Veteran executives and financiers helped fuel WeWork’s rise and fall
wsj.com
wsj.com
I mean a CEO that skipped board meetings entirely? An entire board that basically sat quietly as valuations grew ever further out of touch with reality and that the first time they brought it up as an issue was already after the failed IPO had been halted, really is something straight out of an episode of Silicon Valley on HBO.
Um, like, duh.
The whole point of that IPO was to leave the public holding the bag. If Adam Neumann had only been slightly less of a douchebag, it might have happened.
They needed to go all in, and commit fraud like Enron, if they really wanted to leave the public holding the bag.
By the time public wakes up, the thinking goes, we've already cashed our chips. How many investment firms buy solid businesses, only to chop them up, milk them dry, load with debt and then IPO?
Edit: It's not fraud, they disclose it all but a lot of people are fooled by the low IPO price, even though the business is loaded with debt and has a gazillion shares issued.
A sixteen-year-old newsgroup poster explains it as follows:
> Sorry to disagree, but I thought the quote worked extremely well the first time and on further reflection, still do. I think it's very apt and I would hesitate to say that perhaps you didn't see the intended purpose on first reading.
> Terry talks about the crowd as a creature, therefore implying one single IQ. So, to use your own methods, let's say a crowd of 100 people would have an IQ of 10 - not each, but altogether. Each person would have an IQ of 0.1 if you wanted to break it down, although to do so would be completely counter-productive, because we are talking about a crowd and not a single person. Once you start talking about single people, they are no longer part of the crowd and their IQ would revert to normal status. The crowd is a whole, and the description provides a picture of it being a single organism with one purpose (to imply the fervour that people get swept up in, in crowds, e.g. race riots, Paedophile lynchings, vigilantes that one person would not do)
> I think the purpose behind the description was to provide the metaphor of a crowd being a big, dumb, violent animal composed of intelligent, reasoning people - a sort of paraphrase on "the sum is greater than the parts".
https://alt.books.pratchett.narkive.com/nVL49SnZ/quote-from-...
As an aside, I find it amazing that I was able to go from a paraphrased description of a quote to an in depth discussion of the accuracy of the quote with suggestions for alternative functions. Despite all its flaws, the hacks upon hacks upon hacks we call the internet is incredible when you step back and consider it all.
But I suspect he really means the opposite, that the larger the crowd, the less rational it is.
Hardly.
It wasn't the fact that WeWork had horrific fundamentals that killed the IPO--look at Uber and Lyft. What killed the IPO was all the reporting on how Neumann was looting the company in just incredibly douchey ways.
If Neumann had been a touch more sophisticated or slightly less brazen in looting the company, the IPO probably would have succeeded.
They do this to screw the small fish that might have a % agreement and/or for tax purposes. So ABC Movie makes no money for Disney but (say) Disney Productions made $XX million to produce it, Disney Promotions $XX to promote it and so on. In the end it all went to Disney' pockets, but the movie lost money.
Many great films are made in New York but they still fall under the moniker Hollywood.
He can't be allowed to get away with what he has done, he needs to be stripped of his money and spend some time in jail to act as a deterrent for others who would seek to do the same.
He found a little glitch in the system, and honestly, that's fine. This is how the system learns, and hopefully fewer investors will waste their money on someone like him in the future. But at the end of the day, what he did wasn't really illegal, and it shouldn't be.
The bare essence of what happened is he asked some supposedly very smart and sophisticated people to give him billions of dollars, and they said "we like you, so yes". There's nothing intrinsically wrong with that, it's their money to throw away how they please, and they should have known better.
If there were, a lot of very rich people - who have exploited this particular loophole would need to be prosecuted...
> The deal went through. Mr. Zhao joined WeWork’s board in July 2016.
Spraying potential investors with a fire extinguisher... now there's a fundraising technique I won't be trying.
Well, it worked ¯\_(ツ)_/¯
https://fortune.com/2018/03/30/gwyneth-paltrow-goop-series-c...
"""
Son: What does your company do?
Neumann: We lease office buildings, spruce up the space and sublet it in small chunks.
Son: Hmm I invest in visionary tech stuff, this doesn’t really sound like my thing.
Neumann: Did I mention we are a state of consciousness. A generation of interconnected emotionally intelligent entrepreneurs.
Son: Okay yeah that’s more like—
Neumann: The world’s first physical social network. We encompass all aspects of people’s lives, in both physical and digital worlds.
Son: You’re crazy! I love it! But could you be, say, ten times crazier?
Neumann: You’re going to invest $10 billion in my company, which I will use as kindling to light the whole edifice on fire, and then when we are both standing in the ashes you will pay me another billion dollars to walk away while I laugh at you.
Son: All my life I have dreamed of meeting someone as crazy as you, but I never really believed this day would come.
Neumann: I’m gonna use your money to buy a mansion with a room shaped like a guitar, where I will play the world’s tiniest violin after all your money is gone.
Son: YES PUNCH ME IN THE FACE.
Neumann: Also I’ll rename the company “We” and charge it $6 million for the name.
Son: RUN ME OVER WITH A TRUCK.
"""
https://www.bloomberg.com/opinion/newsletters/2019-10-23/mon...
https://www.mansionglobal.com/articles/wework-founder-adam-n...
This has to be one of the all time biggest pre-IPO delusional ego trips ever, right?
Building an executive oasis in the office probably counts as some kind of warning sign. Departure from reality.
What complicates the picture though is that these lying/cheating/bullshitting financiers work some of the most hours in society. It’s a weird new phenomenon where the very richest and the very poorest are all working very long work weeks.
The poorest are cleaners, care workers, and teachers though, and then there’s these rich people pulling off scams, losing money and contributing nothing of value, yet still getting paid a shitload.
I’m reading “Liar’s Poker” now, and man it is awful learning the anti-social attitudes of these workplaces and knowing that this book then became something that further promulgated those attitudes.
I've read a lot of these post mortem articles. They all feel like the author wished he was Neuman, wished he got away with the millions. I am a software engineer, have been for 20 years, I always felt I was contributing to society. I've build things that make people's life easier (in exchange for teaching my kids, baking my bread or treating me when I'm sick). These predatory people do not bring anything to the table but are regarded as gods.
An interesting problem. The answer is partly that there is more to life than money - and as another poster mentioned, there's really not much leisure involved. The cheaters legitimately work very hard!
Essentially, I think the Gervais principle [1] is largely true. And therefore it's fine, and from a spiritual perspective, strictly better, to be a loser. (And I don't think there's any harm in trying to find an exception to the principle - tilting at the windmill of an honestly made fortune!)
https://www.ribbonfarm.com/2009/10/07/the-gervais-principle-...
And no, bullshitting your way for a mere 5 (?) years of your working life cannot be compared to the 40+ years of work of anyone else.
And no, putting a name on a principle does not make it common sense.
But yes, making a small fortune from your hard work and genius is totally acceptable. Fair and square
However, the Gervais principle book is a very shallow version of lamrim that aims at explaining how the real world works. It also puts people into 3 categories: the clueless majority driven by forces, the small minority that's trying to escape these forces and the those who've largely escaped them and are now free. The sociopaths from the gervais principle are on the right track in general, but they make a common mistake on this path that lamrim discussed at length and so they slide into the nihilism dead end.
Bingo. That's also the best explanation of the concept I've seen.
It's a good read, in an entertainment sense, and there are some lesson to be gleaned -- but the same is true with the Bible, the Koran, or the Rig Vedas.
All that happened was a bunch of rich people paid for a guy to live like a king. They certainly suffered financial losses, even though they may still be rich.
A bunch of rich people lost money gambling on a guy. Laws requiring transparency before access to public markets brought it to down to earth. It seems to me like the system worked well.
The 'wealthy people' involved could sue in civil court and win based on a "clear and convincing" evidence standard and a proven pattern of bad behavior. You'd imagine it'd be worth a try. It would also be a reputational matter for the institutional investors who put money in the venture - sue so that people are unambiguously deterred from trying stuff like that in the future.
What about the employees of WeWork? They lose their jobs because "a bunch of rich people paid for a guy to live like a king."
They lose their homes, access to health insurance, the ability to retire someday.
There's a big difference between some billionaire losing some rounding errors and someone trying to provide for their family.
Another issue is the often jaw-dropping cynicism of a business world so obsessed with doing things, that any concern with how they are done is totally ignored. It's a world in which "cheating" loses its meaning; anyone who is incensed at unethical, or even illegal (but not enforced) behavior is a naive rube. Ultimately, I think this happens because of a catastrophic failure of the justice system.
Business and personal accounting systems deny, ignore, and suppress those contextual details. So does the "investment" industry. And that makes a mockery of "price discovery" because the nominal market price always excludes critical externalities.
It's possible to become extremely rich without negative externalities. It just happens to be incredibly difficult. The looser your ethics, and the less empathy you have for competitors and victims, the easier it gets. It's a feedback loop which rewards unethical behaviour.
Essentially, money itself is a form of morality-laundering. It's an integer when it should be a complete trace through a common contextual event map.
You run into a technical issue in that you can trace a dollar indefinitely in both directions. But perhaps there's a solution, like some sort of decay.
Neumann and his wife have been getting rejected from several condo boards in NYC since the scandal came out:
https://pagesix.com/2019/10/03/ex-wework-adam-neumann-ceo-re...
We tend to focus on juicy scandals. In this case, it was/is terrible conflicts of interest combined with a "pump-and-dump" mentality that exit focused startups are prone to during boom times.
OTOH, the "system" worked, and wework investors got "busted" before IPO. It never reached the stage where pros and insiders cash out to public investors.
In retrospect, investor cash was spent/wasted by operating expenses... Operating expenses are salaries and such. It may be wasteful, but the losers are risk tolerant investors so c'est la vie.
In a "dot-com" scenario, a much larger amount (market cap) goes from public investors to private ones. If wework had succeeded in getting to this stage, it would be aweful.
Imo, we need more risk, not less. Professional risk investors though, they are too good at offloading that risk to where it isn't supposed to be.
Most of the institutional fixers (large funds, banks, regulators, sec, etc) suggest "fixes" that reduce risk. This is not a good thing. We need risk, and that includes a risk of shenanigans. I'd rather have a public blowup than an even more conservative professional investor class.
You're also ignoring one group of victims here. I wonder how the current and former employees of WeWork would feel about your assessment that it's "not so bad"? Their labor was no doubt compensated largely in the form of now-worthless equity grants. "Sorry you got screwed but this is necessary for the health of the investor class. Won't somebody please think of the investor class?!" How totally fucking odious.
I don't know how you look at WeWork and arrive at the conclusion that professional investors are at risk of becoming too conservative. Clearly, venture capital has stopped functioning with any sort of discipline or rationality if it can invest in companies like WeWork and Theranos which later turn out to be obvious mirages of pure ineptitude and greed.
I get it. I agree. Content isn’t free. But I can’t sign up for everything, and this site is meant to be an aggregator. There’s no point aggregating content that we can’t see.
https://news.ycombinator.com/item?id=10178989
Note this bit: It's ok to ask how to read an article or to help other users by sharing a workaround. But please do this without going on about paywalls. Focus on the content.
https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...