During a new spiral of economic crisis, it becomes increasingly difficult to build new businesses and develop existing ones. In an interview with RIAC, Alexander Rappoport, a lawyer, an expert on investment, and a restaurateur, shares his insights on how to set up in business, work with investments and look for a niche in the restaurant business.
You have worked for many years in US investment banks. Could you give some advice to an investor who is starting his career in a declining market?
Any advice to an investor should be given on the basis of the latter’s philosophy, political and life views. It makes no sense asking a doctor if he can cure the patient until he at least knows the diagnosis. Here we have exactly the same story. Any crisis is always an opportunity if a person believes that this crisis will sooner or later come to an end. Entering the market is always better if it is at a low point, so my general advice to an abstract investor is to get a good look at the situation. Americans like to repeat that the most dangerous way of fishing is ground fishing, that is, you should never specifically look for the bottom, but have to determine the trend.
Many say that they will never leave Russia, because it is the best place to conduct business. Others, on the contrary, are leaving the country. Do you believe that our market is favorable for building a business?
To your question, I disagree with relating the phenomena of business and exiting to one another. I think that the issues of coming and going are much more complex due to emotional and spiritual aspects that they involve. Today it is possible to make investments practically anywhere in the world. As for the market, it is quite obvious that Russia is currently facing a crisis, and the market now is noticeably down.
Are there areas of business, in which the risks can be assessed accurately without professional help?
It is impossible to know everything all by oneself; there are dozens of things that someone does better; and it’s necessary to learn to resort to professionals’ help. However, there are a lot of areas and opportunities where your own feelings play the decisive role. If you always turn to specialists for evaluating such a subjective thing as the risk probability, then your decision is bound to be the average statistical and theoretical one.
To get ahead, you have to believe in the success of the plan based solely on your own ideas and beliefs that can be right and can be wrong, but they are your own ones. I do not believe in calculations of abstract interest and risk conditions made for me by someone else. It is another matter if the business is already there: then analyzing economic models and the data could be done by professionals.
In your interviews you have noted that Russian legislation significantly complicates the life of corporations. Does the need to reform our legal system apply to other areas of the law?
It's an open secret that our legislation, including the corporate one, has a lot of serious flaws. I think that our offshoring is largely due not so much to economic conditions as to legal aspects. People went offshore not for tax evasion (today many people want to make money and live peacefully and honestly), but because the legal framing left much to be desired. It is much more convenient to draw up a shareholders' agreement or a contract for the purchase or sale under the British or some other jurisdiction than under the Russian one. It is necessary to create economic, tax and legal systems that are comfortable for business in all respects.
They say that the system of international law is outdated and cannot resolve our current problems in international relations.
I do not really know what the international law is. If you are talking about arrangements between countries and about sophisticated international conventions, it is beyond the scope of my competence. And what is implied by the international law in general is not very clear. All the issues are resolved within the sovereign right – be it British, German, French, etc.
Could you tell us about an international transaction or a legal case that is strongly impressed upon your memory?
We do not talk publicly about our transactions or customers. It’s quite difficult to single something out, but, especially in Russia, I always face some kind of conflict, which is not possible under the British law. Every time you have to figure out how to accommodate this or that right to a given situation. In my view, Russian lawyers and businessmen should not face such problems.
Could you share your experience of dealing with Eastern (Chinese) capital and businessmen? Do Western practices differ from Eastern ones?
Due to their mentality, their approach is diametrically opposed to ours, just as Western medicine differs from Chinese medicine. In Asia, people perceive many things not as we do, and creating certain patterns is difficult enough. However, they carry out the process of negotiating and conclusion of agreements in an entirely different way. Nevertheless, the current Chinese medicine tries to adopt certain ideas and practices, peculiar to Western medicine. Chinese businessmen today are very actively using the rules that have been established within the commonly agreed European principles.
However, the classic style of the structure of negotiating and the system of agreements differ dramatically. It all begins with producing a business card. If you hold out a card to a Chinese with one hand, no matter right or left, he will take it as an insult, and that’s the end of it. The point is that the card should be held forth to a Chinese with both hands. These things may seem strange to Europeans, but we must know them. However, we often underestimate and neglect these aspects.
In your opinion, what mentality is easier for us to adapt to? Is it easier for us to work with the Europeans or with the Eastern partners?
I think that the ability to adapt is the enormous advantage of the Russians. We can adapt to the conditions, to the regime, to everything that happens, since we have been actively taught to do so for the past 100 years.
Given the current situation, will the partial isolation of Russia affect the future business relations of companies with foreign partners?
Of course, it will affect them. Today many Western partners often for no reason at all are afraid to deal with the Russian side. Banks and giant companies are particularly suspicious of us. Many perceive any contacts with partners from Russia with great fear.
What influence have the sanctions had on your restaurant business?
We live in this world, we feel the aftermath of the exchange of sanctions, we see how much the ruble and the dollar cost, we understand that the price of money is becoming very different. Almost all leases were initially signed in foreign currencies (it was the usual business practice). It should be noted that the majority of landlords showed understanding and cooperated, when currency rates began to jump.
As for the menu in my restaurants, they required no special adaptation, caused by the imposition of sanctions. We removed from the menu certain dishes that could not be prepared rightly under the new conditions, but they were few in number. If we are talking about meat or fish, there remain certain alternatives.
How do you come up with the concept of your restaurants?
From the times of my Soviet youth, I do not like to be in the crowd and or be squeezed, so I like to be alone in the niche that has not been filled. That's why I'm trying to find a vacant niche. There are many of them in the restaurant business, and that’s where my own intuition, knowledge and feelings come into play: it is necessary to make a shrewd guess which niche may enjoy the demand and which will not.
Until now, the restaurants that we have opened (there are six of them) occupy a niche that we, for any of several reasons, find sustainable. The existence of a maximum of three Russian restaurants in Moscow, the capital of Russia, seems a sheer absurdness to us, so we opened the modern versions of such institutions.
A question to you as a collector. The value of virtue of different countries is undeniable. Is anything worthy being created in Russia now?
In the first place, I do not consider myself a collector. Yes, sometimes I do bring something to the restaurant from home. Like any other person, I have at home something old or a small set of certain things, but it is very different from a collection. I treat this as a decoration. For example, I have always liked the Russian propaganda porcelain, but I wouldn’t call the items in my possession a collection for love or money, because the system and the size are the integral features of any collection. Again, my keenness for art objects has more to do with decoration than with anything else.
Today, an enormous number of works of art that are in demand now and are likely to be highly appreciated in the future are created in our vast and great country. If you look closely at the Russian artists, their works are highly praised at all Biennales, at Kandinsky Prize contests and other forums. These artists are exceptionally talented people with enormous potential. I think that everything that is related to art in this or that way has a chance to be in demand at any time, including today.
Many people believe that all the good things belong to the past, and nothing new will ever be as great.
You remember the lines of Borodino poem by our poet Mikhail Lermontov: “Yea, were there men when I was young, Whose songs your tribe is not to ‘ve sung.” This repeats from generation to generation – it seems to us that today's generation is light-minded and is not as good as the previous one. But we should understand that such ideas are no more that an illusion, and take it easy and with a grain of salt. There is no good or bad generation, every generation has its outstanding people and its mediocrities, there have always been and will always be villains and good people. In my opinion, it’s the law of the universe.
Interviewer: RIAC Website Editor Maria Smekalova
