The most remarkable fact about WeWork is not that a hyped-up twist on a business as old as office-leasing ended up imploding; it is that Adam Neumann, its messianic co-founder, convinced so many people for so long that his unoriginal, lossmaking start-up could change the world — and the laws of corporate valuation.
Before the near-collapse that cost the Israeli entrepreneur his job, turned his motivational T-shirts into Halloween costumes and brought his business within weeks of running out of cash, Neumann had managed to raise more than US$10bn at valuations peaking at US$47bn.
To believers, he was the model of a visionary founder: a hyperactive, hustling immigrant disrupting one of the world's largest asset classes, convincing followers that they were rethinking work itself by paying him over the odds for tiny workspaces.
A WeWork building — with its meditation rooms, pool tables, vegan food stalls and aroma of small-batch coffees — could make insecure freelancers feel like they were on a Google campus. Neumann had captured a moment where the gig economy sounded like freedom, where Silicon Valley seemed more cool than creepy and thousands laid off in the financial crisis were starting afresh.
Benchmark Capital, the venture capitalist veteran that funded eBay and Instagram, bought what Neumann was selling, as did Harvard's endowment, Fidelity and Alibaba's Jack Ma. Most importantly, of course, there was Masayoshi Son, the Saudi-funded SoftBank boss who liked to throw more cash at founders than they had asked for and then berate them for not thinking big enough.
"These investors were considered the smart money," the Wall Street Journal's Eliot Brown and Maureen Farrell remind us in The Cult of We. It is a retelling of a story that Reeves Wiedeman got to last year in Billion Dollar Loser, which brought out Neumann's skill at flattering such audiences and telling them what they wanted to hear.
Brown and Farrell's most memorable contribution to the reams of earlier WeWork coverage was their September 2019 reporting that during Neumann's attempt to go public that year, he had stashed a cereal box full of marijuana on a cross-border private jet flight, and smoked so much that the oxygen masks came down. If investors still needed an excuse to skip the initial public offering, this reminder of Neumann's rash excesses provided one.
With investors telling him he's a visionary, it is almost understandable that he keeps a hairstylist on staff and snowboards to work
Having added to the pile of WeWork stories myself, I have witnessed Neumann's flattery. As a colleague and I prodded him on his business model in his serene New York office in May 2019, his answers were prefaced with "great question . . . beautiful question . . . you guys are hitting all the marks".
When we pointed out the conflicts of interest in his ownership of some of the buildings that WeWork leased, he suggested the FT should charge companies to have its journalists prepare CEOs for the tough questions they would face on an IPO roadshow. (He seemed not to see that this might itself create conflicts of interest.)
I had wondered whether another book could bring much fresh insight into one of the most scrutinised CEOs of recent years — yet Brown and Farrell have unearthed dozens of new tales, adding colour to a portrait whose outlines are already well known.
At one impromptu office party, they report, Neumann and colleagues lobbed the expensive tequila bottles they had been drinking from, deliberately smashing the glass panes separating his private office from the desks outside. At another tequila-fuelled event, Neumann is said to have sprayed a fire extinguisher over Hony Capital's John Zhao, one of his investors. And in Hong Kong, the authors capture Neumann stumbling through a starchy private club, blasting Jay-Z on a Bluetooth speaker and yelling: "We are taking over the world!"
More substantively, they show how a decade of low interest rates and plentiful private capital allowed splashy start-ups such as Uber, Airbnb and WeWork to avoid the disciplines of the public market while private investors underwrote their losses for years.
When a founder has billionaire investors and fee-hungry advisers telling him he is a visionary and branding his creation a mythical unicorn, it is almost understandable that he keeps a hair stylist on staff, snowboards to work behind a colleague's Jeep in winter or has his surf coach Jet Ski him out to the best waves. ("I don't have time for paddling," Neumann reputedly explained.)
The line between those pursuing a world-changing dream and those hustling to sell a tall tale has always been vanishingly thin
Brown and Farrell do not labour the point, but such absurdities look even more crass when set alongside Neumann's claim to be "elevating the world's consciousness". When he tells a staff meeting that WeWork must lay off 70 people, then pivots to a performance by a hip-hop veteran from Run DMC, the reader is left to wonder how that elevated anybody's consciousness. Ditto with the millions of dollars in stock he was selling while telling investors to buy.
How did Neumann get away with it? The short answer is the capital and cover supplied by SoftBank's Son. The Cult of We provides a useful reminder of how the billions that Saudi Arabia's Crown Prince Mohammed bin Salman had committed to the SoftBank Vision Fund were burning a hole in Son's pocket at the moment when he decided to pour $4bn into a company that had previously raised only $1.7bn.
More than 18 months after Son slashed SoftBank's valuation of WeWork to $2.9bn, it is clear that nobody did more to inflate the WeWork bubble than the inventor turned telecoms mogul who almost lost his first fortune in the dotcom bust two decades ago.
Son once projected that Neumann's company could be worth US$10tn by 2028 (which makes the $96bn valuation in Goldman Sachs' pre-IPO pitch deck look almost modest). But plenty of other investors were just as willing to indulge what Brown and Farrell call "a prolonged adolescence" for the free-spending founders they backed. When Neumann bought a company that made wave pools for surfers, for example, nobody blinked.
The WeWork bubble was inflated by not just by a glut of capital, Brown and Farrell argue, but by a fear of missing out. Such "fomo" haunted once cautious mutual fund managers such as T Rowe Price and Fidelity and seasoned bankers like JPMorgan's Jamie Dimon, who craved the bragging rights that come with advising hot tech (or wannabe tech) companies.
Those participating in such bubbles "are often intelligent — even aware of the madness", they observe. For a corporate cult to succeed, in other words, its early followers need to believe that the cult leader can recruit enough true believers for them to get out at a profit.
The failed IPO proved that Neumann could not. His early enablers may have dismissed his wilder habits as a visionary's privilege, but the public markets saw how fast his excesses were burning through the billions he raised.
The hubris and excess that The Cult of We cast as a parable of the 21st-century economy may already look like relics of a pre-pandemic world. Yet as we watch investors pump up meme stocks and special purpose acquisition companies (including one via which WeWork now plans to go public at a $9bn valuation), perhaps the lesson is that the line between those pursuing a world-changing dream and those hustling to sell a tall tale has always been vanishingly thin.
Once the marijuana haze clears, it becomes clear that the WeWork story is a timeless one, even if this version involves an awful lot more weed and tequila.
- Financial Times