Links - 20th December 2019 (1) (WeWork)

BBC Radio 4 - Best of Today, Wednesday's business with Dominic O'Connell - "[On WeWork] 'Fear of missing out. Fund managers dive into these stocks because they are worried that one of them might be the next Google, Amazon - whatever it is. And there's a lot of money. There's a lot of cheap and easy money around'
'Well Dominic, you said that about Slack as well and they did a direct listing... It's down about 30% from its direct listing price. I think the point with WeWork is that some of the things you've seen in the prospectus are so wildly absurd and unusual that fund managers, who are naturally going to be cautious about the money that they are responsible for are going to take a skeptical view of it. I mean changing human consciousness might be an admirable goal for the Dalai Lama, but for a company with a long track record of burning cash and asking for much more it's maybe not the top priority"

BBC Radio 4 - Best of Today, Wednesday's business with Dominic O'Connell - "‘The name of the game, you know, going back to the very earliest pioneers in Silicon Valley has always been that these companies lose money in the name of growth. But that doesn't mean that every company losing any amount of money for as long as they want in the name of growth is the same thing. When Uber went public, there were tons of Uber investors who got up saying this is the next Amazon, everyone criticized, that Amazon lost money too. But if you compare the actual companies at their time of IPO, they're very different stories. Amazon lost money until it dominated a core market and then used that dominant position in that market, which was profitable, to then expand into other areas and invest in what it's doing. Uber on the other hand, is losing more and more money, quarter after quarter. Its growth is slowing, which is the big thing you can't do if you're going to lose this much money. And there is no end to this money losing in sight. And it hasn't even dominated its core market. You compare something like Amazon, which you know, rivals only a company like Walmart in its ecommerce dominance. Uber isn't even the most dominant ride sharing company in China, which is the biggest rideshareing company on earth. And it utterly failed. And what it said it was existential which was getting into autonomous vehicles, because they attempted to steal billions in trade secrets from Google to get there. I mean, two companies couldn't be more different in terms of focus, execution and having a plan
‘Where do you think WeWork fits into this range of companies? Is it more of an Uber or more of an Amazon?’
‘Well, if there's such a thing, it is a more extreme Uber than Uber. It’s hard for everyone to believe. I mean, it is losing more money. It has a worse business model that's based on you know, short term loans and real estate and things that could fluctuate at any moment. On top of that WeWork has even worse corporate governance than Uber did. Remember, one of the big complaints with Uber was this sort of untouchable base of Alpha Bros. And the fact that the founder and former CEO, Travis Kalanick controlled the whole board. Well, the company had to get rid of that structure in order to go public. WeWork still has that structure and arguably is more corrupt. Most of the headlines we've seen about investors rejecting this deal haven't actually been about lousy business model and losing money. It's been about how bad the corporate governance is’"

WeWork is a prime example of 'counterfeit capitalism' - "WeWork describes itself as offering the '"space-as-a-service" membership model that offers the benefits of a collaborative culture, the flexibility to scale workspace up and down as needed and the power of a worldwide community, all for a lower cost." In other words, the company sublets office space... The old business model, in case it's not obvious from this McKinsey-ified chart, had been to make stupid graphics to show investors in hopes that they give ex-CEO Adam Neumann more money. The new business model will be to beg investors to give money to the new co-CEOs, who will radically change the company by wearing suits to investor presentations instead of ill-fitting t-shirts... The company is losing an enormous amount of money and has no path to profitability at scale... Neumann was an untested CEO with an unlimited line of credit. As I read more stories about him, I noticed reporters dance around his personality. They call him "quirky," "charismatic," "unorthodox," and so forth. These are code words for something else. Consider a few descriptions of how he and his family behaved. His wife, a New Age guru who was the chief impact officer, would fire employees because she "didn't like their energy." They banned employee expensing of meals with meat (employees later saw Neumann eating meat)... Mass layoffs followed by an expensive alcohol fueled party hosted by a celebrity reflects a problematic leadership style, to put it mildly. Neumann paired poor judgment with self-dealing. By now the story of Neumann's corruption is well-known; he has pulled roughly $700 million from the company, owns buildings personally he leases to WeWork, and flies around on private jets... I don't think there's a better example than [WeWork] of using philanthropy as moral cleanser. It is something Anand Giridharadas has written about as a pivotal element of modern capitalism.
Clickbait title aside, this is a good summary of how market discipline exposed WeWork. Apparently VCs throwing their money away is supposed to show that capitalism is broken. And the complaints about predatory pricing don't hold water either, since apart from Amazon and Walmart the other companies have not succeeded in dominating their markets (and anyway both have maintained their low prices despite having market power)
This is a good example of CSR as marketing tool - and why we should be skeptical about it

With WeWork and Theranos, line between charm and fraud doesn't exist - "The brand era manufactured the notion that inanimate objects could take on animate characteristics. Objects and companies could be personified — likable, young, cool, patriotic. Corporate comms execs began to scale the charisma and vision of the founder. Overpromise and underdeliver has become a means for access to cheap capital ("We'll have a million autonomous Teslas on the road within 12 months"). You could fake it till you make it. The lines between charm, vision, bullsh*t, and fraud have become so narrow as to be one line.The MDMA of capitalism is the corporate communications exec. According to LinkedIn, there are more corporate comms personnel working for Bezos at Amazon (969) than journalists working for Bezos at the Washington Post (798). When firms are still searching for a viable business model, the temptation to go full yogababble gets stronger, as the truth (numbers, business model, EBITDA) needs concealer... we looked at the S-1 language of a bunch of tech firms and made a qualitative assessment of the level of bullsh*t. Then we looked at their performance one year post-IPO. We believe there is an inverse correlation that may be a forward-looking indicator for a firm's share performance... Adam Neumann's real innovation, so far, is cooking a drug that appears to have no hangover or side effects. WeChrist shat in the punch bowl. People in hazmat suits showed up, gave him $700 million, and asked him to leave — they'll take it from here and try to clean up his mess. Mr. Neumann wasn't fired, he was liberated. The con artist formerly known as Adam is leaving with more money ($700 million) than the firm is currently worth."

WeWork and the rise and fall of fauxtech - "the definition of “tech” has been stretched, geographically and epistemologically, like a linguistic rubber band by louche self-promoters like the WeWork founder. WeWork’s S-1 uses the term “technology” 93 times. The company went as far as leasing space in Salesforce Tower for a “West Coast headquarters” where it houses its own software engineers and designers, developing what it calls “purpose-built technology” to run its locations. It even hired a YouTube veteran, Shiva Rajaraman, to run this operation, giving it the reputation-by-resume veneer investors look for. Let’s get this straight: WeWork is a real estate company. It rents offices and desks. It does so on more flexible contract terms than most traditional landlords, which startups find appealing and, increasingly, so do larger companies... It’s easy to see why entrepreneurs desperately try to spin their businesses as tech. Investable cash is sloshing around the world, trying to find a home where it will grow in value. Some of that lands in venture capital and private-equity funds, which have to put it to work... losing money doesn’t magically turn a food or finance operation into tech. I’ve argued before about why we need to stop parroting problematic terms like “platforms” that serve to obfuscate what companies actually do. Airbnb rents out homes. Uber provides rides. Twitter lets strangers mock you on the internet. Before you call something “tech,” try stating its real business in plain English. If we had refused to accept WeWork as anything but a real estate play from the get-go — if the private-money marketplace had rejected collective delusion — the company would be smaller today. Perhaps even profitable. It wouldn’t be a tech company. But isn’t that better than being a laughingstock?"

WeWork and the Great Unicorn Delusion - The Atlantic - "Neumann insisted that WeWork change its name to the We Company, a title he had already trademarked, thus allowing him to charge his own company nearly $6 million for the shotgun rechristening... If you wake up on a Casper mattress, hail a Lyft to get to your desk at WeWork, use DoorDash to order lunch to the office, hail another Lyft home, and have Uber Eats bring you dinner, you have spent your entire day interacting with companies that will collectively lose nearly $13 billion this year. Most have never announced, and may never achieve, a profit... What investors and founders may characterize at conferences as an aggressive campaign of global expansion reads as something very different on a simple profit-and-loss statement: ridiculously huge losses... the media-tech frontier has closed, and many investors are looking for the next mountain to scale. In the past two years, the so-called FAANGs— Facebook, Apple, Amazon, Netflix, and Google—have seen their price-earnings ratios collapse by more than 60 percent; big tech companies are now trading near their lowest multiples in history"