Who wants this office space, really? There is far more than enough of it in Manhattan. Everyone builds bigger buildings, then complains about traffic. Duh.
These buildings are all the work of tycoons who want to feed their egos, not really provide something necessary to the city. If there was demand, this place would be more full than empty already.
It's nonsense.
9
The story proves that Neumann is a better con than Son who is too eager to prove an ethnic Korean Japanese can outsmart, more daring and smarter than native Japanese by taking on WeWork. In that process, he forgets to ask is there enough room to make real estate commercial leasing a viable concern at the scale WeWork had envisioned. In the end, Mr. Son has vaporware in his hand and out 15 billion from his investors' pocket and all these postures of salvaging vaporware are only an illusion because vaporware will be vaporized quickly in the air.
3
I'm glad WeWork helps a lot of people find office space, but the environment drove me crazy. Dogs in the office, no privacy barriers, communal desks, no strong task lighting just overhead LED tubes. Sorry, I'm old fashioned. I, and a lot of other freelance folks, need to be able to make calls without others hearing. We need spaces that aren't overly designed with trendy chairs that aren't fully adjustable or ergonomically-challenged desk heights. We don't necessarily need a private office, but a cubicle that muffles general office chatter and phone calls would be nice. I don't need Keurig or Nespresso machines, just a decent coffee shop nearby that ISN'T Starbucks.
20
Got to have respect for Mr Son. At least he’s not cutting and running away from the problem. If the ship goes down, the captain will be at the helm.
2
I work for a small business. Five of us in our Chicago office. Where else would you have us work? A coffee shop? Only from home? We need to be on calls together sometimes. We need to get out of the house sometimes!
To set up your own office is a hassle, and includes longer term contracts (we’re month to month with WeWork). We don’t have IT employees in Chicago, so what if the internet goes down? Or the printer? Who deals with lost key cards or a broken dishwasher? It is so much easier to outsource that to WeWork.
They grow too fast and paid their CEO too much. But for everyone saying there is no need for them - you are incorrect. We do love our WeWork.
22
My first thought when this house of cards began to fall was that there will be no holiday window displays at the Fifth Avenue Lord & Taylor because WeWork made them an offer they couldn't refuse.
I miss Lord & Taylor. As a Child those windows and B. Altman were where my Christmas began. I still went down there every holiday season, that is until this year.
9
I agree. When they bought out Lord & Taylor, they brought on their own downfall.
4
We Work: It's like Bernie Madoff was in the office building real estate business.
24
I am just a pedestrian in this but I wouldn't invest in a business that's main product is its own growth. If they stop growing they go bankrupt and they will stop growing, and growth predicated in investment as opposed to revenue is a loser.
13
WeWork is increasingly dubious here.
To the point where one headline calls it We [might]Work
Yes some do appreciate some premises but the name is far too enthusiastic
1
A desperate SoftBank is predictably throwing good money after bad. The last refuge of an inept lender. How many times before has that been the cunning plan in the financial industry?
As for WeWork, its a simple boom and bust real estate business. Nothing high tech about it. The bells and whistles to attract customers is just the latest low tech exercise in determining what kind of commercial real estate might be attractive in the current market and meeting this perceived demand, a real estate business plan as old as the seven hills of Rome. What is hair raising is the insane valuation the company achieved. It is indicative of far too much money chasing far too few real high tech opportunities. It will end badly. The SoftBank guy condemned to run WeWork better carry around a chair at all times for when the music stops.
13
Whomever thought this was going to be a success? These tribes of rich people feed each other whether there is any talent, worthiness and originality, or not, to what they do. The CEO walks away with $1 billion. Imagine! The 15,000 staff get the shaft. Some elite or rich tribes are going to end the world. They are not good people, and they were never good for democracy, justice or liberty...or true meaningful innovation.
13
@ExhaustedFightingForJusticeEveryDay The CEOs feed each other by building up fake achievements. Reminds me of the story of two druggies selling shots to each other, claiming ‘great business activity’ but only the initial IOU to show for it. Too many ‘startups’ use fund raises as ‘end objective’ and metric for success - even while losing much of the investment.
8
"Saving WeWork Will Be Hard"
Then why save it?
6
@Jimal because softbank wants to save face so as not to turn future VC away....
8
Sounds like a real-estate opportunity ideal for Eric Trump.
6
The only good thing about ww's fall is that it is softbank's money and nobody else....
12
Given the lack of confidence in this company and how quickly they're burning through cash, I would not be surprised if they end up in bankruptcy. Scott Galloway has been saying as much for a while. And he's knows the details much more than I do. I hope the fallout doesn't hurt too many people and that someday karma bites Neumann back.
7
Makes me think of WebVan and some other gems foisted on the starry-eyed and witless.
3
WHY DID SOFTBANK HAVE TO PAY NEUMANN ANYTHING?
I admit that I don't know the details, but there were multiple self-dealing issues, fraud, plus he was about to de called on a $500 MM personal loan from Chase.
If his defense about the self-dealing was that he owned the company, then that would create a "piercing the corporate veil" issue -- i.e., if he's claiming that there's no difference between himself and the corporation to defend himself against accusations that he abused corporate assets, then there's no difference between himself and the company when it comes to the company's liabilities, either. In which case he would have been on the hook for all the losses, now and forever more.
And, while SoftBank's investors might agree to recapitalizing the company to save part of the invested funds, WHY ON EARTH WOULD THEY AGREE TO PAYING NEUMANN $1.7B? How can SoftBank have agreed to this?
13
@Rudolph simply to save face and not turn off future VCs....
2
When Wall Street makes a bad bet, it seems like the citizens of the United States pay.
8
The real issue here isn't whether WeWork survives albeit it seems destined to herald the latest collapse of unicorn corporations.
The much greater economic risk if (when) WeWork craters is the amount of empty office space that will be dumped onto the real estate markets en masse.
Should WeWork file bankruptcy its Trustees will be in the position to immediately cancel any and all of its real estate leases. This will leave many landlords with suddenly empty space and no financial recourse to recoup lost rental income.
The collapse of WeWork will result in a real estate space fire sale.
12
The Adam Neumann story is repeated in a non-infuriating and non-obvious way every day in every S&P 500 company. And it’s been going on for a long time.
9
ww's work philosophy is just a joke/cam; its offices are no place for serious startups but for people to hangout, have fun, and hookup...!
13
I really can’t stop thinking about the messed up incentives at work when a complete and utter failure of a founder/CEO is allowed to walk away with such a vast amount of money. What was his incentive ever to run a real business? He absolutely knew he would walk away from the wreckage a billionaire. This seems like an obvious peril for the company. I though the leaders compensation was supposed to be at least RELATED to the company’s performance but evidently he had already won the game the moment he got the initial investors to buy in, and thereafter had no actual reality based motivation to do anything but play at being a CEO, using other people’s money.
40
Their prices are too high.
Also, most co-working spaces don't think outside the box. I've got a side hustle and I would love to use a co-working space in the evenings and on the weekends (ie at a fairly underutilised time) but most don't accommodate that.
5
It’s office space — even for floating desks — is not cheap. An earlier commenter has it correct, for a startup it is a luxury expense, not one that will make sense as credit tightens and we hit the upcoming economic downturn.
12
Been to several WeWorks, here in Los Angeles, as well as in NYC, and never once got any actual work done. Noisy and full of three-dimensional flurry (someone is *constantly* cleaning out the kombucha), WeWork really seems like the place to go for "busyness" -- and not business. Next!
24
Its much nicer to work at home. Who needs beer to work? My coffee is better. I dont have any annoying hipsters around and I can listen to the Grateful Dead Channel or Howard Stern. Collaborating with 28 yr. olds is highly over-rated.....lol! bwahahahahahahahahahahaha
31
@Phil yeah phil! GD I agree! I spin the dead all day at home. Sans hipsters. Just me my dog and jerry and the boys.
1
Big money got snookered by another sleazy real estate operator from ny city. Sound familiar?
37
Because it's a garbage product no actual people want. Take your exploitation and go
11
It was akin to outright theft Neumann, this loser company's founder, got a huge payout. That money which was paid to him by the sucker SoftBank should be clawed back.
23
I spent a few days in WeWork (working) and the fruit water is great. The biggest distraction is the HR people doing their "interviews" with employees of firms I know nothing about; with the doors sometimes open and in those glass offices. You can easily pick up on the stress and the vibe.
7
How many people want space in the Navy Yard?
The whole point of Wework is that it makes workers / owners of small companies lives’ easier ... and that is definitely not the Navy yard ..
So hard to get to and no food .
16
Fortunately Neumann will walk away from this mess a billionaire. There is justice (for a very select few).
6
@Alex Fortunately? Only for him...
I think WeWork, like a lot of new start-ups that seem to be propelled by the egotistic recklessness of a heavy cocaine user (metaphor only, I'm not implying any drug use by founders), overestimated the demand for their services, and their ability to eliminate all competition.
If all the new tenants starting up their own ventures prospered, grew, and continued to need more space, then WeWork might have a sustainable business model. But most of them will fail, like most of all new ventures always do. The ones that succeed will, most likely, want to invest in their own permanent offices, where they can attach branding insignia wherever they want, and thus won't use WeWork's services anymore.
If WeWork charged enough rent to cover their immense costs, then most new ventures would find cheaper alternatives. The trend now is to have people work from home, or outsource some labor internationally.
I think SoftBank made a major mistake pouring billions into this venture when it has been solidly in the red since its creation. I wouldn't want to invest in WeWork or even SoftBank at this point.
39
Start-ups aren't looking to take high-priced space in shiny new buildings like the one in the photo. They're move likely to be several blocks inland, in grubby walk-ups in Williamsburg.
18
A non profit business in my town had its founder leave town after it's shared workspace opened, the parent organization he started shut down 14 months later and the shared workspace has been given over to another organization to run. Rumor says its grant monies run out in December.
A for profit company setup a shared workspace and shut down after six months.
Lotta distractions out there but one still has to make money.
The We founder did, he made a lot of money just to go away...
8
Simple napkin math and known market data predicted this outcome.
38
WeWork is about to open a new chapter - 11.
66
Sitting on a private plane with the CEO of your rival company, explaining your pricing strategy for taking their customers, sure sounds like it should raise antitrust flags. Was Hodari just supposed to say "Cool...". More likely it's a prelude to a market allocation conversation.
21
All the investors who put money into this turkey deserve the beating that they will inevitably take. The founder has earned a prominent place in the Boondoggle Hall of Fame.
55
This is what happens when the Federal Reserve floods the banking system with free money. Fads like this get funded. The plan was to securitize it, take the money, and run. It reminds me of AOL.
46
@James Ribe ... so far only one guy took the money and ran. Everyone else, including Softbank, is left holding the bag.
4
WeWork opened their first space in Washington several years ago, and I was treated to a private tour by the manager. I was unimpressed with the space, as most of the walls were actually windows, so there was very little privacy. The manager told us that this is like an incubator because you bring in all these little companies, and there are synergies discovered around the free beer and coffee fountains. He said a tech firm may be talking to a design firm, and they can work together for mutual profit. As if those firms couldn't find each other any other way.
We pressed him for how this was going to make money beyond just a plain vanilla real estate company, and he told us this was "proprietary information."
Since then, I visited several WeWorks. I can't stand the noise that is constant all day long, and the lack of any privacy. I never understand how they were different from any other shared workplace.
If Softbank's Mr. Son had done just two minutes of due diligence, he would have realized there is nothing there. But obviously, he's a billionaire, so that makes him so much smarter than the rest of us.
A pox upon them all. It was a scam from the start that any halfway intelligent person could see if they looked past the hype.
97
@randy - I don't understand the appeal. Around here, people usually startup in the garage and if the business catches on they either buy up a small city to build millions of square feet of office space (Bill and Paul) or they build an indoor rainforest for their office space (Jeff). Or, they just buy out a mom-and-pop shop, retool it, and before you know it they are in every grocery store and street corner around (Howard).
As for meeting around free beer and coffee fountains? Again, around here if it ain't a microbrew made on site or coffee beans roasted on site served up in a holiday cup with pumpkin pie spice no one is gonna touch it:) Good grief, they'll just go work for Bezos for 6 figures and sip lattes up in the Crow's Nest in the rainforest.
https://www.youtube.com/watch?v=MRwLyefu0G0
5
@randy Brilliant summary!!!
2
The real scandal shouldn't be Adam Neumann's greed but rather the lack of oversight from their board of directors. The scary thing is that while Neumann will go down in flames the members of the board who enabled this debacle - like the board members of Theranos before them - will continue to profit from their incompetence in failing to provide effective oversight. This is what happens when you stack your board with bros who see board seats as quid pro quo opportunities rather than serious responsibilities.
59
@Cyclocrosser
This critique would be more appropriate for a public company. As a private company owned primarily by Neumann and SoftBank, the board was appointed and controlled by them. They are the ones who lost the most - and appropriately so.
28
@Citizen yeah. 4year contract at 185 million. He lost big...
10
@Citizen
Neumann walks away a billionaire.
6
Three months ago WeWork was still publicly the real estate industry's flavor of the month with none of the major players ready to be the canary in the coal mine. Too many people making too much money to admit what everyone with any time in the real estate industry knows - too much space occupied by one tenant, especially one without an underlying business, is very risky.
Reminds me a lot of the banks and their loose credit standards 15 years ago.
28
@Penpoint I can't blame the real estate industry for fleecing WeWork, but I can blame WeWork for allowing itself to be fleeced.
3
Another flawed business model foisted on the public. Shared office space seems so counter-intuitive in a cut-throat competitive business environment. The work I do would not be possible with non-workforce members sharing my space.
13
@Tortuga Start up companies ,they type WeWork targeted, have little money to begin with, and a high failure rate. Why would any company target such an unstable market to begin with?
9
@randy Volume, and a willingness of those small companies/individuals to be comfortable spending more money than necessary with the thought that it will make them more money down the line. Its the same mentality that Uber capitalizes on when people go out and buy cars just to drive for Uber.
7
So much cheaper to just work at my local coffee shop and also support them. This business model seems unimpressive.
72
@mark for an individual that can make sense. For a small company, not so much. You likely need a space for staff to work together. Not to mention that if your work requires phone time or (gasp) video conferencing doing those things in a coffee shop is just not OK.
Yes, I'm talking to you, people I see doing this every day.
26
Beautiful building which appears to be more than six floors. How does one enter?
2
It's a 15 story building, counting the double-height lobby as one floor. I assume one enters through the front door toward the street, or the rear door toward the dock. They might have added a private ferry, tacking on yet another expensive boondoggle.
1
Thee is a an NYC ferry that is the same price as subway and it extremely pleasant .. only stops a few places but if you live On east side or Astoria / LIC it is amazing .
3
@Dan Stackhouse and Karen--Thank you for responding; I would loved to tour it. I taught in Czech Republic (Prague) and one of my favorite things was to see the inside of the beautiful buildings. They usually surpassed ours. The ferry sounds amazing and how lucky the inhabitants are to have that!
1