Profit, Loss, and Proliferation

Russia’s Americanized Russians

by Molly Cernicek and Cheryl Rofer

No sooner does Russian President Dmitry Medvedev return home from his visit to Silicon Valley as part of the reset in Russian-American relations, than the arrest of eleven Russian spies seems to return to the Cold War. President Medvedev must be wondering how Russia might have done a better job of integrating Russians into America to learn the secret recipes, handshakes, and processes of one of America’s most prolific and prized treasures – its high tech industry – and then getting them back into Russia to use that knowledge. While Russian spies may have provided information of interest, it is doubtful that information sent back to the motherland has provided any value…economic value that is.

After the fall of the Soviet Union, many Soviet government assets were handed out to Friends of Boris and Friends of Vladimir before anyone had an idea of what Russia had of value beyond oil and metals and what potential human talent was available. Little investment went into Russia’s flailing education system or its archaic infrastructure. The country whose scientists designed and built nuclear weapons, supersonic jets, and sophisticated satellites and were renowned globally in theoretical physics and mathematics focused entirely on exploiting natural resources and building a service economy. The theory was that once Russia became economically viable through natural resource trade, the government would focus on investing and building a globally competitive economy. But meanwhile Russian experts in scientific and engineering fields took advantage of opportunities in the West and in Asia, leaving a significant void in Russia. The United Nations estimates that between 1990 and 2002 the number of individuals involved in research and other academic activities decreased by 55.2 percent, or 1,072,500 technical employees. (UNESCO Science Report 2005 p.139).

Today, President Medvedev wants to improve education and build a high tech economy. Thus his interest in Silicon Valley – the model so many want to duplicate around the world. He went to Silcon Valley to find potential investors and business partners to support one of his pet projects – Skolkovo, Russia’s innovation city being developed outside of Moscow to incubate scientific ideas into profitable companies. He left Silicon Valley with one big opportunity – a commitment from CISCO to build offices in Skolkovo, including their second global headquarters for emerging technology and a $1 billion investment in R&D and business development. This is a very big deal for a plan that that will depend heavily on something Russia has very little of – successful high tech entrepreneurs.

One of Skolkovo’s first projects announced this spring is an effort in cloud computing, computer speech recognition, and sending three-dimensional images through the internet. It is backed by seed funding and enthusiasm. And there is someone to lead this effort who has world-class credentials. Serguei Beloussov has experience in a number of high performance computing areas, including cloud computing as CEO of Parallels, a global leader in virtualization and automation software. His background as an innovator and entrepreneur is spectacular. The only complication, he lives in the Seattle area. He plans to spend time in Russia getting this demanding venture going in an environment with many challenges while juggling his growing American company that made over $100 million last year.

As the United States and Russia fret over the spy story, we’re wondering whether President Medvedev wonders what would have happened had Russia had sent many more spies to Silicon Valley to learn about high tech companies and then return to Russia to build ventures of their own rather than sending citizens to fit into American life in the Northeast in order to dig for bits and pieces about US government protocols, plans and policies. What if programs like Skolkovo had been implemented in the 1990s in Russia instead of a frantic grab for natural resources?

Instead, America profited by having Russians like Beloussov come to the United States with ambitions to build companies that have created thousands of high paying jobs. Russians like Sergei Brin, co-founder of Google ( $25 billion in revenue last year); or Valentin Gaponstsev, CEO of IPG Photonics in Massachussetts, a global leader in lasers, bringing in an annual revenue of $191 million. Or the many Russians who have started smaller companies, not to mention the thousands employed throughout America’s high tech sector. Their contributions to our economy far out shadow whatever those 11 alleged spies may have taken. Surely something President Medvedev must be lamenting as he looks for help from both Russians and Americans.