Adam Neumann planned for his children and grandchildren to control WeWork

(Matt Levine on Friday)

Does an investment with those properties sound like a good investment to you?

Recently, in Switzerland, there was a company (Sika AG), where the founding family held 54% of the vote with 16% of the shares. When they wanted to cash out, they simply sold their shares to an outside investor at a sizable premium, and the remaining shares could potentially have ended up worthless (ultimately, after a multi year lawsuit, a compromise prevailed).

asking for a friend.

Everyone knows there is a big difference between a company like WeWork and Apple. There is also a big difference between other money losing unicorns that have a path to generating positive cash flow, albeit perhaps at a much smaller valuation.

Consider this is a person who was operating a company with a (SoftBank granted) valuation of a company that should have been throwing off billions of dollars in free cashflow. Instead, this guy had never run a successful or positive cashflow company in his entire life. If you pulled the average person off the street, told them they were extremely smart and successful, and put them in the exact same position as Mr Neumann, I’m going to guess they would be doing things as weird as he was if not much, much stranger.

I don't follow the premise.

Amazon became so valuable because of AWS, not because of their retail operations. Its hyper low margin retail division might be worth $120-$150 billion in a sane market. It's considerably smaller and less profitable than Walmart for example. It's not trivial of course, however they'd still be a lot smaller than the other titans of market cap. More like Costco, less like Microsoft. And at this point their retail segment is slow growth, so the stock would probably be under compression duress about now, the bloom would be off the valuation rose.

Amazon's recent market value ramp begins when they start showing off the growth and profit potential of AWS. In the first part of 2015 they showed off the figures, the stock promptly skyrocketed four fold in three years afterward (it was previously on a slow, quite gradual climb and had not gone net higher in about 1 1/2 years).

Worth remembering Amazon invested in pets.com though...

Airbnb is successful but is it sustainable? That’s the question we need to be asking of the Uber generation.

The Ford family has 40% voting power and 2% share ownership.

But is it the same?

In one case, the family owns the majority of the company and controls it. In the other case, the family only owns a small percentage, yet still controls the company.

Can a family that doesn't own a company be trusted to act in the company's best interests, or can they be trusted act in their own interests, using their control to extract as much money from the company into their own pockets, destroying the company in the process?

That's what I think the story is getting at, but it's poorly written.

Something called due diligence.

Plus, this insanity is removing power from investors. If they are not even going to look at the company share structure, what kind of decision were they going to make?

There are already numerous laws around securities. That is no excuse for lack of due diligence. Would you buy a house without getting a title search?

I don't want to prevent this. For some companies I want voting rights controlled. I don't want other people in my position telling Google how to run. The founders do a better job than the short-term shareholders. So let them have Class B. As a Class A, I prefer this.

Not in my opinion. Laws are hard to uninstall or to change once enacted, and they tend to have unintended consequences.

And investors aren't like widows or orphans in needing lots of regulatory and legal protections. (The most useful protections for investors are probably the ones that ensure that the relevant published information is actually true.)

An investor should research the company they are investing in. If it's a public company there is a wealth of current and historical data. It takes time, but it's not hard.

This is basic stuff, right?

In the specific case of WeWork, even though it was a private company, there was a massive amount of information questioning its business model, the founder, and its corporate structure.

I have no stake in WeWork, and I barely care about them, but even I knew what they were about.

>Wouldn't it be better to just live under a system of laws that prevents insanity like this? And then you could spend your time learning and being productive instead of poring over the details of how you're being duped in any given situation?

NO!!! I'm flabbergasted someone would make such a statement. You have to take responsibility for your life. You can't just offload that responsibility on someone else. Just because a law is made, doesn't mean it's followed, doesn't mean there aren't loopholes, doesn't mean you're protected. Ask Bernie Madoff investors who lost their life savings even though there were laws and regulations that 'protected' them. You still have to do your own diligence. It's like crossing the street and getting hit by a car - does it matter if you had the right of way and the car broke the law if you're now disabled for life? You look both ways even when the light green before crossing the street.

I'm also not sure what a law to prohibit the children of founders from taking an active role in the operations of said company would even look like. How do you even begin to craft such a law?

And do you even want to? If a child of a founder was around a company from a young age learning how it is run, the culture, and the business - is it that bad if the board and shareholders decide this person, with a wealth of experience, would be chosen to run it? Maybe, or maybe not. This is why laws are a blunt instrument. A law could be made to prohibit this, but it would then prohibit all the cases where it would have been beneficial to the company.