#615 How WeWork Grew, Fell From Grace, and Recovered

Eliot Brown writes about startups and venture capital out of The Wall Street Journal's San Francisco office. He previously covered commercial real estate and economic development from New York City. Eliot’s new book, The Cult of We, breaks down what happened over the last few years with WeWork. In this conversation, we discuss WeWork, startup funding, Adam Neumann, Softbank, and a few crazy stories. ======================= Remote makes it easy for companies of all sizes to employ global teams. We take care of international payroll, benefits, taxes, and local compliance, so you can focus on growing your business. Sign up for Remote today and receive 50% off your first employee for the first three months. Check out remote.com/pomp and enter promo code POMP to get started. ======================= BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp =======================

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

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Elliot Brown writes about startups and venture capital out of the Wall Street Journal's San Francisco office. He previously covered commercial real estate and economic development from New York City. Elliot's new book, The Cult of We, breaks down what happened over the last few years with WeWork. In this conversation, we discuss WeWork, startup funding, Adam Neumann, SoftBank, and a few crazy stories. I really enjoyed this conversation with Elliot, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is Remote. When you use Remote, you can employ people in other countries legally and easily. They take care of international

• 0:47Anthony Pompliano?

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• 1:29Anthony Pompliano?

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• 2:15Anthony Pompliano?

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• 3:00Anthony Pompliano?

  Take back control today and visit retirewithchoice.com/pomp. I use it and so should you. Retirewithchoice.com/pomp. All right, let's get into this episode with Elliot. I hope you guys enjoy this one.

• 3:13Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:37Anthony Pompliano?

  Elliot, what's going on, man? Maybe let's just start with, you know, kind of your journey of covering WeWork, because the book really was the culmination of a lot of the coverage, I think, that you had of the WeWork story as it unfolded.

• 3:50Speaker 02

  Yeah, totally. So I had been covering WeWork since 2013 is when I first met Adam, and I was a real estate reporter and was like, what is this real estate company? And then quickly found out their valuation, which was at the time like $1.5 billion. And I was like, what type of sense does that make at all? It's a tiny real estate company and all they do is real estate, but they keep telling me they're not a real estate company and they're about community. And so things got just crazier from there. Like the valuation kept going up. We'd write stories about how it seemed like an overvalued real estate company and then it would go up more. They'd do- Really crazy things. He'd take money out of the company, buy a wave pool company. He started in elementary school.

• 4:31Speaker 02

  Uh, and then it got even bigger and then everything imploded in like this totally crazy immolation in, in, in 2019. When, um, yeah, like $40 billion of value disappeared.

• 4:43Anthony Pompliano?

  So when you first come across WeWork and you're told it's a community company, it's all these things other than a real estate business. You're obviously talking to other people in the real estate business as your job as real estate reporter. What was the general sense? Did people just not know about it? Were they like, that's complete nonsense? Did they buy the, the kind of story or the hype or kind of what was everybody else saying?

• 5:01Speaker 02

  So in, in real estate, it was interesting because, uh, you know, on the one hand, they didn't, a lot of the landlords just didn't understand. They're like, yeah, it seems like a real estate company to me, uh, but they weren't investing in it. They, all they wanted was rent and WeWork was paying them rent. And so they were kind of, you know, depending on the landlord, pretty happy to have someone to pay maybe even slightly higher than normal rent. Uh, and so then you'd have these conversations and people would be like, yeah, I kind of don't really understand how it's that different. But I don't know, maybe it works. But then the investors that invested with Adam were largely venture capital investors or tech investors. And he was just able to, to like, get them to, to look at, at this thing, which was very clearly office space.

• 5:45Speaker 02

  And just tell them it was, no, it's about the energy. It's about the community. And he'd say it in enough of a convincing way, often with like shots of tequila, uh, that they, you know, sort of went along with it. And, and would just value this thing as really different. It's like 20 times the value of what a normal real estate company would be. Uh, cause yeah, there's comparable companies you can look to and be like, does it work? So it was quite the difference.

• 6:11Anthony Pompliano?

  So when you think of the WeWork model, is it fair to categorize it as they would go into space that a landlord owned? They would say, hey, we will rent it for, from you for $1 a square foot, use easy numbers. And I'm going to turn around and I'm going to rent out, uh, after kind of fractionalizing it to some degree. And I'm going to charge the equivalent of $2 or $3 per square foot. So you as a landlord get your $1 per square foot. You're happy. And then they're taking the difference kind of theoretically between, uh, what they're charging their, uh, members versus what they're paying you.

• 6:41Speaker 02

  Yeah, that precisely. And they would be the other sort of key thing to mention is WeWork would sign a 10-year lease, which is standard for these office buildings because the landlords didn't like doing monthly leases because they couldn't get a loan from a bank. So WeWork was essentially taking the risk and then saying to these graphic designers or tiny companies, yeah, you can leave anytime. You can just pay by the month. But to pay by the month, they would have to sort of pay up and pay WeWork that like additional money. So in that sense, it's like a pretty good business that that's real. People forget like there were some real things about WeWork. But that doesn't mean that you're you should be worth like, you know, infinity or $47 billion. And so that's where things got crazy.

• 7:25Anthony Pompliano?

  So as this kind of happens, you pretty early found them, you know, given where they ended up going. Is this something where the founders start out, they've got kind of an idea, they start to execute, and then they just buy their own hype over time and they kind of double and triple down and and things get worse? Or very early on, would you like, ah, something here is like off and I should pay more attention because this seems like, you know, it's juicy, if you will?

• 7:52Speaker 02

  Well, so, yeah, I mean, I I was just interested and sort of baffled by this concept of sort of startup inflation where not tech companies were claiming they were tech companies. And we I've been told I overly obsess in the book about Casper, the mattress company that, you know, raised money at like a tech valuation. And then you look at like what they do. And it's like, they just they didn't even make their own mattresses. They pay somebody else to make the mattresses. And and it's like, it's a mattress company. And so I think that to me, that's what was really interesting about this. It's like they they were finding smart people and investors and employees and getting them to like convince

• 8:34Speaker 02

  them that they were a tech company. And and then you ask like, well, how? And the explanations made up, like, to me, at least, maybe I, you know, wasn't seeing it, but it just like, Made no sense. It's like you have an app that makes you a tech company? Like, people are paying for real estate. So I was really interested in that. I was really interested in sort of, yeah, just how kind of zany Adam Neumann was. And then as like the story grew, it got like you learned, it's like, God, this guy is doing all these crazy things. Like, why is he flying private at, starting at like, when WeWork was a Series B company, you know, they're essentially a tiny startup.

• 9:12Speaker 02

  And, you know, then it's like, why does he pass out trays of tequila to the entire staff and have them do shots on like a Monday? And, yeah, things, it was just like, the more you look, you'd be like, what is going on in the world that this thing is becoming one of the most valuable startups in the country?

• 9:31Anthony Pompliano?

  What was the craziest thing that you found? Like, you were, you know, from 2013 till today, right? When the book's coming out is a long time. I've heard insane stories from both people who worked there and also people who just kind of watch from the outside. What do you, in your opinion, is the craziest thing that you came across?

• 9:50Speaker 02

  Okay, so I'll start with one that is kind of boring, but I find totally insane. And so that is like, at the end of the day, this guy, Adam Neumann, you know, sort of convinced the world this thing was a tech company, raised, you know, it went up from, you know, zero to 47 billion and then back down to eight billion in valuation. So people lose billions of dollars. And he walks away with like one to two billion plus dollars. So like, he essentially was paid hundreds of millions of dollars to leave the company and then stay away from it and not control it. And it's like, that's the system? Like, you convince people to give you all this money and then to make it so they don't, you don't take the thing to zero?

• 10:32Speaker 02

  They pay you hundreds of millions of dollars more? So that is one crazy thing. In terms of others, there's probably a list of like 300 I could do.

• 10:44Speaker 02

  I, in terms of like more related to tequila and pot, I, one of the best stories we have in the book, that it's really tiny anecdote, but was just a fun one, was on one flight, they were, there was so much pot smoke that the, on his private jet, that the crew had to put on oxygen masks.

• 11:02Anthony Pompliano?

  Wait, what?

• 11:05Anthony Pompliano?

  Is that confirmed?

• 11:06Speaker 02

  He just liked smoking on his plane.

• 11:08Anthony Pompliano?

  Yeah, is that confirmed?

• 11:10Speaker 02

  Uh, I mean, to put it in the book, yeah.

• 11:12Anthony Pompliano?

  Yeah. So they smoked so much weed on the plane that the crew had to wear oxygen masks?

• 11:21Speaker 02

  So this is, it's sort of pairing with like the, there were a lot of rowdy things on private jets. And like, he actually would rent for the first years of WeWork, he was renting a private jet. And one of the private jet companies, Vista Jet, was just always complaining to WeWork staff about how Adam had ruined this or that on the jet. And they had to take a jet out of service because a credenza was torn down. And like stains were on the carpet from wine or something. And another jet company sent them an email, like, uh, the passengers were spitting tequila on each other and like, and they were walking around without a shoe, like without any clothes on and they left, uh, they got sick across the plane and the bathroom or something like that.

• 11:59Anthony Pompliano?

  I mean, it's-

• 12:00Speaker 02

  So he loved jets. He just like absolutely obsessed over them.

• 12:05Anthony Pompliano?

  And I think that I read at one point that like, there would be meetings on the jet as well, right? So, so it was like, there was partying, but there was like meetings as well?

• 12:13Speaker 02

  Yeah. And so some of these people, I mean, you'd, some people would be like, you know, in his office and waiting outside for two hours because he was absolutely late for everything. And then he'd be like, come with me. And so they'd go in the car with him to JFK or Teterboro or whatever airport. And then be like, come on the jet. And so then you'd just like continue your meeting on the jet. And then the plane would arrive in Boston and he'd be like, okay, now go find your own way home. So be meetings. They're often, you know, people said it was like really hard to get, um, go, they hated flying with Adam overseas because you couldn't sleep because you were either working the whole night or partying or both. Uh, so-

• 12:53Anthony Pompliano?

  Is this a, a work hard, play hard scenario? Or is this, uh, play hard and like somebody else does the work? Like, how would you categorize it?

• 13:01Speaker 02

  Oh, definitely the former. Adam, Adam worked really hard. He, he worked, uh, you know, his biggest sort of talent in that regard was like, he just didn't need sleep. I mean, there's this story from the CFO where he told me once where like the- Adam had the CFO in a meeting until 1:30 AM or 2:00 at the office. And then he, Adam was like, I really want to go surfing sometime. And the CFO was like, you can use my beach house. And so then Adam, the CFO comes in at 8:00 AM or 7:30 AM the next morning or something like that. And he gets there and Adam is in the office in his beach clothes, having already gone surfing that morning at the guy's beach house near Rockaway.

• 13:39Anthony Pompliano?

  That's nuts. When you think about kind of the WeWork rise, how much of it is you have to have a founder like this to build this type of company? And at some point, they become kind of difficult to scale it. And so it's like, you know, what got us here may not get us to where we want to go. Versus some other founder who maybe had different tendencies or different preferences could have built the same company.

• 14:05Speaker 02

  Yeah, I think there, you know, this whole story is an outgrowth of sort of the, the type of founder that Silicon Valley and the venture capitalists on Sand Hill Road really like to promote, which is, you know, in the words of sort of like the Founders Fund website, they look for founders with near messianic qualities, I think is the quote. And so that's the type of founder who really, like Adam was really good at motivating people. In hindsight, they all kind of hated him for it, or a lot of them did, because he was sort of, you know, made them working insanely hard and sort of do the impossible. But they did sort of the impossible. They hit really crazy deadlines. And I do think that to grow so fast, because they just grew so rapidly, you need something like that.

• 14:47Speaker 02

  Now, the other way of looking at it is WeWork grew revenue so incredibly fast that they also grew losses at this, just such an extraordinary rate. It's really astounding. I mean, so it was not, they were able to grow that fast. They hit $2 billion of revenue in nine years. And but it was at just an extraordinary cost where they were spending $4 billion a year. So you spend $4 billion, you make $2 billion, and so then you have negative $2 billion, which isn't, I think, the way these, these businesses are supposed to work.

• 15:21Anthony Pompliano?

  So my last question before I let Joe and John ask you a couple is What would be your bull case? Or kind of your bull argument for the positive impact that WeWorks had on the world versus the bear case? And I think that a lot of the bear case obviously surrounds around like loss of capital, just insane stories that you kind of hinted at there. But is there a bull case or like a kind of a counter example that you would use after you've kind of spent so much time looking at it that you kind of say like this would be the thing that I would harp on?

• 15:53Speaker 02

  So, yeah, I mean, it kind of depends on your framing, but one of the things they really did, well, I guess a couple of things, they really did find a new demand out there for a different type of office space. There had always been this concept of subleasing and sort of temporary office space, but they made it much more institutional. They made it so now it's a thing where companies want sort of more hip office space, like big kind of boring companies and Citibank and UBS want more hip office space and they also want more flexibility. So they're leasing for one year at a time instead of 10. And now real big landlords have sort of copied WeWork and tried to adopt that.

• 16:35Speaker 02

  And so that, you know, like that's not changing, making the world that much of a better place. We're elevating consciousness as WeWork said they were going to do. But that's a thing in real estate. Now, you know, then like they also created a lot of really nice space. Like I think their office space is pretty good. Like there's people complain about this and that, but all things considered, I think they had good design taste and they build a good product, they had smart people working there. And then, yeah, on the bear side, the thing that I like to say that's a little less tangible than just sort of destruction of capital is they just distorted reality and it was really frustrating being a reporter covering this for so long because

• 17:19Speaker 02

  People just started saying things and believing things that, at least to me, and based on my understanding of the laws of gravity, made no sense. And it was like, I mean, the big thing people would always say is like, well, the thing, people that makes WeWork special is they're here paying for the energy. And it's like, what is energy worth? I mean, it seems like they're paying the same amount that they pay for office space because they were paying, competitors were charging the same thing and they didn't have energy. But like, people just really believed so firmly because Adam was such a good salesman and sort of taught them to see this thing that wasn't, that they were a disruptive tech company, even though there was like no evidence of it. And so that, it was just like really frustrating sort of communicating to that world and dealing

• 18:03Speaker 02

  with WeWork for years.

• 18:05Anthony Pompliano?

  Joe, John, what do you guys got?

• 18:06Speaker 03

  Yeah, I'll start. Thanks for doing this, Elliot. Really appreciate it. I'm excited to read the book. But so I want to talk about SoftBank real quick. They obviously lost a bunch of money on this. I think the valuation went from 45, 50 billion dollars to 2 or 3 billion in a short period of time. And I'm curious, when it comes to SoftBank, kind of how much did they know about the summer camps, the tequila shots, the private flights versus just being blinded by that whole kind of change the world type vision that Adam was pitching?

• 18:34Speaker 02

  So, yeah, I think they and the other investors, it would have been so impossible to avoid knowing about Adam's antics and him being sort of totally crazy. And it's like, what, this guy, you know, drinks a lot? Because his pitch to a lot of these investors was to, and especially like baby boomers in suits, was they'd walk in at 10:30 in the morning and he'd just like feed them tequila shots. As a bit performative, they'd feel cool in his presence. So SoftBank, I mean, they just had to know about some of the stuff like that. They did a lot of due diligence on the company after they agreed to invest 4 billion dollars in it. And then actually, their analysts came back and said, you guys realize we've looked at

• 19:19Speaker 02

  this twice before, we passed twice before. They didn't hit any of their projections that they gave us before. And it's a real estate company. And then, you know. Masasone at SoftBank is like, no, no, but I like Adam. It's visionary. He's visionary. It's an AI company. He's the next Jack Ma. And then they wrote like the second largest check ever written to a US startup. So, um, you know, I think SoftBank knew, but it was like in a bubbly mentality, you, you just don't focus on the negative and you, you just, your eyes are drawn to the positive. And so you, you know, normal time you would have been like, well, here's all these 55 reasons this is a bad investment. And like, here's this one, and you would look at the 55 and the one, uh,

• 20:00Speaker 02

  and be like, I'd probably go with 55. Um, but in a bubbly time, you like, look at the one, you're like, but, but it could change the world's real estate market. Um, and you sort of forget the other issues.

• 20:11Speaker 01

  Yeah. Um, Elliot, one, congrats on the book. I know it's a big accomplishment, but, um, I'm curious what you think about Adam himself. You spent a lot of time, obviously reviewing the whole situation. Like, what do you think his strengths are? Because I see a lot of people kind of investing in founders and sound like he was a very good talker, salesman, all that. I'm curious what you think his strengths and weaknesses kind of were.

• 20:30Speaker 02

  Yeah. And, and he, he did have strengths. Like, I mean, his ability to, really early on, what he'd do is, uh, he'd sign a lease at a new building. Um, he's sort of an enormous risk taker. So that's one. Um, so he, he'd have the, the sort of willingness and, and vision to sign a lease before they were finished with their first building. And then he'd tell his team, okay, well, uh, we're opening on this date. And they'd be like, oh, no, there's no way we can do that. Um, and he's like, well, I already signed some new customers to come there. So you guys got to. And then they would like do it. They would sort of, he would will be impossible into existence. And so, um, you know, I don't, I don't know that, uh, that's a sort of long-term strategy with the same workers

• 21:08Speaker 02

  because they get very tired and eventually get married and have kids and, and can't do it anymore. But, um, because they work really hard. But, but that's like totally an important skill. And we were actually did, uh, for the one year in its history, turn a profit around then in, in 2012. Um, and so, uh, he was also like really talented at communicating a vision. Obviously in the end it was a, a mirage and, and a hollow vision. But, uh, if he had had a, like a little bit, maybe, maybe a little less ambition or. Had a more of a real like tech company that he was building instead of a real estate company. That's also a great skill. Like he his, the reason he could raise so much money is beyond sort of making these

• 21:50Speaker 02

  people feel fun and giving them tequila was because he was able, when you get in a room with him, he would talk about the future in a way where it just felt so real. Like I met him in 2013 and, you know, he's like 40 minutes late and I was, where is this guy? And he brings me in and he like shows me his laptop with a video of their summer camp and him like riding around on a boat. And then we like had this long conversation. He's like name dropping like Rahm Emanuel and Ashton Kutcher. But then he like talks about how he's like, when we open up in Portland in nine months, we're going to be full within two weeks. And I would sit there thinking like, wow, what a good business. Like, that's crazy. And then I left and he's like, how would he know that?

• 22:35Speaker 02

  Like, he can't know they're gonna be open. Like, it's like literally impossible for him to know that. It's in the future. And so I think he would was really able to sort of bend reality and like get people to just like live in the future with him, which is like an important skill for Lorraine Callen and money. And it's just nice when it's real, I guess.

• 22:54Speaker 03

  And did you feel that he ever had real genuine aspirations for WeWork? Or do you think a lot of it was still centered around kind of the notion of him wanting fame and wealth and kind of notoriety for this stuff?

• 23:05Speaker 02

  I think he melded the two in his mind. Like, so I don't think there was some sort of like evil plan where he took out a whiteboard and said like, how to best enrich myself. Step one, pretend it's a tech company. And like, I do think he would drink his own Kool-Aid. But I think it was like, you can sort of see in the marketing over time, it became like, it shifted. Like at first, when the social network, the movie had come out and Facebook was a big thing, he was telling everyone, and I think himself, that he had a physical social network. And then suddenly, when the sharing economy is in vogue, he's telling everyone, like, no, no, we're part of the sharing economy. We share space. And so like, he, his mind, he was a chameleon and like his mind would sort of quickly change

• 23:49Speaker 02

  color for whatever the sort of in-vogue financing was at the time.

• 23:53Speaker 03

  And what happened to the, they had like a living concept at one point, right? Outside of offices where people would come, what happened with that? What's the story there?

• 24:00Speaker 02

  We live. So everyone is always like, we live such a great idea. So WeLive was like essentially an adult dorm where like, it's like, well, if you're 23, you can rent by the month and you, you, the furniture is already there and, and you can have friends built in and like, you know, I think that's actually a good concept. The problem is like economics. Uh, one of the, like, one of the reasons that, that WeWork worked so well is they would take a normal office space and then they were able to pack people in, uh, at much denser rates. So they were able to get more revenue per square foot. Uh, but if you, you pack like four times as many people in an apartment as you're used to, it's called like illegal tenement. And they had those in the 1910s and, and they were pretty gross. So, uh, you, you, you need a

• 24:41Speaker 02

  certain amount of space to live in, in modern society and, uh, then it's harder to, to make the economics work there. And so then it's like, why wouldn't I just build a normal apartment and make more money? Uh, and so that's what ended up happening to it. So they're, they're, they only did two of them. Adam would always talk about how they were going to do more. He once had a meeting with Brian Chesky, two meetings. He was like, let's do 10,000 apartments, uh, together for the new WeLive. And Brian Chesky of Airbnb was like, uh, that's a little small for us because we, we have like millions of apartments on our platform. And then Adam comes back and he's like, let's do a million apartments together. And then Brian Chesky's like, where are you going to get the like, you know, scribbling down like one trillion dollars you need to build that? Uh, and I'm thinking about Masa. So, um, yeah, it didn't go very far.

• 25:26Anthony Pompliano?

  Talk to us a little bit about, uh, the transition. Obviously there was the, um, kind of loss of the, the market cap. Um, and eventually SoftBank steps in and, uh, I spent some time with the SoftBank people and they seem, uh, from like an operations standpoint, uh, to have really gone in there and completely turned that business around, um, and, uh, started to drive a recovery, uh, that appears to be working, right? And again, I, I think they would be the first to say like, you know, not out of the woods yet. You got to build a great business, got to serve customers, got to do all the right things. But during that transition period, uh, you were reporting on this, you know, it seems like, uh, definitely weekly or almost daily or hourly. I mean, it was like just non-stop. You know, there was always a rumor or something happening. So like, what, what do you remember from that time period and, and kind of were there any main takeaways, uh, when that transition was happening?

• 26:12Speaker 02

  This is in the sort of 2019 implosion era. Yeah. So, yes, that was kind of, as a journalist, a tiring and thrilling time to cover. As this thing, like, I'd spent years wondering, like, where, what is with reality that this thing is worth so much? And then just like became like the biggest business story for weeks. So, right afterward, there was a ton of, by the media, by investors, by shareholders, like, a ton of interest in SoftBank. And this whole strategy, I mean, they raised the world's largest private investment fund. It was like, I think, 30 times bigger than the next biggest venture capital fund that had been raised beforehand.

• 26:55Speaker 02

  And it was just, it's sort of a realization that they were making some really, really reckless, spending it in really, really reckless and dumb ways and kind of absurd ways, right? Like, and at the time, they ended up betting huge on Righthail, which was less of an absurd and absurd bet. But Righthail, like Lyft and Uber's stock had plunged, like, it was clearly not the golden goose they thought it was. They bet sort of at the peak and they're still hurting from that. And then you just looked at these other things and it's like, they invested 7, you know, $375 million in a robot pizza company that didn't make its own robots. And also, why do you need robot pizza?

• 27:35Speaker 02

  And like that went, you know, to effectively zero. They invested in WAG. So, the dog walking, Uber for dog walking, that did not go well. And, yeah, I mean, I think there was sort of like this realization of like, the, you know, all of the money that's flooding into Silicon Valley largely through the Vision Fund is just like the total crap. And, you know, what's with our world and our economy that we thought these were smart investments? And, you know, that's changed some sense because of the, I guess, when you bet macro on the, you know, unicorn economy, the startup economy, it's been going really well for everyone else.

• 28:20Speaker 02

  So, SoftBank and ended up to if you look back today they're they're not in the red it's not I don't think a good investment like if you look at how much they've made it's gone up like the vision funds gone up like 50% in value in five years or four years and the NASDAQ's gone up like 2X more or more so that's not like a great investment but but but it's looking a lot better because they they like you know put 600 million into DoorDash that became like $8 billion or something like that.

• 28:49Anthony Pompliano?

  Elliot, the name of the book is The Cult of We and also WeWork, Adam Neumann and The Great Startup Delusion using words like cult, delusion, etc. How much of this is around this one business versus a sign of the times and like kind of a more macro trend where people want to believe in the other world-changing technology, they want to believe in in specific things and did you get any sense of that as you were covering this specific company, whether it was a company specific or just hey, the whole industry, this was happening?

• 29:21Speaker 02

  Totally. So we think that, you know, the main theme of the book is that WeWork was just the most extreme of a trend. So it was not this like total insane, it wasn't completely aberrant business. It was actually just representative of stuff that was going on throughout it. So I mean, if you rewind to when this was really kind of the rocket ship was taking off in 2015, I mean, like there was just this whole obsession with like the Uber for X. And so, you know, there were like three Uber for valet parking companies that were essentially just giving you subsidized valet parking that lost gobs of money every time you parked your car. And, you know, I mentioned

• 30:03Speaker 02

  things like Casper, it's like, I mean, you have the same thing with scooters where suddenly everyone is obsessing over how scooters are going to disrupt walking. And you could at the time be like, you know, they just tried this in China with bikes and there's like literal viral photos of graveyards of these bikes because it's such a bad business. Why are you treating this as like the next disruptive software company? And, you know, money would just flood in. So I think that it was Like and to a certain extent still is, but just in different pockets. But you you had these like consumer tech companies that were consumer companies that said they were tech companies that just got these extraordinary valuations just by like talking a story.

• 30:48Speaker 02

  And to me, that's not like, you know, journalists, I think, should live in in the now, not the future. And like, it's the venture capitalist job to bet that one out of 10 of these is going to make it really big. But the the the population at large, media should portray things that more in the now. And it's like, you have a cool app that connects people to drivers and loses like a couple bucks every time somebody takes a ride. Like, it could work out, but that's not like completely disrupting the whole economy to the point where you need like 50 of these Uber for Uber for cookies and Uber for ice cream or whatever. Like, let's figure out if Uber works first. So I think that was going on, and now I think it's kind of shifted into different areas.

• 31:29Speaker 02

  Like, it's pulled back in the consumer area, and there's just a lot of money in like software, which is is probably healthier.

• 31:36Anthony Pompliano?

  What, moving forward, are you looking for from the business? Obviously, you've got the book now. Are there specific things that you're like, you know, hey, if they can do A, B, and C, then they'll be successful? Are you looking for specific red flags or or lack of milestones? And you're like, OK, these are going to be the warning signs. How do you kind of just look at it at a forward looking basis?

• 31:56Speaker 02

  Yeah, we were exchanged a lot. I mean, it's like basically after it imploded in 2019 and Adam, the CEO, was ousted. They put in SoftBank, put in a, you know, experienced real estate operator and former CEO of a mall company to run it. And so what's happened is it went from being a company that had a mission to elevate the world's consciousness to now a company like very much focused on, you know, real estate and and flexible office space. So I think it's kind of an interesting time. They they managed to survive COVID, you know, they burned a lot more cash and and occupancy just, you know, the the the people renting their desks just fled, right? Like occupancy fell really low, but now.

• 32:42Speaker 02

  You know, it's sort of this weather vane for the post-COVID economy and what happens with the office. And there's like an interesting theory where a lot of companies just aren't going to know what to do with office, like who's going to be there, you know, three days a week, who's going to be there five, are we going to do all remote, are we, you know, going to have more regional offices? And for that, from that perspective, WeWork, if that is the big path, like WeWork is probably a good business to be in right now in that they, like companies don't want to make 10-year leases if they don't know what the office is going to look like. So if that happens, then they're probably going to be well positioned. But I think the thing that is not going to happen, I would imagine, is that people,

• 33:24Speaker 02

  like its valuation isn't going back to 47 billion anytime soon. I mean, it's office space, and there's only so much somebody's going to be willing to pay for office space. And every time you need a new desk, you have to pay to build the desk. So unlike software, where you can sort of charge, if there's unlimited demand, you can charge gobs of money, and you don't have to spend any new money every time you ship somebody some code across the internet tubes or whatever. So yeah, I think there's a cap on valuation. And I imagine it'll be treated like a real estate company, because it's trying to go public again. But, you know, it's a real business. And it could be a good business, it could be a bad. We're just going to have to see how things work out.

• 34:08Anthony Pompliano?

  Last question for me, and I don't know if you guys have any, is, did you get shit for writing the book? People give you a hard time and any kind of backlash?

• 34:15Speaker 02

  So it's actually really fascinating. So it's just for years of covering WeWork was just like persona non grata. I would have these calls with executives there where like they just sighing on the other end of the line, and they were sort of put on the phone to be defensive and like sort of back my stories. And then after everything collapsed, it was sort of like, you know, the wicked witch is dead, and everyone just started like, you know, saying like, you were right. And somebody said,

• 34:45Speaker 02

  There was a group chat, yeah, two people told me this. There was a group chat of like people who were there really old that had a hashtag or Slack or something where it said, "Justice for Elliot." So, um, people were, uh, I'd say a lot of people who had thought I was just a villain beforehand, uh, were like, "Oh, I guess you were sort of focused on the right thing." So, so that was good. I do not think Adam Neumann is in that camp. Um, I, my sense was he was not terribly happy, uh, we're writing the book. He didn't cooperate, uh, at least personally, like we, we talked to his PR guy a little for the book, but, um, uh, yeah, I can't imagine that, that he's eager to have the book out there.

• 35:25Anthony Pompliano?

  Yeah, I, I have one more, uh, for you, Elliot. What's Adam up to now?

• 35:29Speaker 02

  Um, so he's kinda, you know, he's in the Hamptons, um, in one of his formerly eight homes and, and now it's been, uh, winnowed down a little. Um, and, uh, you know, I think he's sort of plotting his next act. He's not a guy who's just gonna be content to sit on his one to $2 billion and just, you know, enjoy, you know, throwing money up in the air. Like, he really wants to be a player and, and make a dent in the world, uh, as far as we can tell. And so he's talked about like, "I wanna do something on the future of living, uh, but, uh, like I'm about to do something big." But then, you know, that was, that was like eight months ago or so and I haven't heard a thing. Um, he's investing in startups. He's trying to invest in more startups. You know, the founders have to take his money, so it's not always easy for anyone. Um, and, you

• 36:14Speaker 02

  know, a lot of it's based in real estate. He, he bought, uh, he, he bought a couple apartment buildings. Um, so, uh, to be determined. I bet if he tries to raise money for something, you know, the Silicon Valley is such that it funds startup founders that are visionary, even if they had a big failure. So, um, and, you know, some people made money off WeWork. So, uh, my, my guess is that won't, wouldn't be that hard for him, uh, just without finding the right guy.

• 36:39Anthony Pompliano?

  Before I let you go, I was gonna ask everybody the same three questions. Uh, first one is just, what's the most important book you've ever read? Can't say your own.

• 36:46Speaker 04

  What, what is the most important book you ever read?

• 36:50Speaker 02

  Uh, important book? Um, what a good question. Uh, I would say, um...

• 36:59Speaker 02

  Barbarians, well, this is a cop out. Barbarians at the gate, because it's a similar tale, but it's about just like the 80s and finance going totally insane. It's sort of a true story of just like people losing their minds at the time and the capitalism being this weird thing that goes in herds. I probably have a better answer if I think more about it.

• 37:20Anthony Pompliano?

  What is your sleep schedule? This comes from our friends over at Eight Sleep. I think every single one of us sleeps on an Eight Sleep mattress. They make it super cold and has completely changed my life in terms of sleeping way more. During 2019, maybe we can do like the chaos versus now. What's sleep schedule? How has it changed?

• 37:37Speaker 02

  Good thing I got that Casper dig in there. So I usually go to sleep at like 11:30 and wake up at like 7:30. But if my bosses, because I'm on the West Coast, if my bosses hear this, I wake up at 6 and check my email to make sure nothing has happened.

• 37:56Anthony Pompliano?

  That Elliot guy, man, he does not sleep. You ever heard of Adam Neumann's sleep schedule? Elliot has the same exact one. I love it. Last question. Aliens, are you a believer or a non-believer?

• 38:08Speaker 02

  I mean, I don't know. Yeah, wow. What a good question. Sure. Like, those are pretty weird videos.

• 38:19Anthony Pompliano?

  Nobody has blamed the videos yet for their belief, but that might be a fair way to evaluate it.

• 38:25Speaker 02

  A brief, like, personal view there is like, I don't get you. Watch all these sci-fi movies and isn't the answer always that like, oh, it's actually just time travel? Like, how come that's not on the docket too? Why don't people talk about that?

• 38:37Anthony Pompliano?

  My personal belief is that there's probably intelligent life out there. It's just either one, too far, so we'll never come in contact during my or your lifetime, or two, if we had the technology, it's kind of like dinosaurs, like, oh, they were here, but like, you know, we just missed each other on the time scale. So time travel kind of fits right in with that.

• 38:56Speaker 02

  Yeah, Rick and Morty makes it seem pretty realistic, so.

• 38:59Anthony Pompliano?

  Absolutely. All right. Well, listen, thank you so much for taking the time to come on The Cult of We, We Work, Adam Neumann, and the Great Startup Delusion. I told, I feel like Vanna White here, please go buy the book. I'm going to put the link right now into the YouTube comments. Elliot, where can we send people to follow you on the internet or find more of your work?

• 39:16Speaker 02

  I have a lot of wry, obnoxious cynicism on Twitter. Elliot WB, Elliot with one L, one T. These days, I'm just promoting books. And yeah, at the Journal, just search my name, Eliot Brown WSJ, and you'll get stories about electric vehicle companies with no revenue and SPACs and other fun things. Hopefully not any more coworking stories anytime soon.

• 39:40Anthony Pompliano?

  I'm gonna leave you with this because of what you just said. I was on CNBC one day and it was one of these like hour-long segments. And usually they just bring me on, talk about Bitcoin and like, you know, see ya. Thanks for saying whatever you say. But they wanted me to be on for a whole hour. And I was like, what else are you guys gonna talk about, right? Like, you know, I don't want to embarrass myself. And like, look, if we talk about stocks or whatever, we'll kind of like protect you. We won't really ask you about that. And of course, we get on and they start talking about a stock that I've never heard of before. And then luckily, while they were talking about it, I Googled it just to see what it was. And they're like, you know, Pomp, you got any thoughts? And I was like, are we talking about a company right now that has no product, no revenue and is valued at $15 billion because it just went through a SPAC? And they're like, yeah. And I was like, okay, that's what I think about it, right?

• 40:23Anthony Pompliano?

  It's like, you know, that's about my analysis is just like, you guys say venture capital's crazy. Like, this sounds pretty nuts, too.

• 40:31Speaker 02

  Yeah, no, no, that, I mean, like, some of these projections that you look at in these investor decks, like, they look pretty similar to the WeWork projections, except that WeWork showed its investors, except at least WeWork had revenue. These guys have none. And it's like, you're gonna be the fastest-growing company ever, like faster than Google, by like four years to get to $10 billion? And you haven't made a car yet?

• 40:56Anthony Pompliano?

  Awesome, man. Well, listen, thank you so much for taking the time to do this. Everyone go buy the book. Highly recommend it and we'll talk soon.

• 41:02Speaker 02

  Thanks so much for having me.

• 41:03Anthony Pompliano?

  All right, bye.