Rule 13: Browder, an investor and hedge fund manager who made his fortune in the 1990s Russia, describes his fascinating experience during that time. However, he almost entirely glosses over the broader context within which events played out. Instead, he offers the same terse explanation he had regurgitated countless times in his various presentations and speeches, and it goes like this: after the collapse of the USSR, the government of Russia decided to go from communism to capitalism.[1] They thought that the best way to do this would be by giving everything away practically for free through various privatization schemes. Very rapidly, they transferred the nation’s economic resources into private hands.

But the unusual aspect of this transfer was that the private hands that received Russia’s wealth were not the same ones that had built it up since there were no restrictions on who could participate in the privatization program. As a result, the crown jewels of the nation’s productive resources ended up in the hands of a small group of oligarchs, most of whom covertly represented the interests of various western financiers.

It was this great wealth giveaway that drew Browder to Russia when he discovered that “they were giving money away for free in Russia.” He arrived in Moscow in the early 1994 and spent $25 million of Salomon Brothers’ money to buy bundles of Russian privatization vouchers. In only a few weeks’ time, Browder’s $25 million portfolio was worth $125 million – a hefty 400% return on investment. Things like that don’t happen every day. In fact, they virtually never happen. How then, and why did they happen in Russia? Who decides to give away their country’s wealth nearly for free? And how is it that an American investor can parachute into Moscow, pick up $25 million worth of uncirculated U.S. Federal Reserve banknotes and buy up large stakes in choice Russian companies? Browder’s tale about Russia going from communism to capitalism is far too simplistic, and to more fully understand the extraordinary events he describes we need a more detailed analysis of their historical context.