Many previous presidents of the US were "very well off" but not Rich in the warren buffet sense (Obama comes to mind). Possibly the most powerful position in the world.
Many generals of the US army are not "rich".
I suspect there are some cabinet positions that don't pay a lot, but offer a lot of power...
I'm interested about the buildings. A lot of people bullish on WeWork say -- "Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings."
Adam got a $750M loan from WeWork, right? I'm assuming he used that loan to secure more loans to buy the buildings he then rents back to WeWork (at a profit). I wonder what happens to him if WeWork walks away from his buildings. I doubt he has the cash to hold onto those buildings for more than a few months without a client -- especially if WeWork is still private. If they go public before they "walk away" from his buildings, he'll have to sell massive amounts of stock to cover his losses.
Unless we get to negative interest rates, I don't see a future that looks good for WeWork.
> "Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings."
Ugh. What an awful culture we live in where this is considered perfectly normal behavior.
Limited liability is a great concept which allows businesses to be run by people who don’t have the personal capital to absorb all possible losses of the business. Our society would be more unequal without limited liability. There are also many legal safeguards in place to prevent it being used for fraud, negligence, etc.
Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection.
> There are also many legal safeguards in place to prevent it being used for fraud, negligence, etc.
You're doing a thing which is quite frequent on HN, which is where you say that unethical behaviors are prevented because some narrow definition of those unethical behaviors is illegal. But the bit I quoted above is an unethical behavior which is clearly not prevented by the law.
> Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection.
"The victims are tough enough to handle it" is a pretty poor justification for sleazy behavior.
That's it, all unethical behavior is suddenly okay if it's legal, and caveat emptor?
Contracts have very little meaning if one of the signatories can disappear without holding their end of the bargain and without consequences. Is this the society you want, one where giving someone your word is meaningless?
>"Oh, they'll just walk away from the leases. Each lease is owned by a different subsidiary. That subsidiary will just file bankruptcy. Problem solved. They'll just cut the losers, and turn up the dial on the profitable buildings."
"Each lease is owned by a different subsidiary" doesn't help you that much against the lessors, they'll either charge you more or demand signed guarantees from the parent corporation. Counter-parties are not idiots, generally speaking. There's no free lunch here.
How the structure helps is by protecting against other creditors that may arise out of operating the physical business in a way that may inadvertently generate legal liability. Since this is a real estate business, I'll go with a classic example - there's a spill on the floor, someone slips and falls and sues the people running the building. This litigant can generally only collect from any insurance policy and the subsidiary running the building - in order to go after WeWork's assets, they'd have to convince a court to pierce the corporate veil, and that's significantly more difficult.
In this case, the lessors have gotten some good things out of the deal: if We walks away from the leases, the owners of the buildings get to keep all the improvements We has made.
They were always a real estate company, they just didn't get to IPO under the SV hype because as it got closer people looked closer at the company and realized the valuation was ridiculous and the CEO was lining his own pockets acting as landlord to his own company. Now that that's happened and it's all come out he has to step down.
Yeah somewhat. Though instead of it's leader it lost it's appeal and the cult leader had to go into hiding. WeWork is still a decent business idea just no where near the crazy valuations it was given.
I mean more the underlying model seems like it should work. There's tons of successful coworking spaces it seems and that's a lot of what WeWork did just with the option for company size teams.
It's more about the type of hype than the literal place something is run from. WeWork was getting the same kind of 'change the world' and crazy valuations that tech companies get, the kind that assume the company will take over an entire industry.
You've got to wonder what kind of a person is it that can get so far in building a successful behemoth like this but at the same time is able to seriously put forward ideas like becoming President of the world or asking management to cut 20% of the workforce yearly
It's not ignorance to sell your company its trademark or to buy a building with a loan backed by company stock and then have the company lease it from you at a tidy profit.
I tripped, fell, and when I put my hand out to catch myself I accidentally had the company give me a loan to buy a building that I leased back to them.
Let me give you an insight into the thought process here:
'It's not unethical if I don't feel bad about it.'
The key to operating this way to is cultivate a sense of belief in your own BS - inspire others by having the 'vision thing', saying 'I wish you could see what I can see' etc. Ignore anything negative and devote as little thought to it as possible because what people are buying into is your sunny disposition - they don't really want to analyze your stuff, they want to feel the way you look: radiantly confident. So you just think happy thoughts and if anyone asks you troubling questions re-articulate your vision of heaven/ profits/ national pride/ whatever and make a performance of being nurtured by that beautiful vision alone, before mentioning that anyone can share it for 3 easy payments of $____.
Yeah my curiosity is how one can get so many things right when the same logical processes can spit out completely bonkers ideas at the same time. Is it insane luck that they hit the mark so often?
>Is it insane luck that they hit the mark so often?
No, its money.
All these "tech unicorns" backed by VC money are the same.
Spend Billions to obtain "growth metrics" until such time as the spending can no longer be maintained and you have grown your "valuation" to a point no VC/private investor will save your ass, then dump the company on the public.
The marketing doesn't even change just the company, "at any time we can turn off the spending and growth, and make pure profit."
The ultimate lesson is that very few people, even those who seem wildly successful have any idea what they are doing.
This is why narcissist and people who are overconfident to the point of absurdity often excel and business at life. No body else has any idea what they are doing, their competitors mostly have no idea what they are doing, and they are willing to project that they know what they are doing unconditionally which is attractive to many people.
This is basically the take-away of much of modern philosophical thought (absurdism/existentialism). Existence precedes essence... we are thrust into the world with no 'idea' of what's meaningful or important. People gravitate to those who have well-defined vision since working towards something (even if that thing is ultimately flawed in some
way) feels better than idly spinning your wheels waiting to die.
Or you could serve a lot of people, it's probably easier.
Sell something for $10 that's worth $12 to the buyer and costs you $8 to make. Repeat a billion times. The people you did business with got an extra $2 billion, you got $2 billion, everybody's better off.
The main issue is that all of these companies these days are selling things for $7 that cost $8 to make. Repeated a billion times.
The people you did business with got an extra $5 Billion, you lose $1 Billion. All the companies trying to offer the service for $10 (or some other fair price) will be eradicated by your company, because a company cannot compete selling things at a fair ($10) price when you are selling it at $7.
To paraphrase what others said: that’s a great way to become a multimillionaire, but to get to a billion you have to step on a lot of toes. I think Bill Gates observed that your quality of life doesn’t really change after about 50 million. Even with inflation, by the time that’s a billion, billionaire won’t be what people target. Hell, 40 years ago people dreamed of being millionaires. Inflation adjusted that’s only 3 million now.
If you were really that philanthropic, why would you carve out a billion from that revenue stream instead of giving back, or investing it in better equipment or people?
You realize that a billionaire has almost nothing to do with their money but invest it in better equipment or people? That's what investing is and that's what billionaires do with their money.
So on the front end the billionaire had to give more than a billion dollars of value to society in order to get people to voluntarily do business with them. Then on the back end they have to turn around and invest most of that money back into society. In doing so they're shouldering the burdens of market research, diligence, and risk.
Society wins twice from this and in return the billionaire gets to spend a lot of money. Society wins there, too, because the economy benefits from their ridiculous spending.
Does this work perfectly? Absolutely not, but nobody has a better system that I've seen.
>it says a lot that when confronted with an objectively dumb rich dude like trump (no working memory, can't apply grammar consistently, childish vocabulary, shallow concepts) people will choose to believe he's secretly smart rather than that wealth isn't a result of intellect
Trade Trump's name for Adam Neumann and I think you have the answer to your question.
It isn't, corporate leadership is effectively a tournament and CEO and executive salaries are the prize for winning it. The point of having a high prize is to get a lot of people to compete for it, not to reward the winners for the effort they've put it (which may only be slightly more than the runner up, while the reward is several times what the runner up gets).
Like, do you think the best golfer in the PGA tournament is "really worth" ten times as much money as the 14th best golfer? Did they work ten times as hard?
I don't think your analogy proves the point you think it does and is in fact a pretty great argument for why CEOs should be paid less and taxed more. A large part of the success of both athletes and CEOs is up to circumstances and chance, as well as the other competitors who may be deficient in a number of ways. Being less incompetent than your peers doesn't mean the same thing as being competent.
Pay isn't just about giving people what they deserve. It's also about providing the incentives that create the behavior you want. You can do that through piece-work compensation, but that's extremely hard to manage for executives (and knowledge workers, too, but that's a separate discussion).
If your workers aren't risk-adverse, then a tournament is exactly as efficient as a piece-work compensation scheme for convincing them to put in effort. The proof is a bit more involved than I'm willing to digest for a HN comment, but there's a full paper you can read about this here: http://faculty.smu.edu/Millimet/classes/eco7321/papers/lazea...
Anyhow, what all this means is that providing a prize to top performers means you can get a ton of effort, training, and work from people competing for it, and you don't have to incur the expense of monitoring the inputs into performance or quantifying the overall performance rendered. You only have to care about the rank-ordering of performance.
From "We Wants a New Boss"[0], written yesterday in Money Stuff:
> ...it’s terrible for SoftBank! The message from SoftBank is pretty much “your [Neumann's] job was to extract billions of dollars out of us, and you succeeded at it admirably; now that you’ve served that purpose, we should replace you with a real-estate CEO to salvage the value of your investment and ours.”
>...Or I guess maybe the IPO bankers leaked it because they want Neumann gone, to make the IPO easier, and want to commit Son to it by leaking. Or because they love messy drama maybe? It’s not their company.
The even funnier part of the segment is when he gets into what some of the banks actually put out as a reasonable IPO valuation.
>...JPMorgan told WeWork executives the company could be worth between $46bn and $63bn in the listing. Goldman pegged the equity at between $61bn and $96bn. Morgan Stanley estimated WeWork’s valuation at between $43bn and $104bn in a presentation in 2018, though a pitch for the IPO set it at a more modest $18bn-$52bn.
It would seem like never. Matt Levine had another interesting take on that as well. [0]
>... Well, I just got through saying that there’s not really any reward for being pessimistic and right about valuation when you are pitching an IPO. Your optimistic competitors will get the mandate, and then spend some time walking the company back
...
On the other hand it is a repeat game and there are occasionally penalties for getting it wrong:
...
it will be rough for Morgan Stanley if winning the biggest IPO prize [Uber] of the unicorn era loses it the biggest IPO prize of all time [Saudi Aramco]
There’s no real downside to saying a big number when pitching a company’s executives on an IPO. It’s not like it locks the bankers into trying to price the IPO at that number, it doesn’t cost anything, the worst that happens is that journalists and pseudonymous message board commenters snark about it.
This is some dense shit. I can't imagine how working for WeWork feels like, right now.
I have worked for companies where all the employees were eagerly waiting for the day the company will go public. It was seen as a pivotal moment both financially and professionally.
In any rational world that's a landmark moment. A significant milestone for founders, investors and early employees.
For WeWork it has been the complete opposite. They filed to go public and everything is going south since then. Must be surreal that what seemed to be the start of a bright future may be very well the start of a dark end.
I'm so glad I read hacker news. I almost took a job at WeWork just 2 months ago with a recruiter working very hard to convince me I'd be rich when they IPO. Now I'm at a much smaller startup called Weave which is a really phenomenal place to work. I didn't discover until recently that it's also a YCombinator company.
edit: to clarify, hacker news has been extremely skeptical of WeWork for some time, due to this, I was extremely wary of their offer and leaned towards (and eventually chose) other options.
At this point there is a non-zero and growing chance the company collapses completely. They have no plans or research or any other projects that are expected to make money, ever, and nobody seems interested in another round of fundraising.
They will likely try to force the IPO through anyway at some sub $5B valuation, but even then it seems like they may not generate much interest after that cuckooville S1.
> I'm so glad I read hacker news. I almost took a job at WeWork just 2 months ago with a recruiter working very hard to convince me I'd be rich when they IPO.
Did a 2-month old HN comment foretell WeWork imploding which informed your decision to decline their offer, or reading HN in general helped you determine that their offer would be close to worthless, compared to your options at that time?
Same here, and only by reading the headlines. A WeWork recruiter reached out to me. I laughed out loud and added it to the list of companies I would never work for. Not only do they do nothing interesting, but they are apparently unethical as well.
No doubt another failed tech bro pump 'n dump scheme headed to the dustbin of history.
Definitely just another failed tech bro pump 'n dump scheme headed to the dustbin of history.
I seriously doubt that. I think they're overvalued too, but I predict WeWork is still going to be around in another decade. There's clearly a ton of demand for what they provide.
If you don't include the economics of the business model in the evaluation, you could say exactly the same of Juiceroo. There's clearly significant demand for juice presses.
Sure, but that's because the economics of the specific way that the business model doesn't make sense is different for the two - with Juicero, they attempted to screw over the end user, while with WeWork they were trying to screw over (public) investors.
Edit: or to borrow a popular saying - with WeWork, it's not the furnished rental office stuff that is the product, it's the IPO.
Right now, based on their own data, We is selling a dollar for 60 cents to their customers. With very flexible contracts. Of course many people and companies rent from them. Just see how long that lasts when We starts needing to get actual profit from them.
> but I predict WeWork is still going to be around in another decade. There's clearly a ton of demand for what they provide
There's also a TON of rent-a-desk places.
The big questions are:
- What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
- What's WeWork's secret sauce or first mover advantage?
The advantage is similar to that of a large gym chain - you can pay more to get a membership that's valid at all the WeWorks in the entire world. This is great for people who regularly travel between many large cities.
I suspect the majority of WeWork's revenue comes from people working in the same location day in, day out. Same with gym chains. People sign up for Planet Fitness because the nearest location is the most convenient, not because they plan to visit multiple locations over the course of a year (not to say there aren't people taking advantage of the multi-city aspect, just that they aren't the typical customer).
Ya, I can't imagine that is really a draw at all. If you travel a lot, you will have an office in your hotel room or can use the business center in the hotel.
I get your point and agree but I think gyms make money from people not being there at all. If every gym member showed up multiple times a week it would be like going to the gym the week after New Year's.
WeWork may soon be headed the way of Gym's business model which is to oversubscribe like crazy assuming not everyone will show up at the same time and many will not show up at all. When that happens, I wonder what happens to NPS. How many people will be a WeWork member (like their gym membership) but don't really need/want to use it?
The answer to that question is already answered by looking at existing coworking spaces. WeWork isn't doing anything different.
Existing coworking spaces already make lots of money off of people who don't fully utilize their membership (which isn't necessarily a bad thing). WeWork is no different.
>What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
I like this way of thinking. WeWork isn't doing anything "new" - coworking spaces have existed for years. What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces? The answer to this question isn't obvious to me.
WeWork is also very similar to Uber in the sense that you also need a very effective "on the ground" team managing operations of each individual location, doing tours for prospective renters, managing upkeep + maintenance for the space, etc.
> What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces?
Advantage to customers? Likely minimal.
Advantage to the company itself: economies of scale and, likely more importantly, lack of competition allowing them to increase prices.
The very clear trend across all sectors is that companies trend towards giant monopolistic behemoths unless some very strong regulatory force prevents it. People act like healthy, competitive, transparent markets just appear out of thin air, but they are an artificial creation of government.
The advantage to me with Spaces (which I believe is owned by Regus) is that I can do guest co-working in any city they happen to be present - and since I travel extensively, the bigger the network the better, as far as I'm concerned.
Sadly WeWork do not appear to offer this option (or didn't last time I looked).
WeWork offers this if you sign up for an American Express Platinum Business card and take advantage of the free year of WeWork benefit. I can (and do!) book any WeWork in the world any day - all for $0.
Yes, that's right, the free AMEX WeWork plan is significantly better than any WeWork plan you can buy. That's start-up logic for you. I stopped paying WeWork after 1-2 years as a paying customer because their free plan was better.
I live in London and I can choose from any of 36 WeWork London locations for tomorrow along with anywhere else in the world. It's nice living off of VC money.
Interesting - does this mean you have a _UK issued_ Amex Platinum Business? If so, I've not spotted this, despite having had one for years - and I need to rectify this!
Many of the benefits only apply to US-issued cards.
I wanted to sign up for this as an individual, but you need to be at least a 10 person company, so I couldn’t. No idea why they’d have that restriction
I may be misunderstanding, but one of our offices is at a WeWork. I’m listed on the team and we have a ton of monthly credits that I’ll use while traveling in random cities, it’s convenient to have a place to work from.
Every business-traveller orientated hotel like Marriott or Hilton has a “business centre” in which you can rent anything from a small meeting room by the hour to a space for a 500-person conference for a few days, all fully serviced and catered by the hotel too.
I usually stay at Marriotts, and the 'business centres' are often woeful - if not 'closed for renovation'. Not only that, but renting a meeting room for a couple of hours costs the same as a Spaces membership for a month.
I was looking for that option too as I plan to travel for some time while working remotely and all I found is https://copass.org/plans but didn't tried it yet.
Is someone can write more about it it would be nice.
Rabois has suggested multiple times that one bull case for them is that the company becomes almost too big to fail. They'd be so large that even in an economic downturn they'd have the power to renegotiate lower rents with the commercial property owners.
To the other response I can’t reply to - WeWork is also benefitting tremendously from all of the new build outs. Like hotels, condos, and apartments even the cheaper ones are nice when they are shiny and new. 10 years out, they aren’t going to look very good. The front loaded growth could be very damaging to their brand in the long term because of this.
I’m not sure exactly how all of those contracts look with landlords, but someone is going to need money to spend to maintain them. If not, the person with brand new build outs is going to look more attractive.
Now, maybe I’m wrong and run down office spaces don’t matter. Uber drivers all used to wear suits and their cars were pristine. Even UberBlack cars have holes in the seats and transmissions in poor condition. Uber is vastly largely today than it used to be. So that could be the trick, WeWork at scale but more as a necessity than anything else. If that is the case, then it is more a question of how much extra space other sorts of businesses, like coffee shops, want to keep free for customers.
Why is it that you believe these companies can suddenly raise prices and make money? We've been hearing about "economies of scale" in companies like Uber and Tesla for years, yet no sign of it yet. Price cuts and investor subsidization abound.
And no competition in the real estate market? Please.
> People act like healthy, competitive, transparent markets just appear out of thin air, but they are an artificial creation of government.
Thanks for this insightful comment. I never fully considered it, but yes - all healthy, competitive markets exist as a result of a government that fosters them.
Clearly false as there is no regulation to prevent the formation of very large companies (anti-trust laws don't apply). In fact companies tend toward giant behemoths in part BECAUSE of government regulation. Small companies can't afford the enormous fixed cost of compliance the way large ones can. Regulations are a huge incentive for market consolidation and large corporations love writing new barriers to entry regulations.
I don't understand why you are getting downvoted. What you are saying is basic economics and I guess people in here are too ideologically invested to accept it. The claim that governments foster healthy competition when their effect is the exact opposite is ridiculous.
This is a good point. My wife's company has a team consisting of a lawyer and 3 paralegals whose sole job is to review their marketing offers just to ensure they are in compliance.Every state has different rules.
Smaller company would need a smaller team but even a single salary on the books just to comply is a large expense for a small business. Multiply this by other areas now such as licensing, insurance, etc. Just ensuring your every day work is not breaking the law becomes financially prohibitive.
If they raise prices, someone else could locally open up a new coworking space with lower prices. The lack of advantage to costumers, which is your first point, means that customers go to the cheaper place.
So the economics of scale (supposed that is a relevant factor) could provide WeWork with a higher profit margin, but to become dominant, they have to take a cut to this margin.
Say you're a pretty large company and suddenly decide you want to open a dozen 'offices' in a dozen different countries. You just have to deal with one provider, one set of infrastructure etc. Plus if you decide you then want to consolidate to half-a dozen offices, it's easier to scale some up and some down.
However companies like Regus have existed for ages - so not quite sure what WeWork brings, aside from being able spaff away profits to get you in the door.
Weird hypothesis, but is what WeWork brings to the table that Regus doesn't is Silicon Valley brand recognition? Not that I'm in the market for office space, but I haven't heard about Regus until this comment.
Honestly as a programmer they have a name and reputation for providing nice offices that I can rely on. I recently agreed to take a job halfway around the world (interviewing via video chat), and when they asked if I had any questions about the office I was able to say "no, it's a WeWork and that's good enough for me". Surely that's got to be valuable to that tenant company.
AIUI, Regus won't talk to you if you're not willing to commit to a 12 or 24 month lease. If I had a stock position, it would be very short WeWork, but assuming you can make the month-to-month economics work, that's a pretty big benefit regardless of customer size.
I can assure you my regional office manager doesn't give a toss about "silicon valley brand recognition".
I think it's down to the customer. There's a post below about somebody being reassured "it's a We Work" office they'll be in.
When I've looked for a job, it's never entered by head to ask who manages the office (my assumption is that it's my employer and if I'm not happy, I'll take it up with my employer).
I can see if you've often worked in offices not run by your employer, you might have learnt to ask - but would think that's a small pool of people working frequently in shared spaces, having worked their frequently enough to have a preference.
Back to the OP - it's not a "hypothesis", this stuff's been going on for decades.
e.g. ~2000 I was working in Paris and visited our local guy in his local office on the prestigious "Champs Elysee" no less.
I went down the "Champs Elysee", then through a small door behind two shops, then walked back a couple of hundred meters, then through a warren of rooms, then in a room off a room, there was a desk... and that was our office. Hundreds of people all working at this prestigious address - we must have been silver-class as we had our own physical desk.
If you went right back to the entrance door, there was a receptionist you could specifically pay to 'represent you for the hour' and a set of very swish/generic meeting rooms you could pretend were yours to visitors.
Yea - is "brand consistency" actually a good thing for coworking spaces? Different tenants require different aesthetics, and can targeted marketing from coworking spaces that match that aesthetic out-market the name recognition of WeWork?
And on-the-ground ops just require intuitive software to enforce standard operating procedures. The last two coworking spaces I've worked at both used different SaaS solutions for coworking-space management, with customer portals and all. I'm almost certain WeWork's edge has been commoditized.
> I like this way of thinking. WeWork isn't doing anything "new" - coworking spaces have existed for years. What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces? The answer to this question isn't obvious to me.
An advantage I see as a customer is that I can go to any WeWork across the country and get a desk/coffee/etc for the day. I can get that from a few other coworking places, but I don't think any have the number of locations that WeWork does.
I don't really see that use case. If you're in a different city, presumably, you're there to visit something physically located in that city. If not, why travel there? So during the day there's no need for an office. You'll be visiting the factory, client site, etc. that brought you there. For the rest of the time your hotel room comes with a desk and you can work there.
Sure, there's probably some need for temporary surge office space like a insurance company setting up after a disaster. But that seems a pretty small niche to build a billion dollar business on.
WeWork already serves a big number of multi-location tenants (we are one) which I think will continue to grow and be the vast majority of of its businesses. Huge advantage.
Another value of their large network, WeWork has relationships with large companies (like Amazon) to manage satellite offices across the country. Some of those are just a corner of a WeWork carved out, and some of those are entire floors of office buildings that WeWork handles administrative, custodial, and break room for.
I don’t know how much that impacts their profitability or value as a company, but it feels like a very cloud computing model of work space where you get what you need where you need it, so that you can have local employees in cities across the country to serve customers there.
> What's the benefit to a large corporation doing this instead of lots of small companies?
From what I understand, WeWork is structured as many small companies, so they can negotiate favorable terms with long-term leases on office space and the smaller company can fail without leaving WeWork on the hook for the rest of the lease.
In addition to the advantages others listed, I think a big advantage of a large corporation is risk management. If you're a "small" company managing a handful of buildings, and something catastrophic happens to one of those buildings, that could threaten the company's existence. More so if those handful of buildings are in the same city, and all suffer from the same event (flood, hurricane, earthquake, etc.). A large company managing hundreds of buildings spread across the entire country would more likely be able to handle a one-building catastrophe.
But that doesn’t prevent small companies to just take the risk. And by doing so, they are as efficient as WeWork and compete on the same level. What counts is the product and that is the same from the small and big company.
In fact small firms may be more efficient. If they make a bad bet on some real estate they fold while WeWork has to spread that cost to all of its users and keep on moving.
I agree with your general point, but in the specific case of WeWork the benefit has to be tempered to a large degree by the fact that they are losing obscene amounts of money. They are definitely not running as a sustainable business right now and, while they might make it work long term, but I doubt many people will be shocked if WeWork doesn't exist in 5 years.
> What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
Same answer in case of gyms. Your advertising overhead does not scale linearly as you grow. Once you build a brand. Customer acquisition costs go down. For moving workforces - entrepreneurs, sales, executives - it becomes more affordable to use one brand rather than plenty of smaller brands.
There is ton of demand for what they provide, but what they provide can easily be copied, and the copycats will not have a mountain of debt/investment caused by irrational drive for growth at any price that they need to pay back.
Right now, no-one is competing against We because they are selling a dollar at 60 cents to their customers. The second they stop doing that, there will be a dozen clones. We is worthless.
This is my thought. It's about real estate. If starbucks decided to go full throttle into this concept they would kill it. They've essentially been the unwritten king of co-workspace since they showed up.
> There's clearly a ton of demand for what they provide.
There has always been, and will always be, demand for the ability to buy one dollar for 80 cents. This is not some newfangled business model. Amazingly, it keeps cropping up again and again.
Corporate governance problems aside, they have major cash flow problems relative to debt obligations and are also losing money. One could argue the demand is there because the price is artificially low.
Does putting assets onto Adam's balance sheet look like a bad idea for Adam, or for We? As with Enron, the way to understand the company's decision making is that in many particulars it was not trying to optimize its outcomes, it was trying to optimize the CEO's (and in Enron's case, the CFO's and maybe a couple others).
Agreed. The Saudi's via Softbank will install an experienced CEO and they will start operating effectively. I was skeptical about the whole thing, as somebody who worked out of a Regus office about 10 years ago the idea was not novel at all. That said, I see the notion of on-demand capacity in the physical world very similar to what makes cloud computing work: pay for what you need when you need it. With an increasingly remote work world, on-demand space can be purchased or reserved by big companies and well-funded startups, allowing for project-based teams to collaborate in-person. I'm not super optimistic about their prospects, but their backers have the resources to ensure a return on their investment, and they are most likely to do so.
I mean, Groupon's still around too, but at ~10% of their IPO valuation. Is it possible WeWork will struggle along? Sure, although I have questions about what will happen with the $6bn of debt they declare in their S1.
But supposing they do, I see little reason to think they'll be a major player. I don't see anything stopping other rental companies from matching any innovations they've made. The same goes for major property owners. Some will stick with big chunks of space. But if there's a 30% premium for being flexible, providing desks, etc, the some of them will happily cut out the middleman.
Facebook is one, and a week doesn't go by without me being contacted by one of their recruiters touting their advancements in poker playing AI. Whoopee.
The funniest part is when they reach out almost immediately after eliminating a candidate, for the same job. Like their recruiters aren't even coordinated. I'm sure they farm some of that out.
Hijacking this spot to highlight newrelic as a company I used to evangelize and now will go out of my way to recommend against (I consult startups as a virtual CTO). They used to have a brilliant offering (Application level monitoring with all associated hosts included) then they deprecated the host monitoring and jacked the price up on every one of my clients while simultaneously threatening them to collect based on the new plans. Every month was a new account rep reaching out to introduce themselves. My love affair ended when a message to the CMO resulted in them forcing the account into free tier without so much as a reply - basically what I'd expect from someone who designed such an org. Moved all the remaining clients off of it (5 digit MRR) to datadog and didn't look back. Later worked with a former engineer and he attested it was a shit show after they set their sights on an IPO. They had really really strong tech and product culture up until then.
Was kind of a death rattle for me and sure enough after they IPOd they really did nothing.
Still makes me angry when I think of it cause it was such a kick-ass product.
Seems they're trading at 2x their IPO, and they were at 3x a few months ago... Did something happen in 2018 that made them huge for a bit? or was it just the rest of the world discovering cloud?
My company has about half a floor in a WeWork, and we're planning on moving out in the next year. I've been wondering if we'll be forced to move a bit sooner if WeWork fails
Not sure why you're being downvoted. It's a good question. Yeah I saw through it. I've seen too many people screwed out of their options to put any stock in it (heh).
Funny enough, my current company seems to have pretty good odds at making me a good chunk of change from my options, but I didn't even know I got options until after I accepted the offer.
Many companies flaunt it and give a weak offer accordingly. That's a pretty big red flag for me.
As a recruiter, there's an interesting relationship, whereby people use funding raised as a positive metric (oh yes, they raised $200m, this must be a good company!)
Even though the less they have raised, the more valuable your equity is likely to be. It's fascinating to watch.
I always read the "We raised $x million dollars" as "we're not going bankrupt this year, so we can pay your salary." You're right about raising less means you get in earlier, which means you should have more return.
For a startup, raising less money, and a new employee getting more equity, also generally means the position has more risk. So the reaction you see is not necessarily irrational.
I must say, I am jealous. It seems a bit unfair to me how computer engineers are getting hired and paid so well, while my economics degree is useless and I have to fight like crazy to get a job that pays WAY less than engineers get. Honestly, I studied economics because I wanted a job that pays well - that was one of the key criteria - and now I am standing with little money and a job I hate. It sucks.
I was an dropout studying Economics who made the transition into data science / data analysis fairly smoothly. I'd recommend doing so. Many programmers are jealous of quantitative analysts' salaries inside tech companies.
EDIT: I guess I should add I really did not care for the work and stopped after 2-3 years to start my own company. I do a lot of the same work today, but as the Founder, I obviously control the company and my workload.
I think it's worth noting that there's a lot more to it than just the money. Sure, data scientists make more than I do as an engineer, but I would feel absolutely fucking miserable doing the job of a data scientist every day.
Doesn't seem ironic to me. It's easier to be the play by play guy/sports analyst than to get into the field/cage/arena/whatever and make something happen.
I pretty much agree but there is this line "By age 40, the average salary of all male college graduates was $111,870, and social science and history majors earned $131,154 — an average that is lifted, in part, by high-paying jobs in management, business and law." So the GP's prospects are probably better than they look to them right now.
I'm a software engineer and I wrestled with this for a long time too. It seemed bizarre that we should be getting paid what we do and I had an intense experience of being an imposter. Eventually it clicked with me that the work I'm doing directly affects millions of people on a daily basis, or it affects a smaller number of people in a big way that's unique and hard to reproduce. Viewed from that angle, it makes a lot more sense I think.
That's a nice justification. But it doesn't really have much affect on your salary. It's simply that there is a lot of demand for software engineers of a certain skill level and not a ton of supply.
The moment your same exact job can be replaced by a worker willing to do it for less is the moment salaries start to fall.
I understand and support your frustration, but what exactly makes it unfair? The two have little in common. Computer engineers aren't taking your jobs.
Reminds me of a controversy at my University. They were advertising a new English professor position, starting salary $37k. They also had an opening for an economics professor position starting salary $85k.
My economics professor addressed the reason for the difference in class very simply. He noted there were over 350 applicants for the English prof position. Only 3 people applied for the economics position.
So if anything, $37k was too high for English and $85k was not nearly enough for econ.
Unfair? There is no unfair in the real world. You made a bad investment and are now reaping the results of your poor judgement. It’s perfectly fair. You want to make money? Stop blaming the world for not giving you what you want and learn how to give the world what it wants. Computer engineers are paid well because they develop systems that can turn $1 into $2. You could learn a lot from that.
If you really set your mind to it (and you've got the right capabilities), you should still be able to roll into a software engineering job. There's plenty of online resources available to teach yourself software development. There are plenty of companies willing to take on junior developers. Build up a small portfolio of software on Github for potential employers to see and you should be able to get a start as software developer.
Of course you likely won't have great pay from the start, but keep doing work for a few years and keep improving your skills and you should be fine.
Why be jealous when you could just learn software engineering? I also majored in econ, and now work as a sort of hybrid SDE/Data scientist. I mean it's not easy to learn, but it's better than being bitter.
Your not the only one. MBA majors have it just as hard if not harder.
For the majority of professional jobs out there, there's a vast oversupply of labor, and thus the unemployment rate for professionals is much higher than the overall unemployment rate would suggest.
Software engineering is one of the few areas where there some semblance of balance between supply and demand. But, this too will eventually go away. There's nothing that's stopping the supply of Software engineers from growing. Indeed, the Stack overflow surveys suggest there's a huge wave of junior SEs joining the industry. I predict in 15 years, SEs will be in such high oversupply that they will no longer have an advantage in the market place.
Agreed! It has been coming around in recent years, surely helped by the fact that "blockchain for X" has never panned out. But it has taken a painfully long time.
Going by the general sentiment in that thread, I'm sure there are better examples. There are a few people saying how or why they thought Dropbox wouldn't work, but overall the reception is very positive. By contrast, any mention of WeWork here causes an instant pile-on of quite impressive vehemence.
There are always going to be isolated nay-sayers for whatever reasons. When you get a near-consensus on HN that something's a PoS that's something that's worth bearing in mind.
I find in tech, being skeptical by default is usually a good thing - perhaps not if you're an entrepreneur, but certainly if you're a developer or engineer.
Because both end up eventual minority shareholders in the same company. The difference of course being one of magnitude and that the investors are likely more diversified.
It's an essential thing if you want to be a successful entrepreneur -- as long as you don't confuse skepticism with cynicism. Skepticism and optimism make a powerful combination.
There are plenty of cultures around the world who have been surviving on a plant-based diet for centuries. Saying we’re “evolved to eat” anything is what is ridiculous.
Just because you _can_ survive without eating meat doesn't prove what I was disputing: (“Meat is bad for [...] health”). I can survive without carrots, but it doesn't mean they're bad for my health.
I'm guessing the "Non-Executive Chairman" position will just be a temporary one until they can come to agreement on how much money they need to pay him to go away.
Professor Galloway called this the other day. His next prediction is that We will sell off all the bullshit vanity projects like WeLive and WeGrow along with the other nonsense Adam bought (like the wave pool company so he can practice surfing at work). Then they will fire all non-core employees. The clock is ticking if they want to save this company.
I don't think they will shut down WeLive. The entire premise of WeWork, and WeLive, is that they can sell you more than real estate -- they can sell you a "tribe." There are so many reports in recent years about growing social isolation and loneliness, that if something can be successfully packaged into a simulacrum of a community, it will be a hot item indeed. That's the only way WeWork can justify its stratospheric investments, and it is the market they will aim to dominate.
I'm sorry, but while there is some logic to the co-working idea, I don't see any serious demand for co-living. Quite frankly, I find the idea of having on-premise yoga instruction, cafes, bars, shared hot tubs, shared kitchens, etc. so you never have to leave your apartment building (except, presumably, to go to WeWork) to be absurd.
I'm certainly not interested, but it sounds like an extension of dorm living, with better amenities; sort of like senior living, for young people. Without knowing the details, sounds like it would appeal to some; although cost is going to be an issue.
I personally see value in it and could even see myself as a customer, at least to try it for 6-12 months and see what it's like. Sounds like a good way to meet other young people with a bent towards tech
That said, I don't know the details of the program so can't speak to its practicality in this instance. But considering it's wework, there's opportunity for a good vertical there. At its face it seems like sound corporate strategy
Living in a company town earning company scrip to spend in the company store is an old business model and one that had never, ever gone well for the resident-workers. There’s even a word for it: serfdom.
Except you’re not employed by them, you’re just renting office space and potentially living space from them. You don’t have to do it if you don’t want to; I am interested in it for the social aspect of it and the 0 commute
My guess is that they will restructure the whole thing to leave Neumann in charge of and owning some sort of parent WeGroup, which holds all the random stuff and can continue to aim for raising the level of global consciousness or whatever, with the actual office leasing business, WeWork, being a subsidiary, with a single share class, a professional CEO, and a much more sensible story. Floating the WeWork subsidiary (at a valuation much less than the SoftBank highs) will let the parent company raise cash, which Neumann can then spend on cosmic alignment etc.
This is the bull case for We that justifies a stratospheric valuation: it is the extranational life infra and connection market maker for the otherwise hyperalienated worker of tomorrow -- where corporations have surpassed "legacy" social and political units of organization and identity.
Where the valuation came down to earth was when public investors evaluated We as an incrementally better office rental company, and didn't buy the idea of We as creating and monetizing a religion.
I get the impression that SoftBank learned the wrong lesson from Uber. While Uber also raised billions of dollars and had a CEO get forced out by investors, it was broadly understood that his sin was creating a toxic/sexist culture. It wasn't related to business fundamentals, per se.
WeWork's sins were less of rampant sexism, and more closely related to an unreasonable valuation and a business that wasn't prepared for the current IPO climate. In other words, they were things for which the investors are also culpable.
I'm not a founder, but I'd be very hesitant to raise from SoftBank if I was (and very nervous if I had already raised from them). With Benchmark (and Uber's other investors), I'd only be worried if the toxic culture I created was putting their investment seriously at risk.
> it was broadly understood that his sin was creating a toxic/sexist culture
Excluding the sexism, the toxic parts go hand-in-hand with the mindset Uber needed to ignore incumbents and regulations. The only reason Uber was successful was because of that attitude. Where it failed was growing up.
> it was broadly understood that his sin was creating a toxic/sexist culture. It wasn't related to business fundamentals, per se.
So it had nothing to do with:
- General disregard for regulation
- Blocking regulators from the plaform via Greyball
- Corporate espionage - Waymo vs. Uber
From my impression at the time he was forced out primarily because of actions like those last two (only few of many), because they have the potential to cost Uber serious money (sexism sadly not so much).
Well, corporate governance was one of the main factors why the market refused to accept anything close to their last private valuation, so this makes sense. Note that they desperately need the public money before the end of December in order to avoid running out of cash [0].
My bet is that they will now try to remarket We as a shareholder-controlled company, will maybe even eliminate the multi-class stock structure in order to get included into the passive funds. I am still not sure they will ever become profitable through. The only way to disrupt the incumbents in an established market like this one would be to spot a new opportunity in the market and capitalize on it faster than the slow 30-year-old companies like Regus. Except the only market opportunity We has successfully exploited by now are the desperate investors ready to shove billions in your hands if you pretend to be a cool techy thing they don't fully understand.
I just don't see them wrestling control away from the deranged, cult leader. He truly believes he is destined to be president of the world and revolutionize.. well every thing. There best bet would be to drop the multi-class structure to get into passive funds.
I think it's most recent quarter + 4 previous. I'm also fairly certain it's selected by committee. I'm no finance expert, hence the securities fraud conviction. I don't really know which index it could get into with a high amount of passive investment.
Is this part of the business model of these large, unprofitable VC-backed companies? Build a valuation to meet the 8.1bn threshold, then sell the shares to passive investors in S&P 500 index funds?
No. The S&P 500 is selected by committe. And it's 6.1bn, not 8.1bn. Mabye that's the plan for the Russell 3000, though.
But it doesn't really matter except when the stock gets added to the index. The index funds and ETFs are going to rebalance their positions based on market cap and will not affect the price. These funds could affect the volatility though, since it's conceivable that with a lot of the shares locked up, these stocks are going to be more thinly traded than they would have otherwise been. This could create price instability, though I'm not sure there's any proof that it's true.
> But it doesn't really matter except when the stock gets added to the index
It does matter when there are inflows, if there is new money coming into index funds all the stocks in the index benefit (they funds also sell all the stocks in the index when there are outflows). Non-indexed stock are less coupled to flows in and out of trackers.
I saw $6.1b first as a Google given answer. It said different on Wikipedia so I investigated the source. I knew my high school teachers were wrong about Wikipedia!
>He truly believes he is destined to be president of the world and revolutionize.
I am not sure. He has been pretty methodical in siphoning the money out of the company (privately leasing the real estate to We, charging them for the trademark, etc), so he probably knows very well what he is doing.
Somehow, if you act this way, investors will perceive you as a charismatic and energetic leader and buy in even if your business model doesn't make much sense. IIRC, similar happened to Juicero, albeit on a much smaller scale: countless talks about expanding consciousness, changing the world, raw water bollocks, a completely unsustainable business model and questionable transactions to some external consultants.
Please point me to where I can read more about the Juicero story, particularly the external consultants. It was just so comically bad on every level, it made me lose alot of respect for VCs.
There was an article yesterday where Softbank was saying that they think they can renegotiate those LOCs to go forward even if there is no IPO this year. They might end up being a lot smaller and have worse terms for We though. I wouldn't be surprised if pushing Adam out was the first demand the banks made in that renegotiation.
Softbank wants to delay the IPO now because it would mean a massive writedown of their investment value.
Adam seems to be the scapegoat, somewhat justified of course, but the bigger problem of this company being an obvious scam with no way to make money has not been addressed.
Corporate governance was definitely a factor, but getting cut down from $47B to $10-15B is... a lot. Public market investors clearly have a much worse opinion of We's fundamentals than SoftBank did.
Yeah - these institutional investors have a lot riding on "the market was responding to weworks governance structure" and I don't think that is really representative of the facts.
I mean, it likely doesn't hurt anything. I'm sure the underwriters (JPM etc.) have spoken to their institutional clients and no one has said "getting rid of Adam will make my valuation go down."
So you get rid of Adam (and his supermajority voting rights) have some quiet conversations about how people value the company now. Then you decide if you're willing to take whatever haircut the market is offering from the last private round.
If We is to be believed the other option is to halt all expansion. They claim that mature locations are cash flow positive. If that's true then you don't necessarily need to take a haircut, you just stop expanding, prove to the market that you actually do have a business, and then either start siphoning off the cash or try to IPO again.
You are presuming that SOftBank believed in the fundamentals, and not in the proposition that if you carefully stage a series of cash injections at increasing valuations, the charismatic founder's PR halo will impart a shine onto the company's shares.
In which case, the major failing of We was that it did not go public fast enough. I wonder if we'll see this translate into time pressure for future startups to go public a little earlier before the bloom is off the rose.
I don't think speed would help. If Softbank were the only people putting in the last few rounds, that suggests that nobody else wanted to invest in this business with this governance.
People already knew what kind of business WeWork was. Sure, they were getting press, but when actual institutional investors looked at it, they must not have liked what they saw.
That has been going on for the last few rounds, so I suspect that they couldn't have gone public then, either. Nobody was buying what they were selling, except Softbank. And once the S-1 dropped, the press and social media saw all the red flags together in one document.
Those red flags would have been just the same if they'd gone public earlier.
That's a pretty good insight. Last year everyone was talking about the record number of private unicorns and how it was hot to wait longer than ever to ipo. This year everyone is talking about how all the unicorn ipos have been utter shit.
> if you carefully stage a series of cash injections at increasing valuations, the charismatic founder's PR halo will impart a shine onto the company's shares.
Can you give some examples where this has worked in the past?
I'm not claiming it ever worked, what I actually wrote was that perhaps Softbank believed in the proposition that it could work.
The alternatives are either that Softbank believed in WeWork's fundamentals, which honestly feels unlikely, or to believe that they went in early, then discovered that nobody else would invest, so they kept putting more of their own money in to avoid closing the business and taking a write-down.
Unless I am completely misunderstanding the value of WeWork, this ship seems to have already sailed. At least locally, Regus has offerings that are substantially the same in price and features to what WeWork has.
Also, smaller, regional real estate companies are doing this (generic co-working spaces) with empty office space, often on the ground floor. I visited a startup at one such location and was impressed with it. It's a strategy to capitalize on unused assets.
This is some dense shit. I can't imagine how working for WeWork feels like, right now.
I have worked for companies where all the employees were eagerly waiting for the day the company will go public. It was seen as a pivotal moment both financially and professionally.
In any rational world that's a landmark moment. A significant milestone for founders, investors and early employees. For WeWork it has been the complete opposite. They filed to go public and everything is going south since then. Must be surreal that what seemed to be the start of a bright future may be very well the start of a dark end.
I can see how their leadership is a bit bush league and they are potentially overvalued, but it’s not obvious to me that their basic value proposition sucks or is that far off the mark.
God, I love this phrase so much. It's such a brilliant stab at many of these recent unicorns. "Oh you think they can burn money fast, well watch how fast we burn it! We're number one!"
You know I would have thought it's the billion dollars per year of cash burn and the borderline theft of the CEO leasing assets to his own company instead of the meat, but ok.
Possibly like Zynga in 2011[1]. Though CEOs seem to get additional chances even if they have blow up investors multiple times, I wonder if a publicly taking the upside potential away from employees cuts future access to talent.
Much like with Uber, I have no sympathy for the employees and in fact I would take a lot of convincing to hire anyone who had more than a short stint at either.
Let's be honest, in your analogy, WeWork painted a giant target on their own back, put on a shit eating grin, raised a placard saying "I crapped on your lawn and fondled your wife" and started parading through the target end of the All National Homecoming Machinegun and Automatic Weapons Competition range, all the while their CEO handed out 1000 round ammo cans at the entry.
To say that "they were asking for it" would be a huge understatement. The night shift janitor of the building two blocks down from their offices would have called this.
Their criticism of just about anything rings hollow since two of the hosts basically hate just about everything associated with money and capitalism, despite their staggering ignorance of many corners of it. Their guests and Anna Szymanski are the only non-embarrassing parts of the show for me, but I still eventually just gave up and stopped listening.
I think you've got that backwards. Anna is an unabashed capitalist who refuses to criticise even the shadiest goings-on in finance, start-ups etc. Felix and Emily seem to have a good nose for nonsense, like wework.
Well, it looks like we've covered both sides of the arguments :)
I guess my take is somewhere between these two comments. I sometimes hate the way it feels like Anna plays a "contrarian character" no matter what, and yes, Felix and Emily can sometimes be a bit too.. "NPR do-gooder, feel-gooder" for my taste. But I really enjoy the show regardless. It's a saturday morning long-run staple for me.
My assumption has been he will step aside, wait for an inevitable restructuring post IPO markdown (and blame the markdown on his being pushed out) then swoop in and take the credit for getting it back on track
I had concerns earlier this year when I interviewed at WeWork—which was the worst interview experience I’ve ever had. I applied for a data science role. The first two hours of the on-site were painful—they seemed to be asking questions tailored to be outside my experience. The third interviewer came into the room and said, “I, uh, just looked at your resume and I have to ask, why do you want to be a backend engineer?” :facepalm: I showed him my application for a DS role, so he left and came back with a DS guy who made up an interview on the spot. I (fortunately?) didn’t get a call back.
Only thing missing is a plan to get as much of these billions out of the company into your own pocket then, I guess. Not that stupid from a purely self-serving perspective. Ignores every aspect of corporate governance and business ethics, so. Not that SoftBank seems to care if they can get an IPO.
The email I received after applying for a job many months ago:
“Thanks so much for taking the time and interest in applying to WeWork Global Technology. Your application has been received and we will review it as soon as possible.
Once we've had a chance to review we'll be in touch on possible next steps, thanks again for the time!
it's more about facilities management. Collecting data about who (and how many) go in and out the doors, who's where when to optimize things like heating or air conditioning, meeting room occupancy etc... I have a friend working on their data platform and the concept is pretty cool, I can see if I was managing an office I would want that data but the rest of the business is just awful.
I mean, that's not what the writing said at all. The data said that the line for coffee was too long, so they hired a barista to help out with the line.
I think the tweet is really pointing out that offices all over the world have managed and figured those things out without building out a complex sensor network and platform for 50 years.
From what I understand they wanted to instrument their offices (with cameras, microphones, thermometers, etc.) to collect data on the occupants ostensibly because they’re trying to be a tech company. Felt Orwellian, but it sounded interesting enough to at least hear them out.
Not that it's novel — there are corporations specialized in tools to monitor employee activity — but there's no bamboozling in that claim: monitoring nearly every activity, no matter how intrusive, is what almost software and hardware does now.
At my old company (energy company), they've now installed sensors at every desk - to track whether or not someone is sitting at the desk, and their activity level.
You do need data, though. And if you don't have a lot of customers, or a lot of skus, or a lot of transactions -- you probably don't have a lot of data.
to be fair "data scientist" means different things to different companies, and for some may be just synonymous with "business analyst" but sounds cooler
Engineer? Harder to say. Data scientist--that's easy. Stackbucks is very good at looking at demographic data and recognizing where future demand will be new new locations. They basically mark gentrification.
Historically Starbucks has been used as a market indicator for other companies' expansion. If a starbucks opened in a location then it was assumed that there were growth factors at play in the market since that was the north star for Starbucks.
Starbucks in 2019 is the McDonald's of coffee shops, so it's not the same, but if you track their Starbucks Reserve locations you'll find the same predictions being used.
Do you work in commercial real estate? My father does, and would pick them and Walgreens as the most effective scaled siting operations in the US.
Optimizing for absence of failed stores would be an interesting utility function for them to have, but since they own substantially all of the stores (and therefore don't have franchisee relationships to consider, where volatility for a partner might impact you disproportionately to economic loss), that would be a suboptimal utility function. They should calibrate their risk appetite to maximize profits; occasional failed stores are just a search cost.
I've seen a Walgreens that was closed in less than a year because of poor location despite being across the street from a Rite-Aid. They aren't perfect either.
It's not that useful to say they aren't perfect. The better measure would be how they compare to other stores, and/or how their own churn rate has changed over time.
This also misses the point. The point was that optimizing for number of stores closed is the wrong metric to begin with. Who cares how they rank on a metric that doesn't matter?
The original point wasn't that # of stores closed is an optimization problem, but that it was a valid way to judge the abilities of the people making the decisions.
And the counterpoint is the number of closed stores is not a good metric to judge the people making these decisions. In fact, judging the number of closed stores may well be the entirely wrong metric to judge them by.
The point is that failed stores is not a good metric to optimize for.
You can have 0 failed stores if you open 0 stores. A successful operation will inevitably have failed stores. Having a long list of failed stores doesn't mean anything in of itself. You have to look at the rate of failed stores vs successful stores among other metrics.
Walgreens will happily close a location and move it across the street to take advantage of a more advantageously shaped curb cut if they can't get the Illinois Department of Transit planner to approve the optimal curb cut from their current location. This is because they have extreme confidence in their ability to assess the business impact of curb cuts.
A market commenter who believes that Google is not one of the most sophisticated engineering organizations in the world is wrong. If you believe Walgreens is not one of the most sophisticated commercial real estate operations that exist, I would encourage you to talk to people who understand real estate as well as you understand Google and recalibrate based on what they tell you.
I know of Walgreens locations that have been profitable for 50 years or more.
MacDonalds is similar. If they have a franchise that is doing badly, they will pay to move the franchise to a new location. A suburban McD closing is rare, usually only the oldest ones on lots that are too small for contemporary usage patterns.
Chipotle's former CEO (and I believe founder) often mentions that Chipotle's time under McD's ownership hammered home that the single most important element of the company's success was excellence in real estate. It's also why getting a McDonald's franchise is generally very expensive - they'll give you as de-risked a location as possible and a proven operational playbook. It's not easy to run a franchise at all (you have to be available on days your manager calls in sick, deal with vendors, inventory, etc), but you don't need to figure out the business model at all.
I used to work with a guy whose wife worked for Starbucks. He explained that they'll do seemingly crazy shit, like put stores across the street from each other, that makes sense when you look at the data. The store on one side of the street picks up traffic from point A to point B, while the other one gets point C to point D, optimizing for not making their customers walk across the street.
I think of it as similar to how UPS rigs their routes to avoid left turns.
I had a remarkably intense series of frontend... ish interviews for a really difficult to define project. As in, I was working very hard in the little 5 minute slices of time I got for "do you have any questions" figuring out just wtf the job was and what the team was doing, and nobody could really explain it.
It was some sort of "connectivity and identification team" working to identify people/customers/tenants/whatever. Something like, you'd walk in, and WeWork would know it was you, and like, turn your office lights on or some shit. It was going to start off with keycards and I remember someone talking about bluetooth or wifi recognizing your phone, eventually doing face recognition.
I couldn't figure out the point. A HUGE team. The questions I was being asked were wild system design questions and android app stuff (what? I'm frontend lol). All so that people's desks would be at a certain height or whatever when they came in the room.
"WeWork used [a sensor network that tracked everyone throughout the building combined with machine learning] to learn that people drink coffee in the morning so they should hire a barista."
Not a fan of WeWork, but there actually is something to this. We have two coffee makers in the break room at work, and there's always a line. If they brought in a barista who could work the machines, it's theoretically possible that you'd get better efficiency as there wouldn't be the dance of "who is next in line" or "sorry, gotta block the machine while I get sugar" or "I just want some hot water". I'd love to be able to point building management at some data that says that a barista costs $100/hour for 2 hours, but having them would unlock $1000/hour in lost productivity.
Tell your WeWork employed office manager (there is one in every office right?) to look at the line every morning when they're getting their coffee for two weeks. If the line is too long buy another 2 or 3 espresso machines, or supplement them with a few keurigs.
I just saved you $20M per year in sensors, IoT platform subscription, and data scientist salaries for an investment of $5k. Pretty insane how much money is wasted on dumb BS just because there's so much money to waste and it's a trendy way to waste money
Or more likely they wanted an innocuous reason to track all their office users at all times for other reasons
Real estate is a data play: figuring out which locations are going to be valuable. McDonalds famously does tons of research on locations, so much so that "be mcdonalds-adjacent" is an acceptable strategy.
I'm not entirely sure what a data science engineer does, but somewhere between "making it easier for the DS team to find what they need to find" and "figuring out where we should buy/lease next".
Precisely - Real estate boils down to financial operations on assets that have a number of factors and signals that go into predicting market prices. This also includes demand for commercial space.
From what I heard they were doing some notable data engineering - leveraging 4square data to decide where to put locations based on optimisation algorithms, profiling potential lessees based on known good ones, optimizing workspace layout based on camera and keyfob data, lease price elasticity tests... Lots of interesting domains. Sadly I'm sure this was/is one of the first departments to get downsided post backdown.
Data science is one of the few areas where WeWork may achieve an economy of scale - your local coworking operator won't be able to have that in house, and their ops system SaaS provider probably doesn't have the margins to invest heavily in it. If they're this messy at it though, that's not a good sign...
I never felt it was so black and white as people make it which is part of WeWork's problem.
WeWork's long game and eventual income is Real Estate, but their short game, their bread and butter, their brand, and their marketing is and always has been services and transactions. They compete much closer to a Starbucks than a Real Estate company but it's like neither side quite got it. (esp considering the CEO was a scam artist abusing the Real Estate side of the business while misdirecting everyone towards services)
WeWork is (to most) a company whose focus was on people and atmosphere, and on service. I would argue that they are MUCH closer to a hospitality chain like Marriott than a Real Estate firm or a tech co.
I had a similar experience a month or so back with a large consulting firm I was interviewing for in the DC area. It was also a data science role and they kept asking me webdev questions. In this case they knew it was for a data science role but I could also tell the guy hadn't a clue about most machine learning and data science topics. He was probably just as uncomfortable as I was. I didn't take the job.
Haha, I had an interview many years ago in Australia, was a full 2 hour technical interview in MS technologies. Nailed all the C#/.NET/SQL Server questions. Nailed everything they threw at me. I felt really proud of myself because I thought I was doing very well.
After they were done with me I started asking questions. I asked what they would have me doing?
"Oh the back-end system & api is done by a different team, you would just be doing the HTML/CSS for the front-end team"
Unfortunately there's always new recruiters that are willing to press this point either because they believe it or they just want the commission and will say what it takes to place a candidate. This is not something that will be fixed just by having the "bad" recruiters slowly removed over time. It's a constant task to educate job seekers that such an event is very unlikely.
Recruiters get paid by the companies seeking employees. If these tactics do indeed provide employees, then the company pays them and they stay in the business.
Recruiters are selected for recruiting talent. As long as the talent stays for some length of time that the recruiter isn't blamed for poor retention, then the recruiter wins. This time is months, not years.
That's why recruiters who work these angles still exist. It's not like this is a new phenomenon. It has been going on as long as there have been tech-recruiters.
If they did get selected out, they would all be gone already.
But regardless with those companies you tend to get options or grants. That’s real money with the reporting requirements of a public coma-any and entirely on you to decide whether to take it and ride it out.
They also tend to just pay more and have real bonus structures.
I’ve heard the opposite pitch from FANG recruiters: Our stock is pretty stable and/or appreciates modestly. But if you don’t believe me we are a public company so you can sell on day one. Unlike those startups that are just offering pieces of paper with promises of riches on them.
Maybe they’re just good at tailoring their messages. They look at me and see an old guy so they bring out the “stable liquidity” pitch.
At least the A-part or FAANG, the one that sounds like a river and not a fruit, was pretty surprised by the stock development after 2013/2014. This resulted in them over-paying a lot of the people they recruited in that period. Not that I would complain, so. But they didn't over sell the potential of RSUs during recruiting. My trick was to settle for sufficient base salary and take the RSUs as bonus I never really planned with.
Regardless, they put quite some emphasis on the RSUs being part of the salary as base salaries, while not bad per-se, were mere average for the region. And kind of sub-par considering the size of the company.
I had a unicorn's VP-operations try to convince me that my job-offer isn't below market - I should be valuing their stock at 10-100x the valuation used in their most recent round (a few months ago), because this company is sure to become the next big thing.
But does it really? Sure, it sucks if you get tricked to accept a lower salary, but I'd assume that even a below average software developer salary will be enough to lead a somewhat comfortable life.
Joining a startup is an opportunity to be part of a team that's doing something really hard, so you need to trust each other. Lying about the compensation structure isn't a good foundation for trust.
Now, you're spending at least a year of your life, working 40+ hour weeks in close proximity to someone who cheaply misled you.
I had a company in Richmond try to get me to work part time in exchange for stock. They haven't even had an initial round of funding yet. Same situation, told it was to be the next big thing. I'm a gambling man, most projects won't get off the ground, most won't last 3 years, even fewer will reach IPO. We have a lot of crackpots in this industry who think an idea is actually worth something.
I had a similar comical situation with Uber a couple months ago.
I was arguing that the offer they gave me was a paycut compared to my current position. The recruiter explained to me that I should value the stocks not on the latest valuation but on the 100% certain 250B$ valuation on IPO day.
Unfortunately recruiters get a bonus when you sign and are not accountable for anything down the line. They have all the incentives to lie to get a candidate to sign.
I had a similar (ridiculous) conversation with a startup that had already listed on the public stock exchange.
Okay, if the shares are really worth much more than their current market value, and you want to hire me for $X salary and $X/50 market value worth of your stock, it'd make more sense for me to take a different job that just pays $2X salary in cash, and then buy stock on the market...
I joined my current employer a couple days pre-IPO, was given stock options and told they might be worth a lot. Despite my insistence, I wasn't told the exercise price, nor how many shares were outstanding, nor any other relevant information, so (sensibly?) valued the options at around zero. They turned out to be worth more than my base salary.
Good for you but this is still extremely shady. Any respectable company should tell you how much you are getting and how those are currently being valued. Attaching no value to a private company RSU is pretty smart though.
In a traditional IPO, there is generally a 90-180 day lockup period for existing shareholders (to prevent shares from flooding the market on day 1). This is one of the big benefits of a direct listing (see Spotify/Slack)...any shareholder can sell stock on day one.
Could you share some examples of that occurring? To my knowledge, a lockup period is almost always a standard requirement from the underwriter (on any larger IPO), and in some states is even required as part of their Blue Sky Laws.
If a founder/VC wants to get out before the IPO, they usually just do so on the secondary market. Example: Benchmark cashing out a portion of their Uber stake to SoftBank pre-IPO.
Anecdotally, I was a bit sad that I didn't get past the first round with Uber, but then a few days later they announced their hiring freeze and terrible financial performance... probably for the better!
Sorry for my ignorance on this, but recently I find that top hacker news articles need a paid subscription. Do you have a trick for accessing them or just everyone here has a paid subscription?
Anecdotally, on both mobile and desktop I’m able to hit the X button on Chrome after the content loads but before the paywall shows and read the entire article.
On NYT in particular, load the page, when the text loads hit escape and the subscription nag simply doesn't load. It's not particularly ethical, but on the other hand maybe NYT should get serious about the software that's meant to protect its business model.
They aren't withholding the content on page load or requiring authentication, because they need search engines to be able to read it freely to get SEO benefits. They are tricking the search engines and to think they are giving content away to everyone for free unconditionally. They gave you the article for free, then added a bunch of CSS to make it difficult to consume. Modifying the content they already gave you for free is not stealing.
If you by chance have a mac or an iPhone, you can use Safari's reader mode read all the text comfortably after the page loads. Most of these sites load the text and then load some js to hide it from you. I've found reader mode works reasonably well on NYT and Bloomberg.
WeWork's business model is convincing investors they are a tech company with a dozens-of-billions valuation. I am glad HN, amongst others, have torn down this real-estate company wearing a tech-unicorn-mask.
> WeWork's business model is convincing investors they are a tech company with a dozens-of-billions valuation
That's their recruiting model too. These cults have people married to them their whole career and don't even know they are a laughing stock. They have conversations with their friends like "well joining a tech company has been very different from my old cubicle farm!"
Ironically, the company is in the front page of HN for two days. If Tech really didnt care (they do - they ve invested in it) they wouldn't give a toss about a RE company.
It still does not make it a tech company and does not justify the valuation. The business at the very core is not healthy and needs cash to even survive. Institutional investors will not take the bait with no upside.
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[ 3.5 ms ] story [ 322 ms ] threadMany generals of the US army are not "rich".
I suspect there are some cabinet positions that don't pay a lot, but offer a lot of power...
Adam got a $750M loan from WeWork, right? I'm assuming he used that loan to secure more loans to buy the buildings he then rents back to WeWork (at a profit). I wonder what happens to him if WeWork walks away from his buildings. I doubt he has the cash to hold onto those buildings for more than a few months without a client -- especially if WeWork is still private. If they go public before they "walk away" from his buildings, he'll have to sell massive amounts of stock to cover his losses.
Unless we get to negative interest rates, I don't see a future that looks good for WeWork.
Ugh. What an awful culture we live in where this is considered perfectly normal behavior.
Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection.
You're doing a thing which is quite frequent on HN, which is where you say that unethical behaviors are prevented because some narrow definition of those unethical behaviors is illegal. But the bit I quoted above is an unethical behavior which is clearly not prevented by the law.
> Are you really worried for big commercial landlords who know exactly what they are dealing with and how corporations work? Commercial landlords are not typically thought of as especially trusting and vulnerable entities who need special protection.
"The victims are tough enough to handle it" is a pretty poor justification for sleazy behavior.
Contracts have very little meaning if one of the signatories can disappear without holding their end of the bargain and without consequences. Is this the society you want, one where giving someone your word is meaningless?
"Each lease is owned by a different subsidiary" doesn't help you that much against the lessors, they'll either charge you more or demand signed guarantees from the parent corporation. Counter-parties are not idiots, generally speaking. There's no free lunch here.
How the structure helps is by protecting against other creditors that may arise out of operating the physical business in a way that may inadvertently generate legal liability. Since this is a real estate business, I'll go with a classic example - there's a spill on the floor, someone slips and falls and sues the people running the building. This litigant can generally only collect from any insurance policy and the subsidiary running the building - in order to go after WeWork's assets, they'd have to convince a court to pierce the corporate veil, and that's significantly more difficult.
https://www.merriam-webster.com/dictionary/synecdoche
See also: Hollywood. Nashville. Foggy Bottom. Quantico. Denim.
'It's not unethical if I don't feel bad about it.'
The key to operating this way to is cultivate a sense of belief in your own BS - inspire others by having the 'vision thing', saying 'I wish you could see what I can see' etc. Ignore anything negative and devote as little thought to it as possible because what people are buying into is your sunny disposition - they don't really want to analyze your stuff, they want to feel the way you look: radiantly confident. So you just think happy thoughts and if anyone asks you troubling questions re-articulate your vision of heaven/ profits/ national pride/ whatever and make a performance of being nurtured by that beautiful vision alone, before mentioning that anyone can share it for 3 easy payments of $____.
No, its money.
All these "tech unicorns" backed by VC money are the same.
Spend Billions to obtain "growth metrics" until such time as the spending can no longer be maintained and you have grown your "valuation" to a point no VC/private investor will save your ass, then dump the company on the public.
The marketing doesn't even change just the company, "at any time we can turn off the spending and growth, and make pure profit."
This is why narcissist and people who are overconfident to the point of absurdity often excel and business at life. No body else has any idea what they are doing, their competitors mostly have no idea what they are doing, and they are willing to project that they know what they are doing unconditionally which is attractive to many people.
So people follow them.
To become a trillionaire you'd have to fuck over 1000 times as many people. Without getting lynched.
Sell something for $10 that's worth $12 to the buyer and costs you $8 to make. Repeat a billion times. The people you did business with got an extra $2 billion, you got $2 billion, everybody's better off.
You need a moat to actually scale that business model. And the ethics of many moats aren't particularly squeaky-clean...
The people you did business with got an extra $5 Billion, you lose $1 Billion. All the companies trying to offer the service for $10 (or some other fair price) will be eradicated by your company, because a company cannot compete selling things at a fair ($10) price when you are selling it at $7.
If you were really that philanthropic, why would you carve out a billion from that revenue stream instead of giving back, or investing it in better equipment or people?
So on the front end the billionaire had to give more than a billion dollars of value to society in order to get people to voluntarily do business with them. Then on the back end they have to turn around and invest most of that money back into society. In doing so they're shouldering the burdens of market research, diligence, and risk.
Society wins twice from this and in return the billionaire gets to spend a lot of money. Society wins there, too, because the economy benefits from their ridiculous spending.
Does this work perfectly? Absolutely not, but nobody has a better system that I've seen.
>it says a lot that when confronted with an objectively dumb rich dude like trump (no working memory, can't apply grammar consistently, childish vocabulary, shallow concepts) people will choose to believe he's secretly smart rather than that wealth isn't a result of intellect
Trade Trump's name for Adam Neumann and I think you have the answer to your question.
Makes you wonder if being a CEO is really worth 400X the average salary of the plebs or if it's all just luck and smooth talking.
Like, do you think the best golfer in the PGA tournament is "really worth" ten times as much money as the 14th best golfer? Did they work ten times as hard?
If your workers aren't risk-adverse, then a tournament is exactly as efficient as a piece-work compensation scheme for convincing them to put in effort. The proof is a bit more involved than I'm willing to digest for a HN comment, but there's a full paper you can read about this here: http://faculty.smu.edu/Millimet/classes/eco7321/papers/lazea...
Anyhow, what all this means is that providing a prize to top performers means you can get a ton of effort, training, and work from people competing for it, and you don't have to incur the expense of monitoring the inputs into performance or quantifying the overall performance rendered. You only have to care about the rank-ordering of performance.
To the sponsors? Yes.
> ...it’s terrible for SoftBank! The message from SoftBank is pretty much “your [Neumann's] job was to extract billions of dollars out of us, and you succeeded at it admirably; now that you’ve served that purpose, we should replace you with a real-estate CEO to salvage the value of your investment and ours.”
[0] https://www.bloomberg.com/opinion/articles/2019-09-23/we-wan...
From "WeKeepGoingWithThisHuh"[0]
>...Or I guess maybe the IPO bankers leaked it because they want Neumann gone, to make the IPO easier, and want to commit Son to it by leaking. Or because they love messy drama maybe? It’s not their company.
The even funnier part of the segment is when he gets into what some of the banks actually put out as a reasonable IPO valuation.
>...JPMorgan told WeWork executives the company could be worth between $46bn and $63bn in the listing. Goldman pegged the equity at between $61bn and $96bn. Morgan Stanley estimated WeWork’s valuation at between $43bn and $104bn in a presentation in 2018, though a pitch for the IPO set it at a more modest $18bn-$52bn.
[0]https://www.bloomberg.com/opinion/articles/2019-09-24/don-t-...
>... Well, I just got through saying that there’s not really any reward for being pessimistic and right about valuation when you are pitching an IPO. Your optimistic competitors will get the mandate, and then spend some time walking the company back
...
On the other hand it is a repeat game and there are occasionally penalties for getting it wrong:
...
it will be rough for Morgan Stanley if winning the biggest IPO prize [Uber] of the unicorn era loses it the biggest IPO prize of all time [Saudi Aramco]
[0]https://www.bloomberg.com/opinion/articles/2019-09-09/we-mig....
I have worked for companies where all the employees were eagerly waiting for the day the company will go public. It was seen as a pivotal moment both financially and professionally.
In any rational world that's a landmark moment. A significant milestone for founders, investors and early employees. For WeWork it has been the complete opposite. They filed to go public and everything is going south since then. Must be surreal that what seemed to be the start of a bright future may be very well the start of a dark end.
edit: to clarify, hacker news has been extremely skeptical of WeWork for some time, due to this, I was extremely wary of their offer and leaned towards (and eventually chose) other options.
> WeWork, Bankers Have Discussed Laying Off One-Third of Workforce (theinformation.com)
If you, the reader, have an offer from WeWork, I suggest you ask for a bigger paycheck (like real money, not funny money) for all this uncertainty.
They will likely try to force the IPO through anyway at some sub $5B valuation, but even then it seems like they may not generate much interest after that cuckooville S1.
Did a 2-month old HN comment foretell WeWork imploding which informed your decision to decline their offer, or reading HN in general helped you determine that their offer would be close to worthless, compared to your options at that time?
No doubt another failed tech bro pump 'n dump scheme headed to the dustbin of history.
I seriously doubt that. I think they're overvalued too, but I predict WeWork is still going to be around in another decade. There's clearly a ton of demand for what they provide.
Edit: or to borrow a popular saying - with WeWork, it's not the furnished rental office stuff that is the product, it's the IPO.
There's also a TON of rent-a-desk places.
The big questions are:
- What's the benefit to a large corporation doing this instead of lots of small companies? (The economies of scale need to outweigh the large corporate overhead.)
- What's WeWork's secret sauce or first mover advantage?
Existing coworking spaces already make lots of money off of people who don't fully utilize their membership (which isn't necessarily a bad thing). WeWork is no different.
I like this way of thinking. WeWork isn't doing anything "new" - coworking spaces have existed for years. What's the upside of having a giant corporation owning all coworking spaces, versus having many small and independent small businesses running and operating independent coworking spaces? The answer to this question isn't obvious to me.
WeWork is also very similar to Uber in the sense that you also need a very effective "on the ground" team managing operations of each individual location, doing tours for prospective renters, managing upkeep + maintenance for the space, etc.
Advantage to customers? Likely minimal.
Advantage to the company itself: economies of scale and, likely more importantly, lack of competition allowing them to increase prices.
The very clear trend across all sectors is that companies trend towards giant monopolistic behemoths unless some very strong regulatory force prevents it. People act like healthy, competitive, transparent markets just appear out of thin air, but they are an artificial creation of government.
Sadly WeWork do not appear to offer this option (or didn't last time I looked).
Yes, that's right, the free AMEX WeWork plan is significantly better than any WeWork plan you can buy. That's start-up logic for you. I stopped paying WeWork after 1-2 years as a paying customer because their free plan was better.
I live in London and I can choose from any of 36 WeWork London locations for tomorrow along with anywhere else in the world. It's nice living off of VC money.
... Assuming any true competition is still in business in a year.
Are there any limits to how much you can make use of this offer or the kinds of spaces available?
_Surely_ they won't let you just camp an entire private office in SF all year round when it's supposed to cost upwards of $1000 per month?
Many of the benefits only apply to US-issued cards.
Is someone can write more about it it would be nice.
There is so much commercial real estate that it's hard to imagine them in any kind of a monopoly situation.
Consistency of branding can't be overstated too. People turn to trust when times are hard.
I’m not sure exactly how all of those contracts look with landlords, but someone is going to need money to spend to maintain them. If not, the person with brand new build outs is going to look more attractive.
Now, maybe I’m wrong and run down office spaces don’t matter. Uber drivers all used to wear suits and their cars were pristine. Even UberBlack cars have holes in the seats and transmissions in poor condition. Uber is vastly largely today than it used to be. So that could be the trick, WeWork at scale but more as a necessity than anything else. If that is the case, then it is more a question of how much extra space other sorts of businesses, like coffee shops, want to keep free for customers.
And no competition in the real estate market? Please.
Thanks for this insightful comment. I never fully considered it, but yes - all healthy, competitive markets exist as a result of a government that fosters them.
Its the reverse. All healthy, competitive markets exist as the result of a lack of government intervention.
Lack of a competitive market is the result of government intervention.
Smaller company would need a smaller team but even a single salary on the books just to comply is a large expense for a small business. Multiply this by other areas now such as licensing, insurance, etc. Just ensuring your every day work is not breaking the law becomes financially prohibitive.
So the economics of scale (supposed that is a relevant factor) could provide WeWork with a higher profit margin, but to become dominant, they have to take a cut to this margin.
Say you're a pretty large company and suddenly decide you want to open a dozen 'offices' in a dozen different countries. You just have to deal with one provider, one set of infrastructure etc. Plus if you decide you then want to consolidate to half-a dozen offices, it's easier to scale some up and some down.
However companies like Regus have existed for ages - so not quite sure what WeWork brings, aside from being able spaff away profits to get you in the door.
Probably, but that knife does cut both ways. I know a number of people (including myself) who wouldn't be willing to use a WeWork facility again.
Among the people I know who dislike WeWork, there are two main things that they complain about: the surveillance, and the actual environment.
I think it's down to the customer. There's a post below about somebody being reassured "it's a We Work" office they'll be in.
When I've looked for a job, it's never entered by head to ask who manages the office (my assumption is that it's my employer and if I'm not happy, I'll take it up with my employer).
I can see if you've often worked in offices not run by your employer, you might have learnt to ask - but would think that's a small pool of people working frequently in shared spaces, having worked their frequently enough to have a preference.
Back to the OP - it's not a "hypothesis", this stuff's been going on for decades. e.g. ~2000 I was working in Paris and visited our local guy in his local office on the prestigious "Champs Elysee" no less. I went down the "Champs Elysee", then through a small door behind two shops, then walked back a couple of hundred meters, then through a warren of rooms, then in a room off a room, there was a desk... and that was our office. Hundreds of people all working at this prestigious address - we must have been silver-class as we had our own physical desk.
If you went right back to the entrance door, there was a receptionist you could specifically pay to 'represent you for the hour' and a set of very swish/generic meeting rooms you could pretend were yours to visitors.
And on-the-ground ops just require intuitive software to enforce standard operating procedures. The last two coworking spaces I've worked at both used different SaaS solutions for coworking-space management, with customer portals and all. I'm almost certain WeWork's edge has been commoditized.
An advantage I see as a customer is that I can go to any WeWork across the country and get a desk/coffee/etc for the day. I can get that from a few other coworking places, but I don't think any have the number of locations that WeWork does.
Sure, there's probably some need for temporary surge office space like a insurance company setting up after a disaster. But that seems a pretty small niche to build a billion dollar business on.
I don’t know how much that impacts their profitability or value as a company, but it feels like a very cloud computing model of work space where you get what you need where you need it, so that you can have local employees in cities across the country to serve customers there.
In comparison Regus Virtual Offices has more than 2500 locations.
From what I understand, WeWork is structured as many small companies, so they can negotiate favorable terms with long-term leases on office space and the smaller company can fail without leaving WeWork on the hook for the rest of the lease.
Softbank $$$
And that not so much anymore. All they had was a cannabilized version of Meetup.com for doing reservations.
Same answer in case of gyms. Your advertising overhead does not scale linearly as you grow. Once you build a brand. Customer acquisition costs go down. For moving workforces - entrepreneurs, sales, executives - it becomes more affordable to use one brand rather than plenty of smaller brands.
Right now, no-one is competing against We because they are selling a dollar at 60 cents to their customers. The second they stop doing that, there will be a dozen clones. We is worthless.
WHAT? there's quite healthy competition[1], which actually make money as opposed to We.
Granted, you don't get free beer and smarmy slogans. But competition is definitly on the market.
[1] https://en.wikipedia.org/wiki/IWG_plc
There has always been, and will always be, demand for the ability to buy one dollar for 80 cents. This is not some newfangled business model. Amazingly, it keeps cropping up again and again.
Also, the strategy of segregating assets onto Adam's personal balance sheet looks like a bad idea now that he's no longer ceo.
But supposing they do, I see little reason to think they'll be a major player. I don't see anything stopping other rental companies from matching any innovations they've made. The same goes for major property owners. Some will stick with big chunks of space. But if there's a 30% premium for being flexible, providing desks, etc, the some of them will happily cut out the middleman.
Was kind of a death rattle for me and sure enough after they IPOd they really did nothing.
Still makes me angry when I think of it cause it was such a kick-ass product.
Seems they're trading at 2x their IPO, and they were at 3x a few months ago... Did something happen in 2018 that made them huge for a bit? or was it just the rest of the world discovering cloud?
Independently of what you read here, you saw right through this as total bullshit, right?
Right?
Funny enough, my current company seems to have pretty good odds at making me a good chunk of change from my options, but I didn't even know I got options until after I accepted the offer.
Many companies flaunt it and give a weak offer accordingly. That's a pretty big red flag for me.
Even though the less they have raised, the more valuable your equity is likely to be. It's fascinating to watch.
EDIT: I guess I should add I really did not care for the work and stopped after 2-3 years to start my own company. I do a lot of the same work today, but as the Founder, I obviously control the company and my workload.
But if the OP is really distraught about making money in tech, they will find their economics background of use.
The moment your same exact job can be replaced by a worker willing to do it for less is the moment salaries start to fall.
Don't let your degree stop you from doing what you want, the resources are all there.
How did you ever make that connection? Have economists ever been paid well?
My economics professor addressed the reason for the difference in class very simply. He noted there were over 350 applicants for the English prof position. Only 3 people applied for the economics position.
So if anything, $37k was too high for English and $85k was not nearly enough for econ.
My friends have geology and psychology degrees working in technology companies making $130 - $180k/year as non-developers.
Of course you likely won't have great pay from the start, but keep doing work for a few years and keep improving your skills and you should be fine.
For the majority of professional jobs out there, there's a vast oversupply of labor, and thus the unemployment rate for professionals is much higher than the overall unemployment rate would suggest.
Software engineering is one of the few areas where there some semblance of balance between supply and demand. But, this too will eventually go away. There's nothing that's stopping the supply of Software engineers from growing. Indeed, the Stack overflow surveys suggest there's a huge wave of junior SEs joining the industry. I predict in 15 years, SEs will be in such high oversupply that they will no longer have an advantage in the market place.
HN is overly skeptical of startups that take something possible and simplify the UX. Although I can't think of a recent example.
basically someone belittling Dropbox before it went on to be worth billions.
There are always going to be isolated nay-sayers for whatever reasons. When you get a near-consensus on HN that something's a PoS that's something that's worth bearing in mind.
It's an essential thing if you want to be a successful entrepreneur -- as long as you don't confuse skepticism with cynicism. Skepticism and optimism make a powerful combination.
Theranos and WeWork are two great examples of companies hated by HN because there's evidence supporting negative opinions.
Edit: here's the thread - not 100% positive but close: https://news.ycombinator.com/item?id=6349349
When a recruiter makes that argument to me, I consider it a huge red flag all by itself, and am much less interested in working there.
Edit: I'm on the 5th floor, feel free to come party
Is that even legal?
[1] https://time.com/5338287/wework-meat-vegetarian-company-envi...
_Excess_ is bad for your health (such as drinking 1 liter of vegan olive oil).
Professor Galloway called this the other day. His next prediction is that We will sell off all the bullshit vanity projects like WeLive and WeGrow along with the other nonsense Adam bought (like the wave pool company so he can practice surfing at work). Then they will fire all non-core employees. The clock is ticking if they want to save this company.
It was published on Friday and so far he is knocking it out of the park with these predictions.
[0] https://en.wikipedia.org/wiki/Officetel
That said, I don't know the details of the program so can't speak to its practicality in this instance. But considering it's wework, there's opportunity for a good vertical there. At its face it seems like sound corporate strategy
Where the valuation came down to earth was when public investors evaluated We as an incrementally better office rental company, and didn't buy the idea of We as creating and monetizing a religion.
WeWork's sins were less of rampant sexism, and more closely related to an unreasonable valuation and a business that wasn't prepared for the current IPO climate. In other words, they were things for which the investors are also culpable.
I'm not a founder, but I'd be very hesitant to raise from SoftBank if I was (and very nervous if I had already raised from them). With Benchmark (and Uber's other investors), I'd only be worried if the toxic culture I created was putting their investment seriously at risk.
Excluding the sexism, the toxic parts go hand-in-hand with the mindset Uber needed to ignore incumbents and regulations. The only reason Uber was successful was because of that attitude. Where it failed was growing up.
Which, by the way, is not a weird thing. Different stages of a company lifecycle require different types of leadership.
So it had nothing to do with:
- General disregard for regulation
- Blocking regulators from the plaform via Greyball
- Corporate espionage - Waymo vs. Uber
From my impression at the time he was forced out primarily because of actions like those last two (only few of many), because they have the potential to cost Uber serious money (sexism sadly not so much).
My bet is that they will now try to remarket We as a shareholder-controlled company, will maybe even eliminate the multi-class stock structure in order to get included into the passive funds. I am still not sure they will ever become profitable through. The only way to disrupt the incumbents in an established market like this one would be to spot a new opportunity in the market and capitalize on it faster than the slow 30-year-old companies like Regus. Except the only market opportunity We has successfully exploited by now are the desperate investors ready to shove billions in your hands if you pretend to be a cool techy thing they don't fully understand.
[0] https://www.reuters.com/article/wework-loan/clock-ticking-do...
It needs $8.1b market cap to get into S&P500.
But it doesn't really matter except when the stock gets added to the index. The index funds and ETFs are going to rebalance their positions based on market cap and will not affect the price. These funds could affect the volatility though, since it's conceivable that with a lot of the shares locked up, these stocks are going to be more thinly traded than they would have otherwise been. This could create price instability, though I'm not sure there's any proof that it's true.
It does matter when there are inflows, if there is new money coming into index funds all the stocks in the index benefit (they funds also sell all the stocks in the index when there are outflows). Non-indexed stock are less coupled to flows in and out of trackers.
>...Unadjusted company market capitalizations of US$8.2 billion or more for the S&P 500..... are required.
[0] https://us.spindices.com/documents/methodologies/methodology...
I am not sure. He has been pretty methodical in siphoning the money out of the company (privately leasing the real estate to We, charging them for the trademark, etc), so he probably knows very well what he is doing.
Somehow, if you act this way, investors will perceive you as a charismatic and energetic leader and buy in even if your business model doesn't make much sense. IIRC, similar happened to Juicero, albeit on a much smaller scale: countless talks about expanding consciousness, changing the world, raw water bollocks, a completely unsustainable business model and questionable transactions to some external consultants.
Softbank wants to delay the IPO now because it would mean a massive writedown of their investment value.
So you get rid of Adam (and his supermajority voting rights) have some quiet conversations about how people value the company now. Then you decide if you're willing to take whatever haircut the market is offering from the last private round.
If We is to be believed the other option is to halt all expansion. They claim that mature locations are cash flow positive. If that's true then you don't necessarily need to take a haircut, you just stop expanding, prove to the market that you actually do have a business, and then either start siphoning off the cash or try to IPO again.
People already knew what kind of business WeWork was. Sure, they were getting press, but when actual institutional investors looked at it, they must not have liked what they saw.
That has been going on for the last few rounds, so I suspect that they couldn't have gone public then, either. Nobody was buying what they were selling, except Softbank. And once the S-1 dropped, the press and social media saw all the red flags together in one document.
Those red flags would have been just the same if they'd gone public earlier.
Can you give some examples where this has worked in the past?
The alternatives are either that Softbank believed in WeWork's fundamentals, which honestly feels unlikely, or to believe that they went in early, then discovered that nobody else would invest, so they kept putting more of their own money in to avoid closing the business and taking a write-down.
That’s not at all clear.
Unless I am completely misunderstanding the value of WeWork, this ship seems to have already sailed. At least locally, Regus has offerings that are substantially the same in price and features to what WeWork has.
In any rational world that's a landmark moment. A significant milestone for founders, investors and early employees. For WeWork it has been the complete opposite. They filed to go public and everything is going south since then. Must be surreal that what seemed to be the start of a bright future may be very well the start of a dark end.
God, I love this phrase so much. It's such a brilliant stab at many of these recent unicorns. "Oh you think they can burn money fast, well watch how fast we burn it! We're number one!"
https://money.cnn.com/2018/07/13/technology/wework-meat-ban/...
[1] https://news.ycombinator.com/item?id=3220819
Focus on stealing office supplies.
https://www.youtube.com/watch?v=arENYYkYBts
To say that "they were asking for it" would be a huge understatement. The night shift janitor of the building two blocks down from their offices would have called this.
https://slate.com/podcasts/slate-money/2019/09/slate-money-o...
I guess my take is somewhere between these two comments. I sometimes hate the way it feels like Anna plays a "contrarian character" no matter what, and yes, Felix and Emily can sometimes be a bit too.. "NPR do-gooder, feel-gooder" for my taste. But I really enjoy the show regardless. It's a saturday morning long-run staple for me.
these kind of people tend to be driven by ego, so this must have hurt.
looks like he'll still be chairman though.
“Thanks so much for taking the time and interest in applying to WeWork Global Technology. Your application has been received and we will review it as soon as possible.
Once we've had a chance to review we'll be in touch on possible next steps, thanks again for the time!
Regards, WeWork Global Technology”
https://twitter.com/modestproposal1/status/10855834347880202...
data science is a tech agnostic role. Wework might want to play with various data models for predictive modeling.
Starbucks in 2019 is the McDonald's of coffee shops, so it's not the same, but if you track their Starbucks Reserve locations you'll find the same predictions being used.
Optimizing for absence of failed stores would be an interesting utility function for them to have, but since they own substantially all of the stores (and therefore don't have franchisee relationships to consider, where volatility for a partner might impact you disproportionately to economic loss), that would be a suboptimal utility function. They should calibrate their risk appetite to maximize profits; occasional failed stores are just a search cost.
You can have 0 failed stores if you open 0 stores. A successful operation will inevitably have failed stores. Having a long list of failed stores doesn't mean anything in of itself. You have to look at the rate of failed stores vs successful stores among other metrics.
A market commenter who believes that Google is not one of the most sophisticated engineering organizations in the world is wrong. If you believe Walgreens is not one of the most sophisticated commercial real estate operations that exist, I would encourage you to talk to people who understand real estate as well as you understand Google and recalibrate based on what they tell you.
MacDonalds is similar. If they have a franchise that is doing badly, they will pay to move the franchise to a new location. A suburban McD closing is rare, usually only the oldest ones on lots that are too small for contemporary usage patterns.
I think of it as similar to how UPS rigs their routes to avoid left turns.
It was some sort of "connectivity and identification team" working to identify people/customers/tenants/whatever. Something like, you'd walk in, and WeWork would know it was you, and like, turn your office lights on or some shit. It was going to start off with keycards and I remember someone talking about bluetooth or wifi recognizing your phone, eventually doing face recognition.
I couldn't figure out the point. A HUGE team. The questions I was being asked were wild system design questions and android app stuff (what? I'm frontend lol). All so that people's desks would be at a certain height or whatever when they came in the room.
Source: https://twitter.com/modestproposal1/status/10855834347880202...
Sounds like a reasonable use of tens of millions of dollars of VC money.
I just saved you $20M per year in sensors, IoT platform subscription, and data scientist salaries for an investment of $5k. Pretty insane how much money is wasted on dumb BS just because there's so much money to waste and it's a trendy way to waste money
Or more likely they wanted an innocuous reason to track all their office users at all times for other reasons
I'm not entirely sure what a data science engineer does, but somewhere between "making it easier for the DS team to find what they need to find" and "figuring out where we should buy/lease next".
WeWork's long game and eventual income is Real Estate, but their short game, their bread and butter, their brand, and their marketing is and always has been services and transactions. They compete much closer to a Starbucks than a Real Estate company but it's like neither side quite got it. (esp considering the CEO was a scam artist abusing the Real Estate side of the business while misdirecting everyone towards services)
WeWork is (to most) a company whose focus was on people and atmosphere, and on service. I would argue that they are MUCH closer to a hospitality chain like Marriott than a Real Estate firm or a tech co.
After they were done with me I started asking questions. I asked what they would have me doing?
"Oh the back-end system & api is done by a different team, you would just be doing the HTML/CSS for the front-end team"
I was furious when I left...
recruiters still do that? so unethical.
Recruiters are selected for recruiting talent. As long as the talent stays for some length of time that the recruiter isn't blamed for poor retention, then the recruiter wins. This time is months, not years.
That's why recruiters who work these angles still exist. It's not like this is a new phenomenon. It has been going on as long as there have been tech-recruiters.
If they did get selected out, they would all be gone already.
They also tend to just pay more and have real bonus structures.
Not sure this is the same game.
Maybe they’re just good at tailoring their messages. They look at me and see an old guy so they bring out the “stable liquidity” pitch.
Regardless, they put quite some emphasis on the RSUs being part of the salary as base salaries, while not bad per-se, were mere average for the region. And kind of sub-par considering the size of the company.
Employees aren't like A16z, they're not getting preferred shares and their primary source of income isn't likely to be investing in corps.
Stuff like this can ruin people's lives.
But does it really? Sure, it sucks if you get tricked to accept a lower salary, but I'd assume that even a below average software developer salary will be enough to lead a somewhat comfortable life.
Joining a startup is an opportunity to be part of a team that's doing something really hard, so you need to trust each other. Lying about the compensation structure isn't a good foundation for trust.
Now, you're spending at least a year of your life, working 40+ hour weeks in close proximity to someone who cheaply misled you.
I was arguing that the offer they gave me was a paycut compared to my current position. The recruiter explained to me that I should value the stocks not on the latest valuation but on the 100% certain 250B$ valuation on IPO day.
Unfortunately recruiters get a bonus when you sign and are not accountable for anything down the line. They have all the incentives to lie to get a candidate to sign.
I only accept sign on bonuses, keep your stock, it's worth a lot... right?
Okay, if the shares are really worth much more than their current market value, and you want to hire me for $X salary and $X/50 market value worth of your stock, it'd make more sense for me to take a different job that just pays $2X salary in cash, and then buy stock on the market...
These are common, but I don't think they apply to all share classes, so the big boys are free to get their money out.
If a founder/VC wants to get out before the IPO, they usually just do so on the secondary market. Example: Benchmark cashing out a portion of their Uber stake to SoftBank pre-IPO.
https://www.sec.gov/fast-answers/answerslockuphtm.html
That is not to say piracy is theft. Only that 'they should protect themselves better' is not a justification.
That's their recruiting model too. These cults have people married to them their whole career and don't even know they are a laughing stock. They have conversations with their friends like "well joining a tech company has been very different from my old cubicle farm!"