WeWork and Adam Neumann’s Disastrous Arc

Not even two years after WeWork’s dramatic collapse, its story has been told over and over again. In January of last year, just three months after the ousting of the company’s founder and former CEO, Adam Neumann, there was a series of podcasts on the debacle hosted by the former Market host David Brown. In October 2020, New York magazine journalist Reeves Wiedeman published his book, Losing a billion dollars, an engaging profile of Neumann and the company. And in March, Hulu released a ghastly documentary, WeWork: Or the making and breaking of a $ 47 billion unicorn. In this saturated market, the Wall Street newspaper journalists Eliot Brown and Maureen Farrell, who cover start-ups and IPOs respectively, publish The Cult of Us: WeWork, Adam Neumann and the Big Startup Illusion. Fortunately, being the first isn’t always better.

The coverage of many Silicon Valley companies, even (and especially) when they disappeared, tends to focus on the personalities of their founders. This makes some sense and coincides with the fact that these leaders are often given too much power even though they are not very good at their jobs. In this regard, Neumann is as desirable a figure as possible. He turned a successful office rental business into a massive, managementless one. He is married to Gwyneth Paltrow’s cousin. He got a big investment from Ashton Kutcher, whom he met through the Kabbalah Center. He really enjoys smoking weed. Even in the context of the young elite of Silicon Valley, he presents himself as a man of one right, only childish and only stupid. More importantly, maybe he’s tall. (Every startup book, including this one, loves to mention people’s height.)

There is a lot of information about Neumann’s exploits in The worship of us, but what is included is not just exciting anecdotes. It is not irrelevant, for example, that Neumann once told the Crown Prince of Saudi Arabia, Mohammed bin Salman, that they were both going, with Jared Kushner, to remake the Middle East, or that he said a Middle East Peace Treaty would be signed in a WeWork office space. Brown and Farrell also detail reports from those who handled Neumann’s private flights, which included one trip where passengers spat tequila at each other and one where “there was so much marijuana smoke in the cabin that the crew was forced to remove the oxygen masks from the jet. and put them on. A notional meat ban at WeWork was a tough sell, as Neumann barely spoke to anyone who would be responsible for managing the initiative before making the announcement; furthermore, its constant use of private jets and multiple cars undermined the environmental commitment that would have initially motivated the ban.

But the real meat of The worship of us, and what sets it apart from previous recitations of this story is the skill and clarity with which Brown and Farrell describe the economic and financial environment that made WeWork’s absurd $ 47 billion peak valuation possible. Past accounts tend to focus on Softbank’s head, Masayoshi Son, the man famous for losing more money than anyone else (around $ 70 billion in the dot-com bubble) and who made his fortune again through a early investment in Alibaba. Son invested $ 2 billion in WeWork’s best valuation. A frequently repeated anecdote goes that Son asked Neumann, “In a fight, who wins: the smart guy or the crazy guy?” Neumann, to Son’s satisfaction, said “the fool”. But, Son explained, Neumann and his co-founder Miguel McKelvey, “aren’t crazy enough.”

Much of the blame for WeWork’s fuzzy and overly aggressive strategy lies at Son’s feet. But what Brown and Farrell crystallize is how the distorted incentives and reckless decision-making of many well-paid people put WeWork on its doomed path. They highlight the disconnect between the venture capital funds that historically paid for the private periods of start-ups and the mutual funds of companies like Fidelity and T. Rowe Price which supercharged WeWork. Financial firms gave away money that eclipsed what many venture capitalists would consider, and their eagerness to keep up with the start-up manna has clouded their judgment. Banks like JP Morgan Chase were so eager to get WeWork’s IPO activity – which would lead to a fee windfall – that they were willing to lend WeWork and Neumann absurd amounts of money. , stimulating the absurd behavior of the company. The board of directors, the people whose responsibility should have been to control the company, were more focused on securing a gigantic injection of cash from Softbank that would have allowed its members to cash in their shares with a huge profit; when that failed, they pushed for an IPO to get the same.

Brown and Farrell’s big picture of the business arc serves them well, but any real sense of what it might have been like to work there, especially at a lower level than an executive. , is lost. Some examples, such as a complaint that high-ranking officials sometimes had to fly as a coach, arouse mockery. Glimpses we get of those below the C-suite, including a manager who was fired because they left one of WeWork’s mandatory festivals, suggest a worrying situation, but The worship of us just scratches the surface.

Yet Brown and Farrell’s book provides essential insight into the opaque mechanics of how a private company constructs an astronomical valuation and the twisted feedback loop that motivates people not to solve obvious problems. There is little indication that powerful players have actually learned their lesson here, but at least we are now better equipped to understand their mistakes.

Photos of the authors: Eliot Brown (Photo: Andrew Kwok) and Maureen Farrell (Photo: Brie Anderson)