About
Joel Schatz is a pioneer in transforming citizen diplomacy into business in the Soviet period. He co-founded several companies in the former Soviet Union in the 1980s: SovAm Teleport in Moscow and Leningrad offering international email and database access, and Sovintel in Moscow and Baltic Communications in Leningrad offering reliable, state-of-the-art, international telephone service. He established the first Internet connection between the US and the USSR. His telecom ventures paved the way for international business to begin to operate in the Soviet Union and in post-Soviet Russia through providing modern telecommunications.
Daniel Satinsky: So, I’ve read the materials that you sent, and I may ask you some questions that duplicate them somewhat. I’m as much interested in your thoughts and motivations that build around those events that happened. So to begin with I’d just like to understand—my understanding is you’re a peace activist. Your activities initially had to do with that sensibility, if you will. Is that fair, that you began this engagement from that point of view?
Joel Schatz: Yeah, sort of. I remember when Alexander Haig was Secretary of State under Reagan, he made a speech in which he said it may be time to fire a nuclear warning shot over the bow of the earth. That’s a direct quote from that guy. And so at the time I was on a speaking tour with Robert Muller. Does that name strike a bell? He was the Under Secretary General of the United Nations and then became president of the Peace University in Costa Rica. And he was an incredible soul. And we got to talking about Alexander Haig and the threat of nuclear war and he said I know the Russians really well, I think they would enjoy working with you. Why don’t you invite yourself over? I sent a —
Daniel Satinsky: What year was this now?
Joel Schatz: That would have been ’82.
Daniel Satinsky: ’82, okay.
Joel Schatz: And so, I sent a letter to the Soviet mission to the United Nations suggesting that I wanted to go over with my wife, and I didn’t get a response. So I re-sent the letter by certified mail and got an immediate phone call. I realized these guys don’t like to be caught. So, we went over—
Daniel Satinsky: What did you say in that letter? Why did you tell them you wanted to come?
Joel Schatz: My wife and I were working on a very interesting piece of art which eventually became posters and coloring books. It was called Peace Trek. It was the evolution of the arms race into a peaceful world. We were conducting workshops all over the United States and Canada and I wanted input from the Russians.
Daniel Satinsky: Oh, okay. And was this your own initiative or were you part of an organization?
Joel Schatz: No, it was just a Mom and Pop.
Daniel Satinsky: All right. It was social entrepreneurship.
Joel Schatz: Yeah. And so, we hired a woman from the Esalen Institute to be a Russian speaker to be our guide and translator [Anya Kucharev]. We didn’t trust the Intourist guide we would be assigned. We wanted an American. And so, we went over. And it was on that very first trip that we were introduced to Joseph Goldin, who changed our life, basically, because he—one quick story.
Joseph introduced me to a guy named Boris Rauschenbach, who was the head of the Soviet rocket program at that time and was also an incredibly gifted soul, was writing a book about the perspectives of Cezanne. Anyway, he was in the hospital when I met him. He had a lung infection. And he also told me that what you don’t know about Boris, he also sent back the first photographs of the far side of the moon. He wasn’t ordered to do that, he was curious, and since he had rockets, he decided to do that. And I thought, well, that’s interesting. I happened to have in my briefcase an audiocassette of Pink Floyd’s “Dark Side of the Moon,” and I gave it to Boris.
Daniel Satinsky: [Laughs.] Fantastic.
Joel Schatz: This is how things happen, right? And he said what would you like to do here in Russia? And I said I actually have with me a Tandy Radio Shack Model 80 computer. I’d like to set up an email link between the Soviet Union and the United States. And he said, well, what I’d like to do then is introduce you to a guy who can help you. So, he sent me to a guy named Boris Naumov at the Academy of Sciences who was the head of the Institute for Informatic Problems. That’s what it was called. So I went to see Naumov, and I said my first question is why do you call this the Institute for Informatic Problems, why not Informatic Solutions? And he said because this is Russia. [Laughs.]
Daniel Satinsky: [Laughs.] Can I back up just one second?
Joel Schatz: Sure.
Daniel Satinsky: Who introduced you to Goldin?
Joel Schatz: Our translator from the Esalen Institute.
Daniel Satinsky: Okay, so she knew him already from programs they were doing with him?
Joel Schatz: Yes.
Daniel Satinsky: Okay. Because I had seen this overlap with his name, so okay.
Joel Schatz: Right, yeah. He was working with Michael Murphy and Jim Hickman at the Esalen Institute. But he had never been to the United States before we invited him over here. Anyway, so it was Anya [Kucharev] who introduced us to Joseph. Anyway, Naumov then sent me to Oleg Smirnov at the Institute for Automated Systems, VNIIPAS, which became my partner. So, I met those guys because of meeting Rauschenbach in the hospital.
Daniel Satinsky: And these guys met with you, and you just walked in cold, they didn’t know you?
Joel Schatz: Right.
Daniel Satinsky: Do you think they had some file with some briefing, some investigation?
Joel Schatz: No. The fact that Rauschenbach recommended me. He was a major Soviet scientist at that time. That’s all I needed, was his recommendation.
Daniel Satinsky: Okay. So, this is the Russian style of doing through connections and recommendations and network that—
Joel Schatz: It’s all networking. And because Joseph also introduced me actually to Evgeny Velikhov who was, you know, Gorbachev’s science advisor and vice president of the Academy for Atomic Physics, he became my mentor and loved what I was doing with the computer connections, and gave me all the permission I ever needed, from microwave frequencies, any time I had a problem.
I had a guy who was head of the Ministry of Communications who wanted me to give him a bribe to sign my international license. So, I call Evgeny and I said your Minister of Communications wants a bribe. He said what’s the guy’s phone number? And I gave Evgeny his phone number, and Evgeny called me back three minutes later—your contract’s been signed, it’s been faxed to your office. I said what did you do? He said I threatened to fire him. And it was so… I mean, Velikhov was my savior at the highest level with anything I needed to happen.
Daniel Satinsky: And why do you think he did that? What was Velikhov—was this sort of early days and they wanted to build relations with the U.S., or what was going on with that?
Joel Schatz: He understood that the Soviet Union was so stuck in its economy that it couldn’t survive without international investment and technology from the West. And he knew he couldn’t get investors to come into the Soviet Union if they couldn’t communicate. It took a week or two to make a phone call. Telex was bulky and it barely worked. And here I was saying I want to bring electronic mail and open up the system. At that time, we weren’t even talking about an improved telephone system. That was a couple years later after I met George Soros. And how I met Soros is also, in terms of networking, would you be interested to know?
Daniel Satinsky: Oh, yeah, absolutely.
Joel Schatz: Okay. Well, there was a little child pianist named Polina Osetinskaya, she’s a child prodigy, six years old. We met her through Joseph. And her father, who was her teacher, was also molesting her, so we were trying to get her out of the country, and of course, I contacted Gordon Getty in San Francisco, he said he would pay for her transportation to San Francisco to have her study at the conservatory, but that didn’t work out.
But at the same time, I was trying to help Polina, Soros’s foundation manager in Moscow, Gennady…what was his name? It’ll come to me. He was also trying to help Polina. So Diane and I met this guy because we were all trying to save this little girl, and this guy said I work for a billionaire, do you need money? I said sure. He said, well, his name is George Soros, here’s his phone number, tell him I sent you. So, I called Soros, and he said come on over. So, I went to see him and—
Daniel Satinsky: Where? Where did you go see him?
Joel Schatz: I saw him in New York City—I was flying back and forth—at his office on West 57th. And he said you’re wanting to connect by computer? I said yeah. He says well, how much money do you need? I said I don’t know, I don’t have a corporation, and I don’t have a business plan yet. He says those are details—how much money do you need for starts, like you need maybe plane fare, lawyers, some equipment? I said okay, half a million dollars. He says okay, here’s my deal: I’ll give you a quarter of a million dollars if you find somebody to match me in 24 hours, goodbye.
So I left his office thinking—I came from the nonprofit world and government world, and that seemed to me like $50 billion. So, I had a clue about a guy in New York, another rich guy named Alan Slifka. So, I called him, and I went over to see him in his office on Madison Avenue, and I told him the story. He said okay, I’ll consider it, but I need about a month to decide. I said no, I’ll give you ten minutes or I’m going to lose a quarter of a million dollars. He took his eyeglasses off and bit them, I remember that, and said okay, I’m in. So, I called George back, and I said I found the other matching funds, and he said what took so long? [Laughs.]
And the next day these guys wired $500,000 to my personal checking account in Wells Fargo. Nothing was signed. And George said go to work.
Daniel Satinsky: Wow. And they sent it to your personal account, and they didn’t invest in a company, they didn’t get shares.
Joel Schatz: No. They just gave me half a million dollars between the two of them.
Daniel Satinsky: And because they believed in the mission that you were trying to do.
Joel Schatz: George Soros, he’s a guy that makes decisions with his gut. If it’s comfortable he goes with it, if he’s got tension in his gut he says no. He liked me. He believed if anybody can do what I said I was going to do that I had a chance. He just thought that about me. We really clicked.
Daniel Satinsky: So, what did you tell him you were going to do?
Joel Schatz: I wanted to introduce first scientists, and then businesspeople, and educators, and physicians, and writers, and artists by electronic mail, and to open up the system for two-way communication. There were only 33 international telephone trunk lines between 300 million Soviets and the outside world.
Daniel Satinsky: I didn’t even think there were that many, honestly.
Joel Schatz: There were 33. And 50,000 thermonuclear weapons into each other’s population centers. It seemed to us to be an insane case of danger. My motive was not to make money, it was to try to open up two-way communication between the peoples in both countries. And oddly enough my timing was so perfect, everything I tried to do to open up the system I got the green light. And Velikhov, then I went and met him, he just cleared the way for me, anything I needed. When I needed a satellite link with Intelsat, he just said okay, you’ve got it. I mean, with just a phone call.
Daniel Satinsky: And he got you that link with Intelsat?
Joel Schatz: No, I got the link, and I got it for free.
Daniel Satinsky: For free?
Joel Schatz: Yeah. Because Reagan had a summit in 1989 with Gorbachev in Moscow and IDB Communications from Culver City, California had the rights to do the television feed, so they flew over satellite dishes and all the stuff. And the president of IDB said I’d like to do business here, and I said I can help you. He said I’ve got a T1 circuit with Intelsat for a few years, I’ll let you use it for free—all I need from you is advice. I said it’s a deal. So, I got free service, and he never asked me a single question after that day.
Daniel Satinsky: Really?
Joel Schatz: Yeah, so I got a free circuit on Intelsat.
Daniel Satinsky: Wow. So you began with the email, and when did the email start working?
Joel Schatz: Oh, that started working in Nineteen Eighty… Let’s see, we brought… Let’s see, my first trip was ’84. It was ’85.
Daniel Satinsky: ’85, yeah.
Joel Schatz: And then we were shut down by the Defense Department. That’s when I hired this pit bull attorney from San Francisco. It wasn’t Brian [Zimbler]. He was a mad dog attorney. We went back to the Commerce Department demanding that they tell us what laws we were breaking, and they couldn’t find any laws, so they let us come back on. And then we got into database access as well, and we started to just, you know. We went first to American businesspeople and European businesspeople. Every one of them wanted a link.
And it was a couple of years later than I met Soros, and he says let’s build a telephone company also. And I said I don’t know anything about the telephone business. He said well, just find some people that can help you. So again, Velikhov said it’s a great idea, our phone system sucks. So, I built Sovintel, which was the first digital international phone system in Moscow.
Daniel Satinsky: And you went out and you hired American experts?
Joel Schatz: Yeah, right. I did the same thing even with email because the phone system, as you know, was so terrible in Russia that I needed special error correcting modems. So, I flew over a guy from U.S. Robotics out of the Chicago office and he tested all the phone lines, and he said where is the worst phone line you know in Moscow? I said it happens to be at the dacha* of Evgeny Velikhov. He said let’s go. So, we went to Velikhov’s dacha, and it was a terrible phone line, and this guy did some stuff with the modem and got it to work over the worst phone line with this error correcting system of re-sending the signals. And so, then we used those modems with all of our customers, and the business was growing really fast, because everybody wanted the email link. Everybody.
Daniel Satinsky: Wow. And so, there was this pent-up demand for good communication that you—
Joel Schatz: Absolutely. And then more and more, as Western businesspeople realized they could actually work out of Moscow, their investments increased for all kinds of business. And it’s what the Russians wanted, what they needed.
Daniel Satinsky: Right. And your first customers were what, big companies like GE or…?
Joel Schatz: It was Control Data Corporation was one of the first customers. Another one was the Library of Congress, and I connected them to the Supreme Soviet. And another one was Time magazine. And what they wanted was access to their database in New York City so their reporters in Moscow, in writing stories, could have immediate access to do research. The word spread, and we could barely keep up with the demand. And we were the only people doing it.
Daniel Satinsky: Well, this was still the Soviet Union, and you were a joint venture at that point, correct?
Joel Schatz: No. The joint venture actually started in 1989.
Joel Schatz: Yeah, sort of. I remember when Alexander Haig was Secretary of State under Reagan, he made a speech in which he said it may be time to fire a nuclear warning shot over the bow of the earth. That’s a direct quote from that guy. And so at the time I was on a speaking tour with Robert Muller. Does that name strike a bell? He was the Under Secretary General of the United Nations and then became president of the Peace University in Costa Rica. And he was an incredible soul. And we got to talking about Alexander Haig and the threat of nuclear war and he said I know the Russians really well, I think they would enjoy working with you. Why don’t you invite yourself over? I sent a —
Daniel Satinsky: What year was this now?
Joel Schatz: That would have been ’82.
Daniel Satinsky: ’82, okay.
Joel Schatz: And so, I sent a letter to the Soviet mission to the United Nations suggesting that I wanted to go over with my wife, and I didn’t get a response. So I re-sent the letter by certified mail and got an immediate phone call. I realized these guys don’t like to be caught. So, we went over—
Daniel Satinsky: What did you say in that letter? Why did you tell them you wanted to come?
Joel Schatz: My wife and I were working on a very interesting piece of art which eventually became posters and coloring books. It was called Peace Trek. It was the evolution of the arms race into a peaceful world. We were conducting workshops all over the United States and Canada and I wanted input from the Russians.
Daniel Satinsky: Oh, okay. And was this your own initiative or were you part of an organization?
Joel Schatz: No, it was just a Mom and Pop.
Daniel Satinsky: All right. It was social entrepreneurship.
Joel Schatz: Yeah. And so, we hired a woman from the Esalen Institute to be a Russian speaker to be our guide and translator [Anya Kucharev]. We didn’t trust the Intourist guide we would be assigned. We wanted an American. And so, we went over. And it was on that very first trip that we were introduced to Joseph Goldin, who changed our life, basically, because he—one quick story.
Joseph introduced me to a guy named Boris Rauschenbach, who was the head of the Soviet rocket program at that time and was also an incredibly gifted soul, was writing a book about the perspectives of Cezanne. Anyway, he was in the hospital when I met him. He had a lung infection. And he also told me that what you don’t know about Boris, he also sent back the first photographs of the far side of the moon. He wasn’t ordered to do that, he was curious, and since he had rockets, he decided to do that. And I thought, well, that’s interesting. I happened to have in my briefcase an audiocassette of Pink Floyd’s “Dark Side of the Moon,” and I gave it to Boris.
Daniel Satinsky: [Laughs.] Fantastic.
Joel Schatz: This is how things happen, right? And he said what would you like to do here in Russia? And I said I actually have with me a Tandy Radio Shack Model 80 computer. I’d like to set up an email link between the Soviet Union and the United States. And he said, well, what I’d like to do then is introduce you to a guy who can help you. So, he sent me to a guy named Boris Naumov at the Academy of Sciences who was the head of the Institute for Informatic Problems. That’s what it was called. So I went to see Naumov, and I said my first question is why do you call this the Institute for Informatic Problems, why not Informatic Solutions? And he said because this is Russia. [Laughs.]
Daniel Satinsky: [Laughs.] Can I back up just one second?
Joel Schatz: Sure.
Daniel Satinsky: Who introduced you to Goldin?
Joel Schatz: Our translator from the Esalen Institute.
Daniel Satinsky: Okay, so she knew him already from programs they were doing with him?
Joel Schatz: Yes.
Daniel Satinsky: Okay. Because I had seen this overlap with his name, so okay.
Joel Schatz: Right, yeah. He was working with Michael Murphy and Jim Hickman at the Esalen Institute. But he had never been to the United States before we invited him over here. Anyway, so it was Anya [Kucharev] who introduced us to Joseph. Anyway, Naumov then sent me to Oleg Smirnov at the Institute for Automated Systems, VNIIPAS, which became my partner. So, I met those guys because of meeting Rauschenbach in the hospital.
Daniel Satinsky: And these guys met with you, and you just walked in cold, they didn’t know you?
Joel Schatz: Right.
Daniel Satinsky: Do you think they had some file with some briefing, some investigation?
Joel Schatz: No. The fact that Rauschenbach recommended me. He was a major Soviet scientist at that time. That’s all I needed, was his recommendation.
Daniel Satinsky: Okay. So, this is the Russian style of doing through connections and recommendations and network that—
Joel Schatz: It’s all networking. And because Joseph also introduced me actually to Evgeny Velikhov who was, you know, Gorbachev’s science advisor and vice president of the Academy for Atomic Physics, he became my mentor and loved what I was doing with the computer connections, and gave me all the permission I ever needed, from microwave frequencies, any time I had a problem.
I had a guy who was head of the Ministry of Communications who wanted me to give him a bribe to sign my international license. So, I call Evgeny and I said your Minister of Communications wants a bribe. He said what’s the guy’s phone number? And I gave Evgeny his phone number, and Evgeny called me back three minutes later—your contract’s been signed, it’s been faxed to your office. I said what did you do? He said I threatened to fire him. And it was so… I mean, Velikhov was my savior at the highest level with anything I needed to happen.
Daniel Satinsky: And why do you think he did that? What was Velikhov—was this sort of early days and they wanted to build relations with the U.S., or what was going on with that?
Joel Schatz: He understood that the Soviet Union was so stuck in its economy that it couldn’t survive without international investment and technology from the West. And he knew he couldn’t get investors to come into the Soviet Union if they couldn’t communicate. It took a week or two to make a phone call. Telex was bulky and it barely worked. And here I was saying I want to bring electronic mail and open up the system. At that time, we weren’t even talking about an improved telephone system. That was a couple years later after I met George Soros. And how I met Soros is also, in terms of networking, would you be interested to know?
Daniel Satinsky: Oh, yeah, absolutely.
Joel Schatz: Okay. Well, there was a little child pianist named Polina Osetinskaya, she’s a child prodigy, six years old. We met her through Joseph. And her father, who was her teacher, was also molesting her, so we were trying to get her out of the country, and of course, I contacted Gordon Getty in San Francisco, he said he would pay for her transportation to San Francisco to have her study at the conservatory, but that didn’t work out.
But at the same time, I was trying to help Polina, Soros’s foundation manager in Moscow, Gennady…what was his name? It’ll come to me. He was also trying to help Polina. So Diane and I met this guy because we were all trying to save this little girl, and this guy said I work for a billionaire, do you need money? I said sure. He said, well, his name is George Soros, here’s his phone number, tell him I sent you. So, I called Soros, and he said come on over. So, I went to see him and—
Daniel Satinsky: Where? Where did you go see him?
Joel Schatz: I saw him in New York City—I was flying back and forth—at his office on West 57th. And he said you’re wanting to connect by computer? I said yeah. He says well, how much money do you need? I said I don’t know, I don’t have a corporation, and I don’t have a business plan yet. He says those are details—how much money do you need for starts, like you need maybe plane fare, lawyers, some equipment? I said okay, half a million dollars. He says okay, here’s my deal: I’ll give you a quarter of a million dollars if you find somebody to match me in 24 hours, goodbye.
So I left his office thinking—I came from the nonprofit world and government world, and that seemed to me like $50 billion. So, I had a clue about a guy in New York, another rich guy named Alan Slifka. So, I called him, and I went over to see him in his office on Madison Avenue, and I told him the story. He said okay, I’ll consider it, but I need about a month to decide. I said no, I’ll give you ten minutes or I’m going to lose a quarter of a million dollars. He took his eyeglasses off and bit them, I remember that, and said okay, I’m in. So, I called George back, and I said I found the other matching funds, and he said what took so long? [Laughs.]
And the next day these guys wired $500,000 to my personal checking account in Wells Fargo. Nothing was signed. And George said go to work.
Daniel Satinsky: Wow. And they sent it to your personal account, and they didn’t invest in a company, they didn’t get shares.
Joel Schatz: No. They just gave me half a million dollars between the two of them.
Daniel Satinsky: And because they believed in the mission that you were trying to do.
Joel Schatz: George Soros, he’s a guy that makes decisions with his gut. If it’s comfortable he goes with it, if he’s got tension in his gut he says no. He liked me. He believed if anybody can do what I said I was going to do that I had a chance. He just thought that about me. We really clicked.
Daniel Satinsky: So, what did you tell him you were going to do?
Joel Schatz: I wanted to introduce first scientists, and then businesspeople, and educators, and physicians, and writers, and artists by electronic mail, and to open up the system for two-way communication. There were only 33 international telephone trunk lines between 300 million Soviets and the outside world.
Daniel Satinsky: I didn’t even think there were that many, honestly.
Joel Schatz: There were 33. And 50,000 thermonuclear weapons into each other’s population centers. It seemed to us to be an insane case of danger. My motive was not to make money, it was to try to open up two-way communication between the peoples in both countries. And oddly enough my timing was so perfect, everything I tried to do to open up the system I got the green light. And Velikhov, then I went and met him, he just cleared the way for me, anything I needed. When I needed a satellite link with Intelsat, he just said okay, you’ve got it. I mean, with just a phone call.
Daniel Satinsky: And he got you that link with Intelsat?
Joel Schatz: No, I got the link, and I got it for free.
Daniel Satinsky: For free?
Joel Schatz: Yeah. Because Reagan had a summit in 1989 with Gorbachev in Moscow and IDB Communications from Culver City, California had the rights to do the television feed, so they flew over satellite dishes and all the stuff. And the president of IDB said I’d like to do business here, and I said I can help you. He said I’ve got a T1 circuit with Intelsat for a few years, I’ll let you use it for free—all I need from you is advice. I said it’s a deal. So, I got free service, and he never asked me a single question after that day.
Daniel Satinsky: Really?
Joel Schatz: Yeah, so I got a free circuit on Intelsat.
Daniel Satinsky: Wow. So you began with the email, and when did the email start working?
Joel Schatz: Oh, that started working in Nineteen Eighty… Let’s see, we brought… Let’s see, my first trip was ’84. It was ’85.
Daniel Satinsky: ’85, yeah.
Joel Schatz: And then we were shut down by the Defense Department. That’s when I hired this pit bull attorney from San Francisco. It wasn’t Brian [Zimbler]. He was a mad dog attorney. We went back to the Commerce Department demanding that they tell us what laws we were breaking, and they couldn’t find any laws, so they let us come back on. And then we got into database access as well, and we started to just, you know. We went first to American businesspeople and European businesspeople. Every one of them wanted a link.
And it was a couple of years later than I met Soros, and he says let’s build a telephone company also. And I said I don’t know anything about the telephone business. He said well, just find some people that can help you. So again, Velikhov said it’s a great idea, our phone system sucks. So, I built Sovintel, which was the first digital international phone system in Moscow.
Daniel Satinsky: And you went out and you hired American experts?
Joel Schatz: Yeah, right. I did the same thing even with email because the phone system, as you know, was so terrible in Russia that I needed special error correcting modems. So, I flew over a guy from U.S. Robotics out of the Chicago office and he tested all the phone lines, and he said where is the worst phone line you know in Moscow? I said it happens to be at the dacha* of Evgeny Velikhov. He said let’s go. So, we went to Velikhov’s dacha, and it was a terrible phone line, and this guy did some stuff with the modem and got it to work over the worst phone line with this error correcting system of re-sending the signals. And so, then we used those modems with all of our customers, and the business was growing really fast, because everybody wanted the email link. Everybody.
Daniel Satinsky: Wow. And so, there was this pent-up demand for good communication that you—
Joel Schatz: Absolutely. And then more and more, as Western businesspeople realized they could actually work out of Moscow, their investments increased for all kinds of business. And it’s what the Russians wanted, what they needed.
Daniel Satinsky: Right. And your first customers were what, big companies like GE or…?
Joel Schatz: It was Control Data Corporation was one of the first customers. Another one was the Library of Congress, and I connected them to the Supreme Soviet. And another one was Time magazine. And what they wanted was access to their database in New York City so their reporters in Moscow, in writing stories, could have immediate access to do research. The word spread, and we could barely keep up with the demand. And we were the only people doing it.
Daniel Satinsky: Well, this was still the Soviet Union, and you were a joint venture at that point, correct?
Joel Schatz: No. The joint venture actually started in 1989.
Daniel Satinsky: Okay. So, what were you at that time? What kind of an entity were you?
Joel Schatz: I was a little nonprofit called San Francisco Moscow Teleport out of San Francisco. And it was funded by two generous philanthropists from the Bay Area. And it was like, oh, by the way, when we signed the joint venture in ’89 with VNIIPAS, I had one more day to put $250,000 cash into a joint venture, and Soros had not wired the money yet, and they were going to cancel the JV. So, I called him, and I said where is the $250,000 that you promised? He said oh, it’s been earning interest, I’ll wire it today. [Laughs.]
And the money came into the Vneshtorgbank, the only Soviet bank. So, I went there and I said okay, here’s proof from a telex that the money’s been wired to your bank. And they said okay, it’s probably here, but we don’t know where it is. I said but it’s proof that you got it. He said I can see that we have it. I said I need 50,000 U.S. dollars right now. He said okay, I’ll give you $50,000. I said if you’re not doing it from my wire, where are you getting the money from? Oh, I take it from somebody else’s account. And he gave me $50,000.
You know, I can write 500 volumes of my experience in Russia, and nobody would believe it. Because almost everything that happened was bizarre.
Daniel Satinsky: Right, it was all seat of the pants. So, when you were operating—I don’t want to beat this point to death—but when you were operating it, doing the email, did you have an office in Moscow? Were you in some government agency? Where was your physical presence?
Joel Schatz: I was physically working out of the VNIIPAS building. They gave me a desk. It was a few blocks from Red Square.
Daniel Satinsky: And so, when people were your customers, and they paid you, they paid into an account in San Francisco. There was no business activity in—
Joel Schatz: The dollars were paid to us in California, and the rubles from the Russian people were paid in rubles to the VNIIPAS, who was our informal partner.
Daniel Satinsky: I see, so it was an informal arrangement until it became a joint venture.
Joel Schatz: It was informal because had we asked permission to do a business together, we would have been denied. So, we called it an experiment, because in principle experiments were very loosey-goosey. Nobody really cared if it was an experiment.
Daniel Satinsky: But then once after the joint venture law was passed you were able to form a joint venture.
Joel Schatz: It was a legal business, that’s correct. And we were 50-50 partners, and it grew very quickly. And the same was true with the Sovam Teleport. I signed that telephone contract in 1990 with the main trunk line control center of the Ministry of Communications, and that was a 50-50 joint venture. And then went to Leningrad that year and formed another telephone joint venture called Baltic Communications Ltd. My partner was GTE Spacenet—no, GTE Spacenet was Sovintel. My partner was a British company. I forget the name of the company now, but anyway.
Daniel Satinsky: BT?
Joel Schatz: It was Mercury Communications. And they were also a 50-50 joint venture with me. And then SFMT became absorbed into [Global] Telesystems Group. That company then grew into all kinds of telecom activities throughout Europe. And it eventually went bankrupt. But the Wall Street geniuses said we don’t like your Russia company. It might take down the GTS value. So, we formed this special new company called Golden Telecom, which was our Russia properties, with email and phones and everything, and then we separated it from GTS. When GTS went bankrupt, Golden Telecom was eventually sold for $4 billion to Vimpelcom. I mean, you can’t… you know, you can’t dream this stuff up, it’s so bizarre.
Daniel Satinsky: Right. But when you—and you had Russian partners throughout all this or not?
Joel Schatz: Absolutely.
Daniel Satinsky: And did they take an active part in the company? Are they passive? What role did they play?
Joel Schatz: They didn’t know what they were doing. For example, when we wanted to sign up all the major hotels as telephone customers, I would tell the hotel managers here’s the deal: we don’t want any money from you. We’re going to spend millions of dollars on satellite equipment, on telephones, digital phones. And they said something is not right here—why would you bring all this millions of dollars of stuff and not ask us for anything? I said what I’m asking for is permission to make money as a 50-50 partner with you on all telephone calls. We just make the investment in the equipment and the satellite feed. They just had the hardest time understanding that. There was just no sense of business.
Daniel Satinsky: And these were the—
Joel Schatz: But they all went for it.
Daniel Satinsky: And these were all the Russian hotels and Intourist hotels and so on?
Joel Schatz: Yeah, the major hotels, the National.
Daniel Satinsky: So how did—I mean, you made this transition from being an activist to being a manager. Did you have professional managers that you brought over that formed the company and—
Joel Schatz: Yeah. I brought all kinds of people over. I brought technical people. and I brought financial people. And money wasn’t a problem. When it came to GTS, when we first formed Global Telesystems Group, Soros put in a few million dollars of additional cash. And that business was just growing so big. In fact, before it fell into bankruptcy its market cap reached $6 billion. And then it went from 6 billion to zero.
Daniel Satinsky: And why? What caused that to happen?
Joel Schatz: What happened was we had a lot of Wall Street people on the board who didn’t know anything about the technology, and at that time international phone service was so lucrative that it stimulated a lot of competition. New companies went into business. The technology was becoming more efficient, and therefore it was becoming less expensive to operate, and we were expanding as a corporation mostly by selling debt. And then we didn’t have the revenue that we expected in order to repay the debt. That happened to quite a few telecom companies. So, we were being mismanaged by these Wall Street guys that didn’t know anything.
Daniel Satinsky: So, they were setting your kind of fiscal policy and expansion.
Joel Schatz: Yeah, but they were not even interested in looking at the technology. In fact, in one board meeting I said you know, eventually we’re going to have voice over the internet, and they just laughed at me. They just thought I was nuts.
Daniel Satinsky: But that was later. And Global Telesystems, did you bring the Russians along with you? Were they part of that?
Joel Schatz: No.
Daniel Satinsky: So Sovintel and Baltic Communications you had Russian—
Joel Schatz: That’s right. We were the co-owners.
Daniel Satinsky: Co-owners, okay. And so how did—and then you sold those into Global Telesystems, or how did that transition work?
Joel Schatz: We actually, let’s see. I don’t really remember the details, how that happened. I’ve got to think about that. We transferred those joint ventures into Golden Telecom. And that was an all Russian run company that was separated from GTS.
Daniel Satinsky: And who managed that one, Golden Telecom? People you brought in?
Joel Schatz: Soros brought a few people in. We had a guy named Jerry Thames who became the CEO—no, of Golden Telecom, no. Sorry, man, that was GTS. Golden Telecom—I don’t remember, because I left Russia in ’91 and I had a passive role. I stayed with GTS, and I don’t really remember who was running the company at that point.
And I called Soros one day in 1991 and I said, you know, I didn’t grow up to spend the rest of my life living in Russia building telephone companies, I want to go back to America, I have a new idea for a software company. And he says you mean you want to finally leave Russia? I said yes. Because we were living there for like nine years, mostly. He said you finally want to leave after nine years? Do you still have your sanity after nine years? I’ll never forget that conversation. George is a remarkably funny guy, and we just really liked each other.
Daniel Satinsky: I’m sure that makes a huge difference in what you were able to do together, right, that you had a personal bond.
Joel Schatz: Yeah. I could call him at any time for any reason, no problem.
Daniel Satinsky: And those nine years that you lived there, did you have an apartment in Moscow?
Joel Schatz: We had an apartment in Moscow very near the Arbat, and then in St. Petersburg—it was Leningrad back then—an apartment in a former KGB party house in a place called Kamenny* Island where we had a great kitchen staff, and it was just a beautiful facility. And we paid rubles for rent, so we paid nothing, basically. And we just, you know, just made everything work.
And Brian [Zimbler]—here’s one story about Brian he may not have told you. I needed him back in Leningrad. He was in, I think, Bulgaria—or no, he was in Yerevan, and he needed to get back to Leningrad quickly because I really needed him for a contract, but the only plane he could take was flying to Moscow. He got on the plane in Yerevan, and he mentioned to a guy sitting next to him that he was really upset because he needed to get to Leningrad, and the guy says give me a hundred dollars. He says why? He says give me a hundred-dollar bill. And the guy took his money and went into the cockpit and was talking to the captain, and as they took off the pilot said we’ve made a change of plans, we actually have to fly to Leningrad first.
We said to Brian you highjacked the plane? He says I didn’t look at it in those terms, but I think that’s what happened. And again, that’s just a normal little thing.
And when Gorbachev was arrested during that coup attempt, that three-day coup or four-day coup I was in Kazan signing a joint venture, and they announced the coup on the overnight train, August 31st—I’ll never forget that, ’91. As we were coming into Kazan, they said Comrade Gorbachev is ill—this is an announcement on the train. I had never heard an announcement. I didn’t even know they had a PA system on the train. They said but not to worry—this is the announcement—because tractor production is expected to increase today.
So, I knew we were in deep shit. I got there. We signed the contract. It was for a cellular system. And when I got back to the States, I was describing to the board people and Goldman Sachs guys about this contract, and he said how did you sign a contract in the middle of a coup? I said because in Russia they separated revolution from economics. They said, what?
It’s the truth. We signed a goddamn joint venture in the middle of a coup. And I couldn’t even call Moscow because the coup leaders cut the telephone lines. I finally got a call back to Diane, who was in San Francisco, via Istanbul, and I said hey, we signed the joint venture. She said don’t you know what’s going on? I said yeah, yeah, we’re watching it. I’ve got my BBC portable radio, I know, but we signed the JV. And she was really excited. And I made plans because if the coup leaders had succeeded, people like me would have been very unpopular because they were completely opposed to Western communication, and if I had to maybe escape I’ll escape via disguise as a Russian Orthodox priest. I’d already been making my plans.
Daniel Satinsky: You had plans to do that if necessary.
Joel Schatz: Yes, I had to. Because we didn’t know which way this coup thing was going to end up.
Daniel Satinsky: Right. Wow. So, before that coup happened—
Joel Schatz: There was no sign that that was going to happen. The night before we got on the train it was a peaceful Sunday night in Moscow, lovers walking on the street. It was totally calm and there was no clue.
Daniel Satinsky: And you had no sense of it from people that you were talking to or anything.
Joel Schatz: Nobody had a clue. Gorbachev didn’t have a clue, for god’s sakes. The people who turned on him were the people that he appointed.
Daniel Satinsky: So as far as you were concerned, up until that moment you would be dealing with the Soviet Union ad infinitum, into the future. You were going to be building for some reform of the Soviet Union, though.
Daniel Satinsky: We knew that communication was a necessary ingredient in stabilizing relations between East and West. We just in our gut we knew. The opposite would have been who knows what kind of miscalculation or disaster.
And oddly enough, looking at what’s going on today, we thought we solved the Cold War problem and the nuclear disaster problems 30 years ago, but today I think we’re facing more danger than we faced back then.
Daniel Satinsky: Yeah, I—I mean, that’s another conversation, but I think we’re in worse shape in terms of communication than when it was simply a technical problem. It’s a more deeper chasm we have in communication right now, unfortunately. And to do what you did then, something similar would have faced so much social opprobrium and distaste of dealing with Russians. I mean, you had, at least within the community you lived in, support for this idea that you were not only doing a business but building communications. Am I correct about that?
Joel Schatz: Yeah, that’s correct. And all of our relationships with our Russian partners were more like family than business relationships. We became very close friends. And oddly enough, the reason we ended up in first place, all of our competitors, like British Telecom or U.S. West all tried to do—like Gary Hart, for example, was a representative for U.S. West after he lost his thing on the Monkey Business boat. And I was having drinks with him at the National Hotel one night and he says how did you get so far in this country?
I said, well first of all, every time your company, U.S. West, sends people over to negotiate, they send different people. You don’t have people who form relationships. That was true with almost every Western company. They didn’t understand they needed to send the same people, they needed to live there, they needed to become trustworthy, they needed to become known quantities. So, he was taking notes on that—we need to send the same people. In fact, we never made promises we couldn’t keep. We made a point of being trusted. And it made all the difference.
Daniel Satinsky: Did you ever learn Russian or some bit of Russian?
Joel Schatz: No, I speak like Tarzan in Russian, like “ya hochu contract”, me want contract, and they would laugh. Because all of our business partners spoke English. Many of them were from scientific backgrounds and English was the second language.
And Brian Zimbler, because he came back, and he was traveling back and forth, because he was bilingual would be very helpful during negotiations. We did hire translators when Brian was not around. But language was never a problem. And those contracts were golden. There was never any expectation that they would ever be broken by either side. They were completely firm, based on trust.
Daniel Satinsky: And your competitors came and went. I mean, you really established something—
Joel Schatz: Yeah, let me tell you something else. When Anatoly Sobchak was the mayor of—the late Sobchak—was the mayor of Leningrad, he decided to hold a meeting of all the so-called competitors, because people were approaching him to do all kinds of telecom projects, and he said I want to find out which ones are real. So, he invited representatives of maybe a dozen or more Western technology companies who were all telecom.
But before that meeting I went out with my bilingual translator, Veronica Frintal, and I took photographs of our site in Leningrad. We had an actual teleport with microwave dishes, and we had a gigantic trailer at the bottom of the building which had backup battery generators, and it was a real teleport. And then I went around, and I took photographs of empty lots where all the competitors said they were building, they said we’re in process of building, and I had 8 x 10 photographs of these dozen empty lots. And when it came my turn Sobchak said and who are you, and I explained, and I showed photographs of our teleport on Ulitsa Gertzena, and I said and here are the photographs of my competitors’ projects, and I showed them one by one. And he said, “Meeting canceled.”
And then he asked me why do you think that your competitors are just lying? I said because they don’t have respect for your people. They think they can just play games. And they were—Ital Cable—they were big corporations that were doing that.
Daniel Satinsky: So, were they playing games, or were they premature, or was it that you got there first?
Joel Schatz: They were kind of jockeying with each other, trying to see who can maybe land some kind of a contract, and so they were making up stories to look good.
Daniel Satinsky: Well, what they would call marketing, right?
Joel Schatz: Yeah, I mean, I felt…because I felt such compassion for my Russian compatriots, I felt they that they should be ashamed of themselves for what they were doing. I felt angry at them for misbehaving so badly. For example, they promised the guys from the Astoria Hotel, they wanted to charge them $800,000 for a three-meter dish which was an inflated price times a thousand, because the hotel managers didn’t know anything about the technology. They were just trying to gouge.
Daniel Satinsky: It sounds like, from what you’re saying, it was a combination of your sensibilities, or your sensitivities, your relationships, and the fact that you had access to capital to actually implement these plans.
Joel Schatz: Right. I mean, it was never a problem. Soros would always write a check, in the early days. And then I really began to learn the rules of how to operate in the Soviet bureaucracy, and once I learned that there were no rules, which was the rule, I made up my own rules, and did my thing, and nobody ever stopped me. For example, we needed to dig a trench in front of the parliament building in Leningrad. I couldn’t get permission to do it. So, I rented jackhammers, a bunch of guys in uniforms, we got sawhorses with road cones, and we sealed off the street in front of the…and we dug up a trench. And I’m walking around with a clipboard, because when you’re walking around with a clipboard you obviously are an important person. [You’ve got] a clipboard, right?
The local police never asked what we were doing. We laid fiber, we covered the trench back over, and after we finished, I wrote a formal request to do that, thinking that maybe in five years some clerk might find it. I just did what I needed to do. And I did that for years. I was just making up my own rules.
Daniel Satinsky: And this was in the late Soviet period, this was ’89, ’90, somewhere?
Joel Schatz: This was, yeah, ’88 to ’90, yeah. And then a bank opened in Leningrad for foreign currency, a Russian owned bank. So, I went there and I said how do I make a deposit of dollars, and the girl showed me how to do that. And I said and how can I make a withdrawal? Oh, you can’t, you can only make deposits. Maybe in a year you can make withdrawals. I said let me ask you how many customers do you have? She said we don’t have any customers. Can you imagine why? You know, it was like oh my god.
Daniel Satinsky: What impact do you think your enterprise had on teaching Russians about international business and telecom business? Did you have an impact?
Joel Schatz: I think so because our Russian counterparts learned quickly about the technology, and they were learning about marketing, and they were learning about business structure, about making business plans. I mean, under the Soviet system they had, for example, in Moscow a surplus of skis and a shortage of windshield wiper blades because the central committee never asked the market what they needed, they just said this is what you should have. They just proclaimed. There was no feedback at all. People would ask me, when I would come back to the States, what’s it like in Russia. I said imagine the entire U.S. economy being run by the U.S. Postal Service. That’s the Soviet Union. Everyone was a civil servant, from cosmonauts, to engineers, to—
Daniel Satinsky: All true.
Joel Schatz: They were civil servants. And I made up a new definition of Murphy’s law when I was living there. In Russia Murphy’s law is nothing is possible, but occasionally something works.
Daniel Satinsky: That fits.
Joel Schatz: And, you know, my Russian colleagues, they agreed, that’s really accurate.
Joel Schatz: I was a little nonprofit called San Francisco Moscow Teleport out of San Francisco. And it was funded by two generous philanthropists from the Bay Area. And it was like, oh, by the way, when we signed the joint venture in ’89 with VNIIPAS, I had one more day to put $250,000 cash into a joint venture, and Soros had not wired the money yet, and they were going to cancel the JV. So, I called him, and I said where is the $250,000 that you promised? He said oh, it’s been earning interest, I’ll wire it today. [Laughs.]
And the money came into the Vneshtorgbank, the only Soviet bank. So, I went there and I said okay, here’s proof from a telex that the money’s been wired to your bank. And they said okay, it’s probably here, but we don’t know where it is. I said but it’s proof that you got it. He said I can see that we have it. I said I need 50,000 U.S. dollars right now. He said okay, I’ll give you $50,000. I said if you’re not doing it from my wire, where are you getting the money from? Oh, I take it from somebody else’s account. And he gave me $50,000.
You know, I can write 500 volumes of my experience in Russia, and nobody would believe it. Because almost everything that happened was bizarre.
Daniel Satinsky: Right, it was all seat of the pants. So, when you were operating—I don’t want to beat this point to death—but when you were operating it, doing the email, did you have an office in Moscow? Were you in some government agency? Where was your physical presence?
Joel Schatz: I was physically working out of the VNIIPAS building. They gave me a desk. It was a few blocks from Red Square.
Daniel Satinsky: And so, when people were your customers, and they paid you, they paid into an account in San Francisco. There was no business activity in—
Joel Schatz: The dollars were paid to us in California, and the rubles from the Russian people were paid in rubles to the VNIIPAS, who was our informal partner.
Daniel Satinsky: I see, so it was an informal arrangement until it became a joint venture.
Joel Schatz: It was informal because had we asked permission to do a business together, we would have been denied. So, we called it an experiment, because in principle experiments were very loosey-goosey. Nobody really cared if it was an experiment.
Daniel Satinsky: But then once after the joint venture law was passed you were able to form a joint venture.
Joel Schatz: It was a legal business, that’s correct. And we were 50-50 partners, and it grew very quickly. And the same was true with the Sovam Teleport. I signed that telephone contract in 1990 with the main trunk line control center of the Ministry of Communications, and that was a 50-50 joint venture. And then went to Leningrad that year and formed another telephone joint venture called Baltic Communications Ltd. My partner was GTE Spacenet—no, GTE Spacenet was Sovintel. My partner was a British company. I forget the name of the company now, but anyway.
Daniel Satinsky: BT?
Joel Schatz: It was Mercury Communications. And they were also a 50-50 joint venture with me. And then SFMT became absorbed into [Global] Telesystems Group. That company then grew into all kinds of telecom activities throughout Europe. And it eventually went bankrupt. But the Wall Street geniuses said we don’t like your Russia company. It might take down the GTS value. So, we formed this special new company called Golden Telecom, which was our Russia properties, with email and phones and everything, and then we separated it from GTS. When GTS went bankrupt, Golden Telecom was eventually sold for $4 billion to Vimpelcom. I mean, you can’t… you know, you can’t dream this stuff up, it’s so bizarre.
Daniel Satinsky: Right. But when you—and you had Russian partners throughout all this or not?
Joel Schatz: Absolutely.
Daniel Satinsky: And did they take an active part in the company? Are they passive? What role did they play?
Joel Schatz: They didn’t know what they were doing. For example, when we wanted to sign up all the major hotels as telephone customers, I would tell the hotel managers here’s the deal: we don’t want any money from you. We’re going to spend millions of dollars on satellite equipment, on telephones, digital phones. And they said something is not right here—why would you bring all this millions of dollars of stuff and not ask us for anything? I said what I’m asking for is permission to make money as a 50-50 partner with you on all telephone calls. We just make the investment in the equipment and the satellite feed. They just had the hardest time understanding that. There was just no sense of business.
Daniel Satinsky: And these were the—
Joel Schatz: But they all went for it.
Daniel Satinsky: And these were all the Russian hotels and Intourist hotels and so on?
Joel Schatz: Yeah, the major hotels, the National.
Daniel Satinsky: So how did—I mean, you made this transition from being an activist to being a manager. Did you have professional managers that you brought over that formed the company and—
Joel Schatz: Yeah. I brought all kinds of people over. I brought technical people. and I brought financial people. And money wasn’t a problem. When it came to GTS, when we first formed Global Telesystems Group, Soros put in a few million dollars of additional cash. And that business was just growing so big. In fact, before it fell into bankruptcy its market cap reached $6 billion. And then it went from 6 billion to zero.
Daniel Satinsky: And why? What caused that to happen?
Joel Schatz: What happened was we had a lot of Wall Street people on the board who didn’t know anything about the technology, and at that time international phone service was so lucrative that it stimulated a lot of competition. New companies went into business. The technology was becoming more efficient, and therefore it was becoming less expensive to operate, and we were expanding as a corporation mostly by selling debt. And then we didn’t have the revenue that we expected in order to repay the debt. That happened to quite a few telecom companies. So, we were being mismanaged by these Wall Street guys that didn’t know anything.
Daniel Satinsky: So, they were setting your kind of fiscal policy and expansion.
Joel Schatz: Yeah, but they were not even interested in looking at the technology. In fact, in one board meeting I said you know, eventually we’re going to have voice over the internet, and they just laughed at me. They just thought I was nuts.
Daniel Satinsky: But that was later. And Global Telesystems, did you bring the Russians along with you? Were they part of that?
Joel Schatz: No.
Daniel Satinsky: So Sovintel and Baltic Communications you had Russian—
Joel Schatz: That’s right. We were the co-owners.
Daniel Satinsky: Co-owners, okay. And so how did—and then you sold those into Global Telesystems, or how did that transition work?
Joel Schatz: We actually, let’s see. I don’t really remember the details, how that happened. I’ve got to think about that. We transferred those joint ventures into Golden Telecom. And that was an all Russian run company that was separated from GTS.
Daniel Satinsky: And who managed that one, Golden Telecom? People you brought in?
Joel Schatz: Soros brought a few people in. We had a guy named Jerry Thames who became the CEO—no, of Golden Telecom, no. Sorry, man, that was GTS. Golden Telecom—I don’t remember, because I left Russia in ’91 and I had a passive role. I stayed with GTS, and I don’t really remember who was running the company at that point.
And I called Soros one day in 1991 and I said, you know, I didn’t grow up to spend the rest of my life living in Russia building telephone companies, I want to go back to America, I have a new idea for a software company. And he says you mean you want to finally leave Russia? I said yes. Because we were living there for like nine years, mostly. He said you finally want to leave after nine years? Do you still have your sanity after nine years? I’ll never forget that conversation. George is a remarkably funny guy, and we just really liked each other.
Daniel Satinsky: I’m sure that makes a huge difference in what you were able to do together, right, that you had a personal bond.
Joel Schatz: Yeah. I could call him at any time for any reason, no problem.
Daniel Satinsky: And those nine years that you lived there, did you have an apartment in Moscow?
Joel Schatz: We had an apartment in Moscow very near the Arbat, and then in St. Petersburg—it was Leningrad back then—an apartment in a former KGB party house in a place called Kamenny* Island where we had a great kitchen staff, and it was just a beautiful facility. And we paid rubles for rent, so we paid nothing, basically. And we just, you know, just made everything work.
And Brian [Zimbler]—here’s one story about Brian he may not have told you. I needed him back in Leningrad. He was in, I think, Bulgaria—or no, he was in Yerevan, and he needed to get back to Leningrad quickly because I really needed him for a contract, but the only plane he could take was flying to Moscow. He got on the plane in Yerevan, and he mentioned to a guy sitting next to him that he was really upset because he needed to get to Leningrad, and the guy says give me a hundred dollars. He says why? He says give me a hundred-dollar bill. And the guy took his money and went into the cockpit and was talking to the captain, and as they took off the pilot said we’ve made a change of plans, we actually have to fly to Leningrad first.
We said to Brian you highjacked the plane? He says I didn’t look at it in those terms, but I think that’s what happened. And again, that’s just a normal little thing.
And when Gorbachev was arrested during that coup attempt, that three-day coup or four-day coup I was in Kazan signing a joint venture, and they announced the coup on the overnight train, August 31st—I’ll never forget that, ’91. As we were coming into Kazan, they said Comrade Gorbachev is ill—this is an announcement on the train. I had never heard an announcement. I didn’t even know they had a PA system on the train. They said but not to worry—this is the announcement—because tractor production is expected to increase today.
So, I knew we were in deep shit. I got there. We signed the contract. It was for a cellular system. And when I got back to the States, I was describing to the board people and Goldman Sachs guys about this contract, and he said how did you sign a contract in the middle of a coup? I said because in Russia they separated revolution from economics. They said, what?
It’s the truth. We signed a goddamn joint venture in the middle of a coup. And I couldn’t even call Moscow because the coup leaders cut the telephone lines. I finally got a call back to Diane, who was in San Francisco, via Istanbul, and I said hey, we signed the joint venture. She said don’t you know what’s going on? I said yeah, yeah, we’re watching it. I’ve got my BBC portable radio, I know, but we signed the JV. And she was really excited. And I made plans because if the coup leaders had succeeded, people like me would have been very unpopular because they were completely opposed to Western communication, and if I had to maybe escape I’ll escape via disguise as a Russian Orthodox priest. I’d already been making my plans.
Daniel Satinsky: You had plans to do that if necessary.
Joel Schatz: Yes, I had to. Because we didn’t know which way this coup thing was going to end up.
Daniel Satinsky: Right. Wow. So, before that coup happened—
Joel Schatz: There was no sign that that was going to happen. The night before we got on the train it was a peaceful Sunday night in Moscow, lovers walking on the street. It was totally calm and there was no clue.
Daniel Satinsky: And you had no sense of it from people that you were talking to or anything.
Joel Schatz: Nobody had a clue. Gorbachev didn’t have a clue, for god’s sakes. The people who turned on him were the people that he appointed.
Daniel Satinsky: So as far as you were concerned, up until that moment you would be dealing with the Soviet Union ad infinitum, into the future. You were going to be building for some reform of the Soviet Union, though.
Daniel Satinsky: We knew that communication was a necessary ingredient in stabilizing relations between East and West. We just in our gut we knew. The opposite would have been who knows what kind of miscalculation or disaster.
And oddly enough, looking at what’s going on today, we thought we solved the Cold War problem and the nuclear disaster problems 30 years ago, but today I think we’re facing more danger than we faced back then.
Daniel Satinsky: Yeah, I—I mean, that’s another conversation, but I think we’re in worse shape in terms of communication than when it was simply a technical problem. It’s a more deeper chasm we have in communication right now, unfortunately. And to do what you did then, something similar would have faced so much social opprobrium and distaste of dealing with Russians. I mean, you had, at least within the community you lived in, support for this idea that you were not only doing a business but building communications. Am I correct about that?
Joel Schatz: Yeah, that’s correct. And all of our relationships with our Russian partners were more like family than business relationships. We became very close friends. And oddly enough, the reason we ended up in first place, all of our competitors, like British Telecom or U.S. West all tried to do—like Gary Hart, for example, was a representative for U.S. West after he lost his thing on the Monkey Business boat. And I was having drinks with him at the National Hotel one night and he says how did you get so far in this country?
I said, well first of all, every time your company, U.S. West, sends people over to negotiate, they send different people. You don’t have people who form relationships. That was true with almost every Western company. They didn’t understand they needed to send the same people, they needed to live there, they needed to become trustworthy, they needed to become known quantities. So, he was taking notes on that—we need to send the same people. In fact, we never made promises we couldn’t keep. We made a point of being trusted. And it made all the difference.
Daniel Satinsky: Did you ever learn Russian or some bit of Russian?
Joel Schatz: No, I speak like Tarzan in Russian, like “ya hochu contract”, me want contract, and they would laugh. Because all of our business partners spoke English. Many of them were from scientific backgrounds and English was the second language.
And Brian Zimbler, because he came back, and he was traveling back and forth, because he was bilingual would be very helpful during negotiations. We did hire translators when Brian was not around. But language was never a problem. And those contracts were golden. There was never any expectation that they would ever be broken by either side. They were completely firm, based on trust.
Daniel Satinsky: And your competitors came and went. I mean, you really established something—
Joel Schatz: Yeah, let me tell you something else. When Anatoly Sobchak was the mayor of—the late Sobchak—was the mayor of Leningrad, he decided to hold a meeting of all the so-called competitors, because people were approaching him to do all kinds of telecom projects, and he said I want to find out which ones are real. So, he invited representatives of maybe a dozen or more Western technology companies who were all telecom.
But before that meeting I went out with my bilingual translator, Veronica Frintal, and I took photographs of our site in Leningrad. We had an actual teleport with microwave dishes, and we had a gigantic trailer at the bottom of the building which had backup battery generators, and it was a real teleport. And then I went around, and I took photographs of empty lots where all the competitors said they were building, they said we’re in process of building, and I had 8 x 10 photographs of these dozen empty lots. And when it came my turn Sobchak said and who are you, and I explained, and I showed photographs of our teleport on Ulitsa Gertzena, and I said and here are the photographs of my competitors’ projects, and I showed them one by one. And he said, “Meeting canceled.”
And then he asked me why do you think that your competitors are just lying? I said because they don’t have respect for your people. They think they can just play games. And they were—Ital Cable—they were big corporations that were doing that.
Daniel Satinsky: So, were they playing games, or were they premature, or was it that you got there first?
Joel Schatz: They were kind of jockeying with each other, trying to see who can maybe land some kind of a contract, and so they were making up stories to look good.
Daniel Satinsky: Well, what they would call marketing, right?
Joel Schatz: Yeah, I mean, I felt…because I felt such compassion for my Russian compatriots, I felt they that they should be ashamed of themselves for what they were doing. I felt angry at them for misbehaving so badly. For example, they promised the guys from the Astoria Hotel, they wanted to charge them $800,000 for a three-meter dish which was an inflated price times a thousand, because the hotel managers didn’t know anything about the technology. They were just trying to gouge.
Daniel Satinsky: It sounds like, from what you’re saying, it was a combination of your sensibilities, or your sensitivities, your relationships, and the fact that you had access to capital to actually implement these plans.
Joel Schatz: Right. I mean, it was never a problem. Soros would always write a check, in the early days. And then I really began to learn the rules of how to operate in the Soviet bureaucracy, and once I learned that there were no rules, which was the rule, I made up my own rules, and did my thing, and nobody ever stopped me. For example, we needed to dig a trench in front of the parliament building in Leningrad. I couldn’t get permission to do it. So, I rented jackhammers, a bunch of guys in uniforms, we got sawhorses with road cones, and we sealed off the street in front of the…and we dug up a trench. And I’m walking around with a clipboard, because when you’re walking around with a clipboard you obviously are an important person. [You’ve got] a clipboard, right?
The local police never asked what we were doing. We laid fiber, we covered the trench back over, and after we finished, I wrote a formal request to do that, thinking that maybe in five years some clerk might find it. I just did what I needed to do. And I did that for years. I was just making up my own rules.
Daniel Satinsky: And this was in the late Soviet period, this was ’89, ’90, somewhere?
Joel Schatz: This was, yeah, ’88 to ’90, yeah. And then a bank opened in Leningrad for foreign currency, a Russian owned bank. So, I went there and I said how do I make a deposit of dollars, and the girl showed me how to do that. And I said and how can I make a withdrawal? Oh, you can’t, you can only make deposits. Maybe in a year you can make withdrawals. I said let me ask you how many customers do you have? She said we don’t have any customers. Can you imagine why? You know, it was like oh my god.
Daniel Satinsky: What impact do you think your enterprise had on teaching Russians about international business and telecom business? Did you have an impact?
Joel Schatz: I think so because our Russian counterparts learned quickly about the technology, and they were learning about marketing, and they were learning about business structure, about making business plans. I mean, under the Soviet system they had, for example, in Moscow a surplus of skis and a shortage of windshield wiper blades because the central committee never asked the market what they needed, they just said this is what you should have. They just proclaimed. There was no feedback at all. People would ask me, when I would come back to the States, what’s it like in Russia. I said imagine the entire U.S. economy being run by the U.S. Postal Service. That’s the Soviet Union. Everyone was a civil servant, from cosmonauts, to engineers, to—
Daniel Satinsky: All true.
Joel Schatz: They were civil servants. And I made up a new definition of Murphy’s law when I was living there. In Russia Murphy’s law is nothing is possible, but occasionally something works.
Daniel Satinsky: That fits.
Joel Schatz: And, you know, my Russian colleagues, they agreed, that’s really accurate.
Daniel Satinsky: Yeah, that is accurate. And did you…were you doing market studies at that time? I mean, in terms of levels of demand or whatever? You just built it, it filled up?
Joel Schatz: We couldn’t produce equipment fast enough to put in offices and business centers. The word got out and we had no competition for years.
Daniel Satinsky: When do you think competition started to appear for you?
Joel Schatz: In the early ‘90s, when GTS pulled out of Russia, Golden Telecom was expanded rapidly, but it stimulated a lot of competition. Because the demand was so great.
Daniel Satinsky: Right. And did any of your former employees go and start businesses in telecom that you know of?
Joel Schatz: Some of them actually worked for telecom companies. My first Russian employee was 25 at the time, Andrei Kolesnikov. He, I guess about 20 years ago, became the director of domain names for the Russian internet, and now he is the director of the Internet of Things in Russia. And he’s doing really well.
I can also tell you that when we formed my software company back in the ‘90s and we were giving away some founder stock to people who really were helpful I gave some substantial quantities of founder’s stock to two of my former Russian employees who were so helpful in the early days I could never have done what I did without them, because they did stuff for me above and beyond the call of duty. And I gave them this founder’s stock, which turned out to be, when we went public, worth about a quarter of a million dollars U.S. each for these guys. And I felt so just happy to do that because... And that money stayed in the United States at Merrill Lynch, and they could access it through bank cards, whatever.
Daniel Satinsky: They must have been ecstatic with that.
Joel Schatz: And they did good things with it. But we employed so many people I don’t know what happened to most of them. At one point GTS, I know, employed several tens of thousands of people worldwide.
And even Golden Telecom at some point employed several thousand people. And I don’t know how they spun off or what they did. But they were all so grateful for not only the opportunity to work in those businesses, but they were happy to see—your customers were so happy with what they were doing for them. It was such a period of optimism then. It was like we felt in the ‘60s, when things were opening up. People were wearing bell bottom trousers. And the Russians were traveling for the first time, and there was a sense of openness and joy and just excitement. It was contagious. And telecom played a huge part in that.
Daniel Satinsky: If you can put yourself back in that time, after the fall of the Soviet Union, the Soviet Union is dissolved, Russia is getting on its feet, how did you expect things would develop in Russia? Did it turn out like you thought?
Joel Schatz: I thought it would be chaotic, but I didn’t think it would be as bad as it turned out to be. In fact, right after the—interesting you mention the fall of the Soviet Union—we had just signed the Baltic Communications JV, and then I got the Minister, because of Velikhov, to give me the license, and I went to the international—called the International Telecommunications Union in Geneva to get permission to exercise the license to begin commercial activity.
And they said to me we can’t do that because to be a signatory to the International Telecommunications Union you have to be a legitimate country—the Soviet Union no longer exists, and Russia has not yet been identified as a country. I said come on, this is Russia, there’s 300 million people—they have birds, and doorknobs, it’s a country. And they said well, we’ll make an exception, we’ll let cable and wireless sign for the Russian counterpart. They’ll sign both sides of the connect agreement to the satellite. But they actually said Russia doesn’t exist. This is berserk.
But to answer your question, no one could have foreseen. I mean, we knew that it would be chaotic. Suddenly salaries were disappearing from major Soviet research institutes, people were going to work even though they weren’t being paid. They went out of habit because they had nothing else to do, figuring the money would eventually come. So, we saw the signs of disintegration. But it was around that time that we moved back to California. But I could never have foreseen today what’s going on, and it’s just shameful.
The educated, talented people in Russia, can you imagine if they were encouraged to do role model stuff in terms of green energy and, you know, should they give permissions and incentives to really bright Russians to make a safer world how much better the world would be today? And instead, we’ve got this crook and his cronies.
Daniel Satinsky: True. Did you have an opinion about Yeltsin in those days? Did you have hopes for him or did you have any…?
Joel Schatz: It was well-known that he was a super alcoholic, and when he picked Putin, the KGB guy, we saw that as a sign that something is not right here. Although we didn’t expect dramatic changes. None of us, including our Russian friends, could have predicted where we are today, especially in terms of the internet. Because I don’t know how closely you’re following the restrictions that are going on, but it’s getting worse and worse. And face recognition in Moscow is really taking off through telecom in order to track people. So, the surveillance society is kind of beginning to mirror what’s going on in China.
Daniel Satinsky: Probably with Chinese technology, too, I would assume.
Joel Schatz: I don’t know. I just know that I feel… We’re in touch all the time by email and by phone, and also with FaceTime especially with our Russian friends, and they’re just so upset about what’s going on in Moscow right now, really furious.
Daniel Satinsky: Do you think that Yeltsin’s appointment of Putin was a turning point in this whole process?
Joel Schatz: It had to have been because he was drunk, and Putin was ambitious, and he had his nefarious connections, and you could see no good coming out of that. I mean, when Yeltsin came to the United States it was the Esalen people who brought him over, and he was pissing on the street in Washington. D.C. against trees. He was completely like just gonzo drunk.
Daniel Satinsky: I’ve heard some of those stories, yeah. I think one story I heard was that he was supposed to meet Reagan, and he was too drunk, and they put him back in the car and called the meeting off.
Daniel Satinsky: Jim Garrison from Esalen was the guy that was his tour guide around. Jim lived here in Mill Valley, and he came a couple years ago here, and he gave us a blow-by-blow description of that visit. It was just like horrifying. So, I don’t know. Russia has never had an easy time. But the other thing about Russian history, as you know, is throughout hundreds of years they’ve changed leadership on a dime. The czar and his wife and kids never expected to be murdered one day. Who expected any of this to happen?
Daniel Satinsky: Yeah. You’ve kept connections with people just socially.
Joel Schatz: Right.
Daniel Satinsky: No business after you moved back to the States in ’91?
Joel Schatz: No.
Daniel Satinsky: So, there were other managers of Golden Telecom? I mean, somebody was running it after you left, is that right?
Joel Schatz: I don’t know who they were. There was a guy from Holland, I think. They brought a foreigner in to run it because he had great management skills, but it was a Russian owned company.
Daniel Satinsky: Okay. And did you still have shares in Golden Telecom?
Joel Schatz: No.
Daniel Satinsky: You got bought out when the joint ventures were absorbed by Golden Telecom?
Joel Schatz: Yeah. My stock was in GTS, and although we were able to sell some stock, when it finally fell precipitously Wall Street put a freeze on the sale of stock, and we basically, in one day, lost millions of dollars, and were basically down to nothing. But around that time, I was raising money for my software company, and we managed to be bought by a company for…how much was it? For about $150 million. So, I went from millions of dollars to zero. And then within a period of two months went back up again.
And in fact, the day that we lost all the money I went to the beach with Diane, and I started doing a Zorba the Greek dance along the Pacific Coast in San Francisco, and she said, why are you dancing? I said because the universe is larger than a margin call.
And I told this to my finance advisor at Merrill Lynch, who’s been just a wonderful guy over the years, and he said I’ve never known anybody who went from nothing, to a lot, to nothing, to a lot like a yoyo like you did, and then you do a Zorba dance when—because the guy called me and said you no longer have any assets.
Daniel Satinsky: What a call, yeah.
Joel Schatz: You know, I’ll never forget that call. I was on Crissy Field in San Francisco when Tom called me and said I have very bad news for you. And then a few months later Interwoven bought us, and then they went bankrupt.
They were a $2 billion market cap company, and they folded after they bought our company. But their assets were sent to British Telecom, and British Telecom then sent their assets to Hewlett-Packard. So, Hewlett-Packard owns some of the…even some of the software ideas that I had in my software. I mean, it’s… I mean, if you draw a diagram of all this it would be hard to follow it.
Daniel Satinsky: Well, I did a little diagram for myself about Sovam Teleport, Sovintel, GTS just so that I would have an orientation, but yours is a much bigger diagram of the relationships of these companies.
Joel Schatz: And you know when I bought my first video telephone, the one that got lost in Istanbul and finally came to me, I tried to get it through Soviet customs and the woman says “shto eto,” what is this? And I said a video telephone. So, she looks in her book of all possible objects in the universe and she says, “It does not exist.” She’s pointing at this object, and she said it does not exist. [Laughs.] It got taken away and put in storage somewhere. And I called Velikhov, and he got the thing out for me.
And we had to bring alligator clips with us all the time because you couldn’t find any alligator clips in the entire Soviet Union. They had no Radio Shacks there or any kind of stores. In fact, when we were painting the Baltic Communication logo which Diane, my wife, did inside of the dish so you could see “BCL,” we couldn’t find any blue paint because there was not a single paint shop in the entire Soviet Union, like a retail paint store. So, we went with a Russian friend to a marina, and we found some guy painting his boat blue, and I gave the guy 10 U.S. dollars, and I said can I have a pint of this paint—which had some strange objects floating in it. So, he gave us his paint, and she used that paint to pain the logo on the dish.
And the dish, by the way, was on a building in Leningrad by a canal, by the palace where Rasputin was killed, and we could see the window where his half dead body was pulled out where he finally drowned in that canal. And that was where our teleport was, where BCL was.
Daniel Satinsky: Fantastic.
Joel Schatz: So, we have so many remembrances that were so bizarre. Like once I was with Joseph Goldin 1 2 3 4and we did a video teleconference from the VNIIPAS with Armand Hammer and Robert Gale, the doctor who was the bone marrow immunologist who was helping with the Chernobyl victims. So, we did this video telecom link, and after that link I’m walking in Red Square with Joseph, and he points to Lenin’s mausoleum, and he says I can’t believe we were just talking to a guy that used to have breakfast with that guy.
Daniel Satinsky: Yeah, true.
Joel Schatz: So, I don’t know if you know this, but Armand Hammer’s first business deal after the Bolshevik Revolution was to sell pencils because literacy became the big push of Lenin, and they didn’t have pencils. And I said great, I’m going to tell people I’m selling electronic pencils. And that’s a kind of cool marketing idea.
Daniel Satinsky: Absolutely. Wow. And was the Hammer Center, the Mezhdunarodnaya* Center built at that point?
Joel Schatz: It was built there. When we first went there it was built.
Daniel Satinsky: Okay. Did you have a dish there?
Joel Schatz: We did not. And I remember they had a very large mechanical rooster in the lobby they would chime every hour and wake up everybody. It was so obnoxious.
Daniel Satinsky: Yeah, it’s still there. I’ve seen it. Actually, I think they’re doing a major refurbishment of that hotel now, because it’s so old. Where did you get groceries? How did you eat while you were there? Did you have cook or how did that work?
Joel Schatz: We went to restaurants a lot. But also, we learned that a lot of restaurants closed for lunch to feed their workers. That was quite common, actually. And once I was at a restaurant and I wanted chicken, and they said chicken deficit, we don’t have chicken. And in said f*** you, and I walk into the kitchen, and I find chicken in the restaurant. And I said I want that chicken. They said okay, and they gave me chicken. I mean, at that point I was fearless.
Daniel Satinsky: How old were you then?
Joel Schatz: Well, let’s see. I was late 40s, early 50s in the period that we were living there. And then Russian grocery stores were impossible at that time. I mean, you’d stand in line to find something, and you’d stand in another line to write out a piece of paper, and then in another line to pay. I mean, I figured Russians were never going to revolution, they were too busy standing in lines.
Daniel Satinsky: Lines, yeah.
Joel Schatz: And then these foreign grocery stores came into Moscow and Leningrad, and you could buy anything, from Heinz ketchup to…I mean, it was just miraculous. That was just starting in the mid to late ‘80s.
Daniel Satinsky: Right, with Stockmann’s.
Joel Schatz: Stockmann’s came from Finland. And I remember when we were living in Leningrad there was not a Stockmann’s yet, but the American consulate was getting weekly deliveries of groceries. And I said I’ll make you guys a deal. I said to the consul general if you let me get groceries through the consulate, I’ll make you first priority to get a satellite dish back to Washington, D.C. Because I had the ability to do that. He said deal. So, we got groceries delivered every week and he got a satellite within a week, a satellite connection.
Daniel Satinsky: Wow. You imported the satellite equipment?
Joel Schatz: Yeah, and we had problems with COCOM because a lot of it was in violation of some antiquated restrictions on transfer of technology. And the Americans—so I would import that from Belgium, I wouldn’t import it from the United States because the Belgians didn’t care. And I was arguing with the Commerce Department about technology all the time. I said I want to bring a Cray computer into Moscow. They said you can’t do that. I said no, I’m not bringing a physical computer, I’ll leave that in Chicago. I want to have a satellite connection to the computer in Chicago and have a monitor and ability to actually access the machine, but the machine will stay here in America. They said well, we don’t have any regulations for that. Nobody’s ever talked about transferring technology without transferring a machine. They had no even way to think about doing anything like that.
And I did learn. I think I said to you the thing about the FBI when I was… A New York Times article. I think I sent you this thing.
Daniel Satinsky: I think you did, yeah.
Joel Schatz: When they called me to the Pentagon after they made the front page, the satellite connection. And they didn’t really understand anything about Russian telecom technology. They thought they understood. They didn’t know anything about what package switching protocols they were using. They thought they did. And I was teaching them there in the Pentagon how it worked. I’d never had a lag with anybody.
Daniel Satinsky: Why were they so poorly informed? I mean, that’s weird. It wasn’t important? They didn’t consider that?
Joel Schatz: They didn’t have adequate resources, you know, spies. They just didn’t…they didn’t know what the hell they were talking about.
Daniel Satinsky: Well, they probably weren’t too happy about you doing this, obviously.
Joel Schatz: Well, the FBI agents in San Francisco, every time I would return, I would get a call from Agent Barry Hatfield from the FBI, like the following morning after I would arrive, he’d call me. And I’d say hey Barry, how did you know I just got back? [Laughs.]
And he would laugh, and we would have lunch together. And both he and a guy named Rick Smith, who was the chief Soviet guy for the FBI here, loved what they were doing. They’re all college graduates. They’re smart guys. But the bureaucrats back in Washington that don’t really deal with the real world, they were just totally misinformed. We never had problems with the FBI. They would ask who did you meet with on this trip. I would tell them everything. I never held back. Then they did me a favor. I needed maps. You probably don’t know about this. I needed accurate maps of Moscow. Now what you may not know is what Russians published, they would move train stations and rivers. They were not where they were supposed to be.
And they didn’t have any scale on any of their maps. So, I said to Hatfield one day, you know, do you guys have an accurate map of Moscow? He says I have better than that. And he brought over, to scale, U-2 photographs of Moscow, which I still have, actually, in my home here as souvenirs.
Daniel Satinsky: Wow.
Joel Schatz: I brought those back to our Russian partners because we were trying to know where to put cell sites next to wherever. And I made copies of this U-2 photograph which they just loved, because for the first time they could actually see a map of Moscow that was accurate. And that was a gift from the FBI to me because they were helping me put cell sites up in Moscow, just as a favor for being honest with them.
Daniel Satinsky: Wow. You know, you would have been—I mean, today’s world you would have been arrested long before you—
Daniel Satinsky: I would be considered a foreign agent, first of all, because I was funded by foreign money. Sure.
Daniel Satinsky: Yeah, absolutely. Amazing.
Joel Schatz: We couldn’t produce equipment fast enough to put in offices and business centers. The word got out and we had no competition for years.
Daniel Satinsky: When do you think competition started to appear for you?
Joel Schatz: In the early ‘90s, when GTS pulled out of Russia, Golden Telecom was expanded rapidly, but it stimulated a lot of competition. Because the demand was so great.
Daniel Satinsky: Right. And did any of your former employees go and start businesses in telecom that you know of?
Joel Schatz: Some of them actually worked for telecom companies. My first Russian employee was 25 at the time, Andrei Kolesnikov. He, I guess about 20 years ago, became the director of domain names for the Russian internet, and now he is the director of the Internet of Things in Russia. And he’s doing really well.
I can also tell you that when we formed my software company back in the ‘90s and we were giving away some founder stock to people who really were helpful I gave some substantial quantities of founder’s stock to two of my former Russian employees who were so helpful in the early days I could never have done what I did without them, because they did stuff for me above and beyond the call of duty. And I gave them this founder’s stock, which turned out to be, when we went public, worth about a quarter of a million dollars U.S. each for these guys. And I felt so just happy to do that because... And that money stayed in the United States at Merrill Lynch, and they could access it through bank cards, whatever.
Daniel Satinsky: They must have been ecstatic with that.
Joel Schatz: And they did good things with it. But we employed so many people I don’t know what happened to most of them. At one point GTS, I know, employed several tens of thousands of people worldwide.
And even Golden Telecom at some point employed several thousand people. And I don’t know how they spun off or what they did. But they were all so grateful for not only the opportunity to work in those businesses, but they were happy to see—your customers were so happy with what they were doing for them. It was such a period of optimism then. It was like we felt in the ‘60s, when things were opening up. People were wearing bell bottom trousers. And the Russians were traveling for the first time, and there was a sense of openness and joy and just excitement. It was contagious. And telecom played a huge part in that.
Daniel Satinsky: If you can put yourself back in that time, after the fall of the Soviet Union, the Soviet Union is dissolved, Russia is getting on its feet, how did you expect things would develop in Russia? Did it turn out like you thought?
Joel Schatz: I thought it would be chaotic, but I didn’t think it would be as bad as it turned out to be. In fact, right after the—interesting you mention the fall of the Soviet Union—we had just signed the Baltic Communications JV, and then I got the Minister, because of Velikhov, to give me the license, and I went to the international—called the International Telecommunications Union in Geneva to get permission to exercise the license to begin commercial activity.
And they said to me we can’t do that because to be a signatory to the International Telecommunications Union you have to be a legitimate country—the Soviet Union no longer exists, and Russia has not yet been identified as a country. I said come on, this is Russia, there’s 300 million people—they have birds, and doorknobs, it’s a country. And they said well, we’ll make an exception, we’ll let cable and wireless sign for the Russian counterpart. They’ll sign both sides of the connect agreement to the satellite. But they actually said Russia doesn’t exist. This is berserk.
But to answer your question, no one could have foreseen. I mean, we knew that it would be chaotic. Suddenly salaries were disappearing from major Soviet research institutes, people were going to work even though they weren’t being paid. They went out of habit because they had nothing else to do, figuring the money would eventually come. So, we saw the signs of disintegration. But it was around that time that we moved back to California. But I could never have foreseen today what’s going on, and it’s just shameful.
The educated, talented people in Russia, can you imagine if they were encouraged to do role model stuff in terms of green energy and, you know, should they give permissions and incentives to really bright Russians to make a safer world how much better the world would be today? And instead, we’ve got this crook and his cronies.
Daniel Satinsky: True. Did you have an opinion about Yeltsin in those days? Did you have hopes for him or did you have any…?
Joel Schatz: It was well-known that he was a super alcoholic, and when he picked Putin, the KGB guy, we saw that as a sign that something is not right here. Although we didn’t expect dramatic changes. None of us, including our Russian friends, could have predicted where we are today, especially in terms of the internet. Because I don’t know how closely you’re following the restrictions that are going on, but it’s getting worse and worse. And face recognition in Moscow is really taking off through telecom in order to track people. So, the surveillance society is kind of beginning to mirror what’s going on in China.
Daniel Satinsky: Probably with Chinese technology, too, I would assume.
Joel Schatz: I don’t know. I just know that I feel… We’re in touch all the time by email and by phone, and also with FaceTime especially with our Russian friends, and they’re just so upset about what’s going on in Moscow right now, really furious.
Daniel Satinsky: Do you think that Yeltsin’s appointment of Putin was a turning point in this whole process?
Joel Schatz: It had to have been because he was drunk, and Putin was ambitious, and he had his nefarious connections, and you could see no good coming out of that. I mean, when Yeltsin came to the United States it was the Esalen people who brought him over, and he was pissing on the street in Washington. D.C. against trees. He was completely like just gonzo drunk.
Daniel Satinsky: I’ve heard some of those stories, yeah. I think one story I heard was that he was supposed to meet Reagan, and he was too drunk, and they put him back in the car and called the meeting off.
Daniel Satinsky: Jim Garrison from Esalen was the guy that was his tour guide around. Jim lived here in Mill Valley, and he came a couple years ago here, and he gave us a blow-by-blow description of that visit. It was just like horrifying. So, I don’t know. Russia has never had an easy time. But the other thing about Russian history, as you know, is throughout hundreds of years they’ve changed leadership on a dime. The czar and his wife and kids never expected to be murdered one day. Who expected any of this to happen?
Daniel Satinsky: Yeah. You’ve kept connections with people just socially.
Joel Schatz: Right.
Daniel Satinsky: No business after you moved back to the States in ’91?
Joel Schatz: No.
Daniel Satinsky: So, there were other managers of Golden Telecom? I mean, somebody was running it after you left, is that right?
Joel Schatz: I don’t know who they were. There was a guy from Holland, I think. They brought a foreigner in to run it because he had great management skills, but it was a Russian owned company.
Daniel Satinsky: Okay. And did you still have shares in Golden Telecom?
Joel Schatz: No.
Daniel Satinsky: You got bought out when the joint ventures were absorbed by Golden Telecom?
Joel Schatz: Yeah. My stock was in GTS, and although we were able to sell some stock, when it finally fell precipitously Wall Street put a freeze on the sale of stock, and we basically, in one day, lost millions of dollars, and were basically down to nothing. But around that time, I was raising money for my software company, and we managed to be bought by a company for…how much was it? For about $150 million. So, I went from millions of dollars to zero. And then within a period of two months went back up again.
And in fact, the day that we lost all the money I went to the beach with Diane, and I started doing a Zorba the Greek dance along the Pacific Coast in San Francisco, and she said, why are you dancing? I said because the universe is larger than a margin call.
And I told this to my finance advisor at Merrill Lynch, who’s been just a wonderful guy over the years, and he said I’ve never known anybody who went from nothing, to a lot, to nothing, to a lot like a yoyo like you did, and then you do a Zorba dance when—because the guy called me and said you no longer have any assets.
Daniel Satinsky: What a call, yeah.
Joel Schatz: You know, I’ll never forget that call. I was on Crissy Field in San Francisco when Tom called me and said I have very bad news for you. And then a few months later Interwoven bought us, and then they went bankrupt.
They were a $2 billion market cap company, and they folded after they bought our company. But their assets were sent to British Telecom, and British Telecom then sent their assets to Hewlett-Packard. So, Hewlett-Packard owns some of the…even some of the software ideas that I had in my software. I mean, it’s… I mean, if you draw a diagram of all this it would be hard to follow it.
Daniel Satinsky: Well, I did a little diagram for myself about Sovam Teleport, Sovintel, GTS just so that I would have an orientation, but yours is a much bigger diagram of the relationships of these companies.
Joel Schatz: And you know when I bought my first video telephone, the one that got lost in Istanbul and finally came to me, I tried to get it through Soviet customs and the woman says “shto eto,” what is this? And I said a video telephone. So, she looks in her book of all possible objects in the universe and she says, “It does not exist.” She’s pointing at this object, and she said it does not exist. [Laughs.] It got taken away and put in storage somewhere. And I called Velikhov, and he got the thing out for me.
And we had to bring alligator clips with us all the time because you couldn’t find any alligator clips in the entire Soviet Union. They had no Radio Shacks there or any kind of stores. In fact, when we were painting the Baltic Communication logo which Diane, my wife, did inside of the dish so you could see “BCL,” we couldn’t find any blue paint because there was not a single paint shop in the entire Soviet Union, like a retail paint store. So, we went with a Russian friend to a marina, and we found some guy painting his boat blue, and I gave the guy 10 U.S. dollars, and I said can I have a pint of this paint—which had some strange objects floating in it. So, he gave us his paint, and she used that paint to pain the logo on the dish.
And the dish, by the way, was on a building in Leningrad by a canal, by the palace where Rasputin was killed, and we could see the window where his half dead body was pulled out where he finally drowned in that canal. And that was where our teleport was, where BCL was.
Daniel Satinsky: Fantastic.
Joel Schatz: So, we have so many remembrances that were so bizarre. Like once I was with Joseph Goldin 1 2 3 4and we did a video teleconference from the VNIIPAS with Armand Hammer and Robert Gale, the doctor who was the bone marrow immunologist who was helping with the Chernobyl victims. So, we did this video telecom link, and after that link I’m walking in Red Square with Joseph, and he points to Lenin’s mausoleum, and he says I can’t believe we were just talking to a guy that used to have breakfast with that guy.
Daniel Satinsky: Yeah, true.
Joel Schatz: So, I don’t know if you know this, but Armand Hammer’s first business deal after the Bolshevik Revolution was to sell pencils because literacy became the big push of Lenin, and they didn’t have pencils. And I said great, I’m going to tell people I’m selling electronic pencils. And that’s a kind of cool marketing idea.
Daniel Satinsky: Absolutely. Wow. And was the Hammer Center, the Mezhdunarodnaya* Center built at that point?
Joel Schatz: It was built there. When we first went there it was built.
Daniel Satinsky: Okay. Did you have a dish there?
Joel Schatz: We did not. And I remember they had a very large mechanical rooster in the lobby they would chime every hour and wake up everybody. It was so obnoxious.
Daniel Satinsky: Yeah, it’s still there. I’ve seen it. Actually, I think they’re doing a major refurbishment of that hotel now, because it’s so old. Where did you get groceries? How did you eat while you were there? Did you have cook or how did that work?
Joel Schatz: We went to restaurants a lot. But also, we learned that a lot of restaurants closed for lunch to feed their workers. That was quite common, actually. And once I was at a restaurant and I wanted chicken, and they said chicken deficit, we don’t have chicken. And in said f*** you, and I walk into the kitchen, and I find chicken in the restaurant. And I said I want that chicken. They said okay, and they gave me chicken. I mean, at that point I was fearless.
Daniel Satinsky: How old were you then?
Joel Schatz: Well, let’s see. I was late 40s, early 50s in the period that we were living there. And then Russian grocery stores were impossible at that time. I mean, you’d stand in line to find something, and you’d stand in another line to write out a piece of paper, and then in another line to pay. I mean, I figured Russians were never going to revolution, they were too busy standing in lines.
Daniel Satinsky: Lines, yeah.
Joel Schatz: And then these foreign grocery stores came into Moscow and Leningrad, and you could buy anything, from Heinz ketchup to…I mean, it was just miraculous. That was just starting in the mid to late ‘80s.
Daniel Satinsky: Right, with Stockmann’s.
Joel Schatz: Stockmann’s came from Finland. And I remember when we were living in Leningrad there was not a Stockmann’s yet, but the American consulate was getting weekly deliveries of groceries. And I said I’ll make you guys a deal. I said to the consul general if you let me get groceries through the consulate, I’ll make you first priority to get a satellite dish back to Washington, D.C. Because I had the ability to do that. He said deal. So, we got groceries delivered every week and he got a satellite within a week, a satellite connection.
Daniel Satinsky: Wow. You imported the satellite equipment?
Joel Schatz: Yeah, and we had problems with COCOM because a lot of it was in violation of some antiquated restrictions on transfer of technology. And the Americans—so I would import that from Belgium, I wouldn’t import it from the United States because the Belgians didn’t care. And I was arguing with the Commerce Department about technology all the time. I said I want to bring a Cray computer into Moscow. They said you can’t do that. I said no, I’m not bringing a physical computer, I’ll leave that in Chicago. I want to have a satellite connection to the computer in Chicago and have a monitor and ability to actually access the machine, but the machine will stay here in America. They said well, we don’t have any regulations for that. Nobody’s ever talked about transferring technology without transferring a machine. They had no even way to think about doing anything like that.
And I did learn. I think I said to you the thing about the FBI when I was… A New York Times article. I think I sent you this thing.
Daniel Satinsky: I think you did, yeah.
Joel Schatz: When they called me to the Pentagon after they made the front page, the satellite connection. And they didn’t really understand anything about Russian telecom technology. They thought they understood. They didn’t know anything about what package switching protocols they were using. They thought they did. And I was teaching them there in the Pentagon how it worked. I’d never had a lag with anybody.
Daniel Satinsky: Why were they so poorly informed? I mean, that’s weird. It wasn’t important? They didn’t consider that?
Joel Schatz: They didn’t have adequate resources, you know, spies. They just didn’t…they didn’t know what the hell they were talking about.
Daniel Satinsky: Well, they probably weren’t too happy about you doing this, obviously.
Joel Schatz: Well, the FBI agents in San Francisco, every time I would return, I would get a call from Agent Barry Hatfield from the FBI, like the following morning after I would arrive, he’d call me. And I’d say hey Barry, how did you know I just got back? [Laughs.]
And he would laugh, and we would have lunch together. And both he and a guy named Rick Smith, who was the chief Soviet guy for the FBI here, loved what they were doing. They’re all college graduates. They’re smart guys. But the bureaucrats back in Washington that don’t really deal with the real world, they were just totally misinformed. We never had problems with the FBI. They would ask who did you meet with on this trip. I would tell them everything. I never held back. Then they did me a favor. I needed maps. You probably don’t know about this. I needed accurate maps of Moscow. Now what you may not know is what Russians published, they would move train stations and rivers. They were not where they were supposed to be.
And they didn’t have any scale on any of their maps. So, I said to Hatfield one day, you know, do you guys have an accurate map of Moscow? He says I have better than that. And he brought over, to scale, U-2 photographs of Moscow, which I still have, actually, in my home here as souvenirs.
Daniel Satinsky: Wow.
Joel Schatz: I brought those back to our Russian partners because we were trying to know where to put cell sites next to wherever. And I made copies of this U-2 photograph which they just loved, because for the first time they could actually see a map of Moscow that was accurate. And that was a gift from the FBI to me because they were helping me put cell sites up in Moscow, just as a favor for being honest with them.
Daniel Satinsky: Wow. You know, you would have been—I mean, today’s world you would have been arrested long before you—
Daniel Satinsky: I would be considered a foreign agent, first of all, because I was funded by foreign money. Sure.
Daniel Satinsky: Yeah, absolutely. Amazing.
Joel Schatz: The only time I felt fear was the time of the coup, when we didn’t know which way it would turn out, and I was really very nervous about that. I took a photograph of myself in a mirror of my hotel room in Kazan thinking it might be the last picture of me before I was dead. I felt that much fear. And my Soviet friends really felt the fear. They were just terrified at what could happen.
Daniel Satinsky: And you had an actual plan how to get from Kazan to Istanbul.
Joel Schatz: Istanbul, yeah. Because I’m a survivor. And during that coup the Sovintel office, I guess it was when—well, no—it was when Yeltsin was under siege in the White House there in Moscow that there were bullets flying around the Ostankino Tower, and our Sovintel headquarters, our technical building, was a block from the Ostankino Tower, and there were bullets flying around our joint venture.
Daniel Satinsky: Were you in the building at that time?
Joel Schatz: I wasn’t there. You know also, I’ll tell you just again another quick Russian story. I flew back from—oh, god—I flew back from Kazan when the coup guys were being arrested, and I was on a plane flying to Leningrad where there was, in the cabin, a dog and a pig, loose. And the toilet compressor at the back of the cabin exploded and put all this shit and piss into the aisles, and the dog and the pig were running back and forth spreading it everywhere. This was on the flight back to Leningrad, an Aeroflot plane.
Daniel Satinsky: Oh, my god.
Joel Schatz: So, I got back and I’m sitting with my kitchen staff and my other staff and we’re watching this funeral on Soviet TV of the three young men who died during that coup.
Daniel Satinsky: During that coup, yeah.
Joel Schatz: And Russians always had a habit of listening to the radio while they were watching TV. And they had the radio playing, Radio Evropa Plus, Radio Europe Plus. And as the coffins were being lowered into the ground comes onto the radio John Lennon singing “Imagine.”
I wrote this up and I sent this back to Diane and to Soros, said look what happened to me after this coup. That actually was a real experience to me. I could not believe it. I mean, what is the nature of coincidence? I mean, I’ve had a lot of really inexplicable things happen in my life, but that was really unbelievable.
Daniel Satinsky: Yeah, that is unbelievable. I’ll tell you just one quick personal story about the dog and the Aeroflot. In 1990 I flew from Moscow to Vladivostok, nine-hour flight. We got on the plane. Right behind us was a lady with a German Shepherd. In the row in front of us she gets on and the dog is in one of those seats, his paws overlooking down at me with dog breath and the whole thing. And then during the flight he slept in the aisle, and in order to get to the bathroom you had to kind of leverage yourself over the seats to get into the bathroom. But I’ve never…I mean, it was an amazing… But in that period of time that wasn’t so crazy.
Joel Schatz: Diane and I were flying to Bulgaria once on an Aeroflot plane and an old babushka* was sitting next to us, and she took down the little tray and pulled out a big piece of salami and a big knife, and she’s cutting and she’s making a meal. She eats her meal, and she goes to put the tray back up and she couldn’t figure out how to turn the little knob at the top. And she looked at us and she grabbed the tray, and she pulled it off the seat and threw it on the floor.
Daniel Satinsky: Wow.
Joel Schatz: We said I hope the engines are better attached than the tray.
And one more quick Aeroflot flight. I’m flying back to Kazan and the cabin was filled with mosquitoes. In any event, they’re going to serve something. So, we all take our trays down. They only have water. They put down paper cups that were so thin that once you poured the water in you couldn’t pick it up because it would all spill out, so you had to bend over and lick it. So, everybody on the flight was bent over licking like cats, and they came walking around with these flimsy paper cups.
Daniel Satinsky: Unbelievable.
Joel Schatz: And we just adjusted to all of this stuff. And somehow, we made all these companies work.
Daniel Satinsky: Yeah, well, you adjusted, and you didn’t leave. And there were so many people who I—I mean, they would see these things and they’d say just get me out of here. Just get me out of here.
Joel Schatz: I met many Western businesspeople that said we don’t know how you have the stamina to put up with this. I said because it’s fun. I mean, it was no longer a hassle. It was fascinating, that everything was so broken could somehow be managed to get rejiggered to make something happen.
And we also felt our mission. We felt very clearly about our mission and that it was really helpful. And the very fact that we ended up being financially rewarded was a shock. We never thought in our whole life we would ever have any measure of wealth. We never had. And that was not in any way in our mind when we started to do this work. I didn’t think myself capable of doing anything like that.
Daniel Satinsky: You were always a technology person, though.
Joel Schatz: Not really. I would hire people. I had the ideas of what I wanted to see happen and I would hire the people to do it for me. I mean, the software company, I’ve never written a line of code in my life. I just knew what I wanted the software to do. I mean, I’m a vision guy, sort of. And no, I didn’t know anything about satellites or telecommunications at all.
Daniel Satinsky: But you had the vision and the drive to bring it to fruition.
Joel Schatz: That was it, yeah. And I would find people that would be eager to help.
Daniel Satinsky: Yeah, interesting. And so, if you were to say what was the most important lesson you learned—or no, let me put it differently. In terms of the book that I’m preparing, what is the most important thing you would like to convey from your experience to people who would read a book about that period?
Joel Schatz: Well, there’s a couple of things. First of all, the recognition that it’s possible for a single individual to come up with a powerful idea, somehow assemble the resources, and bring it to life. Oh, and that brings me to another thing. I brought to George Soros’s apartment in New York on 5th Avenue once Boris Chirkov, who was the director of the Soviet—he ran the hotline to the White House from the Kremlin, and he was a really important telecommunications guy.
And he said to Soros—because Soros says I’m so impressed with your ability to describe things—your vocabulary, your delivery is so eloquent. And he laughed and said well, it’s true for most—most Soviets, they’ve developed an incredible ability to describe things beautifully because for the most part they never have the ability to make it happen, so they’re judged on their ability to express using language. I thought that was a really interesting insight.
Daniel Satinsky: Yeah, it is.
Joel Schatz: But back to your question, to add to the fact that any individual is capable of coming into the most bizarre environment, but with an idea that’s worthy, it’s possible to just find the resources, solve problems as you go, and make a big difference. And it makes an even bigger difference when my motivation was to contribute to the reduction in the prospects of global annihilation. I mean, talk about a motivation. There were so many people in the citizen diplomacy movement who were traveling to Russia at that time all for the same reason. They wanted to just lower the temperature.
On our first trip to the Soviet Union in ’83 you may remember the Soviets accidentally shot down an airliner over Korea.
Daniel Satinsky: Yeah, 007.
Joel Schatz: Double O Seven. And on that was a congressman named McDonald. Funny I remember his name. And for a few minutes the wrong information went to the Kremlin saying it wasn’t a member of Congress, but dozens of members of U.S. Congress, and they went into red alert thinking they may need to initiate the first strike. That happened on my first trip. And then that story was corrected, and the temperature then dropped again, and they realized it was a bad incident, but there was a miscommunication somewhere in the system. That was—my very first trip we almost were in the middle of, I don’t know, a conflagration.
Daniel Satinsky: So, you considered yourself part of this whole citizen diplomacy movement at that time?
Joel Schatz: Yeah. I don’t know what we…we didn’t really… I mean, we weren’t in… It was not an organized movement. We were all separate people who, for various reasons, were—I mean, our friends Kim [Spencer] and Evelyn [Messenger] were doing satellite connections. David Hoffman was developing Internews, and he was spending a lot of time in Russia. The Esalen people were working on a variety of projects. And I met a guy from Germany, Micky Raymond, who was doing some incredible projects with the Russians. There was such a variety of activity going on.
Daniel Satinsky: Did you meet Sharon Tennyson? Was she part of this?
Joel Schatz: Sure. She was part of the San Francisco base group, yeah. Yeah, there was that building that our friend Henry Dakin made kind of the headquarters for so many people. And Henry was just a dear guy who, you know, I’ll send you a five-minute video of my eulogy at Henry’s memorial because it goes into the whole Russia thing.
Daniel Satinsky: Okay. Yeah, that would be fantastic.
Joel Schatz: Yeah, it was a brilliant—I mean, I was really inspired because I loved Henry. Henry had Asperger’s and was a Harvard graduate. He inherited all this money from the Dakin Toy Company, which was the largest stuffed animal company in the world. His mother and father and a bunch of cousins were killed in a plane crash and Henry and his sisters inherited this money, and they didn’t know what to do with it, and he became this philanthropist. The variety of things that he funded was just mind-boggling. But he was especially interested in the Soviet dilemma. I explain in the eulogy how we met him and what he did.
And Sharon was part of that group, and Mark Graham, who had a small telecom company and is now director of the Wayback Machine at the Internet Archives in San Francisco. In fact, I just spoke with Mark yesterday. There were just a huge number of people that [Henry] made office space available for everybody. And he put a dish on the roof, a satellite dish aimed at the Soviet Molnya* satellite, and he downloaded live Russian programming every day and made videotapes and would bring them over to the Soviet consulate in San Francisco as a gift so they could watch home television. And as a result, they gave us first priority in getting visas any time we wanted to go. And so…but that was such an optimistic time.
Daniel Satinsky: Yeah, very optimistic.
Joel Schatz: [He] felt just nothing but rainbows and good news ahead. So many people were spending more and more time, not so much the businesspeople, but the citizen diplomats, just trying to make projects, two-way communications, school children talking to each other. I had a link from the Manezh right next to the Kremlin, a video phone link with school kids from Berkeley and Moscow. And a guy from the Ministry of Foreign Affairs said what will these first graders say to each other. I said excuse me; you’re seriously telling me you’re concerned about what first grade children are going to say to each other? Please, back off. [Laughs.]
One final story. We smuggled in a copy machine from Helsinki without declaring it, by train. It was Henry Dakin who actually helped me bring that in. And I didn’t declare it at customs, and it was in a box, and I just said it’s nothing. And so, we were using this copy machine in our office in Moscow and letting Joseph use it, and so many Russians were using it.
And one day a KGB officer came by. They found out about our copy machine. He was wearing a black leather coat. He was the vintage KGB guy. And he says, you know, it’s impossible, you need… And meanwhile our office manager, Galina, was an attractive woman, and she realized it was a problem, so she started kind of flirting with him a little bit to distract him. And he says besides, you need it to be behind a steel door.
And I called one of our office guys—Valery, bring me that aluminum Reynolds Wrap roll over here and some pushpins. And I took a closet door, and we covered it with aluminum foil, and we put the copy machine in the closet behind this. I said well, it’s not a steel door. And meanwhile Galina is still kind of flirting with the guy. And he said one of the most popular Russian phrases I heard all the time. I said would this be okay? And he said, “In principle it’s possible.” In principle it works. And he left, and we kept the copy machine. And behind a door covered with aluminum foil. [Laughs.]
Daniel Satinsky: Yeah. V principe, he said. V principe. It’s okay in principle.
Joel Schatz: In principle, that’s right. I heard that so often.
Daniel Satinsky: Yeah, I did, too.
Joel Schatz: And right opposite the VNIIPAS, opposite their front door was a very small Russian Orthodox church. And we had never been—in my first trip with Diane to the VNIIPAS, we went into that church and there were three events taking place in the same open room. There was a baby being baptized, there was a young couple being married, and there was a dead babushka on a slab.
Daniel Satinsky: Wow, the whole life cycle.
Joel Schatz: A funeral, a baptism and a marriage all taking place with people lighting candles and Russian priests singing with deep voice, all, the whole cycle of life taking place in one—we just stood there flabbergasted. It seemed so, in a way, normal to us in the big picture of the mysteries of life.
So, I guess another thing working in Russia was that it was so different in cultural experience than anything we had grown up with that we were just fascinated that this was a whole way of living that we just were completely unaware of.
Daniel Satinsky: Yeah.
Joel Schatz: And we discovered having late night conversations with Russian friends, we would discuss subjects that I hadn’t discussed since college, when your mind was like so curious, like what is the real nature of music. We would have talks like this. And it was like I would never have talks like that in San Francisco.
Daniel Satinsky: Yes. I know what you mean. I do know what you mean. And as a result, you have the friendships that are deep and anchored in both emotions and intellect with those folks.
Joel Schatz: That’s right. I mean, the Russian people were thinking at least as big, or bigger, than Americans. They’re really talented people. Their minds were incredible. I mean, this guy Velikhov was just incredible. You should check his, if you haven’t already, check his Wikipedia page. Look at his background.
Daniel Satinsky: I will.
Joel Schatz: He’s still alive. He had a stroke a few years ago. And I could call—when I was back in America I had to call him a couple of times. I would wake him up in the middle of the night, and instead of being upset with me for waking him up he was so happy to hear from me. You know, John Scully called me from an airplane. He was flying over to Moscow with a group of Apple people to have a major proposal. Basically, they wanted to do the operating system in Cyrillic. And he called me from the airplane phone saying I have a big favor to ask you—each of us on this flight assumed that someone else had arranged visas; we have no visas to come into Moscow.
Daniel Satinsky: Oh, my goodness.
Joel Schatz: What can you do for us? I said, well, I’ll call Velikhov and I’m sure he’ll solve the problem. So, I called Velikhov. He said they forgot their visas? Okay, you got their names? Okay, I gave him the names. He met them at the airport, went through customs, and went to actually where they were getting off the plane, handed them their visas, and then they all went back in through customs.
Daniel Satinsky: Incredible. But yes, those were the things that happened.
Joel Schatz: And Scully once said to me, you know, every time I log onto SFMT email to communicate with Moscow I never take for granted what it must have taken for you to make this possible.
Daniel Satinsky: Yeah. That’s to his credit.
Joel Schatz: You know, I was really impressed with that guy.
Daniel Satinsky: Did they get the deal done?
Joel Schatz: No. Although iPhones are the most popular devices all over the world.
Daniel Satinsky: Absolutely. So, the point that you made when I asked you about this is the impact that an entrepreneurial individual can make in the right circumstances. Is that a summary of what you would say is the most important thing?
Joel Schatz: A lot of it is, I mean, I don’t know how many definitions of the word luck you can make, but our timing, in hindsight, turned out to be perfect, although when I was involved in the activity, I wasn’t even aware. Oddly as it seems I wasn’t even aware of how lucky I was that everything was—I was at these intersections, and I would meet this guy, and he would send me to here. It just seemed like it was just unfolding like a dance. And as I look back on it, had I tried to do these ten years earlier it would have been impossible. And I don’t think I could have survived the corruption and the competition in the ’90s.
Soros told me in no uncertain terms, because he was the money guy, don’t do anything illegal because of the Foreign Corrupt Practices Act. Because he was the money, they would target him. I would have been his agent doing something illegal. The only bribes I ever made were giving cartons of Marlboros to a really busy restaurant to get a table that was unavailable. I would do little things like that. But never, ever do a bribe. And people would make hints. We would say no.
But the power of the individual, I mean, it’s… I guess Margaret Mead had a famous quote about that. It’s the only way anything has ever evolved in human society, is the power of individual initiatives. It’s really true.
Daniel Satinsky: But in the right circumstance.
Joel Schatz: And being open to network, because you never know. To me one of the great mysteries is who you’re sitting next to on an airplane that may give you a tip about something, and you either act on it or you don’t, and that changes the next level of options you have the next day. And that’s true all the time. You meet, and you decide I’m going to go with this guy or that guy. And who would believe trying to help a six-year-old child prodigy pianist would end up introducing me to a guy like George Soros and he would become the chief investor of the enterprise?
Daniel Satinsky: Yes, right. Totally…it’s not serendipity in a way, but I guess it is.
Joel Schatz: Yeah. I mean, we think about that a lot because we’ve had experiences in our life that are totally inexplicable in normal, rational terms.
Daniel Satinsky: So, and Russians would say it was fate, sudba.
Joel Schatz: Diane and I were talking to one of our dearest friends who passed a few years ago, Richard [Kaplan]. He was in Florida, and we were in California, and they have an apartment in New York. I said we’re flying to Moscow tomorrow, but we’ll be coming back to New York in about a month, where will you guys be? He said we’re flying to Rome, but we hope that we can connect back in New York, and we said okay. So, we flew to Frankfurt to change planes and I went to a photo shop to buy film. This was the very next day. And I get a tap on the shoulder and it’s Richard.
Now the day before I was in California. He was in Florida. He was on his way to Rome. We were on our way to Moscow. Had I gotten to that photo shop ten minutes earlier or later, whatever, we wouldn’t have… But what the hell is that? I mean, I love it.
And in our Russian experience, we had so much of that happen in Russia where we just found ourselves being introduced to certain people and…
Daniel Satinsky: Well, you had a certain advantage of, if you will, the first mover, being there at a time where they were looking for contacts, you were trustworthy, there weren’t so many other people to talk to.
Joel Schatz: And also, the big corporations seemed clueless. Like after we had a press conference when we announced Sovintel, the big telephone joint venture, a manager of AT&T came over to me and said how did you know there was an opportunity here? And I said excuse me, 300 million Russians and only 33 international trunk lines and you don’t see an opportunity? He said well, we weren’t thinking it was even possible to even try to do anything. And that was a very honest statement. Corporately they thought that was a dead end. It would have been an impossible use of their resources to try to come up with a digital international phone system. And it turned out to be easy.
Daniel Satinsky: [Laughs.] Yeah, but it probably would have been a lot harder for them than for you.
Joel Schatz: That’s right. I told you earlier, because they would always send different people, and they would bog down and, you know, inertia.
Daniel Satinsky: Yeah. Well, it’s a fantastic episode and era, and you were a great pioneer for things that…a real, real change in ability to communicate and relations between the two countries so, I mean, it’s fantastic. It’s a great story.
Daniel Satinsky: And you had an actual plan how to get from Kazan to Istanbul.
Joel Schatz: Istanbul, yeah. Because I’m a survivor. And during that coup the Sovintel office, I guess it was when—well, no—it was when Yeltsin was under siege in the White House there in Moscow that there were bullets flying around the Ostankino Tower, and our Sovintel headquarters, our technical building, was a block from the Ostankino Tower, and there were bullets flying around our joint venture.
Daniel Satinsky: Were you in the building at that time?
Joel Schatz: I wasn’t there. You know also, I’ll tell you just again another quick Russian story. I flew back from—oh, god—I flew back from Kazan when the coup guys were being arrested, and I was on a plane flying to Leningrad where there was, in the cabin, a dog and a pig, loose. And the toilet compressor at the back of the cabin exploded and put all this shit and piss into the aisles, and the dog and the pig were running back and forth spreading it everywhere. This was on the flight back to Leningrad, an Aeroflot plane.
Daniel Satinsky: Oh, my god.
Joel Schatz: So, I got back and I’m sitting with my kitchen staff and my other staff and we’re watching this funeral on Soviet TV of the three young men who died during that coup.
Daniel Satinsky: During that coup, yeah.
Joel Schatz: And Russians always had a habit of listening to the radio while they were watching TV. And they had the radio playing, Radio Evropa Plus, Radio Europe Plus. And as the coffins were being lowered into the ground comes onto the radio John Lennon singing “Imagine.”
I wrote this up and I sent this back to Diane and to Soros, said look what happened to me after this coup. That actually was a real experience to me. I could not believe it. I mean, what is the nature of coincidence? I mean, I’ve had a lot of really inexplicable things happen in my life, but that was really unbelievable.
Daniel Satinsky: Yeah, that is unbelievable. I’ll tell you just one quick personal story about the dog and the Aeroflot. In 1990 I flew from Moscow to Vladivostok, nine-hour flight. We got on the plane. Right behind us was a lady with a German Shepherd. In the row in front of us she gets on and the dog is in one of those seats, his paws overlooking down at me with dog breath and the whole thing. And then during the flight he slept in the aisle, and in order to get to the bathroom you had to kind of leverage yourself over the seats to get into the bathroom. But I’ve never…I mean, it was an amazing… But in that period of time that wasn’t so crazy.
Joel Schatz: Diane and I were flying to Bulgaria once on an Aeroflot plane and an old babushka* was sitting next to us, and she took down the little tray and pulled out a big piece of salami and a big knife, and she’s cutting and she’s making a meal. She eats her meal, and she goes to put the tray back up and she couldn’t figure out how to turn the little knob at the top. And she looked at us and she grabbed the tray, and she pulled it off the seat and threw it on the floor.
Daniel Satinsky: Wow.
Joel Schatz: We said I hope the engines are better attached than the tray.
And one more quick Aeroflot flight. I’m flying back to Kazan and the cabin was filled with mosquitoes. In any event, they’re going to serve something. So, we all take our trays down. They only have water. They put down paper cups that were so thin that once you poured the water in you couldn’t pick it up because it would all spill out, so you had to bend over and lick it. So, everybody on the flight was bent over licking like cats, and they came walking around with these flimsy paper cups.
Daniel Satinsky: Unbelievable.
Joel Schatz: And we just adjusted to all of this stuff. And somehow, we made all these companies work.
Daniel Satinsky: Yeah, well, you adjusted, and you didn’t leave. And there were so many people who I—I mean, they would see these things and they’d say just get me out of here. Just get me out of here.
Joel Schatz: I met many Western businesspeople that said we don’t know how you have the stamina to put up with this. I said because it’s fun. I mean, it was no longer a hassle. It was fascinating, that everything was so broken could somehow be managed to get rejiggered to make something happen.
And we also felt our mission. We felt very clearly about our mission and that it was really helpful. And the very fact that we ended up being financially rewarded was a shock. We never thought in our whole life we would ever have any measure of wealth. We never had. And that was not in any way in our mind when we started to do this work. I didn’t think myself capable of doing anything like that.
Daniel Satinsky: You were always a technology person, though.
Joel Schatz: Not really. I would hire people. I had the ideas of what I wanted to see happen and I would hire the people to do it for me. I mean, the software company, I’ve never written a line of code in my life. I just knew what I wanted the software to do. I mean, I’m a vision guy, sort of. And no, I didn’t know anything about satellites or telecommunications at all.
Daniel Satinsky: But you had the vision and the drive to bring it to fruition.
Joel Schatz: That was it, yeah. And I would find people that would be eager to help.
Daniel Satinsky: Yeah, interesting. And so, if you were to say what was the most important lesson you learned—or no, let me put it differently. In terms of the book that I’m preparing, what is the most important thing you would like to convey from your experience to people who would read a book about that period?
Joel Schatz: Well, there’s a couple of things. First of all, the recognition that it’s possible for a single individual to come up with a powerful idea, somehow assemble the resources, and bring it to life. Oh, and that brings me to another thing. I brought to George Soros’s apartment in New York on 5th Avenue once Boris Chirkov, who was the director of the Soviet—he ran the hotline to the White House from the Kremlin, and he was a really important telecommunications guy.
And he said to Soros—because Soros says I’m so impressed with your ability to describe things—your vocabulary, your delivery is so eloquent. And he laughed and said well, it’s true for most—most Soviets, they’ve developed an incredible ability to describe things beautifully because for the most part they never have the ability to make it happen, so they’re judged on their ability to express using language. I thought that was a really interesting insight.
Daniel Satinsky: Yeah, it is.
Joel Schatz: But back to your question, to add to the fact that any individual is capable of coming into the most bizarre environment, but with an idea that’s worthy, it’s possible to just find the resources, solve problems as you go, and make a big difference. And it makes an even bigger difference when my motivation was to contribute to the reduction in the prospects of global annihilation. I mean, talk about a motivation. There were so many people in the citizen diplomacy movement who were traveling to Russia at that time all for the same reason. They wanted to just lower the temperature.
On our first trip to the Soviet Union in ’83 you may remember the Soviets accidentally shot down an airliner over Korea.
Daniel Satinsky: Yeah, 007.
Joel Schatz: Double O Seven. And on that was a congressman named McDonald. Funny I remember his name. And for a few minutes the wrong information went to the Kremlin saying it wasn’t a member of Congress, but dozens of members of U.S. Congress, and they went into red alert thinking they may need to initiate the first strike. That happened on my first trip. And then that story was corrected, and the temperature then dropped again, and they realized it was a bad incident, but there was a miscommunication somewhere in the system. That was—my very first trip we almost were in the middle of, I don’t know, a conflagration.
Daniel Satinsky: So, you considered yourself part of this whole citizen diplomacy movement at that time?
Joel Schatz: Yeah. I don’t know what we…we didn’t really… I mean, we weren’t in… It was not an organized movement. We were all separate people who, for various reasons, were—I mean, our friends Kim [Spencer] and Evelyn [Messenger] were doing satellite connections. David Hoffman was developing Internews, and he was spending a lot of time in Russia. The Esalen people were working on a variety of projects. And I met a guy from Germany, Micky Raymond, who was doing some incredible projects with the Russians. There was such a variety of activity going on.
Daniel Satinsky: Did you meet Sharon Tennyson? Was she part of this?
Joel Schatz: Sure. She was part of the San Francisco base group, yeah. Yeah, there was that building that our friend Henry Dakin made kind of the headquarters for so many people. And Henry was just a dear guy who, you know, I’ll send you a five-minute video of my eulogy at Henry’s memorial because it goes into the whole Russia thing.
Daniel Satinsky: Okay. Yeah, that would be fantastic.
Joel Schatz: Yeah, it was a brilliant—I mean, I was really inspired because I loved Henry. Henry had Asperger’s and was a Harvard graduate. He inherited all this money from the Dakin Toy Company, which was the largest stuffed animal company in the world. His mother and father and a bunch of cousins were killed in a plane crash and Henry and his sisters inherited this money, and they didn’t know what to do with it, and he became this philanthropist. The variety of things that he funded was just mind-boggling. But he was especially interested in the Soviet dilemma. I explain in the eulogy how we met him and what he did.
And Sharon was part of that group, and Mark Graham, who had a small telecom company and is now director of the Wayback Machine at the Internet Archives in San Francisco. In fact, I just spoke with Mark yesterday. There were just a huge number of people that [Henry] made office space available for everybody. And he put a dish on the roof, a satellite dish aimed at the Soviet Molnya* satellite, and he downloaded live Russian programming every day and made videotapes and would bring them over to the Soviet consulate in San Francisco as a gift so they could watch home television. And as a result, they gave us first priority in getting visas any time we wanted to go. And so…but that was such an optimistic time.
Daniel Satinsky: Yeah, very optimistic.
Joel Schatz: [He] felt just nothing but rainbows and good news ahead. So many people were spending more and more time, not so much the businesspeople, but the citizen diplomats, just trying to make projects, two-way communications, school children talking to each other. I had a link from the Manezh right next to the Kremlin, a video phone link with school kids from Berkeley and Moscow. And a guy from the Ministry of Foreign Affairs said what will these first graders say to each other. I said excuse me; you’re seriously telling me you’re concerned about what first grade children are going to say to each other? Please, back off. [Laughs.]
One final story. We smuggled in a copy machine from Helsinki without declaring it, by train. It was Henry Dakin who actually helped me bring that in. And I didn’t declare it at customs, and it was in a box, and I just said it’s nothing. And so, we were using this copy machine in our office in Moscow and letting Joseph use it, and so many Russians were using it.
And one day a KGB officer came by. They found out about our copy machine. He was wearing a black leather coat. He was the vintage KGB guy. And he says, you know, it’s impossible, you need… And meanwhile our office manager, Galina, was an attractive woman, and she realized it was a problem, so she started kind of flirting with him a little bit to distract him. And he says besides, you need it to be behind a steel door.
And I called one of our office guys—Valery, bring me that aluminum Reynolds Wrap roll over here and some pushpins. And I took a closet door, and we covered it with aluminum foil, and we put the copy machine in the closet behind this. I said well, it’s not a steel door. And meanwhile Galina is still kind of flirting with the guy. And he said one of the most popular Russian phrases I heard all the time. I said would this be okay? And he said, “In principle it’s possible.” In principle it works. And he left, and we kept the copy machine. And behind a door covered with aluminum foil. [Laughs.]
Daniel Satinsky: Yeah. V principe, he said. V principe. It’s okay in principle.
Joel Schatz: In principle, that’s right. I heard that so often.
Daniel Satinsky: Yeah, I did, too.
Joel Schatz: And right opposite the VNIIPAS, opposite their front door was a very small Russian Orthodox church. And we had never been—in my first trip with Diane to the VNIIPAS, we went into that church and there were three events taking place in the same open room. There was a baby being baptized, there was a young couple being married, and there was a dead babushka on a slab.
Daniel Satinsky: Wow, the whole life cycle.
Joel Schatz: A funeral, a baptism and a marriage all taking place with people lighting candles and Russian priests singing with deep voice, all, the whole cycle of life taking place in one—we just stood there flabbergasted. It seemed so, in a way, normal to us in the big picture of the mysteries of life.
So, I guess another thing working in Russia was that it was so different in cultural experience than anything we had grown up with that we were just fascinated that this was a whole way of living that we just were completely unaware of.
Daniel Satinsky: Yeah.
Joel Schatz: And we discovered having late night conversations with Russian friends, we would discuss subjects that I hadn’t discussed since college, when your mind was like so curious, like what is the real nature of music. We would have talks like this. And it was like I would never have talks like that in San Francisco.
Daniel Satinsky: Yes. I know what you mean. I do know what you mean. And as a result, you have the friendships that are deep and anchored in both emotions and intellect with those folks.
Joel Schatz: That’s right. I mean, the Russian people were thinking at least as big, or bigger, than Americans. They’re really talented people. Their minds were incredible. I mean, this guy Velikhov was just incredible. You should check his, if you haven’t already, check his Wikipedia page. Look at his background.
Daniel Satinsky: I will.
Joel Schatz: He’s still alive. He had a stroke a few years ago. And I could call—when I was back in America I had to call him a couple of times. I would wake him up in the middle of the night, and instead of being upset with me for waking him up he was so happy to hear from me. You know, John Scully called me from an airplane. He was flying over to Moscow with a group of Apple people to have a major proposal. Basically, they wanted to do the operating system in Cyrillic. And he called me from the airplane phone saying I have a big favor to ask you—each of us on this flight assumed that someone else had arranged visas; we have no visas to come into Moscow.
Daniel Satinsky: Oh, my goodness.
Joel Schatz: What can you do for us? I said, well, I’ll call Velikhov and I’m sure he’ll solve the problem. So, I called Velikhov. He said they forgot their visas? Okay, you got their names? Okay, I gave him the names. He met them at the airport, went through customs, and went to actually where they were getting off the plane, handed them their visas, and then they all went back in through customs.
Daniel Satinsky: Incredible. But yes, those were the things that happened.
Joel Schatz: And Scully once said to me, you know, every time I log onto SFMT email to communicate with Moscow I never take for granted what it must have taken for you to make this possible.
Daniel Satinsky: Yeah. That’s to his credit.
Joel Schatz: You know, I was really impressed with that guy.
Daniel Satinsky: Did they get the deal done?
Joel Schatz: No. Although iPhones are the most popular devices all over the world.
Daniel Satinsky: Absolutely. So, the point that you made when I asked you about this is the impact that an entrepreneurial individual can make in the right circumstances. Is that a summary of what you would say is the most important thing?
Joel Schatz: A lot of it is, I mean, I don’t know how many definitions of the word luck you can make, but our timing, in hindsight, turned out to be perfect, although when I was involved in the activity, I wasn’t even aware. Oddly as it seems I wasn’t even aware of how lucky I was that everything was—I was at these intersections, and I would meet this guy, and he would send me to here. It just seemed like it was just unfolding like a dance. And as I look back on it, had I tried to do these ten years earlier it would have been impossible. And I don’t think I could have survived the corruption and the competition in the ’90s.
Soros told me in no uncertain terms, because he was the money guy, don’t do anything illegal because of the Foreign Corrupt Practices Act. Because he was the money, they would target him. I would have been his agent doing something illegal. The only bribes I ever made were giving cartons of Marlboros to a really busy restaurant to get a table that was unavailable. I would do little things like that. But never, ever do a bribe. And people would make hints. We would say no.
But the power of the individual, I mean, it’s… I guess Margaret Mead had a famous quote about that. It’s the only way anything has ever evolved in human society, is the power of individual initiatives. It’s really true.
Daniel Satinsky: But in the right circumstance.
Joel Schatz: And being open to network, because you never know. To me one of the great mysteries is who you’re sitting next to on an airplane that may give you a tip about something, and you either act on it or you don’t, and that changes the next level of options you have the next day. And that’s true all the time. You meet, and you decide I’m going to go with this guy or that guy. And who would believe trying to help a six-year-old child prodigy pianist would end up introducing me to a guy like George Soros and he would become the chief investor of the enterprise?
Daniel Satinsky: Yes, right. Totally…it’s not serendipity in a way, but I guess it is.
Joel Schatz: Yeah. I mean, we think about that a lot because we’ve had experiences in our life that are totally inexplicable in normal, rational terms.
Daniel Satinsky: So, and Russians would say it was fate, sudba.
Joel Schatz: Diane and I were talking to one of our dearest friends who passed a few years ago, Richard [Kaplan]. He was in Florida, and we were in California, and they have an apartment in New York. I said we’re flying to Moscow tomorrow, but we’ll be coming back to New York in about a month, where will you guys be? He said we’re flying to Rome, but we hope that we can connect back in New York, and we said okay. So, we flew to Frankfurt to change planes and I went to a photo shop to buy film. This was the very next day. And I get a tap on the shoulder and it’s Richard.
Now the day before I was in California. He was in Florida. He was on his way to Rome. We were on our way to Moscow. Had I gotten to that photo shop ten minutes earlier or later, whatever, we wouldn’t have… But what the hell is that? I mean, I love it.
And in our Russian experience, we had so much of that happen in Russia where we just found ourselves being introduced to certain people and…
Daniel Satinsky: Well, you had a certain advantage of, if you will, the first mover, being there at a time where they were looking for contacts, you were trustworthy, there weren’t so many other people to talk to.
Joel Schatz: And also, the big corporations seemed clueless. Like after we had a press conference when we announced Sovintel, the big telephone joint venture, a manager of AT&T came over to me and said how did you know there was an opportunity here? And I said excuse me, 300 million Russians and only 33 international trunk lines and you don’t see an opportunity? He said well, we weren’t thinking it was even possible to even try to do anything. And that was a very honest statement. Corporately they thought that was a dead end. It would have been an impossible use of their resources to try to come up with a digital international phone system. And it turned out to be easy.
Daniel Satinsky: [Laughs.] Yeah, but it probably would have been a lot harder for them than for you.
Joel Schatz: That’s right. I told you earlier, because they would always send different people, and they would bog down and, you know, inertia.
Daniel Satinsky: Yeah. Well, it’s a fantastic episode and era, and you were a great pioneer for things that…a real, real change in ability to communicate and relations between the two countries so, I mean, it’s fantastic. It’s a great story.
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