
Veteran executives and financiers helped fuel WeWork’s rise and fall - raiyu
https://www.wsj.com/articles/the-money-men-who-enabled-adam-neumann-and-the-wework-debacle-11576299616
======
raiyu
As the fallout of WeWork being bailed out played out in the public eye it was
obvious that there were tremendous problems at the company. But this article
really goes into detail to show the true dysfunction that existed.

I mean a CEO that skipped board meetings entirely? An entire board that
basically sat quietly as valuations grew ever further out of touch with
reality and that the first time they brought it up as an issue was already
after the failed IPO had been halted, really is something straight out of an
episode of Silicon Valley on HBO.

~~~
bsder
> An entire board that basically sat quietly as valuations grew ever further
> out of touch with reality and that the first time they brought it up as an
> issue was already after the failed IPO had been halted

Um, like, duh.

The whole point of that IPO was to leave the public holding the bag. If Adam
Neumann had only been slightly less of a douchebag, it might have happened.

~~~
chii
Banking on the public being stupid is not a good idea. Wisdom of the crowds is
real. As long as there are regulations about financial reporting, these false
valuations will come out eventually.

They needed to go all in, and commit fraud like Enron, if they really wanted
to leave the public holding the bag.

~~~
leggomylibro
The aphorism that I'm familiar with is, "the wisdom of a crowd is proportional
to the square root of its members."

~~~
andy_ppp
Does that actually mean anything?

~~~
iudqnolq
It's apparently a Terry Pratchett quote: "The intelligence of that creature
known as a crowd is the square root of the number of people in it."

A sixteen-year-old newsgroup poster explains it as follows:

> Sorry to disagree, but I thought the quote worked extremely well the first
> time and on further reflection, still do. I think it's very apt and I would
> hesitate to say that perhaps you didn't see the intended purpose on first
> reading.

> Terry talks about the crowd as a creature, therefore implying one single IQ.
> So, to use your own methods, let's say a crowd of 100 people would have an
> IQ of 10 - not each, but altogether. Each person would have an IQ of 0.1 if
> you wanted to break it down, although to do so would be completely counter-
> productive, because we are talking about a crowd and not a single person.
> Once you start talking about single people, they are no longer part of the
> crowd and their IQ would revert to normal status. The crowd is a whole, and
> the description provides a picture of it being a single organism with one
> purpose (to imply the fervour that people get swept up in, in crowds, e.g.
> race riots, Paedophile lynchings, vigilantes that one person would not do)

> I think the purpose behind the description was to provide the metaphor of a
> crowd being a big, dumb, violent animal composed of intelligent, reasoning
> people - a sort of paraphrase on "the sum is greater than the parts".

[https://alt.books.pratchett.narkive.com/nVL49SnZ/quote-
from-...](https://alt.books.pratchett.narkive.com/nVL49SnZ/quote-from-
jingo#post3)

As an aside, I find it amazing that I was able to go from a paraphrased
description of a quote to an in depth discussion of the accuracy of the quote
with suggestions for alternative functions. Despite all its flaws, the hacks
upon hacks upon hacks we call the internet is incredible when you step back
and consider it all.

~~~
cobbzilla
An interesting idea, but taken literally, it implies that any crowd larger
than 22,500 people (150^2) has genius-level intelligence, which is kind of
laughable.

~~~
vjktyu
The lower boundary of the 99 percentile goes up as 1/sqrt(N) and approaches
the average member intelligence, but never reaches that level. At the same
time, the upper boundary of the 99 percentile goes down at the same speed.
However the number of super smart members, with IQ higher than say 160, grows
linearly.

------
gumby
Why does the article say, "It was a watershed moment for Silicon Valley"?
WeWork was started in NY, has a bunch of facilities in SF but in SV just one
in RWC.

~~~
s_dev
Because Silicon Valley has become a synonym for the American tech scene.

Many great films are made in New York but they still fall under the moniker
Hollywood.

~~~
austhrow743
Its not a technology company either though.

------
onetimemanytime
So even Mr. Schwartz spoke only after all came crushing down? Do I feel bad
about their rich investors? Nope, they got way too greedy and got burned.

------
iamleppert
Why isn't the DOJ looking into him? He should be brought up on charges just
like Elizabeth Holmes. There has to be a clear fraud cause in here somewhere.

He can't be allowed to get away with what he has done, he needs to be stripped
of his money and spend some time in jail to act as a deterrent for others who
would seek to do the same.

~~~
darawk
He didn't really commit fraud, though. He really did create a successful
business. He didn't defraud anyone, he just convinced supposedly smart
investors that he was somehow going to generate billions in profit from a
company that just didn't have the business model for that.

He found a little glitch in the system, and honestly, that's fine. This is how
the system learns, and hopefully fewer investors will waste their money on
someone like him in the future. But at the end of the day, what he did wasn't
really illegal, and it shouldn't be.

The bare essence of what happened is he asked some supposedly very smart and
sophisticated people to give him billions of dollars, and they said "we like
you, so yes". There's nothing intrinsically wrong with that, it's their money
to throw away how they please, and they should have known better.

------
randycupertino
> In late 2015, WeWork was completing an investment round led by Beijing-based
> Hony Capital Ltd. that pushed its valuation to $16 billion. Mr. Neumann
> invited its CEO, John Zhao, to a party at 110 Wall Street, where WeWork was
> about to open its first WeLive dormlike apartment building. Toward the end
> of the night, Mr. Neumann led others to the roof of the 27-story building.
> There, guests passed around tequila shots. Mr. Neumann picked up a fire
> extinguisher and set it off, spraying Mr. Zhao and others with white foam.

> The deal went through. Mr. Zhao joined WeWork’s board in July 2016.

Spraying potential investors with a fire extinguisher... now there's a
fundraising technique I won't be trying.

~~~
hkmurakami
Matt Levine wasn't so far off with his characterization of the Son Masayoshi
Adam Neumann conversation:

"""

Son: What does your company do?

Neumann: We lease office buildings, spruce up the space and sublet it in small
chunks.

Son: Hmm I invest in visionary tech stuff, this doesn’t really sound like my
thing.

Neumann: Did I mention we are a state of consciousness. A generation of
interconnected emotionally intelligent entrepreneurs.

Son: Okay yeah that’s more like—

Neumann: The world’s first physical social network. We encompass all aspects
of people’s lives, in both physical and digital worlds.

Son: You’re crazy! I love it! But could you be, say, ten times crazier?

Neumann: You’re going to invest $10 billion in my company, which I will use as
kindling to light the whole edifice on fire, and then when we are both
standing in the ashes you will pay me another billion dollars to walk away
while I laugh at you.

Son: All my life I have dreamed of meeting someone as crazy as you, but I
never really believed this day would come.

Neumann: I’m gonna use your money to buy a mansion with a room shaped like a
guitar, where I will play the world’s tiniest violin after all your money is
gone.

Son: YES PUNCH ME IN THE FACE.

Neumann: Also I’ll rename the company “We” and charge it $6 million for the
name.

Son: RUN ME OVER WITH A TRUCK.

"""

[https://www.bloomberg.com/opinion/newsletters/2019-10-23/mon...](https://www.bloomberg.com/opinion/newsletters/2019-10-23/money-
stuff-how-do-you-like-we-now)

~~~
randycupertino
Geeze... I thought you were being hyperbolic about the mansion with a room
shaped like a guitar. But nope! Really bought that.

[https://www.mansionglobal.com/articles/wework-founder-
adam-n...](https://www.mansionglobal.com/articles/wework-founder-adam-neumann-
s-trove-of-pricey-properties-132037)

This has to be one of the all time biggest pre-IPO delusional ego trips ever,
right?

~~~
solveit
It's not a delusional ego trip if it made you a billionaire.

------
neonate
[http://archive.md/p0KYR](http://archive.md/p0KYR)

------
doublement
> The sixth floor of its low-slung headquarters was redone, with a large
> section just for executives, including an exercise room.

Building an executive oasis in the office probably counts as some kind of
warning sign. Departure from reality.

~~~
ProAm
Pretty much every company has special amenities for executives.

------
jeromekampot
What I find the most depressing in this saga is that all the people mentionned
are now sipping champagne from their 5 star hotel room. All are
billionaires/millionnairs thanks to a fraud. While good/normal/working people
are just trying to pay their bills. How do you build a society where
lying/cheating/bullshitting is more valuable to the community than working ?

~~~
javajosh
Well, all societies are bound to collapse, and that's probably one reason.
More tactically, the wealthy are often polite, non-violent, and spend a lot of
money in their near vicinity, and this serves to _completely insulate_ them
from the social/emotional effects of how they acquired the money. Nasty looks,
shunning, or the threat of it, goes a long way toward enforcing social norms.

Another issue is the often jaw-dropping cynicism of a business world so
obsessed with doing things, that any concern with how they are done is totally
ignored. It's a world in which "cheating" loses its meaning; anyone who is
incensed at unethical, or even illegal (but not enforced) behavior is a naive
rube. Ultimately, I think this happens because of a catastrophic failure of
the justice system.

~~~
TheOtherHobbes
The numbers in a billionaire's net worth include no contextual information -
nothing about the lives damaged, the jobs lost, the opportunities eliminated,
the time wasted, the scamming, cheating, and manipulation, the ecological
support structures destroyed.

Business and personal accounting systems deny, ignore, and suppress those
contextual details. So does the "investment" industry. And that makes a
mockery of "price discovery" because the nominal market price always excludes
critical externalities.

It's possible to become extremely rich without negative externalities. It just
happens to be _incredibly difficult_. The looser your ethics, and the less
empathy you have for competitors and victims, the easier it gets. It's a
feedback loop which rewards unethical behaviour.

Essentially, money itself is a form of morality-laundering. It's an integer
when it should be a complete trace through a common contextual event map.

~~~
javajosh
Indeed, and what makes it interesting is that the information can (and should)
travel in both directions: just as I want to know what my dollar has done when
I buy an apple (e.g. I paid starvation wages to farmers and justified clear-
cutting of a piece of rain-forest, gave political contributions to some
dictator, etc) and the vendor gets to know how I earned that money (e.g. an
office job where I make software content that tricks users into giving up more
personal info, ultimately to get a higher ad price).

You run into a technical issue in that you can trace a dollar _indefinitely_
in both directions. But perhaps there's a solution, like some sort of decay.

~~~
JimboOmega
I don't know if you've ever seen "The Good Place" but it's a driving plot
point of a recent season that it's almost impossible to be "good" because
every action you take has all these unintended consequences/ supports all
these negative systems.

------
HeWhoLurksLate
Interesting first two lines. :( Anyone have a mirror?

~~~
6nf
[https://luxorr.media/the-money-men-who-enabled-adam-
neumann-...](https://luxorr.media/the-money-men-who-enabled-adam-neumann-and-
the-wework-debacle/)

~~~
dboreham
"Mr. Neumann mesmerized them together with his pitch"

