The Cult of We

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S1: This ad free podcast is part of your slate plus membership. Hello. Welcome to the Cult of We episode of Sleep Money. Your guide to the business and Finance News of the Week. I’m Felix Salmon of Axios. I’m here with Emily Peck of Fundrise. Hello. I’m here with Stacy-Marie Ishmael.

S2: Hello.

S1: And we are here with Elliott Brown. Elliot, welcome.

S3: Thank you for having me. Happy to be here.

S1: Who are you and what have you just written?

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S3: I am co-author with my nonexisting colleague here at the moment, Maureen Farrell, and I am co-author of The Cult of WeWork Adam Neumann and the Great Start Up Delusion.

S1: And we are going to be talking to you this week about I mean, delusion is a great word. It is a fantastic story. We’re going to talk a bit about the story of Adam Neumann, the story of we were, the story of massive song, the whole idea of scaling. We’re going to talk about charismatic founders. We’re going to talk about how hard it is for women to raise money in Silicon Valley. We have an amazing slate plus segment which talks about some of the unbelievable crazy that didn’t even make it into the book. If you are a connoisseur of Rebecca Neumann anecdotes, you’re going to love that. Definitely worth subscribing to Slate Plus for that one alone. It’s a great episode. I can’t wait for fuel to hear it. It’s all coming up on Slate Money. So let’s get started. I think we should probably get started with Adam Neumann. Who is this? If he didn’t exist, you’d have to invent him kind of figure, but no one would believe you. He would be like one of those kind of like caricature capitalists, and everyone would be like, no, no one’s quite like that. Is it basically the message of your book that this guy is just incredibly motivated to an uncommon degree, even among billionaires, by the dream of becoming a multibillionaire?

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S3: That is certainly a main theme of it. You know, I mean, there’s a few different things. And like you said, it’s not I certainly wouldn’t be able to come up with a better fictional character for literature. And it was just some of the stuff. Yeah, you’d really be shocked. But I guess with Adam, the thing that he would do and he even did this pretty recently, you know, after we finished writing the book, he just would come back again and again and surprise me, at least with his greed before writing the book. I did not. They didn’t really believe in the concept of greed. I sort of thought that there was just like, well, there’s this basic level where you’re supposed to look out for yourself, and maybe some people are journalists and don’t try to make that much money. But otherwise, it’s like you do what you do. But like he takes it to this like totally crazy new level and takes the standard amount of self enrichment desire and kind of smothers it in the sand.

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S1: And it’s not just that he’s greedy, but that he’s incredibly open about being greedy. I cover hedge fund managers and financiers and people who everyone kind of understands are motivated by greed. But even them, they will like. If you tell them that they’re motivated by greed, like they will deny it and they will always come up with some great sort of rationalization for what they’re doing. But it seems with Adam Neumann, he’s just going around telling everyone, like his dream is to become the world’s first trillionaire.

S3: I think it is. It was slightly more nuanced in that he says lots of things to lots of people. And he actually was many times more the opposite, where he would say everything was motivated by making the world a better place and just really lean in to that Silicon Valley trope of I mean, did you just say it like sort of in those quotes? I think. And then I guess one of the bigger ironies that was pretty novelistic is he would always say, you need to put wee over me. And then at the end of the day, he literally is putting me over his company, WeWork, like he is threatening to hurt the company by pushing for a bigger compensation package or a severance package when he leaves so he can get paid literally hundreds of millions of dollars to leave his company.

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S1: So he did succeed in becoming a billionaire. And one of the interesting things about sort of frenzies and bubbles is that they cause a lot of investment in various forms of infrastructure, which do make the world a better place. Would you say that on some level he did. Make the world better, even if it costs an insane amount of money.

S3: I mean, I think that works are like the actual spaces are pretty good. Office space and like I think they did some cool things with design. And yeah, what they’ve done sort of unintentionally is take 11 billion or so and turn it into an eight billion dollar company, which generally isn’t, as I understand, how these things are supposed to work. But I only took one econ class. So he did that, that that was a byproduct and say now you have essentially all this subsidized office space out there, which for tenants, for users is actually quite good, like you pay by the month or you pay by the year instead of having a 10 year lease that you’re sort of committed to. So for the perspective of liquidity of office space, he has really made the world a much better place.

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S4: And that might come in handy. Now, it certainly didn’t come in handy during the pandemic when everyone realized they had office space in their own homes and didn’t need to go anywhere.

S1: It did come in handy, right, because a bit of a stretch of break that we WeWork leases really easily, which was very handy during the pandemic.

S4: Right. I guess I’m curious to know if Elliot can give us an update on how the company is doing now and if those WeWork leases are coming back and people are into it again and what the plan is.

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S3: Yeah. So one of the many things Adam Neumann said lots of things. One of the many things he always said was, oh, in a recession, we’re actually going to do better, because the first location we ever opened was in a recession with like 70 desks, and that did pretty well. So then you had this thing where there was something, a particularly bad effect for communal, densely packed office space, and that was a global pandemic. So their occupancy fell to like below 50, which is just a good way to light money on fire. And they were already quite good at lighting money on fire. And now fast forward. They’re actually the sort of interesting weather vane for what’s going to happen with the office market where, you know, like it could turn out that a good place to be right now. And in terms of the business is like someone offering a space for companies that don’t really know what’s up with their office space. Like are people going to come into the office? It’s going to be two days a week. Do you open some satellite office in New Rochelle for some reason? That I don’t really understand. But like we WeWork is like pretty well positioned if that’s what companies are doing.

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S1: It seems to me that the place where they were most inventive and the thing that people got excited about with regard to WeWork was a radical diminution of square feet per worker. They managed to create office space is the people wanted to come in to do people like coming into that had free beer and cool design and yet managed to pack people in in a way that, like normal corporations, were never able to bear on to. The big question I have is like, you know, given how obviously squeezing people into a lot of bodies in a small amount of space looks in the context of a pandemic, like an unbelievably bad idea, like how long are we going to have that mindset of like, I don’t want to be squeezed in with people and does that idea have legs?

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S3: But certainly on the economics, like that’s 100 percent. What was one of the more appealing economic things about WeWork where. Yeah, like companies were generally fitting 150 square feet per person or employee and then giving them 200 square feet per person. We were did 60 square feet per person. And sort of the magic there was just using glass for walls. So it felt light and airy throughout the building and also just making people uncomfortable. I used to cover the office market. That was much of what I covered. I haven’t stayed as close to that in the past few years because I’ve been covering venture capital and startups. But I feel like I’ve just been reading reports for five years or six years that the pendulum swinging the other way and we’ve gone too far with densely packed offices and now it’s going to go back. So I don’t really know. I mean, there’s certainly a lot of people saying it’s going to get stretched out more. One of the other interesting facets, this is detail, but something interesting about WeWork is the always said we Peck so many people in. But then when they lease a whole floor, we’re building to Amazon or some large corporation, they would usually then be like, yeah, actually about 55 square feet per person. That doesn’t work for us. So they’d actually end up taking much sort of more normal amounts of space.

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S1: The big corporations, when they rented, we reworks. They didn’t actually like the density of WeWork. And so they asked for more square feet per worker. They’re like, we’re willing to pay more for being a little bit more comfortable and having a little bit more privacy.

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S3: Yes. And there was always this funny thing where we work when you use square footage. So they tell them desks and they’re like, well, I guess we want one point three desks per person per desk. So Adam like to make math hard for for those things. But yes, that’s what would happen for a lot of these enterprise clients, which are the big businesses that would just take a whole building or floor.

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S2: I think the thing I found most confusing about, not the book as written, but just like the existence of this man. It’s like, why?

S4: Why? That is my first call.

S2: Question on why did so many people look at this dude here, all of these things about this dude encounter this dude in person and then think, here is another check.

S4: It was so clearly a scam artist from the jump. I never read one single thing about him and thought, wow, genius.

S1: He was a great salesperson.

S2: Was he close? He was.

S4: Who invented what? Those crawling baby parts.

S3: I mean, come on. So, yes. So he invented crawlers with a kitty, with a K..

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S4: You know, I feel about that.

S3: Listeners need padded baby clothes for that really big part of life where babies of two months or so, where babies are crawling and not able to vocalize the pain that they’re apparently having on.

S4: Wait Eliot’s, tell them the what was the motto of the crawlers?

S3: The motto, or at least Peck Adam said was the motto was, yeah, just because they can’t talk doesn’t mean they aren’t in pain or something. That doesn’t mean they don’t hurt. Yes. So so he apparently was actually a like at the Javits Center in New York. He would like talk to people who were there with him, like he’d be at this booth and there’d be like a crowd of people around him, sort of as this traveling salesman talking about these baby clothes, holding up like, look at this thing and your children will need these unintended padded knee pads. So I think he’s a really talented in-person salesman. He unlike, say, like an Elon Musk. I don’t think that charisma spills over through video or through quotes in a newspaper. And I think people often have the reaction of like really as you guys did. The other thing, and maybe this is sort of like if there’s one takeaway from the book, it’s like Adam Neumann wasn’t special, like Silicon Valley created Adam Neumann and the financial system created him. And if it wasn’t him, there would have been some other maybe slightly less charismatic, slightly less Takkula drinking guy who instead of jets like yachts and instead of tequila, like drum and set of Run DMC, like, I don’t know, some

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S2: other little note to problems.

S1: So that’s a great segway to, I think the next part of this podcast, which I wanted to ask you about, which is just this whole concept of Plitt scaling the idea that the way you become a success in the VC backed world, in Silicon Valley and SoftBank is by raising so much more money than anyone else that no one can compete with you. And then you own the market and you basically have a monopoly and then you’re a gazillion. They’re hugely successful. This has been around for a while. We WeWork seems to be like one of the more high profile counterexamples. But has that gone away? The people not still kind of believe in that model.

S3: I have many thoughts about what Skilling and I did. The first thing and sort of the thing that was really going on in the mid 2010s is there was this meme in Silicon Valley that everything needed to be blit scaling. I think probably just because people liked saw the name of the book and thought, well, that must be true for everything. And so, yeah, like the theory was like every business can be a monopoly if you grow fast enough. And it’s like, how many monopolies are there out there and what are their characteristics? And arguably a few large tech platforms. But I guess the question is sort of like, yeah, why would a scooter company be something that needs to benefit from BLET scaling or a ice cream company or a coworking company. So the key question is, can you grab the entire market with all this money? And then can you like is there pricing power? Can you just like sort of hike up prices as much as you want? And as you see with something like Lyft, a nuber, it turns out that when they both are doing this at the same time and they both raise billions of dollars, like in the end, then they have to compete on prices. And so neither of them has made a profit. And it’s been like 10 years, 12 years. So this is a long way of saying today. I think there is there’s a little more caution, but not that much more in consumer businesses and sort of just assuming that the next Warchus company needs to blits scale to grab the monopoly on the wool shoes market. But I think it does exist in software for like reasons where like you have a network effect.

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S4: So we were kind of shows the limits of venture capital, like not every company needs to be VC funded. And to take all that much, 100 percent, like they don’t need a lot of. Most companies don’t need billions of dollars to be companies, right?

S3: Yeah. Like this was a really frustrating thing in sort of venture society. And to a certain extent, still is a large extent. There’s just this mean there’s only one way to create a company now, and it’s by raising money from this crazy part of the world that, you know, is looking for messianic founders. So then suddenly it’s like you have literal ice cream companies and coffee companies getting funded by venture capitalists like you used to be able to have an ice cream shop and just open it on your own.

S2: This the roots of this are what used to be dismissively or the dismissive attitudes, what was called like a lifestyle business. It was like the worst diss. You could tell somebody like, oh, it’s a lifestyle business, which just means you can live exceptionally comfortably and treat your employees well, have, you know, bigger ambitions than that. OK.

S3: Yeah, and we were like I was just always baffled by this is like when I first met Adam in 2013 as I was covering real estate and just wanted to meet this kind of fast growing tiny company in lower Manhattan. And I was just kind of confused. It’s like, why does he need to expand so quickly? You know, as someone who hadn’t been covering venture capital, it just didn’t make sense to me. It’s like, why don’t you just grow it a sort of a normal rate? And it turned out that like the tradeoff there is when you’re growing is absolute fast, as you can. You tend to be losing money and not telling if what you’re doing is going to be profitable.

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S1: And in real estate as well, it just like one of the other innovations that we WeWork had is that they took an industry that has been around for a century, you know, real estate, which is where you, you know, buy buildings and rent them out like this is not a new idea, but then funded it with equity and funded it not only with equity, but with the highest cost equity you can possibly imagine, which is venture capital. And these people want like, you know, 10 X, 100 X returns on their investment. And that’s not how real estate normally works. Real estate has always been a debt based business. You know, you borrow money at like three percent and then you make five percent. You got that little two percent interest margin which covers your costs. And you can make it a little bit of money. And then slowly over time, the value of your property goes up and that’s where you really make the money. The long game, yeah. Involves a lot of time, a lot of patience and a lot of debt. And it seems that we WeWork came along without any patience at all and with almost no debt. They just funded everything with equity. And that’s like how that was also a real innovation. And that one, I feel like no one is going to be like trying to sort of scale a real estate company with venture capital. Let just like how did Matheson think that made sense?

S2: Once again, billion’s a good question.

S4: Here you go. Back to the. Why? Why?

S3: The short answer. Well, yeah, I don’t I can’t do that. One to answer is Adam just taught these people to see something that wasn’t there. Theranos was about a fraudster telling people one, you know, a blood testing company worked when it did. And she was doing that with unsophisticated investors. Adam did sort of the opposite. He took a really sophisticated investors and some smart people and then convinced them that just with real numbers to see something that wasn’t. So they look at a real estate company and he’s like, just look at this like a software company. And when you look at some of those numbers, like a software company, meaning like revenue, you’re like, wow, this thing’s fast growing. And then somehow he made it. It was like a magician, like the misdirection was making it. So you didn’t look at costs, which is a really good trick.

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S2: Like when you say real numbers, like the dude invented community adjusted Ebbitt Duck. Yes.

S3: OK, so two other thing. Yeah. First of all, he did lie on occasion. He said they were profitable when they weren’t a lot. But, you know, that was using real numbers in like a bond prospectus. And they just called it something funny and did a real like some real accounting tricks. But it was still real numbers that were sort of allowed. And you should have had smart bond analysts being like, well, that doesn’t make any sense. I don’t really know that they did.

S4: But Eliot’s you think you can explain that a little more? But Stacy was talking about.

S3: Oh, man, really trying to keep listeners with me.

S2: Tell me.

S1: Well, no, I think this is this is important, right? Because the the whole idea here is that like we’ve had entire episodes on this on the subject of my son, who’s the founder of SoftBank, who loves messianic founders and loves that scaling and has had genuine success. And just, you know, earlier this year made a gazillion dollars on the coupon. You know, this kind of approach can sometimes work and he’s OK with the times when it fails. But at the same time, you know, apropos of my point about equity, like at some point we WeWork needed to issue debt. And in order to issue that, they needed to issue a bond prospectus and bond investors and not Marsan. They get no upside from growth. Right. The only thing they worry about is downside. Am I protected? So do tell us a little bit more about this whole way in which we work. At a certain point, it started to be able not just to raise equity, but it started to be able to raise debt, even though it was losing money.

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S3: I guess an answer to this is that Adam, one of the things he did, the misdirection I think he had people focus on was the margins of the locations. So it’s like our office, this office down here below this building is generating 30 percent profit margin. And if you exclude the capital costs of what it took to build it up. And so the way that that they came to that 30 percent was really tricky. Essentially, what they did is if you’re signing an office lease, much like if you’re selling an apartment lease and they give you the first month free, you usually get the first year free. And so you’re not paying your biggest expense in that location, which is rent. And yet you are taking in revenue from people who come in. So that makes the profit margin really high. Now, normally in accounting, some accounts of thought about this and they’re like, oh. Well, you need to adjust for that year of free rent so it doesn’t look like you’re not spending anything in that first year. Otherwise you might be able to confuse people about having a profitable business when you don’t. But then we work adjusted their EBITDA and added a word community before it. And then we’re able to show essentially that their business was highly profitable when it had like a 25 percent or 30 percent profit margin, when it was like literally losing one hundred percent of revenue. So they were spending twice as much as they took in. But they had this one metric that they tried to highlight and misdirect with, which was called community adjusted EBITDA, like, look, we’re making tons of money.

S1: But my question is like, did the bond investors buy that? Yeah.

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S3: I mean, I don’t think the debt was a huge well, it was going to be in the IPO. So, I mean, they raised some debt. It was 700 million dollars of debt. It wasn’t terribly cheap. And then almost immediately after was issued, the price fell to the point where Adam actually became totally obsessed with the price of the bond. The bonds are supposed to stay around 100 right after they go out. And then he would just constantly be yelling, why are why are we at ninety five? You know, that type of thing. And he directed the company to he was so insecure about this. He directed the company to then buy back some of the debt that it had just issued. So they like go through all this rigmarole of selling 700 million dollars of debt with a number of sort of picked out of his head in a hot tub. Seven hundred, two million, I think. And then they go and buy I think it was 30 million plus or maybe even 50 million right after they do it, because they’re so upset that the price is low. And that was the least crazy part, about WeWork, Eliot’s.

S4: I was reading an interview you did with the Virge where they asked you what lessons have we learned from the WeWork

S2: debacle earned Emily? You said

S4: none.

S2: Yeah, exactly.

S3: We’ve learned nothing.

S4: That can’t be right.

S2: Really?

S3: There was this brief period of introspection right after we were collapsed, when it wasn’t terribly brief. It was months long. And like to the point where we mapped out how the book was going to be and like the end. And the lesson of the book was like, this is the punctuation on the era of insanity and, you know, over capitalization in venture capital, because suddenly VCs were getting really introspective about the forces that created this kind of implosion, which was like founders having unfettered control, even though they own 10 percent of the company and pushing for these like messianic type founders and then giving them the keys to the car. So this started to get more introspective and being like, maybe you need to show a path to profitability, which also, by the way, is sort of like, isn’t that what a business like? Is that a new idea? I thought you’re supposed to make a profit and or show a path anyway. The coronavirus comes and everyone thought that all these SoftBank companies are going to go under and we were going to go even more under. And then the world went crazy and then things went the other way. And so, you know, fast forward to like the end of 2020. And you have the CEO of Airbnb is is literally speechless on TV when he’s told the stock price because he just didn’t think it was possible. And you have many things like that

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S4: and things going awry. Now, we’re in possibly a more insane chapter than before. Maybe if you

S3: look at things like founder control and sort of stock prices. Well, yeah, there’s two elements here. There’s like these electric vehicle companies that I’ve now been writing about have no revenue at all. And one of them is going public within days. That is twice the value of Nissan and hasn’t sold a car. And that’s one of the most sort of real electric vehicle companies when you’ve got a there essentially just like power points with the aspirations to become an electric vehicle company. And they’re worth billions of dollars. And they go talk on Robin Hood, favorite YouTube channels about their business. It’s like, wow, you’re really appealing to your investors.

S1: Yeah. The founder control thing is super interesting, right? Because the S&P indices came out about a year ago and said this is getting out of control. Any company that goes public from here on out, if they have it your dual plowshare structure, they will permanently be ineligible to join the S&P 500. And everyone wants to be part of the S&P 500. Therefore, this is going to be a strong incentive for companies not to do that. And then all the companies took one look at this rule and said and it still implemented founder control. Basically, every single major IPO that you can think of, including Robin Hood has the founder control provisions. And then, you know, if you look at, again, that Robin Hood, you have like the founder of the company who already has a monster stake in the company, getting 22 million new shares as part of an employment agreement for nothing, because he’s obviously going to hang out and be the CEO anyway and the greed and the founder control and all of that kind of thing. You’re absolutely right. Seems to have got even worse. We’ve learned nothing.

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S3: There’s this extreme correlation. Who’s to say if there’s causation between these founders that control their companies and suddenly these giant new compensation packages? And so if you look at some three of the biggest ones that went public in the past six, eight months, it’s like Doordarshan, Airbnb, Palantir, all have these really. The extraordinary new enhanced founder control for people who already control the company, and then all three of those have these kind of unprecedented or now it’s becoming precedented new compensation packages for the CEOs and founders. And then DEEDI, the Chinese Ryedale company that just went public. The founders got something like you do have control, something like three billion dollars worth of new stock comp. And there certainly seems to be a correlation like in the past, you would just sort of if Jeff Bezos owned 40 percent of the company, first of all, he didn’t control the company. He just turned 40 percent of normal stock. And then he would get richer because the stock would go up, not just because he decided to give himself a new comp package.

S4: Why do people give these guys so much money? What is it? And they are all guys like what is the appeal?

S1: The compensation is granted to the CEO by the board, but the CEO controls the board by dint of the founder control. So really, the board becomes a rubber stamp, allowing the CEO to just give himself as much money as he wants.

S3: The broader issue is the I think it’s largely Steve Jobs just in sort of the mythology of Steve Jobs, which is kind of crazy because Steve Jobs didn’t have founder control and neither did Bezos. Right. So so two of the biggest sort of like the idea is like, oh, well, founders are these mythical beings. And, you know, if you find these actual visionaries out there and you let them run with it, they’re actually going to make better decisions than a conscious board of directors, because look at the small sample size of highly effective outcomes, which is like Steve Jobs, Jeff Bezos, Larry Page and Mark Zuckerberg, and which is true. Those are like very founder led and very successful companies. But first of all, two of them didn’t have founder control. And second, like what do you think is going to happen if you apply that rule broadly and you like look for kind of crazy people who have no prior experience except maybe running a baby clothes business. And you give them literally billions of dollars, like how can we expect there not to be more WeWork if that’s the case?

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S2: Alison Stewart, in her review of your book in The Washington Post, had a fantastic line, which is like she says, Neumann isn’t enigmatic. He’s just awful in a way that is unfailingly interesting but never surprising. Charismatic white men with good hair have always been able to get away with a lot. And I feel like she’s she sort of summed up this mythology that you’re describing, which was also memorably parodied in Silicon Valley, the television series, which is that if you are, it doesn’t matter if you have no idea what you’re talking about. If you’re wearing like the right vest at the right time, someone will give you bunches of money,

S4: the right vest at the right time.

S1: Yeah. Like Twitter of being a prime example of that. And interestingly, I would I would push back a little bit on Larry Page. Like, I think I think that in a weird way, Sergey Brin and Larry Page, like the counterexamples of this, that Willie on the enigmatic, they didn’t really you know, they do have found a control, but they don’t really use it very much. They write more or less handed over their company to Eric Schmidt for many years. And then and now, you know, Thunder seems to be incredibly good at running the company with them having almost no input. So, you know, like but yet they have held on to their founder control. So in theory, they can do what they like with the thing.

S4: Yeah, founder control has not been a good thing. I mean, maybe except for Steve Jobs, who famously comes back to the company and quote unquote,

S1: and has won share because he sells all of his Apple stock when he gets kicked out of the company. So when he gets when they buy next and he comes back and takes over Apple, he owns one share of Apple at that point, and he still manages to be this transformative CEO. You don’t need control and you don’t need equity.

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S3: I think that’s one of the sort of silly myths that we’ve seen in Silicon Valley, is that there is this connection between founder control and

S2: the important equity structure. Yeah.

S3: One of them is actually just like the investor is giving these people, like sort of bribing their way into an investment round. Right. They’re saying like, well, I want to be in this round and I’m already paying this really high valuation. And they’re like, yeah, but a lot of people are trying to get in. How about you give me this control? And that’s essentially I mean, that’s actually exactly what Adam did. And he would sort of surprise it on the investors and turn it on them at the last minute. And these other investors already agreed to it. So you got to say, yes, just sign on this dotted line here. And then like one of the investors has told him, his earliest venture capitalist was like absolute power corrupts absolutely. Adam and Adam brushed them off and then secured control for forever and ever.

S4: It’s very frustrating when you think of all the women out there who are not getting funding because, you know, VCs are like, I don’t understand how makeup works or whatever, you know.

S2: OK, well, forget makeup. Let’s talk about Cannava, right? What is it? A hundred billion dollars? The last time I checked, it’s a it’s a way to kind of go online and make great slides. And it’s all over Instagram. It helps people put presentations in marketing materials together. And there was a story that was going around the other day, which is like the woman who founded this was rejected 100 times by VCs. And the lesson was you, too, can persevere. And I was like, I’m looking 100 times. Like it took. A hundred different groups of people being idiots and not able to see the potential market value of put marketing in the hands of anyone. And that’s something we’re supposed to celebrate. Oh, whereas dudes with good hair are like, I have an idea for an electric car. Please write a check to me. I have an idea for an electric car. Please write a check to me.

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S3: So the point of this sort of like phenotype like Adam just have this way of of if it was cartoonish, like he just sort of he didn’t go to Stanford. He like checked every other stereotypical box of what these founders or these venture capitalists are looking for. And there were literally things that that were in the show, Silicon Valley, like he had a spiritual advisor that trailed him around. And, you know, he had like eight homes constantly talking about making the world a better place. And he had to the point of hair. He had a hairdresser in his entourage that would sort of fly around the world with him.

S1: He did have a lot of hair.

S2: If I were a mess, I would have a hair.

S4: Josephites Fantastico needs to look good, so I get it. Sure. To make appointments man’s face. Virtually no question about you.

S2: That convert was a hundred billion dollars is fifteen billion dollars. I fact checked myself.

S4: But yeah, the stereotype will perpetuate and men who present as eccentric and geniuses will get the money. And women who found companies will continue to have these uphill battles because they don’t look like you’re supposed to look in order to get a lot of money from investors.

S2: Unless you channel Steve Jobs and tell everyone that you’ve solved,

S4: unless you straight up lie. Yeah.

S3: Like I’m dressed in black turtlenecks. There is a note on this Elizabeth Holmes reference here that I would like to say two of the larger startup frauds in the past few years have both been people who wear black turtlenecks all the time. So causation, correlation, red

S2: flag

S3: on the point of women. One of the sort of my favorite theories about this is Stitch Fix. This is the clothing company run by Katrina Lake. And she says, like, I went through like 50 Deasy’s and didn’t get any laid off people. And it was trying to cut costs to, you know, just make the company profitable and stop raising capital. And then she was sort of lifted from out of the gutter by benchmark and Bill Gurley at Benchmark and which is the same very good venture capitalists that backed WeWork and Uber. But the reason that Bill Gurley found out about Katrina Lake was his executive assistant was using Stitch Fix and so is female executive assistant. So it just kind of this backwards, like as opposed to the standard process of like I tell you,

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S2: I think about the skim at the height of the skimming. One of those lines you would hear a lot from like these guys who liked it as, oh, my wife reads this email or my daughter doesn’t really need to read this email, just like, are you cutting them in on no deal? Because like, if that’s how you’re finding female founders, like are they getting a commission or are they getting a commission?

S4: I interviewed Jennifer Hyman, who founded Rent the Runway a few years ago, and she was saying that when she went around talking to VCs and looking for money, a lot of them were like, I can’t possibly understand the business. The business is renting dresses, renting clothes. I can’t understand this business, but I will ask my wife about it. And she was like, these men, the VCs they invest in, like Eliot was saying, electric vehicle companies, which I promise you most of them don’t understand, or biotech, which is really hard to understand, or pharmaceutical companies that are based on very sophisticated technology. But then they they say like, well, I can’t possibly understand a model in which you rent dresses. It’s like a purposeful sexism that prevents some of this funding to, I think, like, oh, I, I have to wait to my executive assistant flags this company. To me, it’s like I can’t I can’t possibly beneath I don’t know how to do dishes. Well, it’s like the same it’s like it’s so sad to me and not believable.

S1: So Eliot’s, the final chapter of WeWork seems to be that it’s going to spak. Is that still happening?

S3: Yes. So we WeWork had this, particularly under Adam had this incredible ability to just find the loosest money out there every single year. It was like, what is what is this the year of the year of like the mutual fund. And like, you know, they get money from Deir Uprising’s like the year of the other mutual fund, and they get money five months later from Fidelity at twice the valuation. And then they go to China and then they get SoftBank money. And so there was a little bit of a lull after WeWork where there wasn’t a loose source of capital, and now it’s Spex. Now, compared to a bunch of these other like there’s a few different categories of companies that go public through SPAC, and some of them have no revenue and just put out charts that show like this hockey stick, incredible growth. And it’s just like, yeah, sure, we’re going to do that. Give us hundreds of millions of dollars. I think we WeWork is actually in the more reasonable category or bucket, because the wild

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S2: some revenue, while some sort of described a lot’s changed.

S3: I mean, this isn’t the most interesting way to frame it, but like the interesting part of it we work is valuation. Like we never would have cared about it if if they’d been a three billion dollar company or a 300 million dollar company. But what was wild was they were the country’s most valuable startup. And now they’re they went from forty seven billion. Down to eight billion. And they have a lot more office space than they used to because they’d started so much under construction under Adam. That’s a real business, like you are paying rent to somebody and then use it for higher rent.

S1: And meanwhile, like the most valuable startup is, you know, what is it, Stripp? Someone like that is worth a hundred billion dollars. I’ve actually heard rumors that Stripp shares are being offered in various secondary marketplaces for 175 to 200 billion dollar valuations. So maybe maybe that’s the next big bubble to burst. I have no idea. There seems to have revenues and probably even profits non-sequential about that.

S3: We’ll find out at some point.

S2: What a cliffhanger.

S1: Did you bring a number?

S3: I have a number.

S1: What is your number?

S3: Two point one billion. Do I explain the number or do we.

S2: Yes, absolutely. No, we’re just going to leave that hanging seven.

S3: So that is the amount that Adam, Neumann and Adam Neumann controlled entities took out of WeWork and have left. And we were stock. So the company has burned through collectively like 11 billion dollars in cumulative losses is worth 40 billion less than it used to. And Adam is an entities he controls took out two billion.

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S1: So is that how much he’s worth? Like his net worth right now is like on the order of two billion,

S3: some, you know, one to two. Like it depends sort of how much you spend on surf coaches, because he took out like hundreds of millions while he was out the company and then was spending a lot on lots of things.

S1: Surf coaches are expensive, man. Well, so

S3: he would with the surf coach. It’s not just the surf coach. He would fly the surf coach to his house from Hawaii, but then his whole family had to come and then they had to have the nanny to give him the apartment. And then when they go to another place, they had to bring schoolteacher’s from the WeWork funded school to teach the surf coaches family in addition to their own family. So you can see like it’s not very easy being right.

S2: It takes a village, surely. Yeah, absolutely.

S1: I mean, talking of Larry Page, it’s private island in Fiji. Apparently, he has an entourage of 30 people just to keep him in and the coconut water or whatever it is.

S2: I just don’t like people that much. I feel like if I were him like a billionaire, I’d be like, I have five friends. Goodbye.

S1: Stacy, do you have a number?

S2: I do. It’s from the book. This is the number is 69 percent. And it’s the context of we work in twenty seventeen commissioned a study because they were like, we want to know if people are friends at work, which horrifying like as a value to be like. It’s one of our things is we want people to be friends at work and it turns out sixty nine percent if we WeWork members didn’t have any friends that we work, which I was like reassured by, I was like, OK, normalcy reigns because I would have been completely freaked out and even more convinced this was like a cult like environment if it was something like. Sixty nine percent of people say all of their friends are at work. So I this

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S1: is this is like we WeWork one point. Oh, I remember this vividly, like it was selling itself not only as office space, but also was like a networking opportunity where all the different small businesses in the WeWork would start providing services to each other and it would be like this community. And yeah, it sounded both horrifying and extremely implausible that you would meet someone over the free beer. And next thing you know, you’ve worked out a mutually beneficial business relationship.

S3: Yeah, it was definitely part of this era where, I mean, it just like Adam had this way of and this was sort of the culti part of it, this way of seeing that everything that he thought was fun and cool should be like literally the whole world should think. And so it’s I like tequila. And then tequila is like the drink that everyone they pass out trays of tequila to the entire staff in early WeWork. And yes, he thought that because I don’t see a boundary between work and fun, then the whole world needs to live like me.

S1: Gallup, the survey organization, has this management consulting arm. And one of their big things is they’ve done a bunch of surveys of successful companies and unsuccessful companies. And they are absolutely convinced that if you ask everyone in a company, do you have a best friend at work, then the higher the number of people who answer yes to that question, the more successful the company is. Do not ask me how this makes any sense, but they have convinced themselves as this Bassim.

S4: I don’t not believe that that seems fine. What’s wrong with being a friend at work?

S1: I’m not saying there’s anything wrong with it. I’m just saying I’m not sure it has a huge amount of predictive value. The good

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S4: culture,

S2: it correlates with success.

S3: But in newspaper industries generally, I think that people tend to have lots of friends at work and the newspaper industry is not.

S2: Yeah. We have no lives outside of work. It’s a serious indictment of our industry. And that’s a really good point.

S4: OK, forget it.

S1: My my number is not quite as onepoint, but still vaguely related. It’s 19 percent, which is the percentage of companies in the Nasdaq composite, which is the broadest measure of listed companies that we could find that have no stock analyst ridge at all that have like zero. Analysts covering the stock there were massive like corporations. Carl Icahn company Icahn Enterprises, or Lowes, the insurance company that also owns those hotels, have no analysts covering the stock. And we were talking about earlier about how do you manage to persuade bond investors that something like this is good. But even stock investors often investing in stocks where like there is no cell site coverage these days.

S3: Can I obnoxiously push back with a SPAC example? So know if you look at one of my obsessions has been these projections of these electric vehicle companies that you actually looked at, a lot of them like Fisker, and there were five of them that all said that they were going to go from zero to 10 billion dollars in revenue faster than the fastest companies ever on Earth have done that. And it’s like, wow, these electric car companies are really going to be better than Google, all of them. And so but then you look at so Fisker, its first analyst that initiated coverage, I believe, which was also the underwriter on the Spark Cowan. They just took the exact projections or their projections. It precisely matched Fiskars projections that it put in its backpack.

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S1: So that maybe these analysts don’t offer either huge amount of value after all, which is something we discuss in another episode. Emily, what’s your number? Huh?

S4: I want to go with the number from Eliot’s book, which is five point nine million, which is Adam Neumann. And his I don’t know, his founding partner, Miguel. They did a trademark on the commercial use of the word, the two letter word, we the word, we a trademark for that. Then they charged the company five point nine million dollars to use their word, which again is we and this, I think, is a really good example of just how greedy this guy was and how terrible. Right. I mean, using trademark to enrich yourself while you’re. I mean, I can’t it’s too much.

S3: The craziest thing we learned about that was that it seems Adam didn’t even realize it was there. Like I believe that he had created this. First of all, he created his own personal lawyers in a structure to negotiate for things like that, where they thought that was reasonable. And then he created a company where, as they’re gearing up to IPO, people didn’t on didn’t even think this was remarkable because they have a 15 or 20 page list of things that were crazy and, you know, potentially concerning in the IPO thing that might get bad press. And this is like number 100 on there. I mean, because it is true, like he literally was getting a lot more money from renting properties he owns to the company that he runs. And they were like, oh, it’s five point nine million for the word we. Yes.

S4: My question was, I mean, a lot of we were troubles started when they filed for the IPO and everyone got to see under the hood if this had all gone on in twenty twenty one, if Adam Neumann had made it through. And then instead of doing an IPO, he just did a SPAC, which requires less paperwork. Does it end the story and the same way or does does it does it go through or is it Adam Neumann still running? We were I

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S3: wanted this a lot. I mean, part of the problem was he we were did this magical thing where every year they managed to double their losses. So if you’re going to make that hypothetical work, you would have had to give them like four or eight billion dollars or so to get to this point. But let’s say they got there. I actually bet it would be were the same. We were in 2019, was trying to go public through SPAC today. I imagine, like in the markets for Autho in a different way, but I imagine it would have been a lot easier, like we in the press sort of we get a lot of these back filings a week and there’s a wow. Another like flying car company is going public and literally and like we don’t even look at it.

S1: Yeah. OK, on which note, Eliot’s, thank you so much for coming on the show this week. This has been absolutely awesome. We will all be rushing out and buying your book, which is in bookstores right now. Many thanks to the Jessamine Molli for producing this show. And many thanks to all of you guys for listening. Keep on sending us emails. We do love them. It’s Slate money at Slate dot com. Other than that, we will be back next week with even more sleep, honey. For Slate plus with with no one except for the most awesome people in the world, can you just share the most awesome thing that did not go into the book?

S3: I’m trying to think of a non libelous thing, and then you can say you can say

S1: it in Slate, plus you can say

S3: slander. Oh, no, no. All we had some pretty awful things that were were taken out. We cut 20 thousand words from the book because we wrote too much. There was just so many more examples of everything. And then there were a couple like contested scenes that we took out, but none that were really. It really nothing that significant.

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S1: Well, actually, no. I mean, so this is this it interests me like was this sort of fact checked with WeWork? Did you go back and forth with the principals here? And they said, well, that bit is true, but that it isn’t.

S3: Yes, but when we say this in the author’s note, it’s not really anything. I mean, Adam didn’t want to talk to us. We do not for lack of trying on our part. And we did give them a huge list of fact checking of things that were in the book, and then they engaged on some of those points. So, yeah, that I don’t think we can get into more specifics, but we took some stuff out. We didn’t really add. I don’t think anything in as a result. Things I definitely can’t say. Well, OK, well, here’s one, because we did run this by sort of all parties, and so it won’t get us into any trouble. So there was a team chief, Julie Rice, who ran Soul Cycle. She was given a title at WeWork, which was Chief Brand Officer. And so originally she wanted something else. But Adam Kim, all these other designer, got that title, I think. But so she was given chief brand officer. She makes a like dazzlingly white office for herself. And then one day Adam has to call her and say, I can’t have you have that title anymore, because my wife Rebecca wants it back because Rebecca, I’m sorry, was the chief brand officer, in addition to being a added to her title co-founder, which was not originally how the company was founded, and then also she was the head of We Grow. But she was upset that Julie Rice was also given this title, which would very much upset Julie Rice. And she didn’t last too much longer there. And this was part of this general theme of Rebecca would often sort of demand people be fired very quickly. This was not the sort of uncommon thing, just Julie Rice wasn’t fired. But the whims of Rebecca would move a lot of things in Jar H.R., the mechanic for their airplane they had just bought, because you have to have an on staff mechanic for your 650 year on his I believe it was the second day, but so within the first week, Rebecca, meet him on the ground, then communicates to the staff, I think through Adam he needs to be fired because she didn’t like his energy. This is before they fly.

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S4: I mean, you have to have good energy.

S2: It’s all way

S4: without good vibes only.

S1: It is vibes and energy that keeps flames aloft. That’s not, you know,

S2: and friendship for sure.

S4: And best friends,

S3: there’s another good one related in the same genre. The wheels are grinding here. So they eventually had to for the plane, the flight crew. They eventually had to guarantee, I believe, as pilots, a hundred percent of a year’s salary, regardless of how long you lasted, because there was such fear that they were going to get fired too quickly.

S1: Wow. So is Rebecca in Neumann like some kind of like Michigan? Because what’s what’s her role? Yes.

S3: She just kind of added to the crazy, I think. They are still together. Adam they’ve had another kid. They now have six. They had. OK, here’s another thing that came out originally heard they had five nannies for five children, but was later we the only thing we could confirm was that it was three nannies for five children.

S1: But now they have six children, it’s probably gone back up again.

S4: Unclear grudge that yeah,

S1: with two billion dollars, you can afford pretty much all than that. If you want Emily, in your expert opinion, as the mother of multiple children, what is the optimal nanny to child ratio?

S4: I mean, we don’t have any nannies here at the Peck mansion, but I guess I’m not against one to one. That seems great. I got one someone.

S3: Another brief stat in the final summer, including homes rented in the Hamptons, the Neumann’s owned and rented more homes than children. They had the six homes, three Airbnb is three owned and four staff.

S4: Of course, we need a nanny and a house for every.

S3: Well, the surf instructors, plural, got their own house and then. Yeah. Right.

S2: Right. The family’s business instructor. Know it adds up. It’s the village. It’s the village.

S1: Amazing. This is why we get slate plus people. We give them we give them true value. Thank you, Elliot.