About
In 1995, Jim Balaschak and his wife, Kim, moved to Russia when Jim became Managing Director of Teledyne’s efforts to expand in the former Soviet Union. In January 1998, he became the COO of Deloitte in Russia. While in Russia, Jim served for 12 years on the board of the American Chamber of Commerce, at that time one of the largest Chambers in the world, and from 2000-2001, served as its chairman. During his career in Russia, he also served as chairman of the Moscow Country Club. Mr. Balaschak retired in 2015 as a principal in Deloitte’s U.S. Energy & Resources practice where he led the Deloitte U.S. Oil & Gas global inbound investment initiative. At Deloitte, he led scores of strategy projects for Global Fortune 250 companies. Internationally, he worked in Russia, CIS, Europe, Asia, South America and the Middle East.
Jim Balaschak: Probably the best way is to go back to the beginning. How I got involved with Russia. I was working for an American corporation called Teledyne, based in Los Angeles. One of the first US conglomerates. Henry Singleton was the leader who built it. We were involved in four different sectors: aerospace and aviation, electronics, specialty minerals, consumer goods, industrial goods. So very, very broad. What Henry did was take a medium-sized company which was in a technology space and one or two in their segment. He took the number 1 or 2 in that specialty and bought it, building up these assets. Generally, I was working for a division of Teledyne, and we were involved in engineering projects in the energy sector. We did a lot of nuclear, petrochemical, and others. Post-Chernobyl, we developed a program for the U.S. Department of Energy to check all the rest of the RMBK reactors, like Chernobyl, and got the DoE to fund it. Unfortunately, even though we wrote the program and got it funded, we were not shortlisted. Someone like Lockheed or Grumman got the work. So, anyway, we were meeting and working with the USSR Atomic Energy Ministry at the time. So I got to engage with the Russians. They had this strange alphabet and strange language. At the time, this was 1989, the only evening program in the Boston area, South Shore, for Russian language was the Harvard Extension. I started the program studying Russian language. Three years in evenings twice a week, and I finished the program. Out of the group that started my class, two of us finished. The DoD program was past an I moved on to other things. I was doing business development globally and traveling the world. Then the wall came down. I met the vice president of Europe for Teledyne, who said: "we are making forays into Eastern Europe. Most of the work was traveling to Poland, Hungary, Czechoslovakia at the time. Never made it to Russia." But the VP said, "Okay, we're going into Russia. We need someone there. Do you want to go?" It was in 1994. My wife and I moved there in 1995 to run Teledyne's operations. I had some language skills. My wife took intensive training for six months, and her Russian is very good. While we were there in 1995, Teledyne had a hostile takeover attempt. We in Russia were involved with 30 companies for the group and having success in aviation and consumer goods and other areas. That's when we got involved with the US Chamber of Commerce in Russia (AmCham), in 1996-97, and got on the board. The hostile takeover attempt ended, eventually splitting the company into four parts, one of which was sold, and three listed companies. I had opportunities to come back to the US, but they were really boring compared to the pace of change in Russia. We were having a good time in Russia. Just being there, the opportunity at that time was you could buy assets for pennies on the dollar. It was very poor country at the time. Russia was on its knees. You remember those days with Yeltsin. It was so intriguing. We had language skills. There was a big demand. I joined Deloitte as COO in January 1998.
Daniel Satinsky: Yes. January 1998.
Jim Balaschak: Yes. At the time, we were number seven of the big six accounting firms. We were really bad. It was really poorly organized. It was a mess. My job as COO was to help fix the company in Russia, which consisted of offices throughout the CIS territory, the former Soviet Union without the Baltic states.
Daniel Satinsky: And were you mainly a USAID contractor, or what was the source of your business in Russia?
Jim Balaschak: Which Teledyne or Deloitte? No, it was primarily public and private companies. Mainly at first, Deloitte simply had to follow our global clients there. Global companies like GM or name any sector that were going there and opening up shop. They needed audit, tax advice, and other services which we provide to those companies worldwide.
Daniel Satinsky: Okay.
Jim Balaschak: The Russian corporate world didn't really open up until the late 90s and really through the early 2000s. And then it really went full bore. I saw the transition. Historically, the government owned all the assets, and then the government got rid of the assets. How that happened is another story, but they ended up in the hands of new owners. It took a while for those private owners to say, "We need help. We want to go to the capital markets. Therefore, we need audits. We have no management systems, no back office, no management reporting," etc. All the services that we provide as a company to help them really modernize and become a full-fledged corporation with governance, reporting, and all that we did for them.
Daniel Satinsky: Okay. Can I, I'm sorry to interrupt you, but I want to go back to the 1996 election. Did that impact you? How were you thinking about that in 1996?
Jim Balaschak: Yeah. In ‘96 I was thinking, is the country going to go forward to a liberal democracy or backward to the communists? That was an inflection point where the country decided the way forward. It was really close. Yeltsin tipped the scales and ended up in power with little bit of help, but that was a good thing. It showed that the country was ready to move forward beyond communism.
Daniel Satinsky: Yes.
Jim Balaschak: That was a big deal.
Daniel Satinsky: Yes. Was it a big topic of discussion among the expat community at that time?
Jim Balaschak: Oh, absolutely. I forget who was the US President. I think it was Clinton who was President. We had the Gore-Chernomyrdin business bi-lateral group. They had a very positive relationship and impact on the business climate. I think Clinton had a good relationship with Yeltsin, and the US was doing everything to help out. So yes, it was a big topic of discussion. We, as Americans, didn't want to see it go backward. I don’t think that any of those opportunities that were created in the next decade would have happened.
Daniel Satinsky: Yes. And was the expat community very big at that time?
Jim Balaschak: Yes. In the mid-90s, it was pretty small. We knew people through AmCham. That was kind of our circle. You had our people in our organizations like Deloitte. We had more people from other parts of the world, UK, Australia, whatever. But we were short on Americans. Americans don't like to go overseas, and the whole package to get Americans over there was much more costly than bringing people from other parts of the world.
Daniel Satinsky: Right. And how about Russians? Did you have Russians at that time?
Jim Balaschak: Oh, yes. So take Deloitte as an example. We were 90% Russian at the time. There was a transition. In 1998, Deloitte had seven partners, including myself, and 125 staff in the CIS. We got a new managing partner who saw what the future potential could be. I helped put together the strategy. When I left in 2008, we had 170 partners and at least 3,500 staff. We were growing like 50% a year for ten years.
Daniel Satinsky: Yes.
Jim Balaschak: Those seven partners, we had two Russians and five foreigners. By the end of that decade, we developed a full contingency of Russian partners, or Ukrainians, or Kazakhs, etc. I built a consulting business from scratch and a financial advisory business from scratch. When I left, we had 40 partners and 600 staff in those two businesses. The education system in Russia adapted, teaching economics, accounting, and other things. By the time I left, more than half of those 170 partners were Russian, and 96% of the staff. We needed subject matter experts, so we brought in expat partners and senior managers to lead practices, but we quickly had all the human capital we needed in the country.
Daniel Satinsky: Yew. In the country.
Jim Balaschak: That includes Ukraine and Kazakhstan. We had a big practice in Almaty and Kiev, probably over 500 people in each place.
Daniel Satinsky: And did they operate separately?
Jim Balaschak: No, part of our organization. Part of Deloitte's CIS.
Daniel Satinsky: Okay. Let me back up to another inflection point. 1998, when the crash happens in August 1998. What were you thinking?
Jim Balaschak: I was thinking it's short term. Like most people, we've been through these cycles before, but it was really bad. My job was to restructure Deloitte, so we downsized, closed our financial advisory and consulting practices, and closed our office in Saint Petersburg. We kept small offices in Kiev and Almaty but downsized considerably. We knew this country may be on its knees, but looking at natural resources, Russia is either number 1 or 2 in production or reserves in all extraction industries. For example, Norilsk Nickel provides 40% of the world's nickel. Their reserves, at current production levels, would last more than 250 years.
Daniel Satinsky: Wow.
Jim Balaschak: Yes. So we knew they're not going to disappear. The oil, gas, and other commodities... Russia is resource-rich and has human capital. The Soviet system educated people in mathematics, music, and arts. They are literate and smart. With resources and educated people, it panned out through the 2000s. Oil prices went from $10 to $100. The industries were able to invest and grow production.
Daniel Satinsky: Yeah. So you were able to take a longer view.
Jim Balaschak: We on the ground took a longer view, but Deloitte in New York was saying to close it down. We were losing tens of millions a year. In 1999, the partners in Russia bought out the partnership. We took a risk and became solvent by the end of 1999. By 2000, we were making money.
Daniel Satinsky: Because of the recovery.
Jim Balaschak: Because of the recovery and demand for our services.
Daniel Satinsky: And the demand was both foreign and domestic companies?
Jim Balaschak: It was both. Russian financial industrial groups were aggressive in various sectors. We helped create a Walmart equivalent called Mosmart from scratch, which became a billion-dollar business, for example.
Daniel Satinsky: Wow.
Jim Balaschak: The Russian side saw opportunities in banking, retail, telecom, and other sectors.
Daniel Satinsky: They came to you for Western business expertise and systems.
Jim Balaschak: We brought in experts like a former Walmart global VP to advise on the best business models.
Daniel Satinsky: This was the heyday of globalization and integration of Russia into global markets.
Jim Balaschak: Right. Russians tried to grab market share, and foreign companies like Toyota and Ford came in. I was the point man for incoming US business, consulting on various sectors.
Daniel Satinsky: Was the growth driven by oil prices?
Jim Balaschak: One factor was pent-up demand. People who had nothing wanted something. The new consumer class could buy things for their homes. Oil prices helped spread the wealth, but the demand for consumer goods was also a big driver.
Daniel Satinsky: So you lived in an apartment near Leningradsky Prospect.
Jim Balaschak: Yes, right behind Dynamo Stadium. We didn't want to live in an expat townhouse; we wanted the Russian experience. We had the language skills and loved interacting with people, using the metro, and shopping at markets.
Daniel Satinsky: Do you think that differentiated you from other expats?
Jim Balaschak: Absolutely. Understanding people starts with language. Russian is very descriptive and emotional, and learning idioms was fun.
Daniel Satinsky: So you weren't stuck with typical foreigner hangouts.
Jim Balaschak: Not at all. We immersed ourselves in the culture.
Daniel Satinsky: Do you think your personality is different in Russian?
Jim Balaschak: Yes, I think so.
Daniel Satinsky: What language was used in Deloitte's offices?
Jim Balaschak: Primarily English. All audit work, whether US GAAP or IFRS, was in English. Exams were in English, but I loved using Russian.
Daniel Satinsky: And you know, that's part of this project. I'm actually speaking to people like you, mostly because of the language who were able to add and feel more of an integration into the society. Although not everybody, a lot of people, it seems to me, even people who were there a long time, who would say, you know, “I'm not good with languages. I never got it my Russian is bad. But I got by.” But then there's a whole other set of people who lived there who were part of the expat community, probably that left around 1998, who didn't learn the language and lived a different, you know, kind of lifestyle is here. You do agree with that?
Jim Balaschak: Oh yes. We have my wife's book club here and so the book club was reading Bill Browder's book right? And so for the book discussion they had me come in and another person who was the first guy to open BP's business in Russia and lived at Rosinka. When we were telling our stories. It was two different experiences. Two different views of the world. Because he never really got out and interacted with people. Always had security around him. Went from the office to home and you know maybe went to a restaurant or so forth but it very different from riding the Metro and hanging out in Georgian restaurants. Or say, going to Ismailova and haggling with the vendors.
Daniel Satinsky: Yes. And probably also not traveling outside of Moscow or Saint Pete.
Daniel Satinsky: Yes. January 1998.
Jim Balaschak: Yes. At the time, we were number seven of the big six accounting firms. We were really bad. It was really poorly organized. It was a mess. My job as COO was to help fix the company in Russia, which consisted of offices throughout the CIS territory, the former Soviet Union without the Baltic states.
Daniel Satinsky: And were you mainly a USAID contractor, or what was the source of your business in Russia?
Jim Balaschak: Which Teledyne or Deloitte? No, it was primarily public and private companies. Mainly at first, Deloitte simply had to follow our global clients there. Global companies like GM or name any sector that were going there and opening up shop. They needed audit, tax advice, and other services which we provide to those companies worldwide.
Daniel Satinsky: Okay.
Jim Balaschak: The Russian corporate world didn't really open up until the late 90s and really through the early 2000s. And then it really went full bore. I saw the transition. Historically, the government owned all the assets, and then the government got rid of the assets. How that happened is another story, but they ended up in the hands of new owners. It took a while for those private owners to say, "We need help. We want to go to the capital markets. Therefore, we need audits. We have no management systems, no back office, no management reporting," etc. All the services that we provide as a company to help them really modernize and become a full-fledged corporation with governance, reporting, and all that we did for them.
Daniel Satinsky: Okay. Can I, I'm sorry to interrupt you, but I want to go back to the 1996 election. Did that impact you? How were you thinking about that in 1996?
Jim Balaschak: Yeah. In ‘96 I was thinking, is the country going to go forward to a liberal democracy or backward to the communists? That was an inflection point where the country decided the way forward. It was really close. Yeltsin tipped the scales and ended up in power with little bit of help, but that was a good thing. It showed that the country was ready to move forward beyond communism.
Daniel Satinsky: Yes.
Jim Balaschak: That was a big deal.
Daniel Satinsky: Yes. Was it a big topic of discussion among the expat community at that time?
Jim Balaschak: Oh, absolutely. I forget who was the US President. I think it was Clinton who was President. We had the Gore-Chernomyrdin business bi-lateral group. They had a very positive relationship and impact on the business climate. I think Clinton had a good relationship with Yeltsin, and the US was doing everything to help out. So yes, it was a big topic of discussion. We, as Americans, didn't want to see it go backward. I don’t think that any of those opportunities that were created in the next decade would have happened.
Daniel Satinsky: Yes. And was the expat community very big at that time?
Jim Balaschak: Yes. In the mid-90s, it was pretty small. We knew people through AmCham. That was kind of our circle. You had our people in our organizations like Deloitte. We had more people from other parts of the world, UK, Australia, whatever. But we were short on Americans. Americans don't like to go overseas, and the whole package to get Americans over there was much more costly than bringing people from other parts of the world.
Daniel Satinsky: Right. And how about Russians? Did you have Russians at that time?
Jim Balaschak: Oh, yes. So take Deloitte as an example. We were 90% Russian at the time. There was a transition. In 1998, Deloitte had seven partners, including myself, and 125 staff in the CIS. We got a new managing partner who saw what the future potential could be. I helped put together the strategy. When I left in 2008, we had 170 partners and at least 3,500 staff. We were growing like 50% a year for ten years.
Daniel Satinsky: Yes.
Jim Balaschak: Those seven partners, we had two Russians and five foreigners. By the end of that decade, we developed a full contingency of Russian partners, or Ukrainians, or Kazakhs, etc. I built a consulting business from scratch and a financial advisory business from scratch. When I left, we had 40 partners and 600 staff in those two businesses. The education system in Russia adapted, teaching economics, accounting, and other things. By the time I left, more than half of those 170 partners were Russian, and 96% of the staff. We needed subject matter experts, so we brought in expat partners and senior managers to lead practices, but we quickly had all the human capital we needed in the country.
Daniel Satinsky: Yew. In the country.
Jim Balaschak: That includes Ukraine and Kazakhstan. We had a big practice in Almaty and Kiev, probably over 500 people in each place.
Daniel Satinsky: And did they operate separately?
Jim Balaschak: No, part of our organization. Part of Deloitte's CIS.
Daniel Satinsky: Okay. Let me back up to another inflection point. 1998, when the crash happens in August 1998. What were you thinking?
Jim Balaschak: I was thinking it's short term. Like most people, we've been through these cycles before, but it was really bad. My job was to restructure Deloitte, so we downsized, closed our financial advisory and consulting practices, and closed our office in Saint Petersburg. We kept small offices in Kiev and Almaty but downsized considerably. We knew this country may be on its knees, but looking at natural resources, Russia is either number 1 or 2 in production or reserves in all extraction industries. For example, Norilsk Nickel provides 40% of the world's nickel. Their reserves, at current production levels, would last more than 250 years.
Daniel Satinsky: Wow.
Jim Balaschak: Yes. So we knew they're not going to disappear. The oil, gas, and other commodities... Russia is resource-rich and has human capital. The Soviet system educated people in mathematics, music, and arts. They are literate and smart. With resources and educated people, it panned out through the 2000s. Oil prices went from $10 to $100. The industries were able to invest and grow production.
Daniel Satinsky: Yeah. So you were able to take a longer view.
Jim Balaschak: We on the ground took a longer view, but Deloitte in New York was saying to close it down. We were losing tens of millions a year. In 1999, the partners in Russia bought out the partnership. We took a risk and became solvent by the end of 1999. By 2000, we were making money.
Daniel Satinsky: Because of the recovery.
Jim Balaschak: Because of the recovery and demand for our services.
Daniel Satinsky: And the demand was both foreign and domestic companies?
Jim Balaschak: It was both. Russian financial industrial groups were aggressive in various sectors. We helped create a Walmart equivalent called Mosmart from scratch, which became a billion-dollar business, for example.
Daniel Satinsky: Wow.
Jim Balaschak: The Russian side saw opportunities in banking, retail, telecom, and other sectors.
Daniel Satinsky: They came to you for Western business expertise and systems.
Jim Balaschak: We brought in experts like a former Walmart global VP to advise on the best business models.
Daniel Satinsky: This was the heyday of globalization and integration of Russia into global markets.
Jim Balaschak: Right. Russians tried to grab market share, and foreign companies like Toyota and Ford came in. I was the point man for incoming US business, consulting on various sectors.
Daniel Satinsky: Was the growth driven by oil prices?
Jim Balaschak: One factor was pent-up demand. People who had nothing wanted something. The new consumer class could buy things for their homes. Oil prices helped spread the wealth, but the demand for consumer goods was also a big driver.
Daniel Satinsky: So you lived in an apartment near Leningradsky Prospect.
Jim Balaschak: Yes, right behind Dynamo Stadium. We didn't want to live in an expat townhouse; we wanted the Russian experience. We had the language skills and loved interacting with people, using the metro, and shopping at markets.
Daniel Satinsky: Do you think that differentiated you from other expats?
Jim Balaschak: Absolutely. Understanding people starts with language. Russian is very descriptive and emotional, and learning idioms was fun.
Daniel Satinsky: So you weren't stuck with typical foreigner hangouts.
Jim Balaschak: Not at all. We immersed ourselves in the culture.
Daniel Satinsky: Do you think your personality is different in Russian?
Jim Balaschak: Yes, I think so.
Daniel Satinsky: What language was used in Deloitte's offices?
Jim Balaschak: Primarily English. All audit work, whether US GAAP or IFRS, was in English. Exams were in English, but I loved using Russian.
Daniel Satinsky: And you know, that's part of this project. I'm actually speaking to people like you, mostly because of the language who were able to add and feel more of an integration into the society. Although not everybody, a lot of people, it seems to me, even people who were there a long time, who would say, you know, “I'm not good with languages. I never got it my Russian is bad. But I got by.” But then there's a whole other set of people who lived there who were part of the expat community, probably that left around 1998, who didn't learn the language and lived a different, you know, kind of lifestyle is here. You do agree with that?
Jim Balaschak: Oh yes. We have my wife's book club here and so the book club was reading Bill Browder's book right? And so for the book discussion they had me come in and another person who was the first guy to open BP's business in Russia and lived at Rosinka. When we were telling our stories. It was two different experiences. Two different views of the world. Because he never really got out and interacted with people. Always had security around him. Went from the office to home and you know maybe went to a restaurant or so forth but it very different from riding the Metro and hanging out in Georgian restaurants. Or say, going to Ismailova and haggling with the vendors.
Daniel Satinsky: Yes. And probably also not traveling outside of Moscow or Saint Pete.
Jim Balaschak : Probably not. You know they might have gone to see a couple of oil fields but probably not. We traveled extensively and got out a lot, getting out to the regions. It's there that is totally different from Moscow. People are much more different in the small towns of Russia than in Moscow.
Daniel Satinsky: Right I have a memory and I haven't been able to find it of reading in Moscow news that at the time in the 1998 crisis there were a quarter of a million foreigners in the expat community okay in Moscow. And that huge number maybe half at least left in 1998. Does that number ring true to you, that there were that many?
Jim Balaschak: You know it depends how you count them. If you take the foreigners that work in construction, who were from Central Asia that’s a whole different deal. If we are talking about the professional business class, not including the diplomats, that number sounds too high.
I recall that the US Embassy had said it would register you, at the Embassy. They thought they had about half Americans and I think the number was 2500 or 3000. So that's what's in my vague memory to dust off. But it was something like that. So that's probably seems about right.
Daniel Satinsky: Yes.
Jim Balaschak: Just thinking about AmCham. I was chairman for two years 2000 2001. We had you know 700 or 800 companies.
Daniel Satinsky: Right.
Jim Balaschak: If you would take the core companies like us, Fortune 500, we probably had half of them were active in the in the market.
Daniel Satinsky: Yes. So that's a much smaller number. So, a pretty big impact from a small number of people.
Jim Balaschak: I think so. We did a study of kind of core values of companies led by Americans versus Russian-led companies. And there was a vast difference in the way they approach honesty and integrity, for example. We had to operate totally clean, totally white. There was no gray area for us.
Daniel Satinsky: Yeah. No Krisha.
Jim Balaschak: No Krisha. Well, we had a security company. But no Krisha. When Westerners do stupid things and get into trouble, we had to sort that out. But it was small town stuff. Not any big, you know, overriding threat. We were under investigation for tax issues. Deloitte, you can probably Google and find it. And that went on for three years and it was totally fraudulent. It was retribution by someone whose son worked for the tax police and thought their father was wronged by Deloitte. It took three years. We finally got to the Presidential Administration. And going through the courts and everything, they fixed it because it was wrong. But yes, no one got hurt. So, the people involved got punished. It's like, okay, stop doing this. Do it to other people, but not to Deloitte because they audit a quarter of our national companies.
Daniel Satinsky: Is that true? You were auditing a quarter of the national companies?
Jim Balaschak: If you take the big four, you just take a market share of a quarter. That's roughly true. If you had the largest share of resource companies, they did Gazprom and others. But we were okay operating as tax advisors, you know, non-audit tax financial advisors, consulting technology advisors to the other companies. Trying to get like, you know, Lukoil or TMK or Prokhorov's company before it went into Rosneft. And then we worked for Rosneft.
Daniel Satinsky: Yes. But this whole court thing was a personal grievance that led to this.
Jim Balaschak: In Russia, most things are personal. It's not about money. If you cross someone, it's bad. More so than in other places I’ve worked in the world. You could screw somebody in business, and they get that. But if it becomes personal, then beware. And that's where it came out. Khodorkovsky was all about it being very personal and visceral between him and Putin.
Daniel Satinsky: And that's, you know, I think I've encountered this with someone else. It's a strange thing for Americans to understand that at a high level, that kind of personal insult or personal grievance could lead to such a large-scale legal or political action.
Jim Balaschak: No, absolutely. But on the other hand, if you gain the trust of Russians, they will do anything for you as well. So, if you serve them well, then they would do anything for you.
Daniel Satinsky: Yeah, yeah.
Daniel Satinsky: Yeah, yeah. But in the position, you were in, probably building personal relationships with clients was a critical aspect of what you were doing, right?
Jim Balaschak: Correct. Although I was COO, and this is interesting. So, the banks collapsed in 1998, and we lost millions. I don't know which one of the Russian banks, but they just kept our assets. So, we had payroll, and we couldn't do payroll. So, we went to ING bank. So, for six months, ING Bank was stuffing envelopes with cash. And we'd go, I'd go with our security company, pick it up with shotguns and everything. Bring it back. And then we'd have like 8 to 9 A.M., if your name ends A to D, you come and pick up your envelope. We didn't have a bank that was functioning. And as we came out the crisis, we were the first western corporate client for Alfa Bank.
Daniel Satinsky: In '99? Is that...
Jim Balaschak: Probably '99? Yeah. They brought us a payroll solution with credit cards, debit cards for us. And so, Friedman was really grateful. Michael Friedman and Alex Knaster and Peter Aven. And so, once you get like, oh, Deloitte uses us for payroll, like, why wouldn't you use us?
Daniel Satinsky: So yeah.
Jim Balaschak: So things like that happened. You know, anything I ever needed from Friedman? He was open.
Daniel Satinsky: Yeah, yeah, yeah. Because you had built that relationship.
Daniel Satinsky: Yeah, yeah. So, and how did you end up with Norilsk as a client? Was that also relationships?
Jim Balaschak: It wasn't my client. So that was on the audit side. Yeah, just building relationships with, I forget who owned it. I think it was Prokhorov and others. So, it was relationships. I worked on other things, but that was an audit client, so it wasn't mine.
Daniel Satinsky: Right. At what point when you were there did you recognize consciously that relationships were going to be the key aspect of your business?
Jim Balaschak: Well, in our business it always was. I probably spent a third of my time on relationships and client development, a third of my time on human HR, hiring, building an organization, HR issues, and probably another third of the time actually working on projects, overseeing projects, and managing the practice. And then we built a model at Deloitte called the 30/30. These were our top 30 clients, and the top 30 clients accounted for a majority of our revenue. We built client service teams and relationship management teams for each of those clients with a partner in charge to develop those relationships. But the Russians had a problem with that concept between relationships and friendships. It was hard because they couldn't see developing a relationship that wasn't a friendship. You have a business professional relationship, it had to be personal.
Daniel Satinsky: Yes.
Jim Balaschak: Some of the Russians felt like, "Well, this is stupid." "What are you asking me to do, become their friends? I don't want to be their friends." "No, no, no, it's not that." But then it worked over the long term as we kept after it.
Daniel Satinsky: You mean some of your Russian staff were saying, "What are you really asking me to do with these?" Like, okay. I mean, so it was just like go to their birthday parties and send presents to their kids for their birthdays and stuff like that.
Jim Balaschak: Not really. We don't do that. It's Deloitte. A partner would come in and say, "Well, you know, we did this work. We should buy this guy a nice expensive watch." I'd reply, "No, we don't do that. Do it on your own and out of your pocket, but that's not what we do." We were careful on that not to cross the line. It's a business relationship. Some of those can develop into personal relationships. I'm not saying they don't. In fact, the TNK BP CFO and his wife, they come to the US, we go to the UK, and, it's back and forth, but we're Westerners.
Daniel Satinsky: Yes. But do you think it's more this way in Russia, or did you feel it was generally in the world of business that you operate in, is it more relationship-focused in Russia than elsewhere or not?
Jim Balaschak: I'd say not. I'd say it's more, even though we tried that, working for the Western companies, the relationship was important. People got it. And they understood that. For Russians, it was more transactional.
Daniel Satinsky: Okay. It was more transactional.
Jim Balaschak: When I came back to the U.S., I was handling all of our key energy clients in the Northeast, and it's like hanging around the hoop. You develop a relationship with the CEO, CFO and others in the C-Suit. You have lunch, you bring them some thoughts and ideas, having conversations about their business and their problems. And maybe sometime we can fit in where we don't normally lean in. But you're constantly there because they're looking for intelligence from you, what's going on in the industry, etc. Deloitte had good research and thought pieces. And you got to bring them something useful. You're hanging around, and the opportunity comes in. Since you were just there, they call you and say, "Jim, we've got a real problem. Can you get ten people to my office on Monday to start on this problem?"
Daniel Satinsky: Yes, I see.
Daniel Satinsky: But your approach in Russia was different then than that.
Jim Balaschak: No, we tried the same approach.
Daniel Satinsky: You tried the same approach.
Jim Balaschak: Yes.
Daniel Satinsky: AmCham and the golf club, are those part of the relationships, or were they part of just your personal social life, or were they a mixture? How did those work?
Jim Balaschak: It was a combination. I think AmCham was more... When I got involved, AmCham was at the forefront, having the pulse on what's going on in the government and what changes are coming down. And AmCham had, as you know, bilateral relationships, at first, it was Chernomyrdin/Gore, and then under Bush, we had Don Evans, who was Secretary of Commerce. And we had a relationship, so it was about being at the nexus of business and government and policy was very important. The US-Russian relationship was important to business, and being there at the table was important to be impactful on that process, just in general, just for the general business climate. Did it benefit my business? Yes, maybe in a way, but it developed a lot of strong relationships with people on the board and company members and so forth. So that became, yes, outside of that work social group, the AmCham group. And then we joined the golf club, and there was an overlap from some of the AmCham people. But you had a very diverse group at the club, probably a third Russian, a third Asian, and a third Western. That was more a social release to get out of the city and out of the office and play golf and just relax. But then there was overlap with business where you played golf with Russians who were quite wealthy, and they now were involved in things that they needed help on, and that was a major source of client development. But it was mainly just social. And that group became friends, or our social group became the club.
Daniel Satinsky: Yes.
Jim Balaschak: So that was important to us, my wife and I, for our lifestyle. Other than just being in the city and working, working, working. We worked at least 12 hours a day, and you needed to get away from it all.
Daniel Satinsky: And your wife also, you have mentioned that she was, what was she? She was working as well?
Jim Balaschak: Yes.
Daniel Satinsky: What kind of business was she in?
Jim Balaschak: She was mostly in consumer goods. And you might want to talk to her. She was first involved in some USAID projects. She started the first production of orange juice from Florida concentrate at milk plants. Very cool.
Daniel Satinsky: Right.
Jim Balaschak: That was her first project. Then she went and did some consulting as an outside consultant for Coopers and Lybrand. She did some work for Mars in the pet food, developing cat food preferences and pet food.
Daniel Satinsky: Right.
Jim Balaschak: There's a huge new market, right. So, she worked on that.
Daniel Satinsky: And they love their pets.
Jim Balaschak: Yes, they love their pets. And then she went to work for a Russian startup manufacturer of swimwear and athletic wear, like gym clothes, yoga clothes, and helped them develop their product and get it to market. And they're still doing very well.
Daniel Satinsky: Wow.
Jim Balaschak: Then she went to work for an advertising firm, Saatchi and Saatchi, and was doing some work there. And then she was hired by a client, which was a UK retailer called Monsoon/Accessorize. Monsoon was mostly ladies' casual clothing. Accessorize is what it is, all accessories, and you would see them in all airports in Europe. They had 85 stores in Russia, and I think two of the top-selling stores in the world. That's where she was when we left in 2008.
Daniel Satinsky: Okay.
Jim Balaschak: She did a lot. We got involved with Chamber Orchestra Kremlin in the early days with Misha Rachlevsky, and we helped them with their business plan, developing fund raising, etc. We were both on the board. Then I got off the board, and Kim then chaired the board, and we were very involved with the orchestra. They're world-class, s top ten chamber orchestras in the world. Have you ever heard of them?
Daniel Satinsky: No, I haven't.
Jim Balaschak: They're really excellent. If you ever have a chance to see them perform in Russia, it's outstanding. We got involved with that. And that was another group of people too. So yes, then we were involved with United Way Russia, etc. So, a lot of different activities. It was really dynamic.
Daniel Satinsky: Yeah, sounds like it. So, she has a different viewpoint because, you know, she lived on the ground, rode the metro, worked in Russia.
Jim Balaschak: Yes, definitely.
Daniel Satinsky: So I would like to talk to her if you could, you know, just make the connection.
Jim Balaschak: Sure, I'll ask her.
Daniel Satinsky: Yeah, it definitely would be interesting.
Jim Balaschak: Oh, and not to forget she collected the world's largest collection of Soviet-era New Year's tree ornaments. Two exhibitions, world's largest collection.
Daniel Satinsky: Say that again?
Jim Balaschak: Soviet New Year's tree ornaments.
Daniel Satinsky: Okay.
Jim Balaschak: It's a collection of holiday tree ornaments from pre-Revolution to the 1960s. And it's now housed at the Russian Museum of Art in Minneapolis.
Daniel Satinsky: Oh, cool. Cool. Yeah, I visited that museum.
Jim Balaschak: You did?
Daniel Satinsky: Oh, yes.
Jim Balaschak: She donated her collection. It's quite a collection. She had a book on it. She had a very big exhibit at the Russian Museum of Decorative Arts on the Garden Ring.
Daniel Satinsky: Okay, great. No, I would like to talk to her about it. And I am interested in different directions or what you were saying. And I'm, I hope I'm not running around like a, you know, what is it, there's a Russian saying, if you chase two rabbits, you won't even catch one. I don't remember how to say it in Russian anymore. But the philanthropy, the kinds of philanthropy you were involved with, were international organizations that came into Russia. Is that correct?
Jim Balaschak: Yes. With United Way of Russia. But there were also other smaller ones, mostly for children and orphanages. I forget what they were, but yes, we supported those as well.
Daniel Satinsky: So one of the themes of this book, where I started, was this sense that we, that I had, or I think probably you shared in that period of time, that Russia was becoming integrated into this kind of globalized world. And that, you know, that there were Russians who had international viewpoints. And it was over that period of the '90s a growing sophistication and internationalization. And I think there was an assumption that that was going to continue, that that was the path for the future. Did you, do you think you shared that view at that time?
Jim Balaschak: Yes, most certainly so.
Daniel Satinsky: And when did you begin to change any of that viewpoint? When do you think that that separation or maybe in some cases rejection of foreign models, when did you notice that?
Jim Balaschak: I wrote an article when Putin became President for the AmCham News, which offered the opinion that Putin was good for the country. That it came at a time when there was rampant corporate greed and corruption throughout the country with the so-called oligarchs, and that Putin said, "Okay, fellas, this is enough. We need to pay our pensioners, we need to keep our army going, we need to build infrastructure. You have enough money; you've taken enough money. So, either pay up, the taxes of the company and your people and employees, pay taxes or go away." Some of them went away, like Berezovsky and Gusinsky. And then he made an example of Khodorkovsky. I think that changed the dynamic then. I thought it was good. And then we had the ramp-up in oil prices, and everything was even better. And then I think the Khodorkovsky thing was kind of the tipping point. We saw where this was going and that he and his administration would stop at no bounds. They had no limits on their abuse of power and corruption for their own sake. I became disillusioned about the future. People always put it this way: in the Soviet Union, you were told from cradle to grave, you had no control over where you lived, where you went to school, what you read, where you traveled. You had no control; the state controlled all that. That has gone away. The Russians do have all those freedoms. They can live where they want, go to school where they want, work where they want, travel where they want, read whatever they want, and the internet is open. So those freedoms, the population has, but the government has its own mission. And the people around Putin are just really bad news. And they get away with it. They lie, and then it morphed into, "Oh, we're going to take Crimea." And they've already taken half of Ukraine. I think it's very dangerous. The government is on one mission and the people, at least the people I know, are biding their time, hoping this will go away. But it's not going away. It's a bad nightmare.
Daniel Satinsky: Yes, and so you left in 2008.
Jim Balaschak: December 2008.
Daniel Satinsky: Was that because of the 2008 financial crisis?
Jim Balaschak: No, my plan started in the summer of 2008, or actually, in the spring. I was getting older, and I could spend the rest of my days in Russia working, but I wanted to transition back to the U.S. So, it took a while to develop and find that opportunity to come back to the U.S. practice of Deloitte. And I found a place for me to manage a large client portfolio. It was my first thing. And then we reorganized, and I moved on to different things. But I retired in 2015 from Deloitte. We have mandatory retirement at 62. And I wanted to get some years under my belt back in the U.S., reacquaint myself with my family and in the U.S. The U.S. changed so much, it's not the country I left. In 1995. It's even gotten worse even since 2008. I didn't understand that we've become so divided as a country. And we're just kind of on a bad path.
Daniel Satinsky: But when you came back, did people ask you about Russia? Did you feel that you could talk about your experience?
Jim Balaschak: Yes and no. But after two sentences, their eyes would glaze over. It's kind of like being like being a Vietnam vet. Unless you were there, you don't know. And you say, "Well, you know, it was great, and we had a great time, it modernized." And they're like, "Oh, no, no. You know, they're still in line for food or whatever." People don't get it. They don't get it. And in many ways, Russia leapfrogged the West. Especially in digital and IT and telecom because they had none. All they did was modernize, right? You know, we have a fragmented system in the U.S. where we have different companies creating the same infrastructure and competing. And in Russia, you have one infrastructure that allows everybody to compete because you only need one tower. You don't need all providers to have an individual tower, right? I think in telecoms, they leapfrogged. They said, "We're going to overlay internet fiber optic wire in the country." They did it. And that was impressive. And then the cell phone, where impact per capita cell phones is like 1.25 to 1 cell phones for everybody in the country.
Daniel Satinsky: Yes.
Jim Balaschak: And all the Babushkas had cell phones.
Daniel Satinsky: Right. Because they didn't have landlines. You know, through you and other people. And I've talked to people in real estate and, you know, in restaurants. I talked to someone in the restaurant business who talked about how Moscow is the culinary capital of the world. And, you know, real estate people talking about the growth of the sophistication of the real estate markets in the retail space. And, you know, stuff that is incomprehensible to most Americans because of the way we get our information and the information silo we exist in, plus the obsession with sort of national politics that we have. So at least for some interested people, I would like for people like you to be speaking through this book and hopefully to have others decide, well, maybe there's more to this story than we've been given.
Jim Balaschak: This is like the questions we... I don't want to say they're silly but, for example, "The Mafia is really big there." I never met the Mafia in Russia.
Daniel Satinsky: Yes.
Jim Balaschak: Corruption in the government? Yes. But no Mafia. If you say, "How was it?" I say, "Well Moscow went from no restaurants when we first came there, where there were only like seven restaurants that took American Express, and that just transformed to having Michelin-star restaurants. And on every corner, there's a sushi bar and a coffee shop."
Daniel Satinsky: Right.
Jim Balaschak: And it's really cosmopolitan. And there are 170-180 performing arts sites in the city that are open each night. And these people are going to eat and going to hear music or see a play. It's just pretty dynamic.
Daniel Satinsky: Right I have a memory and I haven't been able to find it of reading in Moscow news that at the time in the 1998 crisis there were a quarter of a million foreigners in the expat community okay in Moscow. And that huge number maybe half at least left in 1998. Does that number ring true to you, that there were that many?
Jim Balaschak: You know it depends how you count them. If you take the foreigners that work in construction, who were from Central Asia that’s a whole different deal. If we are talking about the professional business class, not including the diplomats, that number sounds too high.
I recall that the US Embassy had said it would register you, at the Embassy. They thought they had about half Americans and I think the number was 2500 or 3000. So that's what's in my vague memory to dust off. But it was something like that. So that's probably seems about right.
Daniel Satinsky: Yes.
Jim Balaschak: Just thinking about AmCham. I was chairman for two years 2000 2001. We had you know 700 or 800 companies.
Daniel Satinsky: Right.
Jim Balaschak: If you would take the core companies like us, Fortune 500, we probably had half of them were active in the in the market.
Daniel Satinsky: Yes. So that's a much smaller number. So, a pretty big impact from a small number of people.
Jim Balaschak: I think so. We did a study of kind of core values of companies led by Americans versus Russian-led companies. And there was a vast difference in the way they approach honesty and integrity, for example. We had to operate totally clean, totally white. There was no gray area for us.
Daniel Satinsky: Yeah. No Krisha.
Jim Balaschak: No Krisha. Well, we had a security company. But no Krisha. When Westerners do stupid things and get into trouble, we had to sort that out. But it was small town stuff. Not any big, you know, overriding threat. We were under investigation for tax issues. Deloitte, you can probably Google and find it. And that went on for three years and it was totally fraudulent. It was retribution by someone whose son worked for the tax police and thought their father was wronged by Deloitte. It took three years. We finally got to the Presidential Administration. And going through the courts and everything, they fixed it because it was wrong. But yes, no one got hurt. So, the people involved got punished. It's like, okay, stop doing this. Do it to other people, but not to Deloitte because they audit a quarter of our national companies.
Daniel Satinsky: Is that true? You were auditing a quarter of the national companies?
Jim Balaschak: If you take the big four, you just take a market share of a quarter. That's roughly true. If you had the largest share of resource companies, they did Gazprom and others. But we were okay operating as tax advisors, you know, non-audit tax financial advisors, consulting technology advisors to the other companies. Trying to get like, you know, Lukoil or TMK or Prokhorov's company before it went into Rosneft. And then we worked for Rosneft.
Daniel Satinsky: Yes. But this whole court thing was a personal grievance that led to this.
Jim Balaschak: In Russia, most things are personal. It's not about money. If you cross someone, it's bad. More so than in other places I’ve worked in the world. You could screw somebody in business, and they get that. But if it becomes personal, then beware. And that's where it came out. Khodorkovsky was all about it being very personal and visceral between him and Putin.
Daniel Satinsky: And that's, you know, I think I've encountered this with someone else. It's a strange thing for Americans to understand that at a high level, that kind of personal insult or personal grievance could lead to such a large-scale legal or political action.
Jim Balaschak: No, absolutely. But on the other hand, if you gain the trust of Russians, they will do anything for you as well. So, if you serve them well, then they would do anything for you.
Daniel Satinsky: Yeah, yeah.
Daniel Satinsky: Yeah, yeah. But in the position, you were in, probably building personal relationships with clients was a critical aspect of what you were doing, right?
Jim Balaschak: Correct. Although I was COO, and this is interesting. So, the banks collapsed in 1998, and we lost millions. I don't know which one of the Russian banks, but they just kept our assets. So, we had payroll, and we couldn't do payroll. So, we went to ING bank. So, for six months, ING Bank was stuffing envelopes with cash. And we'd go, I'd go with our security company, pick it up with shotguns and everything. Bring it back. And then we'd have like 8 to 9 A.M., if your name ends A to D, you come and pick up your envelope. We didn't have a bank that was functioning. And as we came out the crisis, we were the first western corporate client for Alfa Bank.
Daniel Satinsky: In '99? Is that...
Jim Balaschak: Probably '99? Yeah. They brought us a payroll solution with credit cards, debit cards for us. And so, Friedman was really grateful. Michael Friedman and Alex Knaster and Peter Aven. And so, once you get like, oh, Deloitte uses us for payroll, like, why wouldn't you use us?
Daniel Satinsky: So yeah.
Jim Balaschak: So things like that happened. You know, anything I ever needed from Friedman? He was open.
Daniel Satinsky: Yeah, yeah, yeah. Because you had built that relationship.
Daniel Satinsky: Yeah, yeah. So, and how did you end up with Norilsk as a client? Was that also relationships?
Jim Balaschak: It wasn't my client. So that was on the audit side. Yeah, just building relationships with, I forget who owned it. I think it was Prokhorov and others. So, it was relationships. I worked on other things, but that was an audit client, so it wasn't mine.
Daniel Satinsky: Right. At what point when you were there did you recognize consciously that relationships were going to be the key aspect of your business?
Jim Balaschak: Well, in our business it always was. I probably spent a third of my time on relationships and client development, a third of my time on human HR, hiring, building an organization, HR issues, and probably another third of the time actually working on projects, overseeing projects, and managing the practice. And then we built a model at Deloitte called the 30/30. These were our top 30 clients, and the top 30 clients accounted for a majority of our revenue. We built client service teams and relationship management teams for each of those clients with a partner in charge to develop those relationships. But the Russians had a problem with that concept between relationships and friendships. It was hard because they couldn't see developing a relationship that wasn't a friendship. You have a business professional relationship, it had to be personal.
Daniel Satinsky: Yes.
Jim Balaschak: Some of the Russians felt like, "Well, this is stupid." "What are you asking me to do, become their friends? I don't want to be their friends." "No, no, no, it's not that." But then it worked over the long term as we kept after it.
Daniel Satinsky: You mean some of your Russian staff were saying, "What are you really asking me to do with these?" Like, okay. I mean, so it was just like go to their birthday parties and send presents to their kids for their birthdays and stuff like that.
Jim Balaschak: Not really. We don't do that. It's Deloitte. A partner would come in and say, "Well, you know, we did this work. We should buy this guy a nice expensive watch." I'd reply, "No, we don't do that. Do it on your own and out of your pocket, but that's not what we do." We were careful on that not to cross the line. It's a business relationship. Some of those can develop into personal relationships. I'm not saying they don't. In fact, the TNK BP CFO and his wife, they come to the US, we go to the UK, and, it's back and forth, but we're Westerners.
Daniel Satinsky: Yes. But do you think it's more this way in Russia, or did you feel it was generally in the world of business that you operate in, is it more relationship-focused in Russia than elsewhere or not?
Jim Balaschak: I'd say not. I'd say it's more, even though we tried that, working for the Western companies, the relationship was important. People got it. And they understood that. For Russians, it was more transactional.
Daniel Satinsky: Okay. It was more transactional.
Jim Balaschak: When I came back to the U.S., I was handling all of our key energy clients in the Northeast, and it's like hanging around the hoop. You develop a relationship with the CEO, CFO and others in the C-Suit. You have lunch, you bring them some thoughts and ideas, having conversations about their business and their problems. And maybe sometime we can fit in where we don't normally lean in. But you're constantly there because they're looking for intelligence from you, what's going on in the industry, etc. Deloitte had good research and thought pieces. And you got to bring them something useful. You're hanging around, and the opportunity comes in. Since you were just there, they call you and say, "Jim, we've got a real problem. Can you get ten people to my office on Monday to start on this problem?"
Daniel Satinsky: Yes, I see.
Daniel Satinsky: But your approach in Russia was different then than that.
Jim Balaschak: No, we tried the same approach.
Daniel Satinsky: You tried the same approach.
Jim Balaschak: Yes.
Daniel Satinsky: AmCham and the golf club, are those part of the relationships, or were they part of just your personal social life, or were they a mixture? How did those work?
Jim Balaschak: It was a combination. I think AmCham was more... When I got involved, AmCham was at the forefront, having the pulse on what's going on in the government and what changes are coming down. And AmCham had, as you know, bilateral relationships, at first, it was Chernomyrdin/Gore, and then under Bush, we had Don Evans, who was Secretary of Commerce. And we had a relationship, so it was about being at the nexus of business and government and policy was very important. The US-Russian relationship was important to business, and being there at the table was important to be impactful on that process, just in general, just for the general business climate. Did it benefit my business? Yes, maybe in a way, but it developed a lot of strong relationships with people on the board and company members and so forth. So that became, yes, outside of that work social group, the AmCham group. And then we joined the golf club, and there was an overlap from some of the AmCham people. But you had a very diverse group at the club, probably a third Russian, a third Asian, and a third Western. That was more a social release to get out of the city and out of the office and play golf and just relax. But then there was overlap with business where you played golf with Russians who were quite wealthy, and they now were involved in things that they needed help on, and that was a major source of client development. But it was mainly just social. And that group became friends, or our social group became the club.
Daniel Satinsky: Yes.
Jim Balaschak: So that was important to us, my wife and I, for our lifestyle. Other than just being in the city and working, working, working. We worked at least 12 hours a day, and you needed to get away from it all.
Daniel Satinsky: And your wife also, you have mentioned that she was, what was she? She was working as well?
Jim Balaschak: Yes.
Daniel Satinsky: What kind of business was she in?
Jim Balaschak: She was mostly in consumer goods. And you might want to talk to her. She was first involved in some USAID projects. She started the first production of orange juice from Florida concentrate at milk plants. Very cool.
Daniel Satinsky: Right.
Jim Balaschak: That was her first project. Then she went and did some consulting as an outside consultant for Coopers and Lybrand. She did some work for Mars in the pet food, developing cat food preferences and pet food.
Daniel Satinsky: Right.
Jim Balaschak: There's a huge new market, right. So, she worked on that.
Daniel Satinsky: And they love their pets.
Jim Balaschak: Yes, they love their pets. And then she went to work for a Russian startup manufacturer of swimwear and athletic wear, like gym clothes, yoga clothes, and helped them develop their product and get it to market. And they're still doing very well.
Daniel Satinsky: Wow.
Jim Balaschak: Then she went to work for an advertising firm, Saatchi and Saatchi, and was doing some work there. And then she was hired by a client, which was a UK retailer called Monsoon/Accessorize. Monsoon was mostly ladies' casual clothing. Accessorize is what it is, all accessories, and you would see them in all airports in Europe. They had 85 stores in Russia, and I think two of the top-selling stores in the world. That's where she was when we left in 2008.
Daniel Satinsky: Okay.
Jim Balaschak: She did a lot. We got involved with Chamber Orchestra Kremlin in the early days with Misha Rachlevsky, and we helped them with their business plan, developing fund raising, etc. We were both on the board. Then I got off the board, and Kim then chaired the board, and we were very involved with the orchestra. They're world-class, s top ten chamber orchestras in the world. Have you ever heard of them?
Daniel Satinsky: No, I haven't.
Jim Balaschak: They're really excellent. If you ever have a chance to see them perform in Russia, it's outstanding. We got involved with that. And that was another group of people too. So yes, then we were involved with United Way Russia, etc. So, a lot of different activities. It was really dynamic.
Daniel Satinsky: Yeah, sounds like it. So, she has a different viewpoint because, you know, she lived on the ground, rode the metro, worked in Russia.
Jim Balaschak: Yes, definitely.
Daniel Satinsky: So I would like to talk to her if you could, you know, just make the connection.
Jim Balaschak: Sure, I'll ask her.
Daniel Satinsky: Yeah, it definitely would be interesting.
Jim Balaschak: Oh, and not to forget she collected the world's largest collection of Soviet-era New Year's tree ornaments. Two exhibitions, world's largest collection.
Daniel Satinsky: Say that again?
Jim Balaschak: Soviet New Year's tree ornaments.
Daniel Satinsky: Okay.
Jim Balaschak: It's a collection of holiday tree ornaments from pre-Revolution to the 1960s. And it's now housed at the Russian Museum of Art in Minneapolis.
Daniel Satinsky: Oh, cool. Cool. Yeah, I visited that museum.
Jim Balaschak: You did?
Daniel Satinsky: Oh, yes.
Jim Balaschak: She donated her collection. It's quite a collection. She had a book on it. She had a very big exhibit at the Russian Museum of Decorative Arts on the Garden Ring.
Daniel Satinsky: Okay, great. No, I would like to talk to her about it. And I am interested in different directions or what you were saying. And I'm, I hope I'm not running around like a, you know, what is it, there's a Russian saying, if you chase two rabbits, you won't even catch one. I don't remember how to say it in Russian anymore. But the philanthropy, the kinds of philanthropy you were involved with, were international organizations that came into Russia. Is that correct?
Jim Balaschak: Yes. With United Way of Russia. But there were also other smaller ones, mostly for children and orphanages. I forget what they were, but yes, we supported those as well.
Daniel Satinsky: So one of the themes of this book, where I started, was this sense that we, that I had, or I think probably you shared in that period of time, that Russia was becoming integrated into this kind of globalized world. And that, you know, that there were Russians who had international viewpoints. And it was over that period of the '90s a growing sophistication and internationalization. And I think there was an assumption that that was going to continue, that that was the path for the future. Did you, do you think you shared that view at that time?
Jim Balaschak: Yes, most certainly so.
Daniel Satinsky: And when did you begin to change any of that viewpoint? When do you think that that separation or maybe in some cases rejection of foreign models, when did you notice that?
Jim Balaschak: I wrote an article when Putin became President for the AmCham News, which offered the opinion that Putin was good for the country. That it came at a time when there was rampant corporate greed and corruption throughout the country with the so-called oligarchs, and that Putin said, "Okay, fellas, this is enough. We need to pay our pensioners, we need to keep our army going, we need to build infrastructure. You have enough money; you've taken enough money. So, either pay up, the taxes of the company and your people and employees, pay taxes or go away." Some of them went away, like Berezovsky and Gusinsky. And then he made an example of Khodorkovsky. I think that changed the dynamic then. I thought it was good. And then we had the ramp-up in oil prices, and everything was even better. And then I think the Khodorkovsky thing was kind of the tipping point. We saw where this was going and that he and his administration would stop at no bounds. They had no limits on their abuse of power and corruption for their own sake. I became disillusioned about the future. People always put it this way: in the Soviet Union, you were told from cradle to grave, you had no control over where you lived, where you went to school, what you read, where you traveled. You had no control; the state controlled all that. That has gone away. The Russians do have all those freedoms. They can live where they want, go to school where they want, work where they want, travel where they want, read whatever they want, and the internet is open. So those freedoms, the population has, but the government has its own mission. And the people around Putin are just really bad news. And they get away with it. They lie, and then it morphed into, "Oh, we're going to take Crimea." And they've already taken half of Ukraine. I think it's very dangerous. The government is on one mission and the people, at least the people I know, are biding their time, hoping this will go away. But it's not going away. It's a bad nightmare.
Daniel Satinsky: Yes, and so you left in 2008.
Jim Balaschak: December 2008.
Daniel Satinsky: Was that because of the 2008 financial crisis?
Jim Balaschak: No, my plan started in the summer of 2008, or actually, in the spring. I was getting older, and I could spend the rest of my days in Russia working, but I wanted to transition back to the U.S. So, it took a while to develop and find that opportunity to come back to the U.S. practice of Deloitte. And I found a place for me to manage a large client portfolio. It was my first thing. And then we reorganized, and I moved on to different things. But I retired in 2015 from Deloitte. We have mandatory retirement at 62. And I wanted to get some years under my belt back in the U.S., reacquaint myself with my family and in the U.S. The U.S. changed so much, it's not the country I left. In 1995. It's even gotten worse even since 2008. I didn't understand that we've become so divided as a country. And we're just kind of on a bad path.
Daniel Satinsky: But when you came back, did people ask you about Russia? Did you feel that you could talk about your experience?
Jim Balaschak: Yes and no. But after two sentences, their eyes would glaze over. It's kind of like being like being a Vietnam vet. Unless you were there, you don't know. And you say, "Well, you know, it was great, and we had a great time, it modernized." And they're like, "Oh, no, no. You know, they're still in line for food or whatever." People don't get it. They don't get it. And in many ways, Russia leapfrogged the West. Especially in digital and IT and telecom because they had none. All they did was modernize, right? You know, we have a fragmented system in the U.S. where we have different companies creating the same infrastructure and competing. And in Russia, you have one infrastructure that allows everybody to compete because you only need one tower. You don't need all providers to have an individual tower, right? I think in telecoms, they leapfrogged. They said, "We're going to overlay internet fiber optic wire in the country." They did it. And that was impressive. And then the cell phone, where impact per capita cell phones is like 1.25 to 1 cell phones for everybody in the country.
Daniel Satinsky: Yes.
Jim Balaschak: And all the Babushkas had cell phones.
Daniel Satinsky: Right. Because they didn't have landlines. You know, through you and other people. And I've talked to people in real estate and, you know, in restaurants. I talked to someone in the restaurant business who talked about how Moscow is the culinary capital of the world. And, you know, real estate people talking about the growth of the sophistication of the real estate markets in the retail space. And, you know, stuff that is incomprehensible to most Americans because of the way we get our information and the information silo we exist in, plus the obsession with sort of national politics that we have. So at least for some interested people, I would like for people like you to be speaking through this book and hopefully to have others decide, well, maybe there's more to this story than we've been given.
Jim Balaschak: This is like the questions we... I don't want to say they're silly but, for example, "The Mafia is really big there." I never met the Mafia in Russia.
Daniel Satinsky: Yes.
Jim Balaschak: Corruption in the government? Yes. But no Mafia. If you say, "How was it?" I say, "Well Moscow went from no restaurants when we first came there, where there were only like seven restaurants that took American Express, and that just transformed to having Michelin-star restaurants. And on every corner, there's a sushi bar and a coffee shop."
Daniel Satinsky: Right.
Jim Balaschak: And it's really cosmopolitan. And there are 170-180 performing arts sites in the city that are open each night. And these people are going to eat and going to hear music or see a play. It's just pretty dynamic.
Daniel Satinsky: Right. Oh, now I remember what I wanted to ask you. So, there's a... I think he's an academic, Mark Galeotti, who wrote a book called... You know, you're not here. Okay. Well, it's a history of organized crime in Russia and then into the Soviet Union. Okay. So his theory is that when the state broke down at the collapse of the Soviet Union until Putin's rise and the restoration of the state, that the criminal groupings, which had formed during the Tsarist times, that had formed in, you know, the penal colonies historically before the Soviet period and then strengthened in the Soviet period by the penal colonies and the gangs and people that had formed there, that in the 90s they were able to take advantage of certain opportunities and the weakness of the state. And so that's when, for many cash businesses, restaurants, and smaller businesses, they provided krysha for payment or forced their way into ownership. But that period ended with Putin's ascension into power and the strengthening of the state. Basically, those guys became businessmen or they were put in jail. But there was that period.
Jim Balaschak: There was that period, and that was the early to mid-90s. And we were there then, and that's when, at least once a week, a banker was being shot.
Daniel Satinsky: Yeah.
Jim Balaschak: It was pretty dangerous. That was all getting sorted out. There was a restaurant called TrenMos, and a guy was machine-gunned down. And then there was Paul Tatum at the Radisson Slavyanskaya,
Daniel Satinsky: Right. Paul Tatum.
Jim Balaschak: Paul Tatum was gunned down. You had the Chechen mob in there and so forth. That was a dangerous period. I'm disappointed it turned out this way. I went there with high hopes, maybe naive hopes about Russia becoming a Western democracy or a liberal democracy. I remember... What's the song? The German song "Wind of Change," you know?
Daniel Satinsky: Yeah, yeah, yeah.
Jim Balaschak: That was the atmosphere when the wall came down.
Daniel Satinsky: The Scorpions, yeah.
Jim Balaschak: The Scorpions. And that was the atmosphere in Russia. And I forget who wrote the book. Was it Yergin who wrote a book maybe in the... Right at the beginning of the '90s? It was either "Russia 2000" or "Russia 2020." You know, what model it would follow. Would it be the Russian bear? Would it be this liberal democracy or something else?
Daniel Satinsky: Right.
Jim Balaschak: We ended up with the Russian bear. And was it predictable? I don't think so. I think the key was how Putin came to power. And where did he come from? And no one's unwrapped that mystery because that's the reason we are where we are.
Daniel Satinsky: Yeah.
Jim Balaschak: I’m disappointed. I am hopeful. But if this guy stays on another 15 years or so, I'm not hopeful because my question is, what's next? What supports Putin? Right. What does Russia look like after him? Who is going to assume that kind of power? I don't think it's going to be... it's going to be ugly there. And if you don't like it, people leave. A lot of people I know immigrated out of Russia, right? I think that's one of the things... Our interactions, people-to-people with Russians, it was such a positive experience.
Daniel Satinsky: Yeah.
Jim Balaschak: And they will say, "Well, what were your Russian friends like?" Our Russian friends are like us. They want a good job. They want a place to live. They want their kids to be educated. They want a nice car. They want to go on vacation. They like to entertain themselves.
Daniel Satinsky: Yeah.
Jim Balaschak: All the things we do. And the family values and family ties are very strong there. Stronger than in the US. Extended family is extremely important. And you might have several generations living in a household, and it's quite common.
Daniel Satinsky: Yeah.
Jim Balaschak: The personal relationships were very strong. People are people.
Daniel Satinsky: Yeah, it's the us and them dichotomy that Russians have had for centuries, you know. So yeah, I... I don't... I mean, have I missed something that I should have asked you about?
Jim Balaschak: I don't know. The question I always get is, "Was it safe there? Were you safe?"
Daniel Satinsky: Yeah. Well...
Jim Balaschak: We rode the metro. We walked down the street.
Daniel Satinsky: Yeah, yeah, yeah. No, no. Yeah, I always would get that same... "Aren't you scared? Isn't it dangerous?" No. The answer is no. No more than any other big city. And no...
Jim Balaschak: There was never a time I felt that I was scared. I was in mortal danger, right? We lived in Philadelphia for nine years, and I can tell you there were instances where I didn't feel like I was in the right place at the right time.
Daniel Satinsky: Yeah.
Jim Balaschak: I'm a guy in a business suit, and it's night in certain areas, right?
Daniel Satinsky: Yeah, yeah. And, you know, as one of the famous gangsters said, "Why do you rob banks? Because that's where the money is." If you're in a poor area, no matter where you are in the world, and you're in a suit, you're a target.
Jim Balaschak: Yes.
Daniel Satinsky: But I never felt that particularly there. I never did.
Jim Balaschak: Well, you brought back a lot of memories, and overall, it was a very positive experience. My wife and I can share it with each other, but only with people that have been there and done that.
Jim Balaschak: It's other entrepreneurialism. One story I want to tell you was at Teledyne. We had this company called Teledyne Water Pik.
Daniel Satinsky: Okay.
Jim Balaschak: That made household water filtration devices.
Daniel Satinsky: Okay.
Jim Balaschak: Under-sink filters and faucet filters. We had this young guy and his wife just out of college who came to us and started buying these filters. He had to machine an adapter and sell an adapter so it fit on the faucets in Russia. Now, the water in Moscow was potable. Not like Saint Petersburg that has giardia, but it has a lot of dissolved metals and solids. It's not really good for you. But if you put this activated carbon filter on your faucet, it's drinkable. He bought a number of these, like several hundred. And he and his wife were selling these in the metro. And then he became the largest client. He was ordering more than 5000 a month.
Daniel Satinsky: Wow.
Jim Balaschak: He moved out of the metro and they had a little shop. Plus, they were selling the replacement filters. It's like the razor blades, right?
Daniel Satinsky: Right. Yeah.
Jim Balaschak: And pretty soon he's moved on. He's ordering under-sink filters. He's, as an engineer, thinking about whole house systems, whole apartment systems. Long story short, he becomes the water filtration czar of Russia. He has a manufacturing plant, a design engineering firm, an import firm. And let's say you're Coca-Cola and you're building a plant. His company would design and install the filtration system for all the water. Vlad was very successful. And I always use that story as what I saw going on in the market. This rags-to-riches story that you think is an American story, right? Self-made. There are a huge number of those stories. People have done very well by just using hard work, ingenuity, working in the market, being successful.
Daniel Satinsky: Yeah. And it's not all people who just stole state assets.
Jim Balaschak: Correct.
Daniel Satinsky: Yeah, and that's a good example.
Jim Balaschak: There was that period, and that was the early to mid-90s. And we were there then, and that's when, at least once a week, a banker was being shot.
Daniel Satinsky: Yeah.
Jim Balaschak: It was pretty dangerous. That was all getting sorted out. There was a restaurant called TrenMos, and a guy was machine-gunned down. And then there was Paul Tatum at the Radisson Slavyanskaya,
Daniel Satinsky: Right. Paul Tatum.
Jim Balaschak: Paul Tatum was gunned down. You had the Chechen mob in there and so forth. That was a dangerous period. I'm disappointed it turned out this way. I went there with high hopes, maybe naive hopes about Russia becoming a Western democracy or a liberal democracy. I remember... What's the song? The German song "Wind of Change," you know?
Daniel Satinsky: Yeah, yeah, yeah.
Jim Balaschak: That was the atmosphere when the wall came down.
Daniel Satinsky: The Scorpions, yeah.
Jim Balaschak: The Scorpions. And that was the atmosphere in Russia. And I forget who wrote the book. Was it Yergin who wrote a book maybe in the... Right at the beginning of the '90s? It was either "Russia 2000" or "Russia 2020." You know, what model it would follow. Would it be the Russian bear? Would it be this liberal democracy or something else?
Daniel Satinsky: Right.
Jim Balaschak: We ended up with the Russian bear. And was it predictable? I don't think so. I think the key was how Putin came to power. And where did he come from? And no one's unwrapped that mystery because that's the reason we are where we are.
Daniel Satinsky: Yeah.
Jim Balaschak: I’m disappointed. I am hopeful. But if this guy stays on another 15 years or so, I'm not hopeful because my question is, what's next? What supports Putin? Right. What does Russia look like after him? Who is going to assume that kind of power? I don't think it's going to be... it's going to be ugly there. And if you don't like it, people leave. A lot of people I know immigrated out of Russia, right? I think that's one of the things... Our interactions, people-to-people with Russians, it was such a positive experience.
Daniel Satinsky: Yeah.
Jim Balaschak: And they will say, "Well, what were your Russian friends like?" Our Russian friends are like us. They want a good job. They want a place to live. They want their kids to be educated. They want a nice car. They want to go on vacation. They like to entertain themselves.
Daniel Satinsky: Yeah.
Jim Balaschak: All the things we do. And the family values and family ties are very strong there. Stronger than in the US. Extended family is extremely important. And you might have several generations living in a household, and it's quite common.
Daniel Satinsky: Yeah.
Jim Balaschak: The personal relationships were very strong. People are people.
Daniel Satinsky: Yeah, it's the us and them dichotomy that Russians have had for centuries, you know. So yeah, I... I don't... I mean, have I missed something that I should have asked you about?
Jim Balaschak: I don't know. The question I always get is, "Was it safe there? Were you safe?"
Daniel Satinsky: Yeah. Well...
Jim Balaschak: We rode the metro. We walked down the street.
Daniel Satinsky: Yeah, yeah, yeah. No, no. Yeah, I always would get that same... "Aren't you scared? Isn't it dangerous?" No. The answer is no. No more than any other big city. And no...
Jim Balaschak: There was never a time I felt that I was scared. I was in mortal danger, right? We lived in Philadelphia for nine years, and I can tell you there were instances where I didn't feel like I was in the right place at the right time.
Daniel Satinsky: Yeah.
Jim Balaschak: I'm a guy in a business suit, and it's night in certain areas, right?
Daniel Satinsky: Yeah, yeah. And, you know, as one of the famous gangsters said, "Why do you rob banks? Because that's where the money is." If you're in a poor area, no matter where you are in the world, and you're in a suit, you're a target.
Jim Balaschak: Yes.
Daniel Satinsky: But I never felt that particularly there. I never did.
Jim Balaschak: Well, you brought back a lot of memories, and overall, it was a very positive experience. My wife and I can share it with each other, but only with people that have been there and done that.
Jim Balaschak: It's other entrepreneurialism. One story I want to tell you was at Teledyne. We had this company called Teledyne Water Pik.
Daniel Satinsky: Okay.
Jim Balaschak: That made household water filtration devices.
Daniel Satinsky: Okay.
Jim Balaschak: Under-sink filters and faucet filters. We had this young guy and his wife just out of college who came to us and started buying these filters. He had to machine an adapter and sell an adapter so it fit on the faucets in Russia. Now, the water in Moscow was potable. Not like Saint Petersburg that has giardia, but it has a lot of dissolved metals and solids. It's not really good for you. But if you put this activated carbon filter on your faucet, it's drinkable. He bought a number of these, like several hundred. And he and his wife were selling these in the metro. And then he became the largest client. He was ordering more than 5000 a month.
Daniel Satinsky: Wow.
Jim Balaschak: He moved out of the metro and they had a little shop. Plus, they were selling the replacement filters. It's like the razor blades, right?
Daniel Satinsky: Right. Yeah.
Jim Balaschak: And pretty soon he's moved on. He's ordering under-sink filters. He's, as an engineer, thinking about whole house systems, whole apartment systems. Long story short, he becomes the water filtration czar of Russia. He has a manufacturing plant, a design engineering firm, an import firm. And let's say you're Coca-Cola and you're building a plant. His company would design and install the filtration system for all the water. Vlad was very successful. And I always use that story as what I saw going on in the market. This rags-to-riches story that you think is an American story, right? Self-made. There are a huge number of those stories. People have done very well by just using hard work, ingenuity, working in the market, being successful.
Daniel Satinsky: Yeah. And it's not all people who just stole state assets.
Jim Balaschak: Correct.
Daniel Satinsky: Yeah, and that's a good example.
"The roof", criminal protection
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