Dream no small dreams, for they have no power to move the hearts of men — or venture capitalists.
Adam Neumann, the co-founder and former CEO of WeWork, certainly wasn’t guilty of small dreams. From being a broke émigré living rent-free in his sister’s apartment to building one of New York’s largest real estate companies to becoming the head of one of the country’s five most valuable startups to wanting to “elevate the world’s consciousness,” lack of ambition wasn’t his problem.
Rather, it was too much of it, coupled with frenzied spending and a slipshod approach to management, that brought the company crashing down, argues Reeves Wiedeman.
Wiedeman is a contributing editor at New York Magazine and a business journalist who’s written for the New Yorker, Rolling Stone and others. His new book “Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork,” is out today.
He sat down with The Real Deal to discuss the book, the wacky world of New York real estate and the dangers of hypergrowth fueled by VC dollars.
You have this gift for diving into these complex, insidery worlds — sports, media — and finding narratives in them. In terms of characters per capita, where does New York real estate stack up?
Pretty hot. Much higher than athletes. The thing you realize is businesses, while you think they run on models and numbers, are just filled with characters. I think New York real estate in particular has attracted these kinds of people. It’s a business built on making big bets, taking risks, and that attracts a certain type of person of whom Adam Neumann is only the latest, maybe the most extreme example.
Adam Neumann stands out for the audacity of the bets he made and his ability to spit in the face of the traditional operators. From the beginning, he said, “Fuck you guys. I’m going to do this my way.” Was there a sense that industry insiders were going along with it because it made financial sense, or was there a sense that [WeWork] could actually be something?
There was a trajectory. Early on, WeWork had trouble getting the really nice spaces that it actually wanted. A lot of people who’d been in the business for a while had seen this business before, and they knew the office middleman, flex space world — the Reguses and others before them. So I think there was an early skepticism of [Neumann]. Around 2012, WeWork got a big investment from Silicon Valley, from Benchmark Capital. They started getting more and more investment. At a certain point, if you’re a landlord and you need to fill space and you’ve got someone who’s, frankly, willing to pay above market.… Once WeWork had a bunch of money and was spending it pretty freely, it’s hard to say no to that. Just like it was sort of hard for Adam to say no to SoftBank when they show up and offer him $4 billion.
By the time I started reporting on the company [in March 2019], there was a level of fear. While people couldn’t quite understand how Adam was making it work, how the numbers made sense, he kept being successful, and there was a feeling from people of, “Maybe he has cracked some kind of code.” There was a very real kind of fear. The stories that came out about Adam much later, they were around, and everyone had them. But when Adam and when WeWork were on the rise, people were pretty loath to actually share.
Most of the senior executives at WeWork were pulled in from everywhere — lots of friends and family — but he did make some hires that were hard-core industry insiders, like Wendy Silverstein, who ran ARK, or Sean Black, who was a top broker at JLL. Why would someone who understood the real estate business still go in on this?
For people who are in real estate, what WeWork offered was a chance to take part in the startup boom of the 2010s and the venture capital boom of this era. This also went for a lot of architects, designers, people in kind of related fields. You’re in the middle of your career. You’re a little bit bored. Then suddenly, there’s this company where it’s pretty fun to work. They throw fun parties. They claim to be really changing things. For a lot of mid-career people, it was a little bit of a risk, but it was an exciting one.
Then, of course, there was the potential for really significant financial reward. In real estate, stock options are not a thing, exactly, in the way that they are at a startup.
Was changing the world always part of Adam’s narrative, or did that really emerge post-SoftBank?
It was Adam from the beginning. I think Masa and SoftBank, what they did was enable it. And there was this interesting point in the company’s history around 2016, when it could have gone public. It was running out of money. There didn’t seem to be that many more places to go. Right at that moment, Masa showed up, and I think just kind of enabled Adam to really go for it.
WeWork had been growing, obviously, incredibly fast. Its revenue doubled year-over-year for 10 years — pretty remarkable. There was always this hope from the sort of tech investors who were getting into the company that WeWork was going to figure it out. Ultimately, that’s what they were never quite able to do.
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When I read the book, I thought of Vice Media a lot — the glamour, the arrogance, the ability to attract big-name investors. Do you think there are similarities?
A few things: One, they were brands. They are brands. And that was the thing they sold as much as anything else: this feeling. Where I think both companies went off the rails was they both did a thing pretty well. With Vice, they made cool documentaries, but then suddenly they wanted to be the new CNN. And that’s a really hard thing to pull off. And it wasn’t really clear that they were most qualified to do that. I think a lot of the problems stemmed from this ambition to be something they weren’t.
At WeWork, where you got into trouble was the pace of growth. Adam himself bragged openly — and I think probably accurately — that this was the fastest physical expansion that any company had ever made. He joked that he wasn’t sure about Roman times, but at least since then.
And also the expansion of the mission from, “we make really nice flexible office spaces” to “we are elevating the world’s consciousness.”
From WeWork to We.
That transition really hurt the company. And the $47 billion valuation put a target on the company’s back.
Do you think there is an element of schadenfreude on the media’s part with the collapse of WeWork?
Absolutely. I’ll compliment you all; people who knew the industry were calling it as it looked, which is, “On the one hand, it keeps growing so we have to take it seriously. But there’s also a lot that doesn’t make sense to us.”
But some places are about glorifying the startup entrepreneur. And I think WeWork was, in many ways, this perfect story. So you would always have these sort of glowing articles with a paragraph or two about potential problems.
There’s been a real caricature that’s emerged of Adam and of the company, [that] it was all crazy to begin with. The thing was real. This was not Theranos. It wasn’t like the machine just didn’t exist. The offices were there, they worked.
You make a brief mention of the Rajneeshis, the spiritual cult founded by Osho, featured in “Wild Wild Country.” Neumann also had this cult of personality. Did you get drawn to that magnetism?
I think he’s a charismatic person. He gets into a room and he knows how to not only dominate a room, he knows how to read a room. He knew how to go in and figure out that whoever he was talking to, whether it was an investor, a landlord, [or] his employees, he had different messages for them. And he knew what buttons to press. It can get a little old, calling everything a cult, but I think in this case, it’s really true.
Let me ask you a dumb question. You talk a lot about height in the book; if Adam were six inches shorter, do you think he would have had the same success?
I think it’s fair; there are all the stats about how tall our presidents have been over the years. And I think there’s a real truth to it. It would be too simple to say all of Adam’s successes are because he’s tall, but it’s a part of who he is. It’s a part of what makes him an inspiring leader.
You talk a lot about Benchmark Capital, the first major venture capital firm to invest in WeWork. Did the elite of Silicon Valley not really understand the industry that they were investing in, and that’s part of why it went this way?
There’s truth to that. That goes for Benchmark, that goes for SoftBank. I’d talk to someone at Fidelity, and the real estate investors there were very skeptical and didn’t see the benefit in investing. And they passed and later came back and decided to invest because they bought into the story. It’s also probably too simple to say that, “Oh, these tech investors just didn’t get it.” I think they got it. But the flip side of that is that unlike a lot of the companies that they typically invest in, WeWork was making a bunch of money. Many tech companies, it’s years before they’re bringing in any revenue at all.
The venture capital world is predicated on these big bets. If you make 10 bets and nine of them don’t work out, but one of them is the next Uber [or] Airbnb, that’s fine.
I want to go back to one of the earliest investors in WeWork, Joel Schreiber, who is a bit of a mythical character in New York real estate.
His involvement was the original sin of WeWork’s overvaluation. The way that happened was, WeWork didn’t have a space yet. Looking for a space, they just happened upon Joel, who was happy and interested to invest in the company. And his fateful, “I’ll give you $15 million for a third of a company,” that is now suddenly worth $45 million, out of nowhere.
They pulled that number out of their asses, right?
Adam and Miguel didn’t want an investor. They weren’t looking for someone. And so part of their game was, “Well if this guy wants in, let’s throw out something crazy, partly so he just walks away.”
What were some of the biggest fears for WeWork about being seen as a real estate company? Was that purely because of the earnings multiplier of real estate or was there more to it?
That’s more or less it. There are limits to the real estate business and how much money you can make. It’s a very good business, but it’s set and there are models and this is how it works. Tech over the last 10 years has just broken out. Suddenly, you can make these truly insane amounts of money.
Adam would tell tech investors, “We’re a real estate company. Look at how much money we bring in. And look how big the market is.” And then he would tell people in the real estate world, “We’re bringing this tech part to what you’re doing.” He was able to play both sides a little bit.
This interview has been condensed and edited for clarity.
(Write to Hiten Samtani at hs@therealdeal.com. To check out more of The REInterview, a series of in-depth conversations with real estate leaders and newsmakers hosted by Hiten, click here.)