Losing money doesn't destroy wealth. It just transfers it from one place to another.
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
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.
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.
Except the person who sold the stock for $100.
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.
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.)
Stocks don't reprice without transactions.
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
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.
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.
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.
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.
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.
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.
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.
https://en.m.wikipedia.org/wiki/Parable_of_the_broken_window
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.
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.
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.