7 ms·

If there's one mistake this story makes, it's in trying to come up with complicated theories about why Yuri does well. He's simply smart. That's what DST has

by pg 15y ago

If there's one mistake this story makes, it's in trying to come up with complicated theories about why Yuri does well. He's simply smart. That's what DST has in common with Andreessen Horowitz, though they have little else in common.

mapgrep 15y ago
Come now, Paul. Yes, Yuri is smart. But he also has huge sacks of money to throw around, most of which comes from oligarch Alisher Usmanov. Wolff confirms here for the first time (I believe) that "Milner has created a separate fund to invest in international—and especially American—Internet companies, with Usmanov taking the biggest stake." And we've yet to see any sort of track record for the piles of money Milner throws around, at least the big new money he is spending in America. In what sense is he "successful?" It's kind of sad, to me at least, the extent to which a sort of amorality has really taken hold in Silicon Valley. It's nice that he's helped your investments out, Paul, but where does Yuri's money come from? Have you looked into him and Usmanov? I mean, the sad thing about Yuri Milner to me isn't that he's an ostentatious outsider, it's that he fits in so darn well in Silicon Valley. I wish this was the sort of place that looked completely alien to someone from Moscow or Wall Street. Every year, it seems that's less and less the case, at least in terms of culture.
- vaksel 15y ago
  yeah it's not like VC world is full of idiots, most of those guys tend to be smart.
  - staunch 15y ago
    Judged by their returns, all but the top tier of VCs (of which Milner is now a part) are idiots.
  - pg 15y ago
    Actually only the top few are smart.
    - rdl 15y ago
      Is it that the top funds are packed with smart people, or there are smart people at the top of a lot of funds with lots of less-intelligent junior people? From what I've seen, the top funds (at least the smaller ones) are 75+% smart people (at partner level; I never met enough associates/principals to evaluate them); there are entire bad funds full of mainly dumb people from the top down. This is kind of different from operating entities, where even stupid-dominated organizations often have some great people hiding out, or even entire great teams.
      - chunkybacon 15y ago
        I think pg has a different definition of smart than you do. Think Chuck Norris smart and you'll be on the right track.
        mathattack 15y ago
        Is this supposed to allude to, "Fred Wilson's doesn't want his companies to IPO, IPOs want to Fred Wilson" or something like that?
- mathattack 15y ago
  Based on subsequent valuations it would seem like Facebook, Groupon and others are doing very well. It only takes a few home runs to cover a lot of strikeouts and singles.
  - 0x12 15y ago
    Only when you sell the stock. So the money to buy all that stock still had to come from somewhere. Macaroni somehow doesn't cut it.
    - mathattack 15y ago
      I was referencing where his returns came from, not his capital. That's another story which I haven't dug enough researching to figure out.
    - temphn 15y ago
      Right. We can bound this by getting the total market size of the macaroni business in Russia, and comparing to public investment numbers by Milner in other companies. Does the top down (revenue, profits) match the bottom up (sum of investments)? Unless he built the Russian Chef Boyardee, it strains the imagination to believe that macaroni was anything but a front for money laundering, from the Russian Mafia, Usmanov, or who knows where. Though I doubt YC companies are at risk of having their legs broken by Russian gangsters should they fail, because Milner is in the US and wants to play by American rules (though the US itself is rapidly moving towards the cynicism/crony capitalism/venture socialism of the Soviet bloc). Sort of like Michael Corleone becoming a pillar of the community, these sorts of transactions buy respectability. All that said, Americans shouldn't be too self satisfied. We'll probably realize in a few years that the $787B stimulus and the $9T Federal Reserve bailout ended up in the pockets of a few politically connected American oligarchs like George Kaiser, as the euphoria of 2009 Obama America was similar to the euphoria of 1992 Yeltsin Russia. Massive amounts of money flew around with little accountability and the hangover will be a bitch. Anyway, from a blackbox perspective Milner's presence is good for startups at all stages, as even if he is only a threat to invest his presence forces better terms from others. I think that is the pragmatic perspective: he is a feature of the landscape, so might as well benefit from him. (still, that macaroni calculation would be a damn interesting public spreadsheet. should be done anonymously of course...)
- pg 15y ago
  In what sense is he "successful?" Financially, in the same sense Mark Zuckerberg is.
  - deleted 15y ago
    [deleted]
  - vizzah 15y ago
    I though Zuckerberg's success is in the creation, not in the bank balance? Really, 'financial success' and life's success (for achieving something worthwhile for the history of this planet) must be two absolutely different achievements..
    - pg 15y ago
      That's why I qualified my answer by with "financially." That is the type of success mapgrep is asking about: his returns as an investor.
- jbooth 15y ago
  Huge sacks of money to throw around and huge cojones as well to make those bets, most of his investments had everyone saying "That's crazy!" at the time, yet they've paid off for him so far. Time will tell if they're successful or if he's making money off of a bigger fool, I guess, but he looks pretty good right now.
  - 0x12 15y ago
    Criminals routinely invest lots of money in losing enterprises. This is called money laundering. They'll take a hit from 30 to 70% or even worse just to be able to get their money back in a way that they can spend it legitimately. They may not even care to win overall, as long as some of the bets pay off that's great. It will give influence and legitimacy. The hard part is always to find places that will take large amounts of money, no questions asked and that have a gambling element in it which could explain large returns in a plausible way, and in a way that will stay. That's why casinos are very popular, ditto with antique dealerships, the real estate sector and financial services such as banking. It's really not that much of a stretch of the imagination to use venture capital as another money laundering setup, essentially it has all the elements of a casino, large amounts of money go in, lots of it disappears and some relatively small bets pay off huge. Another reason for making 'silly bets' is to diversify whatever the cost, because being the owner of former state enterprises and a bunch of mines always has a risk of nationalization, silicon valley investments have returns in hard currency and on top of that are unlikely to ever be taken away at the whim of some ruler. http://en.wikipedia.org/wiki/Alisher_Usmanov http://en.wikipedia.org/wiki/Alisher_Usmanov has an interesting profile and if that's Milners main source of capital there are definitely some pointed questions that should be asked. This is not who you want to be indirectly involved with your startup, assuming that it is true and that this guy really is the power behind the investments Milner is making. Pecunia non olet but some money is better refused than accepted, 'success' on the back of stealing from the people of the former Soviet Union is not something to be proud of.
    - shareme 15y ago
      There are legal reasons why you do it as well..lets say you legally got out of paying high 45% corp tax rate by parking profits offshore in Europe. Than obviously you would re-invest those profits in Europe Social-Media start-ups as you would only have ot get a return of 70%. Prices of raw material inputs to energy, Metals, etc went from high to low and back again during Russia's past recent history and we are making unfounded assumptions in this thread that have very little to no basis in fact.
- Hitchhiker 15y ago
  http://www.youtube.com/watch?v=UgcxGFmYyPs http://www.youtube.com/watch?v=UgcxGFmYyPs
gsivil 15y ago
While smartness seems necessary it was almost never enough to succeed in Silicon Valley or in Wall Street or in the sciences. Smart is such a generic term that is almost meaningless.
mathattack 15y ago
Interesting. When I see success, it always seems like there is something additional to intelligence - like work ethic, or conviction. In this case it seems like his place in society allowed him to understand social media before a lot of other smart people. Additionally he had money when others didn't - he could invest in mail.ru and Facebook when other investors were in retreat.
- jacques_chester 15y ago
  > When I see success, it always seems like there is something additional to intelligence - like work ethic, or conviction. I usually see luck. Luck is a huge variable.
- yonasb 15y ago
  Exactly. That's what I got out of this article, insight into why he may be so successful. His ability to appreciate the value of social media more than some other investors and him being in a position to bet on it.
benrpeters 15y ago
It seems that the author had to come up with those complicated theories b/c he couldn't get Milner to open up. The loan insight that he uncovers about the perception that led to investing in SV is that YM foresaw that social networks could generate huge margins from advertising. Well, that certainly was smart of him, but how did he get there and how did he pick the companies he did? He buys Mail.ru and then ... he buys facebook? One dinner with Goldman people in Moscow and voila!?! The article provides a decent biographical sketch but the author is left to speculate on all the whys. I wonder whether he asked tough questions and was simply rebuffed or whether YM provided access but laid strict ground rules. If so, the author should have let the readers know this. That he would prefer to remain enigmatic rather than open up about his process means that he is at least partly responsible for the overly complicated theories about him. Maybe he has good reasons not to or maybe it reflects a different culture. But I find it more than a little ironic that someone so tight-lipped is a social network tycoon.
bootload 15y ago
"... If there's one mistake this story makes, it's in trying to come up with complicated theories about why Yuri does well. He's simply smart. ..." Smart in Russia isn't unique. Opportunity is the scarcity. Smart also doesn't fully explain the "new money" problem. Timing might. Instability in the 90's meant opportunity but opportunity only happens in Russia with influence, in Yuri's case, "Usmanov". Expert knowledge of western economics & Russian business could also explain the ability to conceive & create a western style business in emerging Russia of the late 90's. [0] For me though, it's the link with Usmanov that clouds the "new money" problem. [1] The article also mentions Milner's religion. Highlighting Milner's religion, then questioning his integrity could be viewed as a smear attempt. [0] The investment could be explained knowing that Boris Zakharovich Milńer PhD (father) is member of the "Russian Academy of Sciences" ~ http://www.gbata.com/jgbat.html http://www.gbata.com/jgbat.html & member of "Russian Institute of Economics" ~ http://www.guu.ru/files/gbata/english_program.doc http://www.guu.ru/files/gbata/english_program.doc [1] Bill Powell, Jessi Hempel, Fortune, "Who is Alisher Usmanov?" ~ http://tech.fortune.cnn.com/2010/10/04/who-is-alisher-usmanov/ http://tech.fortune.cnn.com/2010/10/04/who-is-alisher-usmano...
adlep 15y ago
If you think that the only needed quality to be a billionaire in Russia is being smart, you are in fact disconnected from reality and shame on you for that - you should know better.
jakeweineberg 15y ago
Paul are you going to comment on the following? People like Milner and others associated with Russian oligarchs spend lavishly because the money they have came with no sacrifice on their part. The sacrifice came from all those miners working in subzero temperatures in the Kazakh steppe for kopeks a day, their bodies broken down prematurely, with the share of wealth that was promised to them stolen away. And instead of those who betrayed them being brought to justice, they instead depart to the West where they are greeted with applause by those who mistake cunningness with intelligence.

by pg 15y ago

mapgrep 15y ago

Come now, Paul. Yes, Yuri is smart. But he also has huge sacks of money to throw around, most of which comes from oligarch Alisher Usmanov. Wolff confirms here for the first time (I believe) that "Milner has created a separate fund to invest in international—and especially American—Internet companies, with Usmanov taking the biggest stake." And we've yet to see any sort of track record for the piles of money Milner throws around, at least the big new money he is spending in America. In what sense is he "successful?" It's kind of sad, to me at least, the extent to which a sort of amorality has really taken hold in Silicon Valley. It's nice that he's helped your investments out, Paul, but where does Yuri's money come from? Have you looked into him and Usmanov? I mean, the sad thing about Yuri Milner to me isn't that he's an ostentatious outsider, it's that he fits in so darn well in Silicon Valley. I wish this was the sort of place that looked completely alien to someone from Moscow or Wall Street. Every year, it seems that's less and less the case, at least in terms of culture.

vaksel 15y ago
yeah it's not like VC world is full of idiots, most of those guys tend to be smart.
- staunch 15y ago
  Judged by their returns, all but the top tier of VCs (of which Milner is now a part) are idiots.
- pg 15y ago
  Actually only the top few are smart.
  - rdl 15y ago
    Is it that the top funds are packed with smart people, or there are smart people at the top of a lot of funds with lots of less-intelligent junior people? From what I've seen, the top funds (at least the smaller ones) are 75+% smart people (at partner level; I never met enough associates/principals to evaluate them); there are entire bad funds full of mainly dumb people from the top down. This is kind of different from operating entities, where even stupid-dominated organizations often have some great people hiding out, or even entire great teams.
    - chunkybacon 15y ago
      I think pg has a different definition of smart than you do. Think Chuck Norris smart and you'll be on the right track.
      - mathattack 15y ago
        Is this supposed to allude to, "Fred Wilson's doesn't want his companies to IPO, IPOs want to Fred Wilson" or something like that?
mathattack 15y ago
Based on subsequent valuations it would seem like Facebook, Groupon and others are doing very well. It only takes a few home runs to cover a lot of strikeouts and singles.
- 0x12 15y ago
  Only when you sell the stock. So the money to buy all that stock still had to come from somewhere. Macaroni somehow doesn't cut it.
  - mathattack 15y ago
    I was referencing where his returns came from, not his capital. That's another story which I haven't dug enough researching to figure out.
  - temphn 15y ago
    Right. We can bound this by getting the total market size of the macaroni business in Russia, and comparing to public investment numbers by Milner in other companies. Does the top down (revenue, profits) match the bottom up (sum of investments)? Unless he built the Russian Chef Boyardee, it strains the imagination to believe that macaroni was anything but a front for money laundering, from the Russian Mafia, Usmanov, or who knows where. Though I doubt YC companies are at risk of having their legs broken by Russian gangsters should they fail, because Milner is in the US and wants to play by American rules (though the US itself is rapidly moving towards the cynicism/crony capitalism/venture socialism of the Soviet bloc). Sort of like Michael Corleone becoming a pillar of the community, these sorts of transactions buy respectability. All that said, Americans shouldn't be too self satisfied. We'll probably realize in a few years that the $787B stimulus and the $9T Federal Reserve bailout ended up in the pockets of a few politically connected American oligarchs like George Kaiser, as the euphoria of 2009 Obama America was similar to the euphoria of 1992 Yeltsin Russia. Massive amounts of money flew around with little accountability and the hangover will be a bitch. Anyway, from a blackbox perspective Milner's presence is good for startups at all stages, as even if he is only a threat to invest his presence forces better terms from others. I think that is the pragmatic perspective: he is a feature of the landscape, so might as well benefit from him. (still, that macaroni calculation would be a damn interesting public spreadsheet. should be done anonymously of course...)
pg 15y ago
In what sense is he "successful?" Financially, in the same sense Mark Zuckerberg is.
- deleted 15y ago
  [deleted]
- vizzah 15y ago
  I though Zuckerberg's success is in the creation, not in the bank balance? Really, 'financial success' and life's success (for achieving something worthwhile for the history of this planet) must be two absolutely different achievements..
  - pg 15y ago
    That's why I qualified my answer by with "financially." That is the type of success mapgrep is asking about: his returns as an investor.
jbooth 15y ago
Huge sacks of money to throw around and huge cojones as well to make those bets, most of his investments had everyone saying "That's crazy!" at the time, yet they've paid off for him so far. Time will tell if they're successful or if he's making money off of a bigger fool, I guess, but he looks pretty good right now.
- 0x12 15y ago
  Criminals routinely invest lots of money in losing enterprises. This is called money laundering. They'll take a hit from 30 to 70% or even worse just to be able to get their money back in a way that they can spend it legitimately. They may not even care to win overall, as long as some of the bets pay off that's great. It will give influence and legitimacy. The hard part is always to find places that will take large amounts of money, no questions asked and that have a gambling element in it which could explain large returns in a plausible way, and in a way that will stay. That's why casinos are very popular, ditto with antique dealerships, the real estate sector and financial services such as banking. It's really not that much of a stretch of the imagination to use venture capital as another money laundering setup, essentially it has all the elements of a casino, large amounts of money go in, lots of it disappears and some relatively small bets pay off huge. Another reason for making 'silly bets' is to diversify whatever the cost, because being the owner of former state enterprises and a bunch of mines always has a risk of nationalization, silicon valley investments have returns in hard currency and on top of that are unlikely to ever be taken away at the whim of some ruler. http://en.wikipedia.org/wiki/Alisher_Usmanov http://en.wikipedia.org/wiki/Alisher_Usmanov has an interesting profile and if that's Milners main source of capital there are definitely some pointed questions that should be asked. This is not who you want to be indirectly involved with your startup, assuming that it is true and that this guy really is the power behind the investments Milner is making. Pecunia non olet but some money is better refused than accepted, 'success' on the back of stealing from the people of the former Soviet Union is not something to be proud of.
  - shareme 15y ago
    There are legal reasons why you do it as well..lets say you legally got out of paying high 45% corp tax rate by parking profits offshore in Europe. Than obviously you would re-invest those profits in Europe Social-Media start-ups as you would only have ot get a return of 70%. Prices of raw material inputs to energy, Metals, etc went from high to low and back again during Russia's past recent history and we are making unfounded assumptions in this thread that have very little to no basis in fact.
Hitchhiker 15y ago
http://www.youtube.com/watch?v=UgcxGFmYyPs http://www.youtube.com/watch?v=UgcxGFmYyPs

gsivil 15y ago

While smartness seems necessary it was almost never enough to succeed in Silicon Valley or in Wall Street or in the sciences. Smart is such a generic term that is almost meaningless.

mathattack 15y ago

Interesting. When I see success, it always seems like there is something additional to intelligence - like work ethic, or conviction. In this case it seems like his place in society allowed him to understand social media before a lot of other smart people. Additionally he had money when others didn't - he could invest in mail.ru and Facebook when other investors were in retreat.

jacques_chester 15y ago
> When I see success, it always seems like there is something additional to intelligence - like work ethic, or conviction. I usually see luck. Luck is a huge variable.
yonasb 15y ago
Exactly. That's what I got out of this article, insight into why he may be so successful. His ability to appreciate the value of social media more than some other investors and him being in a position to bet on it.

benrpeters 15y ago

It seems that the author had to come up with those complicated theories b/c he couldn't get Milner to open up. The loan insight that he uncovers about the perception that led to investing in SV is that YM foresaw that social networks could generate huge margins from advertising. Well, that certainly was smart of him, but how did he get there and how did he pick the companies he did? He buys Mail.ru and then ... he buys facebook? One dinner with Goldman people in Moscow and voila!?! The article provides a decent biographical sketch but the author is left to speculate on all the whys. I wonder whether he asked tough questions and was simply rebuffed or whether YM provided access but laid strict ground rules. If so, the author should have let the readers know this. That he would prefer to remain enigmatic rather than open up about his process means that he is at least partly responsible for the overly complicated theories about him. Maybe he has good reasons not to or maybe it reflects a different culture. But I find it more than a little ironic that someone so tight-lipped is a social network tycoon.

bootload 15y ago

"... If there's one mistake this story makes, it's in trying to come up with complicated theories about why Yuri does well. He's simply smart. ..." Smart in Russia isn't unique. Opportunity is the scarcity. Smart also doesn't fully explain the "new money" problem. Timing might. Instability in the 90's meant opportunity but opportunity only happens in Russia with influence, in Yuri's case, "Usmanov". Expert knowledge of western economics & Russian business could also explain the ability to conceive & create a western style business in emerging Russia of the late 90's. [0] For me though, it's the link with Usmanov that clouds the "new money" problem. [1] The article also mentions Milner's religion. Highlighting Milner's religion, then questioning his integrity could be viewed as a smear attempt. [0] The investment could be explained knowing that Boris Zakharovich Milńer PhD (father) is member of the "Russian Academy of Sciences" ~ http://www.gbata.com/jgbat.html http://www.gbata.com/jgbat.html & member of "Russian Institute of Economics" ~ http://www.guu.ru/files/gbata/english_program.doc http://www.guu.ru/files/gbata/english_program.doc [1] Bill Powell, Jessi Hempel, Fortune, "Who is Alisher Usmanov?" ~ http://tech.fortune.cnn.com/2010/10/04/who-is-alisher-usmanov/ http://tech.fortune.cnn.com/2010/10/04/who-is-alisher-usmano...

adlep 15y ago

If you think that the only needed quality to be a billionaire in Russia is being smart, you are in fact disconnected from reality and shame on you for that - you should know better.

jakeweineberg 15y ago

Paul are you going to comment on the following? People like Milner and others associated with Russian oligarchs spend lavishly because the money they have came with no sacrifice on their part. The sacrifice came from all those miners working in subzero temperatures in the Kazakh steppe for kopeks a day, their bodies broken down prematurely, with the share of wealth that was promised to them stolen away. And instead of those who betrayed them being brought to justice, they instead depart to the West where they are greeted with applause by those who mistake cunningness with intelligence.