
WeWork isn’t a tech company; it’s a soap opera - artsandsci
https://www.theverge.com/2019/8/15/20806366/we-company-wework-ipo-adam-neumann
======
SamWhited
This is the place where literally every one has the wifi password "P@ssw0rd"
(or something similar, I forget) and instead of just connecting an HDMI cable
to your laptop in the conference rooms you have to download some spyware that
only works on Windows and Mac (despite the fact that their primary client is
tech companies, many of whom use Linux or other OS's). Also never try
printing, that just doesn't work, and the conference rooms are impossible to
book if you're at an even slightly popular location. They also have a crappy
website that they claim "builds community" or something, but everyone I've
ever worked with just dreaded going on it because it meant wading through
advertising and spammy posts from the handful of companies that actually tried
to use the forums just to get a little customer support for the wifi or
whatever was going wrong that day (and there was always something). I've
worked in WeWorks a lot, sadly, but never again if I have any say in the
matter. There are plenty of cool one-off coworking spaces that do a much
better job. The downside of course is that you can't drop into one in any
city, but that's what coffee shops are for.

~~~
roland35
It seems like their isn't much benefit to brand loyalty here - I would imagine
it is easy to simply do a google search for a short term work place in a new
city if you need a change of scenery from the coffee shop!

~~~
freehunter
I think it would be amazing to see a co-working brand have locations
absolutely everywhere, like 24 hour gyms. One price gets you into any of them
and they're all the same. It would help with customer retention because
they've already paid $300/mo to get in, so if they move or travel they're not
paying someone else. They're sticking with you.

I'm surprised WeWork locations are so few and far between, while Snap Fitness
has a location on every other corner. There can't be _that_ much more overhead
to a co-working space versus a 24 hour fitness center.

~~~
big_chungus
It's not impossible, but I'm not sure a one-price-fits-all makes the most
sense. Let's say I travel mostly in the mid-west. I go to lots of co-working
spaces for my three-hundred-per-month. You, mean while, live in new england.
You travel to lots of spaces, too. Here's the difference: it is significantly
more expensive to operate a space in new england. Food is pricier, land is
much pricier, the list goes on. For a unified price, I would 1. have to charge
mid-westerners more and coastal customers less, and 2. Lose some money from
mid-wester customers which could have been made from them.

Better price discrimination -> better profits; businesses seek to do this
every day with tiers, regional pricing, etc. Why would I throw all this away?

~~~
votepaunchy
Gyms solved this problem with pricing tiers. Silver, gold, platinum, etc. You
can only visit locations at or below your membership level.

~~~
SeeDave
That is a far more reputable industry than timeshares ;)

I would propose Silver, Gold, Platinum plus optional drop-in rates of $x day,
$x _4 for a week, $x_ 15 for a month such that $Gold - $Silver = $x*15

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tedivm
For the number of engineers they have you'd think they'd have figured out how
to build a decent wifi network with some actual security in it. Instead every
WeWork has the same password for the wifi (literally a variant on `P@ssw0rd`)
and it is super easy to spy on other people's connections. The hilarious thing
is they actually built a secure wifi network for their staff, so they clearly
recognize the need.

They also use the dumbest access points- they don't support roaming and
connect you to the least congested point regardless of speed. It used to be a
morning ritual of mine to toggle wifi on and off again until I had a decent
connection.

~~~
skrebbel
I thought I knew this stuff, but now I'm not so sure anymore. If I take care
to only visit https sites, what's the risk in being on an open network or a
network with a stupid password?

They can see what domains I connect to and when, but that's it, correct? No
MITM, no further snooping, right?

~~~
stefan_
A favorite attack vector is various auto-updating software on your computer
that downloads updates or update metadata over HTTP. For the longest time
Sparkle (an update framework used in Mac apps such as VLC, iTerm, ..)
defaulted to HTTP.

Once an attacker is in your network, it's more or less trivial to make that
software connect to a malicious update server.

~~~
Kalium
There's a limited amount of room to exploit this, this so long as signing is
handled correctly. The Debian Apt system worked this way for a long time.

Of course, a lot of code signing systems are mismanaged, so...

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baxtr
The Verge simply doesn't get it. WeWork will leverage their real estate assets
and come up with an AI-based cryptocurrency to monetize their community base.
They will call it _" The Country of We."_ Just wait for it. The time will
come.

~~~
not_a_cop75
The difference between reality and satire is getting smaller and smaller all
the time.

~~~
labster
Not just a You-topia, it’s a We-topia. This is how We build an enlightened
world for all of We.

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puranjay
I'm tired of my WeWork. I'm tired of the relentless positivity ("Thank God for
Mondays!") and faux corporate cheerfulness.

I freelanced because I wanted out of that corporatism where I'm reminded that
I don't just have to work; I have to be happy while doing it.

WeWork's championing of "makers" and "creativity" and all that gobbledock
might work for some people, but I just want a space to work out of that has
good WiFi and quiet people. I don't need to be told that I have to be happy
doing my work, or that my work is important or world-changing.

~~~
nkrisc
It's corporate cult-as-a-service for those who don't have an office that
provides that for them.

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zachware
What's so structurally fascinating, in a very morbid way, is the difference
between the balance sheets of the most heavily-funded late stage companies.

I have an opinion but regardless of it, if a no-asset/no-liability company is
losing money and the music stops, they can cut costs and survive. It's messy
but it happens.

WeWork is a completely different beast. It's occupancy costs + G&A are 105% of
revenue. If it can't sustain its losses with free flowing capital it can't cut
long-term liabilities as easily as headcount and perks (again, this is
morbid), so its only option would be bankruptcy.

So in this case it would seem that the most rational way to invest in it, if
you absolutely had to, would be in its debt. I have to assume, though, given
this ridiculous structure, that the opco would be shielded.

Man, we can't predict the future but it's pretty clear that if something
_does_ go wrong, it would be an AIG-level mess to unwind the complexities.

~~~
knd775
One of the founders pulled $700m out of the company, bought properties with
that money, and now leases them back to the company. This could've been a
solid company if it owned the properties directly.

~~~
galkk
That's insane. I believe that investors should sue for that.

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jakelazaroff
I wonder when this trend of calling companies "tech companies" — just because
they happen to use technology — will end.

WeWork clearly is a real estate company; Uber is a taxi company with an app;
etc.

~~~
rootusrootus
I agree on WeWork, but Uber is clearly not a taxi company. They're closer to
being a mobile app developer, though that still feels like it falls short of
an accurate description.

~~~
jvagner
I mostly agree with you, but I think what's happening here is reminiscent of
the e-commerce vs brick&mortar debates from years ago. Ultimately, Amazon
started as an e-commerce business that has a whole ton of brick and mortar
capital and infrastructure.

For a long time, tech companies wanted to do everything virtually (apps,
cloud, etc) and people NOT from the tech industry had an understanding of the
brick & mortar world and harnessed tech to create a boom of some kind.

I think Uber is like that, in that the level of tech needed -- not just an
app, but a global infrastructure that has to stay up and takes payments in a
lot of countries -- when married with the real world, created a kind of
behemoth.

They're also financial structure jockeys, and We is more contracts & funding
and not really all that much tech.

~~~
OJFord
> but a global infrastructure that has to stay up and takes payments in a lot
> of countries

To play devil's advocate though, that's just the 'back office' updated to
replace manual book keeping with automatic software. (Well, 'just'.)

I think we can usefully describe companies as both 'tech-heavy company in the
<domain>' and '<domain> company that uses tech' depending where the emphasis
should be for a particular sentence.

It just doesn't really mean anything to me alone.

~~~
novok
Google is 'just' replacing library card catalogs with software :p

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driverdan
This paragraph at the end stood out to me:

> ...The We Company, used to be called WeWork, but it changed its name. The
> new name was owned, Bloomberg’s Ellen Huet reports, by We Holdings LLC — so
> WeWork paid $5.9 million to acquire “we” and changed its name last month. We
> Holdings — you guessed it! — manages stocks and assets owned by… WeWork’s
> founders.

That's a huge conflict of interest. How would something like that be approved?

~~~
tempestn
Approved by whom? Someone might look at it after the fact, but nothing stops a
company from buying or selling with its shareholders. (In fact it's quite
common for private companies to pay owners for things like office space.) But
yes, it should be at fair market value; you're not supposed to buy something
for one price just to flip it to your company for a higher price (effectively
taking compensation as a capital gain).

~~~
nostromo
In theory, the board.

The board represents investors. And usually the big investors will have a seat
on the board.

The board should have intervened here.

~~~
driverdan
That's my point. The LLC owners / WeWork shareholders should have recused
themselves due to conflict of interest and the board should have shot it down.
This seems really sketchy to me, an end run to get money out of the company.

~~~
lancesells
Definitely seem sketchy and should give some people second thoughts about
investing.

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leroy_masochist
My lasting impression of the year-ish I spent at one of their NY locations
was:

\- The coffee was free, and great

\- The person behind the front desk had recently graduated from Princeton and
seemed way too smart for the job and bored

\- The beer on tap was free after 5, was locked up before then, and was
invariably some weird fruity craft beer that probably cost a lot

\- Printing a single page involved first waiting in line for 5-10 minutes and
then entering a 10-digit code into a really crappy office printer touch
screen, then manually re-authorizing the job you had just set to print. Like
DMV level inefficiency

All told, general impression was, "wow, they actually pulled off getting a
tech valuation for a real estate play".

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logfromblammo
Article author was confused by the org charts and diagrams, but it looked to
me like the founders are setting the public company up to be machine for
transferring investor money to themselves while maintaining voting control and
without delivering any additional value.

Can someone better versed in finance explain to me how this is not a blatant
flimflam to grab the IPO cash?

~~~
readams
The structure of the company is mostly about making sure that Adam Neuman can
minimize his tax burden while maximizing his compensation. It's not really
about stealing the IPO cash, but on the other hand nobody is better positioned
to take advantage of the value generated by the company than Adam Neuman, and
you can be sure, based on the history, that the governance of the company will
be driven by primarily what is good for Adam.

~~~
logfromblammo
I don't really see a significant difference between "stealing the IPO cash"
and restructuring multiple business entities such that the company's new
valuation is predicated on increasing revenues, yet those additional revenues
will actually be siphoned off via increased expenses to more closely held
companies, rather than reinvested into the public entity, or distributed to
its shareholders.

Who is dumb enough to fall for this nonsense?

I get that a lot of public companies make shady sweetheart/nepotism deals with
private companies part-owned by their executives and board members, or friends
and family of same, but why would you willingly be principal for an
untrustworthy agent?

~~~
AndrewBissell
The question you need to be asking is "who is corrupt enough to fall for this
nonsense?" The IPO will probably distribute the flaming bag of poo to various
pensions, ETFs, and other funds where a PM can be leveraged as a single point
of failure.

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jrochkind1
> I am just going to drop The We Company’s org chart here because it honestly
> leaves me speechless...

Indeed, I suspect that kind of a weird org chart of inter-related legal
entities is pretty typical for a real estate company... because, as the OP
suggests, that's really what they are.

~~~
ak217
Also morbidly fascinating is why real estate companies are so much more into
compartmentalizing themselves into all these LLCs/LPs/corps. Most of the time
they seem to do it to maximize the tax advantages and entitlements (and
contain losses) in specific locales. In California, most commercial buildings
are held by a trust designed to never transfer majority control, to preserve
Prop 13 property tax breaks.

~~~
aeorgnoieang
I think it also pertains to how individual deals sometimes include additional
investors or other parties to the deal/transaction, e.g. the parent company
partners with another local company for a specific deal and thus creates a
separate LLC/LP for just that deal.

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par
Incredible scam pulled off by Adam and Rebekah Neuman. Color me impressed.

~~~
unreal37
Enabled by Softbank. An investor who just throws an unlimited amount of money
at things.

~~~
tim333
Unlimited amounts of the Saudi's money in this case so who really cares?

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duxup
I'm not very knowledgeable about WeWork... but what exactly do they bring to
the table that wasn't being done before business wise? They just seem to have
office space like any other company that might.

Presumably the properties they bought or lease or whatever were somewhat
profitable before ... but now WeWork owns them and ... doesn't make money?

That seems, bad.

I'm skeptical of say Uber's long term sustainability but at least with their
app and business model they were doing something different that maybe could
eventually pan out (ok it won't... but there's something there). But WeWork
just seems like office space leasing ... on top of office space leasing,
except they lose money...

~~~
SamWhited
As far as I can tell the only benefit they provide over other smaller
coworking spaces (most of which are a lot better) is that there are a lot of
them. You can get a mebership at a WeWork in Austin, then pop into the one in
Tokyo to get some work done while you're visiting. That being said, that's
probably not worth the expense, terrible technology, or loudness of weworks
for most people.

~~~
roland35
They don't seem to focus much on the 'digital nomad' side of things either, so
I am not sure if that is a big part of their benefits! I'd imagine most of
their customers only use local weworks.

~~~
SamWhited
Yah, absolutely. It's the only benefit I can think of (and it's not really a
benefit, coffee shops and other coworking spaces with a day pass exist) and
I've never heard them advertise it. They only advertise "community building"
nonsense. I'm not saying that no company has ever made vital connections or
new leads in a wework, but I'd be willing to bet money that it's a very, very
low number. Nowhere I've ever worked has engaged with any other company just
because they were both in a wework other than maybe playing a game of ping
pong with some random people in the lobby or similar.

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euler_angles
This post just made We* seem like a big scheme just to make the founder
wealthy. Am I missing something?

~~~
mrnobody_67
You can say that about pretty much any start-up, though in public most
founders are all about the mission and changing the world (insert "HBO Silicon
Valley" meme here).

We has just been particularly blatant about it.

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madengr
WeWork can't crash and burn fast enough. Maybe it will be a trigger for the
next crash, when people realize the other "tech" companies are not tech
companies. Most "tech" companies are marketing.

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chocolatebunny
So I'm trying to look into IWG (which the article claims is WeWork's primary
rival) since it looks like they'll have less competition in a year or two. It
looks like they're traded in the London Stock Exchange. Google seems to claim
that they're owned by Berkshire Hathaway Energy but I can't find any evidence
for that.

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eof
Until recently I thought part of WeWork’s allure was they were a real estate
play underneath the office value add.

Incredible to me this isn’t the case and they have this type of status.
Especially with the recent “exposé” showing the CEO owns some of the buildings
WeWork is leasing from.

~~~
thomascgalvin
There's a real estate play, but it's the CEO who's benefiting, not WeWork
itself. A lot of the properties WeWork occupies are leased from Adam Neumann
himself, or an entity he owns.

------
barbecue_sauce
I would say that the fact that you never see anyone from WeWork post on Hacker
News is a good indicator that it's not a tech company.

~~~
cedricd
But how would you know?

------
coldcode
Looking at that S1 once its public the stock will be mostly worthless. But the
founders will be billionaires.

------
ZainRiz
@patio11 is a huge fans of their business model:

"I think this and remote work are the best bull case for WeWork.

In 2025, every Fortune 500 company will have 10k+ remote workers, and every
purchasing department will approve a reimbursement for WeWork with no
questions asked."

[https://twitter.com/patio11/status/1161796809741627392](https://twitter.com/patio11/status/1161796809741627392)

~~~
vanadium
> "[...] every purchasing department will approve a reimbursement for WeWork
> with no questions asked."

I think this is just a smidge over-optimistic, considering what I know of
finance teams at companies I've worked at, past and present.

Here in Midwest population centers, remote work is starting to become more
widely adopted from a "work from home" perspective. The moment there's an
expense report attached to pay for another office space, you're coming into HQ
and that remote work arrangement is going to be reviewed rather quickly.

------
stephc_int13
Why does all this WeWork thing smells like a Ponzi scheme or something?

~~~
MFLoon
Well, to the extent that all rentierism is the great grandfather of pyramid
schemes.

------
NohatCoder
I just wonder why banks continue to loan to this company? Their expenses are
pretty consistently double their income. They grow by selling the product for
way too little. Do they expect that customers are going to stick around if
they double their prices?

------
naringas
if WeWork is a tech compnay, what's their technology?

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paggle
I mean... it's neither? It is a real estate company. Why is everything a "tech
company" or a scam?

~~~
1v1id
Did you read the article? It's not saying that it's a soap opera because it's
not a tech company, it's saying it because of the crazy family that runs it
and the questionable financials around it.

------
endlessvoid94
This is awful journalism. Just awful.

------
kickopotomus
I don't disagree with the notion that WeWork is a shady "tech" company but
this article is terribly written and hard to follow. I couldn't even make it
halfway through.

> The thing _begins_ with an epigram: “We dedicate this to the energy of we —
> greater than any one of us, but inside all of us.”

Yeah, every S-1 I have read starts with marketing materials. How is this at
all relevant?

> I am just going to drop The We Company’s org chart here because it honestly
> leaves me speechless

Do not just add random images to your article and not explain or discuss them.
The org chart was not even relevant to what you were discussing.

I basically gave up after that because it took the author 4 more paragraphs to
even fully state their "soap opera" thesis.

~~~
kccqzy
The org chart was absolutely relevant. It was evidence that the company was
structured in an incredible way that's just waiting for disasters to enfold.

~~~
kickopotomus
I absolutely agree that it is relevant to the discussion but not where/how the
author introduced it. The image is just distracting and confusing without any
sort of commentary. The author even plainly states that they don't understand
it in the caption:

> This is the planned structure for The We Company after its IPO, as it
> appears in its S-1 form. I’d try to explain it, but I don’t understand what
> the fuck is happening.

If you don't get it but you want readers to be aware of it then either just
link to it or put it at the end after you have made your argument. Don't place
it at the beginning before you have even fully explained the premise of the
article.

