For many years, the thinking in Silicon Valley has been that you have to put “founders first” — people like Mark Zuckerberg were only able to make Facebook as profitable as it is today because no one fucked with them. Adam Neumann, the CEO of WeWork, represents perhaps the worst possible permutation of the “founders first” ideology. On seemingly nothing more than his eccentricity and ambition, he was able to raise billions of dollars to make WeWork into a company once valued at $47 billion. In a different time, perhaps one in which the market wasn’t freaked out by the prospect of a recession in the medium-term future, he might have succeeded in becoming a billionaire on the back of a company fated to expire once it ran out of other people’s money to spend.
Founder-executives such as Zuckerberg and Twitter’s Jack Dorsey are much more well-known than Neumann. This makes a certain amount of sense: Facebook owns many of the fun or addictive apps on your phone, and Twitter is where the president expresses whatever opinions pop up in his spongy brain. Both men run publicly traded companies and billions of people use their services. WeWork, by comparison, possesses a healthy-sounding but comparatively small 527,000 “members” of its coworking spaces around the globe, and was this week forced to scrap its much-hyped IPO. The delayed public stock offering is a particularly bruising black eye, and it may be the best evidence yet that Neumann is, pound-for-pound, the Silicon Valley founder most full of shit without being widely known as the founder most full of shit.
The announcement this week that WeWork’s long-awaited IPO was off was made amid widespread investor skepticism of the venture capital-backed office leasing company’s ability to justify its stupidly large valuation, a number initially bandied about by WeWork executives and their private investors. In a webcast to his staff in the hours after news broke of the delayed IPO, Neumann “told employees he had been ‘humbled’ by the aborted initial public offering of his lossmaking property group, admitting he needed to learn lessons about running a public company,” the Financial Times reported.
If anything, screwing up a public offering like this is merely a capstone to Neumann’s nearly decade-long quest to set as much of his investors’ money on fire as possible. Since launching WeWork with the backing of real-estate investors in 2010, Neumann has spun a tall tale about his company, arguing that by creating something like a frictionless office-leasing experience, he was building a business that would make real estate like the software industry: not something that customers owned, but to which they would pay for access. Of course, this is how much of commercial real estate worked before WeWork existed, but Neumann was a bold personality who was able to sell investors on the idea that applying the ethos of Silicon Valley to real estate would deliver them juicy returns like the ones delivered to early investors in Facebook or Google. All that WeWork had to do was keep growing its number of customers.
This is, roughly, the logic that compelled SoftBank, the Japanese conglomerate that puts more money into tech companies than any other private tech investor in the world, to stuff more than $7 billion into WeWork’s coffers in the past two years — and on terms that allowed Neumann to retain majority control of the company. This also turned Neumann into one of an increasingly common variety of business celebrity: the panglossian Silicon Valley CEO whose commitment to business success is matched only by his vision for making his business a vehicle for social change. It was in this spirit that WeWork rebranded as the “We” company this past January, and in a widely mocked SEC filing described itself as “a community company committed to maximum global impact,” whose “mission is to elevate the world’s consciousness.”
The flipside of all this brilliant business strategery is that Neumann appears to be something of a nutcase. Born in Israel, he immigrated to the U.S. in his early 20s, starting a series of small businesses (including a failed venture to create a collapsible heel for women’s shoes) that culminated in the creation of WeWork in 2010. Neumann was a conventionally unconventional startup CEO, reported the Wall Street Journal in a juicy profile of him published Wednesday; he loved partying, walking barefoot in the office, and investing his personal wealth in meaningless bullshit: “Like some high-profile CEOs in tech, he hopes to live forever, according to three people who heard him say this, and has invested in life-extension startup Life Biosciences LLC,” the Journal reported.
In addition to boozy corporate retreats, the company liked to arrange entertainment for its staff, bringing in the Red Hot Chili Peppers, Florence and the Machine, and Lorde, among others. Arguably this went too far, the Journal noted, as in a 2016 meeting where Neumann somberly addressed laying seven percent of WeWork’s staff off before inviting a member of Run DMC into the room to perform “It’s Tricky” while trays of tequila were passed around. A huge fan of private jets, WeWork also shelled out $60 million for its own jet, which Neumann has flown all around the globe. Neumann has also expressed higher aspirations than being a CEO: he is reportedly interested in one day being the prime minister of Israel, although that dream might be dashed after Neumann carried a “sizeable chunk” of weed “stuffed in a cereal box” on a non-WeWork private plane trip there earlier this year. Neumann has also stated his desire to be “president of the world,” a position he apparently made up.
Predictably, Neumann has allegedly been up to some hinky work with his own personal finances. He “cashed out more than $700 million from the company ahead of its initial public offering through a mix of stock sales and debt,” according to a July Wall Street Journal report, while other employees were disallowed from selling their shares or forced to sell them at far lower rates. Public filings prior to the planned IPO revealed that he had WeWork buy the “We” trademark from him for $5.9 million, which he paid back after it was pointed out that this is pretty grifty thing to do. Neumann’s wife, Rebekah Neumann (née Paltrow, first cousin of Gwyneth), was previously awarded significant say-so in the company’s operations, according to the Journal, such that she “ordered multiple employees fired after meeting them for just minutes, telling staff she didn’t like their energy.”
This is not a comprehensive accounting of Neumann’s conduct or of WeWork’s business operations; that would require something like the length of War and Peace to be sufficiently thorough. A sunny interpretation of the facts above would be that WeWork is now facing the consequences of the free market — having long been shielded by the generosity of its private investors, primarily SoftBank, WeWork is learning the hard way that stock market investors are far more scrutinizing than venture-capital financiers who make their money by betting on the longest of longshots. Neumann, after all, says he is “humbled,” and perhaps his chastening will bring the business back to reality. Failure is the mythological lifeblood of Silicon Valley, the roadblocks that speak to lessons learned and wisdom acquired. Neumann and WeWork could return better, leaner, and stronger than ever before.
This is the inevitable optimistic spin that WeWork will put out when it returns to Wall Street for a second stab at a public offering, which it needs to do because it has debt to pay off and lenders are increasingly unlikely to give it the money that it needs. But there is no reason to buy into it. As WeWork’s revenue grows so do its losses, and the strange charisma that allowed Neumann to raise seemingly endless capital before will be much harder to acquire going forward. There’s a very real chance that WeWork either combusts, or is forced to become a smaller, much less profitable kind of company, likely without Neumann at the head.
On some cosmic scale of justice, Neumann is small fry. He didn’t build a social network that allows livestreamed murder, and there are no WeWork-assisted genocides that we know of (yet). But by the most primitive logic of capitalism — which is that it is important for profit-seeking entities to make a profit — Neumann is perhaps in a league by himself. After all, this is a guy who bought stakes in office buildings with his personal wealth and then leased space in those buildings back to his company. What happens to his company and his power next will be a test of the basic rules of economic physics. But while he probably won’t get the adulation and power of a Zuck or a @Jack, Neumann himself will probably come out fine. Kind of a bummer, man.
