The entire image and “vibe” of this guy / his team is supposed to be an egalitarian re-invention of the status quo. The kibbutz story. The “community adjusted EBITDA.” The rebranding to “We.” But this sort of real estate self-dealing isn’t a We move, it’s a Me move. And thus, we find ourselves facing a bigger issue that is far more troubling if you’re a shareholder or employee (and somewhat enjoyable if you’re a competitor): the emperor has no clothes and the CEO is full of shit. He is self-serving and isn’t optimizing for the benefit of those around him.
As others in the tech industry are only beginning to figure out, once your curated narrative dies and the reality of who you really are comes to the surface, an unstoppable cycle of “bad press” and “negative sentiment” emerges. That’s a hard cycle to work out of, especially if the value of your company is predicated on your image / the image of the company. Hiring Obama’s speech writer and lobbying Congress doesn’t fix the underlying issue, and eventually you’re living in a Reverse Metcalf’s Law situation that’s scaling in the wrong direction.
As WeWork is built on an image of selling “a new, better way of working” to companies of all sizes, it becomes extremely problematic if people start to associate the brand with “the rich keep getting richer, and they’re screwing us over and working us to the bone along the way.” An image of a “collaborative enterprise” becomes a laughable fantasy novel next to the reality of, “we are funded by third world despots and our CEO is lining his pockets with as much of our money as possible, while scheming up ways to do petty things such as avoid paying the cleaning staff any sort of decent wages or benefits.”
This isn’t the We Company. It’s the Me Company. That’s not very innovative. That doesn’t foster greater productivity. And eventually, a lot of tenants aren’t going to pay for it, because it seems a lot of them really think they’re paying to be part of a progressive, futuristic environment. If their smartest and most progressive employees start telling them they don’t want to visit the office, they’re going to get rid of that office. Companies’ desire to please their knowledge workers — what originally drove WeWork’s success — thus ends up killing it.
We're not at WeWork because of hype, or the image of the CEO, or anything like that. We're at a WeWork because it's a cheap/easy way to get an office, that we can scale when the company grows with minimal issues since it's month to month. We shopped around a few competitors, WeWork happened to be the best combination of price vs. space vs. availability, so we went with that.
I haven't exactly done a poll, but I doubt that most WeWork customers know or care about WeWork's culture too much - they just need an office, and WeWork is providing a cost-effective solution. Maybe it's artificial because of VC money - if so, I certainly don't care - it'll be good while it lasts!
For contrast: at my previous company, we also wanted to move to an office (instead of working out of my apartment). We spent a huge amount of time looking at offices, and ended up staying put, because it was hard to find a decent office with a decent price, and signing up for a 2-year lease is a huge commitment which is not fun to make when you don't know the future size of the company - do you get lots more space than you need and pay extra? Do you get less space and are in a tough spot if you grow too fast?
Where is WeWork month to month? Yes the open plan area is month to month, but the instant you try to get a private room they want you to sign a 6 month commitment.
I have not gone to ones in the US, though. This is outside the US. Are they truly, genuinely cancel-any-time month to month? Or "yeah it's month to month but if you cancel before 6 months is up you have to pay 50% of the remaining months"?
There is some variation between offices though, so entirely possible you had a different experience.
The fact that no one can actually do real work at a WeWork was just icing on the shit pie.
I guess it's good if you like to meet people. Not so much if you need a quiet space to work.
In this case, the free beer might be an intentional way to take "loud room I can't work in", to "laid back atmosphere I feel home in". The latter is false, but it's not as bad as being stuck with "loud room I can't work in".
Disclaimer: I work in a private office in a London WeWork and the free beer is a nice to have, even if it wasn't a consideration while picking an office.
This is all just marketing. It's like believing all the actors in a commercial really are elated and blissful just because they chose the right brand of soda.
Like a luxury alcohol makers, they are selling identity, not chair by hour.
But I think it's very important to remember that companies can have moral standards and follow them. Many companies don't sell-out in crucial ways, and throwing one's hands up and condemning them all is punishing the ones that stay true.
I think moral outrage is a very important and effective market force. It will do things our government never could, like take down facebook. I'm glad we have this tool.
I agree, which is why I criticize shallow analysis of a company's motivation based on its skin-deep marketing veneer.
In this case it's not even moral standards - the implication is that WeWork's CEO is neglecting his fiduciary duty to maximize shareholder value by lining his pocket instead.
That's in fact a corruption of capitalism, it's illegal, and he can be sued for that by shareholders.
> I think moral outrage is a very important and effective market force.
I completely agree, which is why it's important to look beyond the marketing.
If a company can breach standards of morality and decency, but get away thanks to some 30 seconds commercial featuring smiling kids, then we will not be effective as a public in enforcing those very real consequences that companies should face for their actions.
There is marketing of product and then marketing of company and then marketing of person/people. Not only does each have varying levels of truth, but each also has varying types of intent. The later in SV seems designed to encourage beliefs about a person or company that are immune to facts that counter them.
Branding it as marketing starts, to me, to sound like a convenient cover for propaganda.
It is not ascertained by buying into the shallowest outer layer of its marketing veneer.
It’s pathological. WeWork, Google, Facebook and all the rest don’t need to shaft their cleaners, catering staff, security guards etc. The cost is a rounding error and it’s directly antithetical to their stated brand values. But they just can’t help themselves.
The comments on that article? Mostly something along the lines of "maximizing shareholder value" and "fiduciary duty to the corporation". Anything to avoid having to admit that this is wrong.
> Short term mentality and spreadsheet driven management has taken a toll on the American dream.
Yes, but stock market growth since the '80s is a big reason why the "wealth" of the average American has increased, even though wages have stagnated and debt has increased. One hand has been feeding the other for a long time.
Of course, all this is in the name of "security" and the least-privilege thing. It's horse shit really. You need to be able to trust your employees and then audit. But it's easier to manage people when you can just lock them into a position and leave them there to rot.
It’s only fitting that the owner would also be full of shit.
For every person shouting about crushing it and hammering back booze there are another handful quietly getting on with their work, happy to have an office space with stable, fast internet, clean, stocked kitchens, 24 hour access and clean, comfortable spaces - where they don't have to worry about sorting bills and contracts, cleaners, etc etc etc.
A couple of examples. Friends in Pasadena have an office that could fit 6 comfortably, 8 less so. $1300 a month. Guy at WeWork 1 block way, $1100 a month for an office just big enough to fit one desk.
A "hot desk" in Tokyo is $490 a month where as at my co-working space my dedicated desk is $400 a month. That includes "fast internet", meeting rooms, printers, copiers, cheap snacks, receptionist, networking events, cleaners, open 24/7 etc... The rent 3 person private office for $1k where as WeWork a single person private office is $1100.
They claim "coffee". Hardly seems like coffee is work $1k a month. Besides, there's probably 11 craft coffee places withing a 3 minute walk of my office.
And it's not an exception, there's been an explosion of co-working / shared office spaces in Tokyo over the last 2-4 years.
The great thing about instant coffee is that you don't even need hot water to make it. I've found that it mixes up great with cold water in one of those protein drink shakers with the little springy balls.
This is awesome because there's no heat or hot water in the storage unit I'm renting. That's a subject for another post, but I just need a parka and a pair of fingerless gloves to get the exact same experience as those co-working hipsters. Plus, I'm not subjected to the torture of an open plan office. My unit is in the basement, and it's dead quiet.
I'm sitting here, only five subway stops away from the fancy WeWork downtown, laughing my ass off at the startup bros high-fiving and "crushing it". I've got a way better experience, and all in I'm saving like $100-200 per month over those hipster bros.
Honestly, I think it's even decent with coffee that's ground ahead of time if it's stored well. Alternatively you can use it to make coffee concentrate that will keep for a few days in a fridge.
"This is awesome because there's no heat or hot water in the storage unit I'm renting. That's a subject for another post, but I just need a parka and a pair of fingerless gloves to get the exact same experience as those co-working hipsters."
a spectacular work of satire
Your startup business probably does not require couches, stocked kitchens, and wi-fi. It needs a mailing address, a phone number, a website, and a way for people to pay you. Those folding tables from Costco will still be useful after you can afford real desks.
Which should tell you something's up with their finances.
As part of an investment round for WeWork in 2014, he was
granted Class B shares that gave him 10 votes per share,
and now he has more than 65% of the overall share vote,
according to WeWork corporate filings.
So when WeWork responded with
-"The board is aware of it and has approved it"
they probably meant
-"Neuman is aware of it and has approved it" right ?
For example, by saying he has "special" shares that grant him 10x the votes of "normal" shares, he can sell way more than 50% of the company and retain 100% control.
This means shareholders are 100% along for the ride, and get no say in how he runs the business.
I could see a strong argument for the SEC coming down hard and saying "Okay, enough is enough. 1 share, 1 vote."
"Buyer beware" doesn't absolve a practice of being, at the very least, scummy.
Simple would be "1 share = 1 vote".
What's deceptive is the conflict of interest he created for himself that makes it unclear whether or not he is actually fulfilling his fiduciary duty.
Clear and conflict-free would be renting from someone unrelated, and renting his building out to different company.
This is not some underhanded, secret dealing. It's very much publicized. That makes it "not a scam" IMO.
EDIT: To clarify, almost every scam involves the victim doing something of their own free will. Either they do not have all the information they need, or they do something based on trust which is then betrayed.
So saying scams are okay because people can just not fall for them is completely asinine.
In this case, you could argue that WeWork's shareholders have been "scammed" because they trusted that the CEO would act in WeWork's best interest, not his own. However, one could argue that he violated his fiduciary duty in renting office space for WeWork from himself at questionable rent prices.
The reason he was interest and able to do that, profitably, was that he actually owns a relatively low % of WeWork's stock. So he can use his 65% voting power to decide to do this, WeWork loses on the rent each month, and he basically profits by over 80% of WeWork's loss.
He's in a position where if he steals $100 from WeWork, then his shares drop by less than $20. Because he has majority control, the board can't do anything about it unless they or the SEC decides he's gone too far and is into fraud territory.
What enables his insane margins there is the 10x vote weighting he gave his own shares. If it were 1 vote = 1 share then he'd steal $100 and profit $35. Still incentive, but not TRIPLE the incentive.
EDIT: To further clarify what I mean by "stealing" is this... let's say the rent would usually be $1000 a month for the space. If he's charging WeWork $1100 a month, he's stealing $100 a month from his own company.
Problems such as the one mentioned in this article start occurring when multi-class share schemes start allowing the founder to effectively sell off most of the company while still retaining total control.
Do you think Mark Zuckerberg's children should retain majority control of Facebook after he dies?
1. How divorced the financial markets are from the real economy.
2. How broken all our voting systems are.
Choose your narrative.
2008 didn't substantively re-tether the financial markets to the real economy.
Governance mechanisms are beginning to crack.
Also, there is a Ponzi-like aspect to VC funding in general, where incentives favor ever-rising valuations rather than the cultivation of sustainable, profitable businesses.
Certainly this is not a natural or easy problem, it requires a values analysis of our goals and principles. But if we truly want the market to evaluate a company, we must ultimately allow that market to change the fate of a company. The dual class shares prevent that, which I agree should be listed differently or restricted.
For example, if dual class shares were always subject to a confidence vote by the other shares once per 5 years, this is fine. Or you say that after 20 years the dual class must be dissolved. Allow the use for initial listing, but not forever. I think the author of the linked speech painted a very good picture of this.
Why would a WeWork object to paying Neumann's rent? WeWork is bascially Neumann anyway! Why would Tesla object to buying Musk's other companies? Tesla is basically Musk anyway! Why wouldn't levandowski just employ his own company to supply components he was procuring for Google? Why wouldn't Shkreli pay his hedge fund investors back with cash from one of his other companies?
It's amazing how often 'innovation' and business success turns into corrupt self-enrichment. Unfortunately justice tends to only come once someone suitably senior gets screwed. With Levandowski that was Google, with Shkreli that was the government. I suspect with WeWork the law suits will come the second the investment value drops - investors won't do a thing until they start losing money, rather than just making less money than they otherwise would have.
MG Rover: https://insolvencyandlaw.co.uk/why-didnt-insolvency-service-...
BHS: https://www.theguardian.com/business/2018/mar/27/philip-gree... / https://www.theguardian.com/business/2017/feb/28/philip-gree...
(fundamentally in a capitalist society that recognises no moral restraint on money and it's not illegal ... why not? Surely you take as much money from the investors as you can and pocket exactly as much as you can get away with without being prosecuted? Anything less would be economically inefficient! /s)
There's nothing inherently capitalist about corruption. It's a property of power, not capitalism.
Worth mentioning, Smith was primarily concerned when anyone had an unfair market advantage that would ruin the state of equilibrium.
Here's an anecdote: I've received hundreds of thousands of euros from my parents (in my early 30's), they fully paid my education in a well-known private lycée, a nice "classe prépa", an expensive French business school. They paid everything until I get a highly paid job in a European startup, incl. some student exchange programmes abroad. I'm getting dozens of €K a year as gifts (with absolutely zero taxes). I own a big flat in one of the most expensive city in the world (where prices keep rising), and tones of shares on the stock market (4x in a few years, thank you Wall Street). My gains on the sale of these stocks are taxed far below my salary, so I'm not working too much (I'm already saving 2/3 your yearly revenues, and own ~6x the median wealth in my country). etc. You probably get the point. I'd be glad if anyone can explain how I'm not taking advantage of an extremely unfair advantage, and what Smith (or any other liberal economist) suggests to reach a state of equilibrium where I have to compete fairly with my fellow citizens.
It seems that the most persistent problems we face often are. We can change our system of economic organization and politics but in the end the system is made up of individuals. Individuals who have all the same sort of flaws and who struggle with their human nature. It takes a lot of will and effort for a person to behave honestly and ethically. The interaction of peoples behaviors and the system they are in is a two way street.
I guess what I am saying is that we need to do the hard work of behaving better ourselves if we want to make our industry, community etc a better place.
Although this may be correct, it could also be the case that some systems nurture such "corruption" more than others. Changed societies produce changed people. For example, the widespread desire for fame only arose around the start of the 15th century but it really does seem quite natural to us now. A famous economist once wrote,
>Economists have a singular method of procedure. There are only two kinds of institutions for them, artificial and natural. The institutions of feudalism are artificial institutions, those of the bourgeoisie are natural institutions. In this, they resemble the theologians, who likewise establish two kinds of religion. Every religion which is not theirs is an invention of men, while their own is an emanation from God. When the economists say that present-day relations – the relations of bourgeois production – are natural, they imply that these are the relations in which wealth is created and productive forces developed in conformity with the laws of nature. These relations therefore are themselves natural laws independent of the influence of time. They are eternal laws which must always govern society. Thus, there has been history, but there is no longer any. There has been history, since there were the institutions of feudalism, and in these institutions of feudalism we find quite different relations of production from those of bourgeois society, which the economists try to pass off as natural and as such, eternal.
We tolerate the corruption that comes with certain societal structures, because we gain more by having them than we lose from the corruption. You can't scale anything to national or international size without introducing a principal-agent problem.
Pardon me, but I'm not immediately seeing the distinction, maybe I've read the statement wrong and found the wrong conclusion. Can you clarify/unpack that statement a bit? If it's not a property of human nature, how is it then endemic in human societies?
Does not the second sentence you're offering here completely betray the first?
In a close-knit, tribal society, limited by the human brain capacity for maintaining personal relationships, where everyone knows everybody else, it is not very profitable to betray a trust. After the first time someone does it, many of their peers revoke their trust, and that person then has to re-earn enough of it to reneg again. Each time, it becomes harder to get ahead.
In order to grow societies of larger sizes, we instituted trust-by-default relationships, just to make goods move from the loading docks. If human nature is 90% trustworthy, this is 90% safe. The remaining 10% can be dealt with via retaliatory mechanisms: bond revocation, lawsuits, arrests, etc. As long as the individual responsible can be identified, and punished, there is significant disincentive to reneg.
To grow larger still, we instituted pseudo-anonymous legal fictions. We started doing business with companies, instead of people. This provided an opening for the renegade 10%. They could let the company establish trust, take control of it or a portion of it, betray the trust for personal gain, and let the corporate shell take the brunt of retaliation--if anyone ever even found out about the betrayal. The type of person who would become corrupt is drawn to positions that are corruptible: the bosses of businesses and bureaucracies, and the cronies and collaborators of those corrupt bosses. The ultimate goal of a corrupt person is to be the fox in charge of a henhouse--nay, in charge of a whole poultry farm.
Whenever we rely on structure rather than people to manage societal complexity, the structures may be attacked whenever no one else is looking. The corporation cannot refuse to do as the CEO demands, as it has no will of its own. You can't watch everyone all the time; we just can't afford the costs of that kind of labor, that only humans can do. And whatever human oversight mechanism you may institute can then be infiltrated by the corrupt 10%, who can collude to profit from failure in oversight.
Qui custodiet custodes? It's corrupt cop-watching cops, all the way down.
It's like an auto-immune disorder. How can your body possibly defend itself from its own immune system, at the same time as all the foreign pathogens? So the corruption becomes endemic, because there are not enough people watching to keep everybody honest all the time.
If you put out a tray of goods with a price label and honor box, 90% of people will pay the correct amount if they take something. It only takes one renegade to empty the tray, break open the honor box, and ruin the whole thing for everyone. Or even just to take goods from the tray without paying, one at a time, until the profits are all gone. It's not worth paying someone to watch one tray. So set up a camera to watch it. That just adds a separate camera-disabling step for the renegade. Put up a camera-watching camera. The renegade tapes a photo of the tray-watching camera over the lens, disables it, then loots the tray. It's an arms race. The only way to win is to put another human in the loop, and the instant you do that, you have to pay them, and then your profit margin is shot. Besides that, there's always the 10% possibility that the person you pay to watch your tray is a corruptible individual, and they'll just go halfsies with the tray-looter.
> Except in edge cases which might not really be capitalism
Oh well then those weren't real communism either. /s
You aren't wrong, but it's worth noting that the US protection of capitalism (more or less) was a pretty awful force throughout the 20th century.
Moreover, in its idealized form, capitalism has less of the state, whereas in its ideal form, marxism/communism has strong involvement of the state, versus classical socialism/anarchism in the Proudhon/Benjamin Tucker sense. There's even an essay by Tucker from the 19th century where he predicts the rise of leninism, gulags, venezuela-like conditions etc, as a natural consequence of Marxism, long before they even happen.
Otherwise, there are many contemporary examples of concentration of capital. Whether it is distributive isn't the question, but more the trends of distribution.
It's also quite interesting you mention central banks here, considering the substantial evidence of bulge bracket banks acting as an antithesis to your statement about risk (i.e "too big to fail").
I think it's only fair to judge the entire reality surrounding an economic system.
Too often people want to abandon markets and replace it with something that solves some of the problems but introduce tons of their own, instead of fixing obvious problems within the current system that was otherwise working well.
The better solution is a bunch of smaller experiments being run simultaneously in large economies (Ala at the state level) to see what works best. Instead of pretending we can have a one-size-fits-all best solution for the entire world.
Same as any other system which allows largely unchecked power.
That's the same argument that says "USSR/DDR/Cambodia/NK/etc was no real communism".
We might excuse a few diversions from a political/economic system, but after some point, like with anything else, capitalism is what capitalism does time and again.
It seems like corruption is simply endemic to the human condition. It has nothing to do with capitalism/communism/etc. Whatever the system happens to be, we will find a way to corrupt it.
Having said that, I find it to be rather unproductive and pessimistic to assert corruption is endemic to humanity and has nothing to do with ideology. Instead I would argue that the nature of the corruption has everything to do with the ideological foundations of said system.
This kind of blank-slate, "New Soviet Man" idea has been tested and found lacking.
How so? Is corruption different somehow depending on the ideological foundations of the system? Corruption is corruption. Every system has rules. When you subvert those rules for personal gain, that's corruption.
Different systems enable, empower, and encourage, different types of corruption.
(Corruption being an abstract word, in programming terms there's no corruption "class", just corruption instances. So the nature of those corruption instances depend on the classes defined in the program -e.g. capitalism.c- you're running...).
(And of course share some basic corruption types, present in all societies/systems, e.g. theft -- the POSIX of corruption).
Check the @pjc50, @Traster etc comments at the top.
And @humanrebar already put this in abstract form: "It's worth noting that luminary capitalists like Adam Smith were very much concerned with privately enabled rent seekers in addition to government enabled ones"
Those are specific examples of corruption here in the US. Are you asserting that you wouldn't be able to find the same corruption, for example, in China?
Please provide a single example of corruption that can occur under capitalism, but wouldn't occur under another economic system. Because I'm asserting they do not exist.
> And @humanrebar already put this in abstract form: "It's worth noting that luminary capitalists like Adam Smith were very much concerned with privately enabled rent seekers in addition to government enabled ones"
Yes, he was perfectly right to. There are always private parties. Even under communism.
I'm saying that some types of corruption are endemic to certain systems. And if we see these types of corruption time and again on a system, then the system enables that type of corruption.
>It seems like corruption is simply endemic to the human condition. It has nothing to do with capitalism/communism/etc. Whatever the system happens to be, we will find a way to corrupt it.
My argument wasn't about corruption in general (which we will always have under every system), but about a certain type of enterprise-related corruption, that can't be brushed away by "no true Scotsman/capitalism", as if 'truly adhering' to the ways of capitalism would eliminate it.
If a system of government promotes X then there will appear X-related corruption. Capitalist governments promote enterprises, thus appears enterprise-related correction. Governments which promote the church will foster church-related corruption, etc. etc..
I don't see how this observation about capitalism is a particularly interesting one. Perhaps you could make some ground with "and capitalism uniquely allows this corruption to flourish on a scale never seen before" but that's not what I've seen in these kind of kneejerk criticisms.
Governments which are the party will promote party corruption. [looks at China] Yup. Checks out.
Just because people are creative and invent new ways to be corrupt doesn't mean captilist societies are indifferent.
I would expect people skeptical towards corporations to see some common ground here.
And by that standard, I'll take capitalism every day of the week:
A good deal of research justifiably focuses on what life is actually like and the nature of exploitation in capitalist societies, and especially under neoliberalism. I'd point you to the work of D.K. Foley, Dumenil and Levy, Roberto Veneziani, Naoki Yoshihara, G.A. Cohen and John Roemer on those points.
That sort of ignores the actual theory of communism, but so far it's a pretty accurate assessment.
Some people will do that in any system, it's human nature.
Now, in a system that has the rule of law you cannot be prevented to do something that isn't illegal. This is actually the best (or least bad) system we've come up with.
It's childish to blame capitalism.
In a systme that has the rule of law, the lawmakers can choose to make certain behaviours legal if or when they harm the society. For example, private and corporate tax loopholes can be closed, and corrupt behavior can be outlawed or a liability instituted that the harmed party can claim.
It's childish not to blame capitalist governments for allowing certain kinds of corruption that are left to fester.
Jeff Bezos can amass $100 billion in wealth and donate it to philanthropic causes, but if he decided to open source AWS or pay his workers a living wage, or pay publishers a reasonable price for books, etc, he wouldn't have $100 billion in the first place.
I would argue that this is not strictly speaking true. There are successful companies which don't (seemingly) put profit first. Examples include Morning Star (tomatoes, not the newspaper), Mondragon and perhaps most co-operatives in general.
Capitalism very clearly and unapologetically forces this, while some people imagine that, somehow, that constraint does not apply in other systems.
no, that’s too strong a claim. capitalism’s innovation is that it redirects greed into productive uses and allows personal gain in the process. so it explicitly accounts for our greed but doesn’t depend on it. it allows more pro-social forms of trade and competition as well.
the reason it seems so heartless/exploitative is that highly competitive markets push the competitors to extremes and money is used to keep score. and people cheat easily; some not to lose, some to win at all costs. (even in non-highly competitive markets this happens if status is highly sought by owners/execs)
What national economic system can function without people exploiting the system for personal gain?
The top 5% of children in some measure of ideal traits for just ruling are whisked away to a bubble where they are educated for the purpose of governing, with no opportunity to ever rejoin the general populace. They have absolute power but no opportunity to benefit themselves or their families.
That or we could tax externalities globally.
So he's not subject to max SSN and Medicare taxes?
Could you sketch out your idea a bit more? At the moment, I'm not getting it.
There are tons of ways to force people that don't involve putting a gun on their head...
"forced" can happen in more ways than one. Workers in third world sweatshops aren't forced by law to work there, but they are forced by capitalism to work there to feed their families.
Also: Exploit (v)
2. To use selfishly for one's own ends.
I don't believe that Bezos or other employers are acting selfishly when them employ people, even when they make a margin on that labor. (In fact, if they don't make a margin on that labor, they would be better off to stop employing that person, meaning the situation where the employee and employer both make money on the deal is the most stable state.)
That's a baseless claim.
If anything, empirically it's true. It's the opposite idea that's fairy tale baseless...
A key differentiator between the two is perhaps those that complain about capital gains tax effectively "taxing them twice".
oho, you are also the company?
This is one of those instances where yes, of course it would be nice for you if you didn't have to give as much money to the government in taxes. But that's just not how it works.
Capitalists are also concerned about conflicts of interest.
Anything less would be economically inefficient! /s)
Smart, far-seeing capitalists are able to see beyond mere legalities. Too much cronyism makes capitalism less efficient, because it starts to resemble centrally planned economies.
Without democracy, capitalism would quickly devolve into feudalism or autocracy.
From a purely capitalistic view, democratic controls are limitations to be overcome through backdoor deals.
A smart, far-seeing capitalist realizes this is a collective action problem, and knows that there is no incentive not to practice cronyism as an individual.
They aren't choosing between having cronyism and not having cronyism... they are choosing between having cronyism and not participating or having cronyism and participating.
This is exactly the argument that Marxist made. They weren't going to let traditional middle class morality hold them back, they had history on their side and new what was ultimately best for society. They had real examples where trashing norms and moral codes ultimately worked for the best, such as overcoming a restriction on vivisection to cure a horrible disease. Or ignoring FDA regulations to get a helpful blood test to market. The argument can always be made. It just tends to end badly.
Arthur Koestler wrote about this a lot in Darkness in Noon.
No it's not. Smart, far-seeing people observe what's broken in the system, and many of them can fix it while making money. Then, there are people who don't care about externalities, and exploit the flaws while causing others harm. Sometimes outdated laws can be modified, or phased out.
The proposal of Marxists is that they take things away by force.
Modifying the law or phasing out a law is fine and smart people companies should do that. I felt like the OP was saying that when you think a law is wrong you should ignore it.
> The proposal of Marxists is that they take things away by force.
Breaking a law in most cases is taking something away from someone or some entity, whether it is rights or property. It is bad to take something away by force. But it is bad to take it away by stealing or cheating too.
I originally meant that as doing more than the law mandated.
Capitalism is not possible without state application of force and coersion.
Consider land ownership, for instance. It is completely predicated on the use of force. The only reason you 'own' your land, is because someone a long time back used force to take it away from someone else (Or, if they were the original settler, used force to take it away from the commons).
"Ah, but now that we've divided all the land into various lots that people own, we can divorce ourselves from the original use of force! Going forward, we won't use violence to secure new ownership of land!"
Well, under Marxism, after a one-time use of force, whereupon productive property is transferred to the ownership of the state, it can also divorce itself from the original use of force. After all, going forward, it won't need to use force to seize productive property, either - because it will already have an owner - the state.
All ownership requires force. Ownership of personal property typically requires a continuous personal application of force. Ownership of private property (Land, productive enterprises, etc) requires a continuous application of state force.
Force is a red herring.
Why do you go to work? To make money. So that you, or your children, don't have to go to work, and can pursue personal interests that don't have one whit to do with capitalism.
> Too much cronyism makes capitalism less efficient, because it starts to resemble centrally planned economies.
Can you give an example of 'central planning' in the modern world that wouldn't also apply to large businesses that operate at scale, like agribusinesses or mining?
Maybe I should write economic tracts for socialists and ancap Libertarians.
Can you give an example of 'central planning' in the modern world
I've seen what happens when huge companies start to mandate that, "All new coding will be in Java. All databases will be on Oracle..." That never works. Everyone figures out a way to drag their feet and bring that to a halt. What does work? Doing something like mandating that all systems will be accessible over Webservices. That opens up resources within the company interacting in new ways as they see fit.
I.e., no one running a company today
In that case, there's a huge market opportunity! (Why don't you throw your hat in?)
Left as an exercise to the student. (Advice: If you don't know the answer yet, don't throw your hat in.)
No, let me give you a clue.
My grandfather was doing microlending in the early part of the 20th century, even when Korea was still occupied by Japan. Even people who are dirt poor can get their hands on enough capital to get the ball rolling. In many cases, Chinese immigrants start off poorer than the poor segments of the societies they move to, and yet have climbed into the middle and upper classes in a few generations. Often, this is done by pooling resources.
Look at history. The key ingredient isn't capital. Those who believe it is are precisely the ones who fail at capitalism. (Often they are the ones who take capital away from others by force, then see those industries fail and fade away.)
The vast majority of small businesses fail; wealthier people are more likely to start companies and more likely to succeed. (For some intuition, they can afford the float, on their living expenses, if nothing else, for longer, until they find market traction.)
Capital is indeed quintessential to capitalizing on market opportunities through business. It is in the name for a reason.
You make a sweeping and inaccurate statement that people who understand the dictionary definition of capitalism are all socialists who want to start a red revolution, which is just ludicrous and broadly offensive.
(The fact that I've revealed a truly remarkable bit of my family's history to you, for you to simply dismiss it, speaks volumes. You demonstrate no curiosity about it. It's simply something for you to "debunk." Just wow. Do you have any idea what my Korean grandfather had to accomplish within the Japanese occupied system to get into the position to microlend? Do you know what that meant for the farmers he was able to lend to? Do you have any clue what the North Korean communists who came into power would have made of all that? No curiosity about actual history, just partisan axe grinding. George Orwell was right about upper/middle class lefties. They don't care about helping the poor so much as about hurting the rich.)
The repeated climb of Chinese immigrants, going back over a thousand years, across different eras of history, in widely differing parts of the world, is not mere anecdote. If you include immigrants of other ethnicities, then the pattern becomes stronger, and the evidence mounts.
The vast majority of small businesses fail;
True. So one tries again.
wealthier people are more likely to start companies and more likely to succeed.
That's Pareto, not Capitalism.
Capital is indeed quintessential to capitalizing on market opportunities through business. It is in the name for a reason.
Yet time and time again, poor immigrants get themselves into the game and succeed, with little or modest access to capital. Contrast this with the numerous situations where industries are socialized, but into the hands of a different class/identity group, then proceed to decay. Capital is helpful, but isn't the key. Culture and knowledge are.
In this, there is hope, because culture and knowledge are transmissible.
> Contrast this with the numerous situations where industries are socialized, but into the hands of a different class/identity group, then proceed to decay.
Dude, I am not advocating socialism. You are repeatedly attempting to frame this as capitalism vs socialism and that is just not even related. I am pro-capitalism as much as I am pro-gravity but also pro-facts, truth, and realistic personal financial advice.
Thankfully she sees the writing on the wall and is about to get her CPA and bounce, and I'm going to laugh when it all collapses around him because she's basically running the firm, but lawyers have a racket so you can't do profit sharing with the non lawyer plebs (by law) like paralegals so she gets a fraction of the pay to do most of the work while he lives the high life, which is exactly what imploded the old firm!
It's a bit more nuanced.
Does anyone know the motivations and publicly stated reasons for this absurd restriction?
> Does anyone know the motivations and publicly stated reasons for this absurd restriction?
Total speculation, but maybe it's to keep the profession controlled by its practitioners and not financiers? The exclusion of paralegals, etc. could just be a side effect of keeping investors out.
I do see some benefits for that kind of restriction. If your profession is bound by a code of ethics, it would help with compliance if all the top leadership were bound by it too. If they're just owners from outside the profession, there will always be pressure to compromise ethics to benefit the owner.
I'm sure they some other veneer for it.
Essentially, think of anyone who argues for certification.
If a lawyer was part of a company that wasn't a law firm, that would be fine. Actually, this happens pretty frequently--many sports agents happen to be lawyers, because sports agents are responsible for contract negotiations and legal skills are valuable in that situation--though they do not necessarily represent their clients as lawyers and hence the sports agencies they own and operate aren't treated as law firms.
For example, Drew Rosenhaus is a lawyer and a prominent sports agent, and his firm is neither a partnership nor a law firm. Rosenhaus is famous for a number of things, such as being the real-life inspiration for the title character in the film Jerry Maguire and holding a press conference with his famously difficult client Terrell Owens during one of the many controversial incidents he got himself into and responding to every question from the reporters with the phrase, "next question". He was also the agent of Chad Johnson, who famously legally changed his name to Chad Ochocinco for four years to get around league rules preventing him from putting that inaccurate Spanish translation of his jersey number on his jersey in place of his surname.
>(3) a lawyer or law firm may include nonlawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement; and
This bit seems like a loophole:
> (3) a lawyer or law firm may include nonlawyer employees in a compensation … plan, even though the plan is based in whole … on a profit-sharing arrangement
Accounting firms used to have the same rule (though they've relaxed it a bit to allow non-CPAs to own less than 40% or 50% as the accounting firms got more and more into "consulting"). The rationale is explained well here. Large law firms are making a similar, though slower, transition to expanding their consulting services. Particularly with respect to data privacy and cybersecurity. I would expect the rules to relax over time.
The U.K. recently permitted non-lawyers to invest in law firms but it doesn't seem many investors have jumped in head-first. Law firms and accounting firms don't have much by way of "assets" so they can be quite risky. I briefly worked at Deloitte with a former Arthur Anderson partner. He was quick to warn all of the young staff about what a terrible investment his equity had been. One rogue partner can sink the entire ship and leave the rest without much ability to recoup the money they put in.
Just seems like an excuse to maintain a racket to me.
You ought to watch out for your SO and this fella :P
It would be like someone trying to impress someone with a fake Rolex that the other person knew was fake.
You know how many girls have said "I can't stand him" to my friends and then slept with me instead of them?
Come on guys get real. Women aren't angels - quite the opposite.
In his autobiography, Benjamin Franklin relates how he found himself as a government official for the colony of Pennsylvania and then proceeded to hire his own printing shop whenever his office needed to publish a widely circulated document or pamphlet.
BTW, that autobiography is a great read. you can find it for free on Project Gutenberg: http://www.gutenberg.org/files/20203/20203-h/20203-h.htm
It would be brilliant to see an analysis of how commonplace this and other types of corruption were historically and geographically.
When you see countless companies get looted and crushed by private equity takeovers, to the point that middle schoolers can predict with accuracy when a company will vaporize, you get analysts with nonsensical stories about turnarounds, etc.
But when self-dealing management use the company to enrich themselves in a way that is at best ethically questionable, you don’t hear too much.
Once mutual funds and pension funds start investing in WeWork, then I’ll care.
There's also a variety of complications, from pension funds that do invest in VC funds, to national security implications of foreign principals funneling investments to individuals. You also have disruptive market behavior if we allow the boys with access to VC capital the ability to do whatever, while publicly traded real estate trusts need to meet regulatory requirements that prohibit that type of activity.
there is a good chance that pension funds have already invested in WeWork, directly or indirectly. Where do you think the money is coming from? The VCs aren't putting in their own money.
“all is mine which is not nailed down and nothing is nailed down that can be pried loose.”
Cultures, laws and traditions aren't set in stone and can be changed. If society and culture simply look the other way and the media simply rehash press releases, then the day will come when acting like this becomes the norm.
A CEO being the landlord strikes me as a big potential conflict of interest. For example, if the company needs to move to a larger space to grow, the CEO might want to delay to avoid losing income. Perhaps the company might have a prospective buyer who'd want to relocate everyone to their campus. In that case, there would be an external incentive for the CEO not to make the deal.
Why wouldn't levandowski just employ his own company to supply components he was procuring for Google?
The way this used to work, is that the employee would become aware of a market need because the current company had that need and would be a great customer, so the employee spins out her own business, then leaves to run it.
So how is this different than WeWork's CEO owning the building and leasing it to WeWork?
He's essentially acting like Ray Kroc.
• 20 year minimum lock-in for franchisee.
• A monthly service/royalty fee based on a percentage of the restaurant’s gross sales (currently 5%).
• A monthly rental being a fixed base rent and a percentage of the restaurant’s gross sales
• A monthly advertising contribution of not less than 4% of gross sales.
• All Outgoings including rates and utilities.
Also a metric butt-tonne of start-up costs.
Chairman of the board (the former CEO) just approved a $5.2 billion deal of some sort from EHL, the fund he is the owner and manager of.
Perhaps he's operating on a level we can't comprehend
To me, this smells like American culture just being corrupt.
It's also worth noting that the US maybe 20 years ago was somewhat exceptional when it comes to conflicts of interest. In other cultures, personal relationships and personal vested interests that we would consider "corrupt" are a load-bearing part of the social structure. So perhaps we're reverting more to the global mean on this point.
It was common knowledge that the "corporate art" on the walls of the buildings was owned by various members of the "C-Suite" and leased back to the company.
Don't even get me started on the private loans given to members of the C-Suite and Board then subsequently "forgiven".
I used to rage about it every time they published their financials.
Also Tesla is not named Musk, or Amazon, Bezos.
(a) you have FU money
(b) you'll get to keep having FU money (perhaps drastically less, but still FU money) whatever you try
Then you don't have "skin in the game" anymore like a normal person does.
If Bezos fortune goes from 100 billion to 5 billion due to bad bets, he still hasn't suffered anything more significant than some damage to his ego (meanwhile Amazon employees could see their lives and finances ruined).
It’s a fairly significant difference.
Functionally what is the difference in quality of life and power between the two?
The only thing I can think of is he'd no longer be astronomically one of the richest ten humans alive.
I also refrain from the concept of FU money, all that it connotates, and that someone else can determine how much I can have.
(And yes, the real world is not a fictional caricature.)
"I stake my personal reputation on the reputation of the company I run"
Also, once you become fabulously wealthy, you want something more than financial security, you want to be remembered. Look at the flip Bill Gates did with becoming a leading philanthropist. He doesn't want to be remembered as the evil, anti-competitive CEO of Microsoft during the 90s, he wants to be remembered for his work in the Bill and Melinda Gates foundation. Trump didn't want to be remembered as the shrewd personality on The Apprentice, he wanted to become President of the United States. Some just want to be extraordinarily rich to make "richest people in the world" lists (that's where I place Larry Ellison).
$2B is far from enough for most people to "be remembered".
"I had a great conversation with Albert Brooks once. When I met him for the first time, I was kind of stammering. I said, you make movies, they live on forever. I just do these late-night shows, they get lost, they’re never seen again and who cares? And he looked at me and he said, [Albert Brooks voice] “What are you talking about? None of it matters.” None of it matters? “No, that’s the secret. In 1940, people said Clark Gable is the face of the 20th Century. Who [expletive] thinks about Clark Gable? It doesn’t matter. You’ll be forgotten. I’ll be forgotten. We’ll all be forgotten.” It’s so funny because you’d think that would depress me. I was walking on air after that."
The shareholders do mind, because these actions may violate the CEO's fiduciary duty to act in their best interest. They can sue him for violating said duty.
Less relevant in WeWork's case, but very relevant in Tesla's case, since it's a public company, and in fact Tesla and Musk have been sued for neglecting their duties before:
Yeah, and how well is that going to work out for them? They should have known better than to invest in this company in the first place; companies like that are cults of personality. It's like investing in Sears under Eddie Lampert; you have to be a moron to put your money into Sears stock when it's obvious the guy is solely working to drain as much money out of Sears and into his own bank account as possible. And a lawsuit, even if you win, isn't going to net you much money.
So you are saying the investors (who are the current shareholders) stupidly bought into Neumann personality cult.
So now they are paying for their idiocy.
This isn't some failure of capitalism: it's the failure of large, wealthy, sophisticated investors to properly assess their own investment.
Other very successful companies that have/had a single person that basically runs the whole place as their own company are Berkshire Hathaway, Apple, Oracle, Microsoft, Amazon. The top five American companies by market cap are of this type. I would not say the this is such a bad thing as these people are looking out for the companies long term future. Compare HP before and after the founders left. Hewitt and Packard would not have focused the company around the evil idea building disposable printers that lock people into overpriced ink purchases. If society needs these huge corporations (maybe we would better of with out them?), I would much rather they be run by a single human than be a soulless bureaucracy with a figurehead at the top.
If Neumann fully owned WeWork, it would not be corrupt self enrichment to own the properties, just vertical integration. If the investors want them to work this way, is it really corrupt? I wouldn't think so.
I'm not a big fan of HP, and I especially abhor the inkjet printer business, but I'd like to point out there's more to HP (and even their printers) than this. Their business printers are still pretty good AFAICT.
My simple rule when contemplating a printer purchase: "do not ever, ever, ever buy an inkjet printer".
And in the case of successful founders, even without a controlling stake, just their reputation makes it harder to go against the CEO. Could anyone on the board have challenged Gates or Steve Jobs 2.0? In the modern era, who would challenge a decision by Bezos or Hastings?
Could any other CEO besides Hastings transitioned Netflix from a DVD business to a streaming media business, and on top of that spend millions of dollars developing a set top box and then decide at the last minute it wasn't in their strategic interest to sell it and spin it off (Roku). The same could be said about Bezos and Amazon.
 No the money MS "gave" Apple didn't save them. Continued software support with Office and IE helped a lot.
Check Carlos Ghosn's ongoing story for example
Don't forget Michael B. Rothenberg:
>The SEC’s complaint alleges that over a three-year period, Rothenberg and his firm misappropriated millions of dollars from the funds, including an estimated $7 million of excess fees, which Rothenberg used to support personal business ventures he claimed were self-funded and to pay for private parties and events at high-end resorts and Bay Area sporting arenas.
Of course, the founder is living meagerly like most educators (including the ones he employs or the one's he's taking funding away from)… wait, no, he's raking in the cash.
That said, BASIS provides an excellent environment for students that are compatible with its education model (read: students who would have been successful anywhere).
To paraphrase James Madison, the Senate ought to protect the minority of wealthy owners from the majority. Deference to wealth and ownership is in the DNA of the country.
America is a tacit caste system, heavily indoctrinated to believe it's a freer place than it is. While there's a stronger guarantee of freedom of speech/expression than other countries, who owns our time/effort is rarely ever discussed and the realities of it questioned. The owners do, of course, and direct it to their desires.
Which shows that outcome is not all that matters, legally.
How did get get the money to buy that building - if he is siphoning money from WeWork revenues and using that, that's illegal I suppose. If he used Wework stock options as collateral to finance the building, that could be some grey area I guess.
CEOs have a fiduciary responsibility to the other stakeholders of their companies. That's the problem here.
I'd rather this was the case completely -- privately owned, extensions-of-oneself companies and we had no BS like boards and stockholders...
100% with you here.
When companies grows so much ego becomes part of the game.
I think it goes beyond that, by people viewing whole states as such extension
Fortunately, most people are not sociopaths, but unfortunately most of these people will not achieve the successes you described.
Isn't business defined as enrichment of the shareholders?
So (depending on who owns the shares) it really shouldn't be amazing, right?
This is not someone who has a strong history of "the right thing to do".