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Comment by hn_throwaway_99 | Hacker News Reader

I irrationally want this to be true because I have an unreasonable amount of anger for how much a16z put into Adam Neumann's Flow. Neumann destroyed billions in value at WeWork, then used essentially hostage tactics to walk away with about a billion, and he still got a16z to invest $350 million in Flow.

I've been following Flow news fairly closely, and it always sounds like tons of fluffy BS to me, same as the new-agey BS that permeated WeWork. If the best example Neumann can come up with about building a sense of "community" is that you get to fix your own toilet, can't wait to see this, and a16z's $350 million, crash and burn. I think I might even be at the very least impressed if Neumann manages to destroy a ton of a16z's money and still pocket tens of millions or so.

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It is irrational. I don't like Neumann at all but if you work in tech, these VCs crashing can't really be good for our jobs and salaries.

If your wealth and well-being is tied to the puppy crushing machine continuing to crush puppies, maybe it's time to reflect on that and reconsider the systems we take for granted.

Let's not pretend there wouldn't be massive industry around puppy-crushing machines if it was profitable for corporations, and marginally legal.

Decades of industry centered around killing other baby animals have shown this.

If anything, it's likely that the lack of a profit motive for "puppy-crushing" has shaped society's general distaste for "companion animal" abuse, while accepting other types of animal abuse as just a way of life.

There is a massive industry around puppy-crushing machines. We call them "puppy mills" and they're large commercial operations that overbreed puppies for sale and kill the undesirables.

I wouldn't say my well-being but we all make a living in this industry, it's what pays the bills. Guess you don't care about that?

This industry involves plenty more than VCs, particularly these VCs.

There are plenty of bits of the tech industry that aren't powered by hype and free money.

That's why I said reflect on the system, not just your own actions within it. You can try to switch careers from a job that actively crushes puppies to one that merely maintains the puppy crushing machine, but the problem is the puppy crushing itself and if the only way to pay your bills is to contribute to that, that's a systemic problem, not one of personal responsibility.

> If your wealth and well-being is tied to the puppy crushing machine

Let's crush some puppies m'boy.

Them bills, they keep coming.

There are puppy crushing machines everywhere. E.g. physicians in the US are paid high premiums relative to other OPEC countries not because their quality of care of experience is significantly higher, but because of the insurance model we have here [1]. Capitalism works for everyone only with strong guardrails which have instead been eroding for decades.

[1] https://nypost.com/2023/02/19/doctor-insurance-companies-wan...

Also because of massive student-debt loads - the average GP came out with like $250k even a few years ago. Someone's gotta pay that, and ultimately it's the patients.

The US medical system is so fucked it's almost hard to narrow it down to specific reasons: essentially it's at the nexus of the symptoms of virtually every crisis-of-capitalism that the US has allowed to fester over the last 70 years. Patents, education, insurance/financialization, employer-labor relations, federalism-induced complexity from state-level rulemaking (and racing to the bottom when that doesn't happen), racial bias to outcomes... I'm sure there's tons that I'm forgetting offhand.

Basically name a high-level problem/trend in american society and you can almost 100% certainly come up with a reasonable thesis for how that problem is making the american medical system worse.

similarly, name a group of powerful stakeholders and you can be sure that reform of the system will probably impact them negatively on a personal/financial level. Seniors? Investors? Doctors? Universities? etc etc.

to me it is without a doubt the single most politically-complex and personally-charged issue in the entire US system and that's really saying something.

> Also because of massive student-debt loads - the average GP came out with like $250k even a few years ago. Someone's gotta pay that, and ultimately it's the patients.

I doubt that's the reason for high doctor wages. They will keep making a huge buck even if tuition is cut by 80% imo. The reason I'm saying this is that the market doesn't care how much debt you have from school: you can pay Harvard 240K to get an art degree, that's not going to make anyone pay you what doctors are earning. You can become unemployed with big debt as you graduate.

Yes. Hence what I said.

This is the right answer.

I think the startup scene is mostly a huge grift. Companies that don't make any sense being propped up by VC money until they find and exit (typically an IPO) and are left to crash and burn. I avoid working for startups like I avoid the plague.

But I like that the grift exists. They inject money into the industry, being indirectly responsible for my salary being much higher than I ever expected.

I hope the startup grift and the advertisement fueled maelstrom keeps going until it's time for me to retire, god bless them.

It's inevitable, though. Eventually the butcher's bill comes due; irrational valuations based on user growth or revenue alone always had a fuse attached to them, because they required a greater fool to come along and pick up the tab. Now that the tech market is having to mature and focus on profitability in general, VCs who only paid attention to the next big hype wave are going to get wiped out. Arguably, it would have been healthier if this had happened five years ago -- delaying the pain only increases it.

Not always. People thought Facebook had an insane seed valuation. Google was “very expensive” upon IPO.

Going to be contrarian and argue its perfectly rational to be angry about Neumann getting $350 Million.

Objectively, Adam Neumann does not have the track record to support that kind of investment. He does not have a track record of building sustainable enterprises. In fact, there's not even evidence he's more capable than the median technology entrepreneur. a16z could probably generate equivalent returns throwing $10million at the next 35 entrepreneurs who pitch them.

It would only be irrational if Neumann had a track record of actually building sustainable businesses. But he couldn't even do it in a 0% interest rate environment!

I think it's irrational, but definitely not for the reason you post. If VCs are using funny money to invest in bullshit technology that deserves to die, I'm fine with our jobs and salaries taking a reset back to a reasonable proportion of actual value created. More of us will be working on actual useful stuff again.

>these VCs crashing can't really be good for our jobs and salaries

This stayed in my head for a day. I finally have a response.

If you're salary is dependent on turning $1.00 into $0.20 as in the case for Adam Neumann and his ilk and those who fund them, then eventually your salary and skill and job is going to crash because it "will run out of other people's money". If your trade is taking in 1 dollar from a VC to acquire 20 cents of customer revenue, your trade is going to end. All the myth making and loose monetary policy in the world will merely delay that end.

Why be angry about rich people giving money to each other? You aren't involved in the equation at all. It has nothing to do with you.

VCs invest others' money, including endowments, pensions, etc. It's not their money to blow without scrutiny

Others' money, not yours. Fund LPs do exercise a good amount of scrutiny over where their money goes. Ultimately if you aren't happy with Andreessen Horowitz and their proposed investment strategy, don't give them your money. Or talk to your employer or pension fund manager if you are indirectly impacted by this (I'm guessing no one here actually is, and this is all just the usual pointless online outrage).

WeWork is great. Hopefully Neumann builds something even better this time.

I love WeWork as a customer now.

I joined in Poland and now use it when traveling around the USA.

It's great. I used to work at Microsoft and I loved that I could travel around the world and work from offices all over. That was awesome for creativity. Now our startup can do that, thanks to WeWork.

I don't know Adam Neumann's story. I do know my own though, and know that when you have success, watch your back, people will come with daggers.

I wouldn't judge someone who built something great, for making a billion dollars. You never know what kind of daggers in the back he took. I for one look forward to seeing what he builds next.

Any customer will love a company selling a dollar for 50 cents. Neumann made a billion dollars by extracting it from a company that is now worth less than that. I think most of the blame lies with Masayoshi but Neumann was the top conman

> I don't know Adam Neumann's story. I do know my own though, and know that when you have success, watch your back, people will come with daggers.

This is such a BS false equivalence. There are plenty of people who built really successful companies who are billionaires whom I greatly admire, e.g. Stripe's founders, Google's founders, etc. I was a huge fan of Musk before he went off the deep-end and became more interested in just being a grade A asshole, liar and bully. Neumann likes to wrap his bargain variety avarice and greed in "changing the world" bullshit, and not all founders do that. For example, Neumann's self-dealing with the "We" trademark took a special level of sociopathic hutzpah.

I'm also a client of WeWork, and I like its services. That still doesn't mean it's particularly difficult to build a company with a market cap of $1.10 billion when you are given a total funding of over $22 billion to start with. Neumann literally destroyed $20 billion in value, and for that incredible feat was given a billion dollar payday. I agree most of that blame goes to Softbank, but doesn't mean I can't have incredible distain for Neumann for conning his way the whole time.

I look forward to seeing him build some license plates.

> I have an unreasonable amount of anger for how much a16z put into Adam Neumann's Flow.

Why so angry? I'm interested in the idea behind flow because it is nontraditional in the American building sense. If I understand the idea, I think providing community is a really good one. There is a lot of loneliness and we know that when seniors move into senior housing they love it. Most young adults love college dorms. So why not have that for everyone else? You do have to contrast this with the "projects" which also tried to develop community but failed I guess, maybe because economic opportunities were not included.

Is Flow based on the idea of a Kibbutz?

No one seems to know what Flow actually is, which probably doesn't bode well.

https://www.fastcompany.com/90847220/adam-neumann-a16z-flow-...

> Is Flow based on the idea of a Kibbutz?

Maybe based on the 1980s Kibbutz Crisis:

> Investments made without economic justification: due to the ease of credit gain, the kibbutzim invested large sums of money in industry and agriculture, often when the investment did not have an economic justification, and often without sufficient examination of the investment in terms of financial risk management.

https://en.wikipedia.org/wiki/Kibbutz_crisis

How did he destroy billions in value? He created the company and spun it up very effectively before being done in by run away valuations -- thank Masayoshi Son who is also a bit of a cowboy. The hostage tactics went both ways..

> same as the new-agey BS that permeated WeWork.

The thing is, this worked great for WeWork. Neumann successfully hyped it up into a global brand. The company still exists. People still enjoy using it. Some people like new-agey community vibes apparently, why is that bad? Apple wouldn't be Apple without some Steve Jobs mystique to capture the popular imagination either. These are lifestyle brands.

You could just work from a crummy McDonalds or your bedroom, nobody really needs a coworking space. Vibes are actually worth something.

> I think I might even be at the very least impressed if Neumann manages to destroy a ton of a16z's money and still pocket tens of millions or so.

I like how there are lots of stories on HN about founders who assume disproportionate risk getting completely screwed by investors and end up with nothing -- yet a guy who is a little bit more savvy is so easily painted as a villain. Ha.

If it was Adam’s personality and approach that bought them down, it was the same thing that built a $multi-billion company in the first place. He deserved to be paid rather than it all falling into investors hands.

> How did he destroy billions in value?

He turned around $25bn in cash into a company worth about $4bn, how else would you describe this?

Same way I would describe Uber. SoftBank trying to muscle their way into ownership stakes by playing games with valuations and squeezing out the founder.

The greater fool theory seems to apply. Masayoshi knew all the numbers, he thought Neumann was a good hype man to unload WeWork unto less sophisticated investors -- when that didn't pan out he tried to make him the fall guy and ended up holding the hot potato.

Uber and WeWork are real companies, still around, providing actual services to actual customers. Both of their founders walked away billionaires, so what?

SoftBank might have to write down their imaginary valuations as the public markets didn't bite into their attempted flip.

The companies might survive long into the future as viable businesses with more realistic market caps.

Firstly, it's not just a totally neutral act to hatch a plan to juice the numbers to a ridiculous extent and try and dump it onto public markets before it explodes. That's literally an attempt to scam you out of your pension fund.

Secondly, you know that phrase "don't break the law while breaking the law", Adam wasn't just building this massive ponzi, he was self-dealing left and right, buying artificial surf beaches, selling his own trade mark back to himself, getting wework to rent offices that he owned, getting Softbanks other entities to rent huge amounts of Wework space to massively juice the numbers in Japan.

The only reason WeWork was kind of acceptable is because he was mainly burning Saudi billionaire money, but make no mistake, the entire plan was that he'd become a billionaire whilst everyone else's pensions would take the hit, and even having failed he walks away a billionaire.

> Firstly, it's not just a totally neutral act to hatch a plan to juice the numbers to a ridiculous extent and try and dump it onto public markets before it explodes. That's literally an attempt to scam you out of your pension fund.

Sadly that is the entire premise of the Softbank Vision Fund and many others like it.

  Masayoshi Son is now personally on the hook for about $5.1 billion on side deals he set up at SoftBank Group Corp.

  ..As SoftBank grew into a global investor, Son argued the company couldn’t keep talent unless executives were allowed to cut side deals that tied compensation to the company’s performance. That’s exposed him further to the current market downturn.

-- https://www.bloomberg.com/news/articles/2023-02-08/masayoshi...

> the entire plan was that he'd become a billionaire whilst everyone else's pensions would take the hit, and even having failed he walks away a billionaire.

Is that so? When do you imagine Adam Neumann hatched this scheme? At the very conception of WeWork in 2010 when nobody would invest? Truly a supervillain.

Or perhaps four years later when WeWork was "the fastest-growing lessee of new office space in New York" and was on track to become "the fastest-growing lessee of new space in America." By which point everybody was calling him a genius visionary? I don't recall anybody complaining at that point that this company is doomed to fail or anything like that. It appeared to be on an upwards trajectory.

Perhaps he turned to the dark side when SoftBank showed up and demanded they grow the company even faster by throwing money at them? And what was Masayoshi's plan when he invested?

> and even having failed he walks away a billionaire.

What did he fail at specifically? Masayoshi tried to squeeze him out of his own company and Adam called his bluff. So Masayoshi got the press to drag him through the mud and trashed the valuation further in the process. Then covid happened. Had Masayoshi succeeded nothing would change except SoftBank owning a larger percentage. I don't see why you favor one party over the other.

My pension was never invested in any of this and neither was yours. This is as you noted, Saudis, Chinese, Koreans, and JPMorgan attempting to simply buy their way into what seemed at the time a very promising market with their overwhelming cash firepower.

Why you should feel sorry for them is beyond my comprehension.

> Or perhaps four years later when WeWork was "the fastest-growing lessee of new office space in New York" and was on track to become "the fastest-growing lessee of new space in America."

Any company can grow very quickly if they give away dollars for fifty cents and have a shitload of dollars.

> What did he fail at specifically?

It's wild that you seem to be giving Neumann a free pass here. He was the founder and CEO of a company that lost 10s of billions of dollars and was eventually forced out for non-performance (and borderline fraudulent activity) so the adults could step in and salvage what was left of the company.

I don't feel sorry for his investors either. You are needlessly painting this situation as one side "good" one side "bad" when "all sides bad" is much more honest.

> By which point everybody was calling him a genius visionary? I don't recall anybody complaining at that point that this company is doomed to fail or anything like that. It appeared to be on an upwards trajectory.

I recall quite a bit of skepticism at the value add of a middleman leasing and then subletting commercial office space, something with zero network benefits and no barrier to entry. Especially on HN, I would even go so far as to say it was widely expected to fail.

The self-dealing underwrites his entire company. I am amazed that A16z is back in.

Exactly. Listening to Marc's discussion about this reminds me of him wanting to jump into the space and see this calculation playing out in his head where cheap-money >> Adam's self-dealing. No surprise this deal happened right at the time when the high-interest environment was starting to kick in.

>What did he fail at specifically?

At running the god damn company. Honestly, are we going insane here? He took tens of billions of dollars and created a company that was worth maybe $5Bn. Yes! It grew incredibly quickly, it's amazing how many customers you can acquire and deals you can sign when you're overpaying for leases and renting out space at a loss. He created a terrible business that was burning through cash, desperately hoped he could dump it on unsuspecting pension funds and when he couldn't the whole thing blew up in his face. But not before lining his own pockets every step of the way. Even, once the company was going bankrupt, he insisted on a generous payout to walk away from the company he mismanaged into failure. He wasn't rewarded for success, he was paid out because he had controlling shares, and once again, he had those shares because he was running the business more as a scam than an ongoing concern.

I think it is really interesting that their is a strong consensus that WeWork is less admirable because it was burning capital for the founder's benefit, while Uber is OK because it burnt capital* for the benefit of the VCs that were able to sell it off to the public market. In the first case the VCs were burned, in the second case Joe Public (and his insurance fund/ his retirement fund) was burned.

* Uber is a valuable company, but I think it is safe to say it will never be profitable enough to justify an $82b valuation in 2019. Some day it will make FASBY profits purely from operations without having to sell a subsidiary that they built or invested in with the huge amount of capital they received.

The big difference is that WeWork spent a bunch of time arguing that you shouldn't value them based on the actual financials of their business. Whereas Uber pursued a risky but honest strategy of winning market share with the intention of recovering margins once they were the incumbent. The whole community EBITDA thing was just a transparent attempt to trick people into thinking there was financial value in the business when there wasn't. And to be clear, Neumann's new start up is trying exactly the same thing, waving his hands in the air about how fulfilling his tenants are going to be plunging their own toilets and how that will create financial value.

Uber received a total of just over $25 billion in funding, and has a market cap of nearly $68 billion.

WeWork received just over $22 billion in funding, and has a market cap of just over $1 billion.

Please tell me how these are in any way equivalent again.

I don't agree with your analysis about the relative culpability of Masayoshi and Neumann, although I agree that both are culpable, but you are missing the point.

I am not talking about WeWork going from a large valuation to a small one, where you might argue, not that value was destroyed (by WeWork management or whoever), but simply that the large valuation was erroneous, and the later, smaller valuation reflected the true value all along, and so no value was destroyed.

Rather, the actual money paid into the company by investors in cash, was much larger than the later valuation of the whole company.

If investors, including Son, paid WeWork large amounts of money, for good or bad reasons, it was always 100% within the CEO's control what that money was spent on. Neumann could have hoarded that money as a war chest, or could have spent it buying something valuable or building something which could be sold profitably. Instead it was wasted (much of it before Softbank's involvement). There is literally no way of blaming investors for this.

> it was always 100% within the CEO's control what that money was spent on. Neumann could have hoarded that money as a war chest, or could have spent it buying something valuable or building something which could be sold profitably. Instead it was wasted (much of it before Softbank's involvement). There is literally no way of blaming investors for this.

I can see how you might think that if it was some normal functioning tech company. As a matter of fact here it is simply not true. This was a real estate play and everybody involved who invested knew exactly what he is going to do with the money -- which is to expand further and faster -- in fact they demanded this and conditioned their investments on it.

No "war chest" was possible here, ha. All of these people though the same as with Uber: grow as quickly as possible even if it means bleeding money, corner the market, IPO as the winner, hope retail investors prop it up long enough for the company to start eeking out profits and pay down the accumulated debts.

From the founders perspective it was like taking money from a loan shark essentially. The only surprising thing about it all is that he made a deal with the devil knowing he was getting played and managed to end up with anything.

I think a lot of folks undervalue the power of "cult-like" behavior when it comes to successful companies. Steve Jobs learned directly from the Hare Krishna's how to get a bunch of people working hard and moving in the same direction for basically no money. We see the same thing in We work. The cult of crypto and even the cult of Elon are really not that far removed...

100% agree. WeWork is great. It does suck for anyone who overpaid for shares, but I was buying FitBit at $40 a share. Sometimes you overpay. Live and learn.

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