‹ View all briefings
August 22, 2021

Kaspi: The Shapeshifter

The Kazak super-app has thrived thanks to its flexibility.

Photo by

I have a puzzle for you. 

Imagine you are in a nondescript room, with the following items on a table in front of you: 

  • A large wax candle
  • A cardboard box full of thumbtacks
  • A matchbook with working matches

Something like this: 

Here’s your task: attach the candle to one of the walls and light it without dripping wax onto the floor. As a note, the walls can be punctured by tacks. They’re not stone. 

Take a moment to devise your solution. Spoilers below. 





...

In a canonical study, Gestalt psychologist Karl Duncker presented test subjects with a version of this quandary. Rather than asking them to imagine the scenario, though, participants were actually placed in a room with these materials.

The solutions varied. You might have considered many of them. 

Some tried to tack the candle straight onto the wall. That didn’t work. Others used the matches to melt the bottom and side of the candle, using the wet wax as an adhesive. Not great, either. 

Only a few completed the task in what looks like the simplest way with the benefit of hindsight: taking the cardboard box that held the tacks, using those tacks to attach it to the wall, and then placing the candle at its center. Like this: 

The box both attaches the candle to the wall and prevents its wax from dripping onto the ground. Mission complete. 

But why did so few subjects think of this solution? How come so many reasonable people pursue more convoluted fixes? 

For Dunker, the answer came down to one main factor: “functional fixedness,” a cognitive bias that limits items’ usage to the context in which they’re presented. Because participants had seen the cardboard box as a “tack box” they found it hard to recast it as a candle box, or shelf. 

The rigidity of functional fixedness can infect matters large and small. Yes, it might prevent us from parsimoniously solving a little brainteaser like Dunker’s, but just as easily, it can affect how we perceive ourselves, how we frame our work, and how organizations that employ or serve us conceptualize their capabilities. 

Yes, JP Morgan is a bank. Could it also be an e-commerce player? Sure, Wells Fargo provides commercial loans. What if it was also the place you bought your next plane ticket? 

It is reasonable to hear such suggestions and balk. But these are exactly the improbabilities that define Kaspi’s story. What began as a middling commercial bank in the 2000s, has transformed into a tech behemoth over the last decade. From its base in Kazakhstan, Kaspi has, without exaggeration, become one of the world’s most dominant and comprehensive super-apps with a lively platform that touches e-commerce, payments, travel, and fintech. Somehow, in a country of just 18.5 million people, Kaspi has succeeded in building a $21 billion business. 

Above all, that success is borne from eschewing functional fixedness, and embracing fluidity; a triumph of shapeshifting. In today’s briefing, we’ll cover: 

  • History. Kaspi’s circular origins as a bank serving a retailer, which became...a retailer with a bank. 
  • Investors. How Baring Vostok, a Russian private equity firm, installed a new CEO and sparked a second act. 
  • Dominance. Calling Kaspi Central Asia’s Mercado Libre or Alibaba is not an exaggeration. The company has the numbers to back it up. 
  • Expansion and risks. Will Kaspi be able to capitalize on the opportunity in Ukraine and stave off competition at home?
Thank you for joining!
Oops! Something went wrong while submitting the form.

Subscribe to make sure you get our next email. You'll be joining a community of over 40,000 entrepreneurs, investors, and operators in receiving private weekly briefings, designed to help you think better, and capitalize on change.

Origins: Smart Money

The story begins in 1993 with a young Vyacheslav Kim living in Kazakhstan’s capital. Rather than seeking entrance to the corporate world, dominated by the petroleum industry, the Almaty State University graduate began a business at the age of 23. Planeta Eletroniki was, as you might have guessed, a purveyor of household electronics, a sort of Kazakhstani Best Buy. 

That proved an appealing proposition. In less than a decade, Kim turned Planeta into the country’s largest retailer, with stores spanning Kazakhstan’s metropolises. Still, Kim wasn’t satisfied. He’d realized, alongside other retailers, that one of the largest impediments to consumer purchasing was a dearth of financing options. The dissolution of the Soviet Union had seen Kazakhstan’s population fall on hard times, with GDP per capita declining between 1990 and 2000. To address that problem, retailers took to M&A, acquiring banks with the goal of providing loans to buyers. 

In 2002, Kim acquired a small local bank, Kaspiskiy. The commercial lender had only been privatized in recent years. The acquisition might have made sense on paper, but realizing the synergies was a struggle in practice. Kim described the issue: 

It might have been a bit naive, but buying a bank was a big trend. Every successful entrepreneur was buying a bank, so we did too. But we didn’t really understand what we were buying or what a banking business was.

Unsure of how to leverage his new asset, Kim sought investment partners with expertise to bring to the table. It was in this process that he was introduced to a partner at Baring Vostok.

Founded in 1994 by American Michael Calvey, Baring Vostok began its life as a subsidiary of Baring Bank, which once counted Queen Elizabeth II among its clients. When one 28-year old derivatives trader tanked the business thanks to a series of speculative trades (what a story!), Calvey spun out but retained the Baring name. 

In the succeeding years, the firm established itself as a major player in the Central and Eastern Asian investment world. Famously, Baring invested $5.3 million in Russian search engine Yandex in 2000. When the company reached the public markets eleven years later, the firm’s position was worth $2.9 billion, a casual 547x return. Baring would hold onto some of its stake through 2016. 

That lengthy holding period was one of Baring’s differentiators, along with its hands-on approach, and the younger age of its staff. That helped create a closer relationship between fund investors and the entrepreneurs it backed. 

Perhaps that was part of the reason Kim recognized the potential for a true partnership with the young Baring financier, Mikhail Lomtadze (Misha). Born and raised on the other side of the Caspian Sea in Georgia, Lomtadze had studied first in Tbilisi before building a local accounting firm, GCG Audit. GCG was later absorbed by Ernst & Young. 

To further his education, Lomtadze headed to Harvard for business school. After finishing his MBA, he joined Baring Vostok. So keen was he to join the fund that he reportedly told Michael Calvey “I don't need any salary.” He got one anyway, going on to develop a specialization in the financial sector while at Baring. That expertise made him a valuable sounding board for Kaspiskiy’s befuddled owner. 

The connection between the two men was effortless, according to Kim: 

We got together for a dinner and there was immediate chemistry. I told Misha my aspirations for the business, and when Misha spoke, it was clear that he saw things the same way and shared the same values.

It proved the start of a remarkable journey. Though he had more lucrative offers, Kim plumped for Baring Vostok’s “smart money,” selling a 51% stake. Kaspiskiy was heading for a transformation. 

Playbook: The reinvention of a middling bank

If the market had complied, Kim and Lomtadze’s renovation might have been of a more modest variety.

In the period leading up to the global financial crisis, emerging market banks were a hot commodity. Larger institutions that sought to expand their footprint in frontier markets happily paid premiums for well-run outfits. Kim and Lomtadze’s first plan was to ensure Kaspiskiy would be one of them. Among their first changes was rebranding the company, choosing the more direct, “Kaspi Bank” (Kaspi). 

It wouldn’t matter, of course. Once the crisis shivered to life in 2007, Kaspi’s turnaround plan evaporated along with the bottom line of its potential buyers. To weather the storm, Lomtadze took the helm, becoming Kaspi Bank’s CEO, though Baring did not seem to think much of the business. One source remarked that the fund considered its investment in Kaspi as a “write-off” at the time. 

Over the following decade, Lomtadze would prove such pessimism foolish, executing one of the great corporate turnarounds. With the benefit of hindsight, we can sketch a playbook from the steps he took: 

  1. Clean house. 
  2. Build a moat.
  3. Befriend the ruling class. 
  4. Streamline the product.
  5. Focus on the customer. 
  6. Layer. 

Step 1: Clean house

“We basically fired everyone.” 

That was how Lomtadze described one of his first acts, the expunging of Kaspi’s leadership. Suited for a different age and a different business, the new CEO felt these executives were ill-equipped to lead the revolution he sought. 

Despite being purchased by Kim to serve customers of Planeta Elektroniki, Kaspi Bank had built its business serving commercial enterprises, primarily through loan products. But that was the past; Lomtadze knew the future lay elsewhere. 

His new team reflected that shift, displaying a preference for young, more digitally-savvy MBAs: 

  • Pavel Mironov joined as Head of Product, coming from Tieto, a Finnish digital consultancy.
  • Tengiz Mosidze, a fellow Georgian, joined from Ernst & Young as CFO. Prior to his time at E&Y, he served at the World Bank. 
  • Yuri Didenko, had worked with Lomtadze at Baring Vostok, where he’d been a Director of Investments. He became Head of Capital Markets, handling treasury operations. 

Together with Lomtadze, this quartet reinvented Kaspi and remains essential to this day, with all retaining leadership positions. It was a brutal way for the CEO to begin his tenure, but it’s proven to have been shrewd.

Thank you for joining!
Oops! Something went wrong while submitting the form.

Subscribe to get our next briefing.

Step 2: Build a moat

With the right team in place, Lomtadze began to execute his master plan. 

It didn’t look like a brilliant idea, at first blush: Lomtadze wanted Kaspi to shift from serving businesses to customers. That required forfeiting 95% of Kaspi’s balance sheet, to focus on just 5%. 

Though the CEO recognized the pain such a move would cause, it seemed the obvious path to building an enduring moat: 

We had a very clear goal to build our competitive advantage on speed of providing products and services, and constant disruption through innovation. You can achieve this only by being data-driven and technologically advanced. We felt that would be our biggest source of competitive advantage in the years to come. 

Kaspi made the shift. To do so, the company reallocated resources to tech, altered its product suite, and expanded its physical footprint to better serve customers. That it managed to do so while riding out the financial crisis was a testament to leadership — reportedly, Baring Vostok advanced a $100 million loan to Kaspi during this period, but it went unspent. 

Step 3: Befriend the ruling class

In researching Kaspi, I had the pleasure of speaking with several knowledgeable sources. That included Kiyan Zandiyeh, Chief Investment Officer of Sturgeon Capital, a fund focused on backing innovative businesses in frontier markets. Much of the firm’s work has focused on Central Asia. 

Zandiyeh noted that the public sector has played an outsized role in industry, in these geographies. In Kazakhstan, for example, many of the companies Kaspi Bank competed with were government-sponsored. Kaspiskiy itself seems to have had affiliations with the Kazak state, prior to privatization. 

That can, if not managed, set up an adversarial relationship between entrepreneurs and the government. After all, in many cases, these businesses are invading state functions, dislocating power in the process. 

Whether by design or circumstance, Kaspi managed this potential friction masterfully. That owes much to Vyacheslav Kim. While Lomtadze focused on recalibrating the business, Kim increasingly busied himself in the political world, becoming a trusted consigliere of the country’s prime minister. 

That seemed to give Kaspi a privileged position, further aided by the involvement of Kairat Satybaldy. The beloved nephew of president Nursultan Nazarbayev bought into Kaspi in 2015, selling prior to the IPO. With the ear and affection of Kazakhstan’s ruling class, Kaspi was permitted to grow unfettered.

The story awaits...

Join today to access the rest of the Kaspi story. You'll also unlock everything else The Generalist has to offer, including:

Here's how one Member described us: 

The Generalist is my number one read. Thoughtful, insightful, and ridiculously consistent. It should be in every investor's arsenal.

- Leif Abraham, CEO of Public

Actionable insights, nutritious brain food, and a cultured writing style — all in one package. Join today.

I have a puzzle for you. 

Imagine you are in a nondescript room, with the following items on a table in front of you: 

  • A large wax candle
  • A cardboard box full of thumbtacks
  • A matchbook with working matches

Something like this: 

Here’s your task: attach the candle to one of the walls and light it without dripping wax onto the floor. As a note, the walls can be punctured by tacks. They’re not stone. 

Take a moment to devise your solution. Spoilers below. 





...

In a canonical study, Gestalt psychologist Karl Duncker presented test subjects with a version of this quandary. Rather than asking them to imagine the scenario, though, participants were actually placed in a room with these materials.

The solutions varied. You might have considered many of them. 

Some tried to tack the candle straight onto the wall. That didn’t work. Others used the matches to melt the bottom and side of the candle, using the wet wax as an adhesive. Not great, either. 

Only a few completed the task in what looks like the simplest way with the benefit of hindsight: taking the cardboard box that held the tacks, using those tacks to attach it to the wall, and then placing the candle at its center. Like this: 

The box both attaches the candle to the wall and prevents its wax from dripping onto the ground. Mission complete. 

But why did so few subjects think of this solution? How come so many reasonable people pursue more convoluted fixes? 

For Dunker, the answer came down to one main factor: “functional fixedness,” a cognitive bias that limits items’ usage to the context in which they’re presented. Because participants had seen the cardboard box as a “tack box” they found it hard to recast it as a candle box, or shelf. 

The rigidity of functional fixedness can infect matters large and small. Yes, it might prevent us from parsimoniously solving a little brainteaser like Dunker’s, but just as easily, it can affect how we perceive ourselves, how we frame our work, and how organizations that employ or serve us conceptualize their capabilities. 

Yes, JP Morgan is a bank. Could it also be an e-commerce player? Sure, Wells Fargo provides commercial loans. What if it was also the place you bought your next plane ticket? 

It is reasonable to hear such suggestions and balk. But these are exactly the improbabilities that define Kaspi’s story. What began as a middling commercial bank in the 2000s, has transformed into a tech behemoth over the last decade. From its base in Kazakhstan, Kaspi has, without exaggeration, become one of the world’s most dominant and comprehensive super-apps with a lively platform that touches e-commerce, payments, travel, and fintech. Somehow, in a country of just 18.5 million people, Kaspi has succeeded in building a $21 billion business. 

Above all, that success is borne from eschewing functional fixedness, and embracing fluidity; a triumph of shapeshifting. In today’s briefing, we’ll cover: 

  • History. Kaspi’s circular origins as a bank serving a retailer, which became...a retailer with a bank. 
  • Investors. How Baring Vostok, a Russian private equity firm, installed a new CEO and sparked a second act. 
  • Dominance. Calling Kaspi Central Asia’s Mercado Libre or Alibaba is not an exaggeration. The company has the numbers to back it up. 
  • Expansion and risks. Will Kaspi be able to capitalize on the opportunity in Ukraine and stave off competition at home? 

Origins: Smart Money

The story begins in 1993 with a young Vyacheslav Kim living in Kazakhstan’s capital. Rather than seeking entrance to the corporate world, dominated by the petroleum industry, the Almaty State University graduate began a business at the age of 23. Planeta Eletroniki was, as you might have guessed, a purveyor of household electronics, a sort of Kazakhstani Best Buy. 

That proved an appealing proposition. In less than a decade, Kim turned Planeta into the country’s largest retailer, with stores spanning Kazakhstan’s metropolises. Still, Kim wasn’t satisfied. He’d realized, alongside other retailers, that one of the largest impediments to consumer purchasing was a dearth of financing options. The dissolution of the Soviet Union had seen Kazakhstan’s population fall on hard times, with GDP per capita declining between 1990 and 2000. To address that problem, retailers took to M&A, acquiring banks with the goal of providing loans to buyers. 

In 2002, Kim acquired a small local bank, Kaspiskiy. The commercial lender had only been privatized in recent years. The acquisition might have made sense on paper, but realizing the synergies was a struggle in practice. Kim described the issue: 

It might have been a bit naive, but buying a bank was a big trend. Every successful entrepreneur was buying a bank, so we did too. But we didn’t really understand what we were buying or what a banking business was.

Unsure of how to leverage his new asset, Kim sought investment partners with expertise to bring to the table. It was in this process that he was introduced to a partner at Baring Vostok.

Founded in 1994 by American Michael Calvey, Baring Vostok began its life as a subsidiary of Baring Bank, which once counted Queen Elizabeth II among its clients. When one 28-year old derivatives trader tanked the business thanks to a series of speculative trades (what a story!), Calvey spun out but retained the Baring name. 

In the succeeding years, the firm established itself as a major player in the Central and Eastern Asian investment world. Famously, Baring invested $5.3 million in Russian search engine Yandex in 2000. When the company reached the public markets eleven years later, the firm’s position was worth $2.9 billion, a casual 547x return. Baring would hold onto some of its stake through 2016. 

That lengthy holding period was one of Baring’s differentiators, along with its hands-on approach, and the younger age of its staff. That helped create a closer relationship between fund investors and the entrepreneurs it backed. 

Perhaps that was part of the reason Kim recognized the potential for a true partnership with the young Baring financier, Mikhail Lomtadze (Misha). Born and raised on the other side of the Caspian Sea in Georgia, Lomtadze had studied first in Tbilisi before building a local accounting firm, GCG Audit. GCG was later absorbed by Ernst & Young. 

To further his education, Lomtadze headed to Harvard for business school. After finishing his MBA, he joined Baring Vostok. So keen was he to join the fund that he reportedly told Michael Calvey “I don't need any salary.” He got one anyway, going on to develop a specialization in the financial sector while at Baring. That expertise made him a valuable sounding board for Kaspiskiy’s befuddled owner. 

The connection between the two men was effortless, according to Kim: 

We got together for a dinner and there was immediate chemistry. I told Misha my aspirations for the business, and when Misha spoke, it was clear that he saw things the same way and shared the same values.

It proved the start of a remarkable journey. Though he had more lucrative offers, Kim plumped for Baring Vostok’s “smart money,” selling a 51% stake. Kaspiskiy was heading for a transformation. 

Playbook: The reinvention of a middling bank

If the market had complied, Kim and Lomtadze’s renovation might have been of a more modest variety.

In the period leading up to the global financial crisis, emerging market banks were a hot commodity. Larger institutions that sought to expand their footprint in frontier markets happily paid premiums for well-run outfits. Kim and Lomtadze’s first plan was to ensure Kaspiskiy would be one of them. Among their first changes was rebranding the company, choosing the more direct, “Kaspi Bank” (Kaspi). 

It wouldn’t matter, of course. Once the crisis shivered to life in 2007, Kaspi’s turnaround plan evaporated along with the bottom line of its potential buyers. To weather the storm, Lomtadze took the helm, becoming Kaspi Bank’s CEO, though Baring did not seem to think much of the business. One source remarked that the fund considered its investment in Kaspi as a “write-off” at the time. 

Over the following decade, Lomtadze would prove such pessimism foolish, executing one of the great corporate turnarounds. With the benefit of hindsight, we can sketch a playbook from the steps he took: 

  1. Clean house. 
  2. Build a moat.
  3. Befriend the ruling class. 
  4. Streamline the product.
  5. Focus on the customer. 
  6. Layer. 

Step 1: Clean house

“We basically fired everyone.” 

That was how Lomtadze described one of his first acts, the expunging of Kaspi’s leadership. Suited for a different age and a different business, the new CEO felt these executives were ill-equipped to lead the revolution he sought. 

Despite being purchased by Kim to serve customers of Planeta Elektroniki, Kaspi Bank had built its business serving commercial enterprises, primarily through loan products. But that was the past; Lomtadze knew the future lay elsewhere. 

His new team reflected that shift, displaying a preference for young, more digitally-savvy MBAs: 

  • Pavel Mironov joined as Head of Product, coming from Tieto, a Finnish digital consultancy.
  • Tengiz Mosidze, a fellow Georgian, joined from Ernst & Young as CFO. Prior to his time at E&Y, he served at the World Bank. 
  • Yuri Didenko, had worked with Lomtadze at Baring Vostok, where he’d been a Director of Investments. He became Head of Capital Markets, handling treasury operations. 

Together with Lomtadze, this quartet reinvented Kaspi and remains essential to this day, with all retaining leadership positions. It was a brutal way for the CEO to begin his tenure, but it’s proven to have been shrewd.

Step 2: Build a moat

With the right team in place, Lomtadze began to execute his master plan. 

It didn’t look like a brilliant idea, at first blush: Lomtadze wanted Kaspi to shift from serving businesses to customers. That required forfeiting 95% of Kaspi’s balance sheet, to focus on just 5%. 

Though the CEO recognized the pain such a move would cause, it seemed the obvious path to building an enduring moat: 

We had a very clear goal to build our competitive advantage on speed of providing products and services, and constant disruption through innovation. You can achieve this only by being data-driven and technologically advanced. We felt that would be our biggest source of competitive advantage in the years to come. 

Kaspi made the shift. To do so, the company reallocated resources to tech, altered its product suite, and expanded its physical footprint to better serve customers. That it managed to do so while riding out the financial crisis was a testament to leadership — reportedly, Baring Vostok advanced a $100 million loan to Kaspi during this period, but it went unspent. 

Step 3: Befriend the ruling class

In researching Kaspi, I had the pleasure of speaking with several knowledgeable sources. That included Kiyan Zandiyeh, Chief Investment Officer of Sturgeon Capital, a fund focused on backing innovative businesses in frontier markets. Much of the firm’s work has focused on Central Asia. 

Zandiyeh noted that the public sector has played an outsized role in industry, in these geographies. In Kazakhstan, for example, many of the companies Kaspi Bank competed with were government-sponsored. Kaspiskiy itself seems to have had affiliations with the Kazak state, prior to privatization. 

That can, if not managed, set up an adversarial relationship between entrepreneurs and the government. After all, in many cases, these businesses are invading state functions, dislocating power in the process. 

Whether by design or circumstance, Kaspi managed this potential friction masterfully. That owes much to Vyacheslav Kim. While Lomtadze focused on recalibrating the business, Kim increasingly busied himself in the political world, becoming a trusted consigliere of the country’s prime minister. 

That seemed to give Kaspi a privileged position, further aided by the involvement of Kairat Satybaldy. The beloved nephew of president Nursultan Nazarbayev bought into Kaspi in 2015, selling prior to the IPO. With the ear and affection of Kazakhstan’s ruling class, Kaspi was permitted to grow unfettered.

The story awaits...

Join today to access the rest of the Kaspi story. You'll also unlock everything else The Generalist has to offer, including:

Here's how one Member described us: 

The Generalist is my number one read. Thoughtful, insightful, and ridiculously consistent. It should be in every investor's arsenal.

- Leif Abraham, CEO of Public

Actionable insights, nutritious brain food, and a cultured writing style — all in one package. Join today.

Unlock the full article by becoming a Member. You'll get access to exclusive briefings and a private community designed to help you master the future.

Become a member