Understanding Russian Oligarchs

Best-selling author Ben Mezrich has captured the attention of millions of readers with his true-life books about Facebook (The Accidental Billionaires) and Las Vegas (Bringing Down The House). In this conversation with The Motley Fool's Dylan Lewis, he revisits his 2015 book, Once Upon a Time in Russia, to talk about the rise of the oligarchs and his experiences with Russia's billionaire class. They discuss:

• The history leading to the creation of Russia's billionaire class.
• Potential ways the oligarchs could affect Russia's war with Ukraine.
• Why Russia's billionaires are more like the Mafia bosses of The Sopranos than the technology titans of Silicon Valley.

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This video was recorded on March 13, 2022.

Ben Mezrich: I'm wondering if we're in the time of the end of the oligarchs. I think we could really be seeing them as a class being disrupted. Listen, they can't walk into a restaurant right now, the known ones. They can't send their kids to the private universities they want to send them to. It's a very difficult moment as long as Putin remains in power and causing world disruption.

Chris Hill: We're not going to introduce you directly to a Russian oligarch, but now's a good time to check in with someone who understands them well. I'm Chris Hill, and that was best-selling author, Ben Mezrich. Among his books are Bringing Down the House and The Accidental Billionaires, which, respectively, became the movies 21 and The Social Network. In 2015, he wrote Once Upon a Time in Russia, a book that hasn't been turned into a movie yet. But it's about the rise of the oligarch and Mezrich's own experiences with Russia's billionaire class.

Dylan Lewis caught up with Mezrich last week to talk about the history that led to this billionaire class, the potential ways that they could affect Russia's war with Ukraine, and why these billionaires are more like The Sopranos than the tech titans of Silicon Valley.

Dylan Lewis: Ben Mezrich is the best-selling author of Bringing Down the House, the basis for the hit movie 21, and The Accidental Billionaires, which became the Academy Award-winning film The Social Network. He joins us today to talk about another book of his, Once Upon a Time in Russia: The Rise of the Oligarchs, to help us better understand the Russian oligarchs, and the history that led us to where we are now.

Ben, you spent a lot of time around some of the wealthiest men in Russia writing this book. This is a group of individuals a lot of headlines have focused on recently. Can you talk a little bit about the oligarch class and who these people are?

Ben Mezrich: Sure, absolutely. The oligarchs, or what we call the oligarchs, are a group of Russian men who came to massive wealth and power in the early 1990s, when the Soviet Union fell apart and was replaced by this form of capitalism. But really, capitalism in its infancy -- it was kind of this crony capitalism where they didn't really know what they were doing. Boris Yeltsin was the head of Russia. He began to hand off the raw materials of the country to a group of people. These were mostly outsiders, black marketeers, "businessmen" in quotation [marks] -- many of them that Yeltsin met via his daughter, Tatyana, who was basically a party girl in Moscow. She would bring her friends to Yeltsin, and he would pick and choose between them and decide who would get the aluminum, and decide who would get the oil, and who would get the banking sectors. These men went from really nobodies to vast wealth almost overnight. This was a very turbulent time in the 1990s.

Dylan Lewis: I think what's interesting about that original group, the oligarchs you mentioned before -- they're outsiders. Some of these folks are people that didn't necessarily have clear mobility or a lot of really amazing options in the conventional Soviet Russia.

Ben Mezrich: These were people who couldn't become doctors and lawyers for a variety of reasons. They were not allowed to go to real universities or good universities. A lot of them were Jewish in a society that was very anti-Semitic. The Soviet Union was very tough on people like them. Some of them were from Siberia, like Roman Abramovich -- from outside the central areas of Moscow. They weren't the people you would expect to grow to power. They weren't part of the Soviet empire. They were businessmen. They were guys who sold whatever they could sell to make a living. And suddenly, they were handed these really important sectors of the Russian economy, and they grew very, very wealthy very quickly, and became powerful. They weren't just rich. They were running the country.

Dylan Lewis: Yeah. There's a little bit of a symbiotic relationship, it seems, between the oligarchy and the post-Soviet Union political establishment of Russia. They are all in a way, their own kingmakers for each other.

Ben Mezrich: Yes. There's a concept in Russia called krysha, I guess in English you would spell it K-R-Y-S-H-A, and it means "the roof." It's almost like a mobster godfather-type terminology, where any individual needs a political benefactor, someone they call their roof, who protects them. If you don't have a strong roof, you can't have a strong house. So each of these oligarchs had Yeltsin as their roof originally. Then, they would have each other as their roof -- the more powerful oligarch could take on an underling oligarch. But that's how they grew their power. It was almost like a mafia organization with Yeltsin at its head. But really, Yeltsin was somewhat under their control because Yeltsin did not understand capitalism. He was drunk all the time. There's a famous story where he literally fell off a bridge because he was so drunk. And he was ill, he wasn't healthy. It was really a free-for-all for these oligarchs who became so powerful.

Dylan Lewis: Yeah, in the early '90s, we have a dynamic where they're being handed these assets that were nationalized and are now being privatized. They are able to rise in power especially, by way of some of the media ownership that they have, and earn a spot where they kind of control the political landscape, a little bit more than the political landscape that originally anointed them, these oligarchs.

Ben Mezrich: Yes, I mean one of them, Boris Berezovsky, owned the main television station and all of the media. It got to the point where they would kill anybody who stood against them. It was very much part of the business that if somebody was your competitor or someone disrespected you, you would take them out. There was even a famous story where a top anchor on the news was saying things, and ended up getting shot in his apartment building. It was a very violent business, being an oligarch.

Dylan Lewis: You mentioned Berezovsky before, and you profiled him throughout the book as this way to explore the changing tides of the oligarchs and the political landscape in Russia. Can you talk a little bit about the Yeltsin/Putin transformation, and how the dynamic between the oligarchs and the politicians changes with that?

Ben Mezrich: Yes, this is a pretty wild story, but the oligarchs had all of this power under Yeltsin, but Yeltsin was getting sick. He was not doing well, and they knew they needed to replace him. So they were seeking somebody that they could control. Boris Berezovsky, who was one of these powerful oligarchs, knew a guy named Putin, who was this low-level KGB agent in St. Petersburg. Putin worked for the mayor of St. Petersburg, and then helped Berezovsky set up a car dealership. Literally, they pulled this guy out of nowhere and they installed him in Moscow. He basically became head of the country. They thought he was a cog, they called him a cog -- like, a low-level guy who they would control.

But everything changed. In the first week, Putin invited all of the oligarchs out to Stalin's old house. This is a place where there's like bullet holes in the walls where people used to get lined up and shot. He had all the oligarchs sit down at a table. He got up in front of them, and he said, you've all made tons of money. You've all done really, really well. You can keep your money. But from here on out, you stay out of my way. All the oligarchs who stayed out of his way are the oligarchs who are around today doing very well, and the oligarchs who did not, who spoke up, all died or were exiled -- were found hanging in their bathroom or fell down an elevator shaft or fell out of a helicopter. It was not good business going up against Putin. Putin very quickly became the most powerful oligarch of all.

Chris Hill: It's interesting, because in your book, you profile Roman Abramovich, who is still in the '90s very much trying to make a name for himself and establish himself in this political and economic system. Now, we think about that name and he is probably one of the most well-known of the Russian oligarchs, in part because he owns Chelsea from the English Premier League. He represents in some ways a little bit of a different chapter in the oligarchs' history. What do you think Abramovich's continued success says about the dynamic between the oligarchs and the Kremlin?

Ben Mezrich: Yes. Abramovich is an interesting case. He's the guy who really came from nowhere, basically an orphan out in Siberia. He was making plastic dolls. And then partnered up with Boris Berezovsky, who he met on a boat during a yachting trip. Suddenly, the two of them took over the largest oil company at the time in Russia, became incredibly wealthy. Then when Putin took power, they had to make a decision. Boris Berezovsky, decided he would go up against Putin. Roman Abramovich decided he would not. Boris Berezovsky was found hanging in his bathroom, and Roman Abramovich is one of the wealthiest men alive. But he's also known somewhat as Putin's cash register. When Putin needs something, Roman gives it to him. When he needed to fund an Olympics, Roman writes a check. Roman is interesting though, because he lives and plays mostly in Europe,  in London, New York, Israel also. He goes back and forth, and has feet in both worlds. But he grew to prominence really outside of Russia in a lot of ways. That's how we all know him. Buying a soccer team, becoming very much part of the limelight. He's in a very difficult position today because he is one of Putin's people. But at the same time, he lives and plays outside of that sphere. So he is in a difficult situation and we're making it more and more difficult on him, which might end up really changing everything.

Dylan Lewis: That brings us to the current state of affairs where we've seen escalating sanctions against Russia. But we've also seen a focus on the oligarchs and the assets that they have around the world. And that's bank accounts, that's real estate, it's these yachts that we've seen a lot of pictures of. The West is looking for leverage wherever it can find it. Do you think the measures against the oligarchs will do anything to chip away at support for someone like Putin?

Ben Mezrich: I mean, I'm fascinated by this. Two weeks ago or three weeks ago, I would've said, absolutely not. I mean, Putin is so powerful. He's weeded out everyone who's an enemy. The oligarchs who remain are utterly loyal to him, and, honestly, very afraid of him. But over the past two weeks, everything has changed. The oligarchs are losing a lot, and although they can hide money away and they have shell companies, they're losing their status. They're losing their ability to travel. They're losing their ability to live in New York and London, to own soccer teams, and to own NBA teams. They're being isolated, and, quite frankly, they have nothing to gain from a war in Ukraine.

None of them even liked the Soviet Union. They hated it. They were outsiders. They were people who were kicked out of universities. They were not allowed to go to school during the Soviet Union. They only made their money after the Soviet empire fell. Putin's idea of bringing back the Soviet empire does not make them happy. So these sanctions, I think, are pretty intricate when they go after these people who have so little to gain from what's going on right now, and have everything to lose. I do think you're seeing cracks appear, and I do think as a class, the oligarchs want this war to end.

The question becomes, what can they do? How much power do they really have? It's not like they could just group together like they did in the '90s and say "We are taking back Russia." But on the other hand, whatever support that Putin had from them is being strained dramatically. Whether that overcomes the danger that they would be in if they really went up against Putin. I don't have the crystal ball that can tell you, but I do think we're seeing cracks appear. We're seeing people speak out who I never would have expected to speak out before, and I believe they are probably putting a lot of pressure on whoever they can to make this come to a conclusion.

Dylan Lewis: You mentioned that these are folks that come from a variety of backgrounds. We often refer to them in this very collective way -- "the oligarchs," as this one group. There are some things that unify them, but in a lot of ways, this isn't like a block of people or a cohort of people that are necessarily coordinating with each other.

Ben Mezrich: When I wrote Once Upon a Time in Russia, I thought of it as Russia's Godfather. But the thing is, these are not people related by blood. This is not a family. Putin is not the head of a family. These are individuals who fought their way up, who made billions and billions of dollars, who looked to Putin as their roof, as their krysha. But if their roof is not protecting them anymore, I don't believe they have any real allegiance to him. Their allegiance is entirely out of fear and out of need. But if you cut away the need, and if they didn't fear him for some reason, I think you would find it'll collapse very quickly.

Dylan Lewis: Do you think that there's a little bit more allegiance or maybe loyalty, or willingness to follow, with some of the folks who have seen their wealth accumulate in the last two decades and were not necessarily folks who had that huge ride up in the '90s because that was part of the Putin political machine?

Ben Mezrich: Yeah. You mean are they more supportive or less supportive?

Dylan Lewis: More supportive?

Ben Mezrich: More supportive of Putin?

Dylan Lewis: Yeah.

Ben Mezrich: The modern oligarchs, the ones who've come to wealth later on, probably are more just Putin cronies. They're not people who placed Putin in power. They're people who came after Putin was already powerful, so I do think the newer oligarchs probably have more allegiance. You have to think about, Putin's being there for so long, he's probably gotten rid of anybody who is disloyal in any way. He's had plenty of time to get rid of any threats to him, so I would think that the circles that are around him are incredibly loyal and will do whatever he wants or says. So it's the older oligarchs, the ones who were there in the '90s, who put him into power, that I think we're hoping will be able to lean on him and make the change happen.

Dylan Lewis: One thing I do want to compare and contrast is -- we have plenty of billionaires here in the United States, and there are a lot of people who -- however you want to chalk it up -- have influenced the United States and have a lot of money in the United States. In what ways are these folks similar, and in what ways are they different, to the capitalists that we often think of within the American economy?

Ben Mezrich: I see comparisons all the time with American oligarchs. There's no comparison. I can tell a story from my research. I was working on the book, and I was talking to these oligarchs going back and forth the London, getting into some very terrifying situations. At one point, there's a story that they told me about Roman Abramovich and Boris Berezovsky. They wanted this oil refinery that was in Siberia. So they flew out to Siberia, they met with this old general and they said, "Will you sell us the oil refinery?" The general laughed at them. He threw them out of the room, he said, "I'm not going to sell it to you." So Roman and Boris went back to Moscow, and that night, that general went swimming in the Irkutsk River and drowned. His bodyguard, who was the only witness, got into a bar fight and died. So I wrote this chapter, and I read it, and then I call up the oligarch, and I'm like, "This sounds a lot like you had this man killed," and he is like, "Yes, it sounds that way." I was like, "Well, is this OK? I'm writing this in this book," and he is like, "Oh yeah, it's fine."

And I was like, "How is it fine? That seems like you had this man murdered." He said, "Well, when you think about Russia in the 1990s, don't compare it to America in the 1990s. Compare it to America in the 1890s. And in the 1890s, if a rival businessman disrespected you, you kill him. And that's the way we were."

So, these are the people we're talking about. These are hard men. These are people who employed assassins. Every major company in Russia in the '90s had a group of people they call the Department of Wet Works or something like that, who they would send to blow up cars and shoot people. Thousands of businessmen were murdered in the '90s in these [rivalries]. The aluminum wars were famous, where all these aluminum companies fought each other in the streets, with beheadings and car bombings. And these are the people we're talking about today. These oligarchs murdered people -- many, many people -- to get to where they were. So there's no comparison to American oligarchs. American oligarchs certainly do things that we might find immoral, and spend their money in interesting ways, and they have the yachts and the planes. But they didn't come up in this Wild West scenario where you were really fighting for your life. I think it's a better comparison to compare the oligarchs to something out of The Sopranos than to something out of Wall Street. It's a very different type of person.

Dylan Lewis: That '90s environment that you are talking about -- it seemed throughout the book there's this constant awareness of all the players that are profiled, that these are, yes, unseemly parts of how to approach business. But it's also the game that all of us are playing.

Ben Mezrich: Yes. I think that's very important. I don't judge them when I write this book. In many ways, it's the same way someone might make the show Sopranos or write The Godfather. They lived in a world where this was happening. Violence was a part of being a businessman in the '90s. The Soviet Union had fallen, capitalism was in its infancy there, and it was a very violent, turbulent time, and people were getting shot in the streets for various reasons. So you had to do this if you wanted to be in business. They did have a certain code that they lived by, but it was an intense Wild West... it would be like judging cowboys. Back in the 1890s, people shot each other in saloons all the time, and they become folk heroes. I think to some extent some of the oligarchs see themselves as folk heroes in a certain way because they fought their way up from these violent, violent roots. But it was a different time, certainly, and it's a dramatic story that I think would make a great movie.

Dylan Lewis: How pervasive, if at all, are those attitudes and the way business is conducted now in Russia?

Ben Mezrich: You don't have the extreme violence. But then again, we certainly have had incidents. We've had people go up against Putin and getting very ill, getting poisoned -- toxic poison, nuclear poisons -- all of that sort of thing. It does go on, on a major scale. But it's not like it was, where cars are blowing up in the streets. Moscow is a very cosmopolitan city. Business is done by major conglomerates. Coca-Cola sells products in Moscow. It's not the way it was in the '90s. But I do think that these men who run these companies grew up in a very intense place. But they don't want to be like that anymore. The oligarchs that I know today, they have their yachts, they have their planes. They want to be respected. They want status. They buy giant townhouses in London because they want to live in London. They want to own soccer teams. They want to own NBA teams. They want to be able to live in the real society now, and the sanctions are making it impossible for them. So I do think that this pressure is going to have an effect.

Dylan Lewis: I know you wrote the book and published [it] several years ago now. Have you kept in touch with your sources, and do you have any sense of how they've been feeling about the geopolitical climate since then?

Ben Mezrich: I've not reached out in the last couple of weeks. I don't want to end up on some list somewhere. I stayed in touch with some of my sources over the years. I had a lot of meetings, a lot of back and forth, a lot of nerve-wracking moments, but overall ... it's an interesting process writing a book like this. In many ways, the book was not an indictment of the oligarch class or an indictment of Putin, either. I was telling the story of how these people came to be, similar to how you'd tell The Godfather or you'd have Sopranos. The people who were in The Godfather, liked the book and the movie, and the mobsters who saw themselves in The Sopranos liked The Sopranos, because they had done something pretty dramatic and they liked seeing it on the big screen. In that respect, as an author, as a fly on the wall, I don't think it's my job to judge what was going on to some extent, but just to tell the story. I did stay in touch with a number of them, but in the last couple of weeks, I haven't made any phone calls.

Dylan Lewis: I got that sense in reading it. I mowed through it. I listened to the audiobook in about two days. I got a sense that really it was more about the power struggle and the environment than anything else.

Ben Mezrich: What I think was fascinating about these guys is they really came from nothing. They came from really hard lives. Some of them were beaten as children. They grew up in a very hard place, and they found themselves in a strange position, and they had the opportunity to get incredibly, vastly wealthy, and they took it. Then they were willing to do anything to get to that next phase, whatever that was. Yes, it was a fascinating process.

Dylan Lewis: If I were to break it up for people who aren't familiar with the book, maybe haven't read it, there are a couple different periods. There's the privatization of the assets; there's accumulation of wealth and maybe some consolidation happening; the preservation of the status quo; and then the realization that they are no longer calling the shots. Is there any chapter or thing you would add to that to bring us current, or anything you would look forward to in the story?

Ben Mezrich: I'm wondering if we're in the time of the end of the oligarchs. I think we could really be seeing them as a class being disrupted. Listen, they can't walk into a restaurant right now, the known ones. They can't send their kids to the private universities they want to send them to. It's a very difficult moment as long as Putin remains in power and causing world disruption. So I do think that there is another chapter coming in this story -- where they go from here, because I don't think the status quo is going to work anymore for them. Seeing Roman Abramovich have to sell the soccer team and speaking out against the war is fascinating. It's something that I would not have expected just a few weeks ago. I do think we're seeing another shift away from who they are as Putin's cash register or whatever it is. Putin is not their krysha anymore. He is not being able to protect them at this moment, and that's going to cause a big shift. So, yeah, I do think there's another chapter. It's funny, you write a book in 2015 and now suddenly, you can't find the book anywhere because everyone's buying it, which is wonderful as an author, but it's this intense moment where I think it really is yet another shift in the landscape of that story.

Dylan Lewis: Is it a story you would revisit at some point with another book?

Ben Mezrich: I'm such a coward at this point in my life. It was scary. Another story: I was in London, and I was meeting with these oligarchs, and suddenly someone comes up behind me, huge guy, and just shoves something into my back pocket. And he's like, "Don't look." This is right during the whole polonium poisoning situation, so I'm terrified. I get back to the hotel and I take it out. It was a computer key card. I didn't know what it was and I had to fly back to the U.S. I had lawyers waiting in the airport. They didn't know what I had. I get home and put it in. There's 10,000 pages of depositions going all the way up to Putin. It ends up being a big backbone to my book. But at this stage of my life, would I do that again? I don't know.

Listen, I've always been terrified of everything and an anxiety-ridden coward. As a writer, I don't know if I'm at a point where I would just dive back into a story like that. I'd also need the right sources. I don't know that I would reach out to the same people again to tell this side of the story. But if they reached out to me, I would probably jump back in. But I don't know.

Dylan Lewis: We might have to settle for the movie then.

...

Chris Hill: We've had the chance to talk with Ben a number of times over the years. His latest book was released last month. It's historical fiction, and here's a sneak peek.

Ben Mezrich: I've been obsessed with the Gardner theft for many years. I got a phone call in the middle of the night about 15 years ago, I think, from a guy who claimed to be one of the people who robbed the Gardner Museum. Call came in at 1 in the morning. The guy told me some stuff that wasn't well-known, told me some stuff I'd never heard before, told me why the museum was robbed, who had ordered it. Really interesting conversation. Then told me he was going to break his parole -- he was on parole -- he had just gotten out of prison for a very similar crime. He had some credibility to him, but he was going to break his parole and wanted to meet me in an alley in South Boston. I'd have to come alone. It got very uncomfortable, the conversation. So I tried to shift where we would meet, I tried to make it a little safer for myself, and the guy got agitated, hung up, and I never heard from him again. For a decade and a half or more, I've wondered if I missed out on solving the Gardner heist because of my cowardice. This was the largest heist in history, $1 billion worth of paintings still missing till today. But that has always been in my mind. The Midnight Ride came about ... The Boston Globe called me. This was in the middle of the pandemic last winter, when everybody was in a place of utter terror. And they said they wanted to put something in The Globe that wasn't just all bad news. They wanted to know if I'd write a serialized book in The Globe. I ended up doing this Da Vinci Code style thing, handing in a chapter that would publish that night. It was on the front page and it built this huge audience. By the end of two weeks, there was a couple hundred-thousand people reading it. I got a call from Steven Spielberg, who was interested in turning it into a movie and so that made me very excited and so I turned it into this book, The Midnight Ride, which is out now. It's the first in a series of books. It's my own little Da Vinci Code, and hopefully, people will pick it up.

Dylan Lewis: Now, if I'm not mistaken at the time of the heist, you're a student at Harvard. So I have to ask: How solid is your alibi for that night?

Ben Mezrich: That's a good question. I was in Boston at the time. I did not have a policeman's uniform hidden in my closet or anything like that. I probably don't have a good alibi because I was just a nerdy kid in college, so I probably didn't have anywhere to go. It is an interesting story. It happened in the middle of the night, two guys dressed as cops wandered in, they stole 11 of the most famous paintings in the world, and then two items that make zero sense -- one of which was incredibly hard to steal, and these two items are not worth anything. But they had to climb up a wall, they had to use tools. So the question is, why did they take these two random things along with the most valuable art in the world? If you read the book, the first chapter, I'd tell you how I think the heist really went down, and it's all pushed by this weird phone call I got in the middle of the night.

Chris Hill: As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.