The narrative of Adam Neumann and the ascent and decline of WeWork resembles a parable rather than an account of business.
A story of enormous ego, unrelenting ambition, and gullible public trust.
Adam Neumann was the tall, attractive, barefoot, stoner, dope smoker, and tequila shooter who brought rap artists to the workplace party. He wanted to be the first trillionaire in history, live forever, and take his business to Mars.
The corporation that grew to be the biggest tenant of office space in New York and London files for bankruptcy protection from the very landlords who once cherished it, but that seems a far cry from the depressing reality.
It all began with a sound, tested concept that had been expertly adjusted for the times.
The concept of a place to work for people who desired something more than a coffee shop but not quite an office was not novel. The late 1980s saw the founding of Regus (now IWG).
However, the circumstances were ideal for the founding of WeWork in 2010.
The financial crisis has caused even some of the largest companies to fail, leaving commercial spaces empty. The landlords were hopeless.
An army of displaced workers was searching for a method to relaunch their careers and, with the advent of mobile technology, they could do so from anywhere.
Interest rates were at an all-time low, making it affordable to borrow money for expansion.
In addition, investors suffering from FOMO, or the fear of missing out, were willing to pay nearly anything to avoid missing the next Facebook, Google, or Amazon.
Add some fun to the mix, such as providing free beer and hosting concerts for a younger audience that embraces the blurring of boundaries between work and personal life, and you have the recipe for a firm that, in the eyes of its supporters, feels more like a movement than a corporation.
All of it revolved around Neumann. He was raised in an Israeli kibbutz and came to New York in 2001. He attended business school, where he came up with several brilliant concepts, such as a company that made knee-padding infant pants and a women’s shoe with a foldable heel.
However, in order to save money, he rented out half of his own office space to a third party in 2008. Later, he convinced a buddy to convince the landlord to allow them to split up and rent out several floors of an abandoned building. This company was named Greendesk; it promoted community living a la kibbutz and offered free fairtrade coffee.
- BBC Sounds: Adam Neumann’s “Good Bad Billionaire: The Cult of WeWork”
As young, hip freelancers began to pour in, Neumann knew he had hit onto something.
Following in the footsteps of Jeff Bezos, the business expands quickly with the aid of a benevolent real estate developer who contributes $15 million (£12 million) for a 33% ownership. The wheels start turning after he renames it WeWork.
Over the next seven years, investors, notably Softbank, one of the largest tech investors globally, pour money into the project, driving its worth to $47 billion (£38 billion).
With his vision, Neumann dazzled investors and spectators. He hires P Diddy for the workplace party, purchases a Gulfstream jet, and keeps growing into more than 20 nations. However, the business was losing £200,000 an hour.
While the epidemic and the subsequent increase in loan rates are frequently cited as WeWork’s demise factors, the company’s decline began much earlier.
Uncomfortable questions about why a company that leased out office space was being valued similarly to a technology company began to surface.
The Wall Street Journal claimed in 2017 that the business was “fueled by Silicon Valley pixie dust.”
In actuality, WeWork was engaging in a risky game that has repeatedly shown to be such.
Buying long and selling short. This meant signing up for a lot of long-term office space contracts in prime locations and crossing your fingers that you could find enough short-term tenants to cover your costs and turn a profit.
However, the curtain may only really come down in 2019 if Neumann chooses to sell shares through an initial public offering (IPO). Authorities received documents from the company that showed larger losses than anticipated and a strange connection between Neumann’s personal and business affairs.
The initial public offering failed. Within a few months, WeWork’s value dropped by $40 billion, and Neumann stepped down as CEO soon after. After Covid struck six months later, shared working saw a significant shift in the landscape.
In the end, Neumann managed to separate his personal finances from those of the business he established rather well. WeWork’s current value is approximately $50 million, or one thousandth of its highest value. More than a billion dollars was taken by Neumann personally, which is more than 20 times the company’s current valuation.
This pied piper has moved on, having charmed some of the biggest and purportedly wisest investors in the world. He has made investments in numerous businesses, and most recently, venture capital firm Andreessen Horowitz, another well-known player, gave him $350 million in support.
Going back to our story, he flew dangerously near to the sun. However, it wasn’t the melted wax on his wings.
