While in Asia on business early last year, Alex Mashinsky got a serious wake-up call. The founder of New York-based Arbinet Communications was wowing industry officials with his vision of how capacity on telephone networks would someday be bought and sold like oil and pork bellies. He told them Arbinet would become an online commodities exchange for digital communications.
But when Mashinsky arrived in China, he received an ultimatum from his own company's management team: Relinquish control of Arbinet immediately, or watch the company die.
"What we sent him was a desperate request," says Jean Louis Bravard, then president of Arbinet. "We wanted to insulate the company from Alex's ability to destroy things." Mashinsky, who had spent his whole life solving tough problems, was forced to recognize he had become one himself.
A Russian emigre who shuns alcohol and cycles across Manhattan every day, Mashinsky figured out early on that telecommunications was adopting the same economics that govern commodities. With no outside investment, the 33-year-old tapped an obsessive work ethic and a pitchman's flair to quickly build a profitable company with $4 million in revenues, making telephony equipment and reselling long-distance service. He became a telecom wunderkind, tutoring curious investment bankers, management consultants and industry officials on an endless stream of schemes to profit from telecommunications. Although he was not the only person to dream up the idea of a telecom commodities clearinghouse, Mashinsky was one of its first evangelists and easily the most vocal.
But his career demonstrates that the creative energy and personal drive needed to pioneer new ideas can spin out of control without clear management. After Bravard's ultimatum arrived, Mashinsky had to scramble for cash to save the company. And while they rebuilt Arbinet, other companies pounced on the commodity-exchange idea. Some of the competition had been inspired by Mashinsky's pitch.
"People heard Alex's story once, said 'Thank you,' left the room and then went to work on it themselves," says an industry official who asked not to be named. "Bill Gates was not explaining to everybody what he was going to do with DOS - he just did it. Keeping your mouth shut can be a very good strategy."
Chastened, the affable Mashinsky says, "I solved the puzzle. I just didn't know how complicated it would be."
Born in Ukraine, Mashinsky moved to Israel as a child. In his teens he began buying confiscated goods from customs auctions at Tel Aviv's Ben Gurion airport. He bought hairdryers, VCRs, pens, electrostatic paper and anything he could snatch up with borrowed money, resold them and pocketed a tidy profit.
Visitors to his family home in the Israeli city of Ashkelon say the place is a Rube Goldberg assemblage of energy-saving gadgets ginned up by Mashinsky's father Boris, such as solar panels that heat rainwater to supply the family bath, which then drains outside to water the lawn. It was years before the elder Mashinsky realized that diluted bath soap was killing his trees.
Always tinkering, the younger Mashinsky liked to tap into public phone lines until Israel's national telco threatened to shut off his family's telephone service. He flitted through three universities, never finishing a degree in electrical engineering, served his requisite time in the Israeli army and then struck out to find the promised land, his own global company.
Three years, 40 countries and many short-lived schemes later, Mashinsky arrived in New York with little more than a bag of clothes. He settled into a modest Manhattan apartment and spent his days roaming the stacks of the New York Public Library, poring through magazines and watching cable television in search of inspiration.
He tried importing urea from Russia, selling Indonesian gold to Switzerland and brokering poisonous sodium cyanide excavated in China for use by gold miners in the U.S. The cyanide business collapsed in 1989 as Mashinsky watched the Tiananmen Square crackdown on CNN.
"I saw this guy standing in front of a tank and I asked the
