The New Republic: The Sinister Privilege of Burning Billions

Read on The New Republic

By the time Adam Neumann arrived in Brooklyn’s Dumbo neighborhood in 2008, most of the creatives who’d once lived and worked on the borough’s waterfront were gone. They’d been exiled years earlier, as successive mayors cracked down on code violations and landlords nursed visions of converting everything into luxury condos. The financial crisis had left a lot of empty buildings like the one where Neumann and his architect buddy Miguel McKelvey rented an office. The pair pitched their landlord on an idea for a creative commune of sorts: a “Kibbutz 2.0,” where musicians and designers would collaborate on projects and escape twenty-first–century alienation; the “world’s first physical social network,” Neumann called it. His landlord, Joshua Guttman, bit, ceding a floor of an evacuated artist loft to the idea. It marked the first major outlay in what would become more than $20 billion, as rich guys plowed money into Neumann’s vision over the next ten years.

Guttman had spent much of the previous decade trying to drive creatives out of his buildings (tenants allege that he’d slashed holes in the roofs, set rats loose, and given the neighborhood crackhead a key). He’d even earned the New York Post moniker “Inferno Landlord” after a series of mysterious arsons on his properties.

Clearly, Guttman attracts arsonists. No company has ever burned cash quite the way Adam Neumann’s office-sharing empire did in the decade that followed. WeWork expanded to 111 cities, becoming the biggest private office tenant in New York City, London, and Chicago, and spent millions of dollars on parties so debauched that it’s frankly miraculous no one died. (In one lawsuit, Neumann himself is described as getting so drunk at one company event that he climbed on a table to attempt to pull a lamp from the ceiling because it wasn’t dark enough.) WeWork renovated the company’s $60 million Gulfstream, then paid a team to spend “three days straight” downloading movies on its central computer for his five children to watch. The company even paid Neumann $5.9 million to change WeWork’s name to The We Company, a trademark he owned. Meanwhile, he nurtured an assortment of quixotic start-ups (peddling keto-compliant coffee creamers and energy drinks, medical marijuana, yoga for children, and high-tech wave pools) and a group of high-profile friendships (Jared Kushner, Jamie Dimon, Rahm Emanuel, Ashton Kutcher, SoulCycle co-founder Julie Rice) that reads like an Era’s Most Obnoxious list.

In 2018, WeWork’s $1.9 billion in losses exceeded its revenue by close to $100 million, though its annual burn rate was closer to $6 billion. Then, this past August, Neumann invited the public to the bonfire, filing an initial public offering prospectus that consolidated, in lurid detail and buzzword-heavy prose, the breadth of Neumann’s grift and the depth of WeWork’s balance-sheet disaster: The company had a staggering $47 billion in lease obligations; Neumann and his “strategic thought partner” wife, Rebekah, (her official title, per the prospectus) had extracted close to three-quarters of a billion dollars out of WeWork over the years. It unleashed a torrent of negative headlines about a company no one ever took seriously enough to thoroughly scrutinize.

We’re so accustomed to opiate manufacturers and oil drillers committing crimes in pursuit of profit that we often forget how sinister and unfair the privilege of losing billions is. As Matt Stoller, a veteran Hill staffer whose new book Goliath chronicles the birth and death of antitrust law, points out, the insidious thing about companies like Amazon and Facebook is that no one can afford to compete with them. That’s chiefly because an elite cabal of venture capitalists decides who gets to burn billions without attempting to post a profit; it’s in their interest to pick winners early and double down often. Market domination at any cost was also the plan for WeWork, which extracted huge concessions from its own landlords and acquired apps designed to streamline office work in the hopes of somehow enslaving its members in a kind of technological walled garden.

The trouble—from an investor’s perspective—was that Neumann seemed more interested in buying mansions and shooting tequila than in obliterating his rivals. WeWork’s culture of tyrannical partying is detailed in a 2018 sexual harassment lawsuit filed by the company’s former “director of culture.” (Among its salient allegations: One employee was fired for not staying late enough at a party, and “too blackout drunk to remember” was repeatedly treated as an acceptable response to a sexual assault investigation by the human resources department.) With each new revelation, WeWork looked more like a high-powered Ponzi scheme headed straight for bankruptcy court than a classic VC darling run amok.

Read the full story on The New Republic.

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