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Unravelling the Russian riddle

Unravelling the Russian riddle
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First Published: Tue, Jun 05 2007. 05 58 PM IST
Updated: Tue, Jun 05 2007. 05 58 PM IST
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
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 could 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 re-entered 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 demeanour 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%, 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 very 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 the same people in that room 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 business people gravitate— understandably, given the rewards and security—towards 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 towards achieving that goal.
Even if Russia were adequately diversified, it would still have the problem of its corruption and its workforce. 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 workforce, 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 said, “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 UK and the US.
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 will it be the other way round?
Russia itself holds the answer, but the whole world will feel the impact.
Jack and Suzy are eager to hear about your career dilemmas and challenges at work , and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Campaign readers can email them questions at winning@livemint.com. Please include your name, occupation and city.
Select questions will be answered.
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First Published: Tue, Jun 05 2007. 05 58 PM IST
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