Reeves Wiedeman, a New York Magazine contributing editor, has turned out a rollicking yarn, Billion Dollar Loser, centered on the evolving WeWork disaster, a bottomless money pit that has consumed billions upon billions of investor capital built largely on the spellbinding charisma of Adam Neumann, an Israeli entrepreneur.
Neumann, an easygoing six-foot-five Adonis who could sell sand to a Saudi, convinced investors that his stone-simple real estate model – rent office space long term, then carve it up into postage stamps rented to operations ranging from one-person start-ups to large corporations temporarily in need of extra space – somehow represented the dawn of a millennium of human work.
He did so with ludicrously lofty rhetoric. Neumann didn’t just have a business plan, but rather, in his words “Instead thinking of it as WeWorld, let’s just think of Powered by We. Think of it as what we call internally WeOs. An operating system that makes work better, living better.” In short, “We are here in order to change the world. Nothing less than that interests me.”
Unfortunately, his ground level real estate nous did not match his charisma and eloquence. The nuts and bolts of building maintenance, accounting, and IT escaped him; WeWork’s supposedly digitally connected offices were chronically plagued by non-functioning WIFI.
Neumann’s evolving megalomania was compounded by that of his wife, Rebekah, the cousin of Gwyneth Paltrow. Rebekah was an aspiring actress herself whose lifestyle choices grew exponentially with the cash flow supplied by investors under the spell of her husband’s charisma. Before long the couple was flying thousands of employees to “summer camps” in the U.S. and England, while they themselves circled the globe in the world’s then-priciest bizjet, the company’s lavishly outfitted Gulfstream G650.
Not content to bend the space-time continuum of the workplace, Neumann aimed to do so with residential operations (WeLive, a shared-space micro-apartment operation), private elementary schooling (WeGrow, run by Rebekah), and a gym club franchise, WeWork Wellness.
By late 2019, the company’s far-flung office empire was bleeding $1.37 billion annually, and so was forced to tap the IPO market for further liquidity. By this point, Neumann’s shenanigans, which included WeWork’s $5.9 million payment to him for his trademark on the word “We,” were coming to light, but it was the company’s SEC S-1 registration form, required of all companies wishing a public listing, that set off alarm bells. Normally a drab document, under Rebekah’s direction it became a glossy extravaganza that looked more like an issue of Architectural Digest than a filing form, so excessive that even the SEC asked the printer to slash the number of illustrations.
Adam Neumann turned out to be one of those folks who look better in person than on paper. The over-the-top S-1 rang alarm bells all over Wall Street; the IPO collapsed, and Neumann was forced out (but not without a $185 million “consulting fee,” a portion of which is still in dispute). The IPO, though, may still be brought back from the dead with, you guessed it, a SPAC.
Wiedeman’s marvellous narrative can be faulted on only one count: its lack of historical perspective. The Neumann/WeWork narrative arc of the charismatic entrepreneur brought low through adulation and hubris is as old as financial capitalism itself. Human nature being what it is, in a society that judges men by their wealth and enterprises by their market cap, great financial success can savagely corrode ethics and business judgment, a story that has played out with ever greater frequency over the past few decades.
The author’s historical myopia, though, is easily forgiven – he set out to describe the shooting star trajectory that was Adam Neumann’s business career, and in this he succeeded admirably; I guarantee you won’t be able to put the book down. For the advisor, its lesson could not be clear enough: beware the heroic, charismatic entrepreneur, a lesson so important that it should be reinforced with forays into similar episodes in both the recent and distant past.
The good news is that you can obtain the historical perspective missing from Billion Dollar Loser with a reading list that is every bit as much fun. Start with The Smartest Guys in the Room by Bethany McLean and Peter Elkind, the story of the Enron con. Then travel back into the Roaring Twenties with Frederick Lewis Allen’s description of Samuel Insull’s electrical utility empire in The Lords of Creation, then finish up with Edward Chancellor’s nonpareil Devil Take the Hindmost, which describes Neumann’s most remote business ancestors, John Blunt of the South Sea Company and the nineteenth century English railway titan, George Hudson. Finally, for sheer moral turpitude, nothing beats John Carreyrou’s exposition of the Elizabeth Holmes/Theranos disaster, Bad Blood.
Not only will you be entertained, but the WeWork, Enron, Insull, Hudson, Blunt, and Holmes narratives will alert you to the signs of impending catastrophe: lofty rhetoric, millennial predictions, and public adulation that almost inevitably give rise to overweening hubris. With luck you’ll be able to immunize your portfolios against the siren song of the never-ending parade of entrepreneurial heroes served up by your colleagues, your clients, and a breathless financial press.
Elon Musk and TSLA, anyone?
William J. Bernstein is a neurologist, co-founder of Efficient Frontier Advisors, an investment management firm, and has written several titles on finance and economic history. He has contributed to the peer-reviewed finance literature and has written for several national publications, including Money Magazine and The Wall Street Journal. He has produced several finance titles, and four volumes of history, The Birth of Plenty, A Splendid Exchange, Masters of the Word, and The Delusions of Crowds about, respectively, the economic growth inflection of the early 19th century, the history of world trade, the effects of access to technology on human relations and politics, and financial and religious mass manias. He was also the 2017 winner of the James R. Vertin Award from CFA Institute.
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Reeves Wiedeman, a New York Magazine contributing editor, has turned out a rollicking yarn, Billion Dollar Loser, centered on the evolving WeWork disaster, a bottomless money pit that has consumed billions upon billions of investor capital built largely on the spellbinding charisma of Adam Neumann, an Israeli entrepreneur.
