WeWork founder will get $1.7B to let SoftBank take over his company

* was inspired by

* generations of prior businesspeople doing

Let's not forget that Enron, Theranos and WeWork propagated a form of corporate fraud that is not foreign to the modern corporate investment system. There are always opportunities to bolt on corporate structures that juice the plausible metrics and existence of an "investable" moat, but at least in more public markets oriented world of yesteryear, SEC regulations could be put in place to plausibly protect main street investors. In the current engorged state of private capital, many private investors will have to learn due diligence the hard way, or they will lose their shirts to exceedingly savvy hucksters and grifters masquerading as trailblazing mavericks.

Let's hope WeWork is enough of a cautionary tail for investors that they're much more on guard against this sort of thing.

I don't think being "tech" is the primary thing that's been exploited here. This is an example of "any indicator or metric will be gamed, no exceptions."

For quite some time the standard thesis of VCs has been to "invest in the founder" before other concerns. Look for a dynamic, resourceful, magnetic, go-getter founder and invest in them and the business is secondary. All VCs don't follow this thesis but it's been very popular among less technical VCs probably because less technical VCs are less competent to evaluate aspects of the business other than the founder's personality.

This heuristic is going to give you two sets of people: highly motivated and resourceful visionaries, and sociopathic con artists. The latter far outnumber the former, and without looking at anything but the founder it's hard to tell the difference. In my experience sociopathic hustler types are probably going to look better according to this heuristic since they are generally better at manipulating people and projecting a superficial aura of power and competence. Even the most dynamic looking visionaries are generally spending more of their time being creators and organizers than perfecting their ability to fake being creators and organizers.

This investment thesis gave us Theranos and WeWork among others.

Repeat after me: any indicator or metric will be gamed, no exceptions. If any investment thesis becomes popular it will be exploited by con artists who will learn to fake whatever indicators are being sought. No exceptions. If "invest in introverted nerds with cool tech" became the popular thesis, that too would be gamed. You'd see a lot of sociopaths pretending to be introverted nerds with whiz-bang sounding snake oil "tech." (This has in fact happened in other areas... look into free energy and medical quackery for examples.)

The even more general principle here is that there is no formula that can act as a substitute for constantly engaged and applied intelligence. I think this is a broad principle. If such formulas existed in any domain then the human brain with its high metabolic cost would never have evolved.

If I were a VC my investment thesis would be "each potential investment is entirely unique and must be evaluated by reasoning from first principles." There are patterns of course, but any pattern that's existed long enough to be recognized as such is already "priced in" and is also probably in the process of being exploited. If you see the pattern you are probably too late to profit from it.

Usually these tricks only work once, or for one generation.

It's not that he is a genius but that his investors were complete idiots.

Some chunk of that was loans secured by stock. Presumably the $500M line-of-credit is to refinance.

Or maybe softbank has redefined what dumb money means.

The beauty of his "con" is that he did it all in plain view and tacit approval by the board. He didn't need to do anything criminal when he's controlling the company's voting shares.

almost certain he also got SoftBank /WeWork to defend him in any future case.

Ha great reference

Uber and lyft are trainwrecks as well. They IPO’d a business that burns money without any hope for profit. We are just witnessing the slow bursting of the current bubble and people are waking up to basic economics again.

Yeah, it's crazy. It's like Softbank's team wasn't even running basic financial models. And once Wall St wouldn't touch it, Softbank never really even made a counterargument in favor of its valuation. It seems like they cut a $10 billion check just based on emotion, but that is just hard to believe. And the bankers on the IPO must have known that it was going to be DOA and took the business anyway just to grab some fees.

This guy got fucked all the way to the bank.

This guy is pretty far left (to the point that he banned meat in his offices). I doubt conservatives and libertarians are going to be bending over backwards to defend him.