Adam Neumann’s new company gets a big check from Andreessen Horowitz
nytimes.com
nytimes.com
He ran WeWork poorly. He convinced the board to let him scam it (legally). And he walked away with an unbelievable amount of money that came from VCs.
Given he has this skill, if I were a VC I wouldn't let him enter the building. I would have his email addresses on block lists. And I sure as hell wouldn't let him into a meeting where he can use his skills to convince me to give him money.
Perhaps Neumann is like a "scam superintelligence"...
Where there are heuristics, there are ways to game those heuristics. Practically none of us are as immune to non-rational persuasion as we think/claim we are. Whatever it is, I've known people whose ability to get what they want was extremely hard to explain any other way. I literally avoid being in their presence, and that has been good for me.
I feel like I'm better than most at detecting BS, at least 90th percentile, but I'd be a fool to think I'm the best in the world. When I can sense that I'm outmatched, the rational thing to do is change the game. Con men have known since forever that egotists are the best marks.
And the politicians who administer such programs are almost invariably more scummy than people like Neumann.
But yeah I trust government more than privates, if anything because there are three branches in governments that oversee each other and are independent and because people can try but somehow the justice comes
And most importantly, are elected
The point was that when Neumann fucks up, a few limited partners get screwed over. Maybe a few building owners too.
When the government fucks up, everybody gets screwed over, but mostly you and me, the taxpayer.
Me neither. It is because of comments like this that I don't downvote people. The signal is too vague. I can report from the front that this is a surprisingly polarising comment; the early score is all over the place.
Just in case the sibling theory is correct ... Contextualising to the US I would have thought it uncontroversial to say that a schizophrenic Bush-Obama-Trump-Biden producing system is not one you want controlling your house. Because that is what politics is. At least half that group should concern any reader, ideally 4 for 4 for people who are more interested in results than intentions.
We want more people to have control over their own home, not less. I'm accepting of the fact that I live in someone else's house and it isn't my choice if I'm here in 12 months - but it is hardly an ideal state of being.
And pretending national politics isn't a big driver of what happens locally is a bit naive. Sticking to the US, the federal government is 20% of the economy. Most other first world countries are probably similar ballpark. That has a huge influence on everyone.
It's often years between the time a government policy is recognized as a failure and when it actually changes. At least companies go under eventually if they aren't profitable. There scale is obviously much more limited as well.
People seem to forget that NYC landlords paid people to burn down their apartment buildings due a combination of rent control and rising costs. Cheaper to just collect insurance than lose money on each unit you rent.
I can literally give you better returns. Give me $20 billion and I'll give you $11 bill back.
Insulting to people who have actually built unicorns to put WeWork in the same category.
> In the case of Flow, the business is effectively a service that landlords can team up with for their properties, somewhat similar to the way an owner of a hotel might contract with a branded hotel chain to operate the property.
In other words, a Property Management Company. There are literally thousands of them out there. This is an industry that has existed forever. It's also largely non-scalable. But he's going to somehow remake the industry by offering consistent branding like paint colors, deco schemes, and coffee service. Why exactly is a tech-focused VC interested in this?
It's hard to look at this from a charitable perspective, though. Adam Neumann is basically Elizabeth Holmes, so I don't know why people keep giving him money.
I usually assume that I must be missing something. But AH is making it real, real hard to figure this one out. What in the fuck has crept into your brain if you think this is a good idea?
SV VCs love saying that it is about the person/team and their experience more than the idea. Okay. It's Adam Neumann, so, swing a dead cat anywhere on the planet and you'll hit someone more capable than that clown.
The idea is also rather basic. So, what happened here? How's this good for AH? Some sort of harebrained scheme where by _them_ giving Adam Neumann money, it means AN can plausibly be called 'a successful businessperson', and thus it makes AH not look like a bunch of fucking idiots who got conned?
Talk about throwing good money after bad.
Unfortunately, sales dominated orgs lead to terrible technical and operational challenges. (Whereas Neumann's efforts are dominated by fund raising.)
Like our sales GOAT, I imagine Neumann is similarly unfamiliar with objective reality. And otherwise unteachable.
I kinda get it. For Neumann's part, he's wildly successful, awash in cash. And has somehow avoided the consequences of his terrible decisions.
Another example of Failing Upwards.
Money that he lost in WeWork is not coming back, but the sales talent is still there. Taking "a water under the bridge" approach isn't unreasonable if AH is genuinely convinced he is that good at selling shit to people.
He is very good at selling VCs on investments, but honestly, it seems like that has more to do with having a big vision that you can promise them and not having the moral scruples to evaluate whether that vision is feasible. We see this with Elon Musk on his series N or O for SpaceX, and it looks like Adam Neumann is next.
WeWork's value proposition in the beginning was that Neumann(or the designer he hired) legitimately knew how to redesign/refurbish what was essentially a lackluster, old office building and make it seem like a great office. That part of WeWork was legitimate and Regus did not know how to do that(Regus still doesn't do that, at least in Europe). Now their big problem of having long term obligations with essentially short term cashflows was still a problem, but the unit economics at that stage were positive.
What set everything on fire was the fact that when they were injected with enormous amount of capital they essentially ran out of bad real estate in the markets they were in(this was the case in New York) and started going into the deluxe office buildings, where a WeWork facelift wouldn't do anything.
I can't remember the exact talk, but I saw a talk recently by some VCs that basically made the very interesting point that in certain businesses too much capital that has to be invested will eventually destroy the unit economics, and the 2 examples were Lyft and WeWork.
But yeah, the idea that WeWork didn't at some point have a legitimately differentiated, valuable offer that wasn't due to VC subsidies is not true.
That doesn't mean WeWork has a bad product (they have a great product due to the capital available to spend) or bad unit economics (most of those investments are probably decently cash flow positive), it just means it's a bad business.
This is a case where "unit economics" doesn't tell the full story.
That made me laugh. The similarities are there down to the strange quirks meant to make them both seem more interesting. Elizabeth has her husky voice and turtlenecks and Neumann has that barefoot in New York thing.
In both cases the early insiders made out that like bandits and I'm assuming that's exactly why they are getting checks now. Everyone is well aware this is nonsense but they are all hoping to offload on greater fools coughretail cough.
I would expect them to also acquire a couple other property companies for massive valuations that will turn out to also be worthless.
Definitely popcorn worthy.
With one big difference. I've worked in a WeWork. I know many people who have. The product is real and it did fundamentally change the idea of coworking (you ever heard of Regus before WeWork came along?). And I'd work at a WeWork again. It was a great experience.
I would work at a WeWork too. WeWork spaces are great, especially when you compare them to competitors, who didn't burn massive piles of VC cash to make their spaces nice and rent them to me at a loss. That has nothing to do with Adam Neumann, only the money he extracted from investors under false pretenses.
Yes? Maybe I'm just old, but I remember them in the 1990s.
Pre-crash articles[0] suggest that WeWork introduced "community" to coworking spaces, which... okay. I guess time will tell whether that fundamentally changed the idea of coworking.
It's no big new discovery that people by and large prefer new things to old things. If WeWork had lasted long enough to become an old thing before imploding, perhaps we would have seen that the difference was mostly that. Or perhaps something actually new did happen, in which case it might now be lost under the clouds of grift and fraud.
0. https://www.forbes.com/sites/forbestechcouncil/2019/06/14/ho...
With that said it doesn’t actually seem as crazy as everyone is making out. It’s worth starting with the premise that WeWork is actually a pretty great product. Making office space flexible is in fact something that needed doing and yes some people were banging around on the edges of it but it used to be kind of miserable and now it’s different. I’m a current WeWork member and I use it constantly when I travel and it’s just a pretty well thought out and executed product that fills a need.
The same issue still exists in the rental market. Getting an apartment is also a bit of a nightmare. Yes property managers exist but if I could go through some kind of centralized process or membership and then live in Miami for 4 months and then Los Angeles for 4 months or whatever I could see a lot of value in that.
The proposition here seems pretty straightforward. Again I think the guy is a bullshit artist but it’s not like it’s impossible to see how this could be a favorable investment.
The rental apartment market is just obviously one of those industries.
A business model that's been around for years, is minimally affected by tech, the guy proposing to build a "tech company" out of it is a self-dealing conman and the VC's exit strategy is presumably to achieve rapid growth by selling below cost price before offloading to greater fools who think the advantage over incumbents is a tech moat, not VCs underwriting losses
They’re trying of course but it’s a different product.
Competing with WeWork in office space is like competing with Saudi Arabia in oil production: the Saudis have slave labor keeping oil prices down, and WeWork has VC cash keeping their office prices down. However, this doesn't mean that WeWork will ever turn the corner to repay investors the billions they have lost on it.
Just looked it up. She did. It was called WeLive. The school one was WeGrow.
The interesting thing about VC investors is that they don't seem to care at all if a company can actually succeed. All they seem to care about is if the person their investing in can raise a larger round - which, somehow, Neumann probably can without problem.
My strong suspicion is that this involves tokenized rent payments on a blockchain, and that a16z is looking to make their money back on the tokens. Never underestimate is cynicism of a16z.
Keep in mind that a16z participated in A-series on the Neumann Flowcarbon tokenized carbon credit scheme just in May. That is already dead
https://businesscloud.co.uk/news/in-crypto-adam-neumanns-flo...
Neumann will brand these apartments, and enough people will feel excited to be living in a "Flow" apartment to fill them up (it's not like the US has enough spare housing to let that many apartments sit empty at even unreasonable prices), and Neumann will convince a lot of people that he's doing something different than every other property management company out there, while people at competing property management companies scratch their heads and think no, he isn't.
Then it will come crashing down as everybody slowly realizes that Neumann has been lining his own pockets and that in the end, this is just another property management company, worth no more than the properties they hold.
There might be another movie or miniseries about the process, too. Because apparently people can't get enough of being conned by Neumann.
Seems like A16Z and AdamN are skating toward that puck.
WeWork destroyed many small business co-working spaces as the pyre of VC money burned. I expect the Airbnb world to get really interesting, probably screwing a bunch of small owners along the way.
I can see that: you buy in so you have the same sort of apartment/living space wherever you need to be.
Whatever A16z's reason's might be, I can only assume (and hope) it'll end up not unlike the story of the scorpion and the frog.
Seems like the same shit he did before.
I can understand investing big in people but Adam would be the last person I would trust to be successful. The lack of owning responsibility in the failure of WeWork is a huge red flag. Why would A16Z give their largest investment to him?
Maybe that’s standard practice for VC to be named co-founder in this circumstance?
The subsequent rounds are where there's little to no chance of success.
I appreciate that people who make mistakes often learn expensive lessons, and that makes them better performers in the long term.
But WeWork - for all the hype - seemed to sub-let commercial space at a loss. Sure, those spaces were nice, and the co-working ecosystem helped recreate the University dorm vibe for those who like that. But the main attraction was high quality facilities at low quality prices.
Is A16Z simply hoping he'll recreate the hype and they'll be able to cash out before it all comes crashing down?
Yes
Because they are hoping they can get out at the top. They're looking for someone else to take the massive loses.
See the greater fool theory
Yes, this is the same VC firm that argues against 10 year exercise windows in the hopes that employees who leave will elect not to exercise their earned vested options in the normal 90 day window thus forfeiting their options and reducing investor dilution [0]. They'll do anything to make an extra buck.
just watch this video and check out his charm, communication skills, ability to speak: https://www.youtube.com/watch?v=Dgp-CM-gQik&feature=youtu.be
of course you want to bet on him, his talents are an unfair advantage in just about any business.
It doesn't reach me personally, but of course con men have charm. It's kind of necessary in that line of work. You can't scam people of billions of dollars without a little bit of "charm".
Could that be part of a causal relationship?
Yeh Blackrock buying tens of thousands of houses is not helping but thats not that main issue here let alone a few thousand apartment units bought by Neumann.
Of course the real reason is that people want property values to increase and rents to decrease. This is a circle you can't square. Many voters are homeowners who have all their savings tied up in their home. In legislations without safety nets this might be their retirement plan and social security, too. In practice this turns into a destructive political force that crushes everyone who doesn't own their home. Incentives, baby!
I think the metaphor would be “they didn’t start the fire so why not throw some more fuel onto it?”
They prevent newer generations from ever accruing any kind of wealth or just their own home. Always beholden to some rent seeker.
Elizabeth Holmes endangered the public by knowingly selling them fake blood test results, which is a crime. That is why she is in jail and Neumann is not.
No one cared about any actual humans, just a few dragons hoarding gold who were duped.