Marx Against Them
Entrepreneurs are evil.
That was the sort of thing you learned behind the Iron Curtain in the midst of the Cold War. That was the message drummed into the minds of Mikhail Kvitchko and Mikhail Markov as they grew up in the 1960s and 1970s.
But it wasn't drummed into them enough. Now known as Mik Kvitchko, 43, and Michael Markov, 41, these two former Russian computer programmers are American capitalists in New York City, co-founders of Markov Processes International Corp., a technology consulting company for the financial services industry that has projected 1999 sales of a little more than $1 million, double what they made last year.
Not so long ago, if they were back in their homeland and had made a million dollars, they might have been shot. As Markov notes, "Millions of farmers were moved to Siberia in the 1920s and '30s for being more productive than their neighbors. My great-grandfather was one of them." (Later, Markov's great-grandfather was shot by the Nazis during World War II.)
Geoff Williams is a features reporter for The Cincinnati Post and a frequent contributor to Entrepreneur. He has written for many other magazines, including LIFE and Entertainment Weekly.
Even without Nazis, the Russian landscape was antisemitic when Markov and Kvitchko were growing up. Both Jewish, they weren't allowed to attend the universities of their choices. They did manage to go to college, however, and they did manage to get jobs, but not in the professions they'd studied for. It was the late 1970s, and Markov, who grew up in a Ukrainian town called Zaporozhye, intended to be a mathematician. All he could find, however, was a job programming truck routes into a computer at a truck depot in Kharkov, a Ukrainian community with several colleges and "lots of factories," says Markov.
Kharkov was also where Kvitchko had been living all his life, but although the two met once at a conference, they were each otherwise oblivious of the other, both living in a land where free markets and free exchange of ideas were not embraced.
Kvitchko had studied to be a mechanical engineer, but upon graduation, he became a punch-card operator. "It was not a job for [an] engineer," he says. "It was the lowest job you could get."
And Kvitchko never would become a mechanical engineer. He eventually became a computer programmer, and that's where he found the first tremors of his entrepreneurial awakening. "We were never taught entrepreneurship, of course," says Kvitchko, "but I always dreamed about being able to do things on my own." And so he would create programs and give them away to anybody who wanted them. It wasn't true entrepreneurship, but in the 1980s Soviet Union, it was as close as he could get. And dangerously close, as far as the Russian government was concerned. "Even this free distribution I had to do quietly," says Kvitchko. "I could have been suspected of running an illegal private business, and even prosecuted."
Is it any wonder they decided to leave?
Coming To America
Markov took his family out of the U.S.S.R. in 1989. With the help of several Jewish organizations, he, his wife, Faina, and their two children skipped from country to country for three months until they reached the United States.
But the family's arrival lacked a ticker tape parade or any sort of welcome wagon. With only $500 in his pocket, Markov set up camp at a welfare hotel in Brooklyn Heights. "It was a terrible place," he shudders. Fortunately, his English was "decent," his computer-programming knowledge was extensive, and he was a formidable mathematician. He landed a job in just a few months.
The position he found was as a technological consultant to a money management firm. Markov understood technology, but had no idea about finance. "In Russia, there's no such thing as inflation or investments," says Markov. "We're very primitive. They didn't even teach us these things in school." He started spending his nights at a local bookstore. He couldn't afford to buy anything, so he stood in the aisles and read books on finance, improving his English and finessing his understanding of the financial world at the same time.
Meanwhile, Kvitchko was also trying to carve his own niche, even if that meant leaving Ukraine. "I came here with my wife and one of my kids to visit a distant relative, who invited us for an opportunity to see the United States"--in this case, he was seeing Riverdale in the Bronx. But Kvitchko was thinking beyond a vacation. Perhaps he could drum up some business with Americans and work on projects for them from his homeland, he thought. "I was pretty naive," admits Kvitchko. "But my [naivete] disappeared quickly. Of course, I couldn't get in to see anybody."
As the month-long visit drew to a close, Kvitchko had failed to turn his vacation into a business opportunity. "Of course nothing's going to happen in a month," a friend of the relative told Kvitchko. "Why don't you stay with me for a while and try for a little longer?"
Kvitchko was delighted--provided one thing: "Before I agreed to his generous offer, I decided to find any job here. Something. Anything."
Any job turned out to be washing dishes in a cafe. Kvitchko scrubbed dishes all day, and by night, he tried to improve his English. He could understand the language all right, but speaking it was another matter. So Kvitchko would read newspapers every night, "trying to make sense of them." He would also pore through the dictionary, writing down words on flash cards and memorizing the meanings. "I still have the cards," he says fondly.
By 1990, Markov was successful enough as a consultant that he began his own company, Markov Processes, and started consulting to financial firms. A year later, he'd grown his business enough that he was looking for a partner. In 1992, a mutual friend introduced Markov to Kvitchko, who was also working as a consultant.
Kvitchko had washed dishes for two months, and then segued into a job at AT&T. An atypical segue, yes, but Kvitchko had been a dynamic force in the the world of computer programming in his homeland, as a few of his friends argued when talking to managers at AT&T.
Once they were partnered, Kvitchko and Markov immediately went to work creating a program called Style Advisor, which characterizes investment portfolios to help financiers determine whether certain investments are sound. They used this program to consult what became their only client for a couple years, a New York City money management firm called Balch, Hardy, Schienman & Winston.
The partners thought they were on track. Considering their communist educations, it's no wonder the thought never occurred to them that their only client might go bankrupt, but that's exactly what happened. Before they had much time to lament their misfortune, however, one of the firm's partners decided to strike out on his own. He bought the rights to Style Advisor and hired the Russians as his consultants.
Markov Processes was back in business--but not for long. Just a few months later, their client decided to hire in-staff computer programmers. Markov and Kvitchko again were without customers--and they didn't own Style Advisor anymore. They had no client, no product...and no business.
So they again went to work, this time creating a new product that analyzed the performances of complex pension funds and portfolios, as well as determined what type of investment decisions were being made. But Markov and Kvitchko had no idea how to market the program, and worse, nobody understood the concept. The product went nowhere.
By 1996, the two men had clued in to capitalism in a big way. They didn't have their Style Advisor, but they could create something that ultimately did the same thing, only better. Their Stylus program analyzes changes in portfolios' values and determines the styles used to make those investments. It also assesses the work of funds' money managers.
And they wouldn't be thrown into a Siberian prison for doing it. For perhaps the first time, it dawned on Markov and Kvitchko: Here in America, competition is encouraged. Who knew?
And what's more, companies understood the concept immediately--and liked what they saw. They were able to sell the program to a slew of companies, including Fidelity Investments, Charles Schwab and Bank of America.
But Markov and Kvitchko were still not exactly business-savvy--"During some early sales pitches, they would argue with each other," recalls a colleague--and the business wasn't turning profits. Markov was being supported by his Ukrainian wife, a financial executive; Kvitchko and his wife were living off their rapidly depleting savings. Kvitchko's wife did occasional baby-sitting or housecleaning to bring in extra cash. It wasn't until 1998 that the partners had their first profitable year, but now those money worries appear to be gone for the time being. With a roster of 30 clients, Markov and Kvitchko can breathe at least a little easier.
But the partners aren't as interested in money as they are freedom. "My vision is to be a team of people who can implement ideas," says Markov. "What's good about the company is when you have an idea, you can do it. You can take it and implement it in the best possible way, and we take pride in what we do."
"We are probably not typical businessmen," admits Kvitchko. "We want to live interesting lives, in terms of having fun out of [a] job. I want to create new things; I want to be able to learn new ideas and implement them in ways that never existed before. At the same time, I wouldn't mind being much more financially independent than I am now."
They may not be full-fledged capitalists yet. But they're learning.
Markov Processes International Corp., email@example.com