Ex-WeWork CEO Adam Neumann Has Regrets, But No Apologies (axios.com) 41
Adam Neumann on Tuesday spoke publicly for the first time since being ousted as CEO of WeWork more than two years ago, expressing "regret" for the employees who lost their jobs but not apologizing for making around $1 billion on his way out the door. From a report: "It was never my intention for the company not to succeed," Neumann offered while being interviewed at the New York Times DealBook Summit, saying he was slow to recognize that the markets in 2019 had shifted from valuing revenue growth to valuing profitability. His most common refrain was "lessons learned."
More takeaways from the interview: Neumann said that WeWork's $47 billion valuation in 2019, bestowed upon it by SoftBank, "went to his head" and made him believe his management style was working. The company formally went public last month via SPAC and is currently valued at around $7 billion. When asked about rampant marijuana use at the company, Neumann replied: "We had a fun culture." Neumann declined to comment on an audience member's suggestion that he share some of his wealth with WeWork employees who either lost their jobs or whose stock options are underwater.
More takeaways from the interview: Neumann said that WeWork's $47 billion valuation in 2019, bestowed upon it by SoftBank, "went to his head" and made him believe his management style was working. The company formally went public last month via SPAC and is currently valued at around $7 billion. When asked about rampant marijuana use at the company, Neumann replied: "We had a fun culture." Neumann declined to comment on an audience member's suggestion that he share some of his wealth with WeWork employees who either lost their jobs or whose stock options are underwater.
Like pets.com all over again.. (Score:3)
Prince called, lets party like its 1999!
Its like pets.com all over again
(and the Shiller Cape ratio just broke 40 this week, just like the last .com bubble! :-) )
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and the Shiller Cape ratio just broke 40 this week,
That's because people don't have anywhere else to put their money. Bonds are very low yield. The stock market is the only thing offering decent yields.
If this hypothesis is correct, the end result isn't a market crash (like 2000), it's inflation.
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https://www.multpl.com/shiller... [multpl.com]
But there is also a long-term trend towards higher PE ratios over the last 100 years.
As the market has become a vehicle for the masses to save for retirement, perhaps valuations will remain bloated permanently?
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The peak year of the baby boom was 1957. That cohort turns 65 next year. After that, the money flowing into retirement funds will diminish while the withdraws increase.
As retirees spend, they may add to already rising inflation from all the stimulus spending. The Fed will then raise interest rates, which will lead to a stock market decline and likely a nasty recession.
On the other hand, I could be wrong.
not really (Score:5, Insightful)
he was slow to recognize that the markets in 2019 had shifted from valuing revenue growth to valuing profitability.
It's more like the markets realized his company was worthless.
Re:not really (Score:4, Informative)
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No ,it was the investors realized that WeWork was a scam to put their money in his pockets.
The CEO bought property. He then leased it to WeWork at exorbitant rates. WeWork was paying the CEO to lease the property he owns, and paying over market for it.
The CEO then leverages this to buy more property that WeWork is then forced to lease as well.
In the end, the money goes into his pocket through the leasing fees. Basically being a huge scam.
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A standard business practice of startups is to make it appear that you're not worthless long enough for the founders to cash in. Actually having a useful product or service is too old school, and a waste of effort and money when the investors are willing to hand over truckloads of cash regardless of what you do.
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WeWork is dying under real estate. If they do not have revenu
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That's what he said.
I'd be happy to set up a billion dollar a year revenue company for anybody who'd like one. Just give me two billion dollars a year and I'll git er done.
Umm.... (Score:3)
Isn't business 101 "come up with a business plan that makes fucking money"??
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Pretty much all business plans have "profit" as an ultimate goal, but in their initial years its not that easy to make a profit while you are building the business to where you want it to be in the market - growth requirements means investment, which takes money away from the profit margin.
The old saying goes, most businesses don't make a profit in the first few years of operations - and that saying is mainly orientated around small, mom and pop style businesses, not businesses intended to be large behemoth
Re:Umm.... (Score:4, Informative)
Yes, Adam had a plan, and it worked very well. The plan was to get investors to buy his company. It worked, and he made quite a lot of money. You thought the plan was selling office space? How last millennium of you. The plan was to sell a company that sells office space. Big difference.
Re: Umm.... (Score:4, Interesting)
On a serious note: what make companies like Microsoft or Alphabet special is their ability to scale. Write a piece of software, then sell it a million times. Or a billion times. Your costs remain nearly constant.
Companies like WeWork are utterly different, because they don't scale the same way. If you have to buy, maintain and manage physical buildings, your *costs* scale with your size. This isn't high-tech at all - it's just good, old fashioned real estate.
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Only short-sighted bean counters thought Amazon was losing money. At any point they could have stopped re-investing and made a profit on paper, but unlike other companies, Amazon actually possess something that creates money.
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Amazon only became truly profitable with AWS.
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It was a sound business plan, essentially a REIT that operated mostly by obtaining long-term leases on large spaces and then subletting short-term units within those spaces. That's a classic wholesale/retail sort of business and it would have been just fine except that the approach was all "this but, hip, modern and oriented towards startup culture" which caused a lot of people who should have known better to loan them scads of money to do crazy things. Then that got combined with a lot of pot smoke, nepo
Re:Umm.... (Score:5, Interesting)
Typical venture funds and private equity are based on the "2 and 20" fee principle. This means the fund keeps 2% of the assets deposited into the fund as a management fee to fund salaries of staff, office work, etc. Since these are ongoing expenses, it's 2% each year. Then they make investments, and the fund managers, ideally being good investment pickers, get to keep 20% of the gains and 80% is returned to the investors. This all makes sense, 2-3 partners plus 2-3 staff raise $100M fund, keep $2M/year, and let's say that's a 10 year fund. If over 100 years that fund invests $80M (remember, 2%/year is 20% of the fund, so they only have 80% to work with), their investments results in a $400m total value, then the fund managers also keep 20% of the $300M gain. Their investors get their money back plus $240M, a nice tidy return, and the 3 individuals who make up the general partners bring home their $300k/yr salaries plus $20M in gains. This is a functional model when you're investing very wealthy people's assets and small businesses, particularly for teh fund managers who are individuals but reaping cash gains on par with businesses and institutions. In theory those individuals interests are aligned with the investors because they become very wealthy if their investors do well.
Then things get wonky because BIG institutions start putting money into funds and the funds start looking like $500M or $1B in size. Now what the partners start seeing is that it's not the 20% carry that can make them very wealthy, it's actually the 2% management fee. Now 3-4 partners in a $500M fund keep $10M/year in management fees; even after a very nice office and some well paid staff; you're probably out $2M/year to operate the fund, leaving $8M per year to split between the 3-4 partners over 10 years. The carry is fine, but the management fee is guaranteed to make the partners wealthy. So how do they up this game? By making their current fund appear to be growing in value and raising another fund before the first cashes out. Carry this forward a few times; now those 4 partners are partners on 3 or 4 funds, let's say the first was $200M, second was $500M, third was $800M, and the fourth was $1.1B. Now the partners are bringing in 2% per year on $2.6B total funds under management, and they're using the same office space and staff, so those 4 partners are equally splitting $52M/year; let's say they go extravagant and have operating costs around $7M/year, that still leaves 4 guys splitting $45M/year or take-home of $11.25M per year as their compensation.
Ok, so how do you make a fund appear to be growing? By working with your buddy in a different fund, who funds the next round in your investment at a higher valuation. How do we do that? Let's make our companies focus more on growth and less on profitability. In fact, grow at all costs! So we can write up the investment, look like heroes, and raise another fund that's even bigger so we collect management fees. Who cares if the companies collapse? THe carry is gambling, we don't really know anything about these companies. What we do know is how to collect management fees.
Neumann is a trumped up narcissist, a terrible business person, and just a horrible human being. But he robbed the VC's investors (not the VCs, their business is management fees; they rob their investors too). It's just a shame that he hired several hundred people who all thought they had equity in the next big thing but are usually the big losers when this all corrects.
Nevertheless, these situations usually fail to portray how complicit the investors are in this scheme. They absolutely are. They are not victims. It's their investors' investors who are taking the hit.
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Thank you for one of the clearest explanations about this entire mess I've ever seen!!!
Great boss (Score:5, Insightful)
I mean sure, he could wipe out all the employees' financial problems he created with a rounding error's worth of his wealth, but he just chooses not to :-)
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When you have his kind of money, you're more a referee than a player. And hating the ref is time-honored tradition.
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I mean sure, he could wipe out all the employees' financial problems he created with a rounding error's worth of his wealth, but he just chooses not to :-)
I find this is a pretty common argument these days, usually around taxation, but people rarely run the numbers.
Adam Neumann is worth $1.6 billion and WeWork apparently had 6,000 employees, if you divide all his wealth among all the employees, that's $267k. That's absolutely good money, but that's not a rounding error's worth of his wealth, it would be all of it. Which would be pretty unrealistic for him to be able to liquidate everything he owns without that wealth decreasing significantly on the way as wel
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You assume that all 6000 got laid off and/or have underwater stock options, which obviously isn't the case. If it's 20% of the workforce that's been harmed then each one gets $85k. The debt number includes mortgages BTW which generally can't be blamed on Adam Neumann.
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You assume that all 6000 got laid off and/or have underwater stock options, which obviously isn't the case. If it's 20% of the workforce that's been harmed then each one gets $85k.
I'll grant you that's a good point, I agree with you.
My counterargument is that it's unworkable. If people getting laid off got massive bonuses courtesy of Neumann, everyone who didn't get laid of would scream bloody murder about how they weren't included.
The debt number includes mortgages BTW which generally can't be blamed on Adam Neumann.
Well, no amount of debt is his fault. The financial difficulties come with the fact that people depend on their jobs to pay their debts and if they lose their jobs they're in trouble. So the argument is that if those laid off people can't make their mortgage payments, it's Neumann's fault.
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But the statement wasn't that he could solve all their financial problems, it was that he could solve all their financial problems that he created.
It's plausible that giving every employee $20K could solve all the financial problems that he created. Worth a try, anyway.
And if only half the employees had financial problems that he created, that would be $50K each.
(* rounding, remember?)
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it was that he could solve all their financial problems that he created.
Well, the only financial problem that he created is that by laying people off, they can't make their debt obligations as a result of no longer getting a salary. So that's why I was using the average debt.
So you can argue solving their financial problems is one of two things: in the first case, it's paying all of their debt, which this wouldn't be enough. In the second case is that it would allow them to make payments until they find another job, which $20k would help with...but that's the purpose of unemplo
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Yeah no plan to make amends with payouts from the CEO's personal wealth would be a flawless plan that would be perfectly fair to all WeWork employees past and present...
Better to let them go completely unaddressed while one asshat gets a billion motherfucking dollars for running the company into the ground I guess?
Yeah, we know.. (Score:3, Insightful)
"I regret not having a bigger parachute"
and
"Us rich guys never apologize."
Lessons learned, indeed (Score:2)
Hopefully some people learn the lesson that startups basically exist *only* to make the founder(s) rich. If they aren't going to pay you adequately for the work you're expected to do, you shouldn't take the job - their only reason for offering you stock options in lieu of benefits is to shorten the time it takes for the founders to get rich.
Unfair treatment of peons, must read!! (Score:4, Insightful)
this episode of "Class Warfare: Time to Embrace Your Marxist Ingratitude" is brought to you by msmash... stoking the embers of strife and controversy to soaring heights of clicks and ad revenue; it's disgusting msmash, you having no phukkin moral high ground so don't point out anybody else's presumed wrongdoing
not sure what to think about the link to axios.com... I see bold claims to truth and fact-based fairness but sheesh, peruse the headlines and how they're worded, read some of the 'articles'... you'll know right away their angle; but still, these days one needs several echo chambers... might add this one to my list
now about the topic itself... not sure if he actually defrauded anybody, that's definitely wrong; but if he is just a poor manager but still got luckier than hell, I don't begrudge that since it's a waste of time to be envious; and besides, the universe giveth, the universe taketh away... its fairness is not my problem, too busy with my own consternations
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I think we can agree that Adam Neumann doesn't deserve to be a billionaire.
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I think we can agree that Adam Neumann doesn't deserve to be a billionaire.
Almost no one generates enough profit through his or her own labor that they deserve to be a billionaire. Unless you're using some definition of the word "deserve" that I'm unfamiliar with.
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If you write a song that creates one dollar worth of enjoyment to a billion people, I am willing to say that it's fair for them to be a billionaire. It's not about the amount of labor you do.
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The people who actually create the music do NOT get their full "worth". Royalties favour the owners, not the creators, not even those who do the groundwork of putting it into people's ears.
But, hey, it's not about the labour, right?
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Yeap, the gatekeepers get a lot of the money, and that's not fair.
No fair, he doesn't deserve it (Score:2)
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The employees knew there was risk in the working for the company.
Really? And should all employees become financial, business and real estate experts, otherwise it's always their fault?
I guess it's all Bernie Madoff's victims' fault that they couldn't see he was running a Ponzi scheme. After all a few people figured it out, so the blame goes to everyone else who didn't, so therefore Madoff didn't do anything wrong.
How predictable that people defend behaviour because they want to be able to be the ones to do it in the not-so-distant future.
Why would he apologize? (Score:2)
He played the game correctly.
Am I missing something here? A bunch of people got to have fun at work, smoke pot, and draw a salary. Some lost their jobs, some still have stock options that, while "under water", aren't valueless.
I don't see how he owes them anything. They were paid along the way, and nobody guarantees employment forever.