
The WeWork IPO - denzil_correa
https://stratechery.com/2019/the-wework-ipo/
======
braythwayt
Refreshingly, this article opens by stating the strong case FOR WeWork’s
business, before getting down to asking whether this is a sound investment
given the founder’s behaviour and the structure of the company.

But when it does turn its attention to that, it is as unflinching in its
criticism as it was optimistic in its appraisal of the business opportunity:

 _Everything taken together hints at a completely unaccountable executive
looting a company that is running as quickly as it can from massive losses
that may very well be fatal whenever the next recession hits._

~~~
mrtksn
Wouldn't recession make business real estate dirt cheap for WeWork too?
Wouldn't it make flexible business spaces even more valuable when things are
uncertain?

At first glance, maybe a recession can enable WeWork to acquire lot's of real
estate under really favorable conditions and make it's premium when the
recession is over. Don't you think so?

Also I'm under impression that the WeWork ysers are not the well funded
companies but smaller companies and contractors and those people usually make
money on their services, instead of relying on funding keeps flowing intil
they exit.

~~~
jvagner
A recession now will make their already signed real estate too expensive, and
that will happen when people dial back in discretionary expenses.

~~~
mrtksn
They may be able to re-negotiate their contracts. It might be much more
desirable to let your tenant get cheaper price than go bankrupt. It might be
more profitable to cut a deal concerning prevoiusly lent space if your tenant
is willing to expand the lending when no-one else wants to rent.

You know what they say? If you owe your landlord 1 month of rent for one room,
you have a problem but if you owe your landlord 10 years of rent for 1000
buildings, your landlord has a problem.

~~~
v77
Man, this was covered, in-depth, in the article. Not only the recession case
but the fact that WeWork will likely just default on a lot of leases in the
worst case scenario as the lease is signed by a independent corporation that
has no assets for the landlord to seize. In addition, of course landlords
would re-negotiate with WeWork, better to have some money than none.

~~~
creeble
Except, as noted above, real estate leases usually don't get renegotiated. I
don't know if it's because of the long time frames or exactly why, but
landlords frequently would rather leave a building empty than not get their
rates.

~~~
BRAlNlAC
It’s because there are huge tax incentives for “under preforming” real estate
investors. It’s honestly maddening. You literally get to deduct everything
short of your desired “market” rent (even if the market can’t bear it, you
just need a team of appraisers on your side) and you can even include upgrades
and entrepreneurial risk as a deduction.

[https://www.nreionline.com/finance-investment/struggling-
vac...](https://www.nreionline.com/finance-investment/struggling-vacancy-you-
may-get-break-property-taxes)

------
mrosett
I'm glad Ben laid out the bull case simply because nobody else is doing that.
However, the analogy to AWS isn't compelling. First, running data centers is a
much bigger challenge (technically, organizationally, and financially) than
running your own office space. That's why AWS can maintain 30% gross margins
and still be cheap at the price. By contrast, it's hard to imagine WeWork
getting that kind of margin for repackaging leases (and adding beer and
smugness into the mix.)

With the rise of serverless computing and similar technologies, there's also
the question of utilization. Setting up your own server for an occasional
request is expensive because you end up using some small percentage. of the
capacity. AWS can make a lot of margin by pooling and smoothing demand for
those occasional services. I don't think there's a good analogy in the office
space category: maybe shared kitchens? Your average small business is much
better at managing it utilization percentage for office space than for
compute.

~~~
julianozen
While this is true, the ability to get space in a new city for exactly as many
employees as needed, without having to have someone on the ground who knows
local neighborhoods is pretty compelling. By going with WeWork a company has
reasonable assurance that the location will be in a good place, have nice
amenities for happy employees, and have the comfort knowing they are
purchasing the right amount of space for their current needs and can expand or
contract quickly. This makes expansion much quicker and lower risk.

Sure a company doesn’t need to offer beer or kombucha or be in central working
districts, but not having to figure out all this info on their own when they
just need a few rooms in a remote city is what companies are paying for. Like
scalable sever infrastructure, the benefit isn’t the cost savings, so much as
not having to hirer experts for things outside your business domain.

~~~
kolbe
You're giving a perfectly compelling reason for someone to use WeWork. Clearly
there are hundreds of thousands of people for whom WeWork offers a service
that benefits them. But there is no reason for me to believe that the few
companies that cannot afford to pay a local expert a few thousand dollars to
help them with a move is going to lead to WeWork fulfilling its $1T/year
vision.

~~~
julianozen
But this is also the way the world is moving – don't hirer or purchase
anything that is not your companies core competency.

Don't run a janitorial service? Use contractors and hirer/fire at will [1].
Don't run a CRM service? Use Salesforce and pay per user. Don't run a server
company? Use AWS and turn on/off servers. Don't run a payments company? Use
Square/Stripe and never think about payment types.

Modern business is becoming (for better or worse) about owning 0 assets and
only focusing on your core product. Yes, with all these things you can do it
yourself, but having a company that is an expert in that service saves your
business time (and often already employees the best resources in that
industry).

[1] [https://www.nytimes.com/2017/09/03/upshot/to-understand-
risi...](https://www.nytimes.com/2017/09/03/upshot/to-understand-rising-
inequality-consider-the-janitors-at-two-top-companies-then-and-now.html)

~~~
kolbe
Where AWS succeeds is actually in its ability to save money. Netflix has
elastic demands that are negatively correlated with other users. Netflix
doesn't have a system to share compute resources with say a hedge fund. Amazon
steps in and allows them both to save money by having one server fulfill both
their needs instead of two. The problem being solved has nothing to do with
expertise. Netflix is as equipped as anyone to manage their own data center.
It's not just domain expertise. It's a marketplace.

That said, there may be reasons that WeWork could entice companies to join,
but there still need to be reasons. Extrapolating with a hand wave just
doesn't cut it.

~~~
julianozen
Well the same thing applies. WeWork can step in and allow Netflix and a hedge
fund to save money on a floor in a remote destination where both companies
don't know anything about the region except for how many people they plan to
employ there. When one of them needs a bigger office, they move out and
another company moves in

Again Netflix is equipped to have office managers, find people/firms to scout
nice neighborhoods to remote cities, and stock kombucha, but all of this
requires hiring people to do a job that Netflix fundamentally doesn't care
about. WeWork will save money for companies not ready to commit to long term
leases, and it will certainly save time for companies that don't want to have
to think about this

~~~
kolbe
What I'm pointing out is that Netflix is not equipped to manage a shared
server marketplace. They don't manage their own servers because Amazon/Google
can do it more effectively for more reasons than expertise. You seem hung up
on the idea that companies just want to give up money to pay other people to
do stuff they don't like.

A better analogy may be legal work. Law firms offer a way to use lawyers as
companies need them, and to share these resources among multiple companies.
But all corporations still hire in-house counsel to fulfill the needs they
know that they have. None of them say "analyzing law isn't our expertise, so
we exclusively use law firms." But almost all of them use law firms, because
there are niche specialties that aren't worth hiring for, and times when more
lawyers are needed to handle a particularly heavy load.

WeWork can definitely fulfill similar analogous roles in real estate. When
Facebook has three people who wants to work remotely in Missoula, co-working
spaces will win their business. But Facebook is never moving its campus to
WeWork, and any startup with over 50 people and decent funding will realize
how unnecessarily expensive it is to use a coworking space, and cut out the
middle man. What's left is not a $1T/year business.

~~~
julianozen
[https://www.bizjournals.com/sanjose/news/2018/06/21/facebook...](https://www.bizjournals.com/sanjose/news/2018/06/21/facebook-
wework-mountain-view-lease-campus.html)

------
docker_up
I lived through the dot-com bust. In Silicon Valley, there were scores of
"technology parks" that were completely abandoned for years afterwards when
the bust hit.

This is a company that can thrive in a Fed-fueled ZIRP economy that only goes
up. If we don't dip into recession and keep growing for the next 15 years,
this company will be genius.

But if there's ever a stumble in the road, it's also the type of company that
immediately collapses on itself.

I also can't stress enough how detrimental Softbank has been and will be to
Silicon Valley. They are dumping billions into companies that have no business
being alive and if/when the econonmy collapses, it's going to be bad for the
entire world. It's like preventing forest fires that clean up dead brush and
instead sets up for a huge uncontrollable forest fire.

I'm personally trying to figure out how to protect myself, whether it's
through buying US Treasuries, or gold or diversifying my cash in various
currencies. But personally I don't think the fund is going to survive and
there will be terrible repercussions from it.

~~~
aczerepinski
There’s also a possibility that the economy grows indefinitely, but remote
work overtakes hour-plus commutes to city centers as the preferred working
arrangement for startups.

~~~
ghaff
OTOH, you also have at least somewhat of a trend of those young urban
professionals wanting to live near those city centers rather than commuting
out from the suburbs. And those that do end up living in the city probably
don't have nicely appointed offices in their apartments.

People's preferences vary of course but I imagine that, under those
circumstances, a lot of those remote workers would like an office they could
go into--at least some of the time.

~~~
mocha_nate
Just dropping in to say the comment threads on this page are refreshing! Way
better than what you’d find on reddit, Twitter, etc

------
WhompingWindows
The comparison between WeWork and AWS the author attempts to make in the bull
case is deeply flawed, IMO. He states the AWS story: commoditizing servers and
allowing new customers to get in cheaply/quickly/easily.

Then he compares to that to We Work...well, don't many customers already have
libraries, cafes, and their own homes to potentially work from? Did AWS
customers have numerous server options to easily use in case they needed to
save money? How are these comparable? Adding ping pong tables and surveillance
tech to an open office work space is vastly less useful than AWS.

And corporate entities, surely WeWork will rely on those and not just
contractors/freelancers/entrepeneurs, right? Well, corporations in a recession
would likely lay workers off, so this dream WeWork has of gaining corporate
partners seems unlikely in the next 5 years, if a recession is to hit as
everyone claims. These corporate players will probably have excess office
space of their own, never mind paying for more.

I appreciate attempting to present the bull case, but comparing WeWork to AWS
is laughable.

~~~
sturgill
I thought his AWS comparison was more favorable than it seems you did. I
remember launching a startup in 2009 and our head investor (who was a CFO at a
bespoke insurance firm) was floored when he saw our financial docs and that we
were able to make our infrastructure expenses OpEx instead of CapEx.

As AWS got its start making it easy for startups to get access to
infrastructure, the bull case for WeWork is that startups choose that
environment over signing a traditional lease. It’s not that a startup can’t
work out of a coffee shop, just like we could have theoretically run our own
email servers. But a physical location and address has advantages and WeWork
opens that to more people with less friction than the pre-WeWork options.

But that’s the bull case. I’m not a financial analyst and I’m not your
financial analyst so this isn’t financial advice, but my risk profile tells me
to pass on this opportunity...

~~~
majewsky
> [He] was floored when he saw [...] that we were able to make our
> infrastructure expenses OpEx instead of CapEx.

Can someone ELI5 to me why spending a dollar on OpEx is better than spending a
dollar on CapEx?

~~~
patio11
You'd likely be able to expense the dollar (deduct 100% of it against your
taxes in the current year), versus having to capitalize the CapEx (deduct
perhaps 20% of it against your taxes in the current year, via depreciation,
while carrying the remaining 80% on your balance sheet for the next ~4 years
in this stylized example).

The real magic, though, is flexibility: you don't have to bunch all of your
server purchases into an annual (or worse) exercise, execute a buildout at a
data center, and then somehow allocate them to internal teams consuming them
prior to the next capacity planning exercise. You just fire API calls, and a
bill arrives at the end of the month. The bill may be _a lot_ of money, but
the amount you were spending on planning, building, operating, fixing, and
decommissioning your infra was a lot of money, too, split between big spiky
equipment purchases and employee salaries with a dusting of leases and
electricity on top.

~~~
SilasX
Am I understanding that right, that there are major inefficiencies induced
merely by how you have to expense capital purchases?

~~~
jmccaf
The second paragraph beginning "The real magic, though, is flexibility: "
describes practical benefits that are not just due to accounting.

~~~
SilasX
Right, but it sounded like that flexibility was at least partly about not
needing to buy the computational resources on a rigid schedule, which, in
turn, is due to capex accounting requirements.

~~~
sturgill
It’s also never a convenient time to buy a new physical server and set it up
in a colo facility while managing DR. Especially when your bread and butter is
a CRUD app.

------
Traster
The thing that bothers me about the comparison between WeWork and AWS is that
Amazon builds, owns and operates AWS data centres. Wework largely doesn't own
the properties. I think that's a pretty important distinction.

Also, whilst a normal business can't really build a "AWS competitor for
Chicago" the "A WeWork competitor for Chicago" seems like a much bigger
threat. If the only way that WeWork can win those situations is by running at
a loss in competitive markets and then monopoly pricing in other markets
you've got two choices: Either they'll never make money because they'll always
be loss leading, or they're facing being broken up by a regulator.

~~~
specialist
Further, AWS had Amazon as its first customer. Eat your own dog food and all
that.

I'm trying to think of a large business that could build (or did) an internal
WeWork like division, and then offered that service to outside parties.

Huh. I guess that'd be a big white collar employer that did project centric
work. Like a big consulting firm. Or an IT services unit, like Microsoft or
Oracle.

Imagine Amazon bundling their own real estate, construction, facilities, space
planning, and misc A/E/C functions as a service. For their own use. And then
offering that service to outsiders.

That's what WeWork should look like.

\--

I now predict that's exactly what Amazon will do.

Amazon will compete with WeWork and others in this space. With the advantage
of themselves as their own first customer. And unlimited capital.

~~~
outworlder
> Further, AWS had Amazon as its first customer. Eat your own dog food and all
> that.

Is that true though? I've read many stories about internal Amazon teams not
being allowed to use AWS and that, for the longest time, it was for customers
only.

~~~
alexatalktome
The alternative story told internally is that the predecessor to AWS
originated from a white-label storefront offering sold to traditional
retailers entering the digital world in the early 2000s.

Edit: Target, Borders (the late bookstore) and gap were example users. It was
called merchant.com (website url now redirects).

Supposedly AWS came about when merchant.com and the main site became hard to
manager resources for, so they were broken out into services and APIs a la
AWS.

~~~
vineyardmike
Here is a good history of this for those interested. I had to search after
seeing this.

[https://techcrunch.com/2016/07/02/andy-jassys-brief-
history-...](https://techcrunch.com/2016/07/02/andy-jassys-brief-history-of-
the-genesis-of-aws/)

I think more companies should look at selling their internal core-competencies
to outsiders. It would make starting and managing businesses easier for
everyone.

------
rossdavidh
So, this brings us to the possibility that WeWork is a symptom of a broader
problem, which is that all that money which central banks have been printing
since 2008 has mostly gone into doing stupid stuff. Eventually, the reality
beneath the accounting always comes to the fore. In 2008, the reality that
spending so much labor and resources on ever bigger houses for people who
already had houses, didn't really produce much benefit (probably not even for
the people living in the new houses).

The money glut printed since 2008 has mostly not gone into new productive
capacity, it has gone into a lot of software-related hooey like Slack, WeWork,
Uber, and various new social networks. I don't even think these have improved
the target sectors that much, far less have they been worth the labour and
other resources put into them.

It feels like another Fiscal Crisis is coming.

~~~
onlyrealcuzzo
All that money did not go to fund "hooey" tech companies. $450B total has gone
into VC since 2009. Stock buybacks in 2018 for U.S. companies alone was $1.1T.

Total global QE is $12.3T.

U.S. stock buybacks alone could be about $5.3T--or an order of magnitude more
than global VC investment.

~~~
sol_remmy2
I'm not sure why you're trying to draw a connection between stock buybacks and
QE when there isn't one.

Stock buybacks are just tax-optimized dividends.

~~~
linuxftw
Stock buybacks are a misappropriation of capital fueled by QE/low interest
rate environments.

------
Multiplayer
Having used wework for a couple of businesses, and left after 12 months or so,
I have a slightly different view.

I think wework is a noisy, distracting and expensive pit stop on the way to
remote work. The company turnover at the weworks we were at was remarkable, to
me. I don’t know the root causes (business closing? Unsatisfied?) but it
seemed very transient.

Our businesses moved to fully remote and enjoyed a significant rise in
productivity each time.

Wework feels like a massive bet on open plan offices. They didn’t work for us.

~~~
unreal37
Companies entering a new market will rent a spot for their "6 person team" at
WeWork. And within a year they'll transition to a real office.

WeWork is indeed a pitstop. A pitstop to better offices for companies on the
rise. Or a pitstop to working from home for people who think they need an
office to work from but eventually don't.

~~~
morrbo
Is it different in the US? in the UK (London) it is literally like 25%
(£1000+) more expensive than just renting a "normal" (nice) office. Couple
that with the "noob" factor of having clients or whoever walking into a big
"WeWork" labelled building, and i just simply don't get why people do this.
The offices and facilities in most of them also look like glorified cafes. If
it was dirt cheap i'd get it, but at the moment i'm just at a loss. What are
you paying for?

~~~
freehunter
I can't speak for WeWork specifically since the closest one to me is about 3
hours away, but I'm renting space at another co-working place near me starting
next week. The space is $275/mo for a dedicated desk, compared to $1300/mo for
the cheapest (second floor) office space nearby. And that $1300/mo does not
include furniture, utilities, or coffee. If you need an office, it's a no-
brainer. And I'm not going to meet clients at my home.

I'm not sure what "noob" factor there would be... meeting clients at home
would be worse. Meeting them at a cafe would be better than at home, but worse
than an office. WeWork or any other coworking office is one step below your
own office, but far above the alternatives. If you're worried about the
signals you're sending to clients, at least a rented office (even at WeWork)
sends the message "we have enough money to afford this". A cafe or home office
does not send the same message.

~~~
morrbo
Sorry, i should have been more specific.. i'm talking about the 6 person
company the OP was on about (assuming they get a private office for 6 people)
as opposed to just one singular person here. From what i can see in my cursory
googling and previous experience looking for offices, wework still comes out a
lot lot more for a lot less.

~~~
unreal37
Well the theory is this. Company X wants to open an office in London. But they
don't know much about real estate, and don't have time to search around for
offices, sign a multi-year lease, or get furniture.

But they can sign a deal with WeWork that gets them a 6-person enclosed office
that they can move into tomorrow.

So you pay a premium to avoid the hassle of doing it yourself. Much like
anything in life.

And if the expansion into London doesn't work out, they cancel the month-to-
month lease with WeWork and their financial exposure is finite. You can't just
walk away from a 3-year office lease.

------
xivzgrev
I respect the hell out of this author but this article to me fell a little
short of his usual rigor/insight.

Two points I would’ve like to see him analyze given the AWS metaphor

1) gross margins - this article reports 15-20% not 30% AWS
[https://news.crunchbase.com/news/gross-margins-wework-and-
th...](https://news.crunchbase.com/news/gross-margins-wework-and-the-public-
comp-question/)

Maybe AWS was able to improve GM over time and the author expects similar
trend but he should explore this given the whole biz is built around variable
income.

2) comparing the core competency between AWS and WeWork. He only gives this
lip service and assumes the two are the same but I don’t agree.

I buy the argument that There’s core competencies in server management. In the
old days servers were pretty basic - you buy, install, and turn on. Done. But
then companies realized all that fixed supply was expensive so they made
server supply dynamic, being able to dial up and down on short notice. That,
plus integrations with lots of dev tools, necessitated a lot of software on
top of the hardware. So now a company can invest precious engineers in
managing that, or can use AWS or Google cloud, where the fixed costs of
developing that software scale infinitely. Plus add on new requirements around
security, etc and it’s a lot for a company to manage in house.

Compare this to office space. The fixed cost of lease is NOT scalable (only so
many people you can fit in a building), and the core tasks of managing an
office are...basically the same as they’ve always been. Sure you have some new
design trends and IT requirements, but it’s slow moving. And who manages
office space? HR and IT, which while valuable, aren’t forcing companies into
trade offs between working on that or new product features / revenue driving
opps.

I definitely agree wework is valuable for the flexibility. I just don’t really
see mass adoption from large companies in the long term. Sure some large
company may temporarily use them when they enter a new market but they will
revert to managing themselves once they feel confident in signing their own
lease.

~~~
yuy910616
Call it post-vacation hangover...Your point is very well made tho. Completely
agree that office space != Cloud Service.

------
rwmj
Regus (IWG) have been doing this for nearly 20 years. Apart from the slightly
funkier interior decoration, what's the big difference?

~~~
doppp
Nothing.

Regus has 2.5 million customers but WeWork has only about over a quarter of a
million. I live in a public housing estate in Singapore and there's a Regus
Business Lounge in our estate's public library. We aren't even talking about
the central business district, here.

I think WeWork has a lot more to catch up on in terms of scale and reach.
Right now they're just building up hype like a tech company but really,
they're just in the property space.

~~~
kevstev
_Nothing_

This is the key "problem." WeWork is a boring real estate business that is
trying to frame itself as some massive scale startup. Add in growth fueled by
a ton of VC money (not earnings), tons of leverage, not even for owned
property, but leases, some questionable deals with the CEO, insane hype and
trying to redefine accounting metrics, and in the end you have a "boring"
business dressed up in a pretty hype coat made of red flags.

------
734129837261
I've started working in Mexico City as a European software engineer. My job
offers 100% remote work and that allows me to work from anywhere. My home
includes a girlfriend and her incidental home office, so I went searching for
office space for myself, thinking it would be affordable in CDMX. There are
like 7 WeWork locations and tons of other state of the art places to work. But
for a private office sized to place one desk chair I'd be paying well over
€500 euros per month. And it won't be a corner office, it'll be a glass-
surrounded cubicle without a view.

So, instead, I went to look on AirBNB. I could rent a full apartment for about
the same amount of money, except this would come with a view, with a couch, a
shower, kitchen, weekly cleaning service, and all kinds of nice things.

But I kept on looking. There are numerous extremely luxurious buildings in the
city where middle to high class people live. And a lot of them have rooms for
rent. So I considered my own office room inside an apartment I share with 2
others. I can lock the door and I get 2 pets for free.

Best of all: The building is only 2 years old. They have a full sized gym on
the 22nd floor, 7 swimming pools of which 2 olympic sized ones and 2 infinity
pools, free saunas, free yoga and spinning lessons every day, a bowling alley
and gaming hall, an indoor soccer field, et cetera.

So I took that. The building even comes with integrated office rooms and a
full floor with couches and desks and tables and ping-pong tables and table-
tennis tables and a grand view of the city. So it's not like they're against
people working from there.

The problem with WeWork is that they aren't that interesting, not even in
cities that are more expensive. The credits you get only allow you to switch
locations until they run out, and then you need to purchase new ones for a lot
of money.

They should really do a few things:

1\. Look at the area they're in, at the very least be cheaper than AirBNB when
it comes to offering a space to work from. 2\. Once someone is a member, allow
them to work from ALL WeWork locations (in the public areas). No credits cost,
nothing. 3\. On the website, per location, clearly show how crowded it is and
how crowded it is expected to be that day.

They're way too expensive for what amounts to a crowded and noisy library. At
least in a library people are expected to keep quiet so you can work. At
WeWork I've been told you're to expect people coming up to you.

Side note: WeWork might be a great choice for companies who want to rent their
first office space. That's not something I looked into.

------
Kaslyn
>Everything taken together hints at a completely unaccountable executive
looting a company that is running as quickly as it can from massive losses
that may very well be fatal whenever the next recession hits.

Absolutely spot on

------
127001brewer
Matt Levin recently wrote about this too:
[https://www.bloomberg.com/opinion/articles/2019-08-19/we-
loo...](https://www.bloomberg.com/opinion/articles/2019-08-19/we-looks-out-
for-our-selves)

------
bryanlarsen
AFAICT, Uber, Lyft, AirBnB & WeWork's valuation can only be justified via the
natural monopoly angle: network effects and all that.

Ben's AWS comparison is apt because I don't think many people consider AWS to
be a natural monopoly. It has huge lock-in and a huge first-mover advantage,
but is not a natural monopoly.

~~~
braythwayt
But what is the lock-in with WeWork? It’s not like you have to rewrite the way
you conduct meetings if you move from WeWork to ACME.

With things like hotels and travel companies, there is a hidden lock in with
their integration with enterprise back end systems.

If there is any lock in, that’s my first guess as to where it would be: Big
companies would integrate with WeWork tightly, and there would a lot of
friction in setting up another company account, similar to what happens when
big companies have a process around becoming an approved vendor.

~~~
bryanlarsen
Isn't WeWork mostly used by small companies? Changing the address of a
company's "headquarters" is a PITA when you have a million other things to do
that actually progress you towards the goal of making customers happy.

~~~
braythwayt
This is very true, but a lot of software companies begin selling to SMB, but
move "up" to Enterprise companies once they have traction.

------
wallflower
The AWS analogy is flawed because there is a “lock in” to the ecosystem of AWS
services outside EC2 once you start using those services. Terraform aside, it
is not easy to divest of AWS once you invest in it for your infrastructure.

WeWork, on the other hand, has very little “lock in”. Not much to stop your
business from moving out.

------
m3at
Relevant thread on WeWork as well by Scott Galloway, from a few days back:
[https://news.ycombinator.com/item?id=20724260](https://news.ycombinator.com/item?id=20724260)

------
stephc_int13
The growing trend or working remotely is clearly contrarian to this case.

As a startup co-founder and CEO, I've never found their offer compelling
enough, way too pricey to put it bluntly.

And I really think that remote work is here to stay and grow.

~~~
not_a_moth
Not exactly. It actually took me a while to figure out that WeWork even offers
this, but for $45 a month you can have access to pretty much any common area
at any WeWork, with a per-visit fee ($25-$50) and 2 credits per month.

In other words, I can travel and work remotely, and maybe once or twice a week
check into a WeWork for a proper work space, unlimited coffee, and a bit of
camaraderie and networking. For $100-$200 a month.

~~~
stephc_int13
Ok, maybe that's just me, but I do not find that compelling either. I never
really managed to work efficiently on a laptop or with a lot of strangers
around.

If it was quiet as a library and equipped with real desktop screens (at least
two) and good keyboards, my opinion might be different.

And if working on a laptop is your thing, you might as well do that from an
actual library or a Starbuck...

~~~
isostatic
> Ok, maybe that's just me, but I do not find that compelling either. I never
> really managed to work efficiently on a laptop or with a lot of strangers
> around.

That's corporate hot desking for you.

~~~
stephc_int13
I know, I once worked at a startup where I made the mistake to ask for a
laptop instead of a good old boring workstation, figuring that I might want to
use it from home sometimes... I did only once.

My desk was a bit too close to the conference room and I could hear people
talking aloud on the phone, it was overall extremely unpleasant.

Of course I could kinda work with the laptop and the noise, but I never
attained the magic -flow-

------
inflatableDodo
> _" The obvious competitor is a company called IWG, with 3,306 locations and
> 445k workstations at the end of 2018. WeWork, in comparison, had 528
> locations and 604k workstations as of June 30, 2019. Note the date mismatch
> — this isn’t a perfect comparison — but that only makes the point that these
> are two very different companies: WeWork had only 466k workstations at the
> end of 2018; a year earlier, when the Wall Street Journal pointed out that
> WeWork’s then-valuation was 5x IWG’s (it is now 13x), WeWork had a mere
> 150k, while IWG had 414k."_

There are a ton of obvious competitors, they are not big, but they are
everywhere, at least in the UK. Hotdesk rental has been a common SME thing for
ages.

------
jpalomaki
Slack grew, because anybody from your organization could just acquire the
tool. No need to talk with IT.

What if same thing hapoened for office space. BYOD and support for remoting
allows people to work anywhere. If marketing finds the company HQ
unattractive, they could just move elsewhere.

Does it actually make sense for different teams to be stuck in one location.
Should they instead work close to customers or partners?

------
AtlasBarfed
AWS has data lock-in and offers fundamental capability-altering abilities to
its customers. And it can't be replicated without a massive influx of capital
to jumpstart (Microsoft, Google, etc).

WeWork has hundreds of competitors, including every building in a downtown
with unused office space, to say nothing of better organized entities.

------
webwielder2
>The tech industry generally speaking is hardly a model for good corporate
governance

I’d love to know what industry is!

------
goatinaboat
_2006 was the year that Amazon launched Amazon Web Services, a computer
hardware business that leveraged the commoditization of hardware_

I’m not sure that’s true. IIRC AWS started as a way to monetise the excess
capacity that Amazon had to have on-hand anyway to cope with spikes.

~~~
sterwill
That story doesn't appear to be true.

[https://www.networkworld.com/article/2891297/the-myth-
about-...](https://www.networkworld.com/article/2891297/the-myth-about-how-
amazon-s-web-service-started-just-won-t-die.html)

------
olivermarks
[https://www.bloomberg.com/news/articles/2019-08-20/wework-
an...](https://www.bloomberg.com/news/articles/2019-08-20/wework-analyst-
warns-ipo-filing-a-masterpiece-of-obfuscation)

------
mabbo
The bull case for WeWork is really well laid out here. And what it tells me is
that a well-run company competing with WeWork would (or will) destroy them.

Imagine a WeWork competitor that launches in a few years, at the bottom of the
coming recession, that isn't doing sketchy financial things to make their
founder wealthy. They could match or undercut WeWork's prices at a time when
WeWork will probably be barely alive (if they make it that long) and still
make money.

"AWS for Offices" is a great story, but it forgets that AWS has some serious
competition now. Hardware as a service stopped being a disruption and became
the norm with a competitive market. So too will "offices as a service" if
WeWork's model is correct.

~~~
southerndrift
What if WeWork is a bet on a future where no recession is going to happen? If
the zero-interest money policy continues, then the amount of money increases
and prices will slightly go up. No competitor can get the low rents that
WeWork has secured.

~~~
human20190310
If the thesis is that no recession will happen, and that money is free, why
not just borrow money and dump it into an S&P 500 index fund and skip all the
actual work?

~~~
southerndrift
Guess what buybacks are!

The problems for anybody else are diminished returns and the limited amount of
banks that are willing to give you money for nothing.

------
rrggrr
IMHO: Great stock to own if/when its trading about 50% down from its IPO. I
feel similarly concerning Slack.

~~~
ApolloFortyNine
IMHO: Once Slack hits 50%, it must be on its way out. Slack is one of the most
easily replaceable tech 'unicorns'. Your company could decide tomorrow to use
one of the many competitors (or clones, since they all look just about the
same) and the biggest downside for you would be having to resubscribe to
channels. And that's if they don't build a migration tool for you.

They're not even that great at what they do, they have regular downtime.

~~~
ValentineC
> _Slack is one of the most easily replaceable tech 'unicorns'. Your company
> could decide tomorrow to use one of the many competitors (or clones, since
> they all look just about the same) and the biggest downside for you would be
> having to resubscribe to channels._

As a tech community organiser, Slack's biggest appeal is that our members
usually already have the desktop and mobile apps installed because of work, so
it's relatively easy to onboard everyone by just asking them to add another
workspace.

------
xwdv
Before the next recession hits, WeWork will be the first to die.

I hope someone from WeWork reads this, and knows it to be true.

~~~
ProAm
Isn't this why all the companies are IPO'ing currently? Lyft and Uber hit the
10-year investment marker and were essentially forced to exit, but all the
others I feel just see the writing on the wall and know they can't outlast a
multi-year recession.

~~~
xwdv
Can’t say much about others but WeWork has been the product of a frothy bull
market for a long time where anybody with a half decent startup could pick up
generous venture capital.

But when that market tightens up, and we see less new startups coming out and
with less money than before, those startups will take a hard sobering look at
their finances and decide they simply can’t afford to blow money on shitty
overpriced hipster co-working spaces, which unfortunately for WeWork is the
only product they offer. WeWork will run into cashflow problems and that will
be the end of it.

~~~
i_cant_speel
What would be the alternative for small companies who want to have some kind
of space to co-locate? If they feel like they can't afford something like We
Work, they probably aren't willing to commit to a dedicated office space.

Also, it isn't just tiny startups that are using We Work. The article stated
that 40% of their revenue comes from large enterprises. The money will be much
slower to dry up for the large, established companies.

~~~
vichu
You do realize WeWork doesn't have a monopoly on shared office spaces? In
fact, they aren't even the biggest player in the space - Regus is.

~~~
i_cant_speel
Yes I'm aware they aren't the only ones. The person I responded to is implying
that total demand for coworking spaces would fall, and I was asking what the
alternative would be.

~~~
secabeen
Some possibilites:

\-- Home offices for employees that can have one.

\-- Move remote employees into corporate HQ or other existing offices, lay-off
employees who refuse.

------
nathanvanfleet
Why does this article keep calling WeWork a software company??????

~~~
TheCoelacanth
Because there's no way to justify their ludicrous valuation if you admit that
they are a real estate company.

------
dbuder
I disagree that WeWork has a lack of competition, they are getting crushed in
China and many local businesses are undercutting them. I'm shocked landlords
sign leases with an entity they cannot sue.

------
cde-v
This guy just gets off on being contrarian. Don't ask him the color of the
sky.

~~~
JackFr
Put another way, "I can't address his arguments."

~~~
cde-v
I'm not saying he doesn't do his research or argue well. I am saying all he
does is write contrarian articles on every topic.

