Legendary investor Jim Rogers should rue the day he took on Dmitri Alimov, a 29-year old Russian MBA student during a talk he gave at Harvard Business School in 2003. Rogers disparaged Russia as a hopeless case just as the economy was starting a five-year boom. Alimov stood up at the end of the talk and took issue with Rogers, following up with an email exchange that was so widely circulated it ended up as an article in Vanity Fair. Rogers wrote Alimov off as a know-it-all neophyte but nine years on and Alimov has just launched a tech fund and is well on his way to becoming a prominent member of Russia's third wave of oligarchs.
Today Alimov is unabashed about his very public run in with one of the world's most famous investors. Rogers is best known as a co-founder of the Quantum fund, which he set up with George Soros and 'broke the bank of EnglandÓ by forcing the British out of the exchange rate mechanism in 1992 making the two men billionaires in the process.
'Rogers was talking about Russia and running it down. But the problem was not what he was saying but the fact that he clearly didn't know what he was talking about. So I wrote an email to him to correct the factual errors, copying the email to a few Russian-speaking friends at the school,Ó says Alimov.
The email exchange was hilarious and as Alimov copied his fellow HBS colleges they quickly spread around the world reaching trading desks in Moscow, New York and London before the press eventually picked up on the story.
Alimov may have been a student but he was no greenhorn. He began his career as an analyst with Renaissance Capital in 1998 under the head of investment banking Leonid Rozhetskin (who was later murdered at Jurmala, Lativa in March 2008) before moving on to work for the bank's founder Boris Jordan at the $500m Sputnik Fund after the 1998 crisis. Rogers clearly underestimated Alimov when locking horns with him.
'I guess I was rather aggressive and for several weeks after the [Vanity Fair] article my apartment turned into a mini PR agency as I had to answer hundreds of calls and thousands of emails from the media,Ó says Alimov sitting in a café next to the Stalin skyscraper at Barrikadnaya in central Moscow. 'But it ended up doing me a lot of good as I met several very interesting people as a result.
The exchange began politely enough. Alimov sending a reasoned email that went through his counter arguments to Roger's statements, backed up with statistics and citations.
'I am the 'lad' who disputed your factual claims with regard to Russia today,Ó Alimov began, going on to highlight three specific allegations that Rogers had made: people are leaving Russia ('wrongÓ); Russia's oil production is declining, and oil companies are not reinvesting ('wrong and wrongÓ); investors are abandoning Russia ('wrong againÓ).
Following the 1998 crisis the devaluation of the ruble had jumped started the economy. GDP growth had tuned positive for the first time since the collapse of the Soviet Union and was up 10% in 2000 alone (a record that stands to this day). The oil companies were flourishing with double digit production growth and in 1999 Lukoil invested more into the sector than the entire sector had ever invested before in a single year. And the tide of portfolio investors had just made Yukos owner Mikhail Khodorkovsky the richest man in the world under 40. While there were some black clouds on the horizon (Khodorkovsky was arrested at the end of the same year) nevertheless in 2003 Russia had never looked as good since the story began in 1991.
'Many people, including future leaders at Harvard Business School, listen to you,Ó Alimov concluded. 'It would be very unfortunate if they were misled by your inaccurate statements. Finally, if nothing else, it is not good for your own public image.Ó
A few days later Rogers replied: 'Thank you for coming [to my talk at HBS] and for writing. I rarely suffer fools gladly and even more rarely bother with chauvinistic know nothings, but since you sent this ludicrous canardÉÓ and launched into a rebuttal with phrases like: 'Oh my. You really should have kept your mouth shut and stopped long ago,Ó as the introduction to a comment on Russia's positive trade balance.
What made this exchange so amusing is that Alimov replied and countered, point for point with indisputable evidence, Roger's attempt to rubbish Alimov's arguments. On the trade balance point Alimov wrote: 'The quote below is taken directly from US Department of Energy website (I hope you at least believe your own government). Or do you think the US government is also lying?Ó
As the exchange continued, the emails became more and more widely distributed until Rogers, who had made a complete fool of himself, finally gave up and stopped replying.
'I don't know why I even bothered to answer that guy in the first place,Ó Rogers told a Vanity Fair reporter that finally caught up with him. 'Whether oil production is up five or six per cent is pretty meaningless in the context of this discussion, which was, and is, that Russia's a hopeless place to invest.Ó?
Where is he now?
The whole Rogers-Alimov exchange highlights a problem that plagues Russia's veteran investors to this day. Russia's economy is very volatile, but with the fastest economic growth in Europe, the best performing stock market year to date, the third highest gross international reserves in the world and a top three European consumer market it is far from being hopeless.
The problem of senior investment figures that patently haven't done even the most basic research on Russia, yet happily condemn the country out of hand on the basis of half digested impressions, largely drawn from reading the international press, is as big a problem for Russia today as it was in 2003.
The irony of the whole affair is Alimov is living testimony to the changes going on in the country. During his time at Sputnik Alimov was in charge of dealing with NTV that was taken over by Gazprom Media following Vladimir Putin's election as president in 2000 and the subsequent attack on the oligarchs. Gazprom Media was given to Jordan to manage and Alimov did the work.
'That was a mad time,Ó says Alimov. 'I was in charge of generating revenue but we had some regions like Novosibirsk, where the local station manager would screen out the ads we sold in Moscow and replace them with an ad for some local business, like a car repair shop, and pocket the money.Ó
Among the assets Jordan inherited as part of this year was TNT, a small broadcaster on the brink of bankruptcy. Jordan put Alimov, still in his mid-twenties in charge and within two years he managed to turn it around. Today TNT is one of Russia's leading commercial broadcasters. However, Alimov got bored and after taking a break to study for an MBA at Harvard in 2002 he returned to Russia and was immediately offered a job. One of the 'interesting peopleÓ he met as a result of his newly won fame form the email duel was Len Blavatnik, a Russian born US resident who is currently ranked number 72 on the Forbes rich list and his Access Industries is one of the shareholders in the British-Russian oil joint venture TNK-BP. Blavatinik put Alimov in charge of A Media, a TV and film production company.
'It was a simple model. We took a successful format in other countries and adapted them to the Russian market. The series was more likely to succeed if had been proven to work elsewhere but we always did deals with the owner either as a collaboration or paying a license fee,Ó says Alimov, who remains a close friend of Blavatnik's.
By the time Alimov stuck out on his own again in 2006 A Media was turning over $60m a year. Alimov, who had a stake in the company, finally had some real money in his pocket and cast about for something new to do.
'My first degree was in computers and maths so I pretty quickly came to the Internet. I had a partner at Sputnik who asked me to come in and run RuNet,Ó says Alimov
RuNet was one of the pioneers of the Russian Internet and by 2006 the number of users was doubling every 18 months or so. Today a third of Russians are online and nation-wide broadband Internet access with a speed of 50 megabit per second, will be available to all Russian homes by 2015, telecoms giant Svyazinvest's Deputy CEO Mikhail Leshchenko said at the start of April. Alimov and his partners began generating companies to bring Russia into the 21st century. There most successful venture was ivi.ru - a site that airs out of copyright movies for free but makes money on the advertising. According to a recent survey 97% of Russians online use the Internet to watch movies.
'The model for this type of business in Russia is a bit different,Ó says Alimov. 'Because of the widespread piracy there is no way to make people pay for access for content (although now we have some Hollywood blockbuster that are paid for) so for most of the films the revenue is generated from advertising, but for the user it is free.Ó
The site has been a smash hit and is the market leader for legal movie distribution in Russia, although the legitimate business remains dwarfed by the rampant piracy. However, accession to the WTO in December means the issue of piracy is slowly being addressed.
In 2008 Alimov moved again, and again cashed out of RuNet, where he held a stake. In January this year he launched a Frontier Ventures, a fund aimed at Russia's burgeoning e-commerce business that has already raised $50m.
'We are looking to investing into five or ten projects and looking for ideas based on an established business model,Ó says Alimov. 'These are not clones. That is an over simplification as you have to take the ideas and adapt them to the Russian realities.
The timing for the fund is good as the Russian internet is growing very fast and thanks to the lack of traditional retail Russia's e-commerce sector could be worth as much as €180bn by 2018, according to bne estimates.
'Now people are not just looking at pictures, but they are spending tens of billions of dollars. And it is only starting to grow now,Ó says Alimov. 'I estimate that the market has another 10-15 years to run before it starts to reach maturity. The first entrepreneurs are taking their early steps but the risk/rewards in Russia are better than elsewhere. What could be more fun?Ó
And Rogers? At the start of April he told a conference in Budapest: 'I expect the price of gold to decline and I when that happens I will buy more.Ó It may not be a stupid move, but what could be more boring than that?