WM Market Reports

Understanding Russia's Multi-Millionaires

Joe Reilly, June 8, 2020


Regular FWR writer Joe Reilly interviews the author of a new book about the multi-millionaires and billionaires who have come out of the former Soviet Union. The author explores how they view the world, their place in it and what they do to protect and enhance their wealth.

Family office consultant and regular Family Wealth Report commentator Joe Reilly talks to Elisabeth Schimpfössl, author of Rich Russians: From Oligarchs to Bourgeoisie, which was published by Oxford University Press.

Joe Reilly: Could you tell us a little about the book itself? I understand that you spoke to many well-known Russian oligarchs about their wealth.

Elisabeth Schimpfössl: Russia’s ultra-rich have set out to develop more cultured tastes, rediscover their family histories and actively engage in philanthropy. This was the main storyline I got from both my ethnographic observations and 80 interviews with Russian billionaires and multi-millionaires, their spouses and children. I asked them how they see the world, what role they have in it, and why they think they are worthy of their privileges.

Most of Russia’s billionaires amassed their wealth during the economic and social turmoil following the collapse of the Soviet Union. In many respects, they did resemble Chicago’s leisured class of the 1890s, as the economist and sociologist Thorstein Veblen described it at that time, bathing in glitz and glamor. By now, they all are keen to shed off an image of being outrageously lavish consumers. They want to be associated with refined tastes and distinction. They long for something that they find meaningful. In short, rich Russians have undergone a similar process that other wealthy figures have gone through in history, among them the late-nineteenth-century businessmen in the US, such as Rockefeller, Carnegie and Mellon. 

A classic example of such a shift over the last couple of decades is the billionaire Alexander Mamut, someone who has always been close to the Kremlin, and yet, someone who, with his online media investments, appears more modern than the average oil or gas oligarch. In the early 2000s the tabloids loved reporting on the extravagant parties he threw on his yacht on the French Riviera. By the mid-2000s, this had changed. He surrounded himself with people from the arts, launched an art house cinema, bought the UK book retailer Waterstones, and set up a very fancy design and architecture school, right in the middle of Moscow. One of the first things he tells you within minutes of meeting him are that his father is a professor of law, how his parents’ library was organised and that he spent his childhood weekends going to the conservatory or a museum. 

The current Russian upper class emerged out of nowhere in the 1990s. While they seem to follow the same patterns of building social institutions, would you agree that they are also particularly Russian in character?
They can’t refer back to a bourgeois class to rely on for status, history and prestige. To anchor themselves in the past, some allude to aristocratic forebears, but most base their history on the background of the Soviet intelligentsia, professionals engaged in the cultural and educational sector as well as academically trained medics, technicians, and engineers. Such a background is associated with a cultured upbringing, education, bookishness and a strong work ethos. 

Could you describe what you mean by the intelligentsia?
Most of my interviewees were born into the Soviet intelligentsia, which consisted of professionals engaged in the cultural and educational sector as well as academically trained medics, technicians, and engineers. By the time of Joseph Stalin’s purges, the Soviet intelligentsia had largely lost their predecessors’ ideals of a humanistic search for truth and a self-effacing devotion to serving the people. What they retained was a strong patriotic feeling of duty to the state, as well as the nineteenth-century perception of society being divided into two classes: the educated intelligentsia and the simple masses.

Today many upper-class Russians embrace the intelligentsia as a group on whom to model themselves. This has been one of the drivers for the new economic elite to distance themselves from the ostentatious lifestyles they used to indulge in and to identify more with cultural symbols. Reviving the Soviet intelligentsia values which their parents held dear allows today’s rich to construct a self-identity that is anchored in the past. Highlighting Soviet intelligentsia background is less (self-) betrayal than it might seem at first. Rather, it illustrates a shift from an emphasis on supposedly being self-made to one foregrounding a cultured upbringing, bookishness, the arts, high morals and a strong work ethos.

What was the most unexpected thing you learned from all your interviews with wealthy Russians?
Many things were most unexpected to me. 

There was Yekaterina, a billionaire’s wife, who got a little impatient when I asked her what qualities and skills she thought her parents had passed on to her. “Listen, Elisabeth, I got genes from my parents,” she replied. “Of course, these genes allowed me to develop myself and all the qualities that led to success.” Attributing fortunes to good genes and biological superiority totally makes sense: what is supposedly grounded in nature is difficult to argue against. In contrast to elites elsewhere, Russians have little qualms about expressing such ideas. 

Another time I was baffled was when I interviewed the billionaire and philanthropist Roman Avdeev who owns Moscow Credit Bank. I asked him to name me a role model for his philanthropy. After a long pause, he said: Karl Marx. He explained that Marx had formulated a number of demands in relation to capitalist society, among them an eight-hour working day, the right to paid holidays, the right to organize unions, and the right for workers to take part in a factory’s management. “All these demands have long been realized in capitalist society,” he said, but one important demand had never been implemented: “The abolition of inheritance. This last point has a lot to do with philanthropy and I’ve thought about it a lot. They are now introducing a high tax on inheritance, which I think is very correct.”

Another thing that threw me was the admiration for Stalin that I encountered among billionaires’ kids. They might run fancy galleries and boutiques in Western cities and yet be convinced that, if anything, Stalin was not tough enough when fighting traitors of all sorts. Stalin nostalgia takes things to an extreme which not everybody shared. Fondness for Soviet values, however, was widespread. The billionaire Ziyavudin Magomedov told me that, apart from private property, they had everything in Soviet times: peace and friendship between the peoples, excellent Soviet education for all, strategic planning, and a deeply ingrained social spirit to support those in need of help. He was keen to bring up his children in line with these values, albeit while educating them exclusively in Western elite institutions. His children went to Harrow and Ludgrove and were supposed to continue their studies on the US East Coast. This might have changed since. Magomedov was arrested in March 2018 and charged with setting up an organized crime group and embezzling state funds. In the very worst-case scenario, the Dagestan-born entrepreneur could be handed down a prison sentence of thirty years. 

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