WeWork Book: The $10T Mirage
axios.com
axios.com
So far, I’ve loved it compared to working out of my apartment. There’s almost nobody there. Work areas are comfortable, furniture is great, building is really fancy, it’s secure, there’s really good free food and coffee, shower, bike room.
I’m telling everybody I know to take advantage of it now while SoftBank is still footing most of the bill.
I think it’s more like a movie theater or gym.
They’re already paying for this big empty building. If they can drop the price a bit and get interest, the marginal cost of one more body isn’t that high. But drop the price too much and it hurts the brand/image/value to those willing to pay full price.
I find it hilarious that you state no one is there even at these prices. I imagine an investor reading that.
His scribbling on the slide reminds me of the gnomes' plan for making major $$$ from collecting underpants on South Park. How was he going to get to those numbers?
After taxes, this is >10% of income for >70% of the population.
If Americans in cities didn't already spend >60% of their after tax income on rent - I could see this being more popular.
There's just not enough people that make enough money and don't work at a good company that already has nice offices for this to make sense.
I agree, in theory, WeWork is a lot better to work at than most people's apartments. I'm not convinced enough people have enough money.
The biggest advantage I’ve seen over libraries/coffeeshops is that I’m expected to be there working all day and it’s fine for me to hog a desk/space as long as I want to. I don’t have to think about whether I’m being selfish or bothering anybody else.
Plus the WeWorks have really great quiet booths for phone calls which very few free/cheap options have.
Wouldn’t this cost be a business expense and so best compared to pre-tax income?
perhaps due to the pandemic?
It’s about 3 miles from my apartment so I just jog there with my stuff (or bike). When I jog, I take a shower and change. So it’s a good way to make myself be more active than I was mid-pandemic.
I figure even at the full price, that’s like $15 per work day, and I usually have an espresso, a Stumptown cold brew, and a snack during the day (or meal if there’s something free/good). Plus on the days I don’t get free lunch, I’m more motivated to meal prep and take a healthy good lunch instead of just snacking while I work in my apartment.
A few times there’s been free meals from local restaurants. I’m hoping they get some kind of discount in exchange for the marketing.
Too many unicorns don't seem willing to accept that it's perfectly fine to have a niche product that serves its market, but it's a finite market and will never take over the world.
WeWork has these big empty buildings with the lights on, whether anybody uses them or not. Adding one more body doesn’t increase their costs that much. So discounting a membership at least helps bring some cash in and gets a new person interested in the service.
The more people used their service, the more money Moviepass lost. With WeWork, they need more people to sign up to have a chance at getting out of the mess they’re in.
This makes me want to watch the wework doc that just dropped. I obviously have much to learn about the whole deal.
At the individual company level, there's some level of common understanding of rules/protocols for coming into offices. That's not generally going to be the case with co-working spaces.
They're only attractive to (a) individuals or (b) companies too small to just deal directly with standard office space brokers.
They need larger accounts to drive their COGS down, but larger accounts can bypass their service. So they're like a cloud provider, except without all the synergy and lock-in.
The only future where they're moderately successful is one where workforces are substantially more spread out (one employee in each different city) and they're a broker.
But even then... they'd face the challenge of scaling their business geographically (office in every city) vs having larger offices in hubs.
As more workers go remote, some will still want a physical office to work out of. That's something WeWork should excel at.
> Let's take a case study: WeWork. WeWork are an American company that provide office space. They dress it up as revolutionizing your workplace and bringing people closer together(, but we're doing materialism, remember?) They own a bunch of offices, and if you need one you can rent it from them. They're landlords! [..] In summer of 2019, WeWork was valued at $47 billion. Now, just a few months later they're worth.. Well actually, it's not clear how much they're worth but nowhere near that.
> So what happened? Was there some kind of disaster? Did the offices burn down? No. The truth is, they were never worth 47 billion.
> [..]
> Their business model was just owning stuff and charging rent, and if nobody wants your stuff or nobody can afford the rent, then all the money that was invested in you can just vanish.
From: The Trouble with the Video Game Industry | Philosophy Tube ( https://www.youtube.com/watch?v=IYkLVU5UGM8&t=1000s at 16m and 40s)
This was published in November 2019, before the pandemic. I am amazed that WeWork is still around.
Citation on that segment: Grace Blakely, Stolen: How to Save the World from Financialisation
I always assumed that WeWork was mostly leasing their space (to acquire the space, I mean), rather than buying it.
Yes.
Near-zero interest rates enabled the creation of "successful" companies that didn't actually make money. That era is coming to a close.
Rates seem to be going down again. What makes you think near-zero interest rates are going away?
The wealthy only use the loans when it makes more sense to keep money earning returns somewhere else.
This is false. Filthy rich people are taking billions in loans right now because there is a chance the dollar crashes and they might have to repay their loans for way less than they have taken them.
Pretty sure you modified your message after I replied to you at first place. This isn't very honest.
You could argue for cutting out the middlemen and simply having the fed issue credit cards.
negative interest rates seem more likely than higher interest rates
I used to really like this word now I see it all over the place, I wouldn't call anything what Gavin did a grift ... or a small time swindle.
https://trends.google.co.uk/trends/explore?date=all&q=grift,...
> "chronicling the wiles and humiliation of Adam Neumann, WeWork's day-drinking co-founder, former CEO, and chief snake-oil salesman"
It's fine to describe situations where people lose their lives as "tragedies", for example. It's possible to go overboard by projecting emotions onto the audience that they don't actually have.
If they purport to be objective journalism (and not all articles need be that) then yes, definitely.
Seems that Axios plays a little loose with these guidelines outside of politics (their main wheelhouse). I think it's probably a mistake, to the extent that they are interested in keeping their reputation for good journalism.
Yes. Articles written in an emotionally charged way in order to influence their readers are a flavor of brainwashing - telling the reader what to think, or even worse, trying to influence them without their knowledge or consent.
Furthermore, the fact that an individual or organization is trying to emotionally manipulate you at all is a huge red flag. The best possible scenario is that they're doing it because they think that they know what's good for you better than you do, and after that it's a toss-up between "they want to make money" (ads) and "they want to control you" (authoritarians).
Emotional manipulation is also a classic tool of tyrants, and is necessary in cases where suppression of the population through pure brute force isn't feasible.
Yes, "There's always a value judgement being made about what is important to report." - but that's unavoidable, because reporters have limited resources. Adding in emotionally-charged (or straight-up manipulative) language makes the bias strictly worse. The fact that totally unbiased reporting is impossible is not an excuse to embrace more bias than is necessary.
> It's fine to describe situations where people lose their lives as "tragedies", for example.
I respectfully disagree, for the reason that news organizations actively pick-and-choose words like this that are emotionally charged and don't have precise meanings in order to slant their articles. While most events that a news organization would describe as a "tragedy" are indeed so, some of them are not. Moreover, even if that word isn't used, readers will understand when events are tragedies anyway - the number of people who weren't aware that a plane crash was a "tragedy" unless it was explicitly pointed out to them (and who were then convinced by the use of that word) is an incredibly tiny sliver of the population.
That’s why we talk about Adam Newman. It’s not conjecture that he’s projections were delusional.
It doesn’t make the reporting any less objective because they are describing how a book portrays someone.
And at that point, it's a solid argument that they all would have been better off if SoftBank's capital had instead been previously allocated to non-zombie / financial-engineering businesses.
As far as I can tell, your average Joe or Josephine not only does not invest in these vehicles, they cannot! Because they are not accredited investors and/or Softbank's Vision Fund is not accepting new capital. So if you're a normal person worrying about getting conned after reading about WeWork, don't! If you're a rich person, consider settling for the market average rather than trusting an individual like Masayoshi Son with your money.
As far Masayoshi Son going to jail, the payoff for Neumann was likely contractually obligated or negotiated to get better leadership into place. Unless some law was broken -- which I doubt, and almost certainly not provably -- criminal charges do not seem to be appropriate. Bankruptcy does not seem to be in the cards either considering he did not have that much exposure to WeWork.
The absolutely do, even if they might now realize it. The stickiest and most sought after capital for funds is typical from pensions or large asset managers.
AFAIK has always been this way for at least a decade.
An example would be Docker , has raised more than 200M yet it had no decent stream of revenue , it's litterrally a dead man walking yet the CEO left the boat years ago with tens of millions...
Startups that failed and have their founders go "bankrupt" are startups that you never ever hear about... The rest of startups you'll find on HN or have raised 100M+ millions often have their founders pocket millions when they raise very large amount ( 50M+ )...
There no surprise here , once you manage to get a business to a certain valuation / run-rate it's worth a lot thus you can trade that for cash , regardless of the "humiliation"
I recall reading their mission statement a few years ago and getting the impression that they were trying to be impartial and fact-based. However, all of the articles that I've read from them recently (~6 over the past year) have been similarly emotionally charged. Perhaps their vision has changed?
I believe Ellen Huet was the narrator and main journalist. One of the more fascinating podcast series I've listened to.
Hearing about Adam and all the wackiness surrounding him, I can totally recall some of the hyper charismatic people I've known. They can have this weird almost energy field around them that just turns people's brains off.
The last time I literally did not make eye contact with him and I kept interrupting his train of thought before he could spin up into a speech.
A collapse in commercial property would roil all markets, including VC.
Clearly a company with more money to burn than they know what to do with.
Like when Boston Market expanded everywhere - including neighborhoods in SF that had zero other chain restaurants/fast food places. The hubris.
Even better, they are going public via a SPAC. So the CEO won anyway, got their billions and the exit scam still succeeded. Theranos tried to do the same thing but the scam was detected and stopped before they could try to get away with it.
Like many blog posts, this one is just parroting and hyping the 'Cult of We' book and telling the story of its failed IPO and overvaluation in 2019.
It would be more interesting if this failed IPO was the start of a gigantic crash, destroyed WeWork and took the tech industry with it.
But given that they are still IPOing and exiting for billions and more overvalued companies are still going through SPACs and IPOs like business as usual; that 'failure' has become ancient history.
People just need to catch up to modern methods of making money.
If: interest rate environment = low
Then: act this way
If: interest rate environment = high
Then: act this other way
There is zero utility in worrying about Neumann’s actual financial success, the cult-like employees who got burned after segregated themselves from how the entire finance sector was making fun of wework pitches. Softbank want to pump and risk limited partners infinite money, so be it.