Revolution 2.0 - What 40 American Entrepreneurs Learned In Cuba

Revolution 2.0: What 40 American Entrepreneurs Learned In Cuba
Loren Feldman
FORBES STAFF

Not long after we arrived in Cuba last month, we heard our first jokes
about the country. In one, Presidents Vladimir Putin, George W. Bush and
Fidel Castro have all died and gone to Hell. There, they meet the devil
who tells them that for a price they can each make one last phone call.
Putin and Bush both pay more than half a million dollars but then are
outraged when Castro is charged just 50 pesos for his call to Cuba.
"It's a local call," says the devil.

The joke is out of date. Before departing on our four-day trip to Cuba
last month — I was tagging along with a group of 40 Americans affiliated
with the Oxford Center for Entrepreneurs — we had been warned that
credit cards and mobile phones would not work in Cuba, that the hotel's
WiFi would be spotty at best and that we should bring our own toilet
paper. Once we landed, we were told that it could take as long as seven
hours for the government-run hotel to register everyone in the group and
get us into our rooms. Most of those concerns proved unfounded. And it
soon became clear that none of the hard-boiled capitalists on the trip —
"Don't talk politics," whispered one over lunch, "there's a major Dem at
the table" — thought he or she was anywhere near Hell.

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Flying into Jose Marti International Airport, we saw nothing but vast
expanses of undeveloped land. On the ground in Havana, as expected, we
found a city where time seemed to have stopped more than half a century
ago. But change is on the way, and the entrepreneurs were eager to see
if they could spot any business opportunities. "You don't know unless
you look," said one.

'Cubans Don't Want McDonald's'

Led by our tour guide, Eric, who stood microphone in hand at the front
of a gleaming Chinese-made bus, we went straight from the airport to a
cigar factory and then to Revolution Square, where Fidel once addressed
his followers, where the iconic multi-story image of Che Guevara still
hangs on the Ministry of the Interior building and where the 358-foot
tower honoring Jose Marti remains the tallest point in the city. The
tower, like many tall buildings in Cuba, is circled endlessly by dozens
and dozens of vultures.

On our second day in Havana, we ate at a paladar, one of the privately
owned restaurants that have been legal in Cuba since the 1990s. Cafe
Laurent sits atop an apartment building that was once the home of the
family that turned it into a restaurant. We ate family-style beef and
pork dishes on an open terrace that offered views of the ocean and of a
huge apartment building across the street that appeared to be
uninhabited. Its swimming pool, like most of the pools we saw, had no
water in it.

Running a restaurant is an entrepreneurial challenge on an island where
food is rationed — Cubans, we were told, are allotted a quarter of a
chicken every two weeks — and where beef is in such short supply that
the unauthorized killing of a cow can bring an eight-year prison
sentence ("If you kill a person," Eric told us, "it's 10 years"). The
restaurant's owner was away, but through a translator, its manager gave
us a taste of Cuban capitalism. He told us that to hire and keep
waitstaff, he has to pay them six times what they would make in a
government-run restaurant. Many Cubans, including doctors and teachers,
work second jobs to earn what is known as "the extra." If a second job
involves serving tourists — waiter, trinket maker, tour guide — it pays
far better than a government salary. "No one lives on salary," Eric told
us. "It's the extra."

The manager said his biggest challenge is that there is no one place to
buy food and supplies. Instead, he and his staff must search 27
different shops on a daily basis to find what they need to keep the
doors open. They rarely find all they need, and every day they improvise
a new plan. The manager noted proudly that the restaurant runs quite
well when the owner is away — a comment that elicited nervous smiles
from the Americans, all well aware that their own managers might be
thinking the same thing at that very moment.

Not far from Cafe Laurent, we visited the offices of Hugo Cancio. Thanks
in part to a profile in The New Yorker and a recent segment on Anthony
Bourdain's CNN show "Parts Unknown," Cancio is becoming known as the man
to see if you are an American looking to do business in Cuba. Born on
the island, he fled at 16 after making an ill-advised joke about Fidel.
Today, his business, Fuego Enterprises, has offices in Miami and Havana,
and he commutes regularly between the two. He is, his Twitter feed
proclaims, "Cuban as The Palm trees. American as the Statue of Liberty."

Cancio's Havana offices look much like those of a typical small business
in the U.S. except that he has better art on the walls and better views
from his balcony, which overlooks the ocean and the Malecon, the
esplanade that lines it. The offices also have WiFi, which Cancio was
able to arrange because he is in the media business. Fuego publishes
OnCuba, a bilingual magazine that targets Cuban exiles in America, and
is also expanding into travel and telecommunications.

Unlike many exiles, Cancio has long believed that the American embargo
of Cuba, which only Congress can lift, is a failed policy, one that
hurts innocent people like the sisters he left behind. The American
entrepreneurs wanted to know how he responds to the Cuban exiles who say
that lifting the embargo will reward a tyrant. "When my Cuban friends in
Miami say human rights," responded Cancio, "I tell them I know this
country is not perfect, but you have no problem investing in countries
with far worse human-rights problems." He mentioned China.

Will the lifting of the embargo and the arrival of the Internet ruin
Cuba? "Cubans don't want McDonald's and Starbucks on the Malecon,"
Cancio said. "It won't happen because the culture here is too strong.
They have the Internet in Spain, and I'm pretty sure they still take
two-hour siestas."

What would it take for an American company to do business in Cuba today?
"If you want to do business in Cuba," he said, "I have a piece of advice
for you: Get to know the culture."

'Money, Time And A Good Liver'

We did our best. Driving through Havana we passed a park where, Eric
pointed out, you can buy the most popular ice cream in Cuba. There are
multiple stands in the park, and there are always long lines of people
waiting to buy the ice cream. "It's not very good," said Eric with a
shrug, prompting 40 sets of entrepreneurial eyes to flash.

Since September, it has been legal for American businesses to open
offices in Cuba. Actually doing business is another matter, but we were
told that both Marriott and Donald Trump have looked around. Only Cubans
can buy Cuban real estate, though, and it's tricky even for them — in
part because of a legacy of unusual regulations. For example, we were
told that it remains very difficult for young couples to rent apartments
for more than six months because of a law stipulating that if a baby is
born in a home, the baby will always retain the right to live in the
home. "I think the way to look at Cuba is as a big startup," said Cliff
Oxford, who founded the Oxford Center, which is based in Atlanta and
serves as something of a support group for fast-growth entrepreneurs.
"You could buy a flat for $100,000, and it could be worth $10 million in
10 years." Or not.

On our second day in Havana, we met with a University of Havana
economics professor, Juan Triana, in a small conference room at a hotel
that had been rehabbed recently. There were video screens in the
elevators that offered romanticized scenes of pre-Revolution tourists
swimming in the hotel's pool — among the very few commercial messages of
any kind that we saw in Cuba. The professor had a MacBook, and he had
prepared a PowerPoint presentation for us but couldn't get it to work.

Nonetheless, he offered a quick take on Cuba's tortured history: long
dominated by Spain, long dominated by the U.S., long dominated by the
Soviet Union. After the revolution, the Soviets brought screws that did
not work in American machines, which meant that after 1959, Cuba could
no longer obtain replacement parts for its existing infrastructure or
those '50s-era American cars. Today, Cuba is finally standing on its
own, but Triana emphasized that relations with the U.S. loom large.
Havana, he noted, is closer to Miami than it is to Cuba's second largest
city, Santiago.

Again, the American entrepreneurs had questions: Can Triana teach
anything he wants at the university? ("Yes.") Does he fear that lifting
the embargo will mean a return of the conditions that led to the
revolution? ("It's different.") How would he invest money in Cuba right
now? ("Renewable energy.") Could an American company do business in Cuba
today? ("Formally, no. But, maybe. It's a-legal.") Will Cuba follow the
Chinese model as it abandons communism? ("We are not following the
Chinese model because we are not Chinese people. But the government will
continue to have a strong hand for a decade or two.")

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He was also asked what advice he would offer Americans considering
trying to start a business. "If you want to start a business in Cuba,"
he said, "you need three things: money, time and a good liver."

'The Genie Is Out Of The Bottle'

Several of the Oxford Center entrepreneurs were medical entrepreneurs,
and on the third morning of the trip, they gathered on the hotel's
grounds — between a cannon that fired on American ships during the
Spanish American War and a bunker constructed during the Cuban Missile
Crisis — to discuss medical care in Cuba, which is free to all citizens.

Dr. Bruce Bode, who founded a company that makes a device to control the
delivery of insulin to diabetics, warned that, while Cubans today have
little choice but to eat farm-to-table, they will face a future of more
processed food and more sedentary jobs that will almost certainly
produce a dramatic surge in Type 2 diabetes.

Dr. Jeffrey M. Gallups, who founded and runs the ENT Institute, one of
the largest ear, nose and throat practices in the southeastern United
States, pondered setting up an ENT clinic in Havana. It might require an
investment of as much as $1 million, he said, and it might be more of a
philanthropic endeavor until Cubans can afford to pay for modern
treatments, but it could eventually lead to entrepreneurial ventures.
"Once you get in the door," he said, "you never know."

The free health care, we were told by Jose Raul Viera, is one of the
things that have gone right in Cuba. Viera, an attorney who served in
the foreign ministry under Fidel had first-hand knowledge: He recently
had to have a leg amputated and sat in a wheelchair as he spoke to us in
the same conference room where we'd heard from the economics professor.
The other thing that has gone right, Viera said, is the free education,
which has produced a literacy rate of 100% — and created what the
entrepreneurs noted could one day be a highly desirable workforce for
American employers. And despite the concerns about human rights, Viera
asserted pointedly, there is no police brutality in Cuba.

He also surprised the Americans by arguing that Fidel had not opted for
socialism immediately after the revolution. That decision and the
nationalizations that followed, he said, came as a reaction to American
belligerence. But he also said that the recent reforms are real and
cannot be reversed. "How do we know?" he asked. "The state itself has
said we can't go on like this. The genie of market relations is out of
the bottle."

The next revolution will be very hard for some Cubans. When the
rationing books go away, many will not be able to afford food. The
country has no natural resources to sell. "Cuba," Viera said, "has
Cubans and culture." He expects Raul Castro to step down in the next
year or two. He expects passage of a new election law to be followed by
a general election. He expects Cuba's complicated two-currency system,
which has allowed the government to control the economy, to end soon.
And he expects negotiations to bring an end to the American embargo —
though he noted that Cuba has demanded compensation of some $300 billion
from the U.S. government to cover the damage it has done.

Is the Cuban government really going to insist on a payment of $300
billion, Cliff Oxford asked Viera. There will be negotiations, Viera
said, smiling: "We may be communist, but we're not stupid."

"You Guys Are Going To Be Millionaires"

On our last evening in Havana, many of the entrepreneurs went to a
converted factory that is part art gallery and part nightclub. Known as
Fabrica De Arte Cubano (The Cuban Art Factory), it offers multiple
levels and choices: fine cuisine, lots of bars, and crowded dance floors
with either DJs or live music. On the Saturday night we were there, all
of the rooms and all of the passageways that connect them were lined
with striking works of art and pulsing with young people who had waited
in a line that stretched around the block.

Most of them were carefully turned out and expensively dressed. Some, we
were told by a journalist who contributes to Hugo Cancio's OnCuba, were
tourists. Others were Cubans who make "the extra" or who had been sent
money by family members living in exile. All were young and ready for
change. We had seen them, in smaller numbers and more casually dressed,
gathering with their devices at all hours around the few public WiFi
hotspots in Havana.

The "Parts Unknown" segment on Cuba had aired just before the Oxford
Center group flew to Cuba, and several of the entrepreneurs had watched
Anthony Bourdain visit Fabrica De Arte, where he dined on dogfish
ceviche and seared pork loin and spoke with the two young Cuban
entrepreneurs responsible for creating a space that would look right at
home in Miami or Austin or Brooklyn. "Bourdain interviewed them,"
recalled Cliff Oxford, "and he says, 'You know, you guys are going to be
millionaires,' and they're like, whatever."

Viva la revolucion!

Loren Feldman edits Forbes' entrepreneurial coverage. You can follow him
on Twitter.

Source: Revolution 2.0: What 40 American Entrepreneurs Learned In Cuba -
Forbes -
http://www.forbes.com/sites/lorenfeldman/2015/11/17/revolution-2-0-what-40-american-entrepreneurs-learned-in-cuba/