Taiwan, so this will be, i think, quite a bit more entertaining. And i really myself am excited about it. To celebrate the publication of a new book, the siberian chop siberia job. And were going to learn more about the true story behind it. Now, when a book is embossed with the words based on a true story, the immediate question that every reader has is whats fact and whats fiction. Today, were going to get it from the source. Whats fact and whats fiction. So, john, we were expecting to really know by the time that we leak John Kleinheinz is a person of great importance here at hoover. He is, in fact the chair of the hoover board of overseers and a great supporter of the institution. He graduated from stanford in 1984 with a degree in economics, and john began his career as an investment banker. He worked in tokyo and new york and london and then he moved to texas in 1993, and he was a partner in an Investment Firm where he managed the Russia Value Fund, one of the earliest funds to invest in russia. And he formed the and formed at the inception of the russian stock market following the Voucher Privatization Program in 1994. A lot more to come on this, john is the ceo today of clients capital partners, based in fort worth. His investment activity spans a variety of areas, including japan, u. S. Energy and Technology Markets and private equity. Now hes in conversation with hoover senior fellow stephen kotkin. Steve is a foremost historian and especially a scholar on the soviet union. In fact, steve has written the most highly regarded biography piece of Joseph Stalin and so he is wellsuited to this task. Now to top up Stephen Johns conversation and to entice you to purchase your own copy of the book. After this event, i want to read part of the forward written by the author, josh heyman. Our last disclaimer as regards this book being fiction based on a true story, i dont want to be too specific about whats real and what isnt. Dont assume its the crazy parts. The caspian sea fishing trip, for instance, or the club feud kidnaping that are made up. It was mostly the banal, technical stuff that seemed most likely to get people into trouble. Those bits of borderline absurd ism and many others really happened. Postsoviet russia was, he says, the wild, wild west of the east. Well, i can tell you that i spent a lot of time in postsoviet russia and the wild, wild west. Never thought of being that wild. And so let me turn it to john and steve. Welcome, everybody. Its nice to see so many familiar faces, including familiar faces from russia in the 1990s. Oh, we have two people who join the Hoover Institution relatively recently. One of whom has published the book. And its not me. Its our chair of the board of overseers. So im going to guess that youre annual Performance Review was going to be better than mine this year. Yeah. And im going to have to do better next year. Yeah, well, im not sure the piano on this book is going to be be any good. Well wait the jurys out on that. And we have the possibility to increase it right here as we sit. So lets start from the beginning. How does an upstanding family man from texas with a beautiful young wife go end up in russia in the 1990s . Of all places. Yeah, thats an excellent question. And before i answer, i just want to thank you, steven and condi, for offering to host this event. I know theres been a dozens and hundreds of really impressive fellows and folks on this stage whove whove written fabulous books and well researched books. And i just want to assure you that that this isnt one of them. This is fiction. This is this is entertain me. This is a three hour read. So its it may be the only fictional book thats ever been up here, but. So. So how did how did we get to russia . How did i get to russia . I was running i was a junior partner in a emerging market fund. And i got calls from a number of people that said you have to look at russia. Its interesting, a market as weve never seen the berlin wall had fallen a few years earlier. The economy had the command economy had spun out of control and had basically frozen in by by 1992, the place was just distraught. There were no go to moscow. There were no cars on the street. Theres no no no goods in the shops. Everybody walked around with their head held low and. And then in 94, i went back and i saw a whole different picture. The the the green roots of the green shoots of the free market system had started. People were excited. Everybody had a deal. Investors were showing up from all around the world to look at the assets, assets in russia were trading it one 2 of the value theyd be trading at if they were trading on a western exchange or the u. S. And it was just a very exciting time and it was a really unique opportunity to make money. Yeah. Okay. I was there to and there were some issues that would not have inspired a lot of confidence and not that i had any money to invest, but im not sure i would have had the comfort insight to think that this is a Good Deal Investment opportunity as opposed to, oh my god, whats going on here . This is a bit wild. So what gave you the confidence that the Investment Opportunity was greater than the risks that the upside was was greater than the risk . So good question. So marshall and i actually my my beautiful young wife whos not quite as young anymore, but we were there and she looks pretty young to me there, dude. She she looks great. But, you know, we were there in 92 and we saw it. We saw such a bleak picture. And and then i was there 18 months later and to see the same streets and the same places in 18 months, to be completely transformed. And you just knew something was up. And remember, russia had vast pools of human capital. You know, they beat us into space. In the space race. They gave us a good run in the arms race. My my view was that russia, you know, they had had tons of oil. They were one of the largest owners of oil in the world. My view is that russia just had a bad system. And if they if they used the free market system and and rule of law, that that these investments that were trading at 1 to 2 of of Intrinsic Value would would close the gap with with western Oil Companies and western telecommunications companies. So it wasnt it wasnt a bet that russia was going to become like the us or europe. It was just a bet that they would make progress toward that goal, because if, if, if, remember, if, if a stock goes from being trading at a one or 2 of value to trading at a 20 of value, youve made ten times your money and so thats what gave me the confidence. Yeah, ten times your money. That would give me confidence too. Its just the murders and other things that would be complex for. Okay, lets, lets accept that that you saw a lot of upside because the valuation, the opening valuation was so low that it couldnt really go any lower. And there were a lot of possibilities inherent in the you know, the people were betting on the system to develop. We werent. Thats all we were doing. So we have this thing called vouchers. Privatization through vouchers. Not Everybody Knows exactly what that might entail. So give us a small tutorial. Youll hear about what the vouchers were and how the privatization and vouchers worked in that 1994 year where they privatized it, 11 time zones through a voucher system. Sure. Sure. So they gave vouchers to every single man, woman and child in russia. And they were they were freely tradable. And what you could do with those vouchers is you could submit them into any any voucher auction. And remember, at the time, russia was auctioning off 80 to 90 of all of their corporations. All the all the oil and gas companies, the fertilizer, steel, aluminum, tobacco, food companies, utilities, everything was was was put up for auction. And what happened is a lot of people took those vouchers and just sold them into the market. And so investors like like our fund could just go out and and buy them and then we could we could submit them into the the various companies voucher auctions that we were interested in. So, so it was it was chaotic, you know, they did it all at once. Theres a lot of debate of whether they should have drawn it out and done it a different way. But but for whatever reason, they decide. 1994 was the year that they auctioned off everything. So they have all these state owned companies. There are no private companies per say at scale. In the soviet period, and theyre all state owned. And so all the state owned property, with some exceptions, is being sold and so this is a vast trans four of property, some of it nominal because its not really worth much, but some of it has a lot of value and youre in your mind and other investors mind sort of transferring this to the private markets and they do it through these pieces of paper that every individual gets or several pieces of paper. And so people are sitting there with this thing called the voucher and theyre living in yoshikazu, la, and theyre living in yaroslavl and theyre living in magadan and i mean, its its very dispersed. Its a gigantic country. And individuals are holding these vouchers and to extract any value from Something Like this, you need a lot of these pieces of paper, right . If you have to vouchers in a company thats worth substantial value, its not going to its not going to move the needle for these people. Yeah. So how is it that you and your partners managed somehow to get your hands on these vouchers that are held in small numbers by massive numbers of individuals across this gigantic space which Whose Community nations and transportation and logistic costs or maybe not. Thats a thats an excellent point. And because a lot of people wouldnt even bother to find out how to submit the voucher into the auction for the company that they may have worked for, they just they would just go down there usually in most of these towns, there was a Street Corner where everybody knew you can sell your voucher and there were those Street Corners in moscow. And so what we would do is we would before i would go over there, we would wire money to a bank that was run by a friend of mine whos in the book, guy named bernie suture. And the money would get there three or four days before us. And then he would turn it all into 100 bills and his people. And sometimes our people, sometimes me would go down to Street Corners with that money and just buy vouchers, and wed take those vouchers and then. Right. So there you are with rolls and rolls of hundred dollar bills on Street Corners in russian. I did that once. I did that one whose names are hard to pronounce. I mean, its just sort of like how capitalism works over here, right . I go to the bank or i go to my friend and i get a suitcase of hundreds all rolled up with a rubber band. And then i go down to the corner there of University Avenue and and ramona and i start asking people if they want to sell their vouchers. And i buy 5 million of them. 8 million of them. And then i own russia. Thats kind of how it worked. I mean, i im not an i mean, your characterizations, a fair characterization. It it was it was. I remember, though, the russian government kept all ownership up of a lot of the bigger companies. They kept some portion, 50 , 60 . So they were really just trying to get the market moving. They were trying to create a stock market with these vouchers. They werent the real the real wealth transfer happened in the loans for share scheme that happened post 1998 after putin got it right. And thats thats where the real wealth was transferred away from the so not a voucher privatization but to the venture privatization started just sort of started the market going thats how i would characterize it. Right. Okay. It i dont know if you can reveal this, but what was your best investment in russia . Where did you do your biggest killing . So thats a poor choice of words here. Were not accusing you of being involved in activities that your partners were involved in. Thank you. Im sorry that that that the other people were involved in the competitors, not your partners. Yeah. So what was your best deal or your best investment at the time . So the investment i thought that worked out the best for us was a Company Called lukoil, and i was friends with a gentleman by the name of robert strauss, who was the Us Ambassador to russia, and he was a he was a partner at akin gump and a very close to bobbys. He gave me a lot of advice, told me, helped us get out of some trouble we had in russia a couple of times. And he lukoil was a customer of akin gump of their law firm. And he told me that lukoil wanted to become a Major International oil company, just like exxon. And so when youre when when all these companies are available, you dont know what to look for. And you hear Something Like that from somebody you respect, you just that company automatically went to the top of my list and we we bought the stock with the vouchers and a 300 million valuation. This is a company that at the time did almost 2 Million Barrels of oil of production a day, which many of you might not know, might not mean much to many of you, but thats about the size of exxon. Its a much exxon produces. So 300 million. Its i think that when when the stock market stopped trading, when russia invaded the ukraine, it had a 60 billion market cap. So it was 200, 200 times. So you bought the equivalent of exxon for 300 million. Thats a stand in on the Street Corners. This guy is a lot smarter than i thought. Yeah, lets just. Lets just say that right . So, you know, its like many things. If i had held on to it, it would have been great. I sold it after, you know, way too soon. Youre still alive to talk about it. So selling sometimes can have advantages beyond the monetary point. So. All right. So were were now heavily invested in russia. Now were making serious money because things are undervalued. And you and your partners are perceiving value. And that value is coming into being over the course of the nineties. And you manage the logistics of mastering this fact. Youre privatized. So here we are, 30 years later and now we have a book. So where the book come from . What motivated you to do the book and why now do we have the book . Since these are events from 30 years ago . Excellent question. So i have always wanted to write this book. Its its really other than what i was doing in russia, everything in my life has been relatively boring and routine, but but its the one thing i constantly go back to and think, wow, i cant believe that that really happened. And so its its you know, everybody has a book in them just about two little over two years ago, i was sitting in front of my bloomberg machine. I saw a title go across that thing that my partner in the book, peter kellner, had been killed in a helicopter ski accident and and it sort of you know, when your friends die, you know, and peter and i were in class. We stayed close for a few years after i left russia. But but, you know, when people like that who are important, your life died and changes you a little bit and i so okay, im going to write that book. So, you know, i do what you know when i dont know how to do something, the first thing i do is i go call somebody and i call somebody whos done it and and i dont know if tom jenks or carol are here. Back there. Oh, there they are. Theyre so i called i called my good friends, tom and carol. Toms around a publishing company, and i said, ive got this story, tom. How do i do it . And and he put me in touch with a great literary agent in new york named warren frazier. And warren helped me look for authors to help write it because, you know, writing, doing creative writing is not in my wheelhouse. Its not my skill set. So warren helped me find a great young author. And then we we a guy named josh gelernter. And josh and i started interviewing people who had been involved with this project. And we called around and to our surprise, literally everybody we talked to about it said, yeah, i want to help. And so we, we set up shop in the bahamas and brought people in and did interviews and came up with this with this somewhat true story. My writing process is different. Ill just say that ive never even been to the bahamas, but im thinking, what kind of book maybe could come out of a trip like that . Ill ill be talking to the director after this about that. Okay. So all right. So so we launched the project. Josh gelernter helps you tell this story. I mean, its your story. You relate the story, its captured, its transmitted. Well, why did we choose fiction as opposed to non fiction or fiction thats close to reality, but its not nonfiction all the same. Yeah, good question. I mean, it happened so long ago, it was just difficult to remember the the specifics and the, you know, the sequencing and who was involved and and then the when you really look at what we did going out, you know, we talk a little bit about the gazprom auction because thats what the storys about. I dont think it would have been as interesting if it was told as a nonfiction work. I just i think it would have bogged down in the details. And josh, you know, almost everything in the book is true. Whats whats not true is how everything fits together. And josh just did a very good and creative job taking all these different anecdotes and all these stories that he heard from the people we interviewed and he he he he was true to the storyline, but the, the way everything fit together was made up and made up in a way that makes it a very readable book. So youre in the book and the characterization of you struck me as close to who you are and what you did. Yeah. Your friend peter kellner, the czech businessman who did the voucher privatization and Czech Republic before the the russian one. Hes in the book and there are a bunch of characters that seem to be based on bernie sucha or bob strauss that would have been a good person for me to know as well. And so you have a cast of characters thats based on all based on real people who who did the the story and what about some of the other characters . Theres this endearing prostitute character. Im sorry, its russia in the nineties. I dont mean to cast aspersions, but theres this very endearing prostitute character who ends up being the