The Success of the ‘Emerging Sports’: in the economy and on the Sochi slopes
You will not grasp her with your mind
Or cover with a common label,
For Russia is one of a kind —
Believe in her, if you are able…
It has only been a fortnight since the Sochi Olympics kicked off with an intriguing opening ceremony that will go down in history, not only for its sense of style and obvious pride for the host country, but also for a technical glitch that left the iconic Olympic symbol with one ring short. I was positively surprised how the organizers were able to adapt the closing ceremony’s script to reflect on this technical malfunction during the opening ceremony. The fluorescent dancers formed an ideal ornament of the Olympic rings, and YES – the group responsible for the 5th ring held tightly together just long enough for everyone to notice before finally bursting to complete the iconic Olympic symbol to the tune of Boney M’s ‘Oh, those Russians’. This gesture of self irony was greeted cheerfully in the arena by an international crowd of more than 40 000, that I had the privilege to be a part of.
With the Sochi Olympics making history I had to admit to my children that with all my econometric background polished by an LBS MBA, the medal count won by Team Russia was way off the chart of my most optimistic forecast. Indeed, careful analysis of the nation’s performance at the previous Olympics, as well as a scrutinised study of the country’s sports education system would NEVER lead even the best in the trade to officially present a well reasoned forecast that would have predicted Russia winning the unofficial medal count by a landslide – counted either by the traditional or the American way. Watching Russia win gold in the women’s Figure skating and Snowboard parallel slalom on Sunday morning, I told my friends that it was too early to celebrate. The same was true with the 30K and 50K Nordic events scheduled on the last day when Norway was set to secure the overall 1st place in the medal count. As such, it was incredible to witness Russia making a clean sweep of the pedestal in the men’s event. This victory in fact led my wife to remind me of the famous Tyutchev’s quote that I found apt for the opening line of this commentary.
However, I wanted to share a slightly different perspective of this Olympics that, as far as I am aware, has so far been underreported: HOW did Russia achieve this remarkable result? And what is even more important for me: does this signal something about the country that goes beyond sport and into the economy?
The country’s Olympic prospects during the Soviet period could be narrowed down to ice hockey, ice skating and Nordic skiing. In 2014 these pillars contributed to only 30% of the total gold count. The new sports (snowboard, short track and skeleton) that emerged after the demise of the USSR in fact delivered 6 medals this year. This was completely unexpected if you consider Russia’s performance at Vancouver just four years ago.
An analogy can be drawn with the economy. If we envisage the three core pillars of the Russian economy – minerals, oil & gas and the defense industry – we should ask ourselves whether we can assume economic growth in Russia will be delivered by these three sectors. Or, alternatively, whether there are new leaders like the ‘emerging sports’ that we simply fail to recognize? For anyone taking a stroll through the Olympic park the answer was plain to see: the colours of Megafon, the country’s mobile telecom provider was firmly holding its ground against the behemoths of Rosneft and Sberbank.
It is likely we will probably still rely on the Three Pillars to add to the golden pot in the foreseeable future, but their contribution will be stable and significant breakthroughs unexpected. The ‘emerging sports’ however have the potential to deliver growth that will pivot the country to the global rankings (be it in sports or the economy). Russian Private Equity has been a longtime advocate of the investments into the emerging and under-appreciated sectors of the country’s economy. Even though the recent successes in fund raising are encouraging, Russian Private Equity still remains at a minuscule 0.01% of the country’s GDP[ii].
We are doing our utmost to convince the global investment community that they need to look beyond the traditional pillars to the healthy macroeconomic indicators and Russia’s potential in making their allocation. As the GPs, we promise to do our utmost to deliver results that go beyond conventional models and/or rational. As Mr Thomas Bach pointed out in his speech during the closing ceremony “Russia delivers on its promises”. I will venture to suggest this assertion goes far beyond the realm of sports, and I hope that the obvious change of tide in public sentiment towards the Sochi Olympics that occurred in a fortnight, is an appetizer for what is yet to come in the financial markets. The question is: “Will you invest in Russian Private Equity with me and my industry peers, or will you be standing on the sidelines 10 years down the road shaking your head in disbelief, whispering under your breath “I can’t believe it, my models have never predicted such returns…”?”
P.S. And by the way, for the scholars of Russia in the audience: you HAVE recognized the tune to which the Russian team entered the stadium during the closing ceremony, haven’t you? ;)
Аршином общим не измерить:
У ней особенная стать –
В Россию можно только верить.] Фёдор Тютчев