November 3, 2023 - 7:00am
O WeWork, we hardly knew ye. Once valued at a mighty $47 billion (£38.7 billion), the onetime startup “unicorn” has spent the last twelve months haemorrhaging 98% of its stock market value and is expected to file for bankruptcy next week.
Future of work? Not so much. Yet even before the pandemic revealed that what the modern knowledge worker desires most is not coworking spaces with ping pong tables but rather to stay home and tap on a laptop from the sofa, the evaluation was an absurdity.
How did it get so high? Simply put, Adam Neumann, WeWork’s co-founder and CEO, was a bullshit artist of the highest order. Although it was clearly a real estate leasing company, Neumann deployed Silicon Valley tech jargon and his own personal charisma to create the impression that he had created something new and unheralded: a “physical social network” like Facebook, or a “platform” like Uber.
In fact, WeWork had no proprietary technology to speak of and its first CTO was a teenage boy known as “Joey Cables”. And yet despite the vast gulf that existed between Neumann’s breathless rhetoric and reality, his bullshit secured billions of dollars for the company. Employees attributed an aura or “reality distortion field” to Neumann that only stopped working when WeWork filed for an IPO, exposing his mythmaking to public scrutiny. The IPO was withdrawn, and Neumann was dethroned shortly afterwards.
Yet although the WeWork CEO was an outstanding purveyor of Silicon Valley waffle, it must be said that he had tough competition.
Elizabeth Holmes — currently serving nine years in prison in Bryan, Texas — is the most notorious of Neumann’s peers. Her Theranos home blood test kits never worked and were actively dangerous, and yet everyone from Rupert Murdoch to former US Secretary of Education Betsy DeVos lobbed millions at her rubbish boxes.
Meanwhile other, much more ordinary products were also engulfed in mystification. In 2017, Peloton, which described itself as “the largest interactive fitness platform in the world”, achieved unicorn status, even though it was obviously just a fancy exercise bike. Similarly, Beyond Meat, which was also once valued in the billions, liked to describe its ersatz chicken tenders as a “plant-based chicken platform”.
Other massively hyped “disruptive technologies” have turned out to be disappointing, too — even when not entirely vaporware. Streaming is now as expensive and confusing as cable; Uber is as expensive as a taxi; Airbnb is frequently more expensive than a hotel. The world was not changed: some things became a little bit more convenient, while others became a little bit worse. Everything has disrupted itself back to its origins.
The impending bankruptcy of WeWork, then, serves as a nice capstone for an era of hype and blather. Years from now the era of venture capital-fueled “disruption” that preceded the pandemic will be regarded in the same light as Tulip mania, or the Beanie Babies craze of the Nineties, only instead of middle-aged women lining up to buy brightly coloured soft toys, it was bankers and MBAs racing to incinerate ever larger piles of money on a quest for un-enlightenment.
That said, the game is not quite over yet. Last year it was reported that Adam Neumann, who exited WeWork with $1.7 billion in hand, received $350 million in funding from Andreessen Horowitz for a company called Flow that promises to disrupt the residential rental market in a vague, undefined fashion. It’s already valued at $1 billion and it doesn’t even have a website yet. A reality distortion field indeed.
Daniel Kalder is an author based in Texas. Previously, he spent ten years living in the former Soviet bloc. His latest book, Dictator Literature, is published by Oneworld. He also writes on Substack: Thus Spake Daniel Kalder.
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SubscribeI remember being harangued by one of Neumanns acolytes as being a dinosaur when I failed to be bowled over by their pitch when they came to London, our analysis of their financial position stating that they were too risky to let to.
they took money they’re didn’t have, spent it on buildings they didn’t own, then leased the final product back to the end user at a loss.
all the silicon valley unicorn bullshit couldn’t hide that from anyone who spent an hour doing some basic analysis. It’s incredible they have lasted this long.
Accounting is boring, yet accounting and financial analysis have a time tested history of debunking bullshit.
First, find a snake-oil salesman – next buy-in cheap – then give them publicity – suck in money from lazy fools – then sell our just before reality bites.
Fake unicorns are just too lucrative to disappear (for the real players).
Low interest rate phenomenons. I think central banks don’t get enough “credit” for this mess. With all the low risk assets being acquired by the government via money printing, capital flowed into high risk VC firms who then found themselves with far more money than quality startups to fund. If your capital:opportunity ratio becomes as utterly unbalanced as it is at a16z then your biggest problem rapidly becomes how to give money away as quickly as possible without seeming to do so.
One thing to note: none of these failed firms are actually tech companies. They’re normal companies with a website or mobile app. Nothing special about that. The reason people like Neumann keep describing their companies as “platforms” is because genuine tech firms led by computer programmers and engineers often create such platforms and generate massive profits by doing so, but that is very specific to the software world.
I also note that speaking on TED talks these days is a great platform for selling BS to the wealthy and clueless
The various crises of the last 15 years have greatly increased the wealth of the very rich, who are not the sort of people to keep their fortunes under the mattress.
With so much money chasing a smaller number of good investments, some of it is bound to end in the hands of carnival barkers selling mirages.
Personally my experience of Uber is that it is still cheaper than taxis and much more reliable and user friendly.
It’s usually cheaper because the drivers end up earning less than minimum wage, out of which they have to deduct petrol and depreciation on the car, and don’t have to pay for licences like other taxi firms. The whole thing is a rort, it’s no different from dodgy building companies undercutting legitimate businesses by using cheap migrant labour, ignoring health & safety obligations and using inferior products.
I’m surprised this article did not include a single mention of the ultimate fake tech-unicorn, Wirecard.
Currently reading the book about it, “Money Men” by the FT journalist who exposed the fraud, Dan McCrum. Very good.
No. It will happen again. Perhaps after a period of greater sanity for several years. But all the root causes are still present. As someone else has noted, there’s a lot of money to be made by the promoters and backers of this stuff who are usually in a position to get out ahead before it all collapses.
It is simply the greater fool theory at work. If people stuck to investing in things they actually understood, it might happen less. Unfortunately, the market dominance of indexed funds means we all get sucked into investing in over-valued tech stocks whether we like it or not.
Absolutely right, and surprised no-one’s mentioned the “.com boom” of the late 90s which is the previous iteration of this outbreak of stupidity.
Honest Al Gore’s carbon credits, anyone?
For anyone with an Apple TV+ subscription and who’s interested in how WeWork rose and fell, be sure to watch ‘WeCrashed’.
Looks good. There’s also some great stuff on WeWork on You Tube.
bankman-fried, anyone?
I have to say I wish I could walk away from something with $1.7billion in hand just for being a long haired gob sh**e..To paraphrase Rudyard Kipling: ‘You’re a richer man than I am Gunga Din’
Nothing has really changed. There will always be grifters. Interesting essay though.