Understanding Russia’s Multi-Millionaires

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. June 8, 2020

Joe Reilly: Could you tell us a little about the book itself? I understand 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 story-line I got from both my ethnographic observations and 80 interviews with Russian billionaires and multimillionaires, 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 glamour. 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 some-thing 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. In the mid-2000s, this 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 you meeting him are that his father is a professor of law, how his parents’ library was organized and that he spent his childhood weekends going to the conservatory or a museum.

Joe Reilly: The current Russian upper class emerged out of nowhere in the 1990’s. While they seem to follow the same patterns of building social institutions, would you agree that they are also particularly Russian in character?

Elisabeth Schimpfössl: 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 forebearers, but most base their history on the Soviet intelligentsia backgrounds, professionals engaged in the cultural and educational sector as well as academically trained medics, technicians, and engineers. Such background is associated to a cultured upbringing, education, bookishness and a strong work ethos.

Joe Reilly: Could you describe what you mean by the intelligentsia?

Elisabeth Schimpfössl: 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 them-selves from the ostentatious lifestyles they used to indulge in and to identify more with cultural symbols. Reviving the Soviet intelligentsia values their parents held dear allows today’s rich to construct a self-identity that has anchoring 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. 

Joe Reilly: What was the most unexpected thing you learned from all your interviews with wealthy Russians?

Elisabeth Schimpfössl: 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 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 sort. Stalin nostalgia takes things to an extreme which not everybody shared. Fondness for Soviet values, however, were 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 West-ern 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.

Joe Reilly: One of the more interesting observations in the book is that there is an upcoming wealth transfer in Russia that will move the largest amount of money to the smallest number of people in history. How are they pre-paring their children for this big transfer?

Elisabeth Schimpfössl: A large percentage of the Forbes-200 are within an age range of 50 to 70 – younger than the global average and yet maturing. They will be the main protagonists in what will probably be the biggest transfer of wealth the world has ever seen. In contrast to China, where the transformation towards market liberalization developed gently from the late 1970s onwards, Russia’s capitalist reforms in the early 1990s came as a bombshell. Consequently, questions of bequest will hit Russia’s first generation of multi-millionaires and billionaires almost all at once. The enormity of this project is daunting even to the Russian rich themselves. Not a single one of them can fall back on entrepreneurial expertise of their parents, let alone their grandparents.

This lack of family history is one reason that their children are not rushing to continue their fathers’ business activities. Another reason is their shady origin in the cut-throat 1990s. Those who want to set up a dynasty have to consider the risks associated with an erratic rule of law, a vulnerable economy and the need to introduce their heirs to their inner circles and their potentially shady practices. For many, securing a comfortable luxury life for their descendants might suffice, even though it will most likely eclipse any hope of post-mortem significance.

Joe Reilly: Do you think there are big differences in the way Russian philanthropy is conducted versus the UK or US?

Elisabeth Schimpfössl: Russian-Orthodox traditions of paternalism have grown from Byzantine ideas of almsgiving. Charity is an emotional and sporadic thing, coming from a good heart. Rich Russians from a Jewish background tend to tick differently. They much rather see charity as an obligation and their giving is more systematic. Nevertheless, faith is usually demonstratively secondary. People might support a synagogue but just as well a Russian Orthodox Church.

What unites all them is an indestructible love for children. When I asked them as to why they supported children and not adults, they usually that they considered children as the only group in society to be trustworthy. The deeply ingrained distrust is a result of seventy years of Soviet rule, followed by the cut-throat 1990s. Support for children is also seen as an investment in the future – unless the children are disabled. Despite the Russian Orthodox teaching to perform good deeds for the sake of passive alms takers, there is a clear priority among wealthy Russians to promote the strong, healthy and gifted over the weak and feeble.

Every single person of the 25 richest on the 2018 Forbes Russia list runs their own foundation. Within the top 100, it is 77 per cent. The fashion in Russia to set up foundations was initially down to the underdevelopment of domestic non-governmental organizations, which were deemed corrupt and hence unsuitable to be tasked with acting as intermediaries. Even though this has since changed since, many philanthropists still reject the idea of outsourcing the operational side of their charity.

Joe Reilly: What is your next project?

Elisabeth Schimpfössl: My current research idea is to trace that first generation of Russia’s rich in their endeavours to pass on their assets to the next generation.

Full interview


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Elisabeth Schimpfoessl

About Elisabeth Schimpfössl

My research focuses on elites, philanthropy and social inequality as well as questions around post-Socialist media and self-censorship. I did my PhD at the University of Manchester and taught at Liverpool University, Brunel and UCL before taking up my current post as Lecturer in Sociology and Policy at Aston University, Birmingham, UK. I live in London.