How to Sell Lipstick in a Communist Regime (and Other Lessons of Entrepreneurship Under Duress)

Sep 1, 2017 | Valerie Demicheva

During a ski trip to Lake Tahoe in 1997, Gary Golduber got a ticket for making a U-turn in Nevada. He was assigned to a traffic school in the state, hundreds of miles from his home in California. Since he couldn’t attend classes in-person, the school sent video tapes and worksheets so that he could take the classes remotely. Golduber realized that the whole cumbersome process could have been facilitated through this new thing called the Internet, and so he partnered with the owner of that same traffic school to create

“Some people think ‘bureaucracy and paperwork,’” he says, “but I thought ‘opportunity’ and so we modernized how they do business and saved countless people from having to waste their time in traditional driver’s ed classes.”

Golduber, a pioneer who has founded two successful companies, learned some valuable lessons about entrepreneurship and pain points from a strange and distant example: the way women wore lipstick during World War II.

Beauty During Wartime

Golduber’s story begins in 1945, when his grandfather, Issai Kumets, completed a tour of duty across Europe after fighting the Nazis and earning a box of medals from the Russian Empire’s Red Army.

Kumets felt lucky to be alive; over 11 million Russian Soldiers were killed or missing at the end of the war. When Kumets returned to his family in Odessa, Ukraine, he wanted to find a way to provide for his family. But Soviet Communism didn’t allow the accumulation of wealth. The system instead dispersed wages equally among all citizens, whether doctor, mechanic or farmer. Imports and exports were difficult for a private citizen to arrange; all goods and labor were directed toward government efforts. Owning a private business was illegal. But Kumets had fought Nazis, and his side had won — he wasn’t afraid of government regulation.

While in the army, Kumets noticed that French and German women wore lipstick. That had given him an idea. A German he’d befriended gave him a formula for lipstick so that when he returned to Odessa, he set up an underground factory. There he started producing contraband lipstick and sold it discreetly in trusted pharmacies, run by government workers who also wanted a cut of the profits. “For his time, my grandfather was almost a millionaire,” said Golduber. “That’s why the authorities kept chasing him.”

Issai Kumets
Grandfather Issai Kumets

Dangerous Shades of Red

With the government sniffing around, Kumets fled to Moscow and reopened his lipstick factory there. Authorities jailed several of his business associates, but they never caught him. “Even the threat of Stalin’s excommunication to Siberia, or worse, execution, couldn’t subdue his determination to build his business,” says Golduber.

In the 1960s, Golduber was born and Kumets became a devoted grandfather. He’d also become a sort of local legend in Odessa for successfully operating covertly under strict Communist rule for two decades.

Kumets’ adversity and his methods for getting by with little access to goods — not to mention formal governmental constraints and real danger in mid-century Communist Russia — are widely applicable to modern American business owners who find themselves starting from scratch. Golduber says his grandfather wanted to make sure these lessons lived on. “I think my grandfather wanted to pass on his ideals, and I remember being 11 or 12, listening to him school me in his craft,” he says.

Here are the lessons that Grandpa Issai preached:

1) Be brave. Be first. But do your homework.

Kumets once told his grandson: “Almost no one ever heard of lipstick here [in Odessa] before, but you can tell the ladies want it because they use dyes and other rubbish to try to imitate the red and pink colors.” This was Golduber’s first lesson in market research. He didn’t realize it at the time, being a child, but his grandpa was teaching him how to spot problems in his environment and research existing solutions. To look for what in business school are called pain points. “My grandpa didn’t have an MBA, but he intrinsically knew how to figure out what people needed, and he wanted to bring it to them,” says Golduber. “He taught me to figure out what truly useful novelty society is looking for and not to be afraid to fulfill that need first.”

2) Respect your customers’ intelligence.

When Kumets set out to recreate the bright shades of lip colors he saw in Europe, he encountered a few flops. At first, he made something closer to crayons. But as he used to tell his grandson: “People are not idiots!” And Kumets wanted to honor their intelligence. He tested his first products on a small circle of friends and family that he knew he could trust to critique his concoctions, and after a few iterations he’d created something his wife — and all of the women in Odessa — were excited to wear. “I didn’t realize it at the time, but his stories were teaching me how to put out a minimum viable product,” says Golduber. “Of course, he tested the bad and mediocre products internally… He never insulted the women just because they didn’t know what lipstick looked like; instead he made sure he got the basic formula right before offering it the public.”

3) Focus on the product, not the competition.

One of Kumets’ sayings was “Let them try to duplicate me!” While his competitors tried to reverse-engineer his formulas, he was already working on a way to upgrade his product with new coral and mauve shades — and he had the reputation and network to keep him on top. “If you get competition, that’s a good thing, because it means there’s a huge need,” says Golduber. “You just have to be sure you’re the one who creates the best product and services so that your customers continue to spread your good name.”

4) Find symbiotic partners.

By sharing profits with his sellers he was able to access a whole network of sales teams through pharmacies. “He could have been greedy about sharing or tried to create the lipstick cheaply, but he wanted everyone in his life to profit and to have a good product, so that opened a real sales team and created trust with his partners,” says Golduber.

5) Adapt quickly.

Kumets had a philosophy: “Don’t look for last year’s snow.” After Kumets’ colleagues were arrested, he worked twice as hard to keep the business going until they got out. “He wasn’t too sentimental about how good he used to have it before he was found. Maybe that’s because it was never easy, but also because he was an innovator at heart who thrived on change, and his compulsive need for his company to thrive surpassed his regard for his own safety,” says Golduber. “I don’t know if I’d be that brave in those conditions, but with his example, there’s really no way I can complain about challenges in the United States, in this era.”

Lessons Learned

Kumets’ mentorship had an effect on Golduber, who opened his own business in Odessa shortly after college. He followed in his grandfather’s footsteps, selling affordable luxury items for the fashion conscious women of Odessa.

Noticing that ivory rings were in vogue during the 1980’s, he created a formula to replicate the rings’ feel and appearance using furniture glue and white lacquer. He found his own distribution channel and partners, working with his disabled aunt who helped sell his jewelry.

At the time, disabled people were among the few citizens in the Soviet Union who were allowed to have small businesses and sell items at farmers markets and the like. When Golduber’s production increased, he made alliances with other disabled sellers and sold through their bazaar outposts. Business was good, but the country’s economic climate and living conditions were poor.

Golduber and his family — parents and aunt included — left the Soviet Union for the U.S. in the late 1980s. For the first couple of years, he and his wife worked minimum-wage jobs at dry cleaners and schools to make ends meet and provide for their two young daughters. Within a few years, Golduber and his wife both became software engineers and enjoyed a middle-class life in Northern California.

From Russia With Apps

Golduber led to a successful exit in 2014. Within months, his attention had turned to a new pain point in transportation. While renting his car via car-sharing apps he became frustrated by the constant need to pass his key to the renters each day. “It was like a mindless part-time job,” he said.

After playing with a few prototypes, he realized that the most logical place for the lock box was in the only universal part of every car: the license plate. He teamed up with another experienced founder in the auto space to launch Phrame, a smart license plate frame that allows vehicle access via a smartphone app. Today, Phrame aims to turn cars into concierges that will take care of everything from grocery deliveries to oil change autonomously.

As for Grandpa Issai Kumets?

He left lipstick behind and went into the construction business. Golduber isn’t sure why Kumets pivoted, but he thinks he may have gotten too famous selling lipstick. If there’s a lesson here, it may be that Kumets was not by definition a rebel, but a businessperson above all else. And that meant lipstick for the young postwar generation and then houses when they began to settle down.

Grandfather and grandson came up in different social climates, but shared an awareness of the most pressing needs of consumers.

“We just kept going until we got it right, always thinking about our customers and how we needed to build something that will honor their needs and intelligence,” says Golduber.