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Commercial real estate is rated on a scale from Class A, which includes the world’s premier skyscrapers, to Class D—fixer-uppers like the narrow brick building on the corner of Grand and Lafayette that Neumann was touring.
The pace was frenetic. “Half day?” one manager asked an early employee who started packing up at 6:00 p.m.
EVERY GENERATION REMAKES the office to suit its needs. The Industrial Revolution produced the factory, and the large manufacturing floors championed by the mechanical engineer Frederick Taylor were the original open-plan offices. When the first white-collar workspaces emerged in the twentieth century, they resembled an assembly line. In 1939, Frank Lloyd Wright’s Johnson Wax Headquarters introduced brighter lighting and more humanity. Cubicles took off in the 1980s alongside the desktop computer, giving workers a bit more individual privacy and dominating the work landscape until Silicon
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Adam said, explaining that so long as the economy was humming along, he had only one goal. “My job is to keep growing until I’m too big to fail.”
WeWork was bringing in millions, and by the end of 2012, it made a tidy $1.7 million profit—the last profitable year in the company’s history, according to the Wall Street Journal.
General Atlantic, a venture capital firm, after one of its employees pointed out a new error in WeWork’s model: a “-” had been replaced with a “+” in a spreadsheet, which prompted WeWork’s model to assume that its buildings were operating at more than 100 percent occupancy.
“You’ve got three options: fast, right, or cheap,” Kramer said. “WeWork always picked fast and cheap.”
“What’s shocking to me is that you could look at our P&L”—profit and loss—“and then you could pull up Regus’s, and it’s the exact same business,” said a member of WeWork’s finance team. “A lot of people got caught up in the hype and Adam’s charisma, but when you looked at the numbers, it was always kind of clear.”
When he tried to offer an example of how WeWork separated itself from other office space operators, he mentioned how much fun people had at its recent Halloween party, where Busta Rhymes performed. WeWork’s competitive advantage, it seemed, was knowing how to put on a good show.
Uber, another Benchmark company, had recently been valued at $17 billion. Gurley was critiquing an NYU professor who said that Uber’s valuation was inflated “by a factor of 25.” The professor’s analysis presumed that Uber’s total addressable market, or TAM, was the $100 billion taxi-and-limousine market. Gurley believed that Uber’s TAM was every single car on the road—a market theoretically worth $1.3 trillion.
“Diversity?” Adam replied. “I’m a brunette, Michael’s blond, and we have a Noah.” Brodsky, who is gay, turned bright red.
Sarbanes-Oxley Act of 2002, the federal law instituted in the wake of the Enron
Hony Capital was a fund started by John Zhao, a Chinese businessman who agreed to invest $600 million—the company’s largest funding round yet. “The nature of the private markets is that if nine smart investors pass, it only takes one relatively dumber investor, and suddenly we’re valued at $16 billion,” the finance team member said.
“Travis [Kalanick] can come across as hard to work with, but he’s to the point in a very intelligent and constructive way,” Morselli said. “Adam was always finding ways to force teams, and people within teams, to compete with each other, as if it were all a zero-sum game.”
It would be impossible to invest $100 billion in five years by funding a flock of nimble sparrows; Masa needed to find albatrosses that could use his cash to overcome barriers to entry in industries where the theoretical returns were also large enough to justify the costs— an industry like real estate, with expensive leases and significant capital expenditures to go along with an enormous total addressable market.
Several months into the negotiation, SoftBank’s team asked to see WeWork’s projections from previous investment rounds to assess whether the company had fulfilled its promises. “There were some projections we missed by [roughly] 80 percent,” the WeWork employee said. “You figure that’s the ‘gotcha moment’ where they say, ‘You guys are full of shit.’
“In a fight, who wins?” Masa asked. “The smart guy or the crazy guy?”
MASA’S INVESTMENT IN Adam and his company was officially announced on August 24, 2017. It totaled $4.4 billion, some of which came from SoftBank itself, and $1.4 billion of which was earmarked for WeWork’s continued expansion into Asia—a deal structure that kept it below Saudi Arabia’s veto threshold.
But IWG operated five times as many spaces as WeWork did globally, and was still valued at just $3 billion. What exactly WeWork was doing to merit a tech company valuation of $20 billion remained a mystery.
‘Okay, we average two hundred bucks per square foot, so that’s $600 million in revenue, then you put a 20x revenue multiple on that’ ”—the lavish multiplier WeWork was being given by investors—“ ‘and that’s an extra $12 billion in valuation.’ ” WeWork employees had always been impressed with Adam’s ability to swiftly tabulate large numbers, and several of them had watched as he took this type of calculation to its next logical conclusion. “We were working on a deal,” one WeWork real estate executive said.
Lindsay Baker, who had just joined WeWork as its first head of sustainability, pushed back against the rationale, fearing that it would come across as insincere. Meat was far from the company’s biggest environmental concern; all the resources that went into the gallons of almond, oat, and cow’s milk they put out for coffee had a much greater impact on the environment, not to mention the wood and aluminum WeWork used in construction and the aging HVAC systems in its spaces.
At the end of 2018, as WeWork rapidly approached ten thousand employees, half of them had been with the company for less than six months.
“Community Adjusted EBITDA.” The acronym stands for “earnings before interest, taxes, depreciation, and amortization,” and is a standard way of measuring financial performance. The phrase “Community Adjusted” was a WeWork creation, meant to apply the company’s rhetorical flourish to a metric that would present its financial picture in a rosier light. By removing certain costs like design, marketing, and administrative expenses, which the company argued would dissipate over time, Community Adjusted EBITDA transformed
Vision Fund’s largest investments, but part of the fund’s conception was to pursue “blockbuster” deals that would pour not just billions but tens of billions of dollars into individual companies. In some ways, the strategy was a necessity. There were only so many good ideas to spend $100 billion on, and the Vision Fund already seemed to be pushing that limit: Masa was investing in food delivery, virtual reality, vertical farming, genomics, driverless cars, car rentals, dog walking, pizza-making robots, and the online sale of sports apparel.
money. At one point, Adam threw out the idea of buying Cushman & Wakefield, the $4 billion commercial real estate giant. He made a bid to acquire Sweetgreen, the salad maker.
At 9830 Wilshire, WeWork was negotiating with Michael Ovitz, the CAA cofounder, who still co-owned the building. Ovitz was one of Hollywood’s shrewdest dealmakers, and a young WeWork employee found himself reading Ovitz’s memoir in a desperate attempt to find some negotiating angle.
The analysts noted that the branded cups WeWork put out in the meeting were printed with the tagline always half full, which wasn’t the most optimistic slogan for a company running a business in which 50 percent occupancy would mean insolvency.
Masa’s second Vision Fund was teetering, but he asked for patience: on a conference call with investors, Masa said that he may be underappreciated in his time, much like Jesus Christ.
