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Comment by AndrewDucker | Hacker News Reader

It never had that much value, it just made it look like it did for long enough to get people to invest in it at vastly inflated prices.

"Renting offices to work in" was never going to be a silicon valley style success, because it just can't scale that way.

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> It never had that much value, it just made it look like it did for long enough to get people to invest in it at vastly inflated prices.

A lot of "Silicon Valley success" fits this model too.

And the sunlight of high interest rates will purge the businesses that have no effective way of making money.

The rain of regulatory sanity needs to fall too.l

It never had that much value but it has taken $22 billion of perfectly valuable money and set it on fire:

"WeWork has raised a total of $22.2B in funding over 23 rounds."

https://www.crunchbase.com/organization/wework/investor_fina...

In fairness they must have spent at least $10B on truly amazing interior design and designers. At least, I hope so. In earnest, I've never seen a bad WeWork interior, and I'm glad those folks got the work.

Surely if they owned $10B in valuable property that’d be reflected in the value of the company. So spending that much on not terribly liquid assets is lighting the money on fire from their creditors perspective if they’re not paying for themselves.

I'm sure that plenty of that $22B came from the sale of other inflated assets to buy into WeWork. WeWork isn't the only scam out there; the economy seems largely dominated by scams (things whose values are determined by their moment by moment success in hyping bullshit) and cons (things that make money by providing services enabling the hyping of bullshit.)

Financialized economy, no manufacturing base, etc etc. Don't want to doomer I guess, but the land has plenty of resources and educated people so recovery wouldn't be too difficult.

Specially because those offices were so noisy you could never get any work done. Best places however for finding a date...

"What people actually do at WeWork" - https://news.ycombinator.com/item?id=16292423

Coworking in general is a hideous working environment. The offices are fishbowls. There's no privacy. It's worse than open plan offices, because at least at the office, everybody works for the same company.

The only times I've found decent coworking spaces, they've been ad-hoc affairs to make use of an old building on cheap real estate. No software startups, nobody chasing VC money, no espresso machines, no free snacks (or maybe just a few sad granola bars for emergencies), just a solid wooden door, wifi, and natural light from a window. I don't think arrangements like that last, though.

One of the founders I worked for mentioned that all of his businesses actually started in the corner of a real-estate office. They just rented a few desks to work from, then whenever they grew they moved up to a small lease.

There is a cowoking place well hidden near my home. It has 3 quite passable conference rooms, 6 "working bays" where you can use with a laptop in a very uncomfortable way, and a free desk at the side of those bays.

It looks like the perfect place to do a meeting and go away, and indeed it looks like people do use it that way a lot. Also, you can rent it at the moment, without any planning. I imagine it's successful.

It is indeed not the kind of place you want to go to do quiet work. But spaces leading to quiet work are plentiful anyway.

WeWork's private offices were fantastic though. I had one for about a year during COVID. It was amazing while we had it.

Yup, if you’re going to coworking spaces to actually work you’re a chump.

The real value of the cowork space was to be around other entrepreneurial types and perhaps even meet a young and hot ambitious babe. The “work” was an excuse to just hang around the same place day after day.

Not to mention that the business had already been done. It's Regus with nice sofas.

Explain why. It’s literally Uber for offices. It could’ve worked if managed right.

Uber has made losses every year, and only works because it is supported by VC money: https://fourweekmba.com/uber-losses-by-year/

Yes, exactly like Uber.

"Mini-cab firm" is not a SV success story either.

I bet you could come up with bullshit like: “WeWork is a platform! We can also do food delivery and sell other add-ons…”. Saudi investors would be delighted five years ago.

I am pretty sure "WeWork is a platform" was actually something they pitched. Or maybe it was WeWork as a service.

WeWork labs was the most genius thing though. Build a tech lab straight up for no other reason than to have a tech lab for the optics of having a tech lab.

Uber isn't exactly financially viable, either.

Is it Uber for offices? Uber's model is that individual people with cars and spare time effectively loan out that car and their time to people wishing to make journeys, with the two parties being connected and the deal arranged by Uber, who take a cut. All the vehicle ownership risk was shoved onto the driver, and in the event that there was suddenly zero demand somewhere, that risk also was borne by the driver (at least, until various jurisdictions started enforcing minimum wage so that drivers who had no rides all day still got paid).

WeWork's model didn't appear to involve individual people with spare office capacity loaning it out for short periods to other people needing an office for a short while. WeWork's model appeared to be that WeWork itself leased office space, and rented it out to people. WeWork paid for the lease, and took on all the risk of that and all the risk of the demand vanishing.

It’s not Uber for Offices. It’s AWS for offices.

The AWS bet is that some companies, especially when starting out, will pay a high premium to not have to manage certain physical resources, and to have the flexibility to scale up or down easily.

Which makes sense. Startups don't like signing 5-year lease agreements, so renting individual offices with all infrastructure taken care off is very attractive, and there are lots of companies offering that. But WeWork tried to sell a very specific brand of that, notably open-plan workspace with great interior design. Which is the opposite of "cheap office space where people can get stuff done", putting them in a tough spot when money isn't plentiful for startups. And it didn't help that was run like a Silicon Valley startup, but in a business where there are very little efficiencies of scale. Just about anyone can start a viable local competitor, allowing the market to adapt far quicker than any one company can.

> The AWS bet is that some companies, especially when starting out, will pay a high premium to not have to manage certain physical resources, and to have the flexibility to scale up or down easily

It's not even a high premium if you need what cloud offerings have.

Management is expensive. Scaling is expensive. Security and compliance is expensive.

Cloud isn't for everyone, but when you need what it offers it can be amazingly cost effective.

It’s sold as Uber for offices. But the majority of customers rent one office (car) and just use it for years.

It’s like Hertz raising money on short term rental possibilities but all they do is lease cars to people long-term.

As the other poster said, it’s kind of like how some percentage of AWS just uses it as a dumb server and probably they’d be better off just renting bare metal.

Timing is everything and they had bad timing.

The time for this company might still not have arrived yet. I just don't see what they could have done at the time and either way Covid would have bankrupted them.

Regus is doing reasonably well, providing the same services as WeWork. So the time was right, just that WeWork was both, a badly managed shit show, and a well executed money grift (millions forbthe name We paid from WeWork to Neuman and WeWork leasing expensive office space from Neuman). No business succeeds, or survives, under that management. Not that VCs care, as long they can dump their shares at some greater idiot down the line before things implode.

From a quick google, Uber may have lost something like $37 billion dollars.

$12B from 2014-2018 [https://www.statista.com/chart/17705/uber-revenue-costs-and-...]

$25B from 2019-2022 [https://therideshareguy.com/uber-statistics/]

I mean if it used to be a very large pile of US currency then yes, it definitely had a lot of value that was apparently destroyed.

Losing money doesn't destroy wealth. It just transfers it from one place to another.

Not really. For example there’s a pretty noticeable difference in the amount of wealth a society will have if they choose to build 890,721 intricate snowmen on the island of Manhattan instead of housing, power plants, and infrastructure.

I don’t know, I’d say those snow sculptors are pretty wealthy there!

In the absence of some sort of external means of support they are dead.

You seem to be consistently conflating potential value with real value, but potential value is and always will be a red herring, so it's important to distinguish them and treat them each separately.

Real value can be destroyed. Dollars can be printed, planes can crash. Crops can grow, or rot. The effort of humans can be deployed wastefuliy, like making snowmen, or not, like planting crops and building shelter.

Wealth represents an assessment of the value to humans of existing resources and it can go up and down based on the decisions of how to allocate that wealth.

There’s absolutely no controversy whatsoever about this concept despite your desire to not acknowledge it.

Your response confuses me given my comment. What is your definition of "conflate"?

Potential future wealth is not "destroyed" when we take actions which do not achieve that potential.

Yes but present wealth is destroyed when resources are deployed unproductively.

This concept isn’t particularly subtle or arguable. If you have a lot of food and you are wealthy and then you let it spoil you’re less wealthy.

Nobody else got that wealth (assuming you don’t count the microbes) and absent another source of resources then you are also dead.

Opportunity cost is a very interesting concept. As you mention, if the wealth doesn't exist, it cannot possibly be destroyed. Why would anyone "leave money on the table" though?

Glutting the wealth creation is not fundamentally destructive - what if a specific location cannot actually sustain high production levels because their housing supply, energy supply, or talent supply is insufficient? What if unfettered growth will lead to a collapse that destroys a lot more value than the potential future wealth destroyed? What if a company heavily invests in business and retail construction and a global pandemic happens?

Wealth creation is impossible to separate from public policy. For Manhattan to exist, a large amount of money had to be poured into its fundamental blocks.

If wealth is not destroyed but transferred, where does it go after an earthquake?

Construction companies?

'The parable of the broken window was introduced by French economist Frédéric Bastiat in his 1850 essay "That Which We See and That Which We Do Not See" ("Ce qu'on voit et ce qu'on ne voit pas") to illustrate why destruction, and the money spent to recover from destruction, is not actually a net benefit to society.'

https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window

Five years in University and never heard of this essay, not even in passing! Thanks for sharing.

What if there is no reconstruction? Not every catastrophe is a catalyst for reconstruction.

If a house is destroyed in a fire, it loses its value as a house. Now you have the value of the land, which will be offset by the cost of clearing it. So the value of the land is below market. The asset has depreciated.

Large scale construction tends to be very good for the economy because it both increases economic activity (construction is expensive, and a lot of people get paid to do a lot of labor in the whole chain, from lamps to concrete to engineers to meal makers), and sets infrastructure that will be used by highly productive companies (white collar offices) to make a lot of money.

But there is no value transfer from rubble to construction companies. That asset owner took a hit.

Surely some of these costs / economic activities are just like the parable of the broken window? For example, the meal makers. Construction works buy their lunches from shops nearby - that's great for those shops. But how is this improving the economy? Those workers would have needed lunches anyway. If they weren't working, they could have made their lunches at home, and not had to eat out. It would have (probably) been cheaper for them than buying lunches from the local shops.

So maybe the workers spent more money buying their lunches, but that's just extra inefficiency, and not extra economic acitivity. Just like the broken window, the workers spend more in one area and so have less money to spend elsewhere.

> But how is this improving the economy? Those workers would have needed lunches anyway.

In economics this is called hedonic adjustment. The economy is improved because the workers value purchasing a lunch more than making their own.

It's cheaper to listen to the radio, or even buy a CD, than to go to a concert. Going to a concert is not seen as economically inefficient.

9 foot ceilings are not seen as economically inefficient compared to 8 foot ceilings. The additional foot is seen as value.

A house made of bricks is valued more than a house made of straw, despite them both functioning equally as well as long as a huffing and puffing wolf isn't around.

Etcetera.

I said losing money doesn't destroy wealth. Destroying a city absolutely does.

I was talking about catastrophic events and how it can make you lose money without necessarily transfering it. In the case of wework, the catastrophe is the rapid decline in inflated prices, which makes the assets lose value without a real transfer in wealth.

> the catastrophe is the rapid decline in inflated prices

Using the word "catastrophe" to describe a financial process not going in one's favor doesn't actually turn it into a natural disaster that physically destroys objects.

If you buy a stock for 100 dollars, and due to a series of bad results which led to price adjustments, the stock is now worth 1 dollar, you lost 99 dollars. Nobody else picked up those 99 dollars.

Asset depreciation is a fundamental concept that you should be familiar with, as it influences several aspects of your personal finance: https://www.investopedia.com/terms/d/depreciation.asp

> Nobody else picked up those 99 dollars.

Except the person who sold the stock for $100.

Person A holds 1 stock, valued at 100. Person A sells 1 stock to person B. Now Person A holds 100 in cash, and 0 in assets.

Person B now holds 0 in cash, and 100 in assets.

Fast forward 5 years. The stock price has crashed to 1 dollar.

Person A still holds 100 in cash and 0 in assets. Person B holds 0 in cash, and 1 in assets.

There was no transfer of 99 dollars back from Person B to Person A. Person A's holdings were invariant because they don't own the stock anymore. The losses brunt by Person B were not transferred to anybody else.

Money doesn't travel back in time.

> Money doesn't travel back in time.

Correct - the transfer happened when you bought the stock. What you have lost is the expectation of getting it back (or at least the expectation of getting it back today.)

Unrelated to this is the distinction between money and wealth.

The challenge for a company like Weework is that it's hard to identify what wealth they generate- at least for me.

In other words, what are they making (goods) or doing (services) that provides value to the world (wealth).

I suppose they'd say that their core value is making it easy to rent space quickly. This is certainly providing some value, but I hardly think it's one that's heavily differentiated.

I bring this up because the conflation of money and wealth is so often what gets people in trouble. Decoupling the two lets us examine what the value of a company is, at its core.

It's simpler than that! They just need to charge more than they spend. The fundamental economics of WeWork never worked because they were a con by its founder, who used WeWork to buy buildings in his name and rent them back to WeWork, amongst other financially boneheaded decisions. WeWork was never meant to be a successful business, it was meant to enrich the founder.

Post founder, WeWork was finding itself as a scalable office provider, where companies were willing to pay a premium for a flexible contract, and add or remove seats as needed. It was an interesting idea, and there were signs of growth. Then COVID happened. I'm surprised they are even still operating.

WeWork certainly provides value to the companies that rent their offices (including the one I work for). If someone else were looking for office rental options I'd recommend WeWork on the basis of the experience I've had working within their office space over the last 8 months or so. But obviously it was massively oversold as being a lot more than an office remodeling/ maintenance/ cleaning/subletting service.

In order for the stock "price" to move, somebody sold.

Stocks don't reprice without transactions.

The quoted price can and does move without transactions. The last-traded price does not.

How would the quoted price move without transactions? (And I realize we're bleeding over into market making dynamics here)

Because the seller sets a lower boundary for selling, and the buyer sets an upper boundary for buying. There is no price over the counter for individual stocks. The ticker that you see is based on transaction execution, but not on the negotiated price.

If there was an overnight discovery of infinite energy supplies, Exxon would wake up to a very different price than the night before, as any potential buyers would severely reduce their upper boundary. Sellers would need to continually lower their price until it finds a willing buyer.

It’s entirely up to the entity quoting it.

That could be me, for instance, putting a bid into the market because I read a hot tip on HN.

Or you may prefer to imagine an automated market-making model that moves its price for Ford because it just saw a big sell-off in GM.

Or consider prices at the open each day, which are set before any transactions take place.

If there is a sufficiently impactful information, investors will reassess their valuation and pricing strategies.

Company X's stock are worth 100 dollars. A scandal breaks out, revealing that their second most important product must be removed from the market immediately due to health concerns. The company will survive, as it has other products, but it is clear that their income will go down and they will spend a fortune on litigation.

Suddenly Investor A wants to sell this stock, because they don't want to hold a risky asset. But who will buy it? Investor B is willing to buy this stock, and will reassess their targets, decide that this stock is now worth around 75, and only buy it at this price.

Investor A has two options now: hold a risky asset, or take a loss. If they decide to take a loss, the stock is now priced at 75. If they decide to hold it, then the price might be artificially 100, but this asset is not liquid now, as nobody is willing to buy it at 100.

So the price has already dropped, before any transactions happened.

See also pre market trading: https://www.investopedia.com/terms/p/premarket.asp

It’s not finite. Shares are trivially created and wealth is trivially destroyed.

Consider the example of a company that is founded and immediately issues and sells a million shares for a dollar each, and then burns the dollars in a bonfire.

There’s less dollars at the end of the story. It’s not a zero sum game.

The price can go to zero with no transaction taking place. And commonly does so.

If I buy a cattle farm, and then the cows all die, where did the wealth go?

"Losing money" is not the same thing as destruction of value.

It never was a large pile of US currency (at least nowhere near as large as the peak of last_price * shares_outstanding would suggest).

If you today form a company having 1 billion and 1 shares and I agree to buy 1 share from you for a dollar, you aren’t a billionaire.

Yes but if you buy the shares from me for $22 billion, as happened here, that’s a little different.

Yeah, finance can be messy for those who just get into it at the smaller to medium scales but who only have some experience in analyzing investments at the micro scales without really understanding the macro scale economics behind it.

If the stock market responds to sales by spooking investors who then sell at lower prices, then the market cap was always a scam. Exchange value of the collection of stock shares for the shareholders is actually not last_price * outstanding_shares but a much smaller amount that exponentially decreases as people sell out.

The use value for the company too is not represented by market cap because short term speculators aren't going to be around long enough to allow you to realize those investments as assets, and anyway there's a large contingent of shareholders who either don't understand or don't agree on company leadership's decisions, so the true value is much lower than depicted.

It's basic economics. Value is what can be done with the set of assets and the collective beliefs held about them, not the projection of such from some pseudo-equilibrium state.

However, big finance depends on you either believing their falsehoods or getting out quick enough that the grift is completed so that average Joes are left holding the bag. They're not on your side, so why continue playing by their rules?

"Taxi services" was never going to be a silicon valley style success, because it just can't scale that way.

"Food delivery services" was never going to be a silicon valley style success, because it just can't scale that way.

Good point, those companies are also going to collapse.

They still aren't in a high rate environment

I think those are different, because they are frequent small transactions where having a smooth flow is essential. Renting an office is a longer term relationship so a marginal improvement in transaction cost doesn't really move the needle in the same way.

Those businesses have some shared infrastructure and brand--maybe more than WeWork--but they're still largely city-by-city labor-intensive retail businesses that still can't clearly profitably operate at scale, at least at their current cost structure.

Those services don't own their taxis or bikes.

WeWork doesn't own much of it's property, it leases and rerents.

They have different models. WeWork gets a long-term lease for a property, refurbishes it and subleases it to tenants.

Neo taxi and food delivery companies are just matching apps that connect sellers with buyers and, in case of taxis, set prices.

Adding or removing a new service provider doesn’t have as much sunk costs as leasing a giant office space for several years.

You realize that in both of your examples, the companies are losing billions?

Uber has made losses every year, and only works because it is supported by VC money: https://fourweekmba.com/uber-losses-by-year/

Deliveroo, likewise: https://www.businessofapps.com/data/deliveroo-statistics/

These are not successful companies, except insofar as they are very successful at handing out investor money.

I feel like Uber's losses are deliberate at this point, like Amazon's lack of profit.

If you look up their losses per journey it's something completely trivial like 50c. Uber's customers are not that price sensitive so if they really did want to make a profit they could probably just raise their prices a little bit.

With Amazon, you could point to what they were spending the money on. With Uber, it's a lot less clear what they are doing other than gaining market share with discounts. They are going to lose a lot of that market share when the discounts go away.

It's actually profitable https://www.sec.gov/Archives/edgar/data/1543151/000154315123...

But I think the consensus is that (unlike Amazon) there is no more scale for them to reach which would make their business model profitable enough to justify the valuation - their only route to large profits is to destroy the rest of the competition and raise prices.

"On Monday morning, an Uber from Manhattan to JFK Airport was $100—nearly double the fixed yellow cab rate. But good luck finding a yellow cab" https://slate.com/business/2022/05/uber-subsidy-lyft-cheap-r...

Aren't Amazon revenues almost flat with only AWS still posting double digit growth?

The linked document writes: "Net loss attributable to Uber Technologies, Inc. was $157 million"

The could have been profitable maybe if they didn't spend ~$400million on stock based comp!

But that won't work will it. Here in Karachi, when careem (the rideshare company uber bought) raises prices, you just have two other ride share companies (bykea, and indrive) undercut it.

You can make cabs dissapear, but copycats are a paradox because you are "validating" their business model with your "success", so they will cannibalize you

Twitter and YouTube don’t make profits, yet are still wildly successful. With a high enough amounts of hype, stock price, and money, a company can stave off reality in seeming perpetuity.

Wasn't Twitter mostly profitable, except for some hugebsttlement with the FCC (?)? Until recently that is.

Elon said that when he acquired Twitter it was burning $4 million per day.

Afaik the number was after the acquisition, and thus with Twitter on the hook for $1.2 billion of yearly debt repayment from the acquisition loans?

If your source would have been Twitters SEC filings, I woupd believe it.

By now, I wouldn't believe Elon tellong me it's raining while being soaked in rain, waiting for one the millions of Tesla's robot taxis to pick me up.

Their net income back in 2021 was -223.32 mil. So only ~0.6 million per day.

The interest payments on the $12.5 billion of debt Musk offloading to its balance sheet to fund his 'purchase' is way more than that.

Basically Musk alone costs Twitter about the same as 4000 - 8000 employees. Which is why he had to fire that many people.. Seems like a great deal.

Not that I mind him running Twitter into the ground it's horrible format/platform for any meaningful communication aside from public single sentence public announcements..

As always, you are (were) using Twitter wrong. I follow authors, artists and journalists. Now, since Musk, the comments on anything newsworthy is a cesspool of paid subscribers with inane comments or just a string of emojis.

If you had told me 6 months ago that I would grow to hate the clown emoji, I would have been bewildered.

> As always, you are (were) using Twitter wrong. I follow authors, artists and journalists.

Well yeah, but those authors, artists and journalists can only use Twitter to share links and images (and announcements) since no meaningful content can fit into 230 chars. The worst is when people split a single paragraph text into 5+ tweets, that just brain damage inducing UX....

IMHO removing the limit would've been the only good thing Musk did if it was available to everyone.

Science and likewise machine learning twitter are interesting in the game theory sense of the whatever Twitter is. Same with journalists. It's distinct from the influencer phenomenon. Also distinct from what you see in the author/podcast world.

I’m fully convinced that YouTube not making money is some sort of accounting trick utilizing the fact that it rents bandwidth and compute from Google.

The only thing saving YouTube from going down under is that Google supplies it with bandwidth. Egress-dominated bandwidth is hella expensive, and video (especially if you're going 4K) demands tons of it.

Netflix eases that problem by providing ISPs and other interested parties with racks full of what are essentially ultra-performant NAS systems [1] for free, but that's only realistic because the utter majority of Netflix's load comes from their top movies/series and it saves them all the egress fees and the ISPs a hefty chunk of their connectivity needs - ~15% of all Internet traffic is Netflix [2] and even serving a quarter of that by ISP-local caches takes off a lot of load.

Youtube, Vimeo and their smaller competitors, in contrast, have way too much different content to make such an expense worth it.

[1] https://openconnect.netflix.com/en/

[2] https://www.statista.com/chart/15692/distribution-of-global-...

I’m not so sure that YouTube isn’t dominated by a small cacheable percentage of content. They could probably save significant bandwidth just by caching Baby Shark (and if they’re not, they’re missing something).

Egress bandwidth is pretty cheap if you’re not paying a cloud provider for it.

Yes, you are right on both of those.

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