Thursday, September 5, 2019

We need to talk more about WeWork.

God knows, we've said our share of mean things about Uber and Lyft and Netflix and Tesla, but for all of the confusion and myth-making that drove those valuations to their current sky high values, even I have to admit that there was at least the possibility of the promise of something big behind each of those companies. The rise of the smartphone made new models of personal transportation possible. We can argue whether the dominant business model will be all-you-can-stream or a la carte or heavily tiered or advertiser-driven, but there is little question that more and more video viewing will be done online. The future of cars is both electric and autonomous.

By comparison, you almost have to admire the pure distilled bullshit of WeWork. There is nothing to ground this business model, no recent or even promised technological advance, no big innovation, nothing but the CEO babble and Ted Talk happy speak so in vogue in Silicon Valley these days.

Here via Brad Delong, Ben Thompson spells out the inevitable corruption and self-dealing that goes with this sort of scam.

The tech industry generally speaking is hardly a model for good corporate governance, but WeWork takes the absurdity an entirely different level. For example: WeWork paid its own CEO, Adam Neumann, $5.9 million for the 'We' trademark.... WeWork previously gave Neumann loans to buy properties that WeWork then rented. WeWork has hired several of Neumann’s relatives, and Neumann’s wife would be one of three members of a committee tasked to replace Neumann if he were to die or become permanently disabled over the next decade. Neumann has three different types of shares that guarantee him majority voting power.... Neumann has already reportedly cashed out 700 million of his holdings via sales and loans. Everything taken together hints at a completely unaccountable executive looting a company that is running as quickly as it can from massive losses that may very well be fatal whenever the next recession hits.... The WeWork bull case and bear case... both are the logical conclusion of effectively unlimited capital. The bull case is that WeWork has seized the opportunity presented by that capital to make a credible play to be the office of choice for companies all over the world, effectively intermediating and commoditizing traditional landlords. It is utterly audacious, and for that reason free of competition. The bear case, meanwhile, is that unlimited capital has resulted in a complete lack of accountability and a predictable litany of abuses, both in terms of corporate risk-taking and personal rent-seeking...

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