Adam Neuman of WeWork- A Great Salesman Or A Great Bullshitter

The WeWork story is one that most of us are familiar with but as you’d expect we go deep into how Nueman was able to raise billions from some of the savviest investors, and from other investors like Softbank, who, as we find out, aren’t very savvy at all.

What I love about this story is that as soon as I started digging, I kept coming across facts and figures and quotes from Neuman that just left me stunned- how did he get investors to fall for his schtick?

We dig into Masayoshi Son the founder of Softbank, this revered investor who takes the biggest bets and also, the most reckless ones.

Even if you thought you knew the WeWork story, as I myself thought, I promise that there’s a lot in here that will keep you in a state of disbelief.

It’s an incredible story- enjoy

[00:00:15] Hey folks and welcome to today's episode titled Adam Neuman of WeWork- A Great Salesman Or A Great Bullshitter.

[00:00:23] Now the WeWork story is one that most of us are familiar with but as you'd expect we go deep into how Neuman was able to raise billions from some of the savviest investors and from other investors like SoftBank who as we find out weren't that savvy at all.

[00:00:39] What I love about this story is that as soon as I started digging I kept on coming across facts and figures and quotes from Neuman that left me stunned.

[00:00:51] How did he get investors to fall for his spiel?

[00:00:55] We dig into Masayashi Sun, the founder of SoftBank, this revered investor who makes the biggest bets and also the most reckless ones.

[00:01:05] And even if you thought you knew the WeWork story as I myself thought, I promise there's a lot in here that will keep you in a state of disbelief.

[00:01:15] It's an incredible story. Enjoy.

[00:01:19] Morning Keith, how are you doing?

[00:01:21] How are you, I'm doing really well, thanks.

[00:01:23] Today's story is WeWork and you chose this so what made you choose this cracker?

[00:01:29] Yeah, so I suppose I first became aware of them as sort of, you know, visiting companies in the startup worlds when we had our advertising business.

[00:01:40] So, you know, you're going to meet people who are kind of in WeWork offices and you're in the shared space.

[00:01:48] And it was intriguing and fascinating.

[00:01:50] I thought this is really cool.

[00:01:52] This is really nice, you know, good coffee, nice vibes, really nice desks, really nice spaces.

[00:01:59] And I thought this is, as a concept, this is really cool.

[00:02:03] Then I met people who'd be kind of hot desking to be in one office one time, one another.

[00:02:09] So I thought this is an amazing concept.

[00:02:11] Yeah.

[00:02:12] Then, of course, Adam Neumann himself popped up and you'd see him.

[00:02:16] And then the whole messaging got really woo-woo, sort of changing the world type stuff.

[00:02:21] So I thought this guy must be the most amazing salesman in the world.

[00:02:27] And then, of course, it all blew up.

[00:02:28] So I thought it would be a really good story to kind of dive into a little bit.

[00:02:32] Yeah.

[00:02:32] But I just love the concept.

[00:02:36] I didn't know much about the underpinning business, which obviously not a lot of people did until it was quite late in the day.

[00:02:44] And he was a really intriguing and engaging figure.

[00:02:48] And I thought, wow, this could be a great story.

[00:02:51] So that's the interest in them there.

[00:02:54] Yeah.

[00:02:54] And I knew a bit about it because when it all blew up, there was a lot of articles about what went wrong with WeWork.

[00:03:03] And when I dug into it then for this episode, you said salesman.

[00:03:07] I'm even thinking of typing this episode, the world's greatest bullshitter, because there's a difference between salesmanship, I think, and bullshit.

[00:03:17] And the more I dug into it, the more I thought, is this guy for real?

[00:03:22] And not only is this guy for real, how is he getting away with this?

[00:03:26] How is he raising all these billions?

[00:03:29] As you said, when you go into the offices, they were very, very nice.

[00:03:33] They were very different to what had been out there before.

[00:03:36] But at the same time, that's not exactly what he was selling.

[00:03:40] And that's the great thing about the story.

[00:03:41] Yes.

[00:03:42] He was selling it as something way more than just office space.

[00:03:46] That's why they were able to raise all these billions.

[00:03:48] And all you had to do was scratch the surface and you realise there's not a whole lot behind what he's saying here.

[00:03:56] One world or story or moral that kept on coming into my head when I was reading, researching this, was The Emperor's New Clothes.

[00:04:04] It kept on coming up.

[00:04:06] I was reading what he was saying and what his investors were saying about him and going, this is just pure fiction.

[00:04:14] So he is obviously a fascinating character that he was able to do what he did and sell this story of what WeWork was about, which makes it such a great story.

[00:04:28] Especially when it all comes out.

[00:04:28] Yeah, and I think we, and the way he extracted himself in the end, I think is an amazing story.

[00:04:35] But we can talk about that as we get to it in chronological order.

[00:04:39] But I think that's one of the standout items.

[00:04:41] It is.

[00:04:42] And to begin the story, we will dig into his background and how he built it.

[00:04:46] But when I was writing the article for this, I started this in 2017, which is really when they were at their height.

[00:04:54] Because he was on the cover of Forbes magazine.

[00:04:56] It sort of gives out any listeners who aren't aware of WeWork.

[00:05:00] Although I'd be surprised if anybody hadn't come across WeWork at some stage because it was such a big story.

[00:05:05] And I think there was the Apple series as well.

[00:05:07] We crashed, was it, with Jared Leto?

[00:05:09] Oh, yeah.

[00:05:09] Yeah.

[00:05:10] But he was on the cover of Forbes magazine with quotes like, we're doing amazing things that no one else is doing.

[00:05:17] We are changing how and where the world does business.

[00:05:22] And he uses words like, it's a physical social network.

[00:05:25] Their mission statement was elevating the world's consciousness.

[00:05:30] And he said WeWork wasn't just renting office space.

[00:05:33] It was a movement, a revolution.

[00:05:35] It was something much, much greater.

[00:05:37] And Newman is central to all of this.

[00:05:40] He was this charismatic, evangelical.

[00:05:43] And as I was saying in the article, it wasn't just that he was selling a business.

[00:05:47] He was selling a myth.

[00:05:49] And he sold this myth really, really successfully.

[00:05:53] And the thing about it, Keith, is you're forgiven for thinking there was only Adam Newman in WeWork.

[00:05:57] Because he did have a co-founder.

[00:05:59] That's right, Miguel.

[00:06:01] Miguel, who really just went into the background.

[00:06:04] And even when I was doing my research on where are they now, you couldn't find anything about Miguel McKelvey.

[00:06:10] It's all Newman.

[00:06:12] Well, it would be difficult not to fade into the background.

[00:06:16] When you're sort of juxtaposed against somebody like Newman, I think.

[00:06:19] Yeah, yeah.

[00:06:20] And he was this very, very imposing 6'5", although Miguel McKelvey was even taller than him.

[00:06:27] Not that that may help him in any way.

[00:06:29] This 6'5'' figure with long brown hair, dressed like a tech bro in expensive trainers and T-shirts and jeans,

[00:06:38] and very much came across as being at the vanguard of this new tech sector, even though they weren't a tech business at all.

[00:06:46] But his background is born in 1979 in Israel to two doctors, lived in a kibbutz for a while, then went into the army, then moved off to New York.

[00:06:57] Started two very bad businesses.

[00:06:59] In fairness to Newman, he himself, I signed to view, he joked about how crap these initial businesses were.

[00:07:06] I suppose it's easy to joke about how crap they were when you've got a few billion in the bank.

[00:07:09] But one of them was...

[00:07:11] And were they also other people's money as well?

[00:07:13] I wonder.

[00:07:14] I didn't see anything about the investment he got for them, but he must have got some investment.

[00:07:18] One was a retractable high heel shoe, high heel shoe for women.

[00:07:22] And the other was a baby company, baby clothes company called Egg Baby.

[00:07:26] And their key product was crawlers, which had these pads on the knees and the byline.

[00:07:31] Or the tagline was something like, even though they don't hurt, or even though they can't talk, it doesn't mean they don't hurt.

[00:07:37] So this was...

[00:07:39] I mean, it was silly ideas.

[00:07:40] But he was outgoing, ambitious.

[00:07:44] Everybody who knew him back then said that he was very, very focused on success.

[00:07:49] You know, he was driven.

[00:07:51] And McKelvey then, a different character, quieter, he was brought up in a collective of single mothers in Oregon.

[00:07:57] And he went down to become an architect.

[00:08:00] But apparently their origin story, and I'm very suspected because, you know, Newman is just so full of it.

[00:08:06] But their origin is stories that they bonded over this shared experience of growing up in these communities.

[00:08:12] And it was this shared experience and this background that gave them this kind of, you know, insight that nobody else had.

[00:08:20] This kind of superpower as to what makes a great community.

[00:08:24] That smells like bullshit.

[00:08:25] Yeah, it does.

[00:08:26] It does.

[00:08:27] And so they formed this idea of, you know, leasing out office space.

[00:08:33] That was it, basically.

[00:08:34] A company that were ranked office space, but with a communal twist.

[00:08:37] And they started out in 2010 with a company called GreenDesk, which was this eco-friendly office space company in Brooklyn.

[00:08:43] They got one floor off a landlord.

[00:08:45] It was a very opportune moment.

[00:08:47] They did do very well from the get-go because this is just two years after the 2008 crash.

[00:08:52] Real estate is very cheap.

[00:08:54] You had an awful lot of people coming out of 2008 without any jobs.

[00:08:58] So it led to an increase in freelancers, in startups, people starting their own companies, and just architects and self-employed people were starting moving into this space.

[00:09:08] And also college graduates were seeing self-employment, freelancing as a viable career opportunity.

[00:09:16] So there was going demand for this sort of flexible month-to-month office space.

[00:09:20] So GreenDesk did very well, but they had huge, huge ambitions.

[00:09:23] Newman was massively ambitious.

[00:09:25] He wanted to expand into Manhattan.

[00:09:27] So they sold GreenDesk.

[00:09:29] They said they sold it back to their landlord for $3 million, which seems like a big amount of money, I thought, for what was a very, very small business back then.

[00:09:37] I couldn't verify whether it was true or not.

[00:09:40] And they started.

[00:09:41] We worked with this distinct space that it wouldn't be just a place to work.

[00:09:45] It would be vibrant communities.

[00:09:47] Newman called this a capitalist kibbutz, mixing commerce with community.

[00:09:53] And again, harking back to why we should be very circumspect about anything that Newman says.

[00:09:59] In their origin story, they said that, you know, they pitched it to a lot of Manhattan landlords

[00:10:04] and that they were getting the cold shoulder until they came across Joel Schweber, this landlord,

[00:10:10] who after a three-hour lengthy meeting eventually gave him 15 million quid, just like that, for a 30% stake.

[00:10:17] And Schweber said, I did negotiate.

[00:10:19] I said yes.

[00:10:20] I loved Adam's energy.

[00:10:21] And that was a story that's carried throughout in Hulu documentary, in every article I read.

[00:10:26] That was sort of a given.

[00:10:29] But I started digging into Joel Schweber just because I was interested.

[00:10:31] I thought, my God, if he got 30% of the company for $15 million, how much did this guy earn in the end?

[00:10:36] How much did he cash out?

[00:10:37] So I dug around and I came across a few articles that had a very interesting history on Joel Schweber.

[00:10:45] He was a controversial character, ruffled an awful lot of feathers.

[00:10:51] And within the articles, Schweber himself admitted that he only ended up giving $1 to $2 million to WeWork.

[00:10:59] And even though he said this publicly and in these articles he said it,

[00:11:03] Newman continued with the narrative that they got $15 million from Joel Schweber.

[00:11:06] Now, apparently, Schweber had about 1% of the company at the time of IPO.

[00:11:11] That's the best figure I could get.

[00:11:12] Which still would have been a hefty sum if he managed to cash out.

[00:11:15] But again, it just shows that as with anything Newman says, you have to be taken with a pinch of salt, really.

[00:11:22] I suppose that helped their valuation as well.

[00:11:25] I suppose if they said 30% was $15 million, then it's a much better story for investors thereafter.

[00:11:32] Maybe that's what was motivating him.

[00:11:34] It does.

[00:11:34] And it also feeds into this narrative of Newman being this fantastic visionary that, you know,

[00:11:39] he goes in, meets the landlord and without even doing any due diligence,

[00:11:42] the landlord just slaps down $15 million and says, there you go, because I believe in you, Adam.

[00:11:47] That kind of stuff.

[00:11:49] I really, I mean, as you can tell, I'm very anti Newman.

[00:11:54] But not just him.

[00:11:55] I'm very anti the people who bought into his shtick, because I'm looking at them kind of going, what were you up to?

[00:12:01] But anyway, let's look at the business model.

[00:12:03] So the business model was simple, but effective.

[00:12:07] They created spaces with, it must be said, as you even testified, an irresistible draw for the target market.

[00:12:13] Oh, they're very cool.

[00:12:14] Very, very, very cool.

[00:12:15] That's it.

[00:12:15] They were saying like this industrial chic aesthetic with it, like exposed brickwork, open areas, comfy couches, cool murals and piped in music.

[00:12:25] And an aspect that I came across all the time in the articles is the free beer.

[00:12:30] Did you come across the beer?

[00:12:32] No, free beer.

[00:12:33] No.

[00:12:33] Yeah, I think that might have been just in the American ones.

[00:12:36] Free flowing beer.

[00:12:37] Alcohol was a huge element of the whole WeWork culture.

[00:12:41] But the basis behind it was very simple.

[00:12:44] Make work more enjoyable and improve productivity.

[00:12:48] And they were.

[00:12:50] Yeah.

[00:12:50] And there was this sense that, you know, it could sort of encourage serendipity.

[00:12:56] You could just bump into another person and, you know, innovation will flourish as a result.

[00:13:02] And, you know, in my research, so, I mean, at the start, this is a quote from an architect who had a desk there.

[00:13:09] And she said, I have to say the vibe there is magnetic.

[00:13:12] People are chatting in small groups or having coffee and working on a laptop.

[00:13:16] This energy, this magnetic productive buzz is what she testified to.

[00:13:20] So, I mean, they did get some of that vibe going, I guess.

[00:13:24] Yeah, I guess the other side of it is, though, if you're maybe a grumpy old man like me, if people on either side of you are focused on their business with headphones on, having loud conversations about something that has nothing to do with your business.

[00:13:40] Yeah.

[00:13:40] And it's like, Jesus Christ, give me some space.

[00:13:43] There was a lot of that.

[00:13:45] I get the feeling that it was really, you know, for young people, I guess is that, you know, a 40-year-old, you know, accountant, you know, trying to crunch his numbers would not like that whole vibe going on.

[00:13:57] So it was very much for the young people, this whole free beer and comfy couches and every mixing and, you know, all that kind of stuff.

[00:14:03] Yeah, it wouldn't be my cup of tea at all.

[00:14:05] And they were charging anything from $45 a month for a temporary desk to $220 a month for a more permanent hot desk and up to $22,000 for up to 50 employees.

[00:14:18] And in later years, larger businesses did start getting, taking space in WeWork offices.

[00:14:24] But at the start, it was mainly freelancers and startups.

[00:14:28] And it was fresh and it was exciting.

[00:14:30] And people will say that, you know, when Google and Facebook and tech companies were doing this years beforehand, they were.

[00:14:37] But this was the first time really that startups managed to experience that kind of, you know, open space, arcades, pool tables, that kind of vibe.

[00:14:47] Yeah, yeah.

[00:14:49] And the sign-in experience with a little iPad mini and all that sort of stuff.

[00:14:53] Oh, yeah, yeah, sure.

[00:14:54] You know, you're having your face scanned, all that sort of crap.

[00:14:57] Yeah, the technology that Newman went out of this.

[00:15:00] That's one thing that we're going to dig into.

[00:15:02] But the thing about it is that for all its coolness and all its vibes, there's no USP here.

[00:15:07] There was nothing here that couldn't be copied.

[00:15:09] And they weren't unique.

[00:15:10] There was people in the space for many years that we are going to dig into as well.

[00:15:14] So it was a very easy thing to copy and competitors did copy it.

[00:15:19] But Newman, what Newman's trick was in convincing everyone that it was much more than that.

[00:15:25] He really fought against this idea that they were just a real estate office rental company.

[00:15:32] And his pitch was, he'd go into the pitch.

[00:15:35] This is what he'd say.

[00:15:37] How do you change the world, he'd ask.

[00:15:40] His answer, bring people together.

[00:15:42] Where is the easiest place to, where is the easiest big place to bring people together in the work environment?

[00:15:48] So he was talking about changing the world.

[00:15:50] That's how he framed it all the time.

[00:15:51] And he used various terms to make WeWork seem much more than it was.

[00:16:00] He'd call it a tech company.

[00:16:01] He'd call it a platform, a physical network or an operating system layering additional streams of revenue,

[00:16:08] saying that, oh no, we're like a physical operating system and we're going to be able to sell insurance and software

[00:16:13] and all these additional services to our customers.

[00:16:16] And his bullshit was infectious because here's a quote from their CFO who says,

[00:16:21] we frankly are in our own category.

[00:16:23] We use real estate and services to empower our community.

[00:16:29] And they use an awful lot of this kind of fluffy language to boost the company.

[00:16:34] Which looking back, and it's not just with hindsight.

[00:16:36] If anybody started talking to me like that about their business, I'd say, look, just give me your numbers, man.

[00:16:41] Tell me how much you're making and how much you're going to make and where your ROI.

[00:16:46] I think that's always coming from what your bottom line is.

[00:16:48] Don't give me this bullshit about empowering your community.

[00:16:52] But this empowering community sounds charitable, Max.

[00:16:55] I know.

[00:16:56] You know, it's like a higher mission.

[00:16:58] Yes.

[00:16:59] Oh, this is all that they're all about.

[00:17:01] We're much more than just, you know, a pure real estate player.

[00:17:04] We're here to, you know, make people better, make the world better.

[00:17:08] But the simple fact of it was that it was a company that had to charge members more than it paid with landlords.

[00:17:14] And it was dependent on a thriving office rental market, which itself is dependent on a strong economy.

[00:17:20] And anybody, you don't have to be a savvy investor to know that real estate is one of the most cyclical businesses in the world.

[00:17:27] Yeah.

[00:17:27] And that's all it was.

[00:17:28] So, of course, to grow, they had to get a lot of money.

[00:17:31] They initially got 7 million from friends and family because it should be noted that Newman's wife, Rebecca, who will be talked about a little bit in the episode, was the first cousin of Gwyneth Paltrow.

[00:17:42] So, they moved in affluent circles and they managed to raise the 7 million from those friends and family, but they needed a lot more money.

[00:17:49] So, in 2012, they pitched to Benchmark, a very well-known venture capital firm.

[00:17:55] And they convinced them, as we talked about, that WeWork was more than the sum of its parts.

[00:18:01] That when he was called up on this, when Benchmark called him up on his valuation and saying, you know, but hey, Adam, you're only leasing three buildings at the moment.

[00:18:11] Adam said, what do you mean?

[00:18:13] I have hundreds of buildings.

[00:18:15] They're just not built, yes.

[00:18:18] Oh, Jesus Christ.

[00:18:23] They fell for us.

[00:18:24] As they said, they weren't really investing in the business at this stage.

[00:18:27] They were investing in him because this is the quote from Bruce Dunleavy, the partner with Benchmark.

[00:18:31] He said, let's give him some money and he'll figure it out.

[00:18:34] So, they gave him $17 million at a valuation of $100 million.

[00:18:39] And then, over the next few years, as they needed more money, they got $150 million from JP Morgan in 2014, valuing them now at $1.4 billion.

[00:18:48] In 2016, they got $430 million from a giant Chinese VC firm, valuing them past $16 billion.

[00:18:57] And the reason why they were able to do this, you're kind of going, because, you know, people were going to bring it into comparison with another company that had been around and doing exactly as we were could be doing for over 20 years.

[00:19:08] And this valuation of $16 billion was way too high.

[00:19:12] And it's because he was using the tech startup playbook.

[00:19:16] It was an idea of grow fast, acquire as many users, or in this case, tenants as you can, and worry about profitability later.

[00:19:24] And as we said, he was very, very good at selling it.

[00:19:27] He was charismatic.

[00:19:29] He was energetic.

[00:19:30] And it wasn't just employees.

[00:19:32] He even had the likes of Jamie Dimon.

[00:19:35] Like, I mean, Jamie Dimon, as far as I'm concerned, is, you know, probably top of the tree in terms of financial know-how and sensibility.

[00:19:44] I've read numerous books on the 2008 crash and how JP Morgan got through.

[00:19:49] He said a lot of it comes down to how Jamie Dimon is this steady hand who just, you know, doesn't lose the head.

[00:19:55] But he came out after they invested in WeWork and said, it's a hybrid hospitality and tech company that's entirely different from anything in real estate.

[00:20:04] Again, notice the tech.

[00:20:05] Walter Isaacson.

[00:20:07] I mean, you know.

[00:20:08] Oh, my God.

[00:20:09] He compared it to Steve Jobs.

[00:20:10] He said, like Steve Jobs and other great entrepreneurs, he knows how to connect the humanities with business and technology.

[00:20:18] So you've got these stalwarts, people who I would normally look up to as much as you'd look up to some of these people.

[00:20:25] But just kind of think, OK, well, these guys have a bit of sense.

[00:20:28] And they are all lavishing praise.

[00:20:29] So obviously, Newman in company, because I've watched videos and I'm not swayed by him, but obviously in company he must have been.

[00:20:37] Had some sort of.

[00:20:40] Charismatic, engaging.

[00:20:41] There must be something there.

[00:20:43] Because both Diamond and Isaacson talk about the tech.

[00:20:49] So obviously he sold them on the tech.

[00:20:51] And this is another quote from them, from WeWork.

[00:20:53] They said, landlords just sell aluminium.

[00:20:56] We make iPhones.

[00:20:58] So you're kind of thinking, OK, so these guys must be doing some amazing technology stuff if you've got all these people buying into them, valuing them as a tech startup.

[00:21:06] But they didn't.

[00:21:08] Like there was nothing there technology-wise.

[00:21:10] The Forbes magazine that I mentioned at the start, they talked about, this is a real puff piece.

[00:21:16] They talked about complex technology and logistic systems for optimising space.

[00:21:21] But companies like IWG that we'll talk about, they'd be refining space optimisation for decades.

[00:21:27] There was nothing new there.

[00:21:28] This is what was in the article as well to kind of exemplify their technology.

[00:21:32] They talked about laptops and touchscreens wired to doors.

[00:21:37] Adjustable desks that could be adjusted with the swipe of a card.

[00:21:41] And they even talked about soundproof phone booths that have adjustable lighting and temperature.

[00:21:49] I can't go, what the hell?

[00:21:51] Like this is just shiny window dressing.

[00:21:54] There's nothing new.

[00:21:54] They talked about their ability to collect and analyse data, conform optimal design and a breakthrough.

[00:22:00] And this is no bullshit.

[00:22:02] In the article that Forbes said to highlight how good they were using their technology and how much they were more than just a real estate company.

[00:22:10] The guy who was analysing this said they had a breakthrough.

[00:22:13] They realised that customers liked desks that were seated beside windows.

[00:22:19] That's what their data informed them.

[00:22:23] So, like, they also created an internal social media platform so that all the people in WeWork could, you know, be on this one social media platform.

[00:22:33] It totally flopped.

[00:22:34] Kind of a LinkedIn.

[00:22:35] Nobody used it.

[00:22:36] Yeah, yeah, yeah.

[00:22:37] And the world, or not the world, the Harvard Business Review then did an analysis of WeWork and how it was claiming to be a tech company.

[00:22:45] And they said the criteria for a tech startup or any tech company should have network effects, low capsule inquirements, low customer acquisition costs, and the ability to scale quickly.

[00:22:55] WeWork didn't shake.

[00:22:56] None of those.

[00:22:57] None of those.

[00:22:57] And nor did it have any technology, proprietary technology, that disrupted any sector in any way.

[00:23:05] It was...

[00:23:05] Oh, it's all CapEx as well, like, pretty much.

[00:23:07] Massively CapEx.

[00:23:09] Massively CapEx.

[00:23:10] And the fabrication just didn't extend to the technology.

[00:23:14] They also used to do what they called, internally, was activate the space.

[00:23:20] And that's whenever Newman was bringing investors around their WeWork building.

[00:23:25] Newman would get all the employees down into the lobby.

[00:23:27] They'd start drinking margaritas.

[00:23:29] They'd start playing pool.

[00:23:31] It was all a fabrication to make it seem like it was this huge, vibrant workplace.

[00:23:35] So he even fabricated that side.

[00:23:37] Now, that I gave him a break.

[00:23:39] I mean, that's probably a bit of, you know, salesmanship and people will do that.

[00:23:43] But the whole tech side of it was pure, as far as I'm concerned.

[00:23:48] Yeah, you know, I can remember the signing with the iPad and I thought that was cool.

[00:23:52] Yeah, a lot of cool stuff.

[00:23:53] I can remember the little phone booths and stuff like that.

[00:23:56] But that was just common sense.

[00:23:58] Yeah, just...

[00:23:58] If you wanted to have a private conversation, you didn't want everybody to over here.

[00:24:03] Yeah.

[00:24:04] But you wouldn't call any of that technology.

[00:24:08] They're just...

[00:24:09] Little add-ons.

[00:24:10] Labour-saving devices or add-ons.

[00:24:12] There's no core proprietary IP there at all.

[00:24:15] No, and just like the pipe music and the nice murals,

[00:24:17] they all add to the atmosphere and they all make it seem a bit cool.

[00:24:21] But there's nothing...

[00:24:22] Yeah.

[00:24:22] There's no underlying or proprietary technology or disruptive technology in any way.

[00:24:26] That's what he was selling and that's what the people were buying into.

[00:24:29] Again, savvy investors putting billions in on this basis.

[00:24:34] They also talked about their culture.

[00:24:36] And this is what Newman said.

[00:24:38] He said, culture is our intellectual property.

[00:24:40] And it wasn't just to promote culture internally.

[00:24:43] It was also a selling point.

[00:24:44] We talked about the we operating system.

[00:24:47] He used culture as something that they would also sell to prospective tenants,

[00:24:52] saying that we're not just going to optimise office space here.

[00:24:54] We're also optimising your company culture.

[00:24:58] But again, you dig down into it.

[00:25:00] Like, if you're going to say that you're a tech company,

[00:25:03] you know, have some technology.

[00:25:04] If you're going to say that your culture is your intellectual property,

[00:25:08] you know, have something to back it up.

[00:25:09] They didn't have anything to back it up.

[00:25:11] They did have a purpose and an awful lot of people bought into that purpose

[00:25:14] that they were changing the way people work.

[00:25:16] But really, the only thing in one of the articles that I read,

[00:25:19] they said their only intellectual property in terms of culture was alcohol

[00:25:22] because they actively promoted alcohol like no other company that they ever came across.

[00:25:27] They had beer on tap.

[00:25:29] They posted it all over the wall encouraging people to meet up for it.

[00:25:33] Newman himself had this tequila called Don Julio 1942.

[00:25:37] It was a very expensive bottle of tequila.

[00:25:40] And every time there was a business success,

[00:25:43] whether he was with a landlord or a business partner or his employees,

[00:25:46] there were shots of tequila all around.

[00:25:48] Drinking was very much part of the culture.

[00:25:52] They'd have a mandatory Monday night event called Thank God It's Monday.

[00:25:56] Mandatory.

[00:25:56] Everybody had to attend where Newman would go up on stage

[00:26:00] and talk about how great they were and talk about this movement they were creating.

[00:26:03] And that was also followed by shots.

[00:26:06] And then they'd have a yearly annual event at the Summer Camp is what it was called.

[00:26:11] I don't know.

[00:26:11] Did you see the Hulu documentary?

[00:26:13] I did.

[00:26:14] Not that.

[00:26:14] Was it Hulu?

[00:26:16] But I was.

[00:26:16] I thought it was HBO.

[00:26:18] It could be HBO.

[00:26:19] I'm not too sure.

[00:26:20] But it was.

[00:26:21] I did.

[00:26:21] I saw this really odd sort of social event where people were really pumped up.

[00:26:28] Yes.

[00:26:28] It was overexcited and it was cultish weird.

[00:26:32] Very cultish.

[00:26:34] Very.

[00:26:34] They started off that shot of the summer event with just drinking.

[00:26:40] Loads of drinking.

[00:26:41] People going nuts, getting drunk.

[00:26:43] And alcohol was free and it was everywhere.

[00:26:46] But then you're right.

[00:26:47] Then there was these events.

[00:26:48] And again, the summer camp was mandatory.

[00:26:50] People had to attend.

[00:26:51] And there was people in that documentary who said, I wasn't comfortable with the alcohol.

[00:26:55] I wasn't comfortable with the cult-like feel.

[00:26:58] And I didn't.

[00:26:59] I expressed that to HR and said, I didn't want to go.

[00:27:02] And HR said, tough.

[00:27:03] You got to go.

[00:27:04] Not only did they have to go, they were also given bracelets that were, that they could be tracked on so that the organizers could enforce them.

[00:27:13] In other words, you had to attend these talks that Adam gave.

[00:27:16] And Adam and his wife would stand on stage for hours on end talking about how great their marriage is.

[00:27:22] And also talking about how they tended to save the world and solve the problem of orphanages around the world.

[00:27:28] And also at one stage, Adam said that he, kind of half jokingly, that he could become the president of the world.

[00:27:35] So it was very cult-like.

[00:27:38] And you're right, in that documentary, you saw the intensity of the people and the belief that they had.

[00:27:44] And it did seem a bit off.

[00:27:47] And some of them are very young.

[00:27:49] Yes.

[00:27:49] And innocent to felt exploitative in some respects.

[00:27:52] Yeah.

[00:27:53] And they were exploited, Keith.

[00:27:54] Because in the research, it all just showed that an awful lot of these young people were working 60 to 70 hours a week.

[00:28:00] Which you'd understand, you know, they were working for low pay as well because they bought into this.

[00:28:06] They're saving the world.

[00:28:08] Yes.

[00:28:08] This vision that Newman was promoting.

[00:28:12] And, but there was also a huge turnover because they were working so hard.

[00:28:16] And also there were stories that Newman was intending to cut up to 20% of the workforce every year.

[00:28:22] And this is a quote from one person.

[00:28:23] He said, when you're at WeWork, there's a certain lack of culture, which is ironic for a company selling culture.

[00:28:29] If there is a culture, it's that of a revolving door.

[00:28:32] So again, if you're going to set yourself up as culture is your intellectual property, you need to have a lot more behind it than just, you know, we go to summer camp once a year.

[00:28:40] And in actual fact, you're forced to go.

[00:28:43] We have a Monday night session where Adam spouts out about how great they are and you're forced to go.

[00:28:48] And we also have loads of alcohol.

[00:28:50] You know, there needs to be a bit more to it than that.

[00:28:52] But, you know, despite our criticisms, WeWork continued to grow in 2017.

[00:28:58] Had 163 locations in 52 cities, 150,000 members.

[00:29:04] It had revenue of 886 million.

[00:29:07] So that's all good.

[00:29:08] Except that 886 million revenue was balanced by an $883 million loss.

[00:29:16] So they were nearly losing a dollar for every dollar that they were spending.

[00:29:21] But they managed to keep on raising investment.

[00:29:24] And part of this is due to the markets back then.