Hacker News new | past | comments | ask | show | jobs | submit login
WeWork Cleans House, Looks to Trim Staff Close to Ex-CEO, Sell Private Jet (wsj.com)
106 points by mises 17 days ago | hide | past | web | favorite | 93 comments



I've worked for CEOs like Adam, tho with way less access to cash. Ambition is good only if you can pull it off, otherwise like like the greatest warrior poet of our generation Dominic Toretto would say: it don't matter if it's by an inch or a mile, losing's losing.

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

This is what a WeWork tech stack would have been:

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

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

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

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

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

For fun: * Wavegarden ($12MM investment)

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

Divesting all this will be a mistake.

Find a better CEO, get it all done.


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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

Except two things may have gotten in the way:

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

This is inevitable for the sake of chasing ambitious hypergrowth.

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

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

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

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

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

Oh well, the world spins on.


For comparison:

Marissa Mayer spent $2.3B - $2.8B on 53 acquisitions in 3 years to make Yahoo into a MaVeNS (Mobile Video Native Social) company. It didn't work because the core revenue engine just didn't flystart.

Mark Zuckerberg spent ~$30B on ~70 acquisitions in 8 years to keep Facebook a social platform through photos, chatting, and VR and he's been successful at it because the core revenue engine keeps it all going.


In the dot-com days Yahoo was $100B val. When Marissa took over it was hovering around $40B val. In the end Yahoo is priced out at $4.83B.

WeWork's $40B+ IPO val and the $4B+ re-val parellels Yahoo's Icarus story.

How does Marissa using Yahoo's $30MM in a sweetheart deal to pay a 16 yo kid in Oxford for his news summary mobile app any more "tech" than a $12MM investment in a Spanish engineering company making artificial waves.

Lol all of this is an indictment of how the last 10 years has been a crazy run.


Also, it's really an indictment on how the era of superpowered CEO is going to hopefully end. While Marissa and Adam share the same winner circle, Zuck is in the same league as Gates.


You forgot about Altaba. Valuation wise Yahoo basically treaded water under Marissa.


He made 9+ figures for hanging out and doing “super zany” shit. If that’s failure, sounds pretty good to me.


I can't seem to find anything about Case - can you link to them?



A tip: you can use an extra newline to make the bullet points appear on the next line.


A little hard to read but good points and background here, thanks.


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


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

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


There’s always Uber.


How will I have my off coastal sort of legal staff employed without taking my people 12+ miles out on the WeWork shared yacht?


Gives a whole new meaning to "off-shoring", doesn't it.


no, not the WeBoat...


Maybe Sea Org can have it


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


Maybe they can keep the staircar


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


There's always money in the banana stand.


You'd think they would have waited and flown it to/from the Global Climate Conference first.


It’s just PR


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


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


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

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


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


"Convergence, viral marketing. We're going guerilla, we're taking it to the streets while keeping an eye on the street. Wall Street. I don't want to reinvent the wheel, but it is what it is. Renting short-term office space just became fun".


*> Ryan from The Office

Wow, that is incredibly spot-on


Which just may have to do with the total lack of soundproofing at WeWork, poor HVAC, and lack of per office thermostats...imagine if the technology existed to solve those problems...


Which just may have to do with the total lack of soundproofing at WeWork, poor HVAC, and lack of per office thermostats...imagine if the technology existed to solve those problems...


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


Reducing his shares from 20 votes each to 3 was a start, but he really ought to only have the same stock class that retail investors will possibly eventually get. That’s the only way to keep founders in check.


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


tell that to Dennis Kozlowski

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

https://en.wikipedia.org/wiki/Dennis_Kozlowski

https://en.wikipedia.org/wiki/Faithless_servant


> the larceny charges at the heart of the case did not depend on whether the defendants took the money—they did—but whether they were authorized to take it

All these cases show is the very nuanced thing they did wrong, and how to do the same thing within the frameworks available.

The decision making authority and the written latitude available for it. They paid excessive ambigious things.

Very different from selling shares you own at market values and leasing property you own back to the company, and IP trading. This is the fun you see at WeWork.


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


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


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

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


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

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


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


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


Maybe "You Be Illin'" this time.


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


Really, none. It's justified by a grossly inflated sense of the value of their own time. They just don't want to fly with the plebs. And in the case of Adam Neumann in particular, he wanted to hotbox the plane.

In just one cross-country trip, the Gulfstream IV emits nearly double the CO2 that the average American emits in an entire year.


Not that it matters, but Gulfstream 3 and 4’s are the minority of gulf streams in the market compared to 5’s-650’s


Heyyy, I don't fart that much. Maybe 1/3rd ... at most ...


In a normal standard company, the argument for buying a private jet is that the value of the time it saved for the person(s) traveling exceeds the costs of flying & maintaining a jet. Wendover Productions did a pretty good video on the topic. [1]

[1] https://youtu.be/jYPrH4xANpU


Or (as in this case): the prestige of flying in on a private jet outweighs the fiscal responsibility concerns of anyone in a position to say "no." Same thing with the Maybach.


This is the justification but is true in only the vanishingly rare case of the company whose activities are constrained by the bandwidth of the CEO, like Tesla. In other cases the CEO should be paying for the jet from his post tax income.


Well, if we had the tail number we could see where it's been and work backwards from there.


Good idea! Unfortunately I can't search the FAA database right now because apparently it's only available during working hours... https://registry.faa.gov/aircraftinquiry/


The tail number is N1872. Sadly, most databases like flightradar hide private planes, and ADSBexchange (which does not) can't find it.


Presumably to fly him around the world to do deals like these:

https://www.insider.com/wework-adam-neumann-investments-wave...


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

Not sure if that was the actual use.

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


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


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


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

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


Fwiw, the nearby airport, XNA¹, opened in 1998 largely to replace FYV as the facility for commercial service. FYV was a crap airport from a pilot/dispatch perspective and flights often were cancelled when the the weather was below minimums; a frequent event².

As the destination airport for both Wal-Mart execs and vendors seeking an audience, FYV was a huge headache for all involved.

Curiously, XNA had its own problems when in 2011 runway degredation was found, so a temporary one was built while the main runway was torn down and re-slabbed. What a PITA.

¹—at the time of its opening it was nicknamed the "eXtra Nice Airport" as a cute promotional blurb and as a handy mnemonic for its unique IATA code.

²—legend has it that in its initial planning phase the surveyor for the siting of FYV died prior to making a final recommendation; "luckily, " they found on his maps a big red X and assumed that would have been his recommended location. So, rather than contract another surveyor and incur more expense & delay, they just went with that and built it there. However, when the airport opened, the frequently fickle weather there with subsequent disruptions to service led those in the know to acknowledge that the "big red X" must have meant, "this site is completely ruled out." Oops.


Wow... if the legend for [2] is real... just wow.

Building an airport based on some scribble a dead person left behind... boggles the mind.


Well obviously... The private jets are typically used when a person literally cannot deal with delays due to time pressures on their schedule or geographic constraints. Is that really the case here?

From the article

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

Also, Walmart is a business that actually makes money. Doesn't seem like the same situation.


There are private jets (aka baller) and there are private jets (corporate airline). I assume We was the first and Walmart the second.

I worked for a Fortune 500 that ran two commuter jets that few to each of their major sites each day.

Why did they have them? Because the volume made it cheaper than airline tickets. If I remember they billed the respective cost center $150 each way.

All the stops were in the NE US.

Still, it was luxurious compared to commercial travel. No security checks, board, close the door and take off.


its so he can work out of any of the wework offices of course!


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

And to think that this mess nearly got listed :(


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

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

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


Rumor is Neumann had to step down because he flew the Great Circle route.


Amazing how quickly the WeWork brand has been demolished


I think they are working to preserve the brand, and are demolishing the personality cult.


WeFucked


I know you’ll get downvoted but ty for the laugh.


I miss FuckedCompany.com ...


WeWorked.


WeBork


Applies to the country too based on the turn of events


The brand was always shady and they never had a good answer for the criticism that they were a better-funded, worse-performing Regus. It's just that Neumann's PR team is no longer pushing this idea of him as a new generation of corporate leader, messianic, charitable, drowning in charisma etc.


> He will remain nonexecutive chairman of the New York company

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


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


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

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

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

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

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

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

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

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

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

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

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


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


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

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

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

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

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

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


> a group that was referred to internally as the “oval office”

Why would they call it the oval office instead of the cabinet?


Both.


Both, in my opinion.


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


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


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


...and the wework obsession at HC continues


You know, it's true, but I'm included. Yesterday, when I tried to tell my wife something about WeWork, she pointed this out to me. I realized that it is basically the same as when Theranos was cratering, and I was way more interested than I should have been.


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


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


For better or worse, they are a powerhouse and are changing the landscape of corporate retail.




Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact

Search: