About
Patricia Dowden’s Russia career began with an Alfa Bank consultancy in 1997. She lectured on management in Russia’s regions; worked with large companies on an ethics self-evaluation system; collaborated on ten business ethics conferences with St. Petersburg State University of Economics and Wharton.
Daniel Satinsky: It’s really a pleasure to see you and have a chance to share your experience, and I know that your experience has been mostly as a consultant to Alfa Bank, and—
Patricia Dowden: No, no.
Daniel Satinsky: No, it’s not?
Patricia Dowden: No.
Daniel Satinsky: Okay. Well, let me take that back. Why don’t you start by telling me how you got involved with Russia and what you ended up doing.
Patricia Dowden: Well, it started with the project at Alfa Bank, which was an incredible experience, but ended pretty quickly with the crash of the banking system in 1998. And so that was, you know, the project only lasted about a year, but by that time I had made some very interesting friends, and so my life took several different turns. One was that I became, as a result of the Alfa Bank experience, a great believer in internships as a mechanism for teaching people, which was, by the way, not at all what the World Bank wanted my project to be. They had such a stupid idea—and I’m happy to be on record about that—as to how they wanted it done that I basically said I wouldn’t even know how to do that, I wouldn’t know how to staff that, it doesn’t make any sense to me. And so they came around and let me do what I wanted to do because they needed an American bank, and we were the only American bank that had applied to have it, and Alfa Bank wanted us.
Daniel Satinsky: Can you actually go back and just give me a sense of your background before you got involved in this? So, when people are listening to this they’ll have a sense of what your expertise was, what your experience was, and then your getting involved with Alfa Bank moving forward.
Patricia Dowden: Well, I worked in commercial banking in Atlanta, first at what was then the Trust Company Bank, now is Truist Bank, and then I came to Philadelphia in 1983 with Philadelphia National Bank, which is now, you know, it finally got bought out and is now Wells Fargo. So, I had a, what would that be, a 25 or 30 year career with them. What does that add up to? I don’t even know. Well, I retired in 1999, so 1983 to 1999, about 20 years. And I did…I was on the commercial banking side in an area called cash management, which I don’t think…it’s not done much anymore, for a variety of reasons that are not relevant here, and strategic planning and stuff like that.
And I had a friend who, a Russian friend who I’d helped get a job at our bank, and she told me about this project. She was made the Russian country manager for our bank. And I said…I was fascinated by the idea. I’m basically a project person. And I was fascinated by the idea, because I’ve always been sort of fascinated with Russia, and it just sounded like a lot of fun and a very interesting thing to do. So, I sort of was like the camel with the nose under the tent, because I wasn’t in the international department, I was in the commercial banking area at that time. And so I wrote the proposal and staffed the team and so on and so forth.
Daniel Satinsky: So, this was a response to an RFP from the World Bank?
Patricia Dowden: Yes, yes.
Daniel Satinsky: And what did the World Bank want to accomplish?
Patricia Dowden: Well, the idea was to…it was actually an interesting idea. They wanted to teach Russian banks Western banking technology in the sense of organizational structure, standards for behavior, just basically how the banking world worked, essentially. And they wanted to do it by pairing up Russian banks with European banks and American banks. As I say, our bank was the only bank that applied for the project from the United States, and they wanted to have at least one.
Daniel Satinsky: What year was this?
Patricia Dowden: We probably started working on this in 1996.
Daniel Satinsky: Okay. It was pretty late after the fall of the Soviet Union.
Patricia Dowden: Right, yes.
Daniel Satinsky: Okay.
Patricia Dowden: Yeah, so it was an interesting idea. A lot of the banks that were selected to be part of the project ultimately failed, and there was lots of analysis done as to why the World Bank picked the banks it picked, which people thought they had not been a good choice. Alfa Bank, however—
Daniel Satinsky: That is the Russian banks failed.
Patricia Dowden: The Russian banks, right. But Alfa Bank was an extremely good choice. I mean, they’ve turned out to be the star of the whole group. A lot of them aren’t even there anymore. One, I think, is still left. And, as it happened, our project was the only one that succeeded. And I know that because I ran into a Wharton professor some years after this all ended who had done a big research project on it, and he told me, he said this Alfa—you know, that he had done the research about how these banks had been selected, and why the World Bank had done a very bad job of that, and had come to the conclusion that the Alfa Bank project was the only one that had been successful, which was not done according to the World Bank’s idea of how it should have been done, and if it had been, it would have failed, too. But part of the failures had to do, of course, with the crisis in 1998.
Daniel Satinsky: But what was it the World Bank wanted to do that you found wasn’t effective, or you didn’t think was the right approach? What did they want?
Patricia Dowden: They basically wanted us to put a person over there, and ultimately, we did this in a way, too, but just to put a person over there and let them just be there and answer questions and so on and so forth. And what I wanted to do was to have experts from various parts of our bank work with the different departments so that you had expertise in different things like technology, or human resources, or marketing, not just have one person go over there and sit next to the bookkeeper. And that’s what we did. And it was extraordinarily successful. We partnered with the Royal Bank of Canada—Royal Bank of Scotland, and they were very helpful in sort of bringing in the British side of things, and yeah, it was an incredible project.
Daniel Satinsky: What did you find were the skills that were most needed by the Russians at that stage? What did they need to know most?
Patricia Dowden: They basically didn’t understand asset/liability management, which was what killed the banking system over there, and which was a huge risk for Alfa Bank. Everybody had these huge amounts of money invested in the GKOs* because the government needed the money, and they probably put pressure on people to do that. But you know if you’re getting a financial instrument that’s paying 200% a year interest, you know that’s not a good idea. But they had enormous amounts of money in that market, and the question was once they realized what was about to happen, how do you get out of it.
And we…the risk management guy on our project told them what to do. And I won’t give you the details. I mean, it’s not a difficult thing, but anyway, they hedged it. They hedged that money. They had no idea how to do that sort of thing, even Alfa Bank, and Alfa Bank was far and away the most sophisticated of the Russian banks at that time. So, they didn’t understand asset liability management, which is very basic, and they didn’t have good technology at all. Now they’re one of the most sophisticated technology banks in Europe, but in that time—
Daniel Satinsky: And by technology you mean more than hardware, it’s the software and management culture?
Patricia Dowden: Yeah. They had, basically they had branches, and the branches had a laptop—or not a laptop, but a desktop computer, and that branch kept all the records for all its customers on that computer. They had no centralized accounting system. Every branch was basically an independent little bank, which is part of the reason why they couldn’t do asset liability management, because they couldn’t pool all their money into one place and lend money from one branch to customers of another branch as banks in the West would do. I mean, you have to have centralized technology, and they didn’t have that. Very primitive. Very primitive technology.
Daniel Satinsky: And they had been in business for how long at the time at which you started working for them—with them?
Patricia Dowden: Well, it was 1997, and things collapsed in 2000—I mean, in Nineteen—
Daniel Satinsky: ’98
Patricia Dowden: 1998 so, you know, very few years.
Daniel Satinsky: Yeah, so they had started—but they had been operating as a bank—
Patricia Dowden: Oh, yeah.
Daniel Satinsky: Yeah. But were they…now, many of these, the Russian banks, were what was referred to as “pocket” banks.
Patricia Dowden: Yeah. And they were pocket banks.
Daniel Satinsky: They were connected to some industrial group. And they were also, right?
Patricia Dowden: Yes, that’s right. That’s right. They were the pocket bank for Alfa Group.
Daniel Satinsky: Which was primarily in what?
Patricia Dowden: They had a huge investment in the gas and oil industry. Fridman was the one—well, that’s another long story. There’re so many long stories here. But he’s the one who got, I think, is it the Sakhalin oil fields? Which they basically managed to legally get taken away from a consortium of companies, including Harvard and people like that, who owned them. And they did it legally, but they got ownership of it, so then they had the… And then he rebuilt it with a partnership with Halliburton under an EXIM bank loan, so that was a big piece of their business.
He had started out as sort of a trader, so he had a lot of small trading companies, and that was sort of his beginning stuff. And then he went in, at some point later on he went into mobile technology. The Beeline company was an Alfa Bank. They were very, you know, communications, technology, all that sort of thing. They were big. But when we were there, they…I’m trying to remember if they had done the Sakhalin oil deal at that time. I don’t think they had. I think they were probably a pocket bank for—
Daniel Satinsky: So, at this point was Alfa Bank…I don’t know how to ask this. Was it a real bank or was it an adjunct of the industrial group? Or was it trying to become a real bank? In other words, were its clients only this industrial group or was it becoming something else?
Patricia Dowden: No, they were becoming something else. They were a genuine retail bank, and they had branches, and their intention was to expand their branch system. And they did that dramatically after the banking system collapsed. Fridman used that as an opportunity to go out and buy up the branch offices of all these banks that had failed, and so he exploded the bank just overnight when the—I mean, he’s…he is one of the smartest people you’ll ever meet. I have huge respect for the guy. I think he’s an honest man, he’s a smart man.
He’s a person of—I’ve seen him in situations which required considerable character, and he never disappointed me. I feel like he’s gotten a very bad rap in general. And where he’s been accused of malfeasance, he’s always been proved in the end to be innocent of it. But anyway, he was smart enough to jump on that opportunity and just expand the system overnight when they failed. So, his idea was to become the largest retail bank built in Russia and also in Europe, and he’s done—I don’t know if he’s the biggest in Europe, but he’s certainly—
Daniel Satinsky: So, just to back up a bit, so then your assistance helped the bank in a way dodge the bullet of the 1998 collapse. In other words, they were able to either hedge or able to preserve their asset base as a result of the collapse of the government bond market in 1998. Is that right?
Patricia Dowden: Well, we did two things, and that was sort of in the moment, the one. And I actually have a letter from Fridman saying that, that we had helped save Alfa Bank. And we did. I mean, I know what happened there. They took out a Lombard loan as a hedge and so on and so forth. Anyway, then they managed to preserve and convert a lot of their assets into hard currency right before the market collapsed, and they were left with the hard currency, and that’s one of the things that saved them.
The other thing that saved them was that Fridman put huge amounts of his own money into funding the deposit outflow until depositors believed that the bank was going to survive, and then the money started to come back in, which was…I was there when that happened, and I have to say it was quite a remarkable experience to watch it.
The other thing that we did for them, though, was to recommend that they centralize their IT operations. And there again the man who was in charge of IT—there was a big competition. This is a typical Russian thing. And you asked me, one of the questions that you asked me gets at this cultural thing, and this is a very good example of it. There was a big competition between the IT group and the retail banking group. Well, you know, you can’t do that. I mean, IT should own, I mean, they’re…it’s like the right hand and the left hand. But the IT guy didn’t want that centralization because he didn’t want to deal with the retail people. He was going to let them run their own little desktop operations. And he wouldn’t, you know, we advised him to centralize it, and we tried, when we were having the internships with these people, that we would bring over the IT people and the retail people together so they would get to know each other, and he didn’t even want to do that.
But then we were—I asked for an executive briefing with Fridman on two topics. One was risk management. And that’s when my colleague told him about what to do about hedging. And the next day there was a line outside his office of all these financial people wanting to tell, you know, and say what should we do about this, that, and the other thing, and they did it. This was three weeks before the collapse that that briefing took place. And the other thing, the other executive briefing was on IT, when we explained why centralized IT was going to be essential to the growth of the retail network. And we hadn’t gotten back to our office—our office was in the same floor of a different building as the guy who was head of IT—and by the time we’d gotten back to our office he had called, Fridman had called this guy and said do it. And so we were…
And, after, it was very interesting, because also this was right before the crisis, after the crisis I canceled the trip of the IT guy over there. I thought this was, you know, the whole thing was over. And they were just furious. I mean, they were full steam ahead. They were continuing with everything they were going to do before. They were quite remarkable people, really, and Fridman especially. Just an amazing guy.
Daniel Satinsky: How often were you in Russia at that time?
Patricia Dowden: I was there every six weeks, probably.
Daniel Satinsky: Every six weeks. And how big was your team that was working with Alfa Bank?
Patricia Dowden: I think there were about ten of us, maybe a dozen, counting the people from the Royal Bank of Scotland.
Daniel Satinsky: But that was a pretty substantial commitment of people then, yeah?
Patricia Dowden: Yes. In other words, from our bank’s standpoint?
Daniel Satinsky: Yeah.
Patricia Dowden: Well, this is another sort of interesting little how things happened wrinkle to it. Our bank had been sold by the time the project got started. We had been sold to another bank. And so everybody was just sitting around waiting to get fired. And so, everybody—and nobody was paying a bit of attention to what I was doing. And so I just, you know, I got what I wanted because people were glad to have something interesting to do. A number of my people were people who were outside the bank, who had been laid off at some point in some past overhaul of the organization, so it was just one of those made for the moment situations.
Daniel Satinsky: Right. And how did—I’m assuming most of the folks you were involved with, and including you, you didn’t have any experience with Russia. You know, obviously as educated people you knew about Russia and you paid attention, but what was it like to encounter Russia in 1997, and to be parachuted into this completely different environment? Were people enthusiastic? Were they optimistic? Were they energized? Or were they appalled and repelled?
Patricia Dowden: You mean our team?
Daniel Satinsky: Yeah, your team.
Patricia Dowden: Oh, I think we were all just fascinated. First of all, the Russians are—the Alfa Bank people were, you know, these were nuclear scientists. The people who had these very sophisticated jobs in Soviet times, they became bankers. That’s where the good jobs were. You know, pilots from the air force. I mean, just very interesting people, very sophisticated people. And they were very excited to have us there.
And, I mean, that, again, had a lot to do with Fridman. I mean, he just, you know, he made it clear that their job was to participate in and contribute to this project, so they were very, very receptive to us. We had a wonderful coordinator, who’s a very dear friend of mine to this day, and he handled…he just… He’s one of these people who knew how to connect people, you know. And although he wasn’t a particularly senior guy at the bank, he had been in Afghanistan twice, and so he had sort of elevated status among his peers at the bank as somebody special who had been to Afghanistan twice, so he was very effective, very effective. I mean, we just, a lot of things came together, you know, in interesting ways.
Daniel Satinsky: And some of your team was resident there or did you all just travel in and out?
Patricia Dowden: One person was resident there. And he was a major part of our success. He had been the president of—he’d been with one of the Big 8 accounting firms, a partner, and then he was the head of a major accounting S&L firm, company in California which failed. Do you remember the big S&L crisis—
Daniel Satinsky: Yeah, yeah.
Patricia Dowden: —when all those banks were…? He was a very distinguished guy. He had been…I’d been on the Federal Reserve advisory committee with him, and he was appointed to represent the S&L industry. And he, after he retired, he decided he wanted to get this experience in that part of the world, and so he was interested in going over there and living.
And of course I was thrilled to have him do it. So, he was our—and everybody, you know, he was a gray-haired, elegant, genial kind of a guy, and he just did very well with the Russians. They adored him. And he was a very effective part of our project, too. Everybody else was in and out.
Daniel Satinsky: And language, everything was done in English?
Patricia Dowden: Yes.
Daniel Satinsky: And the Alfa people were generally…had good facility with English?
Patricia Dowden: Some yes and some no. We had a translator assigned to our team, and so we often were working through a translator. But many of the Alfa people spoke very good English.
Daniel Satinsky: And did you ever feel that any of them sort of resented you telling them what to do?
Patricia Dowden: Never.
Daniel Satinsky: They just wanted the knowledge.
Patricia Dowden: Yeah. One interesting conversation along that line was with the guy who ran their money transfer systems, and he was a nuclear scientist who was fascinated with black holes. And I guess money transfer can be a black hole. But anyway, he said to me, when I first met him and was interviewing him, he said to me, he said, we know that our system is not the right one, and yours is the right one, and you will teach it to us. And I was taken aback by that, and I said, immediately I said no. I said we’re not here to…we’re here to help you develop a system that works for you.
But this gets at a cultural difference, that in the Soviet Union there was a right way and everything else was illegal, literally. I mean, you could go to jail for not believing in the right things because there was only one answer to things. And so we ran into that mentality, and they thought that the Americans had the right answer. But our goal, and one of the stated goals for our team—I mean, I have those written down if that’s of any interest to you—I think there were three or four things, and that was one of them. One of them was to teach them how to work together and one of them was to develop a system that was their system, that fitted their culture and their resources and so on. And so that necessitated that we understood their system and how they did things.
Yeah, we were not there to teach them our way. And then a lot of people, I think that’s the mistake that a lot of people who went to Russia made, was thinking these are a bunch of yahoos who, you know, we need to show them the truth and the light. I think we make that mistake around the world, actually. I encountered a lot of disrespect among the, particularly among the Brits and the Americans who were working over there, and I found it extremely unpleasant and inappropriate.
Daniel Satinsky: And how was that expressed? Do you mean in terms of looking down on their Russian colleagues or…? How would you say that was—
Patricia Dowden: Well, they wouldn’t say it in front of the Russians, but they would just, you know, in conversation among us when we were having dinner together or whatever in the hotel where we were staying, you know, there would be just these conversations, rather contemptuous conversations about whatever was going on.
Patricia Dowden: No, no.
Daniel Satinsky: No, it’s not?
Patricia Dowden: No.
Daniel Satinsky: Okay. Well, let me take that back. Why don’t you start by telling me how you got involved with Russia and what you ended up doing.
Patricia Dowden: Well, it started with the project at Alfa Bank, which was an incredible experience, but ended pretty quickly with the crash of the banking system in 1998. And so that was, you know, the project only lasted about a year, but by that time I had made some very interesting friends, and so my life took several different turns. One was that I became, as a result of the Alfa Bank experience, a great believer in internships as a mechanism for teaching people, which was, by the way, not at all what the World Bank wanted my project to be. They had such a stupid idea—and I’m happy to be on record about that—as to how they wanted it done that I basically said I wouldn’t even know how to do that, I wouldn’t know how to staff that, it doesn’t make any sense to me. And so they came around and let me do what I wanted to do because they needed an American bank, and we were the only American bank that had applied to have it, and Alfa Bank wanted us.
Daniel Satinsky: Can you actually go back and just give me a sense of your background before you got involved in this? So, when people are listening to this they’ll have a sense of what your expertise was, what your experience was, and then your getting involved with Alfa Bank moving forward.
Patricia Dowden: Well, I worked in commercial banking in Atlanta, first at what was then the Trust Company Bank, now is Truist Bank, and then I came to Philadelphia in 1983 with Philadelphia National Bank, which is now, you know, it finally got bought out and is now Wells Fargo. So, I had a, what would that be, a 25 or 30 year career with them. What does that add up to? I don’t even know. Well, I retired in 1999, so 1983 to 1999, about 20 years. And I did…I was on the commercial banking side in an area called cash management, which I don’t think…it’s not done much anymore, for a variety of reasons that are not relevant here, and strategic planning and stuff like that.
And I had a friend who, a Russian friend who I’d helped get a job at our bank, and she told me about this project. She was made the Russian country manager for our bank. And I said…I was fascinated by the idea. I’m basically a project person. And I was fascinated by the idea, because I’ve always been sort of fascinated with Russia, and it just sounded like a lot of fun and a very interesting thing to do. So, I sort of was like the camel with the nose under the tent, because I wasn’t in the international department, I was in the commercial banking area at that time. And so I wrote the proposal and staffed the team and so on and so forth.
Daniel Satinsky: So, this was a response to an RFP from the World Bank?
Patricia Dowden: Yes, yes.
Daniel Satinsky: And what did the World Bank want to accomplish?
Patricia Dowden: Well, the idea was to…it was actually an interesting idea. They wanted to teach Russian banks Western banking technology in the sense of organizational structure, standards for behavior, just basically how the banking world worked, essentially. And they wanted to do it by pairing up Russian banks with European banks and American banks. As I say, our bank was the only bank that applied for the project from the United States, and they wanted to have at least one.
Daniel Satinsky: What year was this?
Patricia Dowden: We probably started working on this in 1996.
Daniel Satinsky: Okay. It was pretty late after the fall of the Soviet Union.
Patricia Dowden: Right, yes.
Daniel Satinsky: Okay.
Patricia Dowden: Yeah, so it was an interesting idea. A lot of the banks that were selected to be part of the project ultimately failed, and there was lots of analysis done as to why the World Bank picked the banks it picked, which people thought they had not been a good choice. Alfa Bank, however—
Daniel Satinsky: That is the Russian banks failed.
Patricia Dowden: The Russian banks, right. But Alfa Bank was an extremely good choice. I mean, they’ve turned out to be the star of the whole group. A lot of them aren’t even there anymore. One, I think, is still left. And, as it happened, our project was the only one that succeeded. And I know that because I ran into a Wharton professor some years after this all ended who had done a big research project on it, and he told me, he said this Alfa—you know, that he had done the research about how these banks had been selected, and why the World Bank had done a very bad job of that, and had come to the conclusion that the Alfa Bank project was the only one that had been successful, which was not done according to the World Bank’s idea of how it should have been done, and if it had been, it would have failed, too. But part of the failures had to do, of course, with the crisis in 1998.
Daniel Satinsky: But what was it the World Bank wanted to do that you found wasn’t effective, or you didn’t think was the right approach? What did they want?
Patricia Dowden: They basically wanted us to put a person over there, and ultimately, we did this in a way, too, but just to put a person over there and let them just be there and answer questions and so on and so forth. And what I wanted to do was to have experts from various parts of our bank work with the different departments so that you had expertise in different things like technology, or human resources, or marketing, not just have one person go over there and sit next to the bookkeeper. And that’s what we did. And it was extraordinarily successful. We partnered with the Royal Bank of Canada—Royal Bank of Scotland, and they were very helpful in sort of bringing in the British side of things, and yeah, it was an incredible project.
Daniel Satinsky: What did you find were the skills that were most needed by the Russians at that stage? What did they need to know most?
Patricia Dowden: They basically didn’t understand asset/liability management, which was what killed the banking system over there, and which was a huge risk for Alfa Bank. Everybody had these huge amounts of money invested in the GKOs* because the government needed the money, and they probably put pressure on people to do that. But you know if you’re getting a financial instrument that’s paying 200% a year interest, you know that’s not a good idea. But they had enormous amounts of money in that market, and the question was once they realized what was about to happen, how do you get out of it.
And we…the risk management guy on our project told them what to do. And I won’t give you the details. I mean, it’s not a difficult thing, but anyway, they hedged it. They hedged that money. They had no idea how to do that sort of thing, even Alfa Bank, and Alfa Bank was far and away the most sophisticated of the Russian banks at that time. So, they didn’t understand asset liability management, which is very basic, and they didn’t have good technology at all. Now they’re one of the most sophisticated technology banks in Europe, but in that time—
Daniel Satinsky: And by technology you mean more than hardware, it’s the software and management culture?
Patricia Dowden: Yeah. They had, basically they had branches, and the branches had a laptop—or not a laptop, but a desktop computer, and that branch kept all the records for all its customers on that computer. They had no centralized accounting system. Every branch was basically an independent little bank, which is part of the reason why they couldn’t do asset liability management, because they couldn’t pool all their money into one place and lend money from one branch to customers of another branch as banks in the West would do. I mean, you have to have centralized technology, and they didn’t have that. Very primitive. Very primitive technology.
Daniel Satinsky: And they had been in business for how long at the time at which you started working for them—with them?
Patricia Dowden: Well, it was 1997, and things collapsed in 2000—I mean, in Nineteen—
Daniel Satinsky: ’98
Patricia Dowden: 1998 so, you know, very few years.
Daniel Satinsky: Yeah, so they had started—but they had been operating as a bank—
Patricia Dowden: Oh, yeah.
Daniel Satinsky: Yeah. But were they…now, many of these, the Russian banks, were what was referred to as “pocket” banks.
Patricia Dowden: Yeah. And they were pocket banks.
Daniel Satinsky: They were connected to some industrial group. And they were also, right?
Patricia Dowden: Yes, that’s right. That’s right. They were the pocket bank for Alfa Group.
Daniel Satinsky: Which was primarily in what?
Patricia Dowden: They had a huge investment in the gas and oil industry. Fridman was the one—well, that’s another long story. There’re so many long stories here. But he’s the one who got, I think, is it the Sakhalin oil fields? Which they basically managed to legally get taken away from a consortium of companies, including Harvard and people like that, who owned them. And they did it legally, but they got ownership of it, so then they had the… And then he rebuilt it with a partnership with Halliburton under an EXIM bank loan, so that was a big piece of their business.
He had started out as sort of a trader, so he had a lot of small trading companies, and that was sort of his beginning stuff. And then he went in, at some point later on he went into mobile technology. The Beeline company was an Alfa Bank. They were very, you know, communications, technology, all that sort of thing. They were big. But when we were there, they…I’m trying to remember if they had done the Sakhalin oil deal at that time. I don’t think they had. I think they were probably a pocket bank for—
Daniel Satinsky: So, at this point was Alfa Bank…I don’t know how to ask this. Was it a real bank or was it an adjunct of the industrial group? Or was it trying to become a real bank? In other words, were its clients only this industrial group or was it becoming something else?
Patricia Dowden: No, they were becoming something else. They were a genuine retail bank, and they had branches, and their intention was to expand their branch system. And they did that dramatically after the banking system collapsed. Fridman used that as an opportunity to go out and buy up the branch offices of all these banks that had failed, and so he exploded the bank just overnight when the—I mean, he’s…he is one of the smartest people you’ll ever meet. I have huge respect for the guy. I think he’s an honest man, he’s a smart man.
He’s a person of—I’ve seen him in situations which required considerable character, and he never disappointed me. I feel like he’s gotten a very bad rap in general. And where he’s been accused of malfeasance, he’s always been proved in the end to be innocent of it. But anyway, he was smart enough to jump on that opportunity and just expand the system overnight when they failed. So, his idea was to become the largest retail bank built in Russia and also in Europe, and he’s done—I don’t know if he’s the biggest in Europe, but he’s certainly—
Daniel Satinsky: So, just to back up a bit, so then your assistance helped the bank in a way dodge the bullet of the 1998 collapse. In other words, they were able to either hedge or able to preserve their asset base as a result of the collapse of the government bond market in 1998. Is that right?
Patricia Dowden: Well, we did two things, and that was sort of in the moment, the one. And I actually have a letter from Fridman saying that, that we had helped save Alfa Bank. And we did. I mean, I know what happened there. They took out a Lombard loan as a hedge and so on and so forth. Anyway, then they managed to preserve and convert a lot of their assets into hard currency right before the market collapsed, and they were left with the hard currency, and that’s one of the things that saved them.
The other thing that saved them was that Fridman put huge amounts of his own money into funding the deposit outflow until depositors believed that the bank was going to survive, and then the money started to come back in, which was…I was there when that happened, and I have to say it was quite a remarkable experience to watch it.
The other thing that we did for them, though, was to recommend that they centralize their IT operations. And there again the man who was in charge of IT—there was a big competition. This is a typical Russian thing. And you asked me, one of the questions that you asked me gets at this cultural thing, and this is a very good example of it. There was a big competition between the IT group and the retail banking group. Well, you know, you can’t do that. I mean, IT should own, I mean, they’re…it’s like the right hand and the left hand. But the IT guy didn’t want that centralization because he didn’t want to deal with the retail people. He was going to let them run their own little desktop operations. And he wouldn’t, you know, we advised him to centralize it, and we tried, when we were having the internships with these people, that we would bring over the IT people and the retail people together so they would get to know each other, and he didn’t even want to do that.
But then we were—I asked for an executive briefing with Fridman on two topics. One was risk management. And that’s when my colleague told him about what to do about hedging. And the next day there was a line outside his office of all these financial people wanting to tell, you know, and say what should we do about this, that, and the other thing, and they did it. This was three weeks before the collapse that that briefing took place. And the other thing, the other executive briefing was on IT, when we explained why centralized IT was going to be essential to the growth of the retail network. And we hadn’t gotten back to our office—our office was in the same floor of a different building as the guy who was head of IT—and by the time we’d gotten back to our office he had called, Fridman had called this guy and said do it. And so we were…
And, after, it was very interesting, because also this was right before the crisis, after the crisis I canceled the trip of the IT guy over there. I thought this was, you know, the whole thing was over. And they were just furious. I mean, they were full steam ahead. They were continuing with everything they were going to do before. They were quite remarkable people, really, and Fridman especially. Just an amazing guy.
Daniel Satinsky: How often were you in Russia at that time?
Patricia Dowden: I was there every six weeks, probably.
Daniel Satinsky: Every six weeks. And how big was your team that was working with Alfa Bank?
Patricia Dowden: I think there were about ten of us, maybe a dozen, counting the people from the Royal Bank of Scotland.
Daniel Satinsky: But that was a pretty substantial commitment of people then, yeah?
Patricia Dowden: Yes. In other words, from our bank’s standpoint?
Daniel Satinsky: Yeah.
Patricia Dowden: Well, this is another sort of interesting little how things happened wrinkle to it. Our bank had been sold by the time the project got started. We had been sold to another bank. And so everybody was just sitting around waiting to get fired. And so, everybody—and nobody was paying a bit of attention to what I was doing. And so I just, you know, I got what I wanted because people were glad to have something interesting to do. A number of my people were people who were outside the bank, who had been laid off at some point in some past overhaul of the organization, so it was just one of those made for the moment situations.
Daniel Satinsky: Right. And how did—I’m assuming most of the folks you were involved with, and including you, you didn’t have any experience with Russia. You know, obviously as educated people you knew about Russia and you paid attention, but what was it like to encounter Russia in 1997, and to be parachuted into this completely different environment? Were people enthusiastic? Were they optimistic? Were they energized? Or were they appalled and repelled?
Patricia Dowden: You mean our team?
Daniel Satinsky: Yeah, your team.
Patricia Dowden: Oh, I think we were all just fascinated. First of all, the Russians are—the Alfa Bank people were, you know, these were nuclear scientists. The people who had these very sophisticated jobs in Soviet times, they became bankers. That’s where the good jobs were. You know, pilots from the air force. I mean, just very interesting people, very sophisticated people. And they were very excited to have us there.
And, I mean, that, again, had a lot to do with Fridman. I mean, he just, you know, he made it clear that their job was to participate in and contribute to this project, so they were very, very receptive to us. We had a wonderful coordinator, who’s a very dear friend of mine to this day, and he handled…he just… He’s one of these people who knew how to connect people, you know. And although he wasn’t a particularly senior guy at the bank, he had been in Afghanistan twice, and so he had sort of elevated status among his peers at the bank as somebody special who had been to Afghanistan twice, so he was very effective, very effective. I mean, we just, a lot of things came together, you know, in interesting ways.
Daniel Satinsky: And some of your team was resident there or did you all just travel in and out?
Patricia Dowden: One person was resident there. And he was a major part of our success. He had been the president of—he’d been with one of the Big 8 accounting firms, a partner, and then he was the head of a major accounting S&L firm, company in California which failed. Do you remember the big S&L crisis—
Daniel Satinsky: Yeah, yeah.
Patricia Dowden: —when all those banks were…? He was a very distinguished guy. He had been…I’d been on the Federal Reserve advisory committee with him, and he was appointed to represent the S&L industry. And he, after he retired, he decided he wanted to get this experience in that part of the world, and so he was interested in going over there and living.
And of course I was thrilled to have him do it. So, he was our—and everybody, you know, he was a gray-haired, elegant, genial kind of a guy, and he just did very well with the Russians. They adored him. And he was a very effective part of our project, too. Everybody else was in and out.
Daniel Satinsky: And language, everything was done in English?
Patricia Dowden: Yes.
Daniel Satinsky: And the Alfa people were generally…had good facility with English?
Patricia Dowden: Some yes and some no. We had a translator assigned to our team, and so we often were working through a translator. But many of the Alfa people spoke very good English.
Daniel Satinsky: And did you ever feel that any of them sort of resented you telling them what to do?
Patricia Dowden: Never.
Daniel Satinsky: They just wanted the knowledge.
Patricia Dowden: Yeah. One interesting conversation along that line was with the guy who ran their money transfer systems, and he was a nuclear scientist who was fascinated with black holes. And I guess money transfer can be a black hole. But anyway, he said to me, when I first met him and was interviewing him, he said to me, he said, we know that our system is not the right one, and yours is the right one, and you will teach it to us. And I was taken aback by that, and I said, immediately I said no. I said we’re not here to…we’re here to help you develop a system that works for you.
But this gets at a cultural difference, that in the Soviet Union there was a right way and everything else was illegal, literally. I mean, you could go to jail for not believing in the right things because there was only one answer to things. And so we ran into that mentality, and they thought that the Americans had the right answer. But our goal, and one of the stated goals for our team—I mean, I have those written down if that’s of any interest to you—I think there were three or four things, and that was one of them. One of them was to teach them how to work together and one of them was to develop a system that was their system, that fitted their culture and their resources and so on. And so that necessitated that we understood their system and how they did things.
Yeah, we were not there to teach them our way. And then a lot of people, I think that’s the mistake that a lot of people who went to Russia made, was thinking these are a bunch of yahoos who, you know, we need to show them the truth and the light. I think we make that mistake around the world, actually. I encountered a lot of disrespect among the, particularly among the Brits and the Americans who were working over there, and I found it extremely unpleasant and inappropriate.
Daniel Satinsky: And how was that expressed? Do you mean in terms of looking down on their Russian colleagues or…? How would you say that was—
Patricia Dowden: Well, they wouldn’t say it in front of the Russians, but they would just, you know, in conversation among us when we were having dinner together or whatever in the hotel where we were staying, you know, there would be just these conversations, rather contemptuous conversations about whatever was going on.
Daniel Satinsky: Right. So, how did you go about understanding Russian reality, what the reality was that Alfa Bank had to live in? How did you go about learning about that?
Patricia Dowden: Well, I became very friendly with a number of them, and some of whom I’m friends with today. I also, this one particularly effective guy, the one that had been in Afghanistan, ended up, after the whole thing had ended, he ended up taking a job with a man who was Putin’s economic advisor, his personal assistant, and so he was introducing—and so this guy had been a part of the Gaidar team, and through that I got introduced to about half of the Gaidar team, which is quite an interesting bunch of people, and very thoughtful people, very bright people, and people who thought a lot about—had been thinking for ten years before—the Gaidar team came together well before the Soviet Union collapsed and were sort of meeting in secret, and talking about the future of Russia and so on and so forth.
And so that’s why, when the Soviet Union collapsed, Yeltsin turned to Gaidar, who already had the team put together, and they’d been working together, you know, discussing these matters. They were in concert with, they were called the Zmeinaya [gorka], which means Snake Hill, and they worked with a university in St. Petersburg, St. Petersburg State University of Economics then, it’s now called UNECON. And so, these people were very thoughtful, very interesting people who had, you know, and we just…you can have wonderful conversations with Russians. I mean, they like to discuss ideas more than, way more than Americans do, and so the conversations were always just fascinating.
And so, I spent a lot of time with those guys, and there was one woman, just talking about their experiences, and what had happened during the… They had some astonishing experiences during the Gaidar period, you know, kidnappings and… I mean, very just…I could write my own book about all that stuff. So, I got to know them, and I had my Alfa Bank friends, and then I got involved with Sharon Tennison. And her scope was teaching entrepreneurs from the region. She didn’t get people from Moscow because she figured they had enough opportunities. They recruited from St. Petersburg and the regions. And so, I traveled around a lot with her to the regions and got to know—
Daniel Satinsky: And this was after—
Patricia Dowden: After Alfa Bank.
Daniel Satinsky: —the World Bank program ended.
Patricia Dowden: Yes.
Daniel Satinsky: Okay. And it ended because of the crisis?
Patricia Dowden: Yes.
Daniel Satinsky: Okay, all right. But that was your platform to then move on with Sharon Tennison.
Patricia Dowden: Yeah. Well, yeah, yeah, lots of other—
Daniel Satinsky: Okay, I’m sorry. I just wanted to get it straight.
Patricia Dowden: Yeah.
But, you know, here’s another piece of that, the ending of that project. Our project was going full steam ahead. We had made huge gains, and Alfa Bank was on record about it, and they wrote to the World Bank, and we went to the World Bank and said please let us keep this project going. It’s a great success, we’ve saved this bank in this crisis, so on and so forth, they want us—you know, they’d written and asked for it to continue. And here’s what they said to us. They said Alfa Bank was on one of our suspect lists, something like that. And I said, well, how many of the banks that are alive today were not on your suspect list. I mean, you know, the answer being clear. They’d all folded. The suspect list wasn’t worth the paper it was written on.
And they didn’t like Alfa Bank because Alfa Bank refused to tell them who the owners were. And so, they were always, that was always a big source of suspicion. Well, of course they didn’t want to tell them who the owners were. It’s like painting a target on your back. You just don’t do it. And if you understood anything about Russia in those days, when these guys are driving around in armor-plated cars with whole battalions around them to protect them, and bankers are getting murdered on the streets of Moscow with rockets. I mean, you had to…it was a dangerous business. I mean, Fridman had armed men sitting outside his office.
Daniel Satinsky: Yeah.
Patricia Dowden: And we had armed people all over the place, to get in our hotel and everything. But anyway, the World Bank had decided that although it was the bank—and that was the bank that everybody went to, by the way, when everything crashed, and all these international agencies had personnel over there, and they wanted to pay their people off and close down the offices. And who did they call to help them get the money out? They called me because they knew I could get it done through Alfa Bank. In other words, they had sent money over, it had disappeared in some of their good banks. Anyway, the point is that their list was worthless.
Daniel Satinsky: Was worthless. Right. But still they used that as a justification then to stop the program?
Patricia Dowden: To stop the project, yeah.
Daniel Satinsky: Yeah. So, why do you think the World Bank was so ill informed? I mean, I think that—I’m not sure how you would characterize it, but was it…? It just occurs to me that you had insights that they just as well could have had. Do you have any idea why?
Patricia Dowden: Well, I don’t know. I don’t know if they could just as well have had. I mean, bureaucracies are bureaucracies. And with respect to Russia, there was not much of a foundation to build on about knowledge inside of Russia, and so I don’t really know how they got whatever knowledge they had. I mean, I will tell you that the Russians are very contemptuous—it might be too strong a word—but of all these people who write books about Russia, they don’t, and I, you know. And some of them, I read them, and I think good Lord, where do they, you know. But you take three courses in one of the big universities and you can write a book. And you can speak the language, and you can write a book on Russia. I don’t speak Russian, and I’m sure a lot of people would disqualify me as being knowledgeable just because I don’t speak Russian, but…I don’t know. I don’t know how people claimed to get knowledge about Russia back in that day.
And I think I was astonishingly lucky to happen to fall into this couple of really astonishing nests, Alfa Bank being one, and this Gaidar group being the other. And then the third leg of it was these entrepreneurs who were quite remarkable people, and to watch how that was developing.
And there again, you know, people’s attitudes about what goes on in Russia just didn’t match up with what I saw. I’d go to these small towns and there would be nice restaurants, and nice hotels, and nice people, and so on and so forth. I remember there was a man named Edward Lucas, who used to write for The Economist, just the most astonishingly horrible articles about Russia, and he was a laughingstock at anybody who was there. He just, you know. I don’t know why they thought he was competent to write about Russia. It certainly dampened my attitude towards The Economist, I have to say.
Daniel Satinsky: Yeah. So, I mean, you were coming back and forth in these years. I want to come back to Sharon Tennison. I don’t want to let that go. I just am curious about this and…because I guess maybe because of my own experience. You had direct experience. You had conversations at a pretty high level with people there. And what was the reaction when you came home and talked to people in Philadelphia about Russia?
Patricia Dowden: That question has a sad answer. I’d say that even though I think I have a very educated, sophisticated group of friends who travel widely, there wasn’t much interest in the days when it was considered more interesting, and as time went on and Putin became the bad guy and all that, then, you know, there’s a lot of bigotry in this country towards Russia, and certainly among my friends, too. It’s rare that I find somebody that I really can talk to about Russia.
Daniel Satinsky: Yeah. That also was my experience, so I don’t want to dwell on that because I want to make sure we cover what that experience is that you had. And I want to come back to Sharon Tennison. Am I correct that she developed this entrepreneurship program in the regions—in a way it was different than the U.S. government programs which required that people speak English, that she didn’t require people to speak English, and that she, I believe, did some work with the Rotary Club to help her with it.
Patricia Dowden: She did, yeah.
Daniel Satinsky: Okay. So, maybe you could just kind of describe this program and what she developed, and then what you experienced with it.
Patricia Dowden: Well, by the time I got involved it was pretty widely considered to be the most successful internship program between the United States and Russia. There were a number of programs going on, and mostly they ended up being opportunities for people to come over here and go shopping. The program that—one of the things that was different about the program that Sharon developed was that the entrepreneurs had to pay part of their own way. I think they had to pay half, maybe. And so, they had some skin in the game. And her book will describe to you how she managed to get connected with Rotary.
And I’m not sure exactly when she started to get government funding. I think by the time I met her and became involved in it that we already had government funding. And I know that I went with her on calls to government officials fairly regularly to talk about the program. And everybody was very complimentary of it and said it was the best program that we were doing there. And they trained something like 6,000 entrepreneurs, all over the country, and developed quite a loyal group. She has had reunions, big reunions where people come all the way to the United States for these reunions. So, they—
Daniel Satinsky: How long a program was it? Were they in…was it like a short educational program? Was it an internship program? Can you describe—
Patricia Dowden: It was an internship program.
Daniel Satinsky: Internship, okay.
Patricia Dowden: Yeah. They were selected to come over. I think the normal stay was about two weeks. I ran one for lawyers myself, which was a strange group, I have to say. I don’t think they did a great job of selection on the other side for that one. But a lot of them were… And I think, and that was coming at a funny time, too, after the economy had collapsed and everything, and so there were a lot of reasons why people were sort of…had a different attitude about stuff.
But they’d come over for a couple weeks. They would be housed with people who lived in that city. They would be matched up with—and they were counterparts, interested counterparts. Cheesemakers would go meet with cheesemakers, and furniture makers would meet furniture makers and that sort of thing. In my case lawyers met lawyers and judges and so on and so forth. And they would meet with them. They would see their facilities, they would ask them questions, just sort of compare notes on how they did things. And the program ultimately sort of died because the entrepreneurs became so sophisticated that they weren’t learning much anymore.
Daniel Satinsky: What were the years that you’re talking about then when you were involved with this?
Patricia Dowden: I was involved 2001, maybe. Maybe 2000. I can’t remember exactly. I could look all that up.
Daniel Satinsky: That’s okay, I don’t need it exactly, but it’s around 2000, 2001, 2002. So, then how long did it continue until it reached the point where they didn’t need it anymore?
Patricia Dowden: I’m not sure I could be explicit about that.
Daniel Satinsky: Okay.
Patricia Dowden: It would probably have been… I’m reluctant to give you that as a part of the record. I could look it up.
Daniel Satinsky: Well, a ball park.
Patricia Dowden: Sorry?
Daniel Satinsky: A ballpark number here.
Patricia Dowden: Well, I don’t know. Well, 2008, of course, was the big global financial crisis. That may have taken a big bite of it out.
Daniel Satinsky: Okay. But the early 2000s.
Patricia Dowden: Oh, yeah.
Daniel Satinsky: And then the people who participated in this, I’m sure that she did follow-up and so on, but I assume that some of them became fairly successful in their localities—
Patricia Dowden: They did, yes.
Daniel Satinsky: —throughout Russia, right?
Patricia Dowden: Yes. Very successful.
Daniel Satinsky: My understanding is that the Rotary Clubs also spread throughout Russia, that there were a lot of active Rotary Clubs throughout Russia, right, to promote local business.
Patricia Dowden: Yeah. I don’t know what’s happened to that now. It would be interesting to find out.
Daniel Satinsky: Yeah. I don’t know. When I was researching the book I contacted some people from the Rotary Club, but my interviews were all done before the war in Ukraine. Before 2022, so I don’t know what has happened since then. I mean, I can guess, but sometimes guessing doesn’t work with Russia, so…
Patricia Dowden: Well, here’s what I would guess. I would guess that the Rotary Club is no longer officially involved, but the seeds were planted. There’re so many seeds that were planted. You know, one of your questions, I’ve forgotten exactly how it was phrased, but, you know, is it all for naught, and we, you know. No, I absolutely don’t believe that. I think they learned an incredible amount. I mean, the changes that I saw in the time I was there—and I was going until right before COVID—the changes were just astonishing. Just, you know, just astonishing. And even if you talk about the regions, the changes were just astonishing. And so you’d have a crisis, and all of a sudden you couldn’t afford imports anymore, and so all of a sudden, they learned how to make their own. I remember when they had the crisis where they couldn’t import cheese from France and all that. Well, then they, all of a sudden, instead of sending Dannon into all the grocery stores you’re seeing the Russian version of it. And they created, they just did—they’d do it overnight. I mean, it’s just fascinating how fast those people can adjust to a crisis.
After the crisis of 1998 I was just devastated. I mean, I just thought this is the end, you know, they’ll never survive this. Well, nobody—I remember walking around Red Square on a bright, sunny, wonderful fall day and nobody looked the least bit excited about it. You know, everybody’s out having a nice time and enjoying the fall weather and everything, and looking at me when I would talk to somebody, let it be known that I was pretty upset, they’d look at me like what’s the matter with you?
Some of these entrepreneurs that we were involved with set up barter enterprises within three weeks. They just organized, some way or another, ways to trade truckloads of tires for truckloads of popcorn. I mean, it was just astonishing. Alfa Bank did the same thing. Alfa Bank figured out a way to net out their transactions so that they could cut way down on the amount of capital that was needed to run the system. They did that in three weeks. The Federal Reserve Bank in the United States took years to do that. But boom, Alfa just did it. And suddenly the money was able to move pretty much the rate that it had before the ruble had dropped in value by 75%. I mean, they just, you know, they barely hiccuped over all that.
Daniel Satinsky: Yeah. I have to say I think when you were saying that I was thinking about the ineffectiveness of sanctions, and how the flexibility—
Patricia Dowden: Oh, yeah, Exactly.
Daniel Satinsky: —of Russians has been able to evade the dire impact of sanctions.
Patricia Dowden: Well, not only sanctions, but shutting down their access to the funding for the Central Bank. That’s the one I really thought was going to do them in, and frankly, I think it was a very stupid thing for America to do because I think everybody’s going to think twice about putting their reserves in the dollar. But no, I thought that was going to kill them. I’m just fascinated. By the way, the people, Nabiullina, who was the head person there, was part of this—I never knew—well, met her, I think—but she was a part of that Gaidar group, too. Those people, the group, that group is still, in one way or another, the heads of the banks or heads of the investment banks, or heads of the railroads or whatever. They’ve held on in a lot of positions.
Daniel Satinsky: Right. One theme about that period that maybe, I don’t know if you have an opinion about, but as I interviewed people, then capital markets developed after the collapse of the Soviet Union. There were no capital markets. All capital was allocated by centralized planning. So, there were banks that developed as these adjuncts of the industrial groups, and then there were investment banks, investment groups, and some private equity. And the U.S. government was very active in setting up the stock exchange and run setting up the first RTS*, and in providing advice about the stock exchange as a way of allocating capital.
And it seemed as if there was a conflict between banks and stock markets as to who was going to be the arbiter of economic input from capital. And it looks like pretty clearly banks won that battle rather than the stock market, as here the stock market has a lot to do with the allocation of capital. I don’t know, did you…am I imagining this, or is this something that you saw or have any thoughts about?
Patricia Dowden: Well, Bernie Sucher would be a wonderful source for you on this because he partnered, he was one of the partners who started Troika Dialog, which is probably still the largest investment bank in Russia, and they started it from nothing, he and the Armenian guy whose name doesn’t pop into my head, but who is, I think, still a big major player over there. And the guy who started the stock market was the husband of one of the members of the Gaidar group who is still a good friend of mine. He was quite a character.
So, I knew these people when these things were just getting started, and the question that you’re asking about, where capital ended up, I don’t know the answer to that. I can’t… It seems to me that all of them had their ups and downs. I mean, certainly the banks did. But I’m not a historian in economics. I’m sure somebody’s studied all that, but I don’t know the answer.
Daniel Satinsky: Right. It’s okay. I just thought you might have an opinion about it, so that’s all.
Patricia Dowden: Well, I will tell you this. The latest that I can remember—now my information may be out of date now—but the Sberbank bought Troika Capital, so it was a subsidiary. And Sberbank was the old Soviet—
Daniel Satinsky: Right, savings bank.
Patricia Dowden: Yeah. And as far as I know it still owns, so that would suggest to me that—
Daniel Satinsky: The banks were dominant.
Patricia Dowden: —the banks would… Well, and—well, the banks and the state. I mean, now, you know, all this stuff is getting taken back over by the state. I mean, I have an economist friend who’s quite expert in all this stuff, and he would be able to answer that, but I can’t. I just remember knowing about it in the baby days.
Daniel Satinsky: Right. Well, so, you know, when you were working with Sharon Tennison in this entrepreneurship program, what was your role in that? Was it to run specific programs, or was it as a trainer, or what were you doing with it?
Patricia Dowden: I was on her board, and I traveled with her and went to the… I mean, I think, to some extent, I was just a warm body that added a certain presence to the thing, as opposed to just Sharon being by herself. And so I learned a lot from it. I’m not so sure how much I was contributing to it, other than just being, you know, a presence. And I had the Alfa Bank experience, which gave me, probably gave me a little weight in the conversation. And I did run one of the projects, you know, for them.
Daniel Satinsky: Right, the lawyers.
Patricia Dowden: Yeah, the lawyer project.
Daniel Satinsky: Do you have any memory of any specific regions that made an impression on you in your travels around the country?
Patricia Dowden: I remember going…we went down to Volgograd, which was just, we had a wonderful trip down there. And first of all, I remember taking the train, and as we were coming into the city, I didn’t know about the statue—and the name’s not popping into my head—but this statue that’s what, two or three times the size of the... You know what I’m talking about?
Daniel Satinsky: The Mother Russia statue.
Patricia Dowden: Yeah. And all of a sudden that came in the window of the train, and I just gasped. I mean, it was incredible. And then one of the oligarchs from our program was in Volgograd, and so he took us out on his yacht. And it was a, you know, it was quite an exciting city.
I remember going to a little—well, I did a lot of work, actually, in Yekaterinburg. That would be the one where I would have the biggest impression. Because after I…I sort of went out on my own after I’d worked with Sharon for a while and worked with some of the—she had representatives in each city that she worked with, and Yekaterinburg was one of the big ones, and one of the more active recruiters for her. And so, this woman would set up seminars for me to teach at universities or, you know, various sponsors, and I would teach courses in business management kind of thing. And I did that a number of times in Yekaterinburg and other places, too, one in Tatarstan, Kazan, which I liked a lot, too.
But every place we went was, as I say, it was always…you know, there’s a little town called Penza which, you know, is not on anybody’s screen, but it was a lovely little place, nice little town, you know. The guy, one of the entrepreneurs, had a bear that he kept in a pit in his backyard, I mean… And drove one of Khrushchev’s old limousines or something like that that was bigger than his mother’s little izba*, you know, I mean, just real characters involved in her program.
I mean, you had this image of Russians as sort of these cowed people. I mean, they are not. There was so much always going on. Everybody thinks that the state rules everything. They had their own lives completely independent of what the government was doing. They did what they wanted. And seeing how budgets worked and some stuff like that was quite interesting.
Daniel Satinsky: And so, this whole experience, which you had no knowledge, you know, you didn’t know anything about Russia, it changed you, right?
Patricia Dowden: Oh, no, absolutely. Everybody on our team would say that. Everybody on our team and everybody, all the people that we worked on the Russian side, everybody said it was a life-changing experience. Everybody felt that way.
Daniel Satinsky: Yeah. And life-changing not just in the experience, but how else? How else would you say it was life-changing?
Patricia Dowden: Well, understanding Russia, that was my objective in wanting to go over there, aside from the fact that I found, from a project standpoint I thought it was a very interesting project. But I really wanted to understand Russia. You know, people talked about Russia’s soul and this kind of thing, and it was just this big black box. And I was just very curious about what that was, and how people would live under a communist system like they had. I had just no way to imagine it.
And I think I made a…I think my…my Russian friends tell me that I understand Russia pretty well now. And so, I mean, God knows I could have gone further, but to understand another completely different way of thinking and living was just a fascinating cultural experience. And, you know, the friends I made there, just, you know, fascinating people. I don’t know. I’d have to think more about the people to be specific about—
Patricia Dowden: Well, I became very friendly with a number of them, and some of whom I’m friends with today. I also, this one particularly effective guy, the one that had been in Afghanistan, ended up, after the whole thing had ended, he ended up taking a job with a man who was Putin’s economic advisor, his personal assistant, and so he was introducing—and so this guy had been a part of the Gaidar team, and through that I got introduced to about half of the Gaidar team, which is quite an interesting bunch of people, and very thoughtful people, very bright people, and people who thought a lot about—had been thinking for ten years before—the Gaidar team came together well before the Soviet Union collapsed and were sort of meeting in secret, and talking about the future of Russia and so on and so forth.
And so that’s why, when the Soviet Union collapsed, Yeltsin turned to Gaidar, who already had the team put together, and they’d been working together, you know, discussing these matters. They were in concert with, they were called the Zmeinaya [gorka], which means Snake Hill, and they worked with a university in St. Petersburg, St. Petersburg State University of Economics then, it’s now called UNECON. And so, these people were very thoughtful, very interesting people who had, you know, and we just…you can have wonderful conversations with Russians. I mean, they like to discuss ideas more than, way more than Americans do, and so the conversations were always just fascinating.
And so, I spent a lot of time with those guys, and there was one woman, just talking about their experiences, and what had happened during the… They had some astonishing experiences during the Gaidar period, you know, kidnappings and… I mean, very just…I could write my own book about all that stuff. So, I got to know them, and I had my Alfa Bank friends, and then I got involved with Sharon Tennison. And her scope was teaching entrepreneurs from the region. She didn’t get people from Moscow because she figured they had enough opportunities. They recruited from St. Petersburg and the regions. And so, I traveled around a lot with her to the regions and got to know—
Daniel Satinsky: And this was after—
Patricia Dowden: After Alfa Bank.
Daniel Satinsky: —the World Bank program ended.
Patricia Dowden: Yes.
Daniel Satinsky: Okay. And it ended because of the crisis?
Patricia Dowden: Yes.
Daniel Satinsky: Okay, all right. But that was your platform to then move on with Sharon Tennison.
Patricia Dowden: Yeah. Well, yeah, yeah, lots of other—
Daniel Satinsky: Okay, I’m sorry. I just wanted to get it straight.
Patricia Dowden: Yeah.
But, you know, here’s another piece of that, the ending of that project. Our project was going full steam ahead. We had made huge gains, and Alfa Bank was on record about it, and they wrote to the World Bank, and we went to the World Bank and said please let us keep this project going. It’s a great success, we’ve saved this bank in this crisis, so on and so forth, they want us—you know, they’d written and asked for it to continue. And here’s what they said to us. They said Alfa Bank was on one of our suspect lists, something like that. And I said, well, how many of the banks that are alive today were not on your suspect list. I mean, you know, the answer being clear. They’d all folded. The suspect list wasn’t worth the paper it was written on.
And they didn’t like Alfa Bank because Alfa Bank refused to tell them who the owners were. And so, they were always, that was always a big source of suspicion. Well, of course they didn’t want to tell them who the owners were. It’s like painting a target on your back. You just don’t do it. And if you understood anything about Russia in those days, when these guys are driving around in armor-plated cars with whole battalions around them to protect them, and bankers are getting murdered on the streets of Moscow with rockets. I mean, you had to…it was a dangerous business. I mean, Fridman had armed men sitting outside his office.
Daniel Satinsky: Yeah.
Patricia Dowden: And we had armed people all over the place, to get in our hotel and everything. But anyway, the World Bank had decided that although it was the bank—and that was the bank that everybody went to, by the way, when everything crashed, and all these international agencies had personnel over there, and they wanted to pay their people off and close down the offices. And who did they call to help them get the money out? They called me because they knew I could get it done through Alfa Bank. In other words, they had sent money over, it had disappeared in some of their good banks. Anyway, the point is that their list was worthless.
Daniel Satinsky: Was worthless. Right. But still they used that as a justification then to stop the program?
Patricia Dowden: To stop the project, yeah.
Daniel Satinsky: Yeah. So, why do you think the World Bank was so ill informed? I mean, I think that—I’m not sure how you would characterize it, but was it…? It just occurs to me that you had insights that they just as well could have had. Do you have any idea why?
Patricia Dowden: Well, I don’t know. I don’t know if they could just as well have had. I mean, bureaucracies are bureaucracies. And with respect to Russia, there was not much of a foundation to build on about knowledge inside of Russia, and so I don’t really know how they got whatever knowledge they had. I mean, I will tell you that the Russians are very contemptuous—it might be too strong a word—but of all these people who write books about Russia, they don’t, and I, you know. And some of them, I read them, and I think good Lord, where do they, you know. But you take three courses in one of the big universities and you can write a book. And you can speak the language, and you can write a book on Russia. I don’t speak Russian, and I’m sure a lot of people would disqualify me as being knowledgeable just because I don’t speak Russian, but…I don’t know. I don’t know how people claimed to get knowledge about Russia back in that day.
And I think I was astonishingly lucky to happen to fall into this couple of really astonishing nests, Alfa Bank being one, and this Gaidar group being the other. And then the third leg of it was these entrepreneurs who were quite remarkable people, and to watch how that was developing.
And there again, you know, people’s attitudes about what goes on in Russia just didn’t match up with what I saw. I’d go to these small towns and there would be nice restaurants, and nice hotels, and nice people, and so on and so forth. I remember there was a man named Edward Lucas, who used to write for The Economist, just the most astonishingly horrible articles about Russia, and he was a laughingstock at anybody who was there. He just, you know. I don’t know why they thought he was competent to write about Russia. It certainly dampened my attitude towards The Economist, I have to say.
Daniel Satinsky: Yeah. So, I mean, you were coming back and forth in these years. I want to come back to Sharon Tennison. I don’t want to let that go. I just am curious about this and…because I guess maybe because of my own experience. You had direct experience. You had conversations at a pretty high level with people there. And what was the reaction when you came home and talked to people in Philadelphia about Russia?
Patricia Dowden: That question has a sad answer. I’d say that even though I think I have a very educated, sophisticated group of friends who travel widely, there wasn’t much interest in the days when it was considered more interesting, and as time went on and Putin became the bad guy and all that, then, you know, there’s a lot of bigotry in this country towards Russia, and certainly among my friends, too. It’s rare that I find somebody that I really can talk to about Russia.
Daniel Satinsky: Yeah. That also was my experience, so I don’t want to dwell on that because I want to make sure we cover what that experience is that you had. And I want to come back to Sharon Tennison. Am I correct that she developed this entrepreneurship program in the regions—in a way it was different than the U.S. government programs which required that people speak English, that she didn’t require people to speak English, and that she, I believe, did some work with the Rotary Club to help her with it.
Patricia Dowden: She did, yeah.
Daniel Satinsky: Okay. So, maybe you could just kind of describe this program and what she developed, and then what you experienced with it.
Patricia Dowden: Well, by the time I got involved it was pretty widely considered to be the most successful internship program between the United States and Russia. There were a number of programs going on, and mostly they ended up being opportunities for people to come over here and go shopping. The program that—one of the things that was different about the program that Sharon developed was that the entrepreneurs had to pay part of their own way. I think they had to pay half, maybe. And so, they had some skin in the game. And her book will describe to you how she managed to get connected with Rotary.
And I’m not sure exactly when she started to get government funding. I think by the time I met her and became involved in it that we already had government funding. And I know that I went with her on calls to government officials fairly regularly to talk about the program. And everybody was very complimentary of it and said it was the best program that we were doing there. And they trained something like 6,000 entrepreneurs, all over the country, and developed quite a loyal group. She has had reunions, big reunions where people come all the way to the United States for these reunions. So, they—
Daniel Satinsky: How long a program was it? Were they in…was it like a short educational program? Was it an internship program? Can you describe—
Patricia Dowden: It was an internship program.
Daniel Satinsky: Internship, okay.
Patricia Dowden: Yeah. They were selected to come over. I think the normal stay was about two weeks. I ran one for lawyers myself, which was a strange group, I have to say. I don’t think they did a great job of selection on the other side for that one. But a lot of them were… And I think, and that was coming at a funny time, too, after the economy had collapsed and everything, and so there were a lot of reasons why people were sort of…had a different attitude about stuff.
But they’d come over for a couple weeks. They would be housed with people who lived in that city. They would be matched up with—and they were counterparts, interested counterparts. Cheesemakers would go meet with cheesemakers, and furniture makers would meet furniture makers and that sort of thing. In my case lawyers met lawyers and judges and so on and so forth. And they would meet with them. They would see their facilities, they would ask them questions, just sort of compare notes on how they did things. And the program ultimately sort of died because the entrepreneurs became so sophisticated that they weren’t learning much anymore.
Daniel Satinsky: What were the years that you’re talking about then when you were involved with this?
Patricia Dowden: I was involved 2001, maybe. Maybe 2000. I can’t remember exactly. I could look all that up.
Daniel Satinsky: That’s okay, I don’t need it exactly, but it’s around 2000, 2001, 2002. So, then how long did it continue until it reached the point where they didn’t need it anymore?
Patricia Dowden: I’m not sure I could be explicit about that.
Daniel Satinsky: Okay.
Patricia Dowden: It would probably have been… I’m reluctant to give you that as a part of the record. I could look it up.
Daniel Satinsky: Well, a ball park.
Patricia Dowden: Sorry?
Daniel Satinsky: A ballpark number here.
Patricia Dowden: Well, I don’t know. Well, 2008, of course, was the big global financial crisis. That may have taken a big bite of it out.
Daniel Satinsky: Okay. But the early 2000s.
Patricia Dowden: Oh, yeah.
Daniel Satinsky: And then the people who participated in this, I’m sure that she did follow-up and so on, but I assume that some of them became fairly successful in their localities—
Patricia Dowden: They did, yes.
Daniel Satinsky: —throughout Russia, right?
Patricia Dowden: Yes. Very successful.
Daniel Satinsky: My understanding is that the Rotary Clubs also spread throughout Russia, that there were a lot of active Rotary Clubs throughout Russia, right, to promote local business.
Patricia Dowden: Yeah. I don’t know what’s happened to that now. It would be interesting to find out.
Daniel Satinsky: Yeah. I don’t know. When I was researching the book I contacted some people from the Rotary Club, but my interviews were all done before the war in Ukraine. Before 2022, so I don’t know what has happened since then. I mean, I can guess, but sometimes guessing doesn’t work with Russia, so…
Patricia Dowden: Well, here’s what I would guess. I would guess that the Rotary Club is no longer officially involved, but the seeds were planted. There’re so many seeds that were planted. You know, one of your questions, I’ve forgotten exactly how it was phrased, but, you know, is it all for naught, and we, you know. No, I absolutely don’t believe that. I think they learned an incredible amount. I mean, the changes that I saw in the time I was there—and I was going until right before COVID—the changes were just astonishing. Just, you know, just astonishing. And even if you talk about the regions, the changes were just astonishing. And so you’d have a crisis, and all of a sudden you couldn’t afford imports anymore, and so all of a sudden, they learned how to make their own. I remember when they had the crisis where they couldn’t import cheese from France and all that. Well, then they, all of a sudden, instead of sending Dannon into all the grocery stores you’re seeing the Russian version of it. And they created, they just did—they’d do it overnight. I mean, it’s just fascinating how fast those people can adjust to a crisis.
After the crisis of 1998 I was just devastated. I mean, I just thought this is the end, you know, they’ll never survive this. Well, nobody—I remember walking around Red Square on a bright, sunny, wonderful fall day and nobody looked the least bit excited about it. You know, everybody’s out having a nice time and enjoying the fall weather and everything, and looking at me when I would talk to somebody, let it be known that I was pretty upset, they’d look at me like what’s the matter with you?
Some of these entrepreneurs that we were involved with set up barter enterprises within three weeks. They just organized, some way or another, ways to trade truckloads of tires for truckloads of popcorn. I mean, it was just astonishing. Alfa Bank did the same thing. Alfa Bank figured out a way to net out their transactions so that they could cut way down on the amount of capital that was needed to run the system. They did that in three weeks. The Federal Reserve Bank in the United States took years to do that. But boom, Alfa just did it. And suddenly the money was able to move pretty much the rate that it had before the ruble had dropped in value by 75%. I mean, they just, you know, they barely hiccuped over all that.
Daniel Satinsky: Yeah. I have to say I think when you were saying that I was thinking about the ineffectiveness of sanctions, and how the flexibility—
Patricia Dowden: Oh, yeah, Exactly.
Daniel Satinsky: —of Russians has been able to evade the dire impact of sanctions.
Patricia Dowden: Well, not only sanctions, but shutting down their access to the funding for the Central Bank. That’s the one I really thought was going to do them in, and frankly, I think it was a very stupid thing for America to do because I think everybody’s going to think twice about putting their reserves in the dollar. But no, I thought that was going to kill them. I’m just fascinated. By the way, the people, Nabiullina, who was the head person there, was part of this—I never knew—well, met her, I think—but she was a part of that Gaidar group, too. Those people, the group, that group is still, in one way or another, the heads of the banks or heads of the investment banks, or heads of the railroads or whatever. They’ve held on in a lot of positions.
Daniel Satinsky: Right. One theme about that period that maybe, I don’t know if you have an opinion about, but as I interviewed people, then capital markets developed after the collapse of the Soviet Union. There were no capital markets. All capital was allocated by centralized planning. So, there were banks that developed as these adjuncts of the industrial groups, and then there were investment banks, investment groups, and some private equity. And the U.S. government was very active in setting up the stock exchange and run setting up the first RTS*, and in providing advice about the stock exchange as a way of allocating capital.
And it seemed as if there was a conflict between banks and stock markets as to who was going to be the arbiter of economic input from capital. And it looks like pretty clearly banks won that battle rather than the stock market, as here the stock market has a lot to do with the allocation of capital. I don’t know, did you…am I imagining this, or is this something that you saw or have any thoughts about?
Patricia Dowden: Well, Bernie Sucher would be a wonderful source for you on this because he partnered, he was one of the partners who started Troika Dialog, which is probably still the largest investment bank in Russia, and they started it from nothing, he and the Armenian guy whose name doesn’t pop into my head, but who is, I think, still a big major player over there. And the guy who started the stock market was the husband of one of the members of the Gaidar group who is still a good friend of mine. He was quite a character.
So, I knew these people when these things were just getting started, and the question that you’re asking about, where capital ended up, I don’t know the answer to that. I can’t… It seems to me that all of them had their ups and downs. I mean, certainly the banks did. But I’m not a historian in economics. I’m sure somebody’s studied all that, but I don’t know the answer.
Daniel Satinsky: Right. It’s okay. I just thought you might have an opinion about it, so that’s all.
Patricia Dowden: Well, I will tell you this. The latest that I can remember—now my information may be out of date now—but the Sberbank bought Troika Capital, so it was a subsidiary. And Sberbank was the old Soviet—
Daniel Satinsky: Right, savings bank.
Patricia Dowden: Yeah. And as far as I know it still owns, so that would suggest to me that—
Daniel Satinsky: The banks were dominant.
Patricia Dowden: —the banks would… Well, and—well, the banks and the state. I mean, now, you know, all this stuff is getting taken back over by the state. I mean, I have an economist friend who’s quite expert in all this stuff, and he would be able to answer that, but I can’t. I just remember knowing about it in the baby days.
Daniel Satinsky: Right. Well, so, you know, when you were working with Sharon Tennison in this entrepreneurship program, what was your role in that? Was it to run specific programs, or was it as a trainer, or what were you doing with it?
Patricia Dowden: I was on her board, and I traveled with her and went to the… I mean, I think, to some extent, I was just a warm body that added a certain presence to the thing, as opposed to just Sharon being by herself. And so I learned a lot from it. I’m not so sure how much I was contributing to it, other than just being, you know, a presence. And I had the Alfa Bank experience, which gave me, probably gave me a little weight in the conversation. And I did run one of the projects, you know, for them.
Daniel Satinsky: Right, the lawyers.
Patricia Dowden: Yeah, the lawyer project.
Daniel Satinsky: Do you have any memory of any specific regions that made an impression on you in your travels around the country?
Patricia Dowden: I remember going…we went down to Volgograd, which was just, we had a wonderful trip down there. And first of all, I remember taking the train, and as we were coming into the city, I didn’t know about the statue—and the name’s not popping into my head—but this statue that’s what, two or three times the size of the... You know what I’m talking about?
Daniel Satinsky: The Mother Russia statue.
Patricia Dowden: Yeah. And all of a sudden that came in the window of the train, and I just gasped. I mean, it was incredible. And then one of the oligarchs from our program was in Volgograd, and so he took us out on his yacht. And it was a, you know, it was quite an exciting city.
I remember going to a little—well, I did a lot of work, actually, in Yekaterinburg. That would be the one where I would have the biggest impression. Because after I…I sort of went out on my own after I’d worked with Sharon for a while and worked with some of the—she had representatives in each city that she worked with, and Yekaterinburg was one of the big ones, and one of the more active recruiters for her. And so, this woman would set up seminars for me to teach at universities or, you know, various sponsors, and I would teach courses in business management kind of thing. And I did that a number of times in Yekaterinburg and other places, too, one in Tatarstan, Kazan, which I liked a lot, too.
But every place we went was, as I say, it was always…you know, there’s a little town called Penza which, you know, is not on anybody’s screen, but it was a lovely little place, nice little town, you know. The guy, one of the entrepreneurs, had a bear that he kept in a pit in his backyard, I mean… And drove one of Khrushchev’s old limousines or something like that that was bigger than his mother’s little izba*, you know, I mean, just real characters involved in her program.
I mean, you had this image of Russians as sort of these cowed people. I mean, they are not. There was so much always going on. Everybody thinks that the state rules everything. They had their own lives completely independent of what the government was doing. They did what they wanted. And seeing how budgets worked and some stuff like that was quite interesting.
Daniel Satinsky: And so, this whole experience, which you had no knowledge, you know, you didn’t know anything about Russia, it changed you, right?
Patricia Dowden: Oh, no, absolutely. Everybody on our team would say that. Everybody on our team and everybody, all the people that we worked on the Russian side, everybody said it was a life-changing experience. Everybody felt that way.
Daniel Satinsky: Yeah. And life-changing not just in the experience, but how else? How else would you say it was life-changing?
Patricia Dowden: Well, understanding Russia, that was my objective in wanting to go over there, aside from the fact that I found, from a project standpoint I thought it was a very interesting project. But I really wanted to understand Russia. You know, people talked about Russia’s soul and this kind of thing, and it was just this big black box. And I was just very curious about what that was, and how people would live under a communist system like they had. I had just no way to imagine it.
And I think I made a…I think my…my Russian friends tell me that I understand Russia pretty well now. And so, I mean, God knows I could have gone further, but to understand another completely different way of thinking and living was just a fascinating cultural experience. And, you know, the friends I made there, just, you know, fascinating people. I don’t know. I’d have to think more about the people to be specific about—
Daniel Satinsky: Well, no, but it’s that insight, knowledge that you got that I want to try to preserve through this process of doing the interview with you, and it’s part of the goal of this.
Patricia Dowden: Yeah, I guess it’s one of those things that I’m not sure you can explain it. Russia is not…it’s not easy to explain Russia, that’s for sure. But I, but, you know, what I…what I do understand now is that I think that we…not understanding Russia has been a terrible—has caused a terrible crisis. I don’t think we needed to be where we are now with this war. I do not forgive Putin for what he’s done. I mean, I was explaining to a Russian friend of mine about a week ago about this, and she’s going through all the reasons why, bad stuff that we had done, you know, moving forward with NATO and so on and so forth.
And I said look, I agree with you about all that, I said, but let me just give you an analog here. Let’s say that two neighbors have a problem with each other, and one of them is really nasty and does all kinds of bad stuff that get on the nerves of the other person, and it goes on for a while, and finally the good neighbor murders the bad neighbor. That is…there’s no excuse for that. No matter what other bad stuff may have preceded it, there is no excuse for that. And so, I think I feel that way about this war. But I wish that we had done a number of things differently. I mean, we treated them…we treated Putin like an outsider from the beginning, and he finally, I think, just said okay, then I’ll be an outsider. And I don’t think it needed to happen.
Daniel Satinsky: Yeah. Well, okay. I don’t know if there are things that you wanted to discuss that we didn’t get to in this interview. Are there? Because I think we kind of have wrapped our arms around this and gotten your experience. Is there more that you wanted to say or that I didn’t ask you about?
Patricia Dowden: Yeah, you know, I could go on for days about my experiences in Russia. I had fascinating experiences there. But we’ve covered the top line of the big pieces of my… Well, I guess not, no, I guess there is one more piece, actually, a pretty big piece, as a matter of fact. After the experience with Sharon…let me see if I can remember how this… One of my Gaidar group friends introduced me to the university in St. Petersburg, which is a very big one. It’s not the St. Petersburg State University, it’s the one that’s—I don’t know if you know St. Petersburg very well, but it’s called UNECON. It was—
Daniel Satinsky: Yeah, I actually met the vice rector there at one point, so I know what you’re talking about.
Patricia Dowden: Maksimtsev?
Daniel Satinsky: Yeah. I think you might have introduced me, I’m not even sure, back when we first started this. But that’s okay, go ahead with this.
Patricia Dowden: Well, his name is Maksimtsev now. He replaced somebody when I first started working with them who had been very corrupt. But anyway, so it’s now called UNECON. And so, my friend Slava, who was one of the Gaidar group, took me up there to that university, and I was supposed to help with them designing some new curriculum or something or other. And so, I met with the rector and so on and so forth, and they were very eager to have a connection, an American connection. They had a program for American students and so on and so forth, and they wanted help with introductions in the United States.
And I found out while I was there that they had a terrible reputation for corruption. And so, I just, I couldn’t let that one go. And I had a colleague at Wharton who I’d done some work with when the lawyers had come, and so I got him… What I did was I wrote a letter to Maksimtsev and I said, you know, we really appreciate meeting with you and working with your university, would be happy to continue it, but I said there’s a major issue here, you know, this corruption, and I understand this corruption issue—and I’ve forgotten how I put it—but I said I just, I think we would like to work on this with you and like to have UNECON change its brand to standing for ethics, for business ethics.
And so, they agreed to that, and we started a series of seminars which we did every year with my colleague from Wharton and I and this Gaidar guy who was a professor at that university. And we would organize pretty important conferences with people like Jack Matlock, for example, was our keynote at one point. We had some pretty big names who participated in those things to discuss about Russian values and business ethics and stuff.
And that sent me off on another leg which involved developing an online evaluation system of business ethics for companies to use, which I did with a lot of meetings with corporations in Russia and all that. And we got it developed and up, and it was funded by the Eurasia Group. Got it up and running and then, you know, things sort of came apart with the Putin thing. I guess it came apart right—it didn’t come apart until COVID. COVID started to shut things down and then, you know, events since then. So, that’s that, and—
Daniel Satinsky: So, it lasted past 2014 then. You were—
Patricia Dowden: Oh, yeah. No, I did a lot of work on my own past 2014, mostly with this colleague from Wharton. And we would go over…I would go over at least twice year, maybe three times, and he was usually with me one or two times, and we did various seminars in various places. Plus, we did this annual seminar with UNECON. UNECON was FINEC.
Daniel Satinsky: Yeah, right. I know those acronyms. So, who came to these seminars on business ethics?
Patricia Dowden: It was a lot of academics, but a lot of businesspeople. They were responsible, UNECON was sort of responsible for the guest list. And it would be some political people. One of the people that was one of our speakers, and one of the last ones, was the deputy minister of…oh boy, it was a big agency that had to do with standards and stuff like that. He’s a lovely guy. So, we had people from the political realm. But as I say, a number of academics, academics and businesspeople, basically.
Daniel Satinsky: You were advocating for forms of business ethics, and what was the incentive then for Russian businesspeople to adopt that kind of ethical approach?
Patricia Dowden: Well, they wanted to do global business. A lot of these people were working for American companies, and so they were interested in it because their American companies were interested in it, and anybody who wanted to do business with them would, the idea of this online self-evaluation system was for them to demonstrate their proficiency on these subjects to potential partners and suppliers, contractors, whatever, and to use it as an internal auditing tool, too.
And it was quite well received. I mean, they helped develop it. They were part of seminars where we would talk about what issues needed to be confronted with it and things like anonymity of whoever was filling out the form and stuff like that. And there were some very interesting cultural issues that came up there. But we spent a lot of money getting this thing online, and it was of interest to international groups and everything, and then poof, it disappeared.
Daniel Satinsky: What was maybe either the most important concept you were trying to get across or maybe the most difficult concept in terms of that business culture that you were trying to bring?
Patricia Dowden: Well, actually, in the process I ended up getting very interested in the subject of trust, and I realized through my experiences in Russia—maybe this is…I’m glad you brought that question up because actually that may be my most important takeaway, is the importance of trust. Russians are not trusting people, as I’m sure you know, and as one person said to me it’s poison in our veins. And so, developing, you know, getting them to understand the importance of trust.
And my Wharton colleague and I were published, actually, on the Russian International Affairs Council website, which is the think tank of the Ministry of Foreign Relations. We published an article on stakeholder trust. And we published articles in the United States, too. And that is…I mean, I think that’s the key to good business. It’s a key to everything, you know, personal relations, political, international relations, everything. If you don’t have trust, you’ve just got no foundation.
And so ultimately, we sort of morphed from business ethics techniques and stuff. I mean, there were lots of articles being written about business ethics rules and things back in those days, and various ways to measure it. There was an ISO something or other that had pages and pages of questions you had to answer for that. And ours was intended to be sort of an abbreviated version of that. But it ultimately came down to how do you establish trust. And one of the ways you do it is to know how…to know what the standards of behavior are so that you can trust the way people operate. You have a common language for what’s appropriate conduct in managing your people and managing your relationships with your customers and so on. But at the bottom line it was about trust.
Daniel Satinsky: And part of it was developing techniques for building trust?
Patricia Dowden: Yeah. Well, but it, you know, build—I mean, like obviously the rule of law is a big piece of trust, that you know, you have sort of…that’s the importance in democracy. It’s not really as important as institutions, that you need to be—you have a way of knowing what the rules are and expecting that everybody will have to abide by those rules. Of course, we are now throwing that all into a [unintelligible] in our—
Daniel Satinsky: Yeah, so my experience with Russians was trust was family members and school classmates. Those were the networks of trust.
Patricia Dowden: Yes.
Daniel Satinsky: And strangers were not trusted.
Patricia Dowden: That’s right. That’s my experience, too.
Daniel Satinsky: And so, the idea that you would put an RFP out and select a company that you didn’t know because they won a competition, you know, was kind of a very strange notion in the Russian context.
Patricia Dowden: Well, and the idea of this ethics, business ethics self-evaluation was to develop some common language for what the behavior was of the company, what the culture was in the company. And then, you know, and if you…and you could audit the results of this questionnaire and give some assurance to—you know, it’s like auditors here—I mean, it gives some assurance to your counterparts or your customers or your contractors or whoever that they can expect certain rules of behavior from you.
Daniel Satinsky: Right. So, this was just getting started when relations were breaking down, so do you know if it’s still being used in any sense at all now?
Patricia Dowden: I don’t know because basically the website was, you know, all of a sudden, the dot RU websites disappeared, and so I don’t know. I mean, anybody who had—there were different, there were companies who were using it, and whether they’re still using it, what happened to all that I just don’t know. We gave a lot of seminars about it and introduced people to it and so on. We had a pretty good group of colleagues who were supportive of it and so on and so forth. But first of all, a lot of those people ended up getting transferred out of Russia by their companies. And, you know, so who knows? I’ve kept up with some of them, but I don’t know. But I believe, I believe that in fact there’s pieces of this stuff there. And whether, what, you know, whether it will morph into something else, how it…I don’t know. I don’t know where it will end up. But I do believe that there were seeds planted, and they will grow.
Daniel Satinsky: Yeah. Well, maybe that’s a good place for us to sort of wrap this up because I think yeah, the future is unknown. But the point is it doesn’t come from nothing, and it comes from seeds, and from past practices that manifest themselves in ways that we can’t predict.
Patricia Dowden: Yeah, I guess it’s one of those things that I’m not sure you can explain it. Russia is not…it’s not easy to explain Russia, that’s for sure. But I, but, you know, what I…what I do understand now is that I think that we…not understanding Russia has been a terrible—has caused a terrible crisis. I don’t think we needed to be where we are now with this war. I do not forgive Putin for what he’s done. I mean, I was explaining to a Russian friend of mine about a week ago about this, and she’s going through all the reasons why, bad stuff that we had done, you know, moving forward with NATO and so on and so forth.
And I said look, I agree with you about all that, I said, but let me just give you an analog here. Let’s say that two neighbors have a problem with each other, and one of them is really nasty and does all kinds of bad stuff that get on the nerves of the other person, and it goes on for a while, and finally the good neighbor murders the bad neighbor. That is…there’s no excuse for that. No matter what other bad stuff may have preceded it, there is no excuse for that. And so, I think I feel that way about this war. But I wish that we had done a number of things differently. I mean, we treated them…we treated Putin like an outsider from the beginning, and he finally, I think, just said okay, then I’ll be an outsider. And I don’t think it needed to happen.
Daniel Satinsky: Yeah. Well, okay. I don’t know if there are things that you wanted to discuss that we didn’t get to in this interview. Are there? Because I think we kind of have wrapped our arms around this and gotten your experience. Is there more that you wanted to say or that I didn’t ask you about?
Patricia Dowden: Yeah, you know, I could go on for days about my experiences in Russia. I had fascinating experiences there. But we’ve covered the top line of the big pieces of my… Well, I guess not, no, I guess there is one more piece, actually, a pretty big piece, as a matter of fact. After the experience with Sharon…let me see if I can remember how this… One of my Gaidar group friends introduced me to the university in St. Petersburg, which is a very big one. It’s not the St. Petersburg State University, it’s the one that’s—I don’t know if you know St. Petersburg very well, but it’s called UNECON. It was—
Daniel Satinsky: Yeah, I actually met the vice rector there at one point, so I know what you’re talking about.
Patricia Dowden: Maksimtsev?
Daniel Satinsky: Yeah. I think you might have introduced me, I’m not even sure, back when we first started this. But that’s okay, go ahead with this.
Patricia Dowden: Well, his name is Maksimtsev now. He replaced somebody when I first started working with them who had been very corrupt. But anyway, so it’s now called UNECON. And so, my friend Slava, who was one of the Gaidar group, took me up there to that university, and I was supposed to help with them designing some new curriculum or something or other. And so, I met with the rector and so on and so forth, and they were very eager to have a connection, an American connection. They had a program for American students and so on and so forth, and they wanted help with introductions in the United States.
And I found out while I was there that they had a terrible reputation for corruption. And so, I just, I couldn’t let that one go. And I had a colleague at Wharton who I’d done some work with when the lawyers had come, and so I got him… What I did was I wrote a letter to Maksimtsev and I said, you know, we really appreciate meeting with you and working with your university, would be happy to continue it, but I said there’s a major issue here, you know, this corruption, and I understand this corruption issue—and I’ve forgotten how I put it—but I said I just, I think we would like to work on this with you and like to have UNECON change its brand to standing for ethics, for business ethics.
And so, they agreed to that, and we started a series of seminars which we did every year with my colleague from Wharton and I and this Gaidar guy who was a professor at that university. And we would organize pretty important conferences with people like Jack Matlock, for example, was our keynote at one point. We had some pretty big names who participated in those things to discuss about Russian values and business ethics and stuff.
And that sent me off on another leg which involved developing an online evaluation system of business ethics for companies to use, which I did with a lot of meetings with corporations in Russia and all that. And we got it developed and up, and it was funded by the Eurasia Group. Got it up and running and then, you know, things sort of came apart with the Putin thing. I guess it came apart right—it didn’t come apart until COVID. COVID started to shut things down and then, you know, events since then. So, that’s that, and—
Daniel Satinsky: So, it lasted past 2014 then. You were—
Patricia Dowden: Oh, yeah. No, I did a lot of work on my own past 2014, mostly with this colleague from Wharton. And we would go over…I would go over at least twice year, maybe three times, and he was usually with me one or two times, and we did various seminars in various places. Plus, we did this annual seminar with UNECON. UNECON was FINEC.
Daniel Satinsky: Yeah, right. I know those acronyms. So, who came to these seminars on business ethics?
Patricia Dowden: It was a lot of academics, but a lot of businesspeople. They were responsible, UNECON was sort of responsible for the guest list. And it would be some political people. One of the people that was one of our speakers, and one of the last ones, was the deputy minister of…oh boy, it was a big agency that had to do with standards and stuff like that. He’s a lovely guy. So, we had people from the political realm. But as I say, a number of academics, academics and businesspeople, basically.
Daniel Satinsky: You were advocating for forms of business ethics, and what was the incentive then for Russian businesspeople to adopt that kind of ethical approach?
Patricia Dowden: Well, they wanted to do global business. A lot of these people were working for American companies, and so they were interested in it because their American companies were interested in it, and anybody who wanted to do business with them would, the idea of this online self-evaluation system was for them to demonstrate their proficiency on these subjects to potential partners and suppliers, contractors, whatever, and to use it as an internal auditing tool, too.
And it was quite well received. I mean, they helped develop it. They were part of seminars where we would talk about what issues needed to be confronted with it and things like anonymity of whoever was filling out the form and stuff like that. And there were some very interesting cultural issues that came up there. But we spent a lot of money getting this thing online, and it was of interest to international groups and everything, and then poof, it disappeared.
Daniel Satinsky: What was maybe either the most important concept you were trying to get across or maybe the most difficult concept in terms of that business culture that you were trying to bring?
Patricia Dowden: Well, actually, in the process I ended up getting very interested in the subject of trust, and I realized through my experiences in Russia—maybe this is…I’m glad you brought that question up because actually that may be my most important takeaway, is the importance of trust. Russians are not trusting people, as I’m sure you know, and as one person said to me it’s poison in our veins. And so, developing, you know, getting them to understand the importance of trust.
And my Wharton colleague and I were published, actually, on the Russian International Affairs Council website, which is the think tank of the Ministry of Foreign Relations. We published an article on stakeholder trust. And we published articles in the United States, too. And that is…I mean, I think that’s the key to good business. It’s a key to everything, you know, personal relations, political, international relations, everything. If you don’t have trust, you’ve just got no foundation.
And so ultimately, we sort of morphed from business ethics techniques and stuff. I mean, there were lots of articles being written about business ethics rules and things back in those days, and various ways to measure it. There was an ISO something or other that had pages and pages of questions you had to answer for that. And ours was intended to be sort of an abbreviated version of that. But it ultimately came down to how do you establish trust. And one of the ways you do it is to know how…to know what the standards of behavior are so that you can trust the way people operate. You have a common language for what’s appropriate conduct in managing your people and managing your relationships with your customers and so on. But at the bottom line it was about trust.
Daniel Satinsky: And part of it was developing techniques for building trust?
Patricia Dowden: Yeah. Well, but it, you know, build—I mean, like obviously the rule of law is a big piece of trust, that you know, you have sort of…that’s the importance in democracy. It’s not really as important as institutions, that you need to be—you have a way of knowing what the rules are and expecting that everybody will have to abide by those rules. Of course, we are now throwing that all into a [unintelligible] in our—
Daniel Satinsky: Yeah, so my experience with Russians was trust was family members and school classmates. Those were the networks of trust.
Patricia Dowden: Yes.
Daniel Satinsky: And strangers were not trusted.
Patricia Dowden: That’s right. That’s my experience, too.
Daniel Satinsky: And so, the idea that you would put an RFP out and select a company that you didn’t know because they won a competition, you know, was kind of a very strange notion in the Russian context.
Patricia Dowden: Well, and the idea of this ethics, business ethics self-evaluation was to develop some common language for what the behavior was of the company, what the culture was in the company. And then, you know, and if you…and you could audit the results of this questionnaire and give some assurance to—you know, it’s like auditors here—I mean, it gives some assurance to your counterparts or your customers or your contractors or whoever that they can expect certain rules of behavior from you.
Daniel Satinsky: Right. So, this was just getting started when relations were breaking down, so do you know if it’s still being used in any sense at all now?
Patricia Dowden: I don’t know because basically the website was, you know, all of a sudden, the dot RU websites disappeared, and so I don’t know. I mean, anybody who had—there were different, there were companies who were using it, and whether they’re still using it, what happened to all that I just don’t know. We gave a lot of seminars about it and introduced people to it and so on. We had a pretty good group of colleagues who were supportive of it and so on and so forth. But first of all, a lot of those people ended up getting transferred out of Russia by their companies. And, you know, so who knows? I’ve kept up with some of them, but I don’t know. But I believe, I believe that in fact there’s pieces of this stuff there. And whether, what, you know, whether it will morph into something else, how it…I don’t know. I don’t know where it will end up. But I do believe that there were seeds planted, and they will grow.
Daniel Satinsky: Yeah. Well, maybe that’s a good place for us to sort of wrap this up because I think yeah, the future is unknown. But the point is it doesn’t come from nothing, and it comes from seeds, and from past practices that manifest themselves in ways that we can’t predict.
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