The Cult of We Review: Brown and Farrell's definitive documentation of how WeWork thrived and eventually crashed

Around 2017 or so, a lot of my freelancer friends would wax eloquent about this co-working space that was gaining traction in Mumbai — WeWork. On the one hand its glass-walled meeting rooms, wackily designed phone booths, and hassle-free administration gave one the quiet needed to get work done. On the other hand, house-plants-filled common areas, free artisanal coffee on premise and an overall college-canteen type vibe gave members enough opportunities to inter-mingle with each other and even collaborate on projects. WeWork offered the best of both worlds not just for the self-employed but also for smaller enterprises who couldn’t afford high rentals on office spaces. WeWork was, by then, a well-established name in the co-working sector globally. It often made it to the front pages of technology news sites. It would make one wonder: How could a real-estate renting company make it to technology news? How was it attracting insane amounts of venture capital (VC) investment? Yes, startups such as Uber, Airbnb and other Silicon Valley companies had made valuation numbers like $50 billion or $100 billion seem at par for this course in the early to mid-2010s. But these were genuine tech platforms unlike WeWork which was a real-estate leasing company above everything else. WeWork’s roller-coaster journey has so far been recounted by countless documentaries, at least two limited episode-podcasts —  WeCrashed and Foundering — one of which was adapted into a Hulu docu-drama series as well. Just last October, there was a book, Billion Dollar Loser, as well. Why should anyone bother with yet another book on this saturated subject matter? Having heard both podcasts on the WeWork saga and seen a couple of news documentaries on the real-estate-turned-tech-turned-‘save-the-world’-startup, I thought I knew most of the details. After having read The Cult of We: WeWork and the Great Startup Delusion by WSJ journalists Eliot Brown and Maureen Farrell, I can vouch that there’s a lot more to the story that’s not been covered previously. The book not only teases out juicy details of how WeWork went from its dizzying heights to its crashing fall, but more importantly also places WeWork’s journey in a wider context. This is significant to fully appreciate how WeWork and its charismatic co-founder Adam Neumann took everyone on a wild ride. On the surface, it’s easy to dismiss WeWork’s demise to its co-founder. But things are a lot more nuanced. The larger question the book addresses is: What made a startup which was once valued at close to $96 billion in September 2018 (and was on the precipice of going public) implode so quickly that its valuation was stripped down to $2.9 billion by May 2021? Despite being a business and startup culture book, there’s so much drama in here that it almost reads like a thriller. I wouldn’t go so far as to say that it’s unputdownable. But as far as big tech biographies go, it comes close. The rise of WeWork… and co-founder Adam Neumann’s God-complex Silicon Valley is littered with a lot of stories of founders hyping up their companies to get more funding. Let’s face it, if only being a geek with a great product to sell was the criteria, Apple co-founder Steve Wozniak would have been more popular than Steve Jobs. But as Jobs demonstrated countless times, having a great product wasn’t enough. It needed just the right amount of showmanship. Neumann was certainly an expert in that aspect. There is no other way to put it — Neumann’s persuasion and the story he was selling were irresistible. Neumann had prestigious names — finance giants Fidelity, T Rowe Price, and Wellington; CEOs of arch rival banks JP Morgan as well as Goldman Sachs; Alibaba founder Jack Ma; and above all, Softbank founder Masayoshi Son — under his spell till mid-2018. All these names collectively pooled in over $10 bn in venture capital to help WeWork grow — despite the startup not showing any profits in over a decade (if you excuse the minor profit in 2012). WeWork took off in an era when operating losses weren’t really that big a roadblock as long as the founders showed constant growth — be it in terms of customer acquisition or revenues or expanding in newer geographies. WeWork convincingly ticked off all three boxes. Even though its net losses were also increasing proportionally, investors overlooked that number as long as Neumann was able to deliver on other growth metrics. For investors, the promise of cashing out rich was too huge to bother with WeWork’s path towards profitability. While a lot of the money was used to grow WeWork, Neumann also ensured that his own personal wealth was rising in proportion to the VC money he was getting. Over time, Neumann’s over-confidence knew no bounds. Adjectives such as ‘unprecedented’, ‘baffling’ or simply ‘WTF’ will pass through your mind multiple times as you are reading about the stuff Neumann was allowed to get away with. Here’s just a fraction of what he pulled off:

• No one blinked an eye when Neumann went about buying and renting properties for his family in some of the toniest neighbourhoods in the US for many millions of dollars using VC money.
• Neumann was allowed to get away with screaming conflicts of interests such as being an investor in buildings which were rented out to WeWork; selling himself the copyright for the word “We” for $5.9 mn; having his wife Rebekah, his friends and relatives in key decision-making positions at WeWork.
• While Neumann waxed eloquent about climate change, he never thought twice before zipping around the globe in his private jet — in which he also smoked marijuana while on a transatlantic flight.
• Neumann made personal angel investments (in tens of millions of dollars) in companies of friends that had nothing to do with WeWork.
• The man even had delusions of setting up a WeWork office on Mars and hoping to resolve the Middle-East crisis on a WeWork premise!

I can go on with more examples, but this gives a slice of what it was like to be in Neumann’s shoes. He epitomised the “Fake it till you make it” culture of Silicon Valley. But thanks to WeWork’s growth — which would only be possible because of the timely infusion of VC money — none of his rash behaviour was called out till it was too late. And just when things couldn’t be getting more out of hand, Neumann managed to convince the one man who had endless pots of cash. Masayoshi Son’s generosity gave Neumann’s recklessness the required escape velocity The story of WeWork and Neumann cannot be separated from the hubris brought about by Masayoshi Son, the CEO of Softbank Inc. The Japanese investor whose early $20 million bet in Alibaba is worth over $100 billion today is a well-regarded figure in investor circles. Son’s risk appetite was rarely matched by any mainstream institutions in the last decade. Just like Neumann, Son had enough charm on his side as well. While gathering capital for his Softbank Vision Fund — a $100 billion investment fund — Son was able to walk away with a $45 billion commitment after a 45 minute meeting with Prince Mohammed bin Salman of Saudi Arabia. The Vision Fund’s $100 billion warchest was ready to be carved out and distributed among upcoming startups to accelerate their growth paths. Son’s end goal was to flip the $100 billion to $1 trillion over time. And the way Son idolised WeWork, it seemed as though he saw this startup as his new-age Alibaba investment. After interacting briefly with Neumann in India at a startup conference, Son took up Neumann’s offer of visiting a WeWork location in Manhattan in 2016. Son spent less than 30 minutes on this official meeting with Neumann before handing him a check of $4.4 bn. Son’s only complaint to Neumann was that he wasn’t ‘crazy enough.’ For someone like Neumann, who had already spent millions of VC dollars on personal endeavours, the ‘go crazy’ directive was like dropping a cigarette in a pool of gasoline. At some point Son even asked Neumann to work towards having 10,000 employees, and 10,000 WeWork locations — numbers which just seemed randomly picked. In 2018, Son promised another $20 bn to fuel WeWork ambitions. It’s no wonder Neumann went ballistic with his spending and vision to “elevate the world’s consciousness”. Take Masayoshi Son out of the equation and it makes one wonder if Neumann would have eventually tasted humble pie and come to his senses. Would he still be heading WeWork? One can’t say for sure. Son did get pushback from his team regarding WeWork. But the heady growth numbers and trillion-dollar dreams ensured both Neumann and Son were beyond listening to sensible suggestions by then. One instance in the book particularly makes you wonder: what was a veteran investor like Son smoking when he agreed to this? (We know for sure that Neumann was smoking some high-quality marijuana). When Neumann had decided to pivot WeWork to encompass all aspects of living and working, he drew a triangle with WeWork (co-working), WeGrow (specialised schools) and WeLive (using the WeWork model for leasing out living premises) and put $1 trillion under each entity. Neumann hoped to make ‘The We Company’ into a $3 trillion enterprise. Son liked the idea and predicted that WeWork would be worth $10 trillion by 2028. Putting things in perspective, the authors mention how the entire US market was worth $30 trillion then, a number that was arrived at after multiple decades. Son and Neumann hoped WeWork would be a third of that in under two decades. Delusion? Over-confidence? Call it what you want, but Neumann and Son were already planning to work with this goal in mind. “Neumann had already dabbled heavily in self-enrichment, and the company was far from focused. But as the dust settled after WeWork’s implosion, it became clear that Son was Neumann’s enabler-in-chief. He handed Neumann far more money than anyone else — more than $10 billion — and encouraged him to engage in even riskier behavior, all despite objections from his own staff,” noted the authors. It’s all about the little details One of the most impressive aspects of the book is the amount of fine details the authors have shone a light on. It almost makes one feel like they were flies on the wall in whichever room Neumann was. Funnily enough, at some point after Neumann’s exit from the company, his office was actually checked for snooping devices as the co-CEOs believed that secrets were being leaked to the press. Things such as Son’s office in Tokyo having a Samurai sword, Neumann’s growing up years in an Israeli community, the music that boomed in WeWork conference rooms to pump Neumann or even the Don Julion 1942 tequila shots being a part of every major meeting involving Neumann, add a lot of colour to the reading experience. The other standout feature of the book is how the authors break down the finer aspects of venture capital, funding, private vs public investors, terms such as EBITDA, as well as the run-up to an Initial Public Offering. It makes the book approachable for anyone interested in the subject and not just the tech and finance bros who understand Valley dynamics. It also provides a good breather from the otherwise break-neck WeWork narrative. Missing on certain things While it is fascinating to learn about the crests and troughs in the WeWork journey, at times you feel confused as the authors throw many numbers at you. I would have really liked to get a macro perspective of where WeWork was in terms of its valuation and projected losses through the growth years. Considering a lot of agreements in WeWork’s journey happened on randomly drawn charts, I feel the authors could have used that style to visually show where WeWork was at various points in time. A timeline of sorts if you will. It would have had a much better impact to know stuff like: WeWork gets a $4.4 billion infusion by SoftBank and Neumann goes and buys x,y,z for his personal use, or something to that effect. A definite missed opportunity. We do get a ringside view of what happened with Neumann, but his co-founder Miguel McKelvey almost seemed like a pushover. Apart from making guest appearances in the journey, one rarely comes to know more about McKelvey. Moreover, the majority of the narrative of the book focuses on what went on at the upper management level. Having read many technology biographies recently, the one aspect I really missed was looking at WeWork through the lens of its regular employees. The authors did scratch the surface, but I am quite sure a chapter on what personal havoc some of WeWork’s earliest employees went through when they saw their paper wealth evaporating while Neumann walked away with millions would have made for a compelling read. Lessons learned? WeWork’s rise and fall certainly is a cautionary tale for not just startup founders but also VCs and bankers. But as the authors have pointed out towards the end of the book, memory is in short supply. In the immediate aftermath of WeWork’s implosion following its S1 document filing — a registration statement for a company which is mandatory before it gets listed on US stock exchanges — there was a halt in random valuation numbers unless a startup showed a clear path to profitability. WeWork’s S1 filing was the final nail in its valuation coffin as it showed the whole world the emptiness behind all the promises made by Neumann. It also demonstrated how Neumann had made up convenient metrics to hide the money-bleeding. Also, all the various conflicts of interests were there for the general public to see. The aftermath was brutal. As a result, a lot of startups which presented a lofty picture of what they were went under. Softbank’s Vision Fund never really had any success stories that could eclipse its total misjudgment of WeWork’s promise. It seemed as if the heydays of higher valuations were done for. Well, that was till the pandemic happened. And all was forgotten. The authors document how people who were bored from staying and working from home used trading apps such as Robinhood to lead to massive valuations for money-losing consumer-friendly brands as demonstrated by many successful tech IPOs. Softbank could finally claim a winner in Doordash (an online food delivery platform) which was valued at $56 billion by the US stock markets — thereby turning $680 mn of Softbank investment into a $10 billion windfall. As for Neumann, it’s difficult to say if it was his foresight or just the fact that WeWork wanted to get rid of him as soon as possible, but he ended up getting a severance package as though he was leaving behind a winning startup. Neumann got over $445 million as part of his exit package, made WeWork pay his $423 million debt accrued over time and was also allowed to sell off $578 million of WeWork stock according to a recent report. Within five minutes of their first date, Neumann’s soon-to-be-wife Rebekah had told him to his face, “You, my friend, are full of shit”. This is a tale that was proudly recounted by Neumann in many of his talks during WeWork’s heydays. It would be over a decade before the entire world would agree with her.