For those that may not have heard of WeWork, or have only heard about it peripherally, WeWork (was) what has been categorized as a “unicorn” firm. A place where the status quo was set aside in place of a new, fantastical change in how things are done. WeWork’s primary area of focus was the workplace. Their purported goal was to make that space somewhere where ideas could thrive, and boundless creativity would break limitations placed on employees having to work in cubicles. As long, that is, if you could afford to rent one of their spaces.
WeWork and its executives are a recent example of problematic business practices hiding behind a “cool new idea”. WeWork was valued at nearly $47 billion because people wanted the company’s revenue model to be real. It wasn’t. The company’s valuation dropped to $8 billion once people could see its true financial potential. This was seemingly fine for its CEO, Adam Neumann, who cashed out $700 million in shares just before its failed IPO. Then he received an additional $1.7 billion golden parachute. For what? For letting people believe what they wanted to believe? For being excited about the potential of what could be?
Despite the common perception that Neumann was an innovator and visionary, developing a business at the forefront of the collaborative, “shared workspace” industry, there are nearly 12,000 employees that are now left with worthless stock, and years of lost time in a company with questionable financial promise. Many have, or will, lose their jobs. WeWork’s largest investor, SoftBank, stepped in to bail out the company, whose valuation had been based almost purely on growth, with no eye for an actual ability to generate income—the true value of any company. It turns out that renting spaces to then rent out spaces after pouring money into them to make them “hip” isn’t as lucrative as some had hoped. So Neumann gets to walk away after becoming a billionaire, and everyone else, including his investors and employees, are unfortunately left holding the bag.
The Culture of "We"
The problem with WeWork’s story does not end there. The culture of “we” included a number of related enterprises of questionable value. WeGrow, the company’s “conscious entrepreneurial school,” was started and headed by Adam Neumann’s spouse, Rebekah Neumann who, did not have and, has, no experience in education or administration. It enrolled roughly 100 students, many of them the children of WeWork employees. Before the recent decision to close the school, tuition ranged from $26,000 to $48,000 a year for a progressive childhood education in the arts, the environment and mindfulness. The level of hubris and short-sightedness demonstrated here in the sole pursuit of innovation-for-its own-sake is startling. Customers, clients, and their children are not just numbers. They are humans with important interests who entrusted their children to the company’s leaders. They should be able to be confident that the company they spend their days and nights making successful will not drop them, and their children, at the first sign of inconvenience or the need to cut costs.
WeGrow is not the only casualty of WeWork’s ambition. The event organizing company Meetup, the office management venture Managed by Q and the marketing company Conductor, all part of WeWork, are up for sale.
All of this highlights my main concern. While I would like to believe that the business culture that gave birth to WeWork will produce benefits, the pressure to grow rapidly through the allure of innovation will not be enough. It will tempt venture capitalists and ambitious “disrupters” with their trusting colleagues to start companies with little financial merit. And, in the process, people’s lives will be upset, there will be an ever-present incentive to act recklessly, jobs will be lost and, at a minimum, we will be left with the economic harm that accompanies questionable uses of investment capital.