Overall though his contribution to massive capital mis-allocation is a huge net negative for my opinion of him.
Now I know that not everyone could be as convincing of a liar as Neumann, but most of us have the ethical boundaries to not really try. So all you can really say is that of the people who are morally bankrupt enough to try to steal as much money as possible, he seems better at it than average.
The bellyflop is probably the one that will be remembered the longest though.
But... as far as I'm aware he didn't hide any of this from his investors. They just handed over the cash no questions asked until the grift got too blatant (I think it was the trademark ownership/name change that was the straw that broke the camel's back.)
I find it interesting to try to derive rational explanations from seemingly irrational actions. If Softbank really are supposed to be some of the most sophisticated investors, did they get hoodwinked by an even more sophisticated conman or are they just colossally more stupid and failed to do basic due dilligence?
Though wildly speculative on my part, I can see a more cynical reason that would explain these seemingly incomprehensible actions. That is that Softbank knew Neumann was a conman from the start and they invested in him because he was conman. Why would they do that? Because the VC game has changed a lot in the 20 years since the first dotcom wave. Early stage VC firms no longer bet on making money from the long term health of the company. They can get their returns by selling to later stage VC firms. So it doesn't matter to them if the company's business model is bogus. They only need the company to generate enough activity and growth metrics to inflate the valuation into the stratospheric level and then dump it on late stage VC investors and then the public as the company makes its IPO. In this way it's not much different than a classic ponzi scheme. And in that case it's in Softbank's interest to find a conman who can pull off the charade long enough and well enough for them to make their exit.
The counter argument to that is Softbank didn't sell off a meaningful part of its position before WeWork filed its S-1. That's when everything really fell apart -- when the internal financials of the company were exposed and everyone could see what a house of cards the company was.
In that case maybe Softbank did get taken in just as everyone else did. Or maybe they just didn't expect Neumann to fumble the exit as badly as he did.
That's exactly the thing. He didn't ignore the rules. It's expected that founders lie, and the super-rich in charge of these giant investment funds are supposed to be the smartest people in the world, that's what entitles them to command the huge resources they do.
The game we agreed to was that these fund managers were supposed to efficiently allocate capital to worthy causes. Neumann made it extremely apparent that there's no guarantee that some rich banker will allocate anything efficiently at all. The bankers already skewed the system, Neumann beat them at their own game.
That doesn't make him a saint, it doesn't even may him "good", but I still think it's nice that SoftBank got fucked.
..Which makes me wonder if the 'super rich' were on some big money losing scheme that somehow made them money elsewhere, against taxes or similar?
The Producers (1967) Official Trailer
[1] Which are a real thing! Caused by a fungus: https://www.cell.com/current-biology/pdf/S0960-9822(18)31602...
You never expect a CEO to personally buy PPE (Plant, Production Equipment) and lease it back to his employer. But hey, if it's not against the rules, and the board is stacked in your favour, why not?
- The founders made money
- The employees made money
- The customers made money in the form of steeply discounted products and services
So really, the only people to lose out were VCs, especially since a lot of these startups haven't really had a chance to IPO and grift out the little guy (at least in my market).
and the teachers' pensions that went into funding those VCs
At this point I don't know what goes through the VCs heads. Are they just in denial about the previous failure, and they are doubling down like a degenerate gambler at the casino? Are they confident that if they get on early, they will be able to pass the bag to someone else, so they don't give a flying fuck? Or is Neumann able to create alternate reality force fields around him, like Steve Jobs? (Unlike Jobs, it seems Neumann doesn't transform anything but the numbers of zeros on his bank account, though)
I literally don't have the faintest idea of how these people think.
[1] https://www.forbes.com/sites/iainmartin/2022/08/23/adam-neum...
This is... not saying much.
The FTX collapse has been eye-opening on this front. FTX was a less serious business than the coffee shop your neighbor opened in 2018, in terms of the books it was keeping. The IRS will be up that coffee shop's ass at the drop of a hat if they claim a bedroom at home as an office, and your neighbor's coffee shop will have a thick packet of receipts and books accounting for every penny spent, at least after they learn their lesson after the first year. FTX could literally not answer the most basic of business questions with any specificity. I'm not talking projections, I'm talking past history. FTX's books were basically a one page napkin scrawl in Excel.
And the list of venture capital was not just long, but prestigious.
Jeepers, Sequoia, give me a billion dollars as an "investment" and I'll personally guarantee you that you'll lose no more than half of it. I've got a napkin right here that says "cryptocurrency" on it. Apparently that's enough for you; where lambo?
When the rumors first broke out that 3AC was toast, no one believed it. Zhu Su was perceived as the smart, wise man of crypto. No way HE would be so reckless.
Then when FTX rumors broke out, no one believed it, again. He was on the cover of magazines, hanging out with Tom Brady, writing these thoughtful pieces about crypto, and was our torchbearer in Washington...
Ironically, the folks with the scammiest public reputation (Justin Sun, Tether folks, even CZ/Binance) are still standing.
VCs are notorious for being herd animals. We've been in (and are hopefully leaving) an era of easy money. I think people don't generally question what they're doing as long as it's working, and easy money plus a bubbly tech sector means that investing hasn't been particularly challenging.
So I suspect a lot of them have just been uncritically doing what worked for them in the past. And "worked" here isn't defined by building successful businesses, because that's a very long feedback loop, but by more immediate proxies like praise from bosses/colleagues, chasing clout in the industry, getting more money from LPs, getting paid themselves, and feeling smart when people listen carefully to what they think is wisdom.
All that is hopefully about to change. As Buffett says, "Only when the tide goes out do you see who has been swimming naked."
s/VCs/humans/
Social proof is a thing wherever you go, whatever you do?
So to answer your question, I think this is way they think: "If this goes wrong, I don't have any real personal skin in the game, and there are a bunch of smart people at other firms that are putting their money in. I better be in because if I don't allocate this capital it goes away. And if I miss a big one, that's worse than losing."
Add the complexities of timing. In fact, even if you thought crypto (or various stocks) was bullocks, you could have made a whole lot of money if you got in and out at the right time.