
WeWork Cleans House, Looks to Trim Staff Close to Ex-CEO, Sell Private Jet - mises
https://www.wsj.com/articles/wework-cleans-house-looks-to-trim-staff-close-to-ex-ceo-sell-private-jet-11569531640?mod=rsswn
======
alaskamiller
I've worked for CEOs like Adam, tho with way less access to cash. Ambition is
good only if you can pull it off, otherwise like like the greatest warrior
poet of our generation Dominic Toretto would say: it don't matter if it's by
an inch or a mile, losing's losing.

This dude had a plan, had big energy, earned trust, spent like a king, and
came up short some miles and inches. He was building We to be a holdings
company since the late-2010's-era, a la Zuck with late-2010's-era Facebook or
a la Mayer with mid-2010-era Yahoo.

This is what a WeWork tech stack would have been:

For construction: * Case - property development management software *
Fieldlens ($12.6MM raised) - construction site management software

For space management: * Euclid ($43.6MM raised) - space tracking software *
Welkio - lobby digital sign-in software * Waltz - digital lock software *
SpaceIQ - office management software * Teem ($100MM buyout) - room booking
software * Manage by Q - office vendor solution management software * Spacious
($9MM raised) - restaurant downtime

For business management: * Conductor - digital ads spam software * Unomy -
sales marketing spam software

For training management: * Meetup ($200MM buyout) - event and group management
software * Flatiron School - coding school * MissionU - fake college

For expansion: * Naked Hub ($400MM buyout) - Chinese wework clone * Spacemob -
Singapore wework clone * The Wing ($32MM investment) - Women wework clone

For fun: * Wavegarden ($12MM investment)

All of this prob has been a $2B spend. But Steve Jobs he ain't with the
integration so it's all loosely organized and disjointed. But Adam's at least
Steve Job's esque enough to convince Ashton Kutcher to call all this pile of
parts a tech behemoth.

Divesting all this will be a mistake.

Find a better CEO, get it all done.

~~~
Traster
You make a compelling case that you could put together a company that owns a
whole portfolio of products that essentially makes them dominant for office
rental. But there's three issues with that:

Firstly, a successful office rental company is valued at no where near the
multiple that WeWork claimed to be. So if this strategy is successful, what
you're left with is likely a company that is significantly less valuable than
the amount that's been invested.

Secondly, it's not entirely clear that all these things put together actually
would be a significant competitive advantage in the office rental space, where
the bread and butter issues are what dominates the running of the business.

Thirdly, let's assume this is a good strategy. Buying up these companies and
integrating them into a single purpose business is a difficult task that most
companies struggle with, it's much more common for these strategies to result
in massive acquisitions followed by write-downs. Even a good CEO would
struggle with it, but WeWork has _already_ bought these companies, so a new
CEO doesn't just need to slowly fold each company into the core business, the
new CEO has to handle the fact they already own these business and need to
integrate all of them, all at once, as fast as possible, before they go
bankrupt in a way that looks good for the IPO.

~~~
alaskamiller
Your assumption is that the narrative is that WeWork is an office rental
company when perhaps you can take the leap of faith and believe We was being
truthful in their intentions of "elevating humanity" or whatever. Therefore
their valuation is based on that.

The tell is amongst these post mortems being drummed up by the media they
remark how Adam Neumann is unreasonable when he demands the tech team to
"think bigger". I've heard that before when working for CEOs like Adam. He
managed upwards, sold that to Softbank Vision Fund, and fails in managing
downwards.

So on one hand it's an indictment on Masayoshi Son's tunnel vision when
spending his fund's cash.

On the other hand, that's in the past. It's already happened.

So to your first assertion: WeWork isn't an office rental company, it's a real
estate financial engineering holdings company with the intention of investing
its funding into software research and development to further make their real
estate financial engineering efficient. In simpler words, WeWork is in the
occupancy game.

Like McDonald's using burgers to pay its mortgages, WeWork uses monthly rent
and a splash of crossfit gym membership to pay its lease.

Therefore to your second point, it is indeed clear how these things would be a
significant competitive advantage. If you think of a building as a living,
breathing being, WeWork is the means in which it monitors all that goes in and
out of that building. WeWork knows when someone shows up, wanders about, sips
coffee, takes a poop, and leaves. WeWork knows when you are occupying a space.

There were some stuff tossed in to help you create and grow a business so that
they can hedge against you running out of money and leaving.

Next step they want to help you be occupational, so they bought up stuff to
make it so that you can go from idiot to trained. They also wanted to help you
occupy your home.

Then he gave away the other silly stuff like raising children to his wife and
brother in law.

Now for your third point, is this a good strategy? Yes. Masayoshi agreed. Will
it work? Won't know till you try.

Except two things may have gotten in the way:

a. WeWork over-extended and needs more cash, Masayoshi Son was painted in the
corner to not being to give more cash, they found themselves in a situation
where they had to IPO in order to get more cash.

This is inevitable for the sake of chasing ambitious hypergrowth.

b. Adam Neumann is inherently greedy and shady, bad at operating a business,
and bad at technology integration.

Will anyone else available now be able to manage the 12-18 mo process of
integrating all that they've bought? Maybe. But it doesn't sound like they
tried or figured it out.

When Microsoft swallows up businesses they work fast to rebrand, clean up the
insides, then toss it to their sales force to recover costs. When Google
swallows up businesses they leave it alone but then shut it down later. When
Facebook swallows up businesses they leave it alone and their businesses grow.

So one might say Adam Neumann just isn't in the same leagues.

And Masayoshi Son is now seen as bad at picking which handful of people out of
8 billion on this world is going to be the next big thing.

Oh well, the world spins on.

------
sadmann1
Incredibly hard hitting cuts, hopefully they yacht is spared at least

~~~
inimino
> Mr. Neumann’s staff included at least one driver for the $100,000-plus
> Maybach luxury car he often traveled in.

That poor driver is gonna be forced back on the job market I bet.

~~~
maxaf
There’s always Uber.

------
codesushi42
You know things have really hit rock bottom when the private jet has to go.

~~~
habitue
Maybe they can keep the staircar

~~~
rumanator
Banana stand is a great name for a venture capital firm.

~~~
themacguffinman
There's always money in the banana stand.

------
helpadvisors
I'm a member at WeWork in Brooklyn - personally I think they could use more
staff. Our community manager told me her inbox is flooded w/ "tickets" from
petty things about chair noise to room temperature. Overall, I like it here
though.

~~~
sib
If I ran the place (I'm just the "primary member" for a 20-space private space
in one of their LA locations), I would suggest that they prioritize handling
all of these real problem tickets and stop spending time planning and
coordinating massages, astrology readings, ice cream with unpronounceable
names, etc.

~~~
EpicEng
But then they would just be a landlord and not a VC backed lifestyle brand
super hip co.

My mental image of the old CEO is Ryan from The Office.

~~~
JohnJamesRambo
And the average investor in WeWork is a Michael Scott type that thinks he has
the next big thing lined up.

------
stefan_
Feels like they need to clean house at whoever invested billions in a company
run by a guy embezzling and his in-laws.

~~~
rolltiide
The thing I like about finance is how you can make things legal simply by
writing the action in a contract and by sometimes disclosing the contract.

~~~
jgalt212
tell that to Dennis Kozlowski

> Kozlowski, prior to trial, asserted his innocence by stating, "I am
> absolutely not guilty of the charges. There was no criminal intent here.
> Nothing was hidden. There were no shredded documents. All the information
> the prosecutors got was directly off the books and records of the company."

[https://en.wikipedia.org/wiki/Dennis_Kozlowski](https://en.wikipedia.org/wiki/Dennis_Kozlowski)

[https://en.wikipedia.org/wiki/Faithless_servant](https://en.wikipedia.org/wiki/Faithless_servant)

~~~
icelancer
This was a really interesting case. I agree with the civil rights lawyers who
fiercely criticized putting it in front of jurors.

~~~
dwoozle
Then why didn’t he request a bench trial by a judge?

------
bogomipz
>"Also out are some of the 10-plus staffers who worked directly with Mr.
Neumann in a group that was referred to internally as the “oval office” and
included some friends who worked on personal deals for him."

Wow so there were people on the We payroll that were being paid by We Co. to
work on private deal's that only benefitted Adam and not We Co? The level of
of greed and hubris involved in the We story is really incredible.

~~~
inetknght
> _Wow so there were people on the We payroll that were being paid by We Co.
> to work on private deal 's that only benefitted Adam and not We Co? The
> level of of greed and hubris involved in the We story is really incredible._

Poke a little more at your own employer and you'll likely find just as much
shenanigans.

~~~
bogomipz
There's no Chief Impact Officer whose married to the CEO, no private jet and
no Maybachs chauffeuring the CEO where I work. You don't have to poke at all
to to be aware of things like that.

------
taude
Wonder if they'll do tequila shots after the Jet leaves the building?

~~~
rdiddly
Maybe "You Be Illin'" this time.

------
wyldfire
What's the utility of a private jet for an office space broker?

~~~
uoaei
You don't have to deal with air travel wait times when visiting locations
which are separated by great distances.

Not sure if that was the actual use.

Similar reason as to why Wal-Mart has a fleet of private jets.

~~~
blackguardx
Wal-Mart headquarters is in the middle of nowhere Arkansas. When my wife was
there, they had a strict policy that you fly private only when it is cheaper
than flying commercial. This mainly only happened when traveling with a team
that can fill the jet.

~~~
mdorazio
Thanks for adding info on this. Everyone I've talked to who has worked at Wal-
Mart HQ has talked about how cost-conscious the entire company is. I would be
really surprised if things like private jets there weren't part of a strong
cost-benefit analysis.

~~~
fgonzag
It also enables high level manager to visit stores and come back in the same
day. Or visit 3 stores in two days.

So those same managers are more inclined to go actually visit the stores they
are in charge of. Imagine having to visit 5 or 6 walmarts across different
small cities, doing it commercially would take a week or more.

------
nevi-me
Why did they need the jet? Was it to swiftly fly startup founders around the
world conveniently when they needed to attend something?

And to think that this mess nearly got listed :(

~~~
Barrin92
>Why did they need the jet? Was it to swiftly fly startup founders around the
world conveniently when they needed to attend something?

for the same reason Neumann's name appeared ~170 times in the IPO filing and
the corporate structure looks like Losts Dharma iniative

it's the only way to get a company that subleases real estate to look like
something that is worth 40 billion dollars

------
paulsutter
Amazing how quickly the WeWork brand has been demolished

~~~
sg47
WeFucked

~~~
PopeDotNinja
WeWorked.

~~~
maxaf
WeBork

------
lucideer
> _He will remain nonexecutive chairman of the New York company_

Phew. At least they haven't lost him completely. /s

------
pxeboot
I am not even sure who to blame for all these shenanigans. The CEO or the
people financing him?

~~~
merlincorey
Cherry picking, of course, but, my gut tells me it might be the CEO:

> Also out are some of the 10-plus staffers who worked directly with Mr.
> Neumann in a group that was referred to internally as the “oval office” and
> included some friends who worked on personal deals for him.

Charitably, some high aspirations from Mr. Neumann and excellent synergy to
have his personal deals team on-site at his We office.

> The plane was a favorite of Mr. Neumann’s, who would use it frequently to
> zip between his homes in the Bay Area and New York.

The main use of the plane was for personal reasons, not business ones.

> Attached to his office was a small spa an ice bath, according to people
> familiar with the matter.

I wonder if this is a normal amenity offered to CEOs and if it is more
prevalent in the Bay Area or New York City?

> The office is in the process of being cleaned up,

... which I take to mean they are removing the spa?

> and as a director, Mr. Neumann’s access to the company’s facilities will be
> more restricted, the people said.

And here's where I hear a loud buzzer signaling that someone is not
appreciated within their organization - no one wants to see them on-site after
they leave.

~~~
inimino
Yes, but... who do we blame for it going on this long?

~~~
raiyu
The board of directors. They have a fiduciary responsibility to the business
and shareholders and obviously they were looking at high level financials and
not digging in further. It is a bit surprising that Masayoshi Son of Softbank
would fund so many rounds when it was quite obvious that it was a house of
cards.

With Uber, at least there was a real business, with some real differentiation
and not the tremendous Capex overhead of real estate to weigh down the
business. Imagine if Uber had to employ all of the drivers full-time and also
own the cars outright, that would be a dramatically different business.

But everyone is happy when things are moving up and to the right, but in this
case, the losses outweighted revenue. It's one thing for a startup to be
burning x% of revenue to grow market share, but to literally every year burn
more capital than revenue at such a massive scale is completely bonkers.

The only logical conclusion is that Masayoshi Son was calculated in this. In
that he had some belief that WeWork would work, but additionally if he was
able to markup his shares through his own investments, he could then raise a
second vision fund based on the supposed returns of the first one.

Obviously that plan is now shot with Uber trading below the value of his
private investments, and with WeWork it is an even larger hole that he has dug
for himself, because not only is it's value dramatically less than when he
invested, but there is a real possibility that the company may not be able to
get on to solid financial footing.

Softbank would literally be the only investor willing to put in more capital
at this point, and they almost have to in order to save the business, but at
that point, don't be surprised if the entire cap table is completely redone.

------
solotronics
And they always told me you couldn't party your way to the top. I could have
had a private jet if I kept it up!

------
not_a_cop75
But what if I want to have a group, shared meeting in a private jet? Hardly
forward thinking, WeWork!

------
ykevinator
That guy had it all, he was a year too late, he could have cashed out and
bounced.

------
CzarnyZiutek
...and the wework obsession at HC continues

~~~
GrayTextIsTruth
I keep seeing "wework isn't a tech company", yet there is definitely an
obsession here as if they were.

~~~
rchaud
I think the fascination with WW on HN is because of how deftly they've used
the "tech company" image to shield themselves from criticisms that their
valuation is far removed from their reality of their gargantuan losses.

