WeWork lays off 2,400 employees
cnbc.com
cnbc.com
I am curious how many "white collar" type jobs WeWork would have, since I heard from previous discussions here that they were hiring for roles in unrelated-to-real-estate things like machine learning. I would imagine that there are lots of hourly-type roles managing the sites, but 12,500 seems reasonable for 849 locations (from https://www.wework.com/locations), ~14 people per location, assuming that they are included in that 12,500 number.
I'd prefer to help good people get out of bad places.
As in, you hope they find new employment at a legitimate company?
If it did implode (Ch 11 or Ch 7 BK) - it will start to have major impacts on the NYC and other real estate markets. It’s the largest lease holder in many cities.
If you buy into the goal being "shareholder value" then plainly Softbank failed. One could make the argument that WeWork's board did the things that they thought created the most value - but if you implode in on yourself, you clearly failed. Even if the self-dealing was not outright legal fraud, it was plainly not to anyone's benefit apart from Adam Newmann - which again is complicit behavior on the part of both boards. None of it is good business.
Imagine something nice that you own- like your car. Do you feel compelled to understand your car? Must you be an excellent driver to own that car, if you can afford it?
No. And while it's not exactly the same, the people generally look at the company as a machine that makes them money. They don't have to be good at anything to own that machine, and if they want, they can even share it with their drug addict fail-child.
Nothing else in the environment matters if it's not on the balance sheet (most notably pollution, social disruption, and general human suffering). Yvon Chouinard has a great perspective on this in his book "Let My People Go Surfing" where he meditates on the paradox of running a private business that fights itself by automatically giving away portions of its revenue to charity rather than paying out shareholders/reinvesting in growth. What do you do when you see every sale your company makes as a failure in the fight against consumption/towards sustainability?
If you are critical of the growth plan or business practices, you are fired from the board.
edit: actually we might be agreeing.
If you're affected by the WeWork layoffs and looking for a new role, fill this out:
https://docs.google.com/forms/d/e/1FAIpQLSdx4TOVN7AdgvyAZGbq...
If you're interested in recruiting ex-WeWork folks, you can look them up here:
https://docs.google.com/spreadsheets/d/14CAtBsn3ZTL59tNMVbew...
original source: https://news.ycombinator.com/item?id=21199247
Economic disparity has reached a point where those at the top end literally have more money than they know what to do with and are increasingly spending it on stupider and stupider things out of some perceived need to do something.
[1] https://en.m.wikipedia.org/wiki/List_of_revolutions_and_rebe...
Re protection: it’s only good if those who are supposed to protect you are on your side.
I think this vastly overstates it. Versailles cost some significant fraction of France's GDP - possibly as much as 25% in some years. WeWork's $10B is a mere drop in the US' $20T GDP.
(Hopefully someone more knowledgable can chime in,) but I always thought VC was a mix of government, private, and institutional funds?
If you assume that the government needs $X to perform its function then when tax rates are cut for corporations and those wealthy enough to game the system, its everyone else whose taxes pay the shortfall. The reason there is so much money floating around the top end is specifically because they've figured out how to foist their tax burden onto others.
I use Uber all the time, as does everyone I know. Hell, I even drove for them for a while.
They provide a needed service and they are subsidizing that to get rid of competition like Lyft and to grow a huge user base. Then, it's likely they will raise prices and start making money.
But it is not a Ponzi scheme. Last I checked, a local taxi company that is still in business wants $30 to take me into town, which is 5 miles away. Uber is $7.
The cost of that $7 are the billions they lose every quarter. It's not sustainable. They're a public company now, so to come up with fresh cash, they have to issue bonds and pay interest on them. How will they repay it when they aren't generating fresh cash through profits? They can't rely on VCs opening their wallets whenever they needed money.
Cheap rides are to gain marketshare and customer acquisition. Not saying the strategy will be fruitful but it is a strategy.
They will raise prices eventually, they are in the "get a lot of regular users" phase still, growing that until they are ubiquitous.
Yes, they may face monopoly concerns then, but that is down the road.
What they will not face is competition from the $30 taxi companies, because unlike the taxi company they do not own any cars and the resultant costs of that.
I disagree. WeWork has 836 locations and 12.5k (now 10k) employees, or ~12-15 employees per location. Regus/IWG has 3,306 locations and 9.6k employees, or ~3 employees per location.
How is 4-5x the number of employees for a comparable non-tech company appropriate?
Just my guess.
Meanwhile, Adam Neumann is still collecting a $1.7 Billion payout.
Imagine the positive press you could drum up about yourself! All while keeping 1.5 billion dollars!
Though there are probably more news worth things you could do with 300m.
750M given away, still have a billion dollars and a bunch of goodwill.
MAYBE you can feel some emotion for the investors whose money was essentially stolen, by a scam artist?
A property leasing company that sub-leases property owned personally by the CEO is a massive conflict of interest and a huge red flag, how these "professional investors" came to the conclusion that it would be a good idea to invest is beyond me.
I've got plenty of sympathy for people being laid off I was just putting forward the case that it was good while it lasted. Less so for investors. From the perspective of the latter you win some, you lose some. And any concerns should be raised with people that funded the company to the tune of billions with what appears to be little governance or due diligence.
Honestly, I think investors were quite aware of what kind of business WeWork is. They were hoping to dump the whole hot mess to public markets and walk away, and they failed.
Please explain what the scam was, and how money was forcefully or fraudulent taken from the investors. Was the scam the public knowledge of a CEO using private jets to smoke weed and vacation with company money and speaking in cultish phrases? Was it the lack of cash flow? Was it the obvious lack of any moat?
shifting of talent
Student loan debt cannot be discharged.
Unsecured personal debt is at all-time highs.
Nearly half of Americans have less than $1000 in savings.
You are wrong.
https://studentaid.ed.gov/sa/repay-loans/deferment-forbearan...
> Nearly half of Americans have less than $1000 in savings.
Those both sound like bad financial planning. Pumping more money into the equation won't solve that.
I mean, I don't know you personally, but if those are your priorities, then there are plenty of big stable boring companies to work for. Maybe apply at one of those instead of wildly unprofitable startups with idiosyncratic founders?
You have agency.
For the existing employees who saw their stock options value deflated overnight, well tough luck. it's hard to become a millionaire
For the investors who just throw money to whoever in sight just to see what sticks, no tears at all
On what possible grounds? They were fairly compensated and got severance. There is no indication that they were hired under false pretenses. They're angry cause they didn't get to rip off Softbank too.
Instead, SoftBank looks incompetent, Son looks incompetent, Neumann walks away a billionaire for delivering nothing of value, and layoffs are still happening. They're doubling down on financially destructive decisions. This is what happens when you have more money and vanity than courage.
[1] https://asia.nikkei.com/Business/SoftBank2/SoftBank-in-talks... (SoftBank in talks with Mizuho and Japan banks for $2.8bn loan)
Who defines a market with that kind of cynical, silly definition? I don't think most of us want that kind of "market". And if that's the only way to make Neumann look good, then maybe the reverse is true.
Most of the people are jumping one over the other to lose money as quickly as possible on some fantastical promise of profits. Human nature is like that. Intelligent people made money out of this sentiment since money had been invented.
That's certainly not a definition. Investing is not zero-sum.
Does anyone?
But their employees were heavily compensated with options that are now worthless.
Of course options are a risk, but they didn’t work there if they didn’t think those options would be at least worth something in the future.
WeWork deflated more than any company in HISTORY. You’re technically correct but people are irrational and I’m sure they were being lied to their face in all hands about how great the future would be.
At that stage as an employee you’re counting on those to be able to put down a down payment or do a much needed renovation, or hopefully not payback debt.
Cisco went from 77$ per share in 2000 to $10 per share in 2002, while being public (so the value was much more real than WeWork, you could hit the 'sell' button to make it real money in 5 minutes, unlike WeWork equity).
IIRC it was valued around 500 billions in 2000, so it was much larger destruction in value. It still hasn't recovered, with $45 per share right now, never reaching its 2000 peak during these 19 years.
The employees pretty much got the typical outcome of working at a startup (startup runs along for a couple years, then fails). The fact that Adam Neumann made bank is rankling, but Rich People Burning Money and Also Accidentally Giving Some Away to Undeserving People Because They Did Incredibly Stupid Things isn't exactly something we can or should stop. You can't make it illegal to be stupid.
It does suck for those employees that their risk didn't work out, but for most of them it was a conscious decision to take on the risk, presumably for a high potential upside.
And if you accept the risk, then its unfortunate that it didn't work out, but that is what risk is.
Yikes. I have worked in two different startups that imploded quickly, largely due to an inability to find an effective sales and growth strategy. The fact that I was sold on the vision and that vision wasn't realized doesn't make the work I was doing any less challenging, nor did it make the job or business any less real.
As far as WeWork not being a real business, I think this was fairly well documented during the IPO attempt. However, more generally, when I say real business I mean a business that can survive without getting most of its funds from an unrelated source, i.e. investors. All evidence points towards WeWork not being able to continue without continued burning of investor money and there's no path to profitability on the horizon even.
One (likely in my opinion) possibility is they did, and they were betting they could find a bigger fool.
The self dealing was reprehensible and evidence of low morals in my view, but none of those events actually materially impact the value of the business. Instead, overnight, investors just came to their senses about what kind of value this type of business is worth. Definitely a strategic misstep on his part, but it’s not like he stole billions of value away from the company. The drop in value is more like what happened to Uber or Blue Apron post IPO, except, unfortunately for the employees, it happened before they could exit.
> he believed in his own spin
It's his fault because he accepted the price for his business! He was in numerous conversations where people wanted to invest in WoWork and he told them that the valuations they were investing at were not just reasonable, but under the real market price - which is why venture buys into companies.
> none of those events actually materially impact the value of the business
> overnight, investors just came to their senses about what kind of value this type of business is worth
These things seem like they contradict each other. If Neumann's actions are not material, why did his removal reveal the true value of the company? Material just means it changes the value of the company. There are lots of "material" events that don't have anything to do with business fundamentals.
That said, there are a few ways to overcome it. Self-dealing is one way, assuming Adam didn't disclose the transactions. Fraud would be another.
All this stuff is pretty fact-specific. We can guess, but there's a lot we won't know until it gets litigated.
What? It's his fault that he was able to hoodwink all these amazingly smart venture capital owners into investing?
No. What happened was some venture capital owners made a bet that they could find a bigger sucker to dump their shares on. But that bet went sideways. Nothing more. There is no indication of any fraud yet. Just some people that thought an eccentric personality could help them ride the wave of funding.
Unless he was cooking the books or conned some other way - you may say he is the one scumbag to rule them all if you like for walking with fuck you money squared while his employees get the shaft, but he did nothing wrong in pitching high valuations that the others side accepted.
Hell of a low bar you're setting.
Self dealing is fraudulent. It sends a message to con-artists of the future to do exactly what Neumann did for a potential big payout.
Materially WeWork is a real estate company selling itself as a tech company to get a higher valuation. Sure, it's expected that founders don't have a realistic idea of what their company is worth, investors should have done more research. But Neumann's ethical failings in regards to self-dealing is closely related to failing to accurately represent the state of his business. I think Neumann is fully responsible for WeWork's overvaluation, even if he fully believed his own spin.
Sellers don't get to dictate what something is worth.
Neumann, as a seller, went out into the market and found some buyers. A seller sells for the most they can, and the buyer buys for the least they can. Except in this case, the buyer wanted to flip it, so the buyer wanted to over value it, so that they could claim it was worth even more (due to the rate of increase in "valuations") when they try to IPO it.
If anyone was lacking in morals, it would be the buyer who intentionally paid more than they knew they would if their aim was to hold onto it as a business, just so they could pawn it off onto someone else who didn't know better.
What? How? He built an 8b business with 16b in investment. Anyone can do that. Take 16b, put it in index funds, call yourself an investment bank. You'd get better returns than -50%, for sure.
Softbank funded WeWork via the Vision fund, which is primarily funded with Saudi money.
No need to be pedantic.
So the odds are lower and the timescale is longer, but you could still lose more, potentially.
"To turn $100 into $110 is work. To turn 100 million into $110 million is inevitable". Edgar Bronfman
She.
He's talking about the WeWork guy, not the theranos woman. I think it's a strange sentence, but technically correct.
That's like saying the Soviet Union was successful at building a strong consumer economy. Anything can look good when you're able to under-price your services using someone else's money.
How was he "phenomenally successful" if the company needed an emergency bailout because they were about to run out of cash?
He did nothing wrong in this society, so maybe we ought to fucking change society.
This sort of thing sends ripples across peoples' lives. Normal people (outside of the idle rich who can afford to waste money on speculation with effectively no consequences) do lose out when things like this blow up.
The lack of regulation and legal accountability here is shocking. The fact that regulation doesn't currently exist shouldn't be used as a justification for excusing the behavior of bad actors!
But yes, normal employees are paying the price here.
Successful at building a large, real business selling $10 bills for $8. It's a dreadful business, they lose money hand over fist with no path to stopping the bleeding.
For a while now, any company who could claim to be a "tech" company like WeWork (an objectively real estate company) did was able to raise on terms that are only suitable for zero-marginal-cost businesses. That is unlikely to continue.
There's a case to be made that the benefit of a recession is that it kills off these types of wildly unsustainable businesses as they're forced to prove their model. It's been over a decade since the last one. This allows us to remove some of the froth from the market without necessarily going through the same level of hardship en route.
The classic "We lose money on every sale, but make it up in volume" approach.
It didn't even buy properties.
I think Galloway explains it well in this video -- https://www.youtube.com/watch?v=3UdhLWGrtDI
Even after hearing that media raved about him/WeWork, analysts were bullish and investors pumped Billions. Startup media are generally happy with their funding related news as it is glamorous.
And due to the funding noise, Startup ecosystem has forgotten that a Startup is a Business and a Business should make money, else it's just a hobby.
[1]:https://www.nytimes.com/2018/02/17/business/the-wework-manif...
I don't see who would want to pay a few hundred bucks a month to work on a conference table surrounded by strangers.
Outside of smaller independent coworking spaces and WeWork's existing customer base there is IWG which does the same (albeit more sustainably): https://www.iwgplc.com
Not inherently a bad idea, though it's full of Silicon Valley optimism where one serendipity produces tons of money while a lot of other things just fail to gel -- but some people get paid regardless.
The employees on the other hand are all screwed: at Thernanos Holmes was the most screwed given the potential jail time, but at WeWork Neumann is walking away with over a billion, which is sort of like spitting on your employees.
WeWork (Neumann) preached about the 'We Generation' and 'elevating the world to a new consciousness,' but really his actions were traitorous against the people who made him. Thernanos never claimed the moral high ground, nor did the leader get off like a bandit.
Sports, TV, designer stuff... all heavily dependent on emotional attention. The attention economy is older than we realize.
Brand building is at the core of this, and we’ve seen this with of elite brand builders over and over.
Those who can do. Those who can’t are CEOs
Besides by that principle his employees didn’t deserve to get paid either, since by your reasoning his employees were only paid by the fruits of fraud. That doesn’t make sense to me.
https://en.wikipedia.org/wiki/Neoliberalism
The overarching goal of which might well summed up succinctly as: "Socialization of risk; privatization of gain."
That's definitely a glass half empty way to look at this;
On the other hand, with 20/20 hindsight, knowing it was selling space it rented for a $.80 for $1 of cost, knowing that this hype meant and in a low unemployment time means that these were effectively a jobs program, with above average market salaries, funded by Softbank (and the Saudis).
Also a jobs program for any companies that would have paid $1/$1 of office space but saved the discount.
And, from a being laid off perspective; while it's not fun to have a job end at someone else's discretion, if you worked at WeWork and the August headlines weren't a hint to get the resume ready, I'm not sure what else might; Effectively, 4+ months of notice combined with now actual severance.
The downstream effects of this are probably worse from a capitalism / worker piece; As WeWork reduces leasing office space, buildings or service companies will likely pocket the contract termination fees while reducing jobs/hours of contract staff -- who, unlike wework employees, were closer to minimum wage, may not even have benefits, and definitely won't get severance.
For it to be like theranos the offices wouldn't exist.
Hiring doesn't happen overnight and it's much more difficult when you're doing it actively, as opposed to passively responding to the recruitment vultures. Especially when there's a time crunch, since severance doesn't last forever and hiring doesn't happen overnight.
I for one wouldn't mind being unemployed for 3 months.
A 3-month hole in your resume will be something you'd have to explain to your future employers for the rest of your life.
Huh? People take time off between jobs all the time.
Whenever there are unreasonable rules and you really do want to get around them, all you have to do is find a way to demonstrate your talent sufficiently that people will bend them for you.
How many of those Meetup employees are sitting on, or exercised, worthless WeWork options?
Talk about no lube...
Based on one friend of mine... he's patching up his resume while waiting for his manager to offer a severance package.
I feel enraged for stockholders. WeWork's management wasn't 'sticking to the knitting', as Buffett would say. They seemed preoccupied with trying to shape the world (see link below) and not so much providing value for shareholders or security to employees.
Hoping for a better, smarter, focused new company to come along and build the business.