Given the history of WeWork, my best guess is that Neumann's chief skill is convincing people to give him money and let him do whatever he wants with it.
He ran WeWork poorly. He convinced the board to let him scam it (legally). And he walked away with an unbelievable amount of money that came from VCs.
Given he has this skill, if I were a VC I wouldn't let him enter the building. I would have his email addresses on block lists. And I sure as hell wouldn't let him into a meeting where he can use his skills to convince me to give him money.
Your approach - which makes total sense - reminds me of the notion that normal human beings wouldn't be able to resist an Artificial Superintelligence because it would always be able to press the right human buttons, no matter how smart the individual is. The only solution, then, would be to find a way to completely isolate oneself from it.
Perhaps Neumann is like a "scam superintelligence"...
But what if Neumann is some sort of financial Roko's Basilisk who will punish me for not helping him scam everyone out of money? Then logically I should help him scam me and everyone else!
A lot of what happens in both business and politics makes more sense if we consider that some people have an innate ability to evade even smart people's BS detectors when they're together in person. Doesn't matter if it's animal magnetism, pheromones, subliminal body language, or scam superintelligence. Is it so hard to believe that we all have heuristics we use to decide whether to trust someone?
Where there are heuristics, there are ways to game those heuristics. Practically none of us are as immune to non-rational persuasion as we think/claim we are. Whatever it is, I've known people whose ability to get what they want was extremely hard to explain any other way. I literally avoid being in their presence, and that has been good for me.
I feel like I'm better than most at detecting BS, at least 90th percentile, but I'd be a fool to think I'm the best in the world. When I can sense that I'm outmatched, the rational thing to do is change the game. Con men have known since forever that egotists are the best marks.
I'd sooner see all residential spaces become nationalised and collectively maintained than to see this looser cooking up some new machination that promises investors will get rich quick through sneaky exploitation and delivers yet another bad debt inflated housing bubble.
You'd get much better results seeing a world where good things happen to bad people. Adam Neumann can't do a fraction of the damage a nationalisation program would before it got rolled back.
And the politicians who administer such programs are almost invariably more scummy than people like Neumann.
I don't know why you're getting downvoted so hard. People here really don't understand the corruption behind even things like section 8 housing. They get so blinded by jealously that Neumann made hundreds of millions in a failed enterprise, but don't care that there are a hundred people worse than him making hundreds of millions by renting out $400 places for $1000 using the taxpayer's money.
Answer is pretty simple, its because people without strict anti-establishment sentiment do not believe that someone like Neumann is actually better than governments.
I believe that people like Neumann are the reason why we have some bad people in governments, like the chicken and egg? Was the corruptor born before the corrupted? I think so?
But yeah I trust government more than privates, if anything because there are three branches in governments that oversee each other and are independent and because people can try but somehow the justice comes
Not only that, with the pace that government operates, the point around trashing the housing market, is true.
It's often years between the time a government policy is recognized as a failure and when it actually changes. At least companies go under eventually if they aren't profitable. There scale is obviously much more limited as well.
People seem to forget that NYC landlords paid people to burn down their apartment buildings due a combination of rent control and rising costs. Cheaper to just collect insurance than lose money on each unit you rent.
I live in Holland. It works quite well here. We only have a government that believes "the market" will fix the housing problems. The problem is that "the market" has no incentive to do so.
So I am really happy that social housing is quite functional here.
> I don't know why you're getting downvoted so hard.
Me neither. It is because of comments like this that I don't downvote people. The signal is too vague. I can report from the front that this is a surprisingly polarising comment; the early score is all over the place.
Just in case the sibling theory is correct ... Contextualising to the US I would have thought it uncontroversial to say that a schizophrenic Bush-Obama-Trump-Biden producing system is not one you want controlling your house. Because that is what politics is. At least half that group should concern any reader, ideally 4 for 4 for people who are more interested in results than intentions.
Bush-Obama-Trump-Biden systems has almost 0 impact on what my city/county/state decide to do about housing. I don’t what the feds controlling my housing and they do not.
If you take the national out of nationalisation that is an improvement. Then shove a "personal" in and we're at a good spot.
We want more people to have control over their own home, not less. I'm accepting of the fact that I live in someone else's house and it isn't my choice if I'm here in 12 months - but it is hardly an ideal state of being.
And pretending national politics isn't a big driver of what happens locally is a bit naive. Sticking to the US, the federal government is 20% of the economy. Most other first world countries are probably similar ballpark. That has a huge influence on everyone.
Why so angry? This "looser" was a guy who built a company from the ground up into something that is now a unicorn. a16z is hardly a gullible investor that is falling naively for some schmoozer. Who exactly are you worried he's going to exploit?
How is this meme of WeWork being a unicorn taken seriously?! They raised $22 billion and currently are valued at under $10 billion. All of that valuation is probably the real estate they bought.
I can literally give you better returns. Give me $20 billion and I'll give you $11 bill back.
Insulting to people who have actually built unicorns to put WeWork in the same category.
> Mr. Neumann, who has purchased more than 3,000 apartment units in Miami, Fort Lauderdale, Atlanta and Nashville, aims to rethink the rental housing market by creating a branded product with consistent service and community features. Flow will own and operate the properties Mr. Neumann had bought and also offer its services to new developments and other third parties. Exact details of the business plan could not be learned.
> In the case of Flow, the business is effectively a service that landlords can team up with for their properties, somewhat similar to the way an owner of a hotel might contract with a branded hotel chain to operate the property.
In other words, a Property Management Company. There are literally thousands of them out there. This is an industry that has existed forever. It's also largely non-scalable. But he's going to somehow remake the industry by offering consistent branding like paint colors, deco schemes, and coffee service. Why exactly is a tech-focused VC interested in this?
Thinking about this from a good faith perspective, I would assume the VC wants to get some exposure to the property market while still pretending to be a "VC" fund. Alternatively, this might be a bailout of sorts after Adam Neumann's crypto-based carbon trading platform went bust (along with $70 million from AH).
It's hard to look at this from a charitable perspective, though. Adam Neumann is basically Elizabeth Holmes, so I don't know why people keep giving him money.
From time to time you see the entire executive body of a large firm, or sometimes even _all_ executive bodies from all firms in a certain market segment, do something that makes you go: Hmm. Odd. Sure seems like they are oblivious morons from where I'm standing and I don't think I'm judging based on hindsight either.
I usually assume that I must be missing something. But AH is making it real, real hard to figure this one out. What in the fuck has crept into your brain if you think this is a good idea?
SV VCs love saying that it is about the person/team and their experience more than the idea. Okay. It's Adam Neumann, so, swing a dead cat anywhere on the planet and you'll hit someone more capable than that clown.
The idea is also rather basic. So, what happened here? How's this good for AH? Some sort of harebrained scheme where by _them_ giving Adam Neumann money, it means AN can plausibly be called 'a successful businessperson', and thus it makes AH not look like a bunch of fucking idiots who got conned?
I mean you can say all you want but basically a lot of the VCs that interacted with him have no problem publicly stating that he is the best salesman they ever saw.
Money that he lost in WeWork is not coming back, but the sales talent is still there. Taking "a water under the bridge" approach isn't unreasonable if AH is genuinely convinced he is that good at selling shit to people.
I guess the way to convince a VC that you are a good salesperson is to sell products in a large competitive market (office space, ride sharing) subsidized with their cash. Being able to sell VC-subsidized real-estate isn't exactly a test of your sales skill. That was the value proposition of WeWork over Regis or other competitors: they offered higher quality spaces for less money because they could afford to do it at a loss. You don't need any skill to gain market share by taking a loss in a competitive market.
He is very good at selling VCs on investments, but honestly, it seems like that has more to do with having a big vision that you can promise them and not having the moral scruples to evaluate whether that vision is feasible. We see this with Elon Musk on his series N or O for SpaceX, and it looks like Adam Neumann is next.
You are misrepresenting what WeWork was and wasn't. The way you put it above makes it seem like WeWork business model had no positive unit economics at any scale and only survived through VC injection. That is absolutely not true.
WeWork's value proposition in the beginning was that Neumann(or the designer he hired) legitimately knew how to redesign/refurbish what was essentially a lackluster, old office building and make it seem like a great office. That part of WeWork was legitimate and Regus did not know how to do that(Regus still doesn't do that, at least in Europe). Now their big problem of having long term obligations with essentially short term cashflows was still a problem, but the unit economics at that stage were positive.
What set everything on fire was the fact that when they were injected with enormous amount of capital they essentially ran out of bad real estate in the markets they were in(this was the case in New York) and started going into the deluxe office buildings, where a WeWork facelift wouldn't do anything.
I can't remember the exact talk, but I saw a talk recently by some VCs that basically made the very interesting point that in certain businesses too much capital that has to be invested will eventually destroy the unit economics, and the 2 examples were Lyft and WeWork.
But yeah, the idea that WeWork didn't at some point have a legitimately differentiated, valuable offer that wasn't due to VC subsidies is not true.
What I mean to say is that WeWork does have positive unit economics, but that the net present value of the cash flows from their investments in buildings would never be anywhere near the amount of the initial investment (on a risk adjusted basis) used to generate those cash flows.
That doesn't mean WeWork has a bad product (they have a great product due to the capital available to spend) or bad unit economics (most of those investments are probably decently cash flow positive), it just means it's a bad business.
This is a case where "unit economics" doesn't tell the full story.
VCs I've met feel Adam Neumann is one of the best at pitching of anyone they have ever met or are aware of, like the GOAT of fundraising. That has massive value, and in theory you could insulate them from operational things that need budgets.
I worked at a startup that had a GOAT level sales person. We understood we needed this person to succeed, enterprise sales to a nascent market segment required a lot of persuasion and tenacity.
Unfortunately, sales dominated orgs lead to terrible technical and operational challenges. (Whereas Neumann's efforts are dominated by fund raising.)
Like our sales GOAT, I imagine Neumann is similarly unfamiliar with objective reality. And otherwise unteachable.
I kinda get it. For Neumann's part, he's wildly successful, awash in cash. And has somehow avoided the consequences of his terrible decisions.
In theory, theory and practice are the same. In practice, the people making the pitch have never been insulated from operations or technology. Either their egos get too big for a split to work or they actually start to believe their own bull. This is a fantasy that has never happened before, and while it would be nice, it is not real.
That made me laugh. The similarities are there down to the strange quirks meant to make them both seem more interesting. Elizabeth has her husky voice and turtlenecks and Neumann has that barefoot in New York thing.
In both cases the early insiders made out that like bandits and I'm assuming that's exactly why they are getting checks now. Everyone is well aware this is nonsense but they are all hoping to offload on greater fools coughretail cough.
I would expect them to also acquire a couple other property companies for massive valuations that will turn out to also be worthless.
With one big difference. I've worked in a WeWork. I know many people who have. The product is real and it did fundamentally change the idea of coworking (you ever heard of Regus before WeWork came along?). And I'd work at a WeWork again. It was a great experience.
When I did catering 15+ years ago I went to a quite a few coworking offices. It was nothing new then. Some were sterile offices and others were like WeWork and had a bartender/helpers doing things. The 2 places I remember are still around while the WeWork signs have been removed and offices closed.
> you ever heard of Regus before WeWork came along?
Yes? Maybe I'm just old, but I remember them in the 1990s.
Pre-crash articles[0] suggest that WeWork introduced "community" to coworking spaces, which... okay. I guess time will tell whether that fundamentally changed the idea of coworking.
It's no big new discovery that people by and large prefer new things to old things. If WeWork had lasted long enough to become an old thing before imploding, perhaps we would have seen that the difference was mostly that. Or perhaps something actually new did happen, in which case it might now be lost under the clouds of grift and fraud.
Not sure why you're getting downvoted. WeWork is a real business with a real business model that's been making real money, especially now that many companies are downsizing their office space because of COVID. Yes, Neumann is a clown who blew a lot of VC cash on weird shit and made out like a bandit before the party ended, but unlike Theranos, the customers of WeWork did receive exactly what they paid for: flexible office space.
If you start a business that spends $22 billion and then starts to bring in a few hundred million a year, that's not a great business. That is a bad business.
Elizabeth Holmes was not convicted of defrauding patients, only of defrauding investors. Adam Neumann has done much the same to his investors.
I would work at a WeWork too. WeWork spaces are great, especially when you compare them to competitors, who didn't burn massive piles of VC cash to make their spaces nice and rent them to me at a loss. That has nothing to do with Adam Neumann, only the money he extracted from investors under false pretenses.
I will preface this by saying I am not a fan of this guy, like at all. I would never want to be in business with him.
With that said it doesn’t actually seem as crazy as everyone is making out. It’s worth starting with the premise that WeWork is actually a pretty great product. Making office space flexible is in fact something that needed doing and yes some people were banging around on the edges of it but it used to be kind of miserable and now it’s different. I’m a current WeWork member and I use it constantly when I travel and it’s just a pretty well thought out and executed product that fills a need.
The same issue still exists in the rental market. Getting an apartment is also a bit of a nightmare. Yes property managers exist but if I could go through some kind of centralized process or membership and then live in Miami for 4 months and then Los Angeles for 4 months or whatever I could see a lot of value in that.
The proposition here seems pretty straightforward. Again I think the guy is a bullshit artist but it’s not like it’s impossible to see how this could be a favorable investment.
WeWork is a great product because it is a subsidized offering in a competitive market. The piles of VC cash that were thrown into WeWork spaces are things that Regus and other competitors cannot do, because they have to make money.
Competing with WeWork in office space is like competing with Saudi Arabia in oil production: the Saudis have slave labor keeping oil prices down, and WeWork has VC cash keeping their office prices down. However, this doesn't mean that WeWork will ever turn the corner to repay investors the billions they have lost on it.
This feels like online businesses around 2000, where people have identified the problem and know the tech they can use to solve it, but the companies trying to do it aren't the ones that can make the business side stick.
Feels more like a classic late 2010s bubble "tech" business.
A business model that's been around for years, is minimally affected by tech, the guy proposing to build a "tech company" out of it is a self-dealing conman and the VC's exit strategy is presumably to achieve rapid growth by selling below cost price before offloading to greater fools who think the advantage over incumbents is a tech moat, not VCs underwriting losses
Exactly. I was around back then too. It is pretty hard to make a user experience seamless and there’s a lot of industries where the user experience is needlessly complex and inflexible. The fact that it hasn’t been fixed yet doesn’t really prove it’s impossible.
The rental apartment market is just obviously one of those industries.
Importantly, it seems the consensus is that Neumann ran WeWork pretty terribly, and also bordered on scammy the way he bought buildings himself and then leased then to WeWork.
The interesting thing about VC investors is that they don't seem to care at all if a company can actually succeed. All they seem to care about is if the person their investing in can raise a larger round - which, somehow, Neumann probably can without problem.
There were tons of other REITs when WeWork launched, and most of those didn't burn more than $10B on fraud.
Neumann will brand these apartments, and enough people will feel excited to be living in a "Flow" apartment to fill them up (it's not like the US has enough spare housing to let that many apartments sit empty at even unreasonable prices), and Neumann will convince a lot of people that he's doing something different than every other property management company out there, while people at competing property management companies scratch their heads and think no, he isn't.
Then it will come crashing down as everybody slowly realizes that Neumann has been lining his own pockets and that in the end, this is just another property management company, worth no more than the properties they hold.
There might be another movie or miniseries about the process, too. Because apparently people can't get enough of being conned by Neumann.
Haha, I'm only laughing because if you swap "Property Management Company" with "Managed Office Space" in your sentence you could have been talking about WeWork.
> Why exactly is a tech-focused VC interested in this?
My strong suspicion is that this involves tokenized rent payments on a blockchain, and that a16z is looking to make their money back on the tokens. Never underestimate is cynicism of a16z.
Keep in mind that a16z participated in A-series on the Neumann Flowcarbon tokenized carbon credit scheme just in May. That is already dead
Airbnb said recently their biggest increases were in long term rentals.
Seems like A16Z and AdamN are skating toward that puck.
WeWork destroyed many small business co-working spaces as the pyre of VC money burned. I expect the Airbnb world to get really interesting, probably screwing a bunch of small owners along the way.
Maybe they think this "tech nomad" thing is going to get big? Personally, I don't think it will be a big market. Maybe young people starting their working careers or consultants/contractors who travel to go on-site for jobs lasting longer than a week.
I can see that: you buy in so you have the same sort of apartment/living space wherever you need to be.
> The firm’s investment in Flow is about $350 million, according to three people briefed on the deal, valuing the company at more than $1 billion before it even opens its doors.
I can understand investing big in people but Adam would be the last person I would trust to be successful. The lack of owning responsibility in the failure of WeWork is a huge red flag. Why would A16Z give their largest investment to him?
Can someone explain why anyone would give this guy any money they wanted back?
I appreciate that people who make mistakes often learn expensive lessons, and that makes them better performers in the long term.
But WeWork - for all the hype - seemed to sub-let commercial space at a loss. Sure, those spaces were nice, and the co-working ecosystem helped recreate the University dorm vibe for those who like that. But the main attraction was high quality facilities at low quality prices.
Is A16Z simply hoping he'll recreate the hype and they'll be able to cash out before it all comes crashing down?
> Is A16Z simply hoping he'll recreate the hype and they'll be able to cash out before it all comes crashing down?
Yes, this is the same VC firm that argues against 10 year exercise windows in the hopes that employees who leave will elect not to exercise their earned vested options in the normal 90 day window thus forfeiting their options and reducing investor dilution [0]. They'll do anything to make an extra buck.
It doesn't reach me personally, but of course con men have charm. It's kind of necessary in that line of work. You can't scam people of billions of dollars without a little bit of "charm".
> Mr. Neumann, who has purchased more than 3,000 apartment units [...] The investment thesis for Flow appears to reflect economic and social trends that are driving more people to rent homes rather than buy them at a time when there is a housing shortage.
A very tiny part. The big reason is supply/demand, we are short hundreds of thousands of houses that needs to be built..
Yeh Blackrock buying tens of thousands of houses is not helping but thats not that main issue here let alone a few thousand apartment units bought by Neumann.
Land-use restrictions and NIMBYism drives up housing costs. I don't blame investors from wanting to make money off of that. They didn't start the fire, so why not roast some marshmallows? It may be in somewhat bad taste, but they're not doing anyone any harm. Direct your anger at the local governments that block cheap mass housing from being built.
Of course the real reason is that people want property values to increase and rents to decrease. This is a circle you can't square. Many voters are homeowners who have all their savings tied up in their home. In legislations without safety nets this might be their retirement plan and social security, too. In practice this turns into a destructive political force that crushes everyone who doesn't own their home. Incentives, baby!
If you actually talk with the most active NIMBYs, they tend to be more concerned with quality of life than with property values. They have lived in the same home for many years and don't plan to sell. Building more housing in their neighborhood means less privacy, more noise, more traffic, more crime, and a shortage of street parking. You might consider them selfish but their concerns aren't irrational.
how is it someone can just take 3,000 properties off the market. isn't this kind of speculative hoarding destructive for society...most people dream to have even 1.
Adam Neumann talked Softbank into willingly investing a whole bunch of money into WeWork at a valuation that was unlikely to be realized in all but the most optimistic scenarios. While Softbank could/should have been more prudent, being irrationally optimistic is not illegal. I don't understand why anyone would be willing to give him another shot given his track record, but I guess A16z is free to do with their money as they please.
Elizabeth Holmes endangered the public by knowingly selling them fake blood test results, which is a crime. That is why she is in jail and Neumann is not.
Actually, she is in jail for wire fraud, not because she sold fake blood test results. I think she claimed contracts that did not exist, among other things. Reading this thread, it doesn’t sound like Adam Neumann did this
https://news.ycombinator.com/item?id=32479652