“Billon Dollar Loser” author Reeves Wiedeman on the epic rise and fall of WeWork

The below is a full (unedited), machine-generated transcript of a Youtube session / podcasting episode I recorded with Reeves Wiedeman, author of Billion Dollar Loser in March of 2021. You can view the video/listen to the podcast on YoutubeApple PodcastStitcher or wherever you get your podcasts.

Adam Neumann 0:01 
Welcome, and thank you for coming. Real estate is going through a fundamental shift from a fixed cost per seat commodity to an experiential differentiated. Real estate is going through a fundamental shift from a must have. It’s a mouthful. We’ll clean it up. I think we’re great. And I think we’re preparing for the roadshow right now. Sorry, the universe had to release it. Sled. The

Unknown Speaker 0:36 
air we work is garnering questions about its business model. There are all kinds of things that just pop out as red flags. And this it feels

Unknown Speaker 0:42 
like it’s valued as a tech company. But this is a real estate company.

Unknown Speaker 0:45 
The founder wanted total complete control for life, the company

Unknown Speaker 0:48 
went from a $47 billion valuation to near bankruptcy in just six weeks. The future of the company very uncertain at this point, if you

Unknown Speaker 0:55 
tell a 30 Something male that he’s Jesus Christ, he’s inclined to believe you.

Erasmus Elsner 1:07 
Alright, welcome, everybody, and welcome to another episode of Sandhill Road. I’m super excited to have today with me, the author of my new favourite book, billion dollar loser, the epic rise and fall of WeWork. So I’m really excited to have with me today, Reeves wiedeman, who’s the author of this great book that I can really recommend everyone to buy physically. It’s a real page turner, and I read it from cover to cover. So Reese, welcome to the show.

Reeves Wiedeman 1:32 
Yeah, thank you for having me. And thank you for that introduction. I’m so glad you enjoyed the book and eager to talk more about it.

Erasmus Elsner 1:39 
Let’s jump right in with the person at the centre of it all your real

Unknown Speaker 1:43 
estate company

Unknown Speaker 1:44 
rats in the sort of in this check machine. So

Adam Neumann 1:47 
definitely not a real estate company. We are a community of creators, we create environment for entrepreneurs and freelancers, we leverage technology to connect people.

Erasmus Elsner 1:56 
So I personally met Adam back in I think it was 2017 TechCrunch Disrupt New York, I remember him, you know, not being quite specific about how he would bring everything to fresh and

Adam Neumann 2:08 
20 over 40% Business whenever margin, you can actually choose when to be profitable. We like to hover around it even a break even. And then we can choose when we want to move where we want to move.

Erasmus Elsner 2:19 
But I could remember walking away thinking that he was the sort of cult like figure in that he had this ability to inspire people with his visionary words, and some would call it reality dilution field

Adam Neumann 2:31 
allow New York Hello, we work Hello global citizens of this earth. You know what a global citizen of this earth is. It’s a member of the regeneration. And a member of the regeneration does not discriminate with age, race, gender,

Erasmus Elsner 2:45 
you met him I think a couple of times while writing the book, maybe talk about your experience with him personally. Sure.

Reeves Wiedeman 2:51 
Well, I actually met Adam, once I met him in the spring of 2019. We met at his office in we work headquarters in Manhattan. And this was when we were Criss flying high, they were valued at $47 billion. They had not yet publicly announced that they were going to attempt an IPO that would happen a few weeks after I met Adam. So in hindsight, everything was in the works. Obviously, when I met him, he exuded incredible confidence, which is which is what you hear from everyone who meets him and it sounds like kind of what you you experienced as well. And he’s just the kind of person who takes over over a room very

Unknown Speaker 3:25 
charismatic from the moment I saw him. And he’s very tall. And so he has a like very commanding presence. And he’s also really, really, he’s really friendly.

Reeves Wiedeman 3:39 
So you both want to be with him. And then and then I think, you know, it can can kind of tell the ways in which he’s he’s sort of directing the conversation wherever he wants it to go. And that’s a real skill. And he has that net that served him well in conversations with reporters, with investors, with partners, with, with employees with all kinds of people. And over over the years as he built this company,

Erasmus Elsner 4:05 
your interaction with him at that meeting, he knew that you were sort of more on the fences with respect to your outlook for the company, and that he was really trying to bring you around. I think that’s something that sort of played out in a number of other relationships that he had, that he was really good at bringing people to his side and feeling that they were part of a bigger mission. Talk a little bit about the nuances of this interaction. Yeah, you

Reeves Wiedeman 4:27 
know, Adam is the kind of person who you ask him a pointed question, and he nods his head and tells you it’s a great question and then says something else and doesn’t quite answer it. And there’s a way in which all of us do that, you know, none of us won’t want to answer the hard questions directly. And it is in some ways, a real skill to sort of take a hard question and kind of diverted back towards sort of what what your narrative is we if you’re asking him or you know, it is a bit unusual, Adam, that you are an investor in some of the properties that that we work leases, for instance, oh, you know, We’re just trying to prove our model, we’re kind of early in the days we work, there’s, there’s sort of Nothing to see here. And he can kind of go off and sort of make his talking points. And he’s very good at that you could take that in a certain way and say, you know, oh, he’s just pulling the wool over everyone’s eyes. But But I think, you know, this is a real skill for any kind of person, no matter what it is, you’re selling.

Erasmus Elsner 5:21 
You’re on a very founder friendly podcast here where we talk, we talk a lot about, you know, building the first version of the product. And obviously, part of you know, making it over the valley of death of every startup is sort of to fake it till you make it but there’s a slippery slope in terms of how much confidence you portray and how much humility you have. Let’s talk about the title of the book in the in the very beginning, which is billion dollar loser. And I think it’s a controversial title. Because if you look at the numbers, Adam Newman did quite well, financially. He, he sold a bunch of secondaries in one of the crossover rounds. And also his early stage investors, top tier Silicon Valley from benchmark, they took out quite a substantial amount in secondaries. So on the face of it, he did deliver for both himself and his early stage investors pass the hot potato in a sense to the growth stage investors which piled on, it’s often referred to as the the MPO, the Massa private offering instead of the IPO, he went through the MPO, and benchmark as well talk to us a little bit about how we should understand the term loser in the context of your book. Sure,

Reeves Wiedeman 6:30 
yeah. You know, it’s intentionally a bit inflammatory, a bit of a title. And there were sort of two two meanings to both are now a little bit off one, this was a company that lost billions of dollars, I mean, that that is one thing about we work in a handful of other companies, not many over the past decade, that that got these huge infusions of cash, never before seen amounts of venture capital, not the seed rounds in the series, ABC rounds, but the Series F round, often coming from Softbank, whether it was to to WeWork, to Uber to some of the other companies that were just kind of burning cash. So that was one part of it. And then the other part was obviously, at the time, when when Adam was pushed out of the company, and the IPO collapsed, his total exit exit package was was north of a billion dollars. And he had done that, despite the fact that by pretty objective metric, the thing he had been building the company toward had failed. And that thing that he was building no longer seemed possible. And you’re right, he came out great. Other investors, early investors got a great return, they didn’t get the return that they perhaps hoped for. But those weren’t the people that got burned. I think, when you think about some of the other people that got burned employees, many of whom lost their jobs, 1000s of whom lost their jobs, almost all of whom did not get the financial windfall, that Adam God, and that Adam was promising them and promising them very publicly and events was coming very, very, very soon. And so, you know, that’s what kind of the two meetings of course, of course, that has now shifted, given that Adam settlement with soft bank was was more or less cut in half. So so the paperback version of the book will will be the half billion dollar loser, right, I suppose.

Erasmus Elsner 8:09 
Yeah. One thing I found extremely interesting about about your personal process in getting into the story, I remember back in 2019, you wrote this New York Magazine article, and there was this quote, where you said valuation and size today are much more based on our energy and spirituality than on multiples of revenue. And that’s, that’s a quote from Adam. And I actually found a tweet of myself where I quoted his article, we work blurring the lines between dilution and dilution since 2010, because I was already quite bearish on it at that point, talk to us a little bit about about the personal writing process, it seems from me from the outside that you were dragged in more by coincidence as a journalist. And then it got so interesting that you felt there was so much material, you had to turn it into a book. And you talk to I think, more than 250 people who had been involved with with the company, talk to us about this process. Sure.

Reeves Wiedeman 9:04 
Yeah. And thank you, yeah, is as you you alluded to this, this started with a magazine article this started with in early 2019. I’m a writer at New York Magazine, and we decided we want to do a feature story on we work, frankly, because we had an office in SoHo in New York at the time, and suddenly we were surrounded by half a dozen WeWorks we saw this as a as a New York real estate story is the story of this company that that was clearly taking off and in many ways taking over the the sort of commercial office space in in New York City and, and we knew some of the weirdness kind of around the company. We knew Adam was a bit of a quirky guy we knew about the summer camp sort of bucking all party every year

Unknown Speaker 9:45 
because of these company events. I mean, it is, it is legitimately the craziest experience you’ll ever have in your life. I think at four o’clock they start serving alcohol. And when I say this or Every alcohol, they are serving alcohol. Like every 50 yards, there’s like a bar set up, and it’s unlimited. Like you want to drink to the end the time, you get to drink till the end of time all these events during the day you listen to presentations, speeches, there was always like some famous people there. And then you know, at night you do the we work thing, which is kind of just party.

Reeves Wiedeman 10:26 
So we knew this, not just your typical company, but but we did not see this as clearly this is a company that’s going to be collapsing. I think, in fact, the opposite we saw it as a company that was on the rise and trying to understand it. And so, you know, when when I published that story, in June of 2019, the company was sort of preparing its IPO. And, you know, people were, it was hard to get people to talk about the company. And that’s the case, with with my job. And no matter what company I’m writing about, you know, even even people who have critical things to say, are, are often reticent to do so for a variety of reasons. In the case of we were some people were scared, which is normal human response, you don’t like talking about your employer for for one reason or another and, or your former employer even and we work had shown in the past that they were willing to crack down on employees who talked to reporters and leaked to reporters, they had been in fact sued one employee at one point for doing so. And there were also just employees who, you know, would would tell me, yeah, you know, Adams a little strange, and there’s kind of weird stuff that’s been going on. But I hope I get a payout soon. And so I don’t want you to put any of this in an article. And you know, there’s, there is that impulse from from employees of of hoping that things work out, even if even if kind of some of the things that they they see don’t quite sit right with them. So so that Article I, you know, I think was sort of appropriately critical and questioning of the company as it headed toward its IPO. And then I think is end of the summer emerged and companies attempting an IPO came and very spectacularly collapsed. I think two things happened for me. One, it felt like the end of a story. And obviously we work is still a company and will still exist. And we can we can talk about sort of where the company is today. But the end of the Adam Newman era had had come and to a certain extent, I felt like the end of certain of a startup era had come I have maybe different thoughts about how much this era has has ended or not at this point. But I think we saw I saw that sort of story kind of encapsulated with with Adam’s departure and the collapse and the IPO and then, and then people were just much more willing to talk people were much more willing to share what had happened now that things had really gotten south so so it just felt like an opportunity to kind of tell a bigger story than what had appeared in the magazine.

Erasmus Elsner 12:45 
That’s super interesting, because if I compare it to the process for bad blood and the Theranos story, I mean, Theranos was always super secretive about what they were doing and their internal operations. And with WeWork it was the complete opposite. Like it was always this sharing this, we I mean, the name itself, I mean, the product, everybody could see that this is not a tech company that this is a real estate company masquerading as a tech company trying to get these SAS multiples and in their case, space as a service, as they termed it in this one, an attempt to sort of get on these frothy tech valuations without actually having having any any tech in

Unknown Speaker 13:24 
real estate usually is very dependable, predictable business. It doesn’t grow that much. But it’s it’s steady, you can kind of map out these returns. But rework was growing so fast that it was being valued by investors as an ultra fast growth, low overhead technology company. It

Erasmus Elsner 13:43 
wasn’t Adams first company. In fact, it was I think, by all accounts, it was his third company, his first company was this baby clothing company.

Unknown Speaker 13:53 
He had this idea called crawlers, which was for babies so they could have padded knees, you know, babies have been doing fine for millions of years without padded knees,

Adam Neumann 14:00 
our tagline was just because they don’t tell you doesn’t mean they don’t hurt.

Erasmus Elsner 14:04 
And then he had green desk, I think of it as sort of the first MVP of WeWork that, that he managed to sell. And that was really this New York real estate story. And as you said, New York real estate is just not real estate. It’s really this highly priced asset, where if you run this arbitrage of long term leases and short term office spaces, you can get great multiples. And we’ve seen a number of people excelling in that but it’s a commercial real estate play. It’s not a software play. Talk to us a little bit about this basic evolution, the basic business model, what were they offering? Yeah,

Reeves Wiedeman 14:37 
I mean, the offering was pretty simple, nicely designed office space with free coffee and flexible lease terms. That was essentially the core of what we were sold beyond that what they were telling people that they were selling and that was both to investors and then to people who rent the space was was a sense of community and that what you’re getting is you know, a place where Are your dog can come to the office, as you can see my my dog wandering the couch behind me, this was somewhat novel that your office should be fun, it should be a place where you should meet people and the company did put effort into this, it was not just a sort of kind of a buzzword that they threw on it, they did, especially early on really tried to get companies to meet each other, a lot of the early people were just solo entrepreneurs, or two or three person design companies or whatever it might be. And so there was a real sense of community. And I think that was really strong for people. And it became a lot harder to both sell and to kind of manufacture as the company grew. And that’s what you had to do, you know, community wasn’t gonna grow naturally. And in a global office network with hundreds of 1000s of people, like a community, you know, has, there has to be work put behind it. And I think at that scale, it was difficult to pull off. And, you know, they aspired to kind of become this physical social network, as they put it,

Adam Neumann 15:58 
this is we work the world’s first physical social network. Our mission is to empower the world through collaboration. But it

Reeves Wiedeman 16:05 
was difficult to kind of translate the sort of what works in a social network. And obviously, we know all of the problems with digital social networks, it was difficult to actually translate that into the physical world in a way, it could actually impact everyone who was working at work. Now there

Erasmus Elsner 16:20 
are two angles, I want to double click on this tech angle that they were always trying to sell. And you outlined it really well in the book that they were trying to build this social network, basically, this LinkedIn, with physical space, they created

Unknown Speaker 16:34 
this sort of Facebook type platform for members where you could get people connected through technology.

Erasmus Elsner 16:40 
And in addition, I think they had some initiatives like putting sensors under the under the desks and sort of monitor where people would spend most of their time sort of creating these heat maps and data analytics on, you know, how people behave within the office, they

Unknown Speaker 16:56 
had acquired a bunch of interesting technologies. And we’re stitching together what might have been by far the most comprehensive tool for how people work,

Adam Neumann 17:05 
we use beacon technology, but a lot of other aspects, we’re using our video cameras to actually see where interactions are happening. And our entire process is built to make our members more successful.

Erasmus Elsner 17:14 
But all of these were like really, like marginal benefits that that didn’t really move the needle without a clear product vision and roadmap.

Reeves Wiedeman 17:22 
Yeah, you know, there, yeah, there were there were kind of two sides of it, there were kind of the physical social network, you know, trying to connect all of these offices and to build their sort of proprietary LinkedIn kind of the way they thought about it. And they tried various attempts at that, of course, whatever you think of LinkedIn is pretty good at what it is. It’s a professional social network. And so there wasn’t a clear utility to having sort of one that existed only within in the WeWork universe. And then the other part was all these other ways in which they tried to make the the sort of construction and operation of a building more tech forward, that, you know, they had some successes on this front, they did actually make the construction process more efficient and streamlined. They were doing all of this research, all of its fine. And well, you know, it’s fine and well to like better learn how people use a conference room. But that isn’t a 20 times revenue multiplier. You know, that’s a that’s a minor efficiency. And so I think there was this this sort of feeling and hope that that one of these pieces of technology would kind of would actually elevate the company to that level, but but there was just never quite able to sort of match what what was promised.

Erasmus Elsner 18:30 
And it always felt like the tech angle was added on top of the core offering, and that the reason why they they passed through as a tech play was because a lot of their tenants were actually tech startups, and that gave the impression of them being part of the ecosystem. I remember in 2016, I went to so many meetups and we work offices in San Francisco, and it was just really this kombucha on taps kind of feeling

Unknown Speaker 18:55 
says do what you love our friends who were doing their tech startups, they all worked and we worked. We didn’t even consider any other co working space. The thinking was, if you have a tech startup, and you want it to be successful, you start it at a we work.

Erasmus Elsner 19:10 
I love co working spaces, so much. So let’s start over here at the snacks area. And everybody felt like they were in a tech space. But it was really just a tech space. And the tech happened somewhere else and was really decoupled from from the physical location to double click a bit on the community aspect. I mean, Adam, he grew up in a kibbutz in the south of Israel. And I really I take him seriously when he when he was saying that he was trying to build a community. And he was a great public speaker and local community builder. I think that was really one of his core talents. You are

Adam Neumann 19:42 
a creator, and you’re a creator, and I know you’re a creator. And the reason we are all creators, is because we do something that’s greater than ourselves.

Erasmus Elsner 19:50 
But community really isn’t scalable in many ways. And I think part of it, of the failure of we work is based on this false premise that this was scary. liberals, what’s your take on the community and cult aspect of it?

Reeves Wiedeman 20:03 
Yeah, I mean, that was a huge part of what the company was was doing and what it sold, I think a huge part of what made it so appealing. And there’s a way in which, you know, early on, when you’re a small company like you, you want to foster that you want to foster in your employees, that sort of, you know, real, real belief in what you’re doing, and a sense of fun, and camaraderie and all that. But it can get out of control. And I think, you know, a lot of startup founders forget that their employees, they are looking for a sort of a mission and a sense of kind of belief in what they’re doing, and essence of fun, and all of that, all of that, but, but they will never, the company will never sort of be wrapped up in their lives kind of as much as it will be for a founder. And that’s just sort of the reality of this. And I think we work at, it got to a point where, you know, you can have a goal to have 10 employees and maybe 50. But once you have 10,000, that doesn’t work is more, it doesn’t hold the centre of a company anymore. And what holds the centre is paying people well, making it a good job and a good place to work and allowing them to build a life and we work with predicated on that. I mean, that’s what they talked about was building, you know, building your life’s work, basically. And suddenly, what what a lot of employees found was that was that they were building Adam Newman’s life, you know, they were building it for him, they were building his empire. And at a certain point, they began to realise like, this isn’t, this isn’t for me as much as I want it to be. And so I think there’s there’s both ways in which kind of pushing that is a good thing, and can help a company grow. But it can also be kind of dangerous.

Erasmus Elsner 21:39 
And I think you brought it out really well in your book that the fact that there was so much grunt work involved, and very few people realise this in these ambitious plans, and also in the execution of opening up so many locations. So quickly, the end, it was really gruelling and hard construction, the wealth accumulation was really centred at the top, very top heavy, heavy organisation, I would say. But let’s talk a little bit about the VCs that enabled a lot of this. And it’s quite interesting to see that we work had a similar funding journey as Uber with benchmark leading the series A and then very quickly crossover arounds JP Morgan, leading the B. And then it was fidelity that led the and then obviously, masa came in with SoftBank. And it’s a typical pattern that we see you have a strong signal investor at the A and then you have the growth capital piling in, in the later rounds trying to preempt the next round. But let’s talk about benchmark and the role there. And I’m a big fan of Bill Gurley. I know you brought it out well, in the book that he was quite suspicious of, of the fast funding trajectory. One quote of him is saying that you have to play the game on the field. So basically, you can’t disregard the signals in the private markets and I mean, his fund and firm has done financially well, I think they’ve realised a good DPI on that transaction good realised multiple. If they look back, I heard the partner from NEA talking about this yesterday actually, about Bill Gurley because he’s he’s benefiting as a seed and series a fund obviously from from this dynamic.

Reeves Wiedeman 23:14 
They were they were the first institutional investor to get involved the first big investor to get involved rather, the money was was important, but so was the brand and so was the name benchmark attached to we work and, and intentionally or not, the narrative of we work as a tech company was fueled early on by benchmarks involvement, you know, that a lot of the other funds that became involved later were more traditional investors, you know, investors that invest in all kinds of things. Benchmark was was the one that that’s what they do. And that’s what they’re known for. And that’s what Bill Gurley is known for. And a few things that I do think benchmark is certainly made efforts to try to push WeWork in a in a more sensible direction, especially later on and Softbank sort of came into the picture and push the company in different directions. But they also fed this growth, they invested it every round along the way they knew Adam was was kind of a crazy guy. And um, nothing in my book was a surprise to them, they sort of enabled it and encouraged it, if not encouraged, it then allowed it to happen, because the valuation kept going up. And even if it didn’t totally make sense to them, then then they were, they were kind of willing to do it. And then you get to a breaking point at some point, which they of course did with Uber and eventually did with we work in with Adam, but you know, there’s collateral damage along the way. And as much as these sort of VC firms can can present themselves as the adults in the room, it’s still pretty rare for them to really put their foot down and make a company sort of act in in a way they think is more sensible. And they did that eventually here, but there were points along the way where they could have done more had they wanted to.

Erasmus Elsner 24:47 
It’s really interesting because on the one hand they might have from a personal perspective, the incentive to say well, better grow slow and grow real. But then they see all this dumb money moving in and obvious Slowly, they like the markups and the fun. They like the, like realisations they like secondaries and the LPs, like markups in their funds. So so it’s definitely a slippery slope for them. Let’s move on to another really important stage of the company, which was the Series C, which was led by JP Morgan, you outlined as really well, in the book, the relation with Jamie Dimon. And Adam Newman, another father figure to Adam Newman before Massa moved in, talk to us a little bit about this relationship, at least how you perceived it from the outside between the two men?

Reeves Wiedeman 25:34 
Yeah, I think for both Jamie Dimon and for others, that JP Morgan, you know, Adam looked up to them, and he, you know, Adam, he was never setting out to become a tech founder or benchmark was not really something that he he cared about what you know, or even knew that much about before they came in. And eventually sort of, he embraced that role, because that was the role you embraced if you were an entrepreneur, but But Adam was just a businessman, like making deals. And that’s what he did from from the get go at that we work. And so I think that in that way, he was always kind of tuned to and interested in the world of banking, the world of finance, where deal making is, is core to what happens. And so this was a sort of crucial moment. It was a different kind of stamp of approval than then benchmarks. It was, you know, that was Silicon Valley. This is kind of old Wall Street money leaving in this as well. And I think that that both of those sort of combined were crucial to the company’s growth.

Erasmus Elsner 26:29 
I think benchmark really helped the company to be cemented as a tech company. When I met Adam Newman at TechCrunch Disrupt in New York. He never felt techie. It wasn’t really, it wasn’t what he was. He was breathing what he was, you know fantasising about he wanted to be a businessman. He wanted to be accepted and respected within Manhattan. And that stamp of approval was really what what Jamie Dimon could provide with JPMorgan, I think and then let’s move on to the next round. The turnaround point in the in the story when, when, when this reality dilution field that Adam Newman has built gets really legitimised in a sense with with these absolutely outrageous valuations when masa moves in with us his 100 billion dollar Vision Fund.

Unknown Speaker 27:13 
Adam has been preparing for this for weeks. And he’s pacing around pacing around watching his clock. 30 minutes goes by no masa. Half an hour goes by no masa. A full hour goes by and he’s still looking at his clock.

Unknown Speaker 27:37 
Finally master shows up and he says Adam, I’m so sorry. I’m late, but we only had 12 minutes. And they’re going through we work and he’s giving him the superspeed tour. At exactly 12 minutes, Masa Son looks at his watch. And he says Adam, I’m so sorry, but I have to go. But Maslow said, if you’d like you can ride with me to my next meeting. So Adam grabs his iPad with the whole WeWork Softbank pitch, and they jump in the car. Adam pulls up his we work pitch and Monster says I don’t need the pitch deck. Let’s just talk. Monster turns to Adam and he says, Adam, let me ask you a question. In a fight who wins the smart guy or the crazy guy? And Adam says the crazy guy. And he goes, you’re right. But you’re not crazy enough. You got to be the crazy one. You need to think bigger, you need to think 10 times bigger. And masa begins doodling his vision for WeWork this grand plan to take WeWork global so basically Masa Son gave Adam Newman a check for $4 billion and said go crazy. And that changes everything.

Erasmus Elsner 29:11 
Maybe talk a little bit about what this entry of masa min

Reeves Wiedeman 29:14 
changed everything. I mean, you know, leading up to that moment, we were just running out of money didn’t have places to turn for it. You know, the company was if they got more money, it needed to be a large amount of money. The valuation was already pretty inflated. So there weren’t places to go to continue funding the growth and Adam was resistant to to an IPO at that point. He did not think the company was ready. He wanted to keep growing and that is not the mode that you’re in when you when you head towards an IPO. And so this this moment of this meeting between Adam and masa to people who see themselves as visionaries, doing things in ways that others are not and with with bigger dreams and bigger visions than than anyone else was perfectly in Congress match and that it sort of led the company down the path But I think the Senate to the end which is, which is that any ambition Adam had, that he had, he had managed to kind of rein it up to that point. He didn’t need to rein in anymore. He had as much money as he wanted to do practically anything to expand not only the office business, but to expand the other businesses that that he wanted to get into just to start a gym to open or no elementary school, all of these things that kind of eventually sent the company away from what it was good at, and distracted, the company, I think can be can be traced back to to this moment when suddenly, Adam had all the money in the world. And there there really were no, no limitations on what he could do.

Erasmus Elsner 30:40 
Yeah, talk about these side businesses that he expanded into, it makes a bunch of acquisitions

Unknown Speaker 30:45 
of other startups,

Adam Neumann 30:46 
we had this idea, why don’t we just invest money in companies to make impact all the employees want to work for them, everybody wants to be part of it. And it’s just going to work out in an amazing way.

Erasmus Elsner 30:56 
I mean, there was obviously the the wave pool company. And then there was the Wii School, which was run by Rebecca,

Unknown Speaker 31:03 
we grow, we’re going to educate your kids better.

Unknown Speaker 31:06 
When my eldest daughter was in kindergarten, as we started to look around for schools and both New York and the West Coast. I wasn’t finding a place that was going to nurture his her spirit, and her soul as much as her mind.

Erasmus Elsner 31:19 
And one that I personally feel quite sad about was meet ups. I think it was a great company. And he managed to acquire them because he just had the money, right? And he could use the position of these founders that they wanted to move on and build something new. Talk about these side businesses a little

Reeves Wiedeman 31:34 
Yeah, well, Meetup is an interesting one, because you know, it made a certain amount of sense, we work has all this space, and people use it during the day, but they don’t use it at night. Meetup is a kind of place where different organisations need space. So so you could make a certain artist or an argument for it. But it was also, you know, it was an acquisition meant to achieve a goal that was set out by Adam and masa, which was to that we work should have millions of members, it should not just have hundreds of 1000s as it had at the time. And to do that you needed to find different ways to bring people in into the WeWork network beyond just renting office space. And the idea was that, you know, you can sort of if meetup was part of it, and you could sell kind of even just a membership to be a part of the week community to have access to the space who to go to events and things like that, you might be able to find a way to increase membership beyond just people who paid rent. So you know, that was one example. The school was another example. You know, they think the company thought, Okay, we’re good, we’re good at one, figuring out and managing how to how to use space in one way. So we could probably do it with a school, it’s a totally different business. And thinking about it as a business, frankly, is a little problematic or can be so you know, there were all these ways in which the company kind of tried to expand into these other areas that were adjacent in certain ways. The wave pool one was certainly farthest afield but but in Adams kind of grand vision, it was, we’re gonna have these corporate campuses, or these big retreat centres, and they’ll have a wave pool, so you can reach for it. But But ultimately, no matter kind of how far afield they were, they ultimately kind of distracted the company from the business of what it was good at.

Erasmus Elsner 33:17 
Yeah. And I think it was all leading up to him really justifying these these frothy valuations. And now let’s talk a little bit about valuations. And I found this great chart that basically benchmarks, the valuations, I think it was back in 2017. So 20 times revenue multiple versus Regis, which is this UK competitor, basically doing the same for two decades already. And that one is trading at one time, top line. So these valuations really got caught so frothy, that that he needed to, in many ways justify the valuation by by selling this tech story

Adam Neumann 33:52 
where as much a co working space as Amazon is a book selling store, anybody who thought that Amazon was there just to sell books just didn’t understand the vision, it became more

Erasmus Elsner 33:59 
and more clear that he was developing his own language his own terms as a way of of doing that. And we first saw this with the the bond offering where the community adjusted EBIT da made its first appearance, I think

Unknown Speaker 34:12 
yesterday was an attempt to say we want to pretend to be profitable by ignoring these expenses.

Unknown Speaker 34:18 
They adjusted for things that were ridiculous to strip out and say you’re profitable. So suddenly, they went from a loss making company to a profitable company

Erasmus Elsner 34:29 
at the S one filing with the spaces of service,

Unknown Speaker 34:33 
it felt more like a novel written by someone who was showrooming than an S one.

Unknown Speaker 34:41 
And s one is a form you have to fill out that the precursor to going public. It’s a first introduction to your company to the world where you’re representing that these are the facts.

Erasmus Elsner 34:51 
Talk a little bit about getting the company ready to IPO. You’re not a financial analyst. I know. But I think you’ve you’ve spent quite some time trying to under sent these valuations.

Reeves Wiedeman 35:01 
Yeah. And the company you know, they they, you know, a lot of people have asked like, were these net were the numbers fake where they were, you know, was there some kind of fraud and as far as I can tell, that’s that’s not the case, as the company moves toward an IPO, they tried to do a couple of things, they tried to make the numbers look as good as they can, which is what any company does, and obviously heading towards an IPO you, you suddenly have to you can’t just use whatever metrics you want, there are specific ones you need to offer to kind of institutional investors who are not taking risks of the same kind that was done Levy, or Bill Gurley or, or Jamie Dimon or anyone is there, they’re making bets on behalf of pension funds and individual investors, they’re just going to be more conservative. And so the company tried to is kind of present its numbers in a certain way. But, but when the numbers came out, they still just showed these enormous losses and not a clear path to becoming profitable to becoming a kind of stable company. And I think, you know, there’s, there’s a universe in which I think investors could have been willing to stomach that I do. I do believe that, you know, because this was just a an era in a time where, where growth was still king, and we work was showing, showing that you might have been able to get investors to buy in. But when you had on top of that all of the kind of craziness, all of the stuff we’ve just talked about, about these other businesses about the focus of Adam at the company, the ways in which he had profited individually, the way in which his his wife and his family members and his friends populated throughout this company, and kind of some of the stranger ways that that he and other others talked about the company elevating the world’s consciousness was was ultimately the mission statement, which, which was confusing to everyone.

Unknown Speaker 36:40 
first red flag was on page one, it says We dedicate this to the energy of weed greater than any one of us. But inside each of us, I mean, for God’s sakes, they’re running fucking desks.

Reeves Wiedeman 36:49 
And so I think all of these things combined, are kind of what what sort of led the company to the IPO just not going how Adam or anyone else had planned.

Erasmus Elsner 36:59 
And there were so many question marks around his person. Eventually, obviously, there was the episode with him smoking weed on corporate chat, there were these buildings he owned and leased to the company, there was the role of Rebecca,

Unknown Speaker 37:14 
and now I believe his wife is choosing his successor. so egregious that he would have his 21 voting shares, or I can’t believe the company’s paying him $6 million for the trademark to the word we and the company name.

Unknown Speaker 37:29 
He was buying buildings, and then asking, we work to lease those buildings from him. And then he took $700 million out of this company at the very time, he was asking the public to put money in the company.

Erasmus Elsner 37:43 
But how do you think that his sort of public perception at the point of the s one filing added to these concerns?

Reeves Wiedeman 37:50 
I think it was huge. And I think, you know, one one thing about this company, it was big, but most people didn’t know about the work. Most people didn’t know about Adam Newman, they were the company had 400,000 customers. You know, Uber has 10s of millions. Google has a billion, you know, what, whatever the number is, so So ultimately sort of the public was finding out about about Adam Newman and the wave pool and the pot smoking and, and the way the elevating the world’s consciousness all at the same time, along with the the fact that this company was burning money. And so I think it was just sort of, it was so egregious, to everyone, even to people who had kind of been to a WeWork. And they thought it was cool. And but they may not have known that it was supposed to supposedly worth $47 billion, or who the founder was and what he was like. So I do think that that a certain way, the press cycle around finding out who Adam was finding out with this come the story of this company, was a hard thing for for the company to overcome on top of the numbers, which which didn’t look great.

Erasmus Elsner 38:53 
So now let’s fast forward. There was recently as you mentioned, at the top of the show, the halfing of the settlement for Adam Newman, and we know that that Softbank has injected additional capital into the company to keep it afloat. Do you see any path to towards profitability towards an IPO personally? And how closely are you still following the company or been so deep in it that you’re sort of tired and want to move on to the next story?

Reeves Wiedeman 39:18 
There was a moment after after I finished writing the book where I needed a break from Adam Newman, and we work certainly but I find the company fascinating. I find him fascinating. I have been following them closely and intend to and I you know, I think we work will be around I have some scepticism about about their ability to kind of live up to what they’re they’re claiming still, and I think Adam will be around I think he is not someone who’s going to retire with his settlement however large it is he’s going to take that money and he already is investing it in a wide range of things. And I think he’s someone who is trying to go in to try to be back in a big way. And I’ll certainly be curious and eager to kind of find out and see how he tries to do that.

Erasmus Elsner 39:58 
I hope he got a a signed copy of you

Reeves Wiedeman 40:02 
he hasn’t asked for one yet but if he did, I would have it absolutely wonderful.

Erasmus Elsner 40:06 
I love it I love it so reefs what’s what’s next for you? How can how can people find out what you’re up to next? How can they follow you and with your future journalistic work?

Reeves Wiedeman 40:16 
Well, I hope everyone was subscribed to New York Magazine, that’s that’s my home base and where I where this, this book began and where, you know, if there’s another book in the future, it’s probably going to begin with with with something I work on here. I just wrote a story about a venture capital funded air purifier so you know, I the startup world is one I will continue to cover and and, you know, people can find me on social media and all the usual ways under under my name, but, but I hope they’ll they’ll continue to keep reading. And I hope, though, that anyone who hasn’t picked up the book well,

Erasmus Elsner 40:49 
it’s it’s really the bulk of 2020. And I don’t see Thank you have any book in this year lining up to parallel this one? And yeah, really looking forward to this air purifier story of yours, which sounds like a zero story. There’s some elements of that there’s some elements of that. I hope you do find some optimism in the startup world. They are really great, I think jewels out there. I’m optimistic about the tech and startup world. But I think we can all be thankful for this cautionary tale of yours. And with that, I will leave you to it. Thanks so much.