Vyacheslav Mishalov: "Put the Hen That Lays Gold Eggs in Wrong Hands And They Won’t Hold The Eggs"

Vyacheslav Mishalov is an unusual interlocutor. “You’re interested in hunting, aren’t you?” he asks us when we meet. He had studied us before the interview as well as we had studied him. The son of Dmytro Mishalov, one of Dnipro’s major businessmen, he did not follow in his father’s footsteps and does business in different areas, other than those where his father's companies are engaged. He is still young but has already been into politics (which he abandoned, though).

Just a few years ago, Mishalov was Secretary of the Dnipro City Council, but he left the post after his Samopomich faction expelled him following a corruption-related scandal. He continued to successfully run his business and became known as one of Ukraine’s biggest Bitcoin holders, reportedly owning nearly 16,000 BTC. We spoke about his journey from metallurgy to cryptocurrencies and investments, why he believes a diversified business is more profitable now, about his reasons for abandoning politics, and why he does not believe in a mass postwar influx of Western investments in Ukraine.

- Why did you abandon politics? What was the reason? You were young and had a good position of City Council Secretary.

First of all, I’m not a politician. Before I came to the city council, I was an entrepreneur and a businessman. I remained an entrepreneur with the same mindset, logic, and behavior. Politics is something else. I realized that very soon, although I still tried – by inertia – to prove what was right or wrong. That wasn't worth it. I'd proven everything to everyone long before. Just let politicians live in their world and businessmen in theirs. The less politicians meddle in business, the more successful and healthier business will be.

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- And yet, what went wrong with your faction? You were expelled due to a scandal over the construction of several boiler houses…

When I met some of the guys high up in the party hierarchy, I saw that things worked by the principle “Me the boss you the fool.” I felt I didn't quite belong where I felt uncomfortable. I'd lived in America for eight years, I had a good education and a decent IQ level, and I couldn't care less about idiotic managers. I spoke my mind, and they didn’t like it. When they found something to latch onto, they did. But now eight years have passed and no charges have been brought, no criminal cases filed, and I’ve never even been called in for questioning. If they were a responsible party, they'd have come and said, “Vyacheslav, it's our fault, sorry.” Smart people admit to their mistakes. I admit that my trip to the City Council was a youthful impulse, a rash act. But there’s not a single business act in my life that I regret more than my dive in the City Council.

- So, what happened to those boiler houses?

Energy efficiency is crucial. I’ve always said that burning expensive natural gas to make hot water is a crime. All the boiler houses are open. Homes are heated, and this is especially relevant in today’s context. This once again proves that I was right. Energy independence and diversification turned out to be essential, though I never wanted it to be proven this way.

- Why didn’t you follow in your father’s footsteps? His business is in metallurgy and construction, while your areas are providers, cryptocurrencies, investments, and a bit of metallurgy. Is that more profitable?

I made my first significant money in the technology business, which included web portals, namely the i.ua portal, collaboration with the Ukrainian Media Holding (UMH) before it was sold, a data center, city portals, and online advertising. At the time there appeared to be the least competition in these niches. I was never integrated with my father’s business. My business is very diversified, and that's what keeps me afloat. My father and his partners have a narrower focus, their business is concentrated on construction, and that's why they’re facing difficulties. A diversified business is better. You’ll always stay afloat no matter what happens.

- But you still happened to deal with metallurgy.

Yes, there was an opportunity that appeared profitable at the time: to buy a plant, a metallurgical plant. Actually, it wasn’t exactly a metallurgical plant. It was a sort of Soviet-era machine-building facility. We repurposed it. What we’re doing now is also a high-tech story, very far from what’s traditionally considered metallurgy. We produce steel, too, but production costs are ten times lower. In the common market pyramid, we are at the very top.

- How come metallurgy, which used to account for the lion's share of Ukraine's export revenues, deteriorated? What needs to be done to reverse the decline?

Firstly, Ukraine lost its major metallurgical clusters – Donetsk, Luhansk, Alchevsk, Mariupol and so on. Secondly, while agriculture is now in the hands of thousands of businessmen, primary metallurgy – specifically blast-furnace metallurgy – was concentrated in the hands of just a few people. Any market dominated by one or two players stagnates. This isn’t just my opinion. It’s confirmed by global statistics. Everyone was just syphoning money from the Ukrainian market. There was no competition or reinvestment. The most important point is that there was no sense of urgency. No one thought something needed to be done. Metallurgy was seen as something that would always be fine. But markets don’t stand still, and competitors don’t stand still. As a result, Turkey, which has no iron ore, is now producing two and a half times more steel than Ukraine is. The bottom line is: monopolies are bad. They’re bad for any country, and especially for Ukraine.

- You’re known to be one of the largest bitcoin holders in Ukraine. How does it work and what do you do with your bitcoins? What advice would you give to those who want to engage in cryptocurrencies?

There are two types of cryptocurrencies. Some are stablecoins, convenient for payments, and others are speculative instruments. Speculation exists in many markets, and gold has probably been the oldest speculative instrument for thousands of years. Speculating with crypto today is like gambling in a casino. It will rise and fall. People have always gambled, and cryptocurrency is just a very convenient and accessible tool for this. The biggest difference is that before cryptocurrencies appeared it was impossible to become an investor with $1,000, but with crypto, anyone can invest with as little as $10. It’s a risk, but the key thing is to know that all volatile currencies are like casinos. It’s hard to win in a casino, but with crypto, it’s probably easier, because you play against people not math. It’s a dangerous tool and it needs to be used with care. I don’t just keep my bitcoins. I sometimes sell and sometimes buy them.

- What do you predict for postwar investment and activity? Everyone expects rapid growth in Ukraine. Will it happen?

I don’t trust overly optimistic forecasts. Investors are very cynical people, all of them, who are very skilled at calculating risk and profit. It’s unrealistic to expect a mass influx of investors. Charity is different. Some help, for instance, to restore schools or hospitals, and that's possible, but that’s not investment. Investment means return on capital. First, an investor needs to see how business functions in Ukraine, and the reality is that business in Ukraine is not doing well right now. The rules are constantly changing. The tax system is changing. The rule of law isn’t always present. The number of checks on businesses is endless. Anyone, if asked, would look at these indicators before making a decision. If you asked me today if I'd come to Ukraine with my expertise, I'd say no. Investors who are considering coming to Ukraine might just go elsewhere. There are many other countries, many territories. I don’t believe in the arrival of Western investors in Ukraine today. And if they do come, it will be because they’ve found a niche with super-high profitability that compensates for the risks involved.

- You’re involved in high-tech developments for the military. Why is digitalization moving quickly in the civilian sector while the army still has issues with paperwork and new technologies have to squeeze their way to it through red tape?

This is a complex issue and the answer is multi-faceted. First, before the full-scale war in 2022, the defense sector wasn’t a customer that paid suppliers fairly. No one wanted to work under those conditions or just for promises. Politicians structured the budget in such a way that the military didn’t receive enough or didn’t monitor development properly. Since 2014, the central government has failed to address these issues, such as dismantling bureaucratic organizations like Ukroboronprom. The state needed to adopt new regulatory norms that would allow production of weapons without bottlenecks. They should have let companies produce weapons on the following terms: the government purchases as much as it needs at the lowest price and you are free to sell all the rest abroad.

The second part is management. There’s a saying: "Put the hen that lays gold eggs in wrong hands and they won't hold the eggs." I think first of all the state should have asked businesses for their best people – not money – and assign concrete tasks for each of them. Businesses can help by committing to concrete tasks on a free outsourcing basis. Businesspeople understand the value of time, the value of money, and the negative impact of bureaucracy, so they try to streamline processes quickly, as competition demands. If the state had given management tasks to businesses, the processes would have progressed faster. Now things are running against the grain, but they should run naturally, and Ukraine has an incredible lot of talented people in the corporate sector.

- Drones: we have a variety of drones, but none of them is truly mass-produced…

I’m not an expert, but let’s say we need a drone that can fly 10 kilometers and carry a 3-kilo payload. We could announce a competition: whoever offers the cheapest price will sell us 10,000 drones. To participate, they would need to submit five or ten specimens for testing. The strongest would win, and everyone would switch to producing the winning model. Demand creates supply, and all you need to do is create the right and fair demand.