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Against All Odds

Creating an industry in Central and Eastern Europe has restored hope and dignity for thousands—and given me a front-row seat on history.

by John Wirth, BA’92

APOVSummer 2009  |  Share This  |  E-mail  |  Print  | 
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Wirth

Wirth

“Welcome to Germany. Just three weeks until you’ll be in Bosnia,” I was told by my battalion’s personnel sergeant upon my 1993 arrival in Frankfurt.

I never imagined then how my longing to experience the adventures of transformational Central and Eastern Europe (CEE) would lead me through the dense complexities of nation building and the thrill and heartbreak of creating a new company, providing me with a front-row seat to the global financial crisis.

I have been exposed to corruption at the highest levels, industrial espionage and intrigue, and the joy and satisfaction of enabling thousands of needy people to live a richer and more fulfilling life. I never could have anticipated the transformative impact this path would have on my perspective and view of the world: My naiveté and raw idealism have transformed into a deeper, more balanced and respectful understanding and acceptance.

Back in my student days at Vanderbilt, the transformation of CEE was a daily topic of discussion for me and my fellow residents at Carmichael Towers II during the fall of 1989. Although none could agree on which government would fall next and which revolt was genuine or staged, we shared a common yearning to be part of this history in the making. The events taking place across the Atlantic were so monumental, so dramatic, so exciting! Why couldn’t we just be a few years older? And couldn’t I find a way to defer my R.O.T.C. obligations to serve in the U.S. Army?

Although my departure to the former Yugoslavia was delayed by several years and my end destination in the service of the U.S. Army changed to FYR Macedonia, it seemed that I would finally realize my dream to experience transformational CEE as a freshly minted 2nd lieutenant. Serving with the United Nations’ Operation Able Sentry required immersion into the region’s deep and complex history.

For centuries various Slavic tribes, the Ural-originated Magyars, the ancient Illyrians, and the dominant Ottoman Turks often lived side by side, more frequently as oppressor and oppressed. As each side could point factually to numerous tragedies and betrayals suffered at the hands of the other, it quickly became apparent that no moral justice or higher truth could be claimed by any side. Objectivity, independence and balance were crucial to our ability to patrol safely through Albanian, Macedonian and Serbian villages.

This intense experience of rich cultural diversity and political transformation left me wanting to experience more. I had just contributed to the political and military stabilization of a region and its ethnic diversity. Having seen much poverty, few professional alternatives, and a population eager to advance themselves, I decided that I would earn an M.B.A. and set up my own company somewhere in CEE to stimulate growth and create opportunity.

A few years later—armed with a Cornell M.B.A., the skills and knowledge gained while launching new businesses as a strategy consultant and investing in and growing startups as a venture capitalist, and the perspective and cultural sensitivity gained from having worked or studied in six different countries—I believed I was ready to build my company.

As a preliminary step I re-entered the region working as an economic adviser assigned to five early-stage companies with a U.S. Agency for International Development (USAID) project in Zagreb, Croatia. The somewhat arrogant goal of my project was to “transfer Western knowledge” to enlighten the locals. But as with my Vanderbilt Alternative Spring Break on a Cheyenne Sioux reservation years back, it was I who walked away with a deeper understanding. Business in the U.S., the U.K. and Germany had been civilized—predictable even. I was just beginning to learn that in CEE, business is much more. It is about survival. This lesson was to be reinforced on many occasions during the coming years.

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I began exploring ideas while continuing with my official USAID role. Introducing coin-operated laundromats appeared very promising until I discovered that, even with boiling water and detergent, locals viewed sharing a washing machine with strangers as a filthy practice.

My plan to privatize and transform a naval shipyard into a yacht marina and repair facility almost became real—until management, union representatives and local officials began demanding personal incentives.

Throughout, I could not help but notice the dire poverty that the senior population (60 years and older) was forced to endure. Forbidden to accumulate wealth under the communist system, lacking private pensions, and facing inflation, currency devaluation, bank crises, and numerous pyramid schemes and other scams, many seniors—even the well educated and accomplished—had been relegated in just 15 years from positions of seniority and respect to poverty, need and dependency. Upon investigation, I learned that seniors across the region were suffering a similar plight.

Aware of reverse mortgage and home equity models well established elsewhere, I recognized the opportunity facing me: a large, fast-growing demographic with unusually high home-ownership rates, unserved in the region by retail banks and insurance companies. I saw an opportunity to aid a suffering and marginalized segment of society.

So with an idea and a laptop, I relocated to Hungary, where there were more than twice as many seniors. And because Hungary was soon to be a member of the European Union, it would be much easier to raise financing.

I was completely alone, without a salary or knowledge of the Hungarian language, and had to be resourceful. Survival became very personal. Living not as an expat with a comfortable compensation package and the coddling support of an established institution, but competing with the locals on their turf and according to their rules, gives one the real experience of living abroad.

It can be overwhelming. There is something spiritual about the process of being broken to the basic elements of your core identity, then picking yourself up, evolving into a stronger, more complete being.

“If nobody’s doing it, it can’t be done!” and “Like everybody else, you just want to steal their homes” were the warmest words of encouragement extended to me in Budapest. This was not the enthusiastic support of individual innovation and creativity at the core of the American psyche. A general pessimism pervasive across Europe to varying degrees, residual feudal instincts of learned helplessness, and 40 years of surviving Communism through passivity and acceptance had created a population with a limited confidence in its own potential for innovation and growth. After decades of party spies, neighbor informants and doublespeak—along with questionable privatizations and all types of scams—trust in society had long been lost.

I found a deeper phenomenon underpinning this pessimism and mistrust, something known locally as the “neighbor’s cow”: “If my cow falls ill, I do not seek treatment to make it better. Instead, I focus on how to ensure that a worse fate befalls my neighbor’s cow.” Little did I realize then how deeply this mentality penetrated the very souls of the region’s citizens and how thoroughly it was reflected in business, political and everyday life.

Reaching out in all directions, tapping all possible resources—such as alumni networks and acquaintances from school—and even teaching entrepreneurship at Central European University, I began to weave a network of local relationships and alliances, creating substance where none had existed. While building my professional foundation, I began to develop my business concept—research, financial modeling, strategy, presentations and investor-ready reports.

Good fortune enabled me to recruit my chairman and first investor. (Luck must have helped as well, as we had
been next-door neighbors in Boston.) Over the following two years, we built a complete team, signed several contracts with seniors, and brought on Deutsche Bank as our primary institutional backer.

“It’s too bad things are becoming difficult for your company,” said an ex-government minister from within the region, now known widely as Mr. Ten Percent. “Working as your consultants, we could guarantee that things clear up for you quickly,” he offered.

I had learned by then that “consulting” in CEE had become a euphemism for “bribe.” Little did this ex-official understand that neither I, my board, nor Merrill Lynch, which by this point had become a shareholder, would even begin to consider entertaining his proposal. (The U.S. Commercial Service can be a great ally in such situations.)

In another of our markets, one of the region’s largest banks, unwilling to accept an innovative startup entering “its” geography, employed various devious tactics from initiating regulatory reviews and manipulating press relationships, to registering complaints against supposed anti-competitive practices. These attacks began only after this bank had lured away several early employees in an effort to acquire our intellectual property.

Corruption and unethical practices are not beyond the purview of the common citizen and business in CEE. An elderly lady once tried to extort money from us in an effort to earn her support for a partnership with her association of retirees. After receiving ungrounded attacks in a local newspaper, we learned that this paper was hoping to generate some advertising revenue. To this day I still wonder how this approach can be so widely preferred over the simple sales call.

Despite the multitude of challenges in establishing a new industry in CEE, we have raised more than $150 million in financing from Merrill Lynch, Deutsche Bank and leading venture capitalists. We have built teams of outstanding and capable nationals in three countries—with two more under way. And we have signed thousands of seniors. With substantial financing from us, our seniors have been able to realize long-forgotten dreams, reassert themselves as family providers, and enjoy the comfort of a secure retirement.

By pooling together many disparate senior associations, we have replicated the cost-savings programs of AARP, creating discount programs with our numerous commercial partners to enable millions of seniors to benefit from discounted pharmaceuticals, travel, medical care, food, banking services, insurance, toys for their grandchildren, and other products and services.

Each of our offices serves as a social center where afternoons are filled with entertainment such as senior karaoke, English lessons, and even senior belly dancing. We also have partnered with leading health-care providers to make available quality and responsive medical attention which, unfortunately, is often lacking in the region. Sometimes it’s difficult to know whether a business truly meets its customers’ expectations and provides good value. Considering the many plates of home-baked cakes and cookies I have enjoyed through the years, it seems that we have hit the mark.

What started as a quest for adventure morphed into a desire to help and, through the years, evolved into a life’s journey of experience and personal development. My natural inclination to view the world in absolutes has transformed into challenging the various shades of gray, differing points of view, hidden motives and layered meanings. There are so many warmhearted, talented and ambitious people in the region. And I continue to be amazed by the number of natural entrepreneurs I have encountered here.

It was naive for us in the West to assume that things would change overnight, or even in two or three generations. Nonetheless, with more people willing to embrace the challenge, to forge new ground, to demonstrate how business can be done fairly and ethically, things will change for the better.

Still idealistic, but now with a measured idealism, I believe each of us can change the world in our own way. But I also have learned that others are not helpless, our way is not the only path, and we should only help those who ask for it.

John Wirth welcomes feedback from other alumni. Contact him at john.wirth@alumni.vanderbilt.edu.

 

© 2014 Vanderbilt University | Photography: Aaron Taylor | Illustrations: DIGITAL VISION ILLUSTRATION

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