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Comment by ahf8Aithaex7Nai | Hacker News Reader

The reason for this is the same as why real estate is so expensive and the price of gold is so high. There is far too much capital accumulation among the ultra-wealthy, who don’t know what to do with all that money. The expertise of someone like this founder lies simply in recognizing that this is the case and that it can be monetized.

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There was a great Money Stuff blurb about that w/r/t Adam Neumann. I can't find it to quote it directly, but the gist was that if you disabuse yourself of the notion that Neumann was playing a game of entrepreneurship and good-faith empire building, and instead conclude that the game he was playing was shameless capital extraction, every step and action he took suddenly makes sense.

The truly amazing thing, especially the second time around, are the supposedly sophisticated investors who fall for it. "Oh, he's learned his lesson -- he won't do it again!".

> ...if you disabuse yourself of the notion that Neumann was playing a game of entrepreneurship and good-faith empire building, and instead conclude that the game he was playing was shameless capital extraction, every step and action he took suddenly makes sense.

Sort of. I get the capital extraction part, but you also need to be a good steward of capital and make a profitable business out of it. He failed badly at the later part, and his reputation is an obstacle for the former.

Not saying you are wrong, but if I am a "capital allocator" at a16z, he would be no-go.

IMO you're being unfair; he talked his way into getting paid half a billion dollars for wework, and he's now a billionaire. That's a massive success at capital extraction.

This is too cynical for even a turbo cynic like me.

Basically, you’re saying he mislead investors and got a bunch of money, so those investors see themselves being ripped off as a valuable skill, so they invest in him again. Wut?

I say again — why would investors trust him if his only track record is losing investor money?

I misinterpreted you; I was arguing that he's already succeeded completely, so it doesn't matter if anyone gives him more money.

But, IMO the reason they're still giving him more money is that they're stupid and greedy. They know WeWork was a disaster, but it was a huge disaster. That shows them he's good at running a con, and they want to get in on the next one.

Class solidarity doesn't hurt either. Being a billionaire makes him an actual person in the eyes of other rich people.

EDIT: Also, it's funny you used a16z as an example:

> Not saying you are wrong, but if I am a "capital allocator" at a16z, he would be no-go.

because Andreesen Horowitz are the ones investing in his new WeWork 2.0 startup Flow.

> I say again — why would investors trust him if his only track record is losing investor money?

Because they look at a serial fraudster and see themselves in him.

If you know he is good at duping investors then you know he is good at gaining investors, and if you think you will be able to well time your exit you will make a shit ton of money off the other investor's investment. Many investors are just straight up gamblers and risk is just part of the game.

Its like people who invest into a ponzi scheme knowing full well it is a ponzi scheme, just thinking they are smart enough to leave before it all comes crashing down. And once you get enough critical mass, other people will invest based entirely on the fact that there is a lot of other investors and a rising price.

Ironically Neumann's latest startup is funded by a16z.

Some of those sophisticated investors are also engaged in shameless capital extraction. Their investment thesis is based on the "Greater Fool Theory": they're gambling that they can dump the inflated assets on another bag holder before it blows up.

But they might end being the bag holder themselves. And is the reputational risk worth it? I would say - no.

Reputational risk is dead. All publicity is good publicity, the alternative is obscurity aka being a loser

> And is the reputational risk worth it?

Yes! The only metric that matters is assets under management, since that’s where funds take their cut. Nothing else matters.

A16Z used to be a respected investor, then they went crazy deep into crypto scams and their AUM exploded, so they made more money than ever before.

To be fair that theory works handsomely.

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