WeWork’s Adam Neumann Steps Down as CEO
wsj.com
wsj.com
edit: to clarify, hacker news has been extremely skeptical of WeWork for some time, due to this, I was extremely wary of their offer and leaned towards (and eventually chose) other options.
> WeWork, Bankers Have Discussed Laying Off One-Third of Workforce (theinformation.com)
If you, the reader, have an offer from WeWork, I suggest you ask for a bigger paycheck (like real money, not funny money) for all this uncertainty.
They will likely try to force the IPO through anyway at some sub $5B valuation, but even then it seems like they may not generate much interest after that cuckooville S1.
Did a 2-month old HN comment foretell WeWork imploding which informed your decision to decline their offer, or reading HN in general helped you determine that their offer would be close to worthless, compared to your options at that time?
No doubt another failed tech bro pump 'n dump scheme headed to the dustbin of history.
I seriously doubt that. I think they're overvalued too, but I predict WeWork is still going to be around in another decade. There's clearly a ton of demand for what they provide.
Edit: or to borrow a popular saying - with WeWork, it's not the furnished rental office stuff that is the product, it's the IPO.
There's also a TON of rent-a-desk places.
The big questions are:
- What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
- What's WeWork's secret sauce or first mover advantage?
Existing coworking spaces already make lots of money off of people who don't fully utilize their membership (which isn't necessarily a bad thing). WeWork is no different.
I like this way of thinking. WeWork isn't doing anything "new" - coworking spaces have existed for years. What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces? The answer to this question isn't obvious to me.
WeWork is also very similar to Uber in the sense that you also need a very effective "on the ground" team managing operations of each individual location, doing tours for prospective renters, managing upkeep + maintenance for the space, etc.
Advantage to customers? Likely minimal.
Advantage to the company itself: economies of scale and, likely more importantly, lack of competition allowing them to increase prices.
The very clear trend across all sectors is that companies trend towards giant monopolistic behemoths unless some very strong regulatory force prevents it. People act like healthy, competitive, transparent markets just appear out of thin air, but they are an artificial creation of government.
Sadly WeWork do not appear to offer this option (or didn't last time I looked).
Yes, that's right, the free AMEX WeWork plan is significantly better than any WeWork plan you can buy. That's start-up logic for you. I stopped paying WeWork after 1-2 years as a paying customer because their free plan was better.
I live in London and I can choose from any of 36 WeWork London locations for tomorrow along with anywhere else in the world. It's nice living off of VC money.
... Assuming any true competition is still in business in a year.
Are there any limits to how much you can make use of this offer or the kinds of spaces available?
_Surely_ they won't let you just camp an entire private office in SF all year round when it's supposed to cost upwards of $1000 per month?
Many of the benefits only apply to US-issued cards.
Is someone can write more about it it would be nice.
There is so much commercial real estate that it's hard to imagine them in any kind of a monopoly situation.
Consistency of branding can't be overstated too. People turn to trust when times are hard.
I’m not sure exactly how all of those contracts look with landlords, but someone is going to need money to spend to maintain them. If not, the person with brand new build outs is going to look more attractive.
Now, maybe I’m wrong and run down office spaces don’t matter. Uber drivers all used to wear suits and their cars were pristine. Even UberBlack cars have holes in the seats and transmissions in poor condition. Uber is vastly largely today than it used to be. So that could be the trick, WeWork at scale but more as a necessity than anything else. If that is the case, then it is more a question of how much extra space other sorts of businesses, like coffee shops, want to keep free for customers.
And no competition in the real estate market? Please.
Thanks for this insightful comment. I never fully considered it, but yes - all healthy, competitive markets exist as a result of a government that fosters them.
Its the reverse. All healthy, competitive markets exist as the result of a lack of government intervention.
Lack of a competitive market is the result of government intervention.
Smaller company would need a smaller team but even a single salary on the books just to comply is a large expense for a small business. Multiply this by other areas now such as licensing, insurance, etc. Just ensuring your every day work is not breaking the law becomes financially prohibitive.
So the economics of scale (supposed that is a relevant factor) could provide WeWork with a higher profit margin, but to become dominant, they have to take a cut to this margin.
Say you're a pretty large company and suddenly decide you want to open a dozen 'offices' in a dozen different countries. You just have to deal with one provider, one set of infrastructure etc. Plus if you decide you then want to consolidate to half-a dozen offices, it's easier to scale some up and some down.
However companies like Regus have existed for ages - so not quite sure what WeWork brings, aside from being able spaff away profits to get you in the door.
Probably, but that knife does cut both ways. I know a number of people (including myself) who wouldn't be willing to use a WeWork facility again.
Among the people I know who dislike WeWork, there are two main things that they complain about: the surveillance, and the actual environment.
I think it's down to the customer. There's a post below about somebody being reassured "it's a We Work" office they'll be in.
When I've looked for a job, it's never entered by head to ask who manages the office (my assumption is that it's my employer and if I'm not happy, I'll take it up with my employer).
I can see if you've often worked in offices not run by your employer, you might have learnt to ask - but would think that's a small pool of people working frequently in shared spaces, having worked their frequently enough to have a preference.
Back to the OP - it's not a "hypothesis", this stuff's been going on for decades. e.g. ~2000 I was working in Paris and visited our local guy in his local office on the prestigious "Champs Elysee" no less. I went down the "Champs Elysee", then through a small door behind two shops, then walked back a couple of hundred meters, then through a warren of rooms, then in a room off a room, there was a desk... and that was our office. Hundreds of people all working at this prestigious address - we must have been silver-class as we had our own physical desk.
If you went right back to the entrance door, there was a receptionist you could specifically pay to 'represent you for the hour' and a set of very swish/generic meeting rooms you could pretend were yours to visitors.
And on-the-ground ops just require intuitive software to enforce standard operating procedures. The last two coworking spaces I've worked at both used different SaaS solutions for coworking-space management, with customer portals and all. I'm almost certain WeWork's edge has been commoditized.
An advantage I see as a customer is that I can go to any WeWork across the country and get a desk/coffee/etc for the day. I can get that from a few other coworking places, but I don't think any have the number of locations that WeWork does.
Sure, there's probably some need for temporary surge office space like a insurance company setting up after a disaster. But that seems a pretty small niche to build a billion dollar business on.
I don’t know how much that impacts their profitability or value as a company, but it feels like a very cloud computing model of work space where you get what you need where you need it, so that you can have local employees in cities across the country to serve customers there.
In comparison Regus Virtual Offices has more than 2500 locations.
From what I understand, WeWork is structured as many small companies, so they can negotiate favorable terms with long-term leases on office space and the smaller company can fail without leaving WeWork on the hook for the rest of the lease.
Softbank $$$
And that not so much anymore. All they had was a cannabilized version of Meetup.com for doing reservations.
Same answer in case of gyms. Your advertising overhead does not scale linearly as you grow. Once you build a brand. Customer acquisition costs go down. For moving workforces - entrepreneurs, sales, executives - it becomes more affordable to use one brand rather than plenty of smaller brands.
Right now, no-one is competing against We because they are selling a dollar at 60 cents to their customers. The second they stop doing that, there will be a dozen clones. We is worthless.
WHAT? there's quite healthy competition[1], which actually make money as opposed to We.
Granted, you don't get free beer and smarmy slogans. But competition is definitly on the market.
There has always been, and will always be, demand for the ability to buy one dollar for 80 cents. This is not some newfangled business model. Amazingly, it keeps cropping up again and again.
Also, the strategy of segregating assets onto Adam's personal balance sheet looks like a bad idea now that he's no longer ceo.
But supposing they do, I see little reason to think they'll be a major player. I don't see anything stopping other rental companies from matching any innovations they've made. The same goes for major property owners. Some will stick with big chunks of space. But if there's a 30% premium for being flexible, providing desks, etc, the some of them will happily cut out the middleman.
Was kind of a death rattle for me and sure enough after they IPOd they really did nothing.
Still makes me angry when I think of it cause it was such a kick-ass product.
Seems they're trading at 2x their IPO, and they were at 3x a few months ago... Did something happen in 2018 that made them huge for a bit? or was it just the rest of the world discovering cloud?
Independently of what you read here, you saw right through this as total bullshit, right?
Right?
Funny enough, my current company seems to have pretty good odds at making me a good chunk of change from my options, but I didn't even know I got options until after I accepted the offer.
Many companies flaunt it and give a weak offer accordingly. That's a pretty big red flag for me.
Even though the less they have raised, the more valuable your equity is likely to be. It's fascinating to watch.
EDIT: I guess I should add I really did not care for the work and stopped after 2-3 years to start my own company. I do a lot of the same work today, but as the Founder, I obviously control the company and my workload.
But if the OP is really distraught about making money in tech, they will find their economics background of use.
The moment your same exact job can be replaced by a worker willing to do it for less is the moment salaries start to fall.
Don't let your degree stop you from doing what you want, the resources are all there.
How did you ever make that connection? Have economists ever been paid well?
My economics professor addressed the reason for the difference in class very simply. He noted there were over 350 applicants for the English prof position. Only 3 people applied for the economics position.
So if anything, $37k was too high for English and $85k was not nearly enough for econ.
My friends have geology and psychology degrees working in technology companies making $130 - $180k/year as non-developers.
Of course you likely won't have great pay from the start, but keep doing work for a few years and keep improving your skills and you should be fine.
For the majority of professional jobs out there, there's a vast oversupply of labor, and thus the unemployment rate for professionals is much higher than the overall unemployment rate would suggest.
Software engineering is one of the few areas where there some semblance of balance between supply and demand. But, this too will eventually go away. There's nothing that's stopping the supply of Software engineers from growing. Indeed, the Stack overflow surveys suggest there's a huge wave of junior SEs joining the industry. I predict in 15 years, SEs will be in such high oversupply that they will no longer have an advantage in the market place.
HN is overly skeptical of startups that take something possible and simplify the UX. Although I can't think of a recent example.
basically someone belittling Dropbox before it went on to be worth billions.
There are always going to be isolated nay-sayers for whatever reasons. When you get a near-consensus on HN that something's a PoS that's something that's worth bearing in mind.
It's an essential thing if you want to be a successful entrepreneur -- as long as you don't confuse skepticism with cynicism. Skepticism and optimism make a powerful combination.
Theranos and WeWork are two great examples of companies hated by HN because there's evidence supporting negative opinions.
Edit: here's the thread - not 100% positive but close: https://news.ycombinator.com/item?id=6349349
When a recruiter makes that argument to me, I consider it a huge red flag all by itself, and am much less interested in working there.
Edit: I'm on the 5th floor, feel free to come party
Is that even legal?
[1] https://time.com/5338287/wework-meat-vegetarian-company-envi...
_Excess_ is bad for your health (such as drinking 1 liter of vegan olive oil).
“Thanks so much for taking the time and interest in applying to WeWork Global Technology. Your application has been received and we will review it as soon as possible.
Once we've had a chance to review we'll be in touch on possible next steps, thanks again for the time!
Regards, WeWork Global Technology”
https://twitter.com/modestproposal1/status/10855834347880202...
data science is a tech agnostic role. Wework might want to play with various data models for predictive modeling.
Starbucks in 2019 is the McDonald's of coffee shops, so it's not the same, but if you track their Starbucks Reserve locations you'll find the same predictions being used.
Optimizing for absence of failed stores would be an interesting utility function for them to have, but since they own substantially all of the stores (and therefore don't have franchisee relationships to consider, where volatility for a partner might impact you disproportionately to economic loss), that would be a suboptimal utility function. They should calibrate their risk appetite to maximize profits; occasional failed stores are just a search cost.
You can have 0 failed stores if you open 0 stores. A successful operation will inevitably have failed stores. Having a long list of failed stores doesn't mean anything in of itself. You have to look at the rate of failed stores vs successful stores among other metrics.
A market commenter who believes that Google is not one of the most sophisticated engineering organizations in the world is wrong. If you believe Walgreens is not one of the most sophisticated commercial real estate operations that exist, I would encourage you to talk to people who understand real estate as well as you understand Google and recalibrate based on what they tell you.
MacDonalds is similar. If they have a franchise that is doing badly, they will pay to move the franchise to a new location. A suburban McD closing is rare, usually only the oldest ones on lots that are too small for contemporary usage patterns.
I think of it as similar to how UPS rigs their routes to avoid left turns.
It was some sort of "connectivity and identification team" working to identify people/customers/tenants/whatever. Something like, you'd walk in, and WeWork would know it was you, and like, turn your office lights on or some shit. It was going to start off with keycards and I remember someone talking about bluetooth or wifi recognizing your phone, eventually doing face recognition.
I couldn't figure out the point. A HUGE team. The questions I was being asked were wild system design questions and android app stuff (what? I'm frontend lol). All so that people's desks would be at a certain height or whatever when they came in the room.
Source: https://twitter.com/modestproposal1/status/10855834347880202...
Sounds like a reasonable use of tens of millions of dollars of VC money.
I just saved you $20M per year in sensors, IoT platform subscription, and data scientist salaries for an investment of $5k. Pretty insane how much money is wasted on dumb BS just because there's so much money to waste and it's a trendy way to waste money
Or more likely they wanted an innocuous reason to track all their office users at all times for other reasons
I'm not entirely sure what a data science engineer does, but somewhere between "making it easier for the DS team to find what they need to find" and "figuring out where we should buy/lease next".
WeWork's long game and eventual income is Real Estate, but their short game, their bread and butter, their brand, and their marketing is and always has been services and transactions. They compete much closer to a Starbucks than a Real Estate company but it's like neither side quite got it. (esp considering the CEO was a scam artist abusing the Real Estate side of the business while misdirecting everyone towards services)
WeWork is (to most) a company whose focus was on people and atmosphere, and on service. I would argue that they are MUCH closer to a hospitality chain like Marriott than a Real Estate firm or a tech co.
After they were done with me I started asking questions. I asked what they would have me doing?
"Oh the back-end system & api is done by a different team, you would just be doing the HTML/CSS for the front-end team"
I was furious when I left...
My bet is that they will now try to remarket We as a shareholder-controlled company, will maybe even eliminate the multi-class stock structure in order to get included into the passive funds. I am still not sure they will ever become profitable through. The only way to disrupt the incumbents in an established market like this one would be to spot a new opportunity in the market and capitalize on it faster than the slow 30-year-old companies like Regus. Except the only market opportunity We has successfully exploited by now are the desperate investors ready to shove billions in your hands if you pretend to be a cool techy thing they don't fully understand.
[0] https://www.reuters.com/article/wework-loan/clock-ticking-do...
It needs $8.1b market cap to get into S&P500.
But it doesn't really matter except when the stock gets added to the index. The index funds and ETFs are going to rebalance their positions based on market cap and will not affect the price. These funds could affect the volatility though, since it's conceivable that with a lot of the shares locked up, these stocks are going to be more thinly traded than they would have otherwise been. This could create price instability, though I'm not sure there's any proof that it's true.
It does matter when there are inflows, if there is new money coming into index funds all the stocks in the index benefit (they funds also sell all the stocks in the index when there are outflows). Non-indexed stock are less coupled to flows in and out of trackers.
>...Unadjusted company market capitalizations of US$8.2 billion or more for the S&P 500..... are required.
[0] https://us.spindices.com/documents/methodologies/methodology...
I am not sure. He has been pretty methodical in siphoning the money out of the company (privately leasing the real estate to We, charging them for the trademark, etc), so he probably knows very well what he is doing.
Somehow, if you act this way, investors will perceive you as a charismatic and energetic leader and buy in even if your business model doesn't make much sense. IIRC, similar happened to Juicero, albeit on a much smaller scale: countless talks about expanding consciousness, changing the world, raw water bollocks, a completely unsustainable business model and questionable transactions to some external consultants.
Softbank wants to delay the IPO now because it would mean a massive writedown of their investment value.
So you get rid of Adam (and his supermajority voting rights) have some quiet conversations about how people value the company now. Then you decide if you're willing to take whatever haircut the market is offering from the last private round.
If We is to be believed the other option is to halt all expansion. They claim that mature locations are cash flow positive. If that's true then you don't necessarily need to take a haircut, you just stop expanding, prove to the market that you actually do have a business, and then either start siphoning off the cash or try to IPO again.
People already knew what kind of business WeWork was. Sure, they were getting press, but when actual institutional investors looked at it, they must not have liked what they saw.
That has been going on for the last few rounds, so I suspect that they couldn't have gone public then, either. Nobody was buying what they were selling, except Softbank. And once the S-1 dropped, the press and social media saw all the red flags together in one document.
Those red flags would have been just the same if they'd gone public earlier.
Can you give some examples where this has worked in the past?
The alternatives are either that Softbank believed in WeWork's fundamentals, which honestly feels unlikely, or to believe that they went in early, then discovered that nobody else would invest, so they kept putting more of their own money in to avoid closing the business and taking a write-down.
That’s not at all clear.
Unless I am completely misunderstanding the value of WeWork, this ship seems to have already sailed. At least locally, Regus has offerings that are substantially the same in price and features to what WeWork has.
> ...it’s terrible for SoftBank! The message from SoftBank is pretty much “your [Neumann's] job was to extract billions of dollars out of us, and you succeeded at it admirably; now that you’ve served that purpose, we should replace you with a real-estate CEO to salvage the value of your investment and ours.”
[0] https://www.bloomberg.com/opinion/articles/2019-09-23/we-wan...
From "WeKeepGoingWithThisHuh"[0]
>...Or I guess maybe the IPO bankers leaked it because they want Neumann gone, to make the IPO easier, and want to commit Son to it by leaking. Or because they love messy drama maybe? It’s not their company.
The even funnier part of the segment is when he gets into what some of the banks actually put out as a reasonable IPO valuation.
>...JPMorgan told WeWork executives the company could be worth between $46bn and $63bn in the listing. Goldman pegged the equity at between $61bn and $96bn. Morgan Stanley estimated WeWork’s valuation at between $43bn and $104bn in a presentation in 2018, though a pitch for the IPO set it at a more modest $18bn-$52bn.
[0]https://www.bloomberg.com/opinion/articles/2019-09-24/don-t-...
>... Well, I just got through saying that there’s not really any reward for being pessimistic and right about valuation when you are pitching an IPO. Your optimistic competitors will get the mandate, and then spend some time walking the company back
...
On the other hand it is a repeat game and there are occasionally penalties for getting it wrong:
...
it will be rough for Morgan Stanley if winning the biggest IPO prize [Uber] of the unicorn era loses it the biggest IPO prize of all time [Saudi Aramco]
[0]https://www.bloomberg.com/opinion/articles/2019-09-09/we-mig....
This particular location just opened 3 weeks ago and is apparently already at 70% capacity with a mix of enterprises and startups. Even my Hotdesk membership can't start officially until Oct 1 because they're apparently sold out (though walking around there's plenty of space).
Based on these surface observations, the core business at least seems "plausibly profitable". But all the crazy side businesses like co-living just seems like overexpansion to me.
I'll politely decline as an investor, but I'm happy to sign up as a lowest-tier, month-to-month customer.
Of course re-leasing office space can be profitable, companies have been doing that profitably for decades - if not centuries.
But those companies have not received Silicon Valley valuations
I like WeWork, WeWork has value, but ping-pong and baristas don't make for 10x valuations.
Source: I work in commercial real estate.
I had your initial impression, it does look good and you can certainly get up and running quickly.
But after a while, my feeling was that it really seemed to be poorly thought out as an office space. I get the appeal of natural light, but you were looking right at your neighbors. The hardwood floors look great, but everyone with heels is banging away, and there was generally no soundproofing.
So many decisions seemed to prioritize looking hip over being functional.
And the details weren't well done. Their tech platform, their attempt at social media, the printers and space reservation and such, all look nice at first and then you realize how unpolished they are after using them for a while.
No complaints as a customer.
The question was whether or not it made sense to value them at 10x what competitors are. I have read that something like $10billion has been shoveled into them, and they are probably are reasonably-priced $4billion company. That doesn't mean there's no value there, just that someone paid 2.5x that value, and now can't find a buyer for 10x.
Towards sibling comment... I'd prefer sacred defecatory silence but the toilets are the only place I notice any music.
Have you ever done workshare places before? I put my laptop down and start working. 30 mins seems a long time for that.
These international sales offices can quickly spring up and grow, but also quickly scale down or close. For satellite offices that can easily get way bigger OR way smaller over the next year, the flexibility WeWork provides, and the fact that they handle furnishing and operating the offices is huge. Plus they’re beautiful offices with free beer and whatnot, so (most) people enjoy working in them.
WeWork clearly has terrible corporate governance, and we’ll see if they can keep the product great while moving towards profitability. But for now they do have a really nice product for a lot of companies (and some individuals). They’re like AWS for offices - flexibility and “managed by someone else” is almost as nice for offices as it is for servers.
https://www.cnbc.com/2019/09/24/wework-ceo-adam-neumann-is-e...
That would also hurt Softbank though, so the question becomes, what was so bad about Neumann staying on to warrant such a stick.
That or they found his cereal box and threatened to call the cops.
I'm sorry, I don't understand this part. Is this a reference to something?
Or, to put it another way, he doesn't have to go through firing all of those people that he hired when he was pumping the company up to ginormous size. I think perhaps the fun part of running WeWork was behind him, regardless of how it turns out.
In any rational world that's a landmark moment. A significant milestone for founders, investors and early employees. For WeWork it has been the complete opposite. They filed to go public and everything is going south since then. Must be surreal that what seemed to be the start of a bright future may be very well the start of a dark end.
God, I love this phrase so much. It's such a brilliant stab at many of these recent unicorns. "Oh you think they can burn money fast, well watch how fast we burn it! We're number one!"
https://money.cnn.com/2018/07/13/technology/wework-meat-ban/...
Focus on stealing office supplies.
Professor Galloway called this the other day. His next prediction is that We will sell off all the bullshit vanity projects like WeLive and WeGrow along with the other nonsense Adam bought (like the wave pool company so he can practice surfing at work). Then they will fire all non-core employees. The clock is ticking if they want to save this company.
It was published on Friday and so far he is knocking it out of the park with these predictions.
That said, I don't know the details of the program so can't speak to its practicality in this instance. But considering it's wework, there's opportunity for a good vertical there. At its face it seems like sound corporate strategy
Where the valuation came down to earth was when public investors evaluated We as an incrementally better office rental company, and didn't buy the idea of We as creating and monetizing a religion.
The issue is that now we have +10k people wondering about their future because they have bills to pay and a hard path ahead. Meanwhile, Galloway brags about how he was right during all this time and suggest massive layouts to save "investors."
I'm getting tired of this.
WeWork's sins were less of rampant sexism, and more closely related to an unreasonable valuation and a business that wasn't prepared for the current IPO climate. In other words, they were things for which the investors are also culpable.
I'm not a founder, but I'd be very hesitant to raise from SoftBank if I was (and very nervous if I had already raised from them). With Benchmark (and Uber's other investors), I'd only be worried if the toxic culture I created was putting their investment seriously at risk.
Excluding the sexism, the toxic parts go hand-in-hand with the mindset Uber needed to ignore incumbents and regulations. The only reason Uber was successful was because of that attitude. Where it failed was growing up.
Which, by the way, is not a weird thing. Different stages of a company lifecycle require different types of leadership.
So it had nothing to do with:
- General disregard for regulation
- Blocking regulators from the plaform via Greyball
- Corporate espionage - Waymo vs. Uber
From my impression at the time he was forced out primarily because of actions like those last two (only few of many), because they have the potential to cost Uber serious money (sexism sadly not so much).
Edit: removed exact salary amounts because my sources said it would out them.
https://www.reuters.com/article/us-wework-ipo-debt/wework-bo...
It fell 1.1%, which is not rapid, especially for something that was already rated a junk bond.
And without any data on the bond's previous price volatility it isn't impossible to say whether 1.1% is worse than it had, say, the week before.
That's their recruiting model too. These cults have people married to them their whole career and don't even know they are a laughing stock. They have conversations with their friends like "well joining a tech company has been very different from my old cubicle farm!"
I keep asking myself how startup culture has gone so far off the rails in terms of professional business tropes, even while they court traditional financial backing to the point where the emperor's new clothes scenario is playing out in front of us and we barely even notice? One word: entitlement
Could this fellow have stood a chance if he wasn't so nonchalant with his appearance opting for the messianic playboy look rather than the modest preppy techie?
I'm sure this comment will get downvoted to oblivion but what are imaginary internet points for if not spending on counterculture opinions?
I say the reason this all fell apart is because the guy is simply unlikeable and his shitty entitled-looking Keith Raniere-esque stage presence did nothing to help
Hear hear!
Essentially they solved the self-dealing issue by removing the self instead of removing the deals?
https://www.profgalloway.com/wewtf-part-deux https://twitter.com/JordanBitterman/status/11765494016213483...
>We will now need additional capital from the private markets, who are no longer under the influence
>We has gone from unicorn to distressed asset in 30 days.
>In just seven days, We lost more value than the three biggest losers in the S&P 500 have lost in the last year combined: Macy's, Nektar Therapeutics, and Kraft Heinz.
I have to pause each time and re-engage my brain to realize he is talking about the company and not himself.
I'm significantly enjoying the level to which this fiasco has made investors look like dolts. One can only hope that it does something to pierce the narrative about the possession of capital making people visionary
Super off topic but why the heck is Heinz losing so much value?
td;lr - Both kraft & heinz were slammed together by a company that bought them both out and then forced them to cut a ton of costs. As it turns out, you can't just cut costs and expect to grow and prosper as the market changes around you.
PS - in the article they mention they took away the free office snacks. Taking away perks like that is always a sign that you should head for the exits...
https://www.merriam-webster.com/dictionary/synecdoche
See also: Hollywood. Nashville. Foggy Bottom. Quantico. Denim.
I have worked for companies where all the employees were eagerly waiting for the day the company will go public. It was seen as a pivotal moment both financially and professionally.
In any rational world that's a landmark moment. A significant milestone for founders, investors and early employees. For WeWork it has been the complete opposite. They filed to go public and everything is going south since then. Must be surreal that what seemed to be the start of a bright future may be very well the start of a dark end.
"But because SoftBank’s latest round was so large and the possible down-round was looking to be less than half of that, the provision was expected to result in the world’s largest IPO ratchet."
Relative to Softbank's total investment, it's not a huge percentage, but relative to the amount expected to be raised in an IPO it certainly is.
After the IPO valuation downgrade the banks are now questioning the value of his collateral WeWork shares and could force a margin call.
I think this might be driving it.
Adam got a $750M loan from WeWork, right? I'm assuming he used that loan to secure more loans to buy the buildings he then rents back to WeWork (at a profit). I wonder what happens to him if WeWork walks away from his buildings. I doubt he has the cash to hold onto those buildings for more than a few months without a client -- especially if WeWork is still private. If they go public before they "walk away" from his buildings, he'll have to sell massive amounts of stock to cover his losses.
Unless we get to negative interest rates, I don't see a future that looks good for WeWork.
Ugh. What an awful culture we live in where this is considered perfectly normal behavior.
Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection.
You're doing a thing which is quite frequent on HN, which is where you say that unethical behaviors are prevented because some narrow definition of those unethical behaviors is illegal. But the bit I quoted above is an unethical behavior which is clearly not prevented by the law.
> Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection.
"The victims are tough enough to handle it" is a pretty poor justification for sleazy behavior.
Contracts have very little meaning if one of the signatories can disappear without holding their end of the bargain and without consequences. Is this the society you want, one where giving someone your word is meaningless?
"Each lease is owned by a different subsidiary" doesn't help you that much against the lessors, they'll either charge you more or demand signed guarantees from the parent corporation. Counter-parties are not idiots, generally speaking. There's no free lunch here.
How the structure helps is by protecting against other creditors that may arise out of operating the physical business in a way that may inadvertently generate legal liability. Since this is a real estate business, I'll go with a classic example - there's a spill on the floor, someone slips and falls and sues the people running the building. This litigant can generally only collect from any insurance policy and the subsidiary running the building - in order to go after WeWork's assets, they'd have to convince a court to pierce the corporate veil, and that's significantly more difficult.
[0]https://arstechnica.com/tech-policy/2019/09/solarcity-was-in...
https://slate.com/podcasts/slate-money/2019/09/slate-money-o...
I guess my take is somewhere between these two comments. I sometimes hate the way it feels like Anna plays a "contrarian character" no matter what, and yes, Felix and Emily can sometimes be a bit too.. "NPR do-gooder, feel-gooder" for my taste. But I really enjoy the show regardless. It's a saturday morning long-run staple for me.
And thus could reinstate himself after IPO?
Further undercutting his position: eccentric behavior that was detailed in a Journal articlelast week, such as a party-heavy lifestyle that included marijuana use in an airplane and unpredictable management decisions.
To say that "they were asking for it" would be a huge understatement. The night shift janitor of the building two blocks down from their offices would have called this.
Add in a self dealing CEO, and the human attraction to watching disasters unfold, and here we are.
I recommend:
https://www.profgalloway.com/wewtf (from Aug 16)
https://www.profgalloway.com/wewtf-part-deux (from Sep 20)
Theranos never worked.
I have a similar enough personality type to such folks that they're easy for me to spot. Rather than taking claims in good faith and doing extensive due diligence to assess their business-worthiness, if I read someone as a fake (an almost purely intuitive thing) and then look at their project with that working assumptions, the holes in their pitch are magnified into yawning chasms.
It's not perfect, of course. I've been taken in by other sociopaths several times, but in personal or employment contexts where it was a 1:1 relationship. I'm not money-oriented so sociopathic entrepreneurs stand out like a sore thumb because I don't have any feeling of excitement about an investment opportunity to get in the way. It's like being able to spot a good or bad athlete in a sport you don't play, if that makes sense.
console.log(document.querySelector('.meteredContent').innerText.replace(/(.{80}\w*)\s*/g, '$1\n'))That is not to say piracy is theft. Only that 'they should protect themselves better' is not a justification.
I don't think he set out to scam investors.
'It's not unethical if I don't feel bad about it.'
The key to operating this way to is cultivate a sense of belief in your own BS - inspire others by having the 'vision thing', saying 'I wish you could see what I can see' etc. Ignore anything negative and devote as little thought to it as possible because what people are buying into is your sunny disposition - they don't really want to analyze your stuff, they want to feel the way you look: radiantly confident. So you just think happy thoughts and if anyone asks you troubling questions re-articulate your vision of heaven/ profits/ national pride/ whatever and make a performance of being nurtured by that beautiful vision alone, before mentioning that anyone can share it for 3 easy payments of $____.
No, its money.
All these "tech unicorns" backed by VC money are the same.
Spend Billions to obtain "growth metrics" until such time as the spending can no longer be maintained and you have grown your "valuation" to a point no VC/private investor will save your ass, then dump the company on the public.
The marketing doesn't even change just the company, "at any time we can turn off the spending and growth, and make pure profit."
This is why narcissist and people who are overconfident to the point of absurdity often excel and business at life. No body else has any idea what they are doing, their competitors mostly have no idea what they are doing, and they are willing to project that they know what they are doing unconditionally which is attractive to many people.
So people follow them.
To become a trillionaire you'd have to fuck over 1000 times as many people. Without getting lynched.
Sell something for $10 that's worth $12 to the buyer and costs you $8 to make. Repeat a billion times. The people you did business with got an extra $2 billion, you got $2 billion, everybody's better off.
You need a moat to actually scale that business model. And the ethics of many moats aren't particularly squeaky-clean...
The people you did business with got an extra $5 Billion, you lose $1 Billion. All the companies trying to offer the service for $10 (or some other fair price) will be eradicated by your company, because a company cannot compete selling things at a fair ($10) price when you are selling it at $7.
If you were really that philanthropic, why would you carve out a billion from that revenue stream instead of giving back, or investing it in better equipment or people?
So on the front end the billionaire had to give more than a billion dollars of value to society in order to get people to voluntarily do business with them. Then on the back end they have to turn around and invest most of that money back into society. In doing so they're shouldering the burdens of market research, diligence, and risk.
Society wins twice from this and in return the billionaire gets to spend a lot of money. Society wins there, too, because the economy benefits from their ridiculous spending.
Does this work perfectly? Absolutely not, but nobody has a better system that I've seen.
>it says a lot that when confronted with an objectively dumb rich dude like trump (no working memory, can't apply grammar consistently, childish vocabulary, shallow concepts) people will choose to believe he's secretly smart rather than that wealth isn't a result of intellect
Trade Trump's name for Adam Neumann and I think you have the answer to your question.
Makes you wonder if being a CEO is really worth 400X the average salary of the plebs or if it's all just luck and smooth talking.
Like, do you think the best golfer in the PGA tournament is "really worth" ten times as much money as the 14th best golfer? Did they work ten times as hard?
If your workers aren't risk-adverse, then a tournament is exactly as efficient as a piece-work compensation scheme for convincing them to put in effort. The proof is a bit more involved than I'm willing to digest for a HN comment, but there's a full paper you can read about this here: http://faculty.smu.edu/Millimet/classes/eco7321/papers/lazea...
Anyhow, what all this means is that providing a prize to top performers means you can get a ton of effort, training, and work from people competing for it, and you don't have to incur the expense of monitoring the inputs into performance or quantifying the overall performance rendered. You only have to care about the rank-ordering of performance.
To the sponsors? Yes.
Many generals of the US army are not "rich".
I suspect there are some cabinet positions that don't pay a lot, but offer a lot of power...
Host: Do you think all of this could just collapse one day?
McKelvey: You know it's a great question. One of the things we're holding onto very tightly is the feeling that we're still figuring it out every day... We'll have that learning curve forever which is what make it awesome.
I guess "awesome" is one way of putting it.
Personally I’ve always found that libertarian ethos in support of crappy things, like shitty schools and tobacco, and opposed to nice things, like healthy kids, frustrating. Like on the one hand there’s a kind of engineer who finds the most abstract IT infrastructure so stimulating, something totally removed from actual concrete stuff with even an iota of moral, emotional or socioeconomic consequence. But then when the schadenfreude gets going, an emotion that these supposedly stoic people seem to have in spades, they have opinions about fucking everything. And then when it comes to hills to die on, they finally choose to die on the Hill of Nicotine.
So like sure, say no to some recruiter. But if you trust the aggregate opinions of people on this board, with its profound adverse selection, get ready to be disappointed.
I get the impression google is seen as the best employer at least paywise mosly from comments on here. Go figure.
On the other hand, even if there is a diversity of opinions within comments, it's very easy to self-curate with a heavy dose of confirmation bias. So while HN can be a valuable source of information, it's useful to remain skeptical and avoid self-congratulations.
It's because of the people who become libertarians-posting-online, man. They don't have kids; people with kids seldom have time for this, nor do they think Every Man As An Island is tenable anymore once confronted with the true need for a Village To Raise The Child.
recruiters still do that? so unethical.
Recruiters are selected for recruiting talent. As long as the talent stays for some length of time that the recruiter isn't blamed for poor retention, then the recruiter wins. This time is months, not years.
That's why recruiters who work these angles still exist. It's not like this is a new phenomenon. It has been going on as long as there have been tech-recruiters.
If they did get selected out, they would all be gone already.
They also tend to just pay more and have real bonus structures.
Not sure this is the same game.
Maybe they’re just good at tailoring their messages. They look at me and see an old guy so they bring out the “stable liquidity” pitch.
Regardless, they put quite some emphasis on the RSUs being part of the salary as base salaries, while not bad per-se, were mere average for the region. And kind of sub-par considering the size of the company.
Employees aren't like A16z, they're not getting preferred shares and their primary source of income isn't likely to be investing in corps.
Stuff like this can ruin people's lives.
But does it really? Sure, it sucks if you get tricked to accept a lower salary, but I'd assume that even a below average software developer salary will be enough to lead a somewhat comfortable life.
Joining a startup is an opportunity to be part of a team that's doing something really hard, so you need to trust each other. Lying about the compensation structure isn't a good foundation for trust.
Now, you're spending at least a year of your life, working 40+ hour weeks in close proximity to someone who cheaply misled you.
I was arguing that the offer they gave me was a paycut compared to my current position. The recruiter explained to me that I should value the stocks not on the latest valuation but on the 100% certain 250B$ valuation on IPO day.
Unfortunately recruiters get a bonus when you sign and are not accountable for anything down the line. They have all the incentives to lie to get a candidate to sign.
I only accept sign on bonuses, keep your stock, it's worth a lot... right?
Okay, if the shares are really worth much more than their current market value, and you want to hire me for $X salary and $X/50 market value worth of your stock, it'd make more sense for me to take a different job that just pays $2X salary in cash, and then buy stock on the market...
These are common, but I don't think they apply to all share classes, so the big boys are free to get their money out.
If a founder/VC wants to get out before the IPO, they usually just do so on the secondary market. Example: Benchmark cashing out a portion of their Uber stake to SoftBank pre-IPO.
these kind of people tend to be driven by ego, so this must have hurt.
looks like he'll still be chairman though.
Short answer: No, it's not a sexual assault thing. It's a "shady self-dealing business" thing
However, those allegations aren't against Neumann, so I personally don't think this quite qualifies as a #MeToo strike against him specifically, but maybe I'm applying that concept too stringently?