The Definitive WeWork Story — With Eliot Brown And Maureen Farrell

Eliot Brown And Maureen Farrell are the authors of The Cult of We: WeWork and the Great Start-Up Delusion. The new book digs into the rise and fall of Adam Neumann's WeWork. And though it's the story of one company, it's really a lens through which you can see all the markets' irrationality. The authors join for a macro discussion of the factors that led WeWork — a real estate company — to become the world's most valuable "tech" startup. And why it couldn't keep the show rolling. Check out the book: https://amzn.to/3Btv6XS Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

  This episode is brought to you by Genesis. What does it actually take to put Agentic AI to work across an entire enterprise? I recently spoke with Genesis chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, head of enterprise business solutions at Voya Financial, to go inside a large-scale Agentic CX transformation, including the business decisions, trade-offs, and lessons along the way. You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay?

• 0:43Alex Kantrowitz?

  Akash is an open cloud that provides easy access, flexibility, and peace of mind. That's how companies like Razer were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation.

• 1:14Alex Kantrowitz?

  Hello and welcome to the Big Technology Podcast, a show for cool-headed nuanced conversation of the tech world and beyond. Man, do we have a show for you today because in studio, I mean, quote unquote, we're recording through a browser, but in studio, we have Eliot Brown and Maureen Farrell. They are the authors of Cult of We: We Work and the Great Startup Delusion. It just came out yesterday. I finished the book. Well, I'm actually about 10 pages from the end, so I'll admit it. It's an amazing, amazing, amazing book. Congratulations, guys. We're like recording this a couple of weeks before it actually comes out, so you haven't experienced the wave of praise that's about to head your way. But you should be excited because this book rules.

• 1:54Speaker 01

  Thank you so much.

• 1:57Speaker 02

  Thanks, Alex.

• 1:58Alex Kantrowitz?

  Of course. Now, for full disclosure, Eliot and I are longtime friends and in exchange for that, he's not going to annoy me when I drive. He's a very, for folks out there listening, Eliot is a very courteous passenger in the car. Just kidding.

• 2:14Speaker 02

  I'll trade that as long as, you know, you can give us any hard questions as long as I can bother you in the car.

• 2:19Alex Kantrowitz?

  Okay, that's a deal. And Maureen, nice to meet you.

• 2:21Speaker 01

  Yeah, very nice to meet you too. I'm a, I'm a slow driver. I'd probably, I don't know, maybe drive you both crazy. I'm always a little below the speed limit.

• 2:30Alex Kantrowitz?

  Uh huh. Well, look, having had a few experiences with Eliot as a co-pilot, I give you tremendous praise for putting up with this guy as you drove this book together and it came out so good. Something must have worked, so.

• 2:44Speaker 02

  I second the motion.

• 2:45Alex Kantrowitz?

  It's a real, it's a real testament to your character. Okay, so let's get into it. We'll just talk a little bit about WeWork. So the, one of the weirdest things about WeWork, and we can talk a little bit about WeWork is in this answer, but there was already an office rental company called Regus. That's the right way to pronounce it, right Eliot?

• 3:04Speaker 02

  Regus.

• 3:05Alex Kantrowitz?

  Regus, okay. There, so there was Regus, which is basically exactly what WeWork does. Lets you, if you have a company that's not big enough to have your own office or prefer somebody else handle all that stuff, to rent something. So there was already a Regus when Adam Neumann founded WeWork. And it was like very rationally valued. So why did we need WeWork? And then why did WeWork end up being one of the most, if not the most highly valued companies in the world, given that there was a very obvious comp right next to it?

• 3:38Speaker 02

  Um, I'll, I'll start with that one. I can probably talk for an hour about Regus. And yeah, it like, so the story of Regus is interesting because basically the exact same thing happened with Regus that happened with WeWork. It was like WeWork but 20 years earlier. And if you go back to 1999, you have this office space subleasing company that

• 4:02Speaker 02

  Tries to IPO, did it in 2000 at a really high valuation and they said they were part of the tech sector. They said that, you know, they were part of the new dot com economy because they had broadband going to their offices and they had a tech-like valuation. And then eventually it totally imploded and its US arm went into bankruptcy. And then 15 years later, they were very sort of rationally normally valued like a real estate company. And then WeWork comes along. So I think the only thing to sort of add, we can talk a whole ton about what was going on in the world that led to why WeWork was essentially valued like 20 times higher than Regis on a, you know, like to like basis. But, you

• 4:47Speaker 02

  know, I think the broad issue is that WeWork did do a little thing that's different, a few things different. They had a cool factor that Regis did not have. They had a communal factor that Regis did not have, but like economically, they were like the same business. So, but they took that cool and that hip and made it look a lot more like a startup and feel like a sharing economy bet. And that like dazzled investors to the point that they were able to ignore that like fundamentally, this is like the same business as Regis.

• 5:19Alex Kantrowitz?

  Right. And so you brought up that it was valued as a tech company, but it should have been a real estate company. So let's talk, this is kind of foundational to the whole discussion of what we're about to get into. So let's talk about valuations. Maury, maybe you want to take this one. What would, how are tech companies valued versus real estate companies? And, and why does that matter here?

• 5:39Speaker 01

  Sure. So, I mean, real estate companies, there's a finite, there's a finite amount you start to see of the growth in them or growth profits in fairness. I mean, it costs a certain amount of money to own physical space. And unlike software, we could build a piece of software and infinitely, to a certain extent, charge for it. It doesn't cost more to make every new piece of software. But a real estate company, and I mean, the valuations are very different because the profits are capped to a certain extent. You need to keep on building out more real estate and it costs money to operate, it costs money to run. So they're fundamentally different business models, but

• 6:24Speaker 01

  You know, Adam Neumann, the CEO of WeWork, his talent, his gift, his downfall, maybe ultimately, was making people see something he wanted them to see. And he knew, he was smart enough in a bunch of different things, but particularly to sort of take the language of tech and apply it to a real estate company and make everyone believe him and sort of, you know, suspend disbelief that this one thing was real estate and one thing was tech. And he knew the valuations were so completely different and he was very fixated on the valuation of the company.

• 7:04Alex Kantrowitz?

  Right. And so just to go back to valuation, Eliot, you've been instructive in helping me figure this one out. But if you're a tech company, because you have essentially unlimited or seemingly unlimited profit, because you can build something once and sell it infinite times, you could end up with a valuation where you're, and the value that investors and the value that the market gives you is somewhere 30, 30 times your revenue or your profit. Where a real estate company, because you're limited, your valuation is going to be much less. And investors are, you know, is going to say, all right, well, you know, if you're making, you know, 200 million in a year, you should really only be worth maybe two times that. So we say your company's worth 400 million. And that's where things started

• 7:49Alex Kantrowitz?

  to get, start to get really interesting with the VCs. Is that a good summary of how this works?

• 7:55Speaker 02

  Yeah, yeah. That's sort of precisely right. Like, I think one of the ways we talk about the WeWork story is like, it's completely a story about valuation, which is not a really good, interesting way to hook anyone into

• 8:07Alex Kantrowitz?

  That's right.

• 8:08Speaker 02

  caring about it.

• 8:08Alex Kantrowitz?

  Listen, everyone, don't drop off. It's about to get wild, I promise.

• 8:13Speaker 02

  But so like behind the clouds of marijuana smoke and fountains of tequila, like what essentially the reason we all cared about this was because WeWork was the most valuable startup in the country. And it wasn't because they were a fast growing office space subleasing company. Like, that's just not a terribly interesting, you know, thing to do. Like, how many episodes have you done about Regis?

• 8:37Alex Kantrowitz?

  Zero. I couldn't even pronounce it right, like five minutes ago.

• 8:43Speaker 02

  But so like the reason that WeWork became so big, the reason that they built this empire of like six or 700,000 desks around the world is all because they were valued like a tech company. And when you're valued super high and people are like, you're worth 47 billion, that means you can raise billions of dollars really easily.

• 9:01Alex Kantrowitz?

  And not give away too much of the company.

• 9:04Speaker 02

  Yeah, yeah, yeah, exactly.

• 9:06Alex Kantrowitz?

  And so I'd like to actually get into sort of the startup environment at the time that this all happened, because it was very different from when it is now. There is like this period of irrational exuberance in some way, where investors were just tossing money at anything and saying it was a tech company. Eliot, one of your favorite examples is Casper, where it's a mattress company and all of a sudden it became tech company somehow, which always was strange to me. So can you guys tell me a little bit more about this era of sort of irrational exuberance? And then when WeWork, how WeWork waltzes into that and says, we're a tech company too, even though for every desk it sold, it had to build that desk.

• 9:49Speaker 01

  Spoiler alert, you may see.

• 9:51Alex Kantrowitz?

  There was a cross.

• 9:51Speaker 01

  Sorry, Alex, I was gonna say spoiler alert, you may see a few references to Casper. Eliot's favorite example of this in our book. It pops up a lot. There may have been a lot more references, but that's another story. Much for cut.

• 10:06Speaker 02

  We were cutting down the Caspers.

• 10:09Alex Kantrowitz?

  I didn't even know Eliot was interested in WeWork, by the way, for a long time. I thought the guy only cared about Casper. Every time we would hang out, he goes, you know, they're made it, the mattresses are made in the same factory that every other mattresses are made in, but they have this valuation because they're funded by VCs or they have a website or something like that. It's pretty amazing.

• 10:30Speaker 02

  So yeah, like one of the things, one of the reasons I got interested in moving to San Francisco from New York and starting to cover VC instead of real estate, which I covered beforehand, was because. Like I would just see all these startups and these startup ads in the subway for these products that like me as a guy who majored in history and you know could use basic functions on Microsoft Excel. I was like, this makes absolutely no economic sense. And it was sort of like, what is going on in the world that people think that a company called Chip should make sense where they spend like what seems to be like thirty dollars or forty dollars of labor to come to your door and pick up packages and then charge you like five dollars

• 11:14Speaker 02

  for it. And or like, why do we get these Uber rides across town or free valet parking with these Uber for valet parking apps? Like, what's going on in the world? So what essentially was happening was just too much money was trying to get into Silicon Valley at the same time. And venture capitalists have like even more so than journalists have this super herd mentality where it's not that one person becomes successful at something, it's that one investment appears like it might be successful in seven years and then everyone else follows and piles it. And so that's why we have all these like crazy mini bubbles of, you know,

• 11:53Speaker 02

  3D printing and blockchain, which we've had like three brief waves of, because it just goes as a herd and then people get really excited and just like overfund things and suddenly you look up and there's like five different companies, two hundred different companies selling you mattresses claiming they're tech companies. So I don't know if that really answers the question or that was just a rant, but that's some of what was going on.

• 12:18Alex Kantrowitz?

  Are gonna be rants, yeah. So what are grilled cheese valuations? Maybe you can unpack that a little bit. That was one of my favorite lines in the whole book. Yeah.

• 12:28Speaker 02

  Melt is, I think it's melt, right?

• 12:32Alex Kantrowitz?

  Yeah, there's one on Market Street next to the old busted office.

• 12:35Speaker 02

  So this company thought that this grilled cheese and sandwich shop that has pretty good chicken sandwiches, if I recall. Uh, thought that it was a tech company because they had some tech addled way of ordering your sandwich in their, their fast food-ish, you know, fast-ish food, sort of Shake Shack like restaurant.

• 12:56Alex Kantrowitz?

  Mm-hmm.

• 12:57Speaker 02

  And, uh, then eventually, you know, they stopped being able to raise money at really high valuations and like things weren't growing in this like super rapid curve where suddenly everyone was just buying grilled, everyone and their brother was buying grilled cheese and giving them huge profits per sandwich. And so, uh, the valuation of Melt really fell, uh, because, um, they previously had a tech valuation and then eventually investors realized like, oh, this restaurant that serves grilled cheese is actually.

• 13:24Alex Kantrowitz?

  Just a grilled cheese restaurant. It's a platform for grilled cheese. Excuse me, Eliot. Respect the name.

• 13:30Speaker 02

  AI enhanced grilled cheese.

• 13:34Alex Kantrowitz?

  Right. So VC has always been doing this, by the way. Uh, it's always been putting money and making lots of bets, many of them weird and actually the weird bets are a feature of the fact that, you know, they're going to go places that people won't be necessarily. So what changed here? And I'm curious what the, um, that, you know, where the money came from that started to make VCs and we're going to get into SoftBank soon, but before SoftBank comes into the picture, was there like this ultimate surge of money coming into VCs that ended up, uh, driving them, you know, to the far corners of the earth to try to imagine things were tech companies? Um, and I'm curious what role the mutual funds played in that.

• 14:18Speaker 01

  Well, so that is the diff, like the huge big shift that came in this era, like the 2010s and we're, you know, starting to change now a lot, but, um, it, the VCs, mutual funds and others saw that the, I mean, especially the mutual funds and other pockets of capital that typically got returns in the public markets, started to see companies like Facebook.

• 14:44Speaker 01

  Going public later and later and realizing instead of like Amazon where you could capture, you know, a thousand percent returns over a few years in the public markets. Facebook, a lot of the returns went to private investors. So there was this sort of reckoning of that and, you know, companies wanted to go public later. They had the capital sort of moved into the private markets. And there was more and more going to VCs, first of all, just because the returns had been so good. But then mutual funds like Fidelity, T. Rowe Price, Wellington, started to see if they could devote some portion of their fund to these private companies. Maybe they could get these giant returns and it worked.

• 15:26Speaker 01

  I mean, Henry Ellenbogen at T. Rowe Price was one of the first mutual fund managers to do that and he started having some huge success and, you know, other people looked at that. But that, that basically fundamentally changed the landscape for a tech company raising money. And there was just so much money flooding into these quote unquote tech companies, some of whom weren't, many of whom weren't, to go after these potential gigantic returns.

• 15:56Alex Kantrowitz?

  Yeah, and so there was money in search of companies to invest in versus companies in search of money to invest in them. Is basically what happened in the market.

• 16:06Speaker 01

  That was, yeah, in broad terms, that shift.

• 16:10Alex Kantrowitz?

  Does zero, does zero, does the fact that we're like at a zero interest rate policy, does that play into it at all or was this sort of before that?

• 16:19Speaker 02

  Yeah, yeah, and that's like sort of central to everything. So basically like, you know, if you want to go super macro, after the recession in, you know, after the, the financial crisis in 2008, then you have like the Fed buying lots of money and so like yield, the return you get on your investment generally just throwing in the savings account or bonds fell and so. Then you just have all these guys working in offices whose job, like their sole job is like, you must get seven percent average annual return because you're managing other people's money and that's what you promised. And it's like, well, it's not really a high return world. So what am I supposed to do with that?

• 16:56Alex Kantrowitz?

  You go risky.

• 16:57Speaker 02

  Then, right, like you to fulfill your mandate, you suddenly have to start taking bigger risks than just like putting something in a savings account. And so that's what was happening is these guys were like, well, where do I get risk? And they're like, you know, I think the cartoonish version is they like to read the paper. And they're like, wow, that Facebook, that thing looks like it's really taken off. I missed out on that. How do I get on that next time? What's the next Facebook? And so suddenly a grilled cheese restaurant is raising money at like this, you know, totally insane valuation.

• 17:26Alex Kantrowitz?

  Okay. So into this environment where people were, where venture capitalists and mutual funds were interested in funding anything from a sort of like what you mentioned, a sort of doorman service that was losing money to a mattress service that said it was a tech company to a grilled cheese company. In walks Adam Neumann, which is really, really interesting. So because he was sort of, you know, in reading the book, it's very clear that he's a man that meets the moment. He knew that there were people that wanted to invest their money. And he stood there and said, and it didn't really matter if they were a tech company or not. And he stood there and said,

• 18:10Alex Kantrowitz?

  I have, I have just a thing for you. It's called a WeWork, which is again, this office rental space. And he capitalized it on it pretty well. So I'd love for you guys to just describe our, our main character here. You know, tell me like what your, what your perspective is on, on Adam Neumann and sort of how he was so effective in selling. And, um, you know, I, I read the book and I, I thought that some of his charisma really was infectious. Like it comes out, there is a moment where I think they just raised some money and he's chanting with one of his coworkers or co-founders like, we're gonna take over the world. We're gonna take over the world. I like, I love that. And, you know, obviously like,

• 18:53Alex Kantrowitz?

  I guess there were some downsides to that, but it did seem like I read the beginning, you know, and he talked about how WeWork was a place that was going to build a community for people and sell not just real estate, but other services. And it was the place where people are going to be where work and life were melding and that was going to be their community. And I was like, oh, that's, that's pretty cool. So just, you know, in your words, tell me a little bit about who Adam Neumann is and how he was able to accomplish this.

• 19:23Speaker 02

  I think Adam was one of the world's greatest salesmen, and I don't say that in a complimentary way. I mean, I think he just has this incredible gift to, what I often say is like, he, he takes a pigeon and he gathers somebody else next to him and he says, hey, you see that? That's a swan. And, and he convinces that person to see that pigeon as a swan. And then, you know, they convince somebody else the same thing. And it's, he, a huge amount of it is the in-person reaction. Like, I don't think it usually translates that well through video, through phone, or, or, or, you know, quotes in a paper. But like, when he has you in the room, he, he has this way of sort of, you know, looking

• 20:08Speaker 02

  at you and, and sort of talking to you and being super nice and asking questions about you that make you feel sort of alive. With sort of older investors like baby boomer landlords, he would, he would make them feel sort of young and hip and fun in a way that they'd been craving, or apparently had been craving in their lives. Like, so, you know, normally if you're like a landlord in New York, you're, you know, you're in a pinstripe suit and you meet someone at some fancy, not very good Italian restaurant for lunch, and that's your business meeting. And then here, Adam would have them at like 10 a.m. to his office in Lower Manhattan, and like take them around a tour and show them the beer on tap and then make them do tequila shots. And they'd be like, it's 10 a.m. He's like, oh, come

• 20:50Speaker 02

  on, we do this all the time here. And, and, yeah, they like really feel like they're, they're young again. And so it's these like personal connections and sort of the way he talked about the future that, that made everyone seem like, like this has everything. He's cool. It prints money. This is the greatest investment ever.

• 21:08Alex Kantrowitz?

  One of the things that was interesting to me was it really felt like the customer was not necessarily the people sitting in the desk in WeWork. For him, the customer was the venture capitalist who he was selling.

• 21:19Speaker 02

  Hundred percent.

• 21:20Alex Kantrowitz?

  He was selling on the idea of investing in WeWork. So can you guys take me through just quickly? Like maybe just list off the various rounds and like what the valuations were. Do you have like a list of that in front of you? Or can you say it offhand or even just give me just like this or give us really this broad outline of how this company skyrocketed in value?

• 21:43Speaker 02

  I can probably do it off the top of my head. Okay, so they're worth like a pretty little for 2010 and 2011, when he's just raising from friends and family. And then he gets his first venture capital from at the end of 2011, early 2012, and that's $100 million valuation. And then Goldman Sachs, like the next year, offers him a $200 million valuation, and he turns it down. And there's like this silence on the phone after he does that. He quickly finds someone else to give him a $400 million valuation. And so that's 2013.

• 22:14Speaker 02

  2014, no, later in 2013, he goes up to 1.5 billion from JP Morgan. 2015, end of 2014, it becomes 5 billion from T. Rowe Price. Six months later, it becomes 10 billion. That's from Fidelity, the mutual fund. Late 2016, early 2017, they go to 16 billion. It becomes 20 in 2017, and then 47 in at the beginning of 2019.

• 22:46Alex Kantrowitz?

  That was their valuation. And what was the last?

• 22:48Speaker 02

  We won't give any spoilers.

• 22:49Alex Kantrowitz?

  Right. No, that's what you're here to do. So when was the last? We know it doesn't go well. When was the last? How much did he raise in those last rounds? Five billion or something like that?

• 23:00Speaker 02

  The total was like over 10. It's a little complicated because some, yeah, I mean, we don't need to get into the nuance. The total was over 10 and from SoftBank it was like, you know, SoftBank also put 10 in, but gave some to existing shareholders.

• 23:15Alex Kantrowitz?

  Yeah. And so that, that, this is a lot of the setup. Where is the conflict here? Because, all right, maybe, maybe, you know, he takes on this money. What's the problem with that? Just because investors think that it's, you know, worth a lot more than it is, he's still building this thing. What's the issue?

• 23:29Speaker 01

  I mean, the biggest, one of many issues there is that, you know, it's sort of this like mass dilution of this valuation. I mean, there, if there comes a point where, you know, someone, the world stops and people wake up and look at where this thing is going and it can't get anywhere near the promises it's made. I mean, I think the interesting thing, I mean, I love that you say that the, the client is the venture capital firms because that's a really interesting takeaway because it is fascinating to watch that. Um, but yeah, at some point, I mean, you raise so much money and there's nothing behind it. And I mean, he's taking money out every step of the way too.

• 24:11Speaker 01

  And, you know, if someone wakes up and doesn't, the whole thing comes crashing down. I mean, one of the biggest problems is they kept on needing more money to grow. The, you know, the, it wasn't, if the music stopped, which it did, the company was going to run out of money. And I mean, we, clearly we saw that happen. I don't think, hopefully that's not too much of a spoiler, but you need to just keep on funding this to keep the growth going, to keep it at a level where anyone was going to give it even the same valuation. So, um, just like they're like, yeah, the numbers.

• 24:47Alex Kantrowitz?

  Yeah.

• 24:49Speaker 02

  Yeah, I think like part of what he did here is like every single round, particularly for the the last five years or so, it was like, um, okay, just give me a little more money, but and by a little, I mean, a really large amount and we're we're gonna do this new thing. Um, and then everything's gonna be profitable and we're gonna be great. Um, and then the numbers kept getting bigger. It's like, we're gonna, we're gonna need money for to build apartments because that's gonna be the next big area. And then like, that didn't really work out. And they're like, we need to go to China. Like, that's the next big area. And then like, you know, that didn't really work out. And then like, we need to elevate consciousness. That that's like our our and do elementary schools. That's our next big thing. Um, and so like, but then if you actually went back each time, you're like, well, you always said you were gonna be profitable. And turns out that actually

• 25:33Speaker 02

  your losses just doubled year over year. Um, literally, uh, you know, again, and again, and again. And so like, you know, you keep doing that. We've learned with, we've all learned a lot about exponential growth, um, in the past year. Um, like, you keep doing that, the numbers get really ginormous really quickly. So, you know, we work with soon like on path to lose like $4 billion.

• 25:54Alex Kantrowitz?

  Yeah, and like going back to our valuation conversation, um, when you're, when you're a software company and you're valued high, you can lose money for a long time because eventually you can make it back because you couldn't just keep selling that software. Once you get it good, and your costs don't go up as much. But when you're a real estate company, which we worked turned out to be, you know, you can have that loss and keep growing revenue. But like you just mentioned, the the losses will grow with it. And there's really not an easy way to pull back and become profitable. Like, there was one really interesting line where Adam said, we can, in order to become profitable, we just stop our expansion and we'll become profitable right away. Uh, because that will like cut our costs. And then there was this great moment of realization

• 26:39Alex Kantrowitz?

  from the employees, where they're like, that was just smoke and mirrors, you know, as they they had been there the whole time and not realize that. That was fairly amazing.

• 26:47Speaker 01

  I mean, I think that is, I mean, when you think about the whole, the big picture of this story, I think that's one of the things that just keeps on. flooring me about it. It was, you know, to the extent that anyone's ever compared him, and people do, obviously, Adam Neumann to Elizabeth Holmes. Like, she was hiding the fact that they didn't, you know, couldn't do what they promised, what they set out to do.

• 27:10Alex Kantrowitz?

  She was the CEO of Theranos.

• 27:12Speaker 01

  It was a pure fraud. She was, no one was allowed to go and see the technology because it didn't exist. It didn't work. They were hiding it. With Adam Neumann, I think with these projections, the most fascinating thing is that he was saying this company was going to be profitable. The numbers look a certain way, but they're going to look so drastically different. Then you have the world's top investors, so many different ones, that saw projections. He didn't hide them. He would paint this vision for the future, like the swan, like Eliot said, the pigeon is the swan. But you could go back and look at every number. I mean, we've seen these pitch decks. And then you see six months later, they're nowhere near the numbers he says they're going to be.

• 27:53Speaker 01

  Yet, he still manages, and he just collects more and more impressive kind of people that other people believe in.

• 28:02Speaker 02

  And, and sorry, I'll be quick. Like, Alex, you know, you sort of asked, like, what's wrong with that? Well, like, the problem is, you have to keep the, the train running. And, you know,

• 28:12Alex Kantrowitz?

  You need money to keep supporting it. Yeah.

• 28:14Speaker 02

  Right. And, and everyone who, all the 15,000 employees who you've brought in that are, you've told this is a, a consciousness elevating company, and, and we're here to make the world better. And you've given them stock options at a certain price. Like, you need things, the valuation to keep going up. You need money to keep coming in. And every time that happens, that you need new investors to sort of believe what, what you're selling them. And, uh, you know, eventually, Adam ran out of investors who, who would believe it, particularly those who had, like, the billions he needed to keep this, uh, like, train going uphill.

• 28:49Alex Kantrowitz?

  Right. And, you know, it's interesting that the numbers were public. And Eliot, I remember we were all telling you, write the WeWork book, write the WeWork book, because you would be like, this doesn't make sense. And you said, I'll do it when it all falls apart.

• 29:00Speaker 01

  Wow.

• 29:01Alex Kantrowitz?

  When it all falls apart, and here's, here's the book. So, another interesting story, Eliot, I'm just going to tell all your secret stories here. Tell me if I have to delete this. This might have been set in confidence. But, uh, Adam, even when he met you, told you,

• 29:16Alex Kantrowitz?

  You you were covering real estate when you met him first and he goes, no, you're not the right reporter. I'm here to talk to the tech reporter. And how did that interaction go down? We could keep that in.

• 29:27Speaker 02

  Yeah, of course.

• 29:30Speaker 02

  My A material.

• 29:34Speaker 02

  Yeah, I met Adam in 2013 when I was a real estate reporter and I was just interested in this coworking company that that was kind of rapidly expanding. And I go down there and we meet and he was like really gracious and nice and fun and energetic and sort of doing all these things that he's being a salesman. And I'm like, wow, this is really interesting. But he's like, but you cover real estate and we aren't a real estate company. Like, do you have anyone else at the Wall Street Journal who who covers community companies? And it's like, I, you know, I don't think we do, but but I would probably be the best person either way.

• 30:08Alex Kantrowitz?

  Right.

• 30:09Speaker 02

  But he was incredibly insistent that that they were not a real estate company, which I didn't at the time. I just found puzzling like I didn't even know anything about valuation and tech companies. And venture capital at all. I just found it really strange and then sort of like was digging into that, talking to a bunch of people like, why is he so insistent about this?

• 30:32Alex Kantrowitz?

  Yeah. The last thing that a last piece of, you know, potential pushback that I'll throw out there before we go to break is WeWork still exists. And I've gone and worked in their sales force tower location and really enjoyed it. And yeah, they lost a lot of money and Adam looked like a fool going out because the valuations are are pretty high. But it looks like it will be the dominant coworking company for a long time moving forward. And some might ask, what's the problem with what happened? It's tough to build things and he built it.

• 31:08Speaker 02

  Yeah, I mean, the response to that is he took $12 billion to make an $8 billion company, which like if I were doing it, I would prefer, if I were an investor, I'd prefer that, you know, maybe one or two billion goes over 10 years to build an $8 billion company. So it's artificial, it's subsidized by SoftBank. So like, you know, you're literally sitting in one of the most valuable pieces of office space in San Francisco. They spent four or five times as much per like square foot to renovate that building. It has a really nice atrium as a result, but. It basically rules. So thank you, SoftBank. I'm sure, yeah, so it's, but it's completely subsidized. It made absolutely no economic sense, right? And so that's great and all, it's just not very replicable. It's not sort of good for

• 31:51Speaker 02

  the concept of reality. But, but if you're a fan of using SoftBank's money to make a nicer office space for yourself, like the royal you or plural you, like that is one thing that's happened here is we now have a really kind of large coworking industry that also spawned all these other sort of artificially highly valued companies as a result of this mirage.

• 32:16Speaker 01

  Eliot, you missed one big thing in your math. I mean, if you're Adam Neumann and you spend a billion to make it or two to make an $8 billion company, you also do not walk away. I mean, in that $10 billion plus, he's walked away with $1 billion plus of that. That money, a lot of money was torched and burned, but he has a pretty good, pretty incredible exit package out of all that. So the math wouldn't have worked in that way either.

• 32:45Alex Kantrowitz?

  Do you think WeWork, but do you think there's a potential possibility where WeWork long-term does achieve some sort of valuation close to what Adam was hoping for as it grows over time? Or do you think that money that all these investors put on, put in is essentially gone?

• 33:04Speaker 01

  I mean, I guess if you could put, think of that question in a few ways. It's a great question. But I mean, the valuation he was talking about, and we get into this in the book at times, was like a $3 trillion valuation he was talking to Masayama about. So that seems unimaginable.

• 33:25Speaker 01

  Getting back to forty seven billion.

• 33:26Alex Kantrowitz?

  There are no three trillion dollar companies, so that's pretty dreamy.

• 33:29Speaker 01

  Exactly.

• 33:30Alex Kantrowitz?

  Yeah.

• 33:31Speaker 01

  But something closer to what it was, I don't know, maybe. I mean, it just seems like it's a, they have an office, uh, a real estate veteran who's running the company now, he's cut costs. It seems like things are maybe turning around. They're still losing a lot of money. But, um, it's hard to imagine it's going to be a gigantic company and valuation, um, even if it stays, but it could be really successful still.

• 33:56Alex Kantrowitz?

  Yeah.

• 33:58Speaker 02

  Yeah, I mean, they're, they're a real estate company now and like real estate companies grow at a certain speed, even the best ones. Um, and they get certain profits, certain levels of profits, even the best ones. And unless they find some sort of magic way to become much more profitable than, I mean, first of all, they, they're losing gobs of money. So first they'd have to become profitable at all. Uh, but i- if they find some magic way to become more profitable than a normal real estate company, then maybe, but I don't really think anyone knows that, that magic elixir. And if you talk to the former employees at WeWork who were just so bought into the concept, they weren't a real estate company. They now were like, oh yeah, I see. It was a real estate company.

• 34:35Alex Kantrowitz?

  Yeah. And I heard similar things where people would talk to me about the algorithms they had to place people in space efficiently and how no one else could do that. And obviously that all just turned out to be Adam. So, but you know, I think WeWork would have probably hit a, a wall after reading the book. It's clear WeWork would have hit a wall uh, by making its way through conventional investors, uh, and probably hit that wall somewhere around twenty seventeen or so. Uh, but, or even twenty sixteen, but the party kept going thanks to one guy. After the break, we're going to hear a little bit more about main character. Number two, Masa, the head of SoftBank, uh, and how he ended up fueling the growth.

• 35:18Alex Kantrowitz?

  And what you guys say is the delusion. So stick with us. We'll be back right after this. This episode is brought to you by AVPoint. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data and most teams have no single way to see it, secure it, and prove it's under control. That's exactly what AVPoint does. For 25 years, they've been the trusted layer beneath the world's most demanding data, now extended across your entire AI estate. Your data, your cloud, and the agents acting on your behalf. It's how more

• 35:58Alex Kantrowitz?

  than 28,000 organizations deploy AI with confidence. So innovation scales without scaling risk. AVPoint, the unifying trust layer for AI. Head to AVPoint.com to see how enterprises deploy AI with confidence. Learn more at AVPT.co/bigtechnologypodcast. That's AVPT.co/bigtechnologypodcast.

• 36:25Alex Kantrowitz?

  And we're back here for the second part of the Big Technology Podcast with the Cult of We crew, Eliot Brown and Maureen Farrell. Welcome back, guys. Second half. Here we go.

• 36:37Alex Kantrowitz?

  Hi, we're psyched.

• 36:38Speaker 01

  Happy to be back.

• 36:40Alex Kantrowitz?

  So let's, we made it through the break. Let's talk about Masa, Yoshi's son of Softbank. He's main character number two. So who is he and how did he end up getting involved in this story?

• 36:56Speaker 01

  Sure. So he has been a very long-term prolific investor. He has his own fund in Tokyo, based out of Tokyo, Japan, called Softbank.

• 37:09Speaker 01

  And he's built it, you know, mostly with his own money over several decades. And he's both made some, he's been on top of the world in terms of one of the wealthiest men in the world, based on his technology investment bets. He's also, he's very proud to say he lost more money than anyone else in the world during the dot com crash. He's, I mean, I don't, I think more than Adam Neumann, I mean, he's one of the biggest risk takers imaginable. And he sort of, he prides himself on that.

• 37:47Speaker 01

  He's taken big, big bets, won lost money, invested in, I mean, his biggest win was investing in Alibaba, the Chinese retail, online retailer, very early on. But he's just sort of consistently been a venture PE investor. He's taken big stakes in companies. And, I mean, anything, anything to add Eliot? Then we could talk about this vision fund, which is what really made this happen.

• 38:20Alex Kantrowitz?

  Maybe Eliot can talk about the combination of Masa and Adam. What happens when these two people come together?

• 38:27Speaker 02

  This combustible reaction where I think they would both describe crazy meets crazier. So, yeah, like basically, they, they first meet in India and we have a pretty fun scene that, you know, follows some drunken pass out and security coming to his room. But, you know, they briefly meet in India, but that is sort of Adam's.

• 38:55Alex Kantrowitz?

  Wait, now I'm curious, who's crazy and who's crazier?

• 38:59Speaker 02

  Um, well, so yeah, I'll answer this way. So like basically Adam gets this investment from Masa and they get it like Masa rolls up to WeWork on the way to Trump Tower at the end of 2016, when he has gobs of money from the Middle East because he had just raised all this money from the Middle East to invest in tech. And he meets Adam, they go on a 12 minute tour of WeWork headquarters. Um, and then like get in the car and drive up to Trump Tower. And in the car ride, in those, you know, 40 blocks, uh, they hash out, uh, a deal on paper of over $4 billion investment. Um, and so like, that's one of those things where we saw

• 39:44Speaker 02

  that was like, there must have been more to it. And then you learn about it. And like, there was not that much more to it. It was, it was like, I think the second largest venture capital investment of all time, uh, hashed out, um, you know, an hour tour.

• 39:58Alex Kantrowitz?

  Yeah.

• 39:59Speaker 02

  Right. Um, and so then when that deal is closing, um, you know, getting completed, Masa says to Adam, uh, you know, this, uh, question along the lines of like, in a fight, who wins? The crazy guy or the smart guy? Um, and like the crazy guy. And, and the lesson is you need to be crazier. And so then Adam would tell people he was really excited to hear this answer. He like, you know, calls up his board and it's like, hey, guess what Masa just told me? He's like, I always thought I was crazy. He told me to be crazier. Uh, and so like, I mean, that's one thing. And you're like, wow, that's kind of scary. And then you like, look at what happened. And then Adam would come back from these meetings with Masa and like, tell staff, like, no, we have to think even bigger. And, and so it would get like, he indeed wanted to be crazier after this guy who was just feeding

• 40:44Speaker 02

  him wheelbarrow loads of cash, uh, was like, yeah, think even bigger and crazier. Like, you know, becoming the dominant coworking company in the world is not enough.

• 40:53Alex Kantrowitz?

  Right. And so just to take a step back, Adam was a guy meeting the moment where there was all this cash that VCs were looking to invest like we described in the first half. Masa was, I think, was he the biggest VC out there? He had this thing called the Vision Fund where he raised so much money, $100 billion. And

• 41:13Alex Kantrowitz?

  Would basically say he wanted to invest in the biggest tech companies, the ones that could really dominate their field and then just give them a ton of money. And I think that you guys had this one anecdote in the book where he would force founders into taking $500 million checks when they wanted 150 million and they, when they said, no, it's too much. We won't be able to grow sustainably about with that. We worry about the valuation. He would use it as a threat and say, hey, do you want me to go back your competitor?

• 41:43Speaker 01

  Indeed. Yes. So it was crazy. He was going after, I mean, he had this huge win in Alibaba. It was the most successful investment pretty much of all time, his most successful investment. And he was going to create the next Alibaba and just create industries out of thin air, dominate every industry. And I mean, it kind of played out like you might think, um, not just, I mean, we work on probably the most spectacular fashion of the rise and fall. We're like burning money, but in so many other cases, I mean, like you said, this happened constantly, Alex, the 150 million that you're seeking and you have a path to using it. He gives you 500 million. I mean,

• 42:27Speaker 01

  what do you think is going to happen in that case? Like, is money going to be like spent in a smart way? Like constructively or are people going to make some bad decisions? And it was definitely the latter in that case. But yeah, I mean, he's still, as we discussed earlier, like revolutionize industries along the way and give us all cheaper Uber rides and all sorts of exciting things. Great office space, sales, you can work in a Salesforce tower.

• 43:00Alex Kantrowitz?

  Thank you, Masa. Thank you, Masa. So, so eventually Adam comes up with this idea that WeWork is going to be worth $3 trillion. A trillion in office space, a trillion in services, a trillion, what's the third trillion? In owning the buildings.

• 43:15Speaker 02

  Yeah.

• 43:16Alex Kantrowitz?

  And that will be the great, you know, uh, Illuminati triangle of WeWork. Or is that what's on the cover of your book, I think? I get it now.

• 43:24Speaker 02

  Um, yeah. Do you want to behind the scenes here with the cover?

• 43:27Alex Kantrowitz?

  Sure.

• 43:28Speaker 02

  Okay. So on the cover of the book, uh, which everyone should have in their hand, uh, or see it best. Uh, definitely better than online. Um, so there's, it's a triangle and then there's some light illuminating from the back of it. Some rays of light. And so the, the, the cover illustrators at, at Crown, the publisher, um, had, you know, we told them about the triangle. And so they did this and then they added those lines. We're like, wow, that looks really cool. And then I think like two days later, I was on the phone with a source and they were describing this triangle. They're like, yeah, and sometimes Adam would draw some lines of light behind it. So it's really Illuminati like.

• 44:00Alex Kantrowitz?

  Oh, there you go. And it looks, it looks like it's going well, right? And then how does it come crashing down?

• 44:09Speaker 01

  Um, the public markets. So well.

• 44:13Alex Kantrowitz?

  So they, they were forced to go, to try to go public because Masa just didn't have the cash. So let's, let's go through that and then talk about what happened with the public markets.

• 44:22Speaker 01

  Sure. Yeah. So they get to the public markets because, um, Masa and Adam, I mean, they had this combustible intense partnership. Uh, Masa had first invested a 4.4 billion after, um, the 12 minute tour. He invests, they're, they're working together. Adam starts getting crazier and crazier, thinking even, even bigger thoughts, spending more money, taking more money out. He comes up with this giant idea, this three trillion dollar company that he's going to build. He asks Masa for $70 billion to help him get there. And instead Masa and Adam agree to something that's basically going to be a $20 billion buyout.

• 45:06Speaker 01

  They're going to put $10 billion into WeWork. $10 billion will let people cash out. They're going to be pretty much equal partners and, um, Adam's completely over the moon about that, this. It's going to remove every restriction from him. He was like frustrated that, oh, his board of directors and his investors, like people were putting all these, um,

• 45:29Speaker 01

  Constraints on him, which is, you know, completely ironic when we've heard things like he never really showed up for board meetings, he had cashed out so much money. Still, Mas' had even fewer constraints, think even bigger. They construct this deal, and we had reported on some of it at the Journal. But as we got deeper into the book, I mean, this deal was as close to a done deal as you could ever imagine. They worked on it, there were teams of lawyers, meetings all over the world about this. They'd have meetings like every night, like certain teams within WeWork to work through the, all the, you know, dot all the I's and T's.

• 46:12Speaker 01

  And it's supposed to be done by Thanksgiving of 2018. Yet things, you know, delay it, this deal from getting done, including Adam Neumann pushing for more,

• 46:26Speaker 01

  more items that he needs, like he wants more certainty that he'll be CEO forever. He's taking, you know, structuring his compensation package. It delays the deal and a few other things closer to the Christmas holiday, near the end of December. And then a few different things happen. Saudi Arabia, which had been a huge backer of the Vision Fund, decides they don't want to participate in it. So Mas, instead of using the Vision Fund, has to use this publicly traded stock that he has in Japan. And then the tech markets around the world in December start to crash. They do the IPO of a company, SoftBank does an IPO of a company.

• 47:11Speaker 01

  Basically, SoftBank's stock starts to fall. And we at the Journal also report that this deal is happening, and the investors in Japan get really spooked. SoftBank stocks fall and they basically, Mas's CFO, SoftBank CFO says you can't do the deal. He's very highly leveraged. There's so much debt on the balance sheet of SoftBank. If this deal goes through, it's going to crush the company. So he tells Adam on Christmas Eve of 2018, "Sorry, I can't do it," which then there's no other choice. They need money. WeWork needs money to keep going. They know at that moment, or within the next few days, they're going to have to go forward with an IPO, something Adam never really wanted to do.

• 47:56Alex Kantrowitz?

  Okay. I want to get into the story of how the IPO goes south right after the break. So let's take a quick break. We'll be right back here on the Big Technology Podcast talking about Cult of We.

• 48:06Speaker 03

  Now, more than ever, we need someone on our side. But Rob Whitman? Whitman's votes drove up costs, cut Medicaid, and risked 350,000 Virginians' healthcare to pay for tax breaks for himself and his donors. He's not on our side. Shannon Taylor will fight corruption, cut taxes, and bring down costs. This November, vote for Shannon Taylor. She's for us. Paid for by HMP, the HouseMajorityPact.com. Not authorized by any candidate or candidate's committee.

• 48:37Alex Kantrowitz?

  And we're back here for one final segment on the Big Technology Podcast. We're speaking with Eliot Brown and Maureen Farrell, two great Wall Street Journal reporters who have written the definitive book on WeWork. It is a great book. I'm not just saying this because I'm friends with Eliot. Eliot, you know I'd be honest with you if this book sucked. It's amazing. I literally just plowed through the thing. It's really so good. So let's get to the rubber meets the road, which is the IPO. So just quickly tell us. So WeWork's losing money. They need money from the public markets in order to stay solvent, essentially.

• 49:17Alex Kantrowitz?

  And they go to the public markets and they start talking about the energy of We trying to make all these cases that they are more than just a real estate company. But the argument that worked so well with private market investors kind of falls flat with public market investors. So how does that happen?

• 49:39Speaker 02

  Yeah, so they mean, you know, this is a emperor's new clothes story. And the IPO was essentially the parade or whatever. When the emperor goes out and everyone looks at him.

• 49:50Alex Kantrowitz?

  Says, hey, he's not wearing clothes.

• 49:52Speaker 02

  Oh, wow. He's not wearing any clothes. And so, uh, so that's what happened with WeWork. They, they, they put out this document into the world that says all of their financials. And it lays out all of these conflicts of interest that Adam has, uh, where, you know, he's literally getting rich off of the company, paying him rent in, in, uh, office buildings and, and a number of other things. And there's like rampant nepotism. And, uh, then they also have all this like weird, kooky language, uh, about elevating consciousness and, and, you know, the energy of we. And, uh, you know, there were, there were also like a lot of concerns about WeWork

• 50:33Speaker 02

  because in part because like the Wall Street Journal was writing stories about how Adam had all these conflicts of interest.

• 50:40Alex Kantrowitz?

  When you say the Wall Street Journal here and in the book, you mean you guys, right?

• 50:44Speaker 02

  Yes, it was the two of us and others, but, but we were the main obsessive ones. Um, and, you know, we'd written on, and this wasn't even in the, the IPO document. We'd written how much money Adam took out and, you know, how it was like over $700 million, including loans, which turned out to be an even higher number in reality. We were wrong, but wrong in the conservative way.

• 51:05Alex Kantrowitz?

  Yeah, well, this is totally bonkers. So the guy raises something around 10, 11 billion. He took out almost a billion for himself. How does that happen? Like, how do investors let that fly?

• 51:16Speaker 01

  I mean, that's this like one of many mysteries. I mean, not mysteries, he just did it and said, if you're, I mean, basically the way he did it was saying like, um, hey, I'm going to take out money in this round or like the round's going to be a little bigger than you thought. And I'm just going to do you guys a favor and just take some money out so you guys can invest more. And then if anyone spoke up and said, huh, that doesn't sound right. It's like, okay, great. Don't worry about it. Someone else will be right behind you and can get those shares. Who doesn't care? That was, I mean, basically, essentially how it worked out. But, um, when we were hearing of. The fact that he had cashed out so much, I mean, people were saying, we have never seen anything like this in any other startup ever. I mean, Travis Kalanick, he was so obsessed with

• 52:00Speaker 01

  following Travis's, the CEO of Uber, the former CEO of Uber's playbook for fundraising. But Travis never took any money out of the company until like after he was pushed out as CEO. And he would tell every investor that like, stick with me, I believe in this company, I'm not selling. And did everything except also take out money and then get these gigantic loans that JP Morgan and others backed against his stock.

• 52:28Alex Kantrowitz?

  Right. And so JP Morgan gave him those loans in part because they wanted him to use them to IPO because they hadn't had a real strong tech portfolio and they thought this could help. So they really didn't want to call off this IPO. What ended up pushing them to call it off? Cause they filed the paperwork where they put the prospectus in, the SEC approved it and away it goes. So how does JP Morgan end up calling it off?

• 52:54Speaker 01

  I mean, I'll, I'll take this on there. Two, two things. I mean, number one, they were going out there. I mean, they and other banks were telling Adam, oh, you can go public at 60 billion, more, 90 billion. Um, as it was getting closer to the IPO, even before the people started to see the documents. But like over late August and early September, it was just very clear people weren't buying. I mean, they were sort of testing the market out and oh, would you take this company? You know, would you buy the stock at 20 billion, 15 billion? And people were incredibly spooked. So there was just a question of whether if they went to market, who was going to buy the stock? That was a, a big question as time was going on.

• 53:38Speaker 01

  Then there was an article that Eliot wrote, he had been working on for so long. And over the course of, as I was like, we were both reporting on the IPO. Eliot wrote the, the story on, you know, sort of explaining the whole history of Adam. And some of his behaviors, but they were get becoming aware that this story was coming and realizing that with some of the revelations in Eliot's piece, particularly that him, you know, taking marijuana um on an international flight, something that's potentially a felony. If that was going to come out in the journal, you know, they knew the story was coming because we all fact check everything very carefully, that there was going to be no way that he could stay a CEO and they could take a company

• 54:23Speaker 01

  public once that was made public.

• 54:27Alex Kantrowitz?

  What do you guys think would have happened if they did IPO and went through with it?

• 54:33Speaker 02

  I think that um Adam wouldn't have lasted long. Uh I mean, you know, it was pretty clear, given that that they didn't IPO and they they they were way off about how much cash they had. So they had a lot less than they thought and they almost ran out of money. Um they would have just started burning through money really fast. They would have kept expanding and spending even more and then COVID would have hit. And then they would have just been like lighting money on fire.

• 54:56Alex Kantrowitz?

  Yeah.

• 54:57Speaker 02

  Uh with with a much sort of bigger base and more uh you know, extended overreach. Um and so it's just hard for me to imagine that Adam could have ever been

• 55:08Speaker 02

  a public CEO of of a public company being speaking on quarterly conference calls about consciousness and and uh you know,

• 55:16Alex Kantrowitz?

  Yeah.

• 55:17Speaker 02

  like speaking the language of Wall Street.

• 55:18Alex Kantrowitz?

  A community based EBITDA. Can you say what that is? Because they're they try to make their numbers.

• 55:23Speaker 02

  I thought you wanted listeners to to keep listening.

• 55:27Alex Kantrowitz?

  Well, we're at we're at almost an hour now, so.

• 55:30Speaker 02

  All right.

• 55:30Alex Kantrowitz?

  Let's let's get nerdy.

• 55:31Speaker 02

  Community adjusted EBITDA.

• 55:33Alex Kantrowitz?

  Before we go in to that, I'll just say we have a fun section coming up as we end this. So if you're here now, stay with us. We're going to get to some of the more fun stuff, even though this has been a blast. It's been super fun. But this one important thing to talk about, community based EBITDA.

• 55:48Speaker 02

  Community adjusted EBITDA. So yeah, normally you have like, it used to be in the old world, we only cared about net loss, net and net, net profit and net income. Then companies started talking a lot more about essentially income before a few of these other things like taxes and depreciation. So that's EBITDA. And then you adjust the EBITDA to account for other things that look bad and that's adjusted EBITDA. And then WeWork had this other thing called community adjusted EBITDA where they, they took out these other things to make it look like they had a huge profit.

• 56:16Alex Kantrowitz?

  So they were trying to say they were power, they were, they were profitable.

• 56:19Speaker 02

  Yes, it was a way of showing profit and it was in a sort of tricky way that took advantage of, of how landlords give WeWork, so you know, in the same way that a tenant gives an, a landlord gives an apartment tenant the first month free landlords do that for, for real estate. And so they would sort of trick with, make accounting tricks to make it look like they had a lot more money coming in or fewer expenses.

• 56:40Alex Kantrowitz?

  So they would get like the full, a full year free, but they wouldn't factor that into the fa, the, what, the cost that they were paying sometimes.

• 56:47Speaker 02

  Exactly. And GAAP accounting, like normal accounting says, like you have to factor that in and that's the, the smart way to do it. But they wouldn't do that. And you know, suddenly this $2 billion loss would go to like a modest profit. It's like, wow, uh, this thing does have decent margins. Like maybe we should invest in it. Um, so that, that was the idea.

• 57:07Alex Kantrowitz?

  Didn't work.

• 57:09Speaker 02

  The SEC didn't like it. Um, they kept fighting them on it. Um, they changed the name to something incredibly uninteresting and the SEC still wasn't happy. Uh, and so, yeah, that, that was another sort of, um, accounting trick. It legal, right? Like they were, they were allowed to make, make a funny name for something. But, uh, not terribly savory.

• 57:29Alex Kantrowitz?

  So the final step of this is they call the IP off and then Adam Neumann, who really was WeWork, I think that there's a line in the book. I am WeWork and WeWork is me. He said that. I love that.

• 57:41Speaker 02

  For a company literally named We.

• 57:43Alex Kantrowitz?

  It was MeWork, really.

• 57:47Alex Kantrowitz?

  So then he gets pushed out.

• 57:49Speaker 02

  Yeah, so basically after after my story runs, there's this few day period where it's pretty clear that he's never going to IPO as CEO and then the knives come out. And so, you know, this whole thing is a tale of founder control. And the reason that Adam got all of this money out of the company and started buying wave pool companies and investing in elementary schools was because he had full control of WeWork, even though he didn't own more than half of the shares. And that's just the thing in Silicon Valley, because you just say the word founder and people, you know, see this aura, this new glow on you as though you're some superhuman type of person.

• 58:34Speaker 02

  That lasts as long as there's money to fund the business. But if the business has no money and people no longer are impressed with you as a founder, then something's got to give. So it was either WeWork was going to run out of money or Adam needed to go. And so Adam eventually decided that he needed to go because the investors said he did, or else there would be this huge fight in the company.

• 58:57Alex Kantrowitz?

  Well, yeah, they impressed it on him. It basically said, do you want to walk away with nothing or do you want to walk away with a lot of money? And he walked away with a lot of money.

• 59:05Speaker 02

  Precisely. We should write a book.

• 59:07Alex Kantrowitz?

  That's right. That's right.

• 59:09Speaker 02

  People should buy your book.

• 59:10Alex Kantrowitz?

  Yeah, exactly. All right. It's a wild story. By the way, did Adam, I'm kind of curious how Adam, you mentioned that you fact checked, how was Adam reacted? And what do you think he's going to feel when he reads this thing, if he reads this thing? Do you think he's going to read it?

• 59:30Speaker 02

  I think that he, you know, reviews previously are he hasn't read that many stories or some of the stories we, you know, sent. He's highly dyslexic, so whether or not he'll take the time to listen to the audiobook version, I have no idea. We spent a long time going through with their fact checker, or our fact checker went through with his PR person and we went through, you know, with his PR person.

• 59:54Speaker 02

  You know, I can't imagine they're gonna love the portrayal, but you know, hopefully they think it's fair. We certainly think it's fair. We kind of went above and beyond. And yeah, I mean, actually, a number of people have read this and been like, oh, you guys weren't that hard on Adam, which was kind of surprising, given how much stuff we have in there on.

• 1:00:18Alex Kantrowitz?

  I thought it was totally appropriate tone wise. So.

• 1:00:22Speaker 02

  Thank you.

• 1:00:23Speaker 01

  That's great to hear.

• 1:00:23Alex Kantrowitz?

  Not just saying that. Okay, let's get to like, what I guess, like a little lightning round, because there were so many fun nuggets in the book. I just want to give you guys a moment to talk about a few of them. So what is jet ski surfing?

• 1:00:40Speaker 02

  Want me to do that?

• 1:00:41Speaker 01

  Yeah.

• 1:00:42Speaker 02

  Okay, so, so Adam, like surfing, I haven't gone surfing myself, but so surfing like paddling is a huge part of the sport. Like, you know, it's the pain before the reward. You have to be patient and then you wait for your awesome wave and then then you stand up and ride it. Adam surfs differently. He goes on a jet ski. A surf coach will bring him up to a perfect wave and he'll step onto the board and on, you know, the board will then be placed onto this awesome wave and then he goes on it. And so this is like totally considered cheating and like, you know, he's an apostate in the surfer community for this. They've had like angry emails from

• 1:01:26Speaker 02

  surfers, like, I saw this guy at this beach and like, he just.

• 1:01:30Alex Kantrowitz?

  The surfers emailed you?

• 1:01:31Speaker 02

  Oh, yeah.

• 1:01:33Alex Kantrowitz?

  As someone who gets in the water every now and again, I read that and it made me mad. You cannot jet ski out through the break. You gotta paddle out through that stuff. Ridiculous. Let's move on. Oh, sorry. Go ahead.

• 1:01:46Speaker 02

  Yeah, there's this surfer blog that had a big field day when they found out about it. Yeah, it, he said, the way I surf, I don't have time to paddle, is what he told a colleague.

• 1:01:59Alex Kantrowitz?

  That's ridiculous. Okay, fun fact. Number two, Adam Neumann doesn't use a computer.

• 1:02:05Speaker 01

  Yeah, it's incredible. I mean, he, I mean, partially, as we said, he's

• 1:02:10Alex Kantrowitz?

  What? He's, he's, I wait, hold on, I guess he's a tech founder. Yeah. I mean, oh my God. Yeah. Sorry. Go ahead.

• 1:02:18Speaker 01

  I mean,

• 1:02:19Alex Kantrowitz?

  Oh, is it? Is it because of the sex here?

• 1:02:21Speaker 01

  Uh, partially struggles to type and write, but um, I don't think that explains the full thing.

• 1:02:28Alex Kantrowitz?

  Okay. Now I feel bad. So.

• 1:02:30Speaker 01

  No, I mean, there's so many amazing ironies in this story, every step of the way. And I think that's gotta be one of the greatest that he uh, and like, he spoke the language of tech in such a like fluid way. People are always like kind of floored when he would explain things and, you know, say that's something we works business, what about it was techie? And yet, yeah, he couldn't use a computer at all. Um, I, I think Eliot, maybe you have some, so you have some great story of like, him trying to turn on his computer when you're in there, not knowing really basically how to use it, witnessing that.

• 1:03:06Speaker 02

  Yeah. So, so when I met him in 2013, um, after like waiting for him for 45 minutes, I, I sit in the office and he like tries to show me a video of summer camp, because they had a summer camp, because that's what office space subleasing companies do. And uh, he opens the MacBook and like, can't figure it out. And so then like calls it to his assistant like Stella, and like she comes running in and she just like presses play. And it's like, wow.

• 1:03:33Alex Kantrowitz?

  I do think that, you know, I mean, I wouldn't want to invest in Adam's companies, but I do kind of feel like I'd like to hang out with the guy. Like, that's seem fun. Next, next thing we'll move to is um, how Adam almost didn't take SoftBank's money.

• 1:03:48Alex Kantrowitz?

  Not because it came from the Saudis, but because there was a stipulation that he couldn't use it to fund anything having to do with the Israeli military.

• 1:03:58Speaker 02

  Yeah, so so at the as they're like just about, you know, in the process of sort of receiving the first check from SoftBank, he gets SoftBank makes clear to him that the Arab investors, there were two, the Saudis and Abu Dhabi Investment Fund, had a request, which is that, yeah, this money can't be used for the Israeli military. And I think like this is essentially when the geopolitical implications hit him, that he's like, oh, I'm indirectly accepting billions of dollars from like Middle Eastern governments and I'm an Israeli, like I was born in Israel and I'm Jewish and like, you know, there

• 1:04:43Speaker 02

  were not normalized relations between Saudi Arabia and Israel, like you couldn't Israelis couldn't go to Saudi Arabia, right? And yet they're giving indirectly giving him all this money. And so then, yeah, he suddenly freaks out and he's like, let's call off the entire deal. And, you know, he was calmed down by his staff and then it really wasn't that much longer later, maybe a year later, he was sort of bragging to everyone how he met the Saudi Crown Prince and how amazing it was.

• 1:05:13Alex Kantrowitz?

  Wild.

• 1:05:14Speaker 01

  And to be fair, I mean, he thought they were gonna sign the Middle East Peace Agreement. I mean, they, when they were convincing him, some of his other people on his staff, like you can't just like bail on this investment. But people were saying, you know, take the money and do something good with it. Let's take this money. And, yeah, he was saying the first, the Middle East Peace Accord would be signed in a we work. And he would be crucial to, you know, solving, like, be part of the Middle East Peace Accords.

• 1:05:40Alex Kantrowitz?

  There was like a part of the book where like, he said, oh, Mohammed bin Salman just needs a good advisor. And someone said, who is that? And he said, me.

• 1:05:48Speaker 02

  The person he said it to wasn't nobody. It was like the National Security Advisor on George W. Bush.

• 1:05:53Alex Kantrowitz?

  And he, he also said, his wife said at one point that some people say he's the Messiah. And he said one day he wants to be the president of the world. What do you, I mean, I'm curious, like, what you, what you think about this, this type of person? You know, maybe in the olden days, they would be like a religious figure or something like that, but. He's a C, he was a CEO is, is, do you think he has some sort of narcissism to him? Or what do you think the story is there?

• 1:06:22Speaker 02

  I mean, yes, um, yeah, I mean, I think essentially what happened is he just got, the more money he got, the more power he got, and the more his head like went into the clouds. And, uh, you know, in the WeWork story, like 2018 is really sort of the, the, the peak of the Roman Empire before it all crumbled.

• 1:06:40Alex Kantrowitz?

  Mm hmm.

• 1:06:41Speaker 02

  Um, and that's when you see the most amount of this sort of like these crazy statements popping up.

• 1:06:46Alex Kantrowitz?

  Complex stuff.

• 1:06:46Speaker 02

  Right. And, and, you know, he, he literally thought he would live forever because then he's like funding a live forever company or aging, you know, curing.

• 1:06:54Alex Kantrowitz?

  And aging. That happens a lot in Silicon Valley.

• 1:06:56Speaker 02

  Yeah, that, that, that one happens to not be that unique, but, um, yeah, thinking you're going to be the richest, thinking that somehow that your office space, subleasing company is going to be the place where nations come to settle their, their differences, which is one of the things he said. Um, like, you, you know, how do you square that with the rap, any sort of reality that any of us know?

• 1:07:17Alex Kantrowitz?

  This is, we're, we're still in the, in the fun lightning round, but I need to stop and, and ask this question. I meant to ask it earlier, but we were making, we had momentum going through the story. Do you think Adam and this whole idea exists if we don't have a workaholism culture? I mean, a big part of his pitch to investors was the line between work and life is blurred and people live at the office now. And that's why this company is going to be valued. So do you think this entire thing is sort of a product of, yeah, of the workaholism culture that we live in?

• 1:07:48Speaker 01

  Um, I, I'm sure that's part of it. I, I, yeah, I mean, that's definitely part of it. You want work to be fun though. I, I mean, I think it's different nation by nation workaholism. You know, the US has a problem with it. I think many countries in Asia.

• 1:08:06Alex Kantrowitz?

  China does.

• 1:08:07Speaker 01

  Excuse me, China. Yeah, exactly. Um, but Europe, I mean, I think that, you know, culturally it's different. And so it's interesting though, that, I mean, certain parts of Europe, um, and the summer is so much better there in a non-COVID world. Um, but I, but it's translated into, you know, these beautiful office spaces did fill up all over the world. So I'm, I don't know, that's just one, uh, other side to this, that there is interest no matter what, I think, in being in beautiful office space.

• 1:08:38Alex Kantrowitz?

  Yeah.

• 1:08:38Speaker 01

  They were really nice.

• 1:08:40Alex Kantrowitz?

  Yeah, it did just strike me that like. You know, I feel like Adam would have like started his own religion if he was born a thousand years ago. And like now, we don't have religion. We have, you know, religion's in decline. People have replaced it with work. So of course, he was a guy who took advantage of this work culture. Anyway, just, just that was one thought. Okay, let's get back to the, the good stuff. Last one. What's WeWork Mars?

• 1:09:06Speaker 02

  Um, so, uh, in, I was gonna get the year wrong, 2017. Um, he, he, he was obsessed with Elon Musk, um, and always wanted to meet, meet Elon Musk. And he told Forbes, like, if I ever meet Elon Musk, I'm gonna pitch him on WeWork Mars. And, uh, then he does get a meeting with Elon. Um, and at least the way he relays it back to, to staff, uh, well, I know we heard this from a few points. So, uh, yeah, he, he gets the meeting and, um, first of all, Elon keeps him waiting for a long time, which is funny because Adam is late for everyone. Um, and so then finally gets to meet Elon as pretty brief and, and he, he sort of starts talking to him about building community on Mars.

• 1:09:50Speaker 02

  Uh, and he's like, you know, this is what he tells his staff. He's like, the hard part about what you're doing to get to Mars i- isn't, isn't getting there. It's, it's building community when you're there. And Elon is just like, no!

• 1:10:03Alex Kantrowitz?

  The hard part is getting there.

• 1:10:04Speaker 02

  Getting there.

• 1:10:07Alex Kantrowitz?

  God, to be a fly on the wall. That is such an amazing, amazing story. And it like almost perfectly captures Adam and Elon. So good. So good. The book is Cult of We, We Work and the Great Startup Delusion. Maureen Farrell, thanks for coming by the Big Technology Podcast. Eliot Brown, good to see you again.

• 1:10:28Speaker 02

  Good to see you. Thanks for having us.

• 1:10:29Alex Kantrowitz?

  Thank you for bringing your A-game, guys. It is a terrific book. I smiled start to finish. Adam Neumann is just an unbelievable main character. Uh, just great stories and anecdotes all along. And if you read it, and I hope you do, you'll learn not only about WeWork, but a lot about society and our economy as well. And I can't recommend it enough. Okay, that'll do it for us here on the Big Technology Podcast. Thank you, Nick Guatini, for editing. By the time this goes live, you will hopefully be enjoying your vacation. Promised to get you early, the audio early, and I did. So I hope you're having a good time and you don't have to think about any of this stuff while you're out there. Thank you to Red Circle for hosting and selling the ads. Appreciate you guys as always.

• 1:11:11Alex Kantrowitz?

  And thank you to you, the listeners, for sticking with us, especially if you're still here an hour plus into a conversation. I told these guys it was going to be a long one because I kept reading stuff in the book I wanted to talk about, and we covered it all. If you're still here, if you rate us, that would be a great help. Every rating goes a little bit of way to help elevate the world conscious and bring the energy of we to this podcast. And if this is your first time here and you're still here, maybe subscribe. We do these every Wednesday with tech insiders, outside agitators, authors, journalists. Sometimes people fall into multiple categories. Okay, well, that will be that. We'll be back next week with the next episode of Big Technology Podcast. We'll see you then.

• 1:12:03Speaker 03

  Now, more than ever, we need someone on our side. But Rob Whitman? Whitman's votes drove up costs, cut Medicaid, and risked 350,000 Virginians' health care to pay for tax breaks for himself and his donors. He's not on our side. Shannon Taylor will fight corruption, cut taxes, and bring down costs. This November, vote for Shannon Taylor. She's for us. Paid for by HMP, the House Majority PAC dot com. Not authorized by any candidate or candidate's committee.

• 1:12:32Speaker 04

  In this life, you can't win.

• 1:12:34Speaker 05

  When the world gets you down.

• 1:12:36Speaker 04

  No!

• 1:12:36Speaker 05

  Escape to Pluto TV.

• 1:12:38Speaker 04

  This is objectively fantastic.

• 1:12:40Speaker 05

  Relax into the movies and shows you already know and love, all for free.

• 1:12:43Speaker 04

  Shwing!

• 1:12:44Speaker 05

  Even our news is uplifting.

• 1:12:45Alex Kantrowitz?

  You stay classy, San Diego.

• 1:12:47Speaker 05

  Watch School of Rock, Crazy Ex Girlfriend, Anchorman: The Legend of Ron Burgundy, The X-Files, Wayne's World, and so much more.

• 1:12:53Alex Kantrowitz?

  We're not worthy!

• 1:12:55Speaker 05

  The best things on TV really are free. You just have to know where to look. Escape to Pluto TV. Stream now, pay never.