Tora-center - History of a Man and a Company: Interesting and Instructive
Stock Market Journal,
Moscow, 1997, No. 16
Tora-Center was established in 1993 as a small company, which had no intentions to go out on the financial market. It was set up as the company to carry out contracted jobs in the KVANT Research Institute: installation of computers, organization of LANs, development of software to orders, etc.
There erupted a scandal since the design was top secret. But it was a lucky scandal : the developers became famous and they got a chance to legalize their work.
Andrey Masalovich was then assistant chief developer of the unit in charge of its architecture and software, i.e. just the elements which the Americans found to be the main Russian weapon in the recent years.
The Russian Academy of Sciences gave him a scholarship called "An Outstanding Russian Scientist" and for three years they paid him $70 a month. The Americans were more practical and they invited him to a course of studies. Masalovich himself sees certain ambiguity in the goals of that program: it was implemented by the American Committee for Assistance in the Reforms in Russia, and they were choosing the most talented people from the defense industry and giving them funds to study in the USA to show them that business was more interesting than defense. During his studies in the USA Masalovich discovered that close to the area that he had been involved in (processing of visual signals, telemetry data on the basis of multiprocessor networks and, in particular, neural networks) there was a still more interesting one - using practically the same algorithms in financial activity and business.
The Man Who Made Himself
The culmination of the studies in the USA was usually the development of a business plan. Masalovich wrote it. The key idea was that in the US there had been developed a great number of analytical instruments, which could be used and were already being used by financiers. In Russia, however, there were scientists who could adapt these instruments to Russian conditions but they have absolutely no funds because this problem was outside the sphere of scientific interests, and financiers seemed to be able to do without any analysis at all.
The Americans liked the idea but gave no funds to start this business in Russia. Masalovich asked for a quarter million dollars. The idea was forgotten for six months.
But in the process of preparation of his business plan Masalovich collected material and compiled a review of the American market in neural networks. For his own use.
It turned out that 100 companies were involved in neural networks, 70 out of them in the US, but only 20 of them were actually prominent in the financial community. The review, which was a long one and took 200 pages, was bought by Los Angeles University. A paper of that type is very expensive, and the University could not specially order such a report for the money it could afford. Understanding it, the University provided publicity for the author and the latter was invited by all these 20 companies and visited them all, twice going round the USA in one month. As the result of his tour, Masalovich learnt everything which was going on in this market at first hand. He reached an agreement with many of the companies about the possibility of deliveries of their products to Russia.
At the Right Time In the Right Place
1995 came. If before Masalovich had been writing academic articles and was involved in developing new technologies, now he began writing popular science articles. The first of them appeared in the first issue of PC Week.
The presentation of the magazine took place at the COMTEK, on May 9, 1995. And on May 10, in spite of the fact that due to it being a day off Masalovich disconnected his telephone, he was reached by representatives of Incombank and Autobank. They wanted to know whether the author of the article was a specialist in the area he was writing about and whether he would be able to adapt the American packages to the Russian conditions. The answer was affirmative. Thus Masalovich got his first customers.
On May 11 the process continued in a self-generating mode: there came representatives of another and still another bank, asked nearly the same questions, inquired what banks he was already working with (were duly impressed with the names of Incombank and Autobank). In 50 days it earned him $ 50 thousand, an office in Stoleshnikov, a staff, i.e. became a business.
In Masalovich's own words his first impulse was to attribute this success to himself: after all it was he who found and developed a good idea. But it turned out that the reason was quite different. The reason lay in the approaching interbank crisis which erupted in August but the first signs of which were already evident in May. The most farsighted banks started realizing that they may collapse through elementary shortage of cash and loss of liquidity. That generated the demand for analytical research.
Market Discovery. Tora-Center
Now Masalovich together with the team of the company he set up - Tora-Center - opened a new market where the demand greatly exceeded the supply. He studied the market though many people tried to dissuade him from this idea. It turned out that at the time there were 43 banking systems and only three of them had some element of analysis, the others only compiled balances, solved statistical tasks but did not do any analytical tasks.
Now the staff of Tora-Center is over 10 people, it has two offices. The first one is a store and a show room, the second serves to develop products to customers' orders and own products.
They have already installed over 200 neural networks for banks and financial companies.
There exist about 300 packages of technical analysis. The experts of Tora-Center studied them and selected 10-15 of the most selling ones, the winners of competitors by certain criteria, etc.
When customers come in they are offered Western packages out of the selected best which are the best suitable for their purposes. Before that the packages are adapted, are tuned to the Russian conditions. All the packages are supplied with very detailed description and full documentation - both for users and for technical specialists. The projects always include a stage of comprehensive utilization when the Tora-Center specialists work together with the customer. And as a rule the company implements projects from the initial to the finishing stage - from a satellite dish on the roof to portfolio management.
Employing highly professional specialists on their staff, having gained huge expertise in the field, understanding that no one knows one's "own" conditions better than local specialists, Masalovich now can afford something which before he considered to be pure arrogance - they can now develop their own software.
Tora-Center pursues a consistent policy on the market. After it becomes clear that the package is in demand on the market, Masalovich gets in touch with the company which developed the product to get exclusive rights, and if he cannot do it, then to obtain a distribution license, the right of publication of documentation in Russian and methodological guides.
Knowledge As Commodity
Studying the market, Masalovich found that besides the analytical packages proper there is a great need of knowledge in the field. That generated the idea of commercial seminars "The Strategies of The Best Traders of The World".
The first seminar did not pursue any commercial goals, Masalovich and his team prepared a book for publication - "The Strategies of The Best Traders of The World", written after the eleven volumes of Greg Morris ' publication. On the Russian market the book sold rather poorly: the book gives bare facts, there are no generalizations, just listing of the strategies one by one. And the price was high - $1000. A Tora-Center specialist worked on the book for six months, adapting it to our conditions, all the strategies were input to the MetaStock package, tested on historical data, Russian examples were selected. So now it turned into their "own" book.
But before printing a large number of copies of the book in a good cover, Masalovich decided to "try" it on specialists and organized a seminar to which he invited his acquaintances out of the best professional traders. The participants took the seminar as a training session. It was a tremendous success. As a result there were 60 applications for the 12 vacancies for the seminar participants. The seminar became an ongoing and commercial enterprise, starting yet another line of business.
Copyright © 1997 Stock Market Journal, Moscow, 1997, No. 16, p. 295-296.