WeWTF, Part Deux
profgalloway.com
profgalloway.com
Second, there is definitely a question mark on companies that have their main office at WeWork, like “this is temporary until we actually make money”. And as WeWork is forced to charge more, and the glut of office space hits (I see endless cranes over the Boston skyline) it will be not much more expensive to get the real thing.
The long term tenants at WeWork would be satellite offices of a major company, so if company X wanted to move into a new city they would hire sales people and put them into a WeWork for when they aren’t out meeting clients. Otherwise everyone else is temporarily embarrassed while they plan on moving up.
But have 6 people and growing, then it’s a different world. Hard to find places that aren’t WeWork. Get to 14 and growing still, and you are doing leases for expected size (say 65) and a long term lease. So you are getting much more than needed. Then you grow faster and you need an office for 200 and you still have your old 5-10 year lease for 65 and now you have to sublease that out and get your next 10 year lease, hopefully in a place with an option to expand. And you probably have that 12 person office lease too if you weren’t able to get out (we were in this story).
Spot on from grandparent comment on community. One of their main forms of community is an occasional cereal bar with $20 worth of cereal and milk for the whole space, and the majority of other social events are paid for by another company.
Granted, if you need truly flexible amount of space on a sub-yearly basis (both up and down), WeWork or other co-los are a better model despite the huge price premium, but I genuinely don't understand the demonization of the traditional office leasing market that WeWork supporters bandy about.
Why _do I_ have to sign a 5 year lease?
Unfortunately the real estate market (outside of a few key players) has struggled to change their offerings away from rigid fixed terms to accommodate the need for flexibility.
Their long term business models and predictions were based on the revenue streams from those rigid terms, but the segment of the market which requires flexibility above all else is growing fast.
However, that demand only had access to office space which specialised in the flexible office space market, meaning your choices are limited to providers which shove you in a generic box room, until you need to move to another bigger generic box room.
To square that circle, we launched FLEX by SquareFoot, where we work with clients to pick the terms of their lease with all of the concerns you listed, but without having to restrict their choices to providers which specialise in flexible solutions.
It's our way of exposing a lot more commercial real estate inventory that in the past required rigid commitments to the growing segment of the market which needs the flexibility.
https://www.squarefoot.com/blog/why-we-launched-flex-by-squa...
https://www.profgalloway.com/wewtf
It's just as fun to read. It contains this sentence: Adam's wife is Gwyneth Paltrow's cousin, meaning Adam is two degrees removed from Goop, an assault on humanity.
But the gist of Part Deux is really that the F in WTF stands for Fraud. Let's hope this story ends with some jail time for the main characters.
AirBnB has network effect for the huge market of "a place to sleep at while travelling". This requires matching customers with providers frequently, and the same customer will use the same platform and a different provider.
Uber has the same for "a car to take me somewhere". Again, repeat customers, different provider every time.
WeWork seems to be... a company that runs coworking and office spaces. What advantage does it have over any other company that runs coworking spaces? Why would a customer choose them over any other coworking space/landlord in a city where they want a coworking space/office? Most customers don't make that decision often enough for WeWork to benefit from any sort of lock-in/network effect. Why do/did people ascribe more value to WeWork than to a random collection of coworking spaces with the same square footage? (Did they?)
Companies like Google and Facebook got investors thinking that a tech thing that a lot of people used must be worth a lot of money.
Uber came along and legitimately made something that a lot of people loved, and if you didn't look too hard, it looked like a tech thing. Plus it spent years getting bigger and bigger rounds of investment, so it looked like a rock star. Everybody wanted to be "Uber for X", never mind that Uber was losing money hand over fist, still does, and may never stop.
WeWork went with the same formula, hoping to cash in similarly: Uber for office space! Shiny thing that people like in a market that is a pain in the ass! Amazing growth! Sure, the technology gloss was a little thinner, a little hazier. But the CEO was even more arrogant, more of a performative visionary than Kalanick, so that compensated for a while.
Unfortunately for WeWork, Lyft and Uber IPOd and didn't do so well. Tesla's not looking so healthy either, and let's not forget Theranos. So investors are starting to get wise to the fact that even if a "tech visionary" has gotten investment, grown quickly, and gotten a lot of good press, it doesn't mean it's a good stock to buy.
So yes, from an analytical perspective, it makes no sense. An oversupply of investment money and tech hype meant a lack of discipline, meaning a dreamer or a scammer (if in the end there's a difference) could try to build an empire, and investors would either fall for it or believe that they had a good chance of cashing out in an IPO before the house of cards collapsed. (For a parallel example, consider Groupon, which is now trading at 10% of its IPO price.)
And they are right to be afraid, engineering advances can be unpredictable. What if a AI developer at TSLA discovers a new approach to reinforcement learning tomorrow? Or what if Holmes had found the Einstein of blood science?
On the other hand, I can't imagine anyone with sensitive information working out of a shared workspace just because ofbthe ease with which a room or whole floor could be bugged.
Is WeWork really gonna be continually frosting/defrosting rooms as tenants move in and out?
I laughed out loud when I read this.
I'm not saying that this is the case. But I'm wondering what sort of impact that would have on thousands of businesses that rent/use their offices, as well as the many buildings that depend on WeWork paying rent to stay afloat.
How much of an impact would this have on the global economy, or at least on the tech and/or real-estate sectors?
The one thing it could do is bring additional scrutiny to other "unicorns" books as bring them down to more realistic valuations.
Is there any significant economic activity actually happening in WeWorks? Or is it all techbros doing nothing that really matters? Serious question.
Now we get a new investor, who might acquire a relatively small part of the company for crazy price per share. Then we state that the total value of the company is now total_number_of_shares*crazy_price_per_share.
And of course even for the investor it might make sense to pay extra for the investment. If you have for example participated in previous funding rounds with lower price, it may make sense to pay overprice in the subsequent rounds, since that might make your existing share more valuable.
https://medium.com/@henry.hawksberry/is-we-work-a-fraud-5b78...
No? I enjoyed the article. But it has a ton of mistakes. The last two paragraphs are literally repeated, in addition to all the spelling / grammar mistakes. Many people have also pointed this out in the comments of the article, and somehow the author hasn't fixed it.
I had a similar thought a few weeks back. If they're willing to cavalierly expose this craziness in the S1, what else is going on there that we don't know about.
They need the extra cash from the IPO, and they have to disclose the craziness in the S-1 otherwise it’s plain fraud.
When my company started building an office overseas, they looked first at a new development built by a pension fund. Long story short our company would have had to have a facilities person locally for months on end to coordinate this. Lots of things lost in translation - the construction and real-estate industry have many local norms and cultures. For example, the US facilities people assumed to have many flexibilities how the office would be built out while the local landlord had more of a “take it as it us or go away” attitude - which is how real-estate deals are done in this city. Negotiations dragged on for months. Project got delayed. It was a nightmare, we didn’t know where people would be working as our team was growing.
Meanwhile I figured WeWork would open their first offices in the city. I connected them to facilities. Turns out we already rent a space in NYC - so connect them to the rep, moved in within two months. Problem solved, and the product we get (AC everywhere, office design) is a few notches better than what we would have gotten elsewhere.
WeWork also said once the office size gets stable they could build one out for us - with our brand and separate entrance. So, I see it more as an outsourcing shop for facilities departments, whose moat is the experience of doing this at scale - internationally and for many customers. If they get their act together this could be just as viable of a strategy as it was for KPMG, Deloitte et al. in accounting.
If true remote work becomes a bigger reality then you’d expect to see a greater share of workers who only need a hot desk and not one of the glass cubes, which have smaller margins and easily switched out with a Starbucks.
Hm, what exactly does WeWork do that is so unique? Sounds like a regular real estate company except they are targeted towards tech startups.
No. Outside of hipster hotspots WeWork makes no sense.
What’s that worth is debatable but I think it’s worth more than zero.
It comes up on HN frequently that what “talent” really wants is an office with a closing door so that they (we) can concentrate. WeWork offers the polar opposite of this experience by design. A company that chooses to base itself in a WeWork is cutting itself off from talent.
I think it’s worth more than zero.
It’s also possible that it’s worth less than zero.
https://www.vox.com/the-goods/2018/10/31/18049142/wework-bee...
However, compared to the (different) WeWork I worked at in 2017, the tap seemed to get locked up much earlier. Didn't make sense to me at the time versus opening the tap later; it was almost incentive to drink around 5 or 6 instead of waiting until later (I tend to work later) if you wanted a free beer.
Also worthy to note: instead of two taps for beer (at my WeWork in 2017), there was one for kombucha and one for beer.
Really, The whole booze on tap in the work environment never made any sort of sense to me. It seemed like a short-term recipe for poor productivity (I could be wrong though) and worklplace conflict, and a long-term recipe for lawsuits 10 years out when alcoholics sue for their work environment facilitating or causing their condition. (yes, it's happened before, breweries used to allow it, but stopped)
My impression is that in addition to being startup-friendly with flexible terms, they give your average remote worker for standard boring companies the startup culture experience in their work environment. I don't know what that's worth in premiums though. Personally, if I was allowed to work from home (yeah, blanket policy of no remote work where I'm at, because stupid) I would rather lounge on my couch with a keyboard in my lap and monitor on a flex arm in front of me.
Its a mixture of not following any financial publications, not understanding financial terms and thus the memes, seemingly no emphasis on IPO at work (this I find harder to believe, maybe the word is mentioned but its white noise if the financial literacy is really that low), and then sprinkle the “cult of CEO” where everyone pretends to be there for the vision instead of 15 months.
The margin call is going to be a rude awakening.
I loved the article, but even if it were valued at $0, would that decimate and "shutter" the Vision Fund?
>"The firm will be forced to sell equity/issue debt at a price substantially lower than they had anticipated."
What is this "selling debt" referred to here, is the basically a bond? Would it be a bond that's backed by equity? Something else entirely?
Yes, issuing bonds or taking out a loan from a bank.
Most loans are then immediately resold by your bank to some other bank, unless you're at a tiny credit union it's unlikely the bank will keep that debt asset on their books.
'No Mercy, No Malice'
> To be clear, I’m not a journalist, nor a forensic accountant.
Forensic accountant?? That reminds me of Snow Crash:
> When she says, "Do you have any relatives in Afghanistan?" that's like a code phrase, it tells all of her spook gear to get ready, shake itself down, check itself out, prick up its electronic ears.
> We've witnessed a halving of journalists since 2008, while the number of corporate communications execs has tripled. In sum, the ratio of bullshit/spin to watchdogs has increased sixfold.
I personally know half a dozen former journalists that recently moved over to PR, but I hadn't realized had much of a sea change it's been over the last decade.
This assumes that journalists are capable of spotting (and willing to) spin / bullshit in the first place.
There has been some very good investigative journalism done in the tech sector. Theranos/Uber/Tumblr comes to mind. Specially from media outlets outside of the SV echo chamber.
News outlets are too dependent on advertising, ratings, and public opinion now.
But the idea that there isn't an increase in the ratio at all is laughable. You'd have to be some type of fascinating conspiracy theorist to believe that none of the Pulitzer-winning stories of the past decade uncovered any type of corruption or wrongdoing.
What's so unique about a tech company that it would be immune to standard journalistic practices? And is We even truly a tech company anyway?
Nope. Just a real estate play trying to be valued at tech level multiples. That's part of reason We's in trouble.
A quick google search shows plenty of news outlets running articles about how you should learn to code.
It's not a dumb myth, it's dumb reporting.
"We has gone from unicorn to distressed asset"
Don’t forget maximizing the ability to trademark the simple, common daily word and go after anyone using a variant of it when you’re big enough to do so.
And yes I read your last sentence in Gollum’s voice and it was perfect. :)
Plus the spelling is different on Wii, so it's not confusable in written text regardless.
Foreigners, does Apple do this in other languages, too?
Btw, there was an interesting case where the inclusion of "the" in the French version caused conflict:
https://en.wikipedia.org/wiki/United_Nations_Security_Counci...
(And I think you mean a definite article rather than a pronoun?)
If anyone knows of any other tech/biz strategy readings like these, please share!