WeWork rework

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Ethan Wu (0:36)

Pushkin.

In the Easy Money era, we saw a lot of crazy business ideas and crazy founders get funded. But there was perhaps no Easy Money founder that was as Easy Money as Adam Neumann, the head of WeWork. He turned a real estate company, subleasing office space into a tech company that was going to elevate your consciousness to a level never before seen. And it ended in tears for the investors. Today on the show, why some big name investors want to bring Adam Neumann back.

This is Unhedged, the markets and finance show from the Financial Times and Pushkin. I'm reporter Ethan Wu here in the New York studio, joined by reporter Ortensa Aliaye, who, as I understand, is basically best friends with Adam Neumann.

Ortensa Aliaye (1:25)

Yes, I'm here to elevate Unhedged listeners' consciousness.

Ethan Wu (1:30)

Well, I'm already feeling elevated, my consciousness is at least.

So Ortensa, you've covered this for a while, right? You've been kind of in the thicket of WeWork for some time.

Ortensa Aliaye (1:39)

Yes, I came into the WeWork story relatively late. It was after everything had sort of fallen apart, and it was about to go public through a deal with a special purpose acquisition company, SPAC.

And I followed Adam Neumann around the party at the Stanford Hotel whilst eight months pregnant.

Ethan Wu (2:01)

How was that?

Ortensa Aliaye (2:02)

Tiring.

Ethan Wu (2:03)

Yeah, it sounds tiring. I want to take it back though, because I feel like it's been a few years, people may not have fresh memories about WeWork. The broad scope of it is, you know, there's a very straightforward business model, right? They buy buildings, they sublease out chunks of them, they make them pretty, kombucha on tap, beer on tap, you know, fancy glass doors or whatever. Straightforward business. What happened is a lot of money got poured into it by one particular investor, that's SoftBank of Japan, run by Masayoshi Sun.

And the whole thing went a little bananas, didn't it?

Ortensa Aliaye (2:38)

It did. Just a quick clarification. The WeWork business model was long-term leases. So I don't think they bought a lot of their buildings. I think they were, that was the sort of liquidity mismatch. They were taking on these long-term leases and providing short-term leases to people who are renting.

And yes, that was the entire business model effectively with some apps and websites. And they got repackaged into a big tech company.

Or that's how they market it.

Ethan Wu (3:06)

We can argue about how tech it really was.

Ortensa Aliaye (3:08)

Yes, exactly.

Ethan Wu (3:08)

But what was your, before we get into it a little more, what was your favorite moment of the WeWork saga that was?

That's hard. So many to choose from.

Ortensa Aliaye (3:16)

There's so many to choose from. I don't know if you've read the book that came out by the two Wall Street Journal reporters, which was great. But my favorite moment is obviously just smoking pot on a plane.

Truly flying high.

Ethan Wu (3:31)

That's just kind of Tuesday for Elon Musk, right? Well, my favorite moment, I dig back in the archive for this a little bit, was they had this summer camp, right? They had like an annual summer camp where all the employees would have like a big bonfire. They had their own little burning man, essentially. And there's a great anecdote in New York Magazine from a few years ago where one employee told the reporter that they would camp out in tents, and she woke up one morning to see urine pooling on the top of her tent. And she just had to sort of pray that it would not fall on her.

She's just looking up at the urine, hoping for the best.

So anyway, this is all to say like, it got a little crazy. It got a little crazier.

Ortensa Aliaye (4:08)

We urinate.

Ethan Wu (4:11)

Not at Bridgewater. All right, let's get this back on the rails.

Like you said, Rutenzo, and thank you for the corrective, they would take long-term leases, they would sub them out on sort of a short-term basis. There's some kind of real business model there, and there are other companies that actually do that for real. But WeWork ended up getting to this preposterous evaluation with all this venture capital money from SoftBank. And the whole thing, it kind of imploded. I mean, what was the story of the fall, just given briefly?