Billion Dollar Loser by Reeves Wiedeman
“What is Coworking?” WeWork is one way to do coworking, at least, they called it “coworking”.
I have been writing about coworking for quite a while now. I think my own book, “What is Coworking?” (2018) may have come out right at the highest point of this wave of coworking .
(This article was posted earlier here.)
Rising in the great recession, coworking marched in step with the gig economy and the digitally enabled nomadic worker. There have been lots of words spilled about the perceived merits of coworking, but my own view is that coworking spaces are, in the memorable phrase of Zachary Klaas, a “respite from our isolation” . Gig workers and remote workers are often lonely, and when it works well, coworking helps workers to be less lonely.
This wave of coworking has crashed as the pandemic has enforced isolation and hollowed out the gig economy. Freelancers are unemployed and broke, coworking spaces are closed and many will never reopen. No one really knows what coworking will look like on the other side.
But coworking was already declining before the pandemic, because the business was cycling down, driven by the spectacular boom and bust of WeWork. Over the years, I have criticized WeWork as misunderstanding the concept of coworking—coworking is about community, not about office space—and pursuing a debt and venture funded fueled drive to monopolize the business.
This was, as I said many times, bound to fail. And fail it did. Spectacularly.
Reeves Wideman recounts this story, which is mainly about the man behind the curtain, Adam Neumann.
It’s not a pretty story.
If nothing else, this story shows us that access to too much money can be very bad for you and everyone around you. Massive amounts of money to spend magnifies personal proclivities, and generally convinces you that you are and infallible genius. You aren’t.
In this book, Neumann is portrayed as a great salesman, able to talk people into giving him absurd amounts of money. He was also able to talk subordinates into enduring absurd abuse. I have worked with great salesmen <<link>>, and also not to mention a lot of people who incorrectly believed they are great salesmen. Neumann doesn’t sound that impressive to me, but maybe I’ve grown calloused.
And this is anotherd thing we see in this book. The people Neumann was mostly selling to were businessmen (yes, mostly men) within the culture of contemporary global venture capitalism and real estate. This culture talks about capitalism and rational risk taking, but also admires a strain of swashbuckling, irrational exuberance. In this case, too many people bought the sizzle.
What did Adam Neumann do that was so wrong?
From my point of view, his greatest crime was misrepresenting the concept of “coworking”. In then end, WeWork was mainly a flexible office space company. They dressed the enterprise up with the terminology of coworking, but this was never really what they were doing.
But since he had billions of dollars to play with, his misunderstanding was taken as gospel by far too many people.
This misunderstanding was expressed in many ways.
Coworking originated as a low tech, bottom up, movement—independent workers sharing a workspace and building a local, face-to-face community. Community is central to coworking, but it is all about a set of people that you meet in person and know in person. This is going to be no more than a couple of hundred people, probably fewer. That’s just an anthropological fact.
Neumann talked about community, but obviously did not understand what that meant. He talked about “scaling up”, about creating a community of millions or hundreds of millions. This is absurd.
So, in my view, WeWork’s basic idea could never have been achieved, in principle. Scaling up “community” does not work, will never work, and, I would say, cannot work.
Second, WeWork’s efforts ‘community’ were sort of modeled on social media, so they worked on a lot of surveillance technologies. For example, they toyed with tracking the behavior of their
victims customers members in the space. While this data might (slightly) improved the efficiency of the office building, monitoring the behavior of your customers in this way doesn’t really benefit the customers.
(I’ll also point out that the prototypical coworker is a freelance, gig worker who generally does not want to work for an organization that will track his or her every move, the better to exploit him.)
WeWork had a serious streak of “cargo cult” about them. Their offices mimicked the luxurious workspaces of Silicon Valley, presumably hoping that this would attract the magic “cargo”, the exciting success of start ups .
Free food, game rooms, butcher block tables, beer on tap, parties. This stuff may have made their (self-selected) customers happy, especially when the rent was free. But, as in this case of Elizabeth’s black turtleneck, this is mistaking the appearances for the reality.
If anything, WeWork was a Potemkin village. A fantasy of Silicon Valley startup workplace, to be available to every gig worker. Their product was this stage setting, with little inside.
One memorable example is that WeWork designed their workspaces with really narrow hallways. This layout is obviously good for the operator, jamming more offices into the same space. But the company claimed, preposterously, that this design promoted “community”, by forcing people to interact as they walked the halls. Bad design dressed up with dubious sociology. No wonder they went down.
This whole story would be laughable had Neumann not been able to glom onto insane amounts of money, many billions of dollars. And he showed us that any idiot can build an empire if he has access to infinite funding. Give me 30+ billion dollars and I can buy and renovate hundreds of buildings, too. Create a sustainable business? Not so easy.
Unfortunately, WeWork did a lot of harm with the money, through its massive campaign of predatory pricing. They would outbid competitors for space. They would set up near a competitor and offer free rent to draw off customers. They bought out competitors and made special deals to break up partnerships.
Again, if you give me billions of dollars to play with, I can put my competitors out of business. This isn’t innovative, and it doesn’t create value or a viable business.
In face, WeWork bled money. They lost billions over the years, seldom making a profit.
How could they keep going so long? In this case, the magic of venture capitalism operated as a form of Ponzi scheme, paying off early investors with money from later investors and current rents. This game was made possible by a consistently dishonest management and accounting within the company, as well as abusively low wages and exploitation of their workers.
Growth was everything, no matter the cost. This was a cancerous version of what Silicon Valley calls “blitzscaling”—spend whatever is necessary to capture customers as fast as possible, aiming to create a monopoly.
Blitzscaling is a dubious strategy in any circumstance. But in the flex office business it was idiotic. I could never work.
Of course, WeWork did lots of other stuff that should have been a warning. Neumann took shares that had 10 and then 20 votes each, assuring that it was a one man show. He consistently hired friends and family. Adam and spouse Rebekkah indulged personal projects and raked off obscene amounts of money.
And things evolved into some kind of spiritual quest, supposedly based on Kabbalah. By the end, the goal of the company had become “raising the consciousness of the world”, or something like that. Whatever that means, it certainly isn’t “coworking”.
But the nonsense was enabled by willful blindness, ignoring the losses, the misbehavior, and the extreme implausibility of the sales pitch. It couldn’t possibly last.
And the end did come. Burning cash at an insane pace with no profit on the horizon, WeWork eventually ran out of
chumps private funders. They had to try to go public with an IPO. Neumann waited as long as he could, because he would not be able to control a public company as a personal toy.
The problem is, an IPO requires real accounting and a real business plan. Investors expect the company to make a profit someday. Worse, the SEC and public investors are skeptical and do not swallow nonsense so easily.
WeWork’s IPO was comically rushed, incompetent, and disastrous. To be fair to the people who worked hard on it, they were definitely swimming up stream. WeWork was a shambles which did not resemble anything like a well run company. Lipsitck on a pig, etc.
As the IPO was pushed off, it became clear that, absent that hoped for infusion of money, WeWork would run out of cash in weeks, not months. And it was obvious that the impediment to finding new money was crazy boy Adam. So he had to go.
With Trumpian chutzpah, Neumann received about a billion-dollar payoff to leave the burning wreck he had created. (We are not surprised that the Neumanns are friends with another over-entitled, under-performing couple, the Kushners.) That payout is in dispute, but the Neumann’s had already sucked about that much out of the company already, so they will not be starving.
I wanted to read this book to learn more about this most famous and most notorious example of “coworking”, which I considered to not even be real coworking.
I learned a lot that confirmed my early impressions.
I also learned a bit more about how venture capitalism works, especially at the highest levels.
We also see how the 1% self-deal and generally indulge their whims, without a qualm and without criticism. These “makers” do not generate wealth, they pay themselves and their friends to destroy wealth, and to destroy lives in the process.
It’s truly disgusting. It seems that if you’ve got enough money, you can do anything you want.
- Zachary R. Klaas, Coworking & Connectivity in Berlin. University of Illinois at Urbana Champaign, 2014. https://www.academia.edu/11486279/Coworking_Connectivity
- Robert E. McGrath, What is Coworking? A look at the multifaceted places where the gig economy happens and workers are happy to find community. 2018, Robert E. McGrath: Urbana. https://whatiscoworkingthebook.com/
- Reeves Wiedeman, Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork, New York, Little Brown and Company, 2020.
(This article was posted earlier here.)