I Gave My Word
In Russia the single most valuable thing you have is your word, once you give it, it binds you. It’s thought to be a very Mafia like thing, but it’s not just with the Mafia, it’s with every man I met in Russia. Many contracts worth millions of dollars were agreed upon over a simple handshake and someone’s word. I was shocked the first time I saw this and my American brain went right to… “How is this going to hold up in court, where is the contract, what are the terms and the fine print?” To which my partners informed me that if someone is going to screw you over, they’re going to screw you over, why waste all your energy reading the fine print.
I, of course, had to create that fine print in two languages for the international contract and terms, but I understood what they were saying. If a Russian man lost his word, no one would do business with him again ever, I mean ever, so keeping your word or your promise meant everything.
The first time I met Oleg, (renamed in this blog out of respect) the head of the Khabarovsk mafia, he had called me to meet him in a billiard parlor to have a conversation with him. I knew OF him, he was the roof (insurance) on our stores, which meant if anyone bothered us or made threats, we called Oleg and he took care of it, how he took care of it, I didn’t ever ask. Tonight I was being called to meet with him, about what, I didn’t ask.
(retracted and updated 1/10/23)
Side thought here — before you jump to conclusions, the photo above is of my good friend Dmitry and not Oleg. Dmitry and I worked on real estate projects together in Vladivostok, his death remains a mystery to this day. He was shot and killed near his home one day, the reasons behind his killing were never known, but he was always known in as an upstanding businessman. I put him at the top of my blog in respect to his life and all that he taught me about doing business in Russia. R.I.P Dmitry.
When I got to the parlor, the area wasn’t well lit and he was in the back corner playing Russian billiards or snookers (the one with the red and white balls and smaller pockets on a bigger table, yeh, that one, so if you suck at USA billiards, you shouldn’t ever try this game). The whole thing was basically the scene from the Godfather movie and I was a little nervous. He continued to play and I stood there, once he finished his shot he looked up at me with the kindest smile.
Oleg is a tall man, 6'4" or 6'6", so everyone looks up to him. He’s in incredible shape, can easily do 40 pull-ups and he plays sport regularly. The story I was told about his rise to his current position is as follows:
Oleg went to university and played a sport there, he lived in the dorms with his wife. A students life in Russia may be a few steps above a prisoners life in the fact that those dorms are awful, not really rooms, more like curtains, central toilets, the raised up ones with the hole in the ground and no dividers. No real kitchen, more of a single electric burner and a hot iron or heating coil to heat water for tea.
Side thought here — a portable water heating coil can kill you, you put this thing in a glass of water to hurry and boil the water for tea and to kill all the bad stuff in the water. What they don’t tell you is that if you take it out of the water without turning it off first it can explode on you. People are worried about wild animals and bugs killing them in Australia, but making tea in Russia can kill you.
Like every good student, everyone had a good side hustle to make a little money, odd jobs here and there, Oleg was a mechanic on the side. So as Oleg started to make a little money his wife was so happy because now she could have a Shuba (fur coat) like all the other wives and look good, but Oleg asked her to wait and wear her old coat a little longer. He continued to make her wait until they had enough money to buy a car, once again Oleg’s wife was so happy, no more trams, buses and walking, but Oleg bought a damaged car that was in need of repair, not even drive able. Once again the wife was disappointed and confused, but Oleg told her that he could fix the car and then by two more. So the wife waited, in her ragged clothing, in their student dorm while watching all her friends ride around in cars and wear nice things. Over time Oleg not only bought cars, he bought the shop he was working in, the surrounding land and built quite the empire. His wife now has anything she wants and they have a wonderful life together. I think because of his good business mind and discipline to sacrifice to get what he wanted, others started to follow him, with this group he started to resolve problems and thus, he is the head of a group, some may refer to is as a mafia, but he never liked that word.
Back to the billiard parlor — Oleg gave me the kindest smile and said that he heard that I was quite the business woman, resourceful, smart and successful. I felt really good, but I was waiting for the BUT or for me to have to reply to him in Russian, as my Russian wasn’t that good right now. He went on to tell me that he has land and that under this land they found a natural spring 160 meters down, so he wants to start a water bottling plant. I honestly didn’t think I understood him and at this point we didn’t have bottled water in Russia, so I didn’t have an example to show him. I repeated in my best Russian what I heard so that I understood him, and that he want to produce water from the spring, bottle it and sell it. Yep, that’s what he wanted. Now I racking my brain thinking, do I know anything about manufacturing? No. Do we even have plastic or whatever we need? Remember, at this point in time, we didn’t have the world wide web, so I couldn’t just look up resin and or pellet molds and how to manufacture bottled water, there were no YouTube videos, I was blind.
But then again, I didn’t know anything about opening a store, importing products, exporting wood, importing sugar or releasing oil tankers, so why not build a water manufacturing plant, how hard could it be? Oleg now walked towards me and asked me to give me my word that I would work with him and only him on this idea, not share his plans with anyone and decide right now if I want my percentage on the purchase of the equipment or be a partner in the on going revenue generated from this plant. If you’ve read previous blogs then you know this was a critically bad decision for me and I chose to make money on the equipment. He then extended his hand and asked me to give him my word. This was it, the contract and the terms of our agreement in my word and my handshake. I’d been doing business long enough to know how important this was, I knew that I could agree to what he was asking, so I extended my hand and gave my word.
We traveled all over the US looking at used equipment, new equipment, learned about the industry and then bought equipment out of Europe since they could supple us with service and parts. This plant was huge and is still producing a large line of products, but I kept my word and I received my percentage of earning in the purchase of the equipment. More importantly I established myself as a reliable business person and my network of friends and connections was growing stronger and stronger.
Later when I had a dispute about a car I purchased for someone I needed to use Oleg’s service again. I had agreed to purchase a car for someone, but they needed to pay for it in advance. Once I located the car and asked for payment, the client stated that I didn’t understand him and that I had agreed to bring the car here and then he would pay me. I met with Oleg, told him my side of the story, and asked him for help with this issue. He asked me 3 times if I had told him everything. I recalled a few details more and then ended the meeting. Oleg did the same with my client, met with him and asked for all the details. After this meeting Oleg made a decision, we both were out a little money and that was it, case settled.
There was only one time during my business dealings in Russia that I asked someone to break their word. I asked them even though I knew it would ruin them forever, and the man I asked was my walrus mustache business partner.
While we were building our stores for EMA and importing food for the city, the Mayor asked my partner if he could source sugar for the Krai (the whole region, not just the city). My partner said yes to this request and showed up in my office telling me that we needed to go to Brazil. I love a good trip to Brazil, but why are we going. He told me that we needed to buy a boat load of sugar (I don’t use boat load here as A LOT, but literally a ship full of sugar, 12,500 MT to be exact). Now that I’d been in this industry for awhile I new that sugar was traded out of the markets in NY and UK. The sugar harvests are purchased in advance of the season and then sold off later. I informed my partner of this, but he thought he could go down to Brazil, pay someone on the side extra and they would load up a boat of sugar for us, as if they were just farmers and wouldn’t they like some extra cash in their pockets. I couldn’t stop him from this way of thinking, so off to Brazil we went.
I arranged a tour of several sugar plantations with meetings with the owners. When I called to set up the appointment, they told me that they couldn’t sell us any sugar, but I told them that we still wanted to meet. Anyway, we got to see a lot of pretty countryside and enjoy some really good food, but we bought sugar through NY like everyone else. So by now we’re established enough to use a Letter of Credit through the banks and an International Contract. We sign the agreement, I go back to Brazil to oversee the loading of our ship (took pictures of our ship so that nothing tricking happen at sea, I mean this was our first contract worth $4,375,000 since we bought at $350 per MT) and now we wait the 30 days for our boat to arrive.
As our boat is at see, an earthquake happens in India. What does this have to do with my boat of sugar you ask? Well the earthquake hit the rail line, thus the transportation of product through rail now was greatly delayed, thus India was paying a premium to have products delivered to sea ports. Everyone was diverting their cargo to India and paying the minor 2% contract fee as sugar was now $550 per MT on the market.
Let’s do some math —
Original Contract Value = $4,375,000 (12,500 MT x $350 per MT)
2% Contract agreement clause = $87,500
Current selling price of sugar $550 per MT
So if we sell our 12,500 MT x $550 per MT = $6,875,000
Thus minus what we bought it for and the 2% clause
$6,875,000 — $4,375,000 — $87,500 = $2,412,500 in profit
I mean this is a no brainer, we sell our boat load and buy another one, we make an easy profit margin and everyone is happy. NO. We did not do this, why? My partner had given his word that he would deliver sugar in the Fall for everyone to make jam with for the winter. I was like WHAT? You want to give up $2 million in profit for jam? I was furious. He repeated again that he gave his word. I was still mad and greedy and cocky, so in my fit of immaturity I asked him to just break his word.
It took me a minute to calm down and realized what I had asked, I had asked him to do something that no amount of money could replace. Once I realized what I had asked, I apologized and agreed to bring our sugar to Russia as agreed. We continued to get higher and higher offers for our sugar as it traveled to our port, but it wouldn’t matter the sum, his word had been given and that was the end of the conversation.
This was one of life’s greatest lessons for me to learn, that your word and having people trust you is the most valuable thing you have in business. I went on to have great success, wonderful partners and clients and when asked what the secret to my success was and is, I simply tell them that people trust me.
Side thought here — though my walrus mustache partner and I may disagree and fought a lot, we were really good friends. In looking through photos to create this blog I found this one and remembered one of those funny random stories about his dog.
As you can tell from the caption, I almost die several times in my life, so it’s just a thing, but this dog came very close to doing just that or some serious amount of damage. Here’s what happen:
We had all arrived back late from a trip and I can’t remember why I couldn’t get into my place, but I stayed the night at my partner’s home. I’d been there many times before, so I’d met his dog. He had a mastiff and it was really well trained, never ate anything from other people, never listened to anyone but his master and he was trained to allow people into the house, such as a robber, but never let them out. A mastiff has such loose skin that another dog could bite it’s skin and the mastiff can slide around and attack because their skin is so loose. You get the picture, they are trained to protect and kill intruders.
I wake up in the middle of the night and I really need to pee, I don’t really want to get dressed in my pants just to go to the bathroom, so in my t-shirt and underwear I think I’ll just run over to the bathroom and back without anyone noticing. Forgetting the part about the dog killing intruders, I began to run. Out of nowhere and at a speed I never thought that dog could move, the dog jumped up and pinned me against the wall with his full mouth open ready to bite my neck. Luckily for me, my partner was still up and quickly told the dog to hold. Not down, not come, not release, he said, “Hold”. So there I am, pinned up against the wall in my t-shirt and underwear and here comes my partner around the corner. When he sees me he smiles and calls the dog off. He laughs at me and ask what was I doing to get his dog to attack me. I told him I was running to the restroom, he, in a very Russian way, says, “Next time walk or get dressed or you may not be so lucky.”
