WEBVTT 00:00:00.000 --> 00:00:02.000 Welcome back to the Deep Dive. Today we are looking 00:00:02.000 --> 00:00:06.660 at a story that, frankly, feels like it was written 00:00:06.660 --> 00:00:09.179 by a screenwriter. Oh, absolutely. You know, 00:00:09.179 --> 00:00:11.460 a screenwriter who was told to come up with the 00:00:11.460 --> 00:00:14.179 most implausible business thriller possible. 00:00:14.519 --> 00:00:16.539 And then the producer came back and said, yeah, 00:00:16.679 --> 00:00:19.300 that's good. Dial it up another 20 percent. Right. 00:00:19.460 --> 00:00:22.219 Make it crazier. It's a story about a man who 00:00:22.219 --> 00:00:25.379 explicitly stated, and this is an exaggeration, 00:00:25.460 --> 00:00:28.140 he wanted to be the world's first trillionaire. 00:00:28.440 --> 00:00:30.940 Not billionaire. Crillionaire. Which is a number 00:00:30.940 --> 00:00:33.280 so large the human brain, you know, it has trouble 00:00:33.280 --> 00:00:37.659 actually visualizing it. Exactly. And he didn't 00:00:37.659 --> 00:00:40.259 stop there. He mused about living forever. And 00:00:40.259 --> 00:00:42.780 this is my personal favorite. He genuinely had 00:00:42.780 --> 00:00:44.840 aspirations to become president of the world. 00:00:44.920 --> 00:00:47.179 A position that, and I feel compelled to point 00:00:47.179 --> 00:00:50.350 out. Does not exist. There is no job opening 00:00:50.350 --> 00:00:52.689 for that. Details, details. But look, the reason 00:00:52.689 --> 00:00:54.829 we are obsessing over this story isn't just because 00:00:54.829 --> 00:00:58.350 the ambitions were so wild. It's the the gap 00:00:58.350 --> 00:01:00.770 between those ambitions and what actually happened. 00:01:00.869 --> 00:01:03.829 A chasm. It's a chasm. Yeah. We are tracing a 00:01:03.829 --> 00:01:06.689 trajectory that goes from claiming to elevate 00:01:06.689 --> 00:01:10.049 the world's consciousness to a reality involving. 00:01:10.760 --> 00:01:13.959 Well, a marijuana stuffed cereal box on a private 00:01:13.959 --> 00:01:17.000 jet and one of the most spectacular high velocity 00:01:17.000 --> 00:01:19.920 corporate implosions in the history of capitalism. 00:01:20.079 --> 00:01:22.500 We are, of course, talking about the saga of 00:01:22.500 --> 00:01:24.599 Adam Neumann and WeWork, but I think it is crucial 00:01:24.599 --> 00:01:26.760 to set the stage for why we're doing this deep 00:01:26.760 --> 00:01:29.980 dive today, February 6th, 2026. Yes. Because 00:01:29.980 --> 00:01:32.859 if you just watch the news back in 2019 or even 00:01:32.859 --> 00:01:36.319 2023, you might think this story just ended. 00:01:36.859 --> 00:01:38.719 You know, with the crash. Right. If you haven't 00:01:38.719 --> 00:01:40.400 been glued to the business pages lately, you 00:01:40.400 --> 00:01:43.120 probably assume WeWork is dead, buried, and maybe 00:01:43.120 --> 00:01:45.040 turned into a spirit Halloween store somewhere. 00:01:45.219 --> 00:01:47.420 Right. But it's not. Maybe close. Far from it. 00:01:47.459 --> 00:01:49.280 The company has actually emerged from bankruptcy. 00:01:49.340 --> 00:01:51.379 It has new owners. And believe it or not, it's 00:01:51.379 --> 00:01:54.480 actually profitable. But the twist, the real 00:01:54.480 --> 00:01:57.120 reason we are here, is that Adam Neumann didn't 00:01:57.120 --> 00:01:59.379 just fade away into the sunset with his billions. 00:01:59.760 --> 00:02:02.840 No. He is back. He has a new company called Flow, 00:02:03.060 --> 00:02:05.200 and he is effectively competing with the monster 00:02:05.200 --> 00:02:07.920 he created. It is the ultimate business soap 00:02:07.920 --> 00:02:10.580 opera. So today we have a stack of sources here. 00:02:11.319 --> 00:02:13.340 Biographies, court filings from the bankruptcy, 00:02:13.599 --> 00:02:16.439 the infamous S -1 document that started the fire, 00:02:16.520 --> 00:02:18.699 and of course, media coverage of his new ventures 00:02:18.699 --> 00:02:22.159 right up to this year, 2026. Our mission today 00:02:22.159 --> 00:02:26.419 is to unpack the unicorn. the fall and the surprising 00:02:26.419 --> 00:02:32.259 flow into a second act. It is at its core a case 00:02:32.259 --> 00:02:34.900 study in charisma, total governance failure, 00:02:35.000 --> 00:02:38.539 and the, well, the commodification of community. 00:02:38.960 --> 00:02:40.680 That's the perfect word for it. Okay, so let's 00:02:40.680 --> 00:02:42.319 unpack this. We have to start with the man himself, 00:02:42.500 --> 00:02:44.500 who is Adam Neumann, because you don't just wake 00:02:44.500 --> 00:02:46.039 up one day and decide you want to be president 00:02:46.039 --> 00:02:49.139 of Earth without some interesting backstory. 00:02:49.379 --> 00:02:51.699 Not at all. And to understand WeWork, you cannot 00:02:51.699 --> 00:02:53.520 just look at the real estate market in New York. 00:02:53.560 --> 00:02:55.039 You have to go back. You have to look at Israel 00:02:55.039 --> 00:02:57.780 in the 1980s and 90s. Okay. Neumann was born 00:02:57.780 --> 00:03:00.960 in Beersheba in 1979. His childhood was defined 00:03:00.960 --> 00:03:03.639 by severe instability. His parents divorced when 00:03:03.639 --> 00:03:06.039 he was seven, and he was constantly moving. By 00:03:06.039 --> 00:03:08.240 the time he was 22, he had lived in 13 different... 00:03:08.240 --> 00:03:12.620 homes. 13 homes by age 22. That is, I mean, that's 00:03:12.620 --> 00:03:15.300 chaotic. It creates a specific psychology, right? 00:03:15.979 --> 00:03:18.500 When you are always the new kid, you have to 00:03:18.500 --> 00:03:22.610 be You have to learn to charm people and charm 00:03:22.610 --> 00:03:24.969 them quickly because you don't have the luxury 00:03:24.969 --> 00:03:28.229 of long -term relationship building. You need 00:03:28.229 --> 00:03:30.210 to be magnetic immediately. Immediately. You 00:03:30.210 --> 00:03:32.090 have to walk into a room and own it. But the 00:03:32.090 --> 00:03:34.370 most critical piece of the puzzle, the thing 00:03:34.370 --> 00:03:36.849 that appears in almost every analysis of his 00:03:36.849 --> 00:03:39.469 philosophy, is the time he spent living on a 00:03:39.469 --> 00:03:42.110 kibbutz as a teenager. Okay. For the listeners 00:03:42.110 --> 00:03:44.310 who might only know the word from, I don't know, 00:03:44.349 --> 00:03:46.909 crossword puzzles, can we define what a kibbutz 00:03:46.909 --> 00:03:50.210 actually is? Sure. So historically, a kibbutz 00:03:50.210 --> 00:03:52.610 is a collective community in Israel. It started 00:03:52.610 --> 00:03:55.909 with agriculture. It's based on socialist communal 00:03:55.909 --> 00:03:58.210 principles. So everyone works together. Everyone 00:03:58.210 --> 00:04:00.250 works together. You eat in a communal dining 00:04:00.250 --> 00:04:02.550 hall. Children often sleep in communal houses. 00:04:02.969 --> 00:04:05.889 Income is shared. It is the ultimate expression 00:04:05.889 --> 00:04:09.830 of we over I. It's the socialist utopia in theory. 00:04:10.270 --> 00:04:13.530 In theory, yes. But for Neumann, it was this 00:04:13.530 --> 00:04:16.670 incredibly formative emotional experience. He 00:04:16.670 --> 00:04:18.930 later explicitly stated that he wanted to replicate 00:04:18.930 --> 00:04:21.930 that feeling of togetherness he felt there because 00:04:21.930 --> 00:04:23.730 he thought it was completely lacking in the West, 00:04:23.889 --> 00:04:25.949 specifically in the U .S. Okay, but this is where 00:04:25.949 --> 00:04:28.910 my brain starts to hurt. Go on. He takes this 00:04:28.910 --> 00:04:34.310 socialist communal living model and he hypercapitalizes 00:04:34.310 --> 00:04:37.560 it. He decides to package that feeling of belonging 00:04:37.560 --> 00:04:41.079 and sell it for a premium per square foot. That 00:04:41.079 --> 00:04:43.379 is the central irony that drove the entire business. 00:04:43.579 --> 00:04:45.720 That's the whole thing right there. WeWork was 00:04:45.720 --> 00:04:48.560 essentially selling a non -capitalist feeling. 00:04:49.339 --> 00:04:52.279 Friendship, belonging, community using a hypercapitalist 00:04:52.279 --> 00:04:54.639 structure. It's brilliant. It is. He identified 00:04:54.639 --> 00:04:56.920 a loneliness epidemic in the emerging freelance 00:04:56.920 --> 00:04:59.899 economy and realized people would pay extra just 00:04:59.899 --> 00:05:01.540 to feel like they were part of a tribe. He was 00:05:01.540 --> 00:05:03.959 selling a cure for loneliness. Which is a powerful 00:05:03.959 --> 00:05:07.160 product. But before he was this guru of community, 00:05:07.439 --> 00:05:09.139 he was just a guy trying to make a buck in New 00:05:09.139 --> 00:05:11.600 York. He served in the Israeli Navy first, right? 00:05:12.000 --> 00:05:14.439 Yes, he was a junior officer, a captain in the 00:05:14.439 --> 00:05:16.740 Navy. He brings that up a lot to establish his 00:05:16.740 --> 00:05:19.259 leadership bona fides. But he also struggled 00:05:19.259 --> 00:05:22.100 immensely with severe dyslexia. He couldn't really 00:05:22.100 --> 00:05:24.600 read or write until third grade. I want to pause 00:05:24.600 --> 00:05:27.779 on that for a second. Dyslexia often forces people 00:05:27.779 --> 00:05:30.360 to develop other skills, doesn't it? If you can't 00:05:30.360 --> 00:05:32.399 rely on reading the manual, you have to rely 00:05:32.399 --> 00:05:35.939 on people, on your charm. Precisely. Many, many 00:05:35.939 --> 00:05:38.959 successful entrepreneurs are dyslexic. It often 00:05:38.959 --> 00:05:41.579 forces you to become an excellent oral communicator 00:05:41.579 --> 00:05:44.680 or storyteller. You learn to delegate the details 00:05:44.680 --> 00:05:46.959 because the details are literally difficult for 00:05:46.959 --> 00:05:49.800 you to process. You become the vision guy out 00:05:49.800 --> 00:05:52.819 of necessity. So he lands in NYC. He attends 00:05:52.819 --> 00:05:55.220 Baruch College. Drops out, by the way, though 00:05:55.220 --> 00:05:57.300 he did, to his credit, go back and finish his 00:05:57.300 --> 00:05:59.759 degree in 2017. After he was already a multi 00:05:59.759 --> 00:06:01.819 -billionaire. Yeah. Right. And he starts trying 00:06:01.819 --> 00:06:03.699 to launch businesses. And this is where we find 00:06:03.699 --> 00:06:06.839 my favorite early venture of his. Crawlers. Ah, 00:06:06.920 --> 00:06:09.379 yes. The crawlers. I did a double take when I 00:06:09.379 --> 00:06:11.319 saw this in the notes. This was his big idea 00:06:11.319 --> 00:06:14.740 before Office Space. Baby clothes. It was. Baby 00:06:14.740 --> 00:06:18.180 clothes with built -in knee pads. Because babies 00:06:18.180 --> 00:06:20.459 are injuring their knees. Is that a thing? That 00:06:20.459 --> 00:06:22.680 was the premise. He was absolutely convinced 00:06:22.680 --> 00:06:25.079 that babies were suffering from knee trauma while 00:06:25.079 --> 00:06:28.000 crawling around. Has a single baby in human history 00:06:28.000 --> 00:06:30.720 ever complained about knee trauma? They're practically 00:06:30.720 --> 00:06:32.939 made of rubber. That is exactly the point. He 00:06:32.939 --> 00:06:34.980 was solving a problem that didn't exist. The 00:06:34.980 --> 00:06:37.360 tagline was something like, just because they 00:06:37.360 --> 00:06:39.399 don't tell you doesn't mean they don't hurt. 00:06:40.139 --> 00:06:43.459 It's classic Newman logic, even back then. Create 00:06:43.459 --> 00:06:46.079 a narrative of a hidden problem and then sell 00:06:46.079 --> 00:06:48.810 the only solution. And he also... Tried to sell 00:06:48.810 --> 00:06:51.970 women's shoes with collapsible heels. Yes. High 00:06:51.970 --> 00:06:54.129 heels that could retract and turn into flats. 00:06:54.389 --> 00:06:57.110 Again, not a terrible idea in theory, but the 00:06:57.110 --> 00:06:59.470 engineering was a disaster. He was just throwing 00:06:59.470 --> 00:07:02.769 ideas at the wall, desperate to hit it big. But 00:07:02.769 --> 00:07:05.649 the pivot happened in 2008. The financial crisis. 00:07:05.709 --> 00:07:08.329 The financial crisis. And he met Miguel McKelvey 00:07:08.329 --> 00:07:10.550 through a mutual friend. And Miguel is the other 00:07:10.550 --> 00:07:13.129 half of this equation. He's often described as 00:07:13.129 --> 00:07:16.129 the quiet architect to Adam's loud salesman. 00:07:16.410 --> 00:07:18.870 Exactly. Miguel was trained as an architect. 00:07:19.129 --> 00:07:21.329 He was the one who could actually visualize how 00:07:21.329 --> 00:07:23.290 to carve up a physical space, how to make it 00:07:23.290 --> 00:07:26.129 feel cool. They were in the same building and 00:07:26.129 --> 00:07:28.850 Adam noticed all these empty floors. And his 00:07:28.850 --> 00:07:31.509 mind just starts racing. Starts racing. He goes 00:07:31.509 --> 00:07:34.449 to the landlord and pitches this idea. They start 00:07:34.449 --> 00:07:37.129 a company called Green Desk in Brooklyn. This 00:07:37.129 --> 00:07:40.089 was the precursor to WeWork. Right. It's 2008. 00:07:40.410 --> 00:07:43.310 The financial world is collapsing. Lehman Brothers 00:07:43.310 --> 00:07:45.829 is gone. People are getting laid off left and 00:07:45.829 --> 00:07:49.589 right. And suddenly there is a flood of freelancers. 00:07:49.589 --> 00:07:51.810 People who used to have an office now have a 00:07:51.810 --> 00:07:54.509 laptop in a coffee shop. And Neumann and McKelvey 00:07:54.509 --> 00:07:57.889 see this. They start Green Desk as an eco -friendly 00:07:57.889 --> 00:08:00.189 co -working space. Which is funny because eco 00:08:00.189 --> 00:08:03.009 -friendly in 2008 usually just meant we reuse 00:08:03.009 --> 00:08:05.389 some wood and the lights are CFLs. Pretty much. 00:08:06.300 --> 00:08:08.560 But it worked, right? It was profitable. It worked. 00:08:08.560 --> 00:08:10.779 It was profitable almost immediately. But the 00:08:10.779 --> 00:08:12.360 landlords they were working with, they wanted 00:08:12.360 --> 00:08:14.120 them to just stick to Green Desk, maybe open 00:08:14.120 --> 00:08:16.300 another one in Brooklyn. Adam and Miguel wanted 00:08:16.300 --> 00:08:19.279 to build a global brand. So in a move that kind 00:08:19.279 --> 00:08:22.160 of foreshadows everything, they sold their stake 00:08:22.160 --> 00:08:24.819 in Green Desk back to their landlord. For just 00:08:24.819 --> 00:08:27.220 a few hundred thousand dollars. And they used 00:08:27.220 --> 00:08:31.500 that cash to fund the big idea, WeWork. Which 00:08:31.500 --> 00:08:35.230 launched in 2010 in Soho, Manhattan. Now, usually 00:08:35.230 --> 00:08:37.009 when you start a business, especially in a recession, 00:08:37.250 --> 00:08:40.049 you scrape by, you count every penny. But Noman 00:08:40.049 --> 00:08:42.789 had this ability to convince people to bet big 00:08:42.789 --> 00:08:45.529 on him immediately. It's his superpower. Their 00:08:45.529 --> 00:08:47.769 first major investor, a real estate guy named 00:08:47.769 --> 00:08:51.470 Joel Schreiber, put in $15 million for a 33 % 00:08:51.470 --> 00:08:53.870 stake. I want to emphasize how insane that is. 00:08:54.149 --> 00:08:58.519 $15 million. For a third of a company that barely 00:08:58.519 --> 00:09:01.259 existed, run by a guy whose previous hit was 00:09:01.259 --> 00:09:04.200 Kneepad Pants for Babies, it valued the company 00:09:04.200 --> 00:09:06.659 at roughly $45 million right out of the gate. 00:09:06.820 --> 00:09:08.799 How? How do you convince someone to do that? 00:09:08.840 --> 00:09:11.759 What is in that pitch? It's the conviction. Absolute, 00:09:11.759 --> 00:09:14.539 unwavering, almost religious conviction. Neumann 00:09:14.539 --> 00:09:16.799 doesn't pitch, he preaches. He made investors 00:09:16.799 --> 00:09:18.460 feel like the train was leaving the station, 00:09:18.620 --> 00:09:20.460 and if they didn't get on right now, they would 00:09:20.460 --> 00:09:22.700 miss the next Apple or Google. And to be fair, 00:09:22.840 --> 00:09:24.820 in those early days, the product actually worked. 00:09:25.259 --> 00:09:28.259 It was cool. It was. The early WeWorks were genuinely 00:09:28.259 --> 00:09:30.840 great. They had free beer on tap, glass walls, 00:09:31.080 --> 00:09:33.320 nice lighting, a sense of energy. It was way 00:09:33.320 --> 00:09:35.240 better than a Starbucks or your kitchen table. 00:09:35.500 --> 00:09:37.299 And then they get a huge piece of validation 00:09:37.299 --> 00:09:42.340 in 2011. PepsiCo. Yes. PepsiCo placed a few employees 00:09:42.340 --> 00:09:45.100 in a WeWork location. That feels like a major 00:09:45.100 --> 00:09:47.539 turning point. It was a massive validation. It 00:09:47.539 --> 00:09:49.799 proved that this wasn't just for, you know, a 00:09:49.799 --> 00:09:52.509 couple of guys in hoodies building an app. Big, 00:09:52.509 --> 00:09:55.429 boring Fortune 500 corporations wanted a piece 00:09:55.429 --> 00:09:58.129 of this energy. And those Pepsi employees acted 00:09:58.129 --> 00:10:00.710 as scouts, right? Rubbing shoulders with startups, 00:10:00.950 --> 00:10:03.269 seeing what was new. Exactly. It gave WeWork 00:10:03.269 --> 00:10:05.409 credibility to go to landlords and say, see, 00:10:05.610 --> 00:10:08.169 we attract the big guys, not just risky freelancers. 00:10:08.190 --> 00:10:10.129 Give us your whole building. So you have the 00:10:10.129 --> 00:10:12.389 proof of concept. The engine is running. Now 00:10:12.389 --> 00:10:14.269 we get to the part where they don't just add 00:10:14.269 --> 00:10:16.710 fuel to the engine. They pour rocket fuel into 00:10:16.710 --> 00:10:19.230 it. A whole tanker truck of it. From 2014 to 00:10:19.230 --> 00:10:22.700 2019, this company goes super. We're talking 00:10:22.700 --> 00:10:25.879 about a valuation jumping from $5 billion to 00:10:25.879 --> 00:10:30.340 $47 billion. And you cannot talk about this era, 00:10:30.440 --> 00:10:32.720 this explosion of capital, without introducing 00:10:32.720 --> 00:10:36.440 the other main character of this tragedy, Masayoshi 00:10:36.440 --> 00:10:39.700 Son. Masa, the CEO of SoftBank. The man with 00:10:39.700 --> 00:10:42.490 the $100 billion Vision Fund. You have to understand 00:10:42.490 --> 00:10:44.649 Masa's psychology to understand WeWork's rise. 00:10:44.889 --> 00:10:47.950 He was a guy who invested early in Alibaba and 00:10:47.950 --> 00:10:51.029 made a fortune. He believes in the singularity, 00:10:51.029 --> 00:10:53.750 in AI, in companies that grow faster than physics 00:10:53.750 --> 00:10:56.250 should allow. He's a gambler on a global scale. 00:10:56.509 --> 00:10:58.330 There is that famous story about their first 00:10:58.330 --> 00:11:01.129 meeting. Adam gets 12 minutes in the back of 00:11:01.129 --> 00:11:02.909 a car, right? It was supposed to be a short car 00:11:02.909 --> 00:11:05.610 ride. Adam gives him the tour of the WeWork headquarters. 00:11:06.049 --> 00:11:08.649 At the end of it, Masa invites him into his car, 00:11:08.830 --> 00:11:11.070 pulls out an iPad, and sketches a deal right 00:11:11.070 --> 00:11:13.529 there on the spot. For how much? For $4 .4 billion. 00:11:13.850 --> 00:11:16.070 After a 12 -minute tour. But the most important 00:11:16.070 --> 00:11:17.929 part, the part that changed everything, is what 00:11:17.929 --> 00:11:20.350 Masa said to him. He looked at Adam and told 00:11:20.350 --> 00:11:22.710 him that WeWork wasn't thinking big enough. He 00:11:22.710 --> 00:11:25.250 said, and I'm quoting here, In a fight, the crazy 00:11:25.250 --> 00:11:28.429 guy always wins. You were not crazy enough. Imagine 00:11:28.429 --> 00:11:31.139 telling Adam Neumann. a man who wants to be president 00:11:31.139 --> 00:11:34.220 of the world, that he isn't crazy enough. It's 00:11:34.220 --> 00:11:36.419 like telling a pyromaniac that the fire is a 00:11:36.419 --> 00:11:39.539 little too small. It was pure validation for 00:11:39.539 --> 00:11:42.740 every single one of his wildest impulses. Completely. 00:11:43.419 --> 00:11:46.980 SoftBank ended up pouring over $10 billion into 00:11:46.980 --> 00:11:49.940 WeWork over time. This created a specific economic 00:11:49.940 --> 00:11:52.559 distortion field around the company. It's called 00:11:52.559 --> 00:11:56.159 blitzscaling. OK, what's that? The idea, popularized 00:11:56.159 --> 00:11:58.320 in Silicon Valley, is that you prioritize speed 00:11:58.320 --> 00:12:00.779 over efficiency. You intentionally lose money 00:12:00.779 --> 00:12:03.419 on every customer, but you grow so fast that 00:12:03.419 --> 00:12:05.399 you wipe out all competitors and own the entire 00:12:05.399 --> 00:12:08.480 market. Then, theoretically, once you have a 00:12:08.480 --> 00:12:10.519 monopoly, you raise prices and finally make a 00:12:10.519 --> 00:12:12.580 profit. But to do that, you have to burn cash 00:12:12.580 --> 00:12:15.279 at an unbelievable rate. An unbelievable rate. 00:12:15.419 --> 00:12:19.120 In 2018 alone, WeWork lost over $2 billion. That's 00:12:19.120 --> 00:12:21.730 almost $6 million a day. They were lighting money 00:12:21.730 --> 00:12:24.570 on fire to open locations in London, Tokyo, Rio, 00:12:24.789 --> 00:12:26.990 everywhere. They were trying to be on every street 00:12:26.990 --> 00:12:29.070 corner like Starbucks. And as the money poured 00:12:29.070 --> 00:12:32.309 in, the cult of we started to get really, really 00:12:32.309 --> 00:12:35.429 weird. Yeah. It stopped being about desks. It 00:12:35.429 --> 00:12:37.330 started to be about encompassing every second 00:12:37.330 --> 00:12:39.980 of your existence. Total mission creep. They 00:12:39.980 --> 00:12:42.600 launched We Live, which was their communal apartment 00:12:42.600 --> 00:12:46.320 concept. They had Rise by We, which was a gym 00:12:46.320 --> 00:12:49.100 and spa. And my personal favorite, We Grow. The 00:12:49.100 --> 00:12:51.240 school. A private elementary school inside the 00:12:51.240 --> 00:12:53.740 headquarters for children age three to grade 00:12:53.740 --> 00:12:57.279 four. And it was run by Rebecca Neumann, Adam's 00:12:57.279 --> 00:12:59.440 wife. Rebecca is a crucial figure here, too. 00:13:00.279 --> 00:13:03.259 Gwyneth Paltrow's cousin, deeply spiritual, into 00:13:03.259 --> 00:13:05.980 Kabbalah, and she brought this very new age language 00:13:05.980 --> 00:13:08.340 into the boardroom. The mission of WeWork officially 00:13:08.340 --> 00:13:11.620 changed from renting desks to elevating the world's 00:13:11.620 --> 00:13:14.259 consciousness. Which is hard to measure on a 00:13:14.259 --> 00:13:16.419 quarterly earnings call. Impossible. And they 00:13:16.419 --> 00:13:18.019 started buying things that made absolutely no 00:13:18.019 --> 00:13:21.179 sense. They bought a majority stake in a wave 00:13:21.179 --> 00:13:23.840 pool company called Wave Garden. Why? Why does 00:13:23.840 --> 00:13:26.220 a landlord need a wave pool company? The official 00:13:26.220 --> 00:13:28.440 justification was that surfing is a community 00:13:28.440 --> 00:13:31.480 activity. But in reality, it was because Adam 00:13:31.480 --> 00:13:34.200 liked to surf. That's pretty much it. They bought 00:13:34.200 --> 00:13:37.100 Meetup, the social gathering platform. They bought 00:13:37.100 --> 00:13:39.379 a coding academy called the Flatiron School. 00:13:40.120 --> 00:13:41.940 They were desperately trying to prove to the 00:13:41.940 --> 00:13:44.620 world that they were a tech company, like Amazon 00:13:44.620 --> 00:13:47.620 or Google, not a boring real estate company. 00:13:47.879 --> 00:13:50.179 That's the grift, isn't it? Convincing the world 00:13:50.179 --> 00:13:51.940 you're a tech platform when you're actually just 00:13:51.940 --> 00:13:54.220 subleasing office space. That was the entire 00:13:54.220 --> 00:13:57.360 game. Tech companies get 20x revenue valuations. 00:13:57.440 --> 00:13:59.460 Real estate companies, if they're lucky, get 00:13:59.460 --> 00:14:03.360 2x. The whole $47 billion number was based on 00:14:03.360 --> 00:14:05.559 pretending they were tech. And with this expansion 00:14:05.559 --> 00:14:08.799 came this incredible, almost paternalistic level 00:14:08.799 --> 00:14:13.179 of control. In 2018, Newman banned all employees 00:14:13.179 --> 00:14:16.240 from expensing meals with pork, poultry, or red 00:14:16.240 --> 00:14:19.299 meat. For what reason? He said it was for the 00:14:19.299 --> 00:14:21.860 environment. And sure, meat has a high carbon 00:14:21.860 --> 00:14:24.519 footprint. But think about the dynamic. You are 00:14:24.519 --> 00:14:27.059 the CEO and you are telling your accountants 00:14:27.059 --> 00:14:29.259 and your sales reps what they're allowed to eat 00:14:29.259 --> 00:14:31.480 for lunch if they want to get reimbursed. It's 00:14:31.480 --> 00:14:33.940 a level of personal control that really crosses 00:14:33.940 --> 00:14:36.559 the line into cult -like behavior. Meanwhile, 00:14:36.679 --> 00:14:39.000 the culture inside the company wasn't exactly 00:14:39.000 --> 00:14:42.259 a monastery. Far, far from it. The sources we 00:14:42.259 --> 00:14:45.000 looked at describe a frat boy culture on steroids. 00:14:46.039 --> 00:14:49.379 We are talking about mandatory tequila shots 00:14:49.379 --> 00:14:52.759 during job interviews. Not at all. He would walk 00:14:52.759 --> 00:14:56.299 around with a bottle of Don Julio 1942, and if 00:14:56.299 --> 00:14:57.940 he offered you a shot and you didn't take it, 00:14:58.000 --> 00:14:59.799 that was a bad sign. And then there were the 00:14:59.799 --> 00:15:01.740 mandatory summer camp festivals. Why was that? 00:15:02.039 --> 00:15:04.059 Thousands of employees were flown from all over 00:15:04.059 --> 00:15:06.100 the world to fields in the UK or upstate New 00:15:06.100 --> 00:15:09.139 York for three days of partying, music, and free 00:15:09.139 --> 00:15:11.379 -flowing alcohol. It sounds fun if you're 22, 00:15:11.639 --> 00:15:13.580 but I'm guessing it was an absolute nightmare 00:15:13.580 --> 00:15:16.149 for the HR department. A total nightmare. In 00:15:16.149 --> 00:15:19.309 October 2018, a former director of culture filed 00:15:19.309 --> 00:15:21.470 a lawsuit alleging she was sexually assaulted 00:15:21.470 --> 00:15:24.149 at company events. She described a culture where 00:15:24.149 --> 00:15:27.029 alcohol was just everywhere, completely unchecked. 00:15:27.029 --> 00:15:29.350 There were multiple suits regarding gender pay 00:15:29.350 --> 00:15:32.669 gaps, age discrimination. It was a chaotic, high 00:15:32.669 --> 00:15:35.250 testosterone environment masked by this soft, 00:15:35.409 --> 00:15:38.429 new agey language of love and community. So you 00:15:38.429 --> 00:15:41.889 have this chaotic, high spending. Party -fueled 00:15:41.889 --> 00:15:45.129 rocket ship. It's early 2019. The valuation is 00:15:45.129 --> 00:15:48.029 at its peak, $47 billion. They are arguably the 00:15:48.029 --> 00:15:50.549 hottest startup in the world. And they decide, 00:15:50.690 --> 00:15:52.370 let's take this thing public. They file for an 00:15:52.370 --> 00:15:54.450 IPO. And that is the moment the music stopped. 00:15:54.710 --> 00:15:58.980 Cold. August 2019. The release of the S -1 filing. 00:15:59.159 --> 00:16:02.100 For our listeners, the S -1 is the big document 00:16:02.100 --> 00:16:04.700 a company files with the SEC to list on the stock 00:16:04.700 --> 00:16:06.960 market. It's supposed to be a boring technical 00:16:06.960 --> 00:16:09.759 brochure saying, here are our financials, here 00:16:09.759 --> 00:16:12.299 are our risks, please buy our stock. Instead, 00:16:12.559 --> 00:16:14.960 this document read like the diary of a madman. 00:16:15.299 --> 00:16:17.220 Let's open it up. First of all, the dedication. 00:16:17.419 --> 00:16:19.519 You mentioned it earlier. Most S -1s are dedicated 00:16:19.519 --> 00:16:21.879 to, you know, our shareholders or our amazing 00:16:21.879 --> 00:16:24.399 team. This one was dedicated to the energy of 00:16:24.399 --> 00:16:26.769 we. And the first sentence of the document was, 00:16:26.889 --> 00:16:29.330 we dedicate this to the energy of we greater 00:16:29.330 --> 00:16:32.190 than any one of us, but inside each of us. That 00:16:32.190 --> 00:16:34.149 is not something a Goldman Sachs banker wants 00:16:34.149 --> 00:16:37.429 to read. No, they want to see numbers. And when 00:16:37.429 --> 00:16:39.190 they finally got to the numbers, it was even 00:16:39.190 --> 00:16:42.830 worse. But the real horror show was the corporate 00:16:42.830 --> 00:16:45.950 governance section. This is where investors actually 00:16:45.950 --> 00:16:48.169 started screaming. Let's break down the governance 00:16:48.169 --> 00:16:50.909 nightmares, because this is where the scam accusations 00:16:50.909 --> 00:16:53.370 really started to fly. Let's start with the big 00:16:53.370 --> 00:16:56.110 one. The trademark issue. It's almost comical. 00:16:56.289 --> 00:16:59.809 So the company decided to rebrand from WeWork 00:16:59.809 --> 00:17:02.789 to the We Company to reflect its expansion into 00:17:02.789 --> 00:17:06.490 living and schools and wave pools. Okay, rebranding. 00:17:06.829 --> 00:17:09.430 Standard corporate stuff. Except Adam Neiman 00:17:09.430 --> 00:17:11.869 personally owned the trademark for the word We 00:17:11.869 --> 00:17:14.190 through a private holding company. He had bought 00:17:14.190 --> 00:17:16.410 it before the rebrand. And then the We Company 00:17:16.410 --> 00:17:19.630 paid him $5 .9 million to license the rights 00:17:19.630 --> 00:17:21.690 to use that word. Hold on. Let me get this straight 00:17:21.690 --> 00:17:24.230 for the listener. He was the CEO. He decided 00:17:24.230 --> 00:17:26.309 to change the company name to a word that he 00:17:26.309 --> 00:17:28.490 personally owned. And then he made the company 00:17:28.490 --> 00:17:31.650 pay him nearly $6 million for the privilege of 00:17:31.650 --> 00:17:33.910 using the name that he chose. You've got it. 00:17:34.009 --> 00:17:37.589 It was peak audacity. It signaled to everyone 00:17:37.589 --> 00:17:39.990 on Wall Street that he viewed the company as 00:17:39.990 --> 00:17:43.390 his personal piggy bank. He was just extracting 00:17:43.390 --> 00:17:45.529 cash from the investors right in front of their 00:17:45.529 --> 00:17:48.509 faces. Did he get away with it? No. The public 00:17:48.509 --> 00:17:51.009 outcry was so intense that he eventually returned 00:17:51.009 --> 00:17:53.690 the money. But the fact that he thought he could 00:17:53.690 --> 00:17:56.210 get away with it in the first place, it terrified 00:17:56.210 --> 00:17:58.049 them. And it wasn't just the name. There were 00:17:58.049 --> 00:18:00.569 the buildings, too. Right. The related party 00:18:00.569 --> 00:18:03.150 transactions. This was another huge red flag. 00:18:03.979 --> 00:18:06.240 Newman personally bought commercial buildings, 00:18:06.559 --> 00:18:09.240 often using lines of credit secured by his WeWork 00:18:09.240 --> 00:18:11.700 stock. And then he would lease those buildings 00:18:11.700 --> 00:18:13.900 back to WeWork. So he was the landlord and the 00:18:13.900 --> 00:18:15.940 tenant. He was on both sides of the deal. If 00:18:15.940 --> 00:18:18.279 WeWork paid really high rent on a building, WeWork, 00:18:18.299 --> 00:18:20.420 the company, lost money. But Adam Newman, the 00:18:20.420 --> 00:18:23.599 landlord, made a fortune personally. It's conflict 00:18:23.599 --> 00:18:26.680 of interest 101. Unbelievable. What else is in 00:18:26.680 --> 00:18:28.890 there? The stock structure. This is the key to 00:18:28.890 --> 00:18:31.289 his power. We mentioned governance. Neumann had 00:18:31.289 --> 00:18:33.950 set it up so that his shares gave him 20 votes 00:18:33.950 --> 00:18:36.369 for every one vote a normal shareholder would 00:18:36.369 --> 00:18:40.170 get after the IPO. 20 to 1. 20 to 1. It meant 00:18:40.170 --> 00:18:42.970 that even if he sold off half his financial stake, 00:18:43.170 --> 00:18:46.589 he could never be fired. He had total dictatorial 00:18:46.589 --> 00:18:48.710 control over the company forever. He couldn't 00:18:48.710 --> 00:18:50.609 be removed by the board. And there was a clause 00:18:50.609 --> 00:18:53.309 in there about his wife, right? Yes. The succession 00:18:53.309 --> 00:18:56.470 clause. The S -1 stipulated that if Adam died, 00:18:56.710 --> 00:18:58.849 his wife Rebecca would be on the committee to 00:18:58.849 --> 00:19:01.640 choose his successor. Like a monarchy. Passing 00:19:01.640 --> 00:19:03.819 control through the family. Exactly like a monarchy. 00:19:03.859 --> 00:19:06.339 And public market investors, we're talking pension 00:19:06.339 --> 00:19:08.720 funds, mutual funds, the people who manage your 00:19:08.720 --> 00:19:11.339 401k, they looked at this structure and said, 00:19:11.400 --> 00:19:14.079 absolutely not. We are not investing in a dictatorship. 00:19:14.440 --> 00:19:16.539 And while the entire financial world is reading 00:19:16.539 --> 00:19:19.940 this S -1 and freaking out, a story breaks in 00:19:19.940 --> 00:19:21.579 the Wall Street Journal that just perfectly, 00:19:21.660 --> 00:19:24.339 perfectly encapsulates the madness. The cereal 00:19:24.339 --> 00:19:26.700 box incident. This is the anecdote that I think 00:19:26.700 --> 00:19:29.960 really turned the tide of public opinion. It 00:19:29.960 --> 00:19:32.799 painted him not as a brilliant, eccentric visionary, 00:19:33.019 --> 00:19:36.200 but as an unstable liability. Completely. Set 00:19:36.200 --> 00:19:38.339 the scene for us. Okay, so it's the summer of 00:19:38.339 --> 00:19:42.480 2018. Newman and his friends charter a Gulfstream 00:19:42.480 --> 00:19:46.779 G650, a top -of -the -line $60 million private 00:19:46.779 --> 00:19:49.960 jet, to fly from the U .S. to Israel. The best 00:19:49.960 --> 00:19:52.940 plane money can buy. On the flight over, they 00:19:52.940 --> 00:19:55.579 are smoking so much marijuana that the smoke 00:19:55.579 --> 00:19:58.130 is thick in the cabin. According to the reporting, 00:19:58.309 --> 00:20:00.210 the flight crew had to put on their oxygen masks 00:20:00.210 --> 00:20:02.329 because they were worried they'd fail a drug 00:20:02.329 --> 00:20:05.130 test from inhaling the secondhand smoke. That's, 00:20:05.130 --> 00:20:07.069 I mean, that's just dangerous. Forget everything 00:20:07.069 --> 00:20:10.589 else. It's insane. So they land in Israel. Adam 00:20:10.589 --> 00:20:12.710 and his entourage get off and go to their party. 00:20:13.329 --> 00:20:15.710 But the flight crew stays behind to clean the 00:20:15.710 --> 00:20:18.470 plane for the return trip. And what do they find 00:20:18.470 --> 00:20:21.250 stuffed in a compartment? A cereal box. A cereal 00:20:21.250 --> 00:20:23.230 box. And it's not full of Cheerios. It's stuffed 00:20:23.230 --> 00:20:25.549 full of a large amount of weed. Just left there 00:20:25.549 --> 00:20:27.509 in the cabin. Now, this is an international flight. 00:20:27.650 --> 00:20:30.269 This crosses the line from partying into international 00:20:30.269 --> 00:20:32.690 drug traffic. That's a felony, a serious one. 00:20:32.849 --> 00:20:35.549 Exactly. So the owner of the jet gets a frantic 00:20:35.549 --> 00:20:38.490 call from the pilot. The owner realizes that 00:20:38.490 --> 00:20:40.829 if this plane tries to leave Israel and get searched 00:20:40.829 --> 00:20:44.190 by customs, the plane could be seized. The pilot's 00:20:44.190 --> 00:20:46.569 arrested. So he orders the plane to return to 00:20:46.569 --> 00:20:49.450 the U .S. immediately empty. So Adam is stranded 00:20:49.450 --> 00:20:52.890 in Israel. Yes. The CEO of a supposed $47 billion 00:20:52.890 --> 00:20:56.069 company is stranded because he left his drugs 00:20:56.069 --> 00:20:59.869 in a cereal box on a rented jet. It just showed 00:20:59.869 --> 00:21:01.910 a complete lack of discipline, a total lack of 00:21:01.910 --> 00:21:03.970 judgment. It showed he thought the rules simply 00:21:03.970 --> 00:21:06.460 didn't apply to him. And when you combine the 00:21:06.460 --> 00:21:09.579 shocking financials, the insane governance issues 00:21:09.579 --> 00:21:11.960 and this kind of reckless personal behavior, 00:21:12.240 --> 00:21:14.960 the IPO just completely collapsed. The valuation 00:21:14.960 --> 00:21:18.759 crash from $47 billion to, oh, the bankers tried 00:21:18.759 --> 00:21:20.599 to salvage it at maybe $20 billion and people 00:21:20.599 --> 00:21:22.440 were whispering $10 billion. But in the end, 00:21:22.460 --> 00:21:24.960 the IPO was pulled entirely. They ran out of 00:21:24.960 --> 00:21:27.759 cash. And in September 2019, the board led by 00:21:27.759 --> 00:21:30.539 SoftBank, who had the most to lose, finally decides 00:21:30.539 --> 00:21:32.940 we have to cut the head off the snake. They move 00:21:32.940 --> 00:21:36.430 to oust him. But, and this is the part that still 00:21:36.430 --> 00:21:38.930 drives people crazy, because of those super voting 00:21:38.930 --> 00:21:41.089 shares we talked about, they couldn't just fire 00:21:41.089 --> 00:21:43.410 him. They had to buy him out. The golden parachute. 00:21:43.809 --> 00:21:46.190 This wasn't a golden parachute. This was a platinum, 00:21:46.329 --> 00:21:49.609 diamond -encrusted parachute. To get him to leave 00:21:49.609 --> 00:21:52.049 and give up his voting control, SoftBank put 00:21:52.049 --> 00:21:54.930 together an exit package initially valued at 00:21:54.930 --> 00:22:01.019 nearly $1 .7 billion. 1 .7. Billion dollars for 00:22:01.019 --> 00:22:02.880 essentially breaking the company. It included 00:22:02.880 --> 00:22:04.980 SoftBank buying about a billion dollars of his 00:22:04.980 --> 00:22:07.500 shares, refinancing his massive personal debts, 00:22:07.619 --> 00:22:11.859 and get this, $185 million consulting fee. They 00:22:11.859 --> 00:22:16.700 paid him $185 million to consult on how to run 00:22:16.700 --> 00:22:18.599 a company into the ground. Did they ever actually 00:22:18.599 --> 00:22:20.920 call him for advice? I highly, highly doubt it. 00:22:20.940 --> 00:22:23.299 That was just a bribe. is the price to get him 00:22:23.299 --> 00:22:25.539 to walk away quietly and give up the keys. Now, 00:22:25.579 --> 00:22:27.480 that deal was renegotiated later. There were 00:22:27.480 --> 00:22:29.839 lawsuits, and the final number he got was lower. 00:22:29.920 --> 00:22:31.700 But he still walked away with hundreds of millions 00:22:31.700 --> 00:22:34.400 in cash. He failed, and he became a billionaire 00:22:34.400 --> 00:22:37.220 because of it. An unbelievable outcome. So Neumann 00:22:37.220 --> 00:22:40.440 is out. He's rich. He's in his mansion. But WeWork, 00:22:40.640 --> 00:22:43.440 the company, the thousands of employees, the 00:22:43.440 --> 00:22:46.940 landlords, they are still there. And we move 00:22:46.940 --> 00:22:49.339 into what I'd call part four, the wilderness 00:22:49.339 --> 00:22:53.700 years. 2020 starts. SoftBank takes control. They 00:22:53.700 --> 00:22:56.420 bring in a new CEO, Sandeep Mithrani. He's a 00:22:56.420 --> 00:22:58.900 veteran real estate executive. He's the anti 00:22:58.900 --> 00:23:01.900 -atom. Serious, boring, focused on the balance 00:23:01.900 --> 00:23:04.480 sheet. His only job is to stop the bleeding. 00:23:04.680 --> 00:23:06.900 And then, just as he's trying to perform surgery, 00:23:07.339 --> 00:23:09.839 the universe decides to play a cruel joke. COVID 00:23:09.839 --> 00:23:12.710 -19 hits. It's the worst possible timing. Think 00:23:12.710 --> 00:23:15.150 about it. WeWork's entire business model is based 00:23:15.150 --> 00:23:18.069 on density, packing people into small glass offices, 00:23:18.289 --> 00:23:20.789 sharing kitchens, sharing air, sharing everything. 00:23:21.009 --> 00:23:22.750 And suddenly the governments of the world say, 00:23:22.849 --> 00:23:25.349 stay six feet apart, work from home. It was an 00:23:25.349 --> 00:23:27.470 extinction level event for their business model. 00:23:27.609 --> 00:23:29.710 The offices emptied out. I remember walking past 00:23:29.710 --> 00:23:32.170 WeWorks in 2020 and 2021. They were just ghost 00:23:32.170 --> 00:23:34.269 towns, lights off. They immediately stopped the 00:23:34.269 --> 00:23:36.210 free beer. They started closing locations. They 00:23:36.210 --> 00:23:38.670 laid off thousands and thousands of people. But 00:23:38.670 --> 00:23:40.670 they had a massive fundamental problem being 00:23:40.670 --> 00:23:43.750 into their books. The leases. They had signed 00:23:43.750 --> 00:23:46.529 15 -year leases on hundreds of buildings back 00:23:46.529 --> 00:23:49.049 when rents were at their peak. But their customers, 00:23:49.329 --> 00:23:52.670 the tenants, were on flexible month -to -month 00:23:52.670 --> 00:23:55.349 contracts. That is the fundamental flaw of the 00:23:55.349 --> 00:23:58.430 model, the asset liability mismatch. You owe 00:23:58.430 --> 00:24:01.049 the landlord for 15 years, but your customer 00:24:01.049 --> 00:24:03.809 only owes you for the next 30 days. Exactly. 00:24:04.589 --> 00:24:06.869 When all the customers canceled their memberships, 00:24:06.950 --> 00:24:09.589 WeWork was still on the hook for billions in 00:24:09.589 --> 00:24:12.250 rent. They were bleeding cash at an apocalyptic 00:24:12.250 --> 00:24:15.269 rate. But surprisingly, they managed to go public 00:24:15.269 --> 00:24:18.849 anyway in 2021. How? I mean, who would buy this 00:24:18.849 --> 00:24:20.630 stock in the middle of a pandemic when nobody 00:24:20.630 --> 00:24:23.210 was in an office? They used a SPAC. A special 00:24:23.210 --> 00:24:24.990 purpose acquisition company. We saw a lot of 00:24:24.990 --> 00:24:26.529 these during the pandemic bubble. Can you explain 00:24:26.529 --> 00:24:28.750 the mechanics briefly for our listeners? Sure. 00:24:28.950 --> 00:24:32.400 Think of a SPAC as a backdoor IPO. A group of 00:24:32.400 --> 00:24:34.960 investors lists a blank check company on the 00:24:34.960 --> 00:24:37.140 stock market. It has no business, just a big 00:24:37.140 --> 00:24:40.000 pile of cash. Then that public shell company 00:24:40.000 --> 00:24:42.380 goes and merges with a private company. In this 00:24:42.380 --> 00:24:45.180 case, WeWork. It's a faster, easier way to go 00:24:45.180 --> 00:24:47.160 public with less scrutiny than a traditional 00:24:47.160 --> 00:24:50.319 IPO. So WeWork merged with a SPAC called BOEX. 00:24:50.660 --> 00:24:54.980 Yes. And it valued WeWork at $9 billion. Which 00:24:54.980 --> 00:24:59.019 is a long, long way down from $47 billion. But 00:24:59.019 --> 00:25:02.190 it's still $9 billion. It is. And more importantly, 00:25:02.369 --> 00:25:04.849 it gave them access to a fresh injection of cash 00:25:04.849 --> 00:25:06.970 from the SPAC. They desperately needed that money 00:25:06.970 --> 00:25:10.009 just to survive the pandemic. But even that wasn't 00:25:10.009 --> 00:25:12.670 enough. The debt load was just too heavy. The 00:25:12.670 --> 00:25:15.190 old expensive leases from the Adam era were like 00:25:15.190 --> 00:25:17.230 an anchor dragging the ship to the bottom of 00:25:17.230 --> 00:25:20.750 the ocean. And so we get to the inevitable conclusion 00:25:20.750 --> 00:25:24.250 of this first act. November 2023. WeWork files 00:25:24.250 --> 00:25:27.519 for Chapter 11 bankruptcy. Now, bankruptcy sounds 00:25:27.519 --> 00:25:29.160 like death to most people, like going out of 00:25:29.160 --> 00:25:30.559 business. But Chapter 11 is different, right? 00:25:30.619 --> 00:25:33.539 It's a tool. Correct. Chapter 11 is reorganization, 00:25:33.599 --> 00:25:36.680 not liquidation. It's a court supervised process 00:25:36.680 --> 00:25:38.799 where you get to pause your debts and crucially 00:25:38.799 --> 00:25:41.559 renegotiate your contracts. For WeWork, it was 00:25:41.559 --> 00:25:43.319 a strategic weapon. It allowed them to go to 00:25:43.319 --> 00:25:45.119 all their landlords across the world and say, 00:25:45.180 --> 00:25:47.799 look, we are legally rejecting this lease. You 00:25:47.799 --> 00:25:49.500 can take the keys back and have an empty building 00:25:49.500 --> 00:25:52.420 or you can cut our rent by 50 percent. It was 00:25:52.420 --> 00:25:54.640 a way to purge all the toxic overpriced leases 00:25:54.640 --> 00:25:57.500 from the Adam Neumann era. Exactly. They shed 00:25:57.500 --> 00:26:00.259 billions in future rent obligations. SoftBank 00:26:00.259 --> 00:26:02.480 had to write down almost their entire investment. 00:26:03.220 --> 00:26:05.059 Masayoshi's son admitted on an earnings call 00:26:05.059 --> 00:26:06.960 that he lost billions and that his judgment was 00:26:06.960 --> 00:26:10.039 flawed. The unicorn was, for all intents and 00:26:10.039 --> 00:26:12.839 purposes, officially dead. Was it? Because here 00:26:12.839 --> 00:26:16.559 we are. It's February 2026. And WeWork is still 00:26:16.559 --> 00:26:19.690 here. My local WeWork is open. It is. And this 00:26:19.690 --> 00:26:21.309 brings us to the part of the story that often 00:26:21.309 --> 00:26:23.829 gets ignored. The resurrection. WeWork emerged 00:26:23.829 --> 00:26:27.569 from bankruptcy in May 2024. Who owns it now? 00:26:28.190 --> 00:26:30.710 It's not SoftBank anymore, is it? A company called 00:26:30.710 --> 00:26:33.349 Yardi Systems is now the majority owner. I've 00:26:33.349 --> 00:26:35.130 never heard of them. And that's probably a good 00:26:35.130 --> 00:26:38.390 thing. They are a massive, profitable, and frankly 00:26:38.390 --> 00:26:40.730 boring back -end software company for the real 00:26:40.730 --> 00:26:42.930 estate industry. They provide the software that 00:26:42.930 --> 00:26:44.910 landlords use to manage their buildings and track 00:26:44.910 --> 00:26:47.839 rent. They took a 60 % stake. SoftBank is still 00:26:47.839 --> 00:26:49.940 there with about a 20 % stake, but they're not 00:26:49.940 --> 00:26:52.200 in charge. And how are they doing this new, boring 00:26:52.200 --> 00:26:55.359 WeWork? Surprisingly well. Because they used 00:26:55.359 --> 00:26:57.779 the bankruptcy process to cut all the bad locations, 00:26:58.059 --> 00:27:01.200 they closed about 160 unprofitable spots. They 00:27:01.200 --> 00:27:04.160 are now running a much leaner ship. By the fourth 00:27:04.160 --> 00:27:07.079 quarter of 2024, the company actually hit break 00:27:07.079 --> 00:27:10.680 -even EBITDA. EBITDA. Earnings Before Interest, 00:27:10.680 --> 00:27:13.940 Taxes, Depreciation, and Amortization. Basically, 00:27:14.019 --> 00:27:16.019 their day to day operating profit. Right. And 00:27:16.019 --> 00:27:18.619 by the first quarter of 2025, they were actually 00:27:18.619 --> 00:27:22.299 EBIT deposit. The core business model, flexible 00:27:22.299 --> 00:27:25.319 office space actually works. People want it. 00:27:25.359 --> 00:27:28.000 The demand is there, especially in a hybrid work 00:27:28.000 --> 00:27:31.240 world. It was just the insane execution, the 00:27:31.240 --> 00:27:33.799 crushing debt and the hubris of the first iteration 00:27:33.799 --> 00:27:36.789 that broke it. So under disciplined. Boring management. 00:27:36.930 --> 00:27:39.069 It's a totally viable business. A totally viable 00:27:39.069 --> 00:27:41.009 business. But we have to talk about the plot 00:27:41.009 --> 00:27:43.210 twist that happened during the bankruptcy. This 00:27:43.210 --> 00:27:44.690 is the moment where I actually laughed out loud 00:27:44.690 --> 00:27:46.809 when I read the news reports from 2024. An attempted 00:27:46.809 --> 00:27:49.869 buyback. February 2024. Adam Neumann, the man 00:27:49.869 --> 00:27:51.589 who brewed the company, the man they paid over 00:27:51.589 --> 00:27:53.869 a billion dollars to leave. Yeah. He tried to 00:27:53.869 --> 00:27:56.369 buy it back. He did. While the company was at 00:27:56.369 --> 00:27:59.170 its most vulnerable, in bankruptcy court, he 00:27:59.170 --> 00:28:02.150 swooped in with a bid of over $500 million to 00:28:02.150 --> 00:28:05.509 regain control of WeWork. The audacity. It's 00:28:05.509 --> 00:28:08.150 just, it's breathtaking. I broke it, you paid 00:28:08.150 --> 00:28:10.329 me to leave, now it's on sale for pennies on 00:28:10.329 --> 00:28:11.789 the dollar because I broke it so I'll just buy 00:28:11.789 --> 00:28:14.490 it back cheap. It is stunning, Chutzpah. He was 00:28:14.490 --> 00:28:17.769 backed by a big hedge fund, Third Point. He argued 00:28:17.769 --> 00:28:19.789 that the current management didn't understand 00:28:19.789 --> 00:28:22.730 the magic of the brand. He wanted to bring the 00:28:22.730 --> 00:28:25.329 vibe back. And what did the company and its creditors 00:28:25.329 --> 00:28:28.130 say? They essentially ghosted him. Publicly, 00:28:28.130 --> 00:28:30.230 they said they'd review all offers, but privately, 00:28:30.390 --> 00:28:32.589 the reports say they viewed him as radioactive. 00:28:32.930 --> 00:28:35.349 They did not want him anywhere near the controls 00:28:35.349 --> 00:28:37.769 again. They eventually went with the much safer 00:28:37.769 --> 00:28:41.309 Yardie deal instead. Probably a wise bet. But 00:28:41.309 --> 00:28:43.829 Adam Neumann is not the type of person to just 00:28:43.829 --> 00:28:46.130 sit on a beach and count his money. He didn't 00:28:46.130 --> 00:28:48.450 get WeWork back, so he decided to build something 00:28:48.450 --> 00:28:51.759 else. And that brings us to his second act. Enter 00:28:51.759 --> 00:28:54.460 Flo. Okay, let's look at Flo. This is his current 00:28:54.460 --> 00:28:57.220 venture in 2026. What is it? Initially, the pivot 00:28:57.220 --> 00:29:00.259 was to residential real estate. If WeWork was 00:29:00.259 --> 00:29:03.160 community for work, Flo was supposed to be community 00:29:03.160 --> 00:29:06.539 for living. So WeBut at 2 .0. Pretty much, but 00:29:06.539 --> 00:29:09.190 on a much bigger scale. He started going on a 00:29:09.190 --> 00:29:11.769 buying spree, buying thousands of apartment units 00:29:11.769 --> 00:29:14.450 in Miami, Fort Lauderdale, Atlanta, Nashville. 00:29:14.769 --> 00:29:17.769 The idea is the same. Renting an apartment sucks. 00:29:18.289 --> 00:29:21.849 It's a lonely transactional experience. The landlords 00:29:21.849 --> 00:29:25.230 are unresponsive. Flo wants to create a branded 00:29:25.230 --> 00:29:27.369 living experience. What does that mean in practice? 00:29:27.750 --> 00:29:29.349 It means there's an app, there are community 00:29:29.349 --> 00:29:31.750 events, neighbors actually know each other. It's 00:29:31.750 --> 00:29:33.829 the WeWork plea book applied to where you sleep. 00:29:34.049 --> 00:29:37.109 And crucially, he got funding. Massive funding. 00:29:37.480 --> 00:29:39.539 This is the part that shocked the entire tech 00:29:39.539 --> 00:29:43.000 and venture capital world. In 2022, Andreessen 00:29:43.000 --> 00:29:45.799 Horowitz, also known as A16s, one of the most 00:29:45.799 --> 00:29:48.640 prestigious VC firms in the world, wrote their 00:29:48.640 --> 00:29:51.259 largest single check ever to a single founder. 00:29:51.400 --> 00:29:54.059 Not much. They invested roughly $350 million, 00:29:54.380 --> 00:29:57.299 and it valued flow at over $1 billion before 00:29:57.299 --> 00:29:59.519 it had even opened its doors to a single tenant, 00:29:59.640 --> 00:30:02.740 before it had a product. Okay, stop. After the 00:30:02.740 --> 00:30:05.259 S -1, after the cereal box, after the bankruptcy, 00:30:05.480 --> 00:30:08.799 after the $10 billion write -down by SoftBank, 00:30:08.839 --> 00:30:11.880 how does Marc Andreessen, a guy who literally 00:30:11.880 --> 00:30:14.779 invented the modern web browser, look at Adam 00:30:14.779 --> 00:30:18.240 Neumann and say, here's $350 million? It speaks 00:30:18.240 --> 00:30:20.500 to a very powerful theory in venture capital 00:30:20.500 --> 00:30:23.049 called founder mode. Andreessen wrote a whole 00:30:23.049 --> 00:30:25.690 blog post justifying the investment. He argued 00:30:25.690 --> 00:30:28.390 that Adam is a singular visionary. He said that 00:30:28.390 --> 00:30:30.769 Adam fundamentally redefined the commercial office 00:30:30.769 --> 00:30:33.450 space. And sure, he made mistakes, but he has 00:30:33.450 --> 00:30:35.650 the energy and the vision to do it again for 00:30:35.650 --> 00:30:38.049 the home. They're betting that the crazy is a 00:30:38.049 --> 00:30:40.549 feature, not a bug. That's exactly it. They're 00:30:40.549 --> 00:30:42.730 betting he's learned his lesson about governance. 00:30:43.190 --> 00:30:45.089 Or more cynically, they're betting that he'll 00:30:45.089 --> 00:30:46.750 just make them a ton of money before he crashes 00:30:46.750 --> 00:30:48.430 the plane again. That is the billion -dollar 00:30:48.430 --> 00:30:50.589 question. But Flo didn't stick to just apartments, 00:30:50.829 --> 00:30:54.630 did it? No. In late 2024, the rivalry reignited. 00:30:54.769 --> 00:30:56.970 Neumann announced that Flo would launch a direct 00:30:56.970 --> 00:30:59.650 rival to WeWork, offering flexible office space 00:30:59.650 --> 00:31:01.869 within their residential buildings. So he is 00:31:01.869 --> 00:31:04.049 competing head to head with the company he founded, 00:31:04.230 --> 00:31:06.589 using the money he made from leaving it, backed 00:31:06.589 --> 00:31:08.789 by new investors who think he can do it all again. 00:31:09.049 --> 00:31:11.430 Precisely. And he's doing it with that signature 00:31:11.430 --> 00:31:15.049 eccentric flair. In 2024, he also bought a magazine 00:31:15.049 --> 00:31:17.789 called Whalebone, a cool little surf and culture 00:31:17.789 --> 00:31:20.250 magazine based out in Montauk, and he renamed 00:31:20.250 --> 00:31:23.369 it Flo Trip. Flow Trip. Flow Trip. It's a marketing 00:31:23.369 --> 00:31:25.710 vehicle for the brand. It's full of beautifully 00:31:25.710 --> 00:31:28.509 shot articles about wellness, community, travel, 00:31:28.650 --> 00:31:32.210 and surfing. It's the we vibe all over again, 00:31:32.230 --> 00:31:34.690 just with a new logo. So here we are in early 00:31:34.690 --> 00:31:38.130 2026. Let's recap. Adam Neumann is back on the 00:31:38.130 --> 00:31:40.970 billionaire list. Forbes estimates his net worth 00:31:40.970 --> 00:31:44.750 at around $2 .2 billion. His company, Flow, is 00:31:44.750 --> 00:31:47.029 operating thousands of apartments and now office 00:31:47.029 --> 00:31:49.150 spaces in places like Florida and even Saudi 00:31:49.150 --> 00:31:51.390 Arabia. And at the same time, WeWork is operating 00:31:51.390 --> 00:31:53.950 separately, it's profitable, and it's run by 00:31:53.950 --> 00:31:56.170 a boring software company. It's like a split 00:31:56.170 --> 00:31:58.210 reality. It raises a really difficult question 00:31:58.210 --> 00:32:00.410 about our economic system, doesn't it? Was Adam 00:32:00.410 --> 00:32:03.329 Neumann a visionary who was just right too early? 00:32:03.609 --> 00:32:05.869 Or was he a brilliant salesman who sold dollar 00:32:05.869 --> 00:32:08.230 bills for 50 cents? I think the answer might 00:32:08.230 --> 00:32:12.470 be both. He clearly, clearly identified a real 00:32:12.470 --> 00:32:15.650 hunger for community in modern life. He saw that 00:32:15.650 --> 00:32:18.390 the way we work was changing before almost anyone 00:32:18.390 --> 00:32:22.069 else did. He forced the entire state real estate 00:32:22.069 --> 00:32:25.130 industry to modernize. He did. If you walk into 00:32:25.130 --> 00:32:27.450 a boring office building today and there is a 00:32:27.450 --> 00:32:29.990 lounge with nice coffee and a couch, that is 00:32:29.990 --> 00:32:32.329 because Adam Neumann's influence forced them 00:32:32.329 --> 00:32:34.690 to compete. He set a new standard. But he also 00:32:34.690 --> 00:32:37.529 proved that community is incredibly hard to scale. 00:32:37.839 --> 00:32:40.400 You can't mass produce a genuine feeling of belonging 00:32:40.400 --> 00:32:43.059 like you can mass produce iPhones. At some point, 00:32:43.059 --> 00:32:45.740 it becomes fake. And he proved, maybe more than 00:32:45.740 --> 00:32:48.680 anyone else, that in the modern economy, failing 00:32:48.680 --> 00:32:50.720 big is actually much safer than failing small. 00:32:51.420 --> 00:32:53.759 That is the so what for our listener. If you 00:32:53.759 --> 00:32:56.579 borrow $50 ,000 from a bank to start a bakery 00:32:56.579 --> 00:32:58.900 and you fail, the bank takes your house, you're 00:32:58.900 --> 00:33:01.119 ruined. But if you burn through $10 billion of 00:33:01.119 --> 00:33:02.940 venture capital, you get a golden parachute, 00:33:03.180 --> 00:33:05.480 you keep your mansions, and Andresen Horowitz 00:33:05.480 --> 00:33:08.440 gives you another $350 million to try again. 00:33:08.640 --> 00:33:11.640 It's the fail -up phenomenon. It suggests that 00:33:11.640 --> 00:33:14.740 confidence, the pure, unadulterated ability to 00:33:14.740 --> 00:33:17.599 tell a compelling story. might be the single 00:33:17.599 --> 00:33:20.220 most valuable asset in the 21st century economy. 00:33:20.440 --> 00:33:23.180 Maybe more valuable than actual competence. In 00:33:23.180 --> 00:33:25.319 the short term. Absolutely. The market rewards 00:33:25.319 --> 00:33:27.480 great storytellers. It rewards people who can 00:33:27.480 --> 00:33:29.859 create a reality distortion field and suspend 00:33:29.859 --> 00:33:33.099 disbelief. Adam Neumann is arguably the greatest 00:33:33.099 --> 00:33:35.480 salesman of his generation. The fact that the 00:33:35.480 --> 00:33:37.480 first WeWork collapsed doesn't change the fact 00:33:37.480 --> 00:33:39.400 that he sold the dream effectively enough to 00:33:39.400 --> 00:33:41.960 become a billionaire. So as we wrap up this deep 00:33:41.960 --> 00:33:45.359 dive, we leave you with this image. WeWork survived. 00:33:46.029 --> 00:33:48.529 It shed its charismatic, reckless founder and 00:33:48.529 --> 00:33:50.789 became a healthy, normal business. It grew up. 00:33:51.069 --> 00:33:53.789 But Adam, Adam refused to grow up. He just found 00:33:53.789 --> 00:33:56.109 a new playground. And a new, even bigger allowance. 00:33:56.390 --> 00:33:59.069 Exactly. And it forces us to ask, does failure 00:33:59.069 --> 00:34:00.849 actually matter anymore if you feel big enough? 00:34:01.329 --> 00:34:03.930 Or is catastrophic failure just a stepping stone 00:34:03.930 --> 00:34:07.069 for the 0 .01 %? A provocative thought to end 00:34:07.069 --> 00:34:09.710 on. Something to mull over on your commute. And 00:34:09.710 --> 00:34:11.670 hey, if you happen to be listening to this in 00:34:11.670 --> 00:34:14.190 a co -working space right now, do me a favor. 00:34:14.969 --> 00:34:17.389 go to the kitchen, check the cereal boxes. Just 00:34:17.389 --> 00:34:19.090 to be safe. Just to be safe. You never know. 00:34:19.449 --> 00:34:21.289 Please check the show notes for all our sources, 00:34:21.449 --> 00:34:23.909 including that wild S1 filing and the breakdown 00:34:23.909 --> 00:34:26.110 of the flow deal. Thanks for listening to The 00:34:26.110 --> 00:34:27.670 Deep Dive. We'll see you next time.