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Comment by siruncledrew | Hacker News Reader

It's true Adam Neumann is a con - being a con, though, is not industry specific. Elizabeth Holmes is a con and investors still wasted their money on Theranos, which was more moonshot-esque emerging technology than some office buildings.

Every industry has snake oil salespeople, and the Vision Fund should have put in more due diligence with their choices.

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I think the VCs that invested the money into Neumann and Holmes are also snake oil salespeople, hoping to to dump it off on the public markets during frothy times. Is anyone supposed to believe that the smartest people educated at the finest institutions in the world don't know how to do basic due diligence before throwing their money at businesses that don't scale, yet valuing them as if they do?

Or that wealth is not an indicator of anything and some stupid people are rich because of a fragile broken system which doesn't reward based on meritocratic standards always.

In my opinion very few of the smartest, most successful businesspeople attribute their success to anything they learned at an institution. There are essentially no traditional institutions that can teach you how to be a great entrepreneur, identify those people, or help them be successful.

A good entrepreneur knows how to navigate a downturn. A successful entrepreneur gets lucky (or puts themselves in better positions) and isn't afraid to gamble.

There is almost no way to make it big from bottom with just playing safe. Bigger the uncertainty bigger the upside potential.

There must be some element of that. Wasn't there a company that promised to charge phones over the air with ultrasound? The basic math showed it would never work, but they had lots of VC backing.

You can read more on the slow demise of uBeam at https://liesandstartuppr.blogspot.com/

Yes, but the con of Elizabeth Holmes was a case of blatant fraud. Obviously investors should work harder to do due-diligence that can uncover actively fraudulent behavior, but you can understand some people being caught out by it. There was very little in WeWork's model that wasn't visibly problematic on the surface.

According to experienced scientists with decades of experience and knowledge about testing blood, there were very clear problems with Theranos' claims.

Yeah there was no technical info on how they overcame the issues with actually maintaining the machines... and how they operated with so little blood.

Competitors and scientists were pretty skeptical. Word has it when they tried to pick up some traditional investors and started asking questions they just got BS and a lot of those investors walked.

From everything I've read and watched on Theranos they were committing major fraud. It's hard to blame investors where the company itself is creating false test results during meetings. As far as I can tell it's way worse than WeWork.

Somebody explain uBeam to me then. They're just a regular startup that everyone with high school-level knowledge of physics knows is bullshit, and yet they're still around.

They fired just about everyone and are gliding along until their money runs out, hoping for a miracle.

(And so that the executives can keep paying themselves healthy salaries, undoubtedly.)

Investors should never rely on the target for such info. And if a company refuses DD then you just walk.

In WeWork's defense -- and it's cray I have to say that -- you can, in a world where we aren't on covid lockdown, stroll into a WeWork and rent an office at the rates they advertise. I've even worked in one. It wasn't a great experience, but they're definitely not fraudulent or in any way really comparable to Theranos.

Not a good investment, but not fraudulent. Whether they can make money given their model is a matter for CPAs. But they sell a real product at least.

> Not a good investment, but not fraudulent.

As in "claiming you're a tech company and inflating your valuation isn't fraudulent".

I believe the GP's point was that, if Theranos hadn't been a fraud, it was a story that investments made sense in. WeWork wasn't, it only "worked" because it was essentially a pyramid scheme where the guy at the top took the money investors brought in, pissed some off it away publicly and then used that to show potential investors how great his company was going.

Not a fraud for the customers, at least in the short term. But I think it made even less sense as a business, so I think it's just as much of a con job for the investors.

Think of it as akin to a Ponzi scheme. Early Ponzi investors do fine. They get paid a real rate of return, and often can even withdraw their money. Does that make it less of a fraud? Nope. It just means the house of cards hasn't collapsed yet.

Fair, but did they lie to investors, or did they just sell a (really) optimistic story? Particularly that consumer/business preferences would change for tiny crappy loud pay-by-the-month offices?

If folks like Vision can't be considered sophisticated, and capable of making up their own minds about the likelihood of a financial model working, and whether they like a somewhat-self-serving ownership structure, I don't know who can.

>did they just sell a (really) optimistic story?

Lies by omission are just as bad as those by commission.

I think a lot of scammers don't start out as calculated liars. They're people who are good at talking big and promising the moon, but they get in over their heads. They weren't sure what they were saying is false, but neither did they do the work to be sure what they were saying is true.

Ultimately, I don't think it matters. Whether they meant to or not, they're running a scam.

I think our disagreement is if there is a set of circumstances under which WeWork could have worked as a company. I think there probably is, albeit low probability. See also Blue Apron. Probably a dead company without covid; maybe rescued by our current circumstances.

edit: I also think my attitude is partly influenced by the fact that successful companies are often quite lucky. Why did facebook succeed when a thousand other social platforms died? Why did Youtube beat all the other video startups? Instagram ... etc. Some of those probably looked like scams that, in some path dependent way, happened to work out.

Successful companies are quite lucky, and YouTube is a fine example. But there was never any question that some company would achieve dominance in the market.

In contrast, there is no world in which WeWork would ever work as it was sold, and their failure does not open the way for somebody else to win. In theory, they weren't just going to rent desks to people; they were going to transform the very nature of work through technology and culture. In some hazy way that would allow them to gain the kind of pricing power that lets the FAANGs mint money. That didn't and couldn't happen; there's no natural monopoly to be had in offices, and their technology was nothing more than spray-on glitter.

WeWork was always, in the Frankfurt sense [1], bullshit. I don't know Masa actually fell for it or just spotted something that he could bullshit other people about. But again, I don't think it matters, especially at that scale.

[1] https://en.wikipedia.org/wiki/On_Bullshit

I would say the way the founder structured the company and self-delt so highly in his own favor - selling the "We" trademark to the company from himself for several milion dollars, buying buildings himself and then leasing them by the company from himself, etc - was certainly fraudulent.

I think the point was, if you're going to invest in someone reckless, you might as well invest in a reckless company where at least if they deliver what they claim, the returns will be substantial.

At least if Theranos had delivered what they claimed, they would have had a wildly valuable product. WeWork was always transparently just a middle man for real estate.

WeWork's fall wasn't because they failed to deliver what they promised; it's that what they promised wasn't even that valuable in the first place. That is an even more embarrassing miss for an investor to have bought into than to be wrong about tractability, as valuing a business model should be a VC's bread and butter, whereas tractability is a fundamentally hard and niche problem that's different for every business, and an easier place to be misled.

The "visionaries" are often cons like the Vision founder. It might as well be the Peter Principle fund.

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