Marketeer quits the business after making fortune

September 17, 1990|By Scott Shane | Scott Shane,Moscow Bureau of The Sun

MOSCOW -- At the time of his recent retirement, Valentin, a ranking officer in the army of unofficial Soviet entrepreneurs, was taking home a cool 30,000 rubles a month, or 120 times the average worker's salary.

His rags-to-riches story has a simple plot, familiar from the lore of capitalism.

He identified a product people wanted -- an electronic device permitting West European videotapes to be viewed on Soviet television sets. He found a way to produce it in quantity. He priced the "decoders" competitively and virtually cornered the Moscow market.

In the West, Valentin might be profiled by a financial magazine or invited to lecture at a business school. In the Soviet Union, he considers himself lucky to have avoided a long term in a labor camp.

Because of the anti-market statutes in Soviet law and the non-existence of legitimate supplies of parts, virtually everything Valentin did was illegal.

His electronic components were stolen or illegally imported. They were assembled by technicians at state enterprises during working hours, using state-owned equipment. And they were sold at a market price, a crime known to Soviet jurisprudence as "speculation" and punishable by incarceration.

"I consider that everything I did was useful to society and harmed no one. But everything that's not part of the government monopoly is considered speculation," Valentin says. Understandably, he prefers not to inform the Soviet police of his last name.

Valentin acknowledges that in a free market it would have been harder for him to make a killing. But he has an firm belief in market economics.

"As long as there's not free commerce -- not only in the law but in people's psychology -- our economy won't work," he says.

Valentin is a man of slight build and almost shy manner who looks younger than his 32 years. He grew up in a backwater of 10,000 people in the western Ukraine, 4,000 of whom were convicts sentenced to work in the local chemical industry.

A self-described bookworm, he nonetheless twice failed the entrance examination for Moscow State University, spent time at a technical institute and then was drafted into the army.

"In the army, I became an anti-Communist," he says. "I stopped looking in books and looked at reality."

When he left the army in 1979, he moved to Moscow and got one of the lowly jobs scorned by the capital's natives: cleaning and sweeping a street and sidewalk outside the Chinese Embassy.

His take-home pay was a paltry 73 rubles a month. But the job, nominally 40 hours a week, could be done in two to four hours a day. This suited him, because it gave him time for his hobby -- rock music.

And that hobby led him into the black market.

At first, he traded and sold records among the young peoplwho gathered each Saturday in a park near the Moscow Circus. Later, he reproduced hard-to-find foreign records on cassette tapes -- a business that brought him nearly four times as much money as an average factory worker. Soon, he was buying stereo equipment from Soviet citizens who worked or traveled abroad and reselling it for a profit.

"Almost everyone gets into business step by step -- at first clothes, records, even chewing gum. Then electronics. Then foreign currency. Finally icons and antiques," he says.

Some "fartsovschiki," as black marketeers are called here, stop with records, or electronics, or deal in everything except currency to avoid the longer labor camp terms dealt out for currency violations. On each rung of the ladder, profits are higher and risk is greater.

After a while, Valentin began making preamplifiers for stereo systems from stolen Soviet radio parts. Electronic parts are practically unavailable in regular stores, so for years the only parts for hobbyists or unofficial businessmen were stolen from factories.

In 1988, he and a partner started making the television decoders. He paid 1 ruble apiece to a radio factory employee to make the printed circuit boards and five to 10 rubles to a technician who soldered the parts to the board.

The parts cost about 40 rubles, but they required microchips not available in the Soviet Union. So Valentin provided friends traveling to the West -- he has never gone himself -- with Soviet military watches and Cuban cigars to sell. The friends would buy him microchips.

When the two partners started, decoders were selling for 250 rubles on the black market -- a profit of about 200 rubles. But they created a crude mass production system, cut their price to 125 rubles and sold 300 to 400 a month.

Competitors didn't take it well. "People called when we cut the price and said, 'Sell them for 125 and we'll burn your apartment out.' We answered very simply: 'Call again and we'll cut the price another five rubles.'"

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