Sweater -- then there won�t be a Dictatorship Interview with an Anonymous Source
Translated by Luba Schwartzman

The following is an interview with an officer of the Federal Security Service who is involved in the investigation of the YUKOS Affair. Granted on the condition of anonymity, it is cited word for word, with no corrections. Despite the officer�s careful wording, we can still find answers to very important questions.

* Who can say �shush� in the YUKOS Affair?
* What fate awaits Chubais?
* Does the �national question� play a role in the Khodorkovsky Affair?
* Is there such a thing as a �good� oligarch?

Q: How will the story starring Khodorkovsky end? What does the government want? To jail him? To take away his property? Or just to make an example of him to make others obedient?
A: Yes. Khodorkovsky was asking for it. He annoyed everyone; he was a real jerk.

Q: What did he do that was annoying?
A: Did you see how he was dressed when he came to meet with the President? The �I don�t give a damn� attitude� He stuck his nose in all over the place, going way too far. The worst part was when he said that he would rather be a political prisoner than a political refugee.

Q: So how will he be pressured? Until he breaks?
A: We don�t make decisions about that. We only carry out orders. But we will keep going as long as they let us.

Q: And how long will they let you?
A: Until they stop us. Once they say �shush,� we�ll quietly step away. But for now, we�ll have some fun. Our boys are pretty angry, you know. Angry at him and angry at the unfairness of life.

Q: Who are the bosses who can let or stop you?
A: The bosses are different for everyone. But everything is decided at the very top.

Q: The very-very top?
A: Of course.

Q: Are there political motivations for this?
A: Well, we certainly don�t have any. What have we got to do with it? We just carry out orders. They said �go� and we did. If they say �stop,� we will.� You know how it is in Russia -- it�s enough to say �act in accordance with the law.� Then anyone can get in trouble -- you, me� For many years we weren�t allowed to follow the law. Now, with regard to YUKOS, they said: �ok, go ahead!� We cheered. (laughs) We know that we have to act carefully and precisely. The political environment could change and then we could get in trouble. So those who carry out orders cannot overdo it. The main thing is to follow the law to the letter, to conform to all of the procedural regulations. Well, we�ll make him [Khodorkovsky -editor] sweat as long as we can, and then we�ll let him go. Certainly we understand that, sooner or later, someone who has as much money as he does will buy his way out. But it will be a pity if they let him off so easy. After all, we�re really trying, really working hard�

Q: But, tell me, what are you really after?
A: Well, we�ll push him as far as we can� Of course it would be really great to kick him out of the country. After all, our boys used to do it back in Soviet times. �Out of sight, out of heart� you know! (laughs) �No person means no problem.� Although Stalinist methods don�t cut it now� and the jerk [Khodorkovsky -editor] said he doesn�t want to leave. Our boys got pretty mad about that. Look at him being brave! He really is going too far!

Q: So how far will you go? Are you going to kick all of the oligarchs out?
A: We take our cue from Zhirik [Zhirinovsky -editor]. He says it will happen soon. He told all the oligarchs recently: �You�re all going to jail soon!� So that�s what the oligarchs have coming. All of them have dirty hands. All of these �shares-for-loans auctions� are a questionable affair. I�m talking about the law here! Why didn�t they return the money for the stocks? They could have, you know�

Q: But it was the government that made the decision about the auction. Are you ready to open up cases against Chernomyrdin and Chubais?
A: That�s a very sensitive issue you�re bringing up. Many of our boys can�t wait to get their hands on Chubais. But there�s an obstacle there. You can�t touch the government. That�s why we�re keeping low and waiting. But the boys have been quietly gathering information all these years. We�ve got plenty of evidence. The problem lies elsewhere: the interests of the state are involved, the interests of the government. One needs to be very, very careful. Look who�s at the top now -- if you really think about it, theose people shouldn�t be at the top. We have information -- plenty of information, even way back from Yeltsin�s time� but let�s not talk about that� It�s better for you not to know� You�ll be able to sleep better.

Q: How about Aksenenko?
A: Oh, nothing�s going to happen to him. They�ll just let him know: sit and keep quiet. If you don�t -- you�ll be sorry.

Q: Do you like how things are going in Russia?
A: I was a little uneasy before. But then I understood -- things like that always happen when the rules of the game change. And the rules of the game are changing now. It�s just that we�ve adapted to them and you haven�t yet.

Q: Which rules are changing?
A: Well, you see -- back under Yeltsin, certain things came to be accepted as dogmas. The notion that private property is sacred, for example. That�s rubbish. Do you really believe that all of these liberal values are here to stay? Don�t get used to these illusions! All of the rules can still be reviewed -- and the will be reviewed. In the past, everything was predictable: If someone made a move against an oligarch, he would give some money to the media, and the journalists would rally around him. He would give some money and buy his way out. If he didn�t get out of trouble tight away, it only meant that he didn�t give enough money. Now, none of the oligarchs can predict all of the consequences. Everything has come into motion. The rules of the game are changing. Now they are afraid of us, because they don�t know what to expect.

Q: And now they cannot bribe you?
A: You know, for us, the main priority right now is to be on Putin�s team. That means more than a one-time pay-off. If you manage to stay on the team, you�ll get back everything and more. If, on the other hand, you take money now, you can get kicked out. Before was chaos. No one valued their positions, since they knew they could end up on the street tomorrow. That�s why everyone grabbed whatever they could get -- to get at least something out of the job. But now we value our jobs. Look at what happen to the cops. All of the Ministry of Internal Affairs guys got quite a fright� We don�t want to become �werewolves.� So we do everything according to the law! We keep our noses clean! But the main thing is not to stray too far from the �party and government line.� (laughs) We�re the servants of the state, you know!

Q: How do you tell apart the �good� oligarchs and the �bad� oligarchs?
A: Oh, it�s very simple. Those who have a national orientation are safe. But these oligarchs aren�t �home based� in Russia.

Q: Where then?
A: In the US, in Israel� They are a major threat to our nation. There is a danger that Russia will be turned into a source of natural resources, a danger that we will be subjugated to a different country. That�s why the oligarchs have to be pushed down or pressed out. Of course, only those who are internationalist in ideology. It�s obvious that Gus [Gusinsky -editor] worked for Israel, just like Bereza [Berezovsky -editor] did. We should only keep those who are thinking about the nation and not about their own wallets. Khodorkovsky is clearly oriented toward the United States. He shouldn�t be in Russia. This is a real fifth column we�re talking about. This is a very dangerous political wing. If it becomes stronger, Russia will lose its independence from the West. And if we don�t get rid of him now, Khodorkovsky will become invincible.

Q: So, are there any �good� oligarchs, who might be allowed to stay?
A: Sure. Mordashov, for example. He�s a Russian.

Q: Is nationality what counts?
A: Of course. All Jews are traitors. They all lean towards the West. This was always the case. Back at the �High� [Higher School of the Committee for State Security -editor] they taught us that all intelligence workers rely on Zionist lines, because the Jews have diasporas everywhere. You know, for them nationality is more important than citizenship. Zionists were always hostile towards Russia. And they had many ideas about how to use international capital against us. All of our achievements in intelligence work were based on Jews and their networks. Take the Rosenthal Affair, for example. We always worked along Jewish channels. So now we cannot allow in this Zionist capital�

Q: What about democracy?
A: Oh, democracy is a bluff. The only thing that counts is power. Remember how everyone was afraid of us when the USSR was strong? And now that we�re weak, everyone is trying to get at us. During the mess that the Yeltsin regime was, we created way too many of those� Well, the same thing that happened with Trotsky, basically.

Q: So what�s coming? Nationalization?
A: No, nationalization isn�t on the agenda. The main thing right now is redistribution in favor of nationally-oriented businessmen. Why the heck should Khodorkovsky have seven billion dollars? Who the heck is he?

Q: Perhaps he is smarter than other people and a better businessman?
A: How much brainpower does it take to pump oil? Just build some towers, and you�re set. All of the technology is purchased in the West. You don�t need to be smart for that.

Q: Do we need to get rid of LUKOIL as well?
A: No. LUKOIL protects out strategic interests on the borders, in disputed areas like Kazakhstan and Azerbaijan. This is �our� company. It�s nationally-geared. Alekperov never tried to stick his nose into politics.

Q: So politics is what counts?
A: Yes. You see, Khodorkovsky is driven by ambition. Just look how much money he gave to oppositionist parties! He must be quashed with no questions asked, before he becomes another Berezovsky.

Q: And what�s so dangerous about giving money to these parties -- Yabloko, Union of Right Forces?
A: Oh -- right now it may not seem dangerous. But they are just lying low and waiting for their hour. These are the same Zionists we were talking about. Under no circumstances should they be allowed to grow stronger. And Khodorkovsky? Let him run about and complain now. No Strasbourg Court can help him. After all -- they got their chance to live well, but quietly. But, no! That wasn�t enough! They wanted to get involved in politics! Well -- now they will have neither politics nor money.

Q: Is this also an example set for other oligarchs?
A: Of course. You see, Abramovich is the smartest of them. We�ve already made a deal with him. Once his gubernatorial term is up, he will leave quietly, without a scandal. He�s already sold everything here and bought everything there.

Q: So, who should leave? Just the Jews or others as well?
A: Whoever proves their loyalty can stay. We aren�t trying to ruin relations with large business. Hitler hadn�t revoked major holdings that helped him.

Q: So where are you taking the country? Towards totalitarianism?
A: Yes. But this is going to be a capitalist totalitarianism rather than a socialist totalitarianism. This is the kind of government we had after Catherine II. Nicholas I came to power and replaced the ruling class. Officials replaced the nobility. Officials should get property for their service to the state, instead of property getting handed down by birthright. Then we will have order in the country.

05 November 2003

The Entrepreneurial Mind: The Experience Myth Great comment from a bus school prof i have never heard of before.

Innovation will fail when the investing process is run by bus school grads with the entrepreneurial instincts of a dead slug and a tick board to fill in.

Yukos or Those Who Have vs Those Who Would Like to Have What Those Who Have, Have

It's difficult to write intelligently about the Khordokhovsky affair - to do so requires an understanding of what is going on. No one really does. There have been some very intelligent attempts to assess the impact. Most of them private; if you can get to read what Bernie Sucher and Eric Kraus are writing its worth doing so as they differ markedly from the newspapers.

However, both of them come from the buy/sell side of the asset management/ brokerage game. Their antennae are directed accordingly. As John Dizard put it in the most avertly cynical Make Money from the Crisis article; its probably only Khordokhovsky so buy in to a growing economy. Unfortunately its that greed that Putin and his advisors are banking on to get him through before we all forget.

They should sit for an hour and listen to young (immensely) educated Russians working for international companies before letting greed get to them. They are very concerned and have some understanding what it is to be in an overtly authoritarian regime. They hate it and hate the people who are pushing this policy - the ex-KGB.

Lets not paint Khordokhovsky as any kind of saint; as one of the few who has taken him on and come away with something I feel reasonably well placed to comment. He does not want a pluralistic democracy in Russia anymore than Putin. But he does need the rule of law so that he can hold onto what he took with the Government's money for nothing. But if that is a crime; they are all going to jail - Putin included.

For a good Russian take on this read Yulia Latynina in the Moscow Times Conspiracy Theories Abound

Article on Russia's breakthrough in to the nano tech world

Long break from the blogging thing - good article from Valerie; not that she has ever been to Russia. Pavel Lazarev is an extraoridinary guy and worth following - if only out of interest.