The documentary : “WeWork: Or the Making and Breaking of a $47 Billion Unicorn” is entertaining (if you don’t get angry easily), and contains an amazing exploration of the behavior of markets, consumers, and leaders. There are many hilarious moments too!
This documentary illustrates the dangers of excess, “hopium”, and building great castles on foundations of ‘fluff’. The top WeWork lessons explored in this article include excess, fuzziness, consumer (and investor) behavior, and spectacles.
https://www.imdb.com/title/tt11188154/
What is WeWork
If we wanted to simplify, we’d say it is a company that leases offices!
They rent buildings (in a not-so-good state usually), and fix them.
Well… how do you go from that to ‘elevating the world’s consciousness’?? This is the funny-sad part.
As “Adam”, the CEO repeats, ‘whoever thinks we’re a real estate company, doesn’t understand’… Why? because they are into building amazing ‘communities’… ‘differentiation’… ‘experiences’… (and later weirder things).
The company had huge growth (not in profits, but in ‘noise’), and was able to bring in huge investments… till the bubble popped at one point, and then it became ‘clear’ to everyone that this was a huge joke (there are many documentaries about this, with colorful titles and a lot of coverage).
This post is not a general discussion about reasons for the failure. It is an observation of some elements that characterize marketing, consumer behavior, and the integration of cultural resources with physical ones.
WeWork Lessons : 1 – Fluff, and more Fluff
In one of the opening takes to the documentary, Adam is trying to memorize and say a couple of sentences for a pitch video. They are not exceptionally difficult, but he somehow keeps failing the task, even though he is “born ready”.
He then farts (not a joke).
Everyone is glad with the fart, and Adam (proudly) qualifies the fart as a representative of cosmic forces. He says: “The Universe Had to Release It”.
Even though it is a joke, nothing could have been more descriptive of him, of the WeWork brand, and of the documentary.
A fart replaces a clear statement, in the middle of a confused struggle. The fart is then considered a cosmic sign. Everyone laughs approvingly.
Everyone, was buying into this legend. Until suddenly no one was. (Everyone includes employees, customers, the media, and investors …).
WeWork Lessons : 2 – ‘Hopium’ and FOMO
FOMO (the fear-of-missing-out) is a great emotion frequently present in consumer behavior studies. It motivates people to act and buy things, even if they don’t really need to… because the opportunity to get them will be lost in the future.
This described how many investors, employees, and customers thought about WeWork. The narrative was too strong. It is too late for you to be an early employee or investor in Amazon, Google,… Well, this is the next one. You better pay up and work hard (or “work till you drop” as Adam told his employees), or you’ll miss your shot.
The company had ugly metrics, and the company’s fundamentals obviously weren’t healthy. Professor Scott Gollaway (an excellent commentator on markets), called it “the most overvalued company in the world.”
Where the investors silly to fall for that?
This is how FOMO works. The data are less important. So are all other ‘objective’ criteria.
If a fart is a cosmic force, who cares about EBITDA ??
In one of their financial documents, WeWork talked about a ‘community-adjusted EBITDA’. One of the guests said that this financial document looked like a novel written by somebody who had eaten some mushrooms!
Pretty soon everyone will be a millionaire. Obviously. I (He) can see it! Let’s not get into the (boring) details, like revenues, cash and profits.
We don’t just believe. We want to believe. This is more dangerous.
Investors or the Media : The Ultimate Sucker !
So if investors were fomo-ing in, what about the media?
Well, what does media want? Stories that are easy to understand and that are – to a degree – sensational. Adam Neumann is a god-send. In all the interviews (and there were many of them), he was given all the space/time he needed to repeat his stories. He was not pressured.
One correspondent actually admitted. He said he didn’t grill Adam in the interview because he didn’t really understand what they were doing clearly.
There was a media hype around WeWork, and the other ‘We’ things, and it became beneficial for media to cover more news about it. A scary vicious loop.
Landlord or Overlord ?
This is basically a familiar case of product-augmentation. We have a basic product (office space), that is being offered as something else: It is being transformed into a ‘cultural product’, where the new customer are not really buying the office space.
They are buying their belonging to a community. They are buying an image of being part of this great movement. This movement that elevates world consciousness.
How do we elevate this product? Technology and Culture. (at best)
We can use some (silly) tech tools to increase the veil of mystery around the company (there was a WeOS – for operating system at some point). Also, We can create a cultural of community, partying, and a vague set of values that define ‘us’.
Sometimes this transition from a basic product into a cultural one can become quite tricky. This is what happened here.
(Reference: I’ve discussed another company that has used technology and innovation to revolutionize the sales of a seemingly boring product: Shein Fashion)
WeWork Lessons : 3 – Stories, Celebrities, and Networks
At some point, and in an interview that features Ashton Kutcher, the latter expresses his expert opinions. WeWork is solid, and Ashton has confidence in the company.
How much is this opinion worth?
Well, unlike Kutcher’s financial reputation, the answer is “disproportionately too much”. People listen to celebrities. We assume they know what they’re talking about.
We make decisions based on how something feels, or based on a range of different cues. This why celebrities matter a lot.
Additionally, other elements like stories, heroes, and symbols add to this ‘air’ of perceived success.
Brands thrive on narratives and associations.
On frequent occasions, Adam starts his presentations or interviews with ‘Shalom’. Why ‘Shalom’? to remind everyone he came from Israel, and he was raised on a ‘Kibbutz’, which is a communal thing (how this can be taken at face value as a positive baffles me), in a faraway place.
This does raise the ‘networks’ question, and the disproportionate access to funds question. Someone knows someone who knows someone, and you have a $47 billion parade.
Anyway, similarly invoking his wife, the messianic speeches, the parties, all fit into this big story. The Story of ‘WeWork’ and all the things that were later related to it, like ‘WeLive’ for example. Thankfully, the horror-like WeSomething that would have been aimed at raising kids was foiled.
Stories fit with a general and approximate understanding. Identities do too. Charisma is more important than understanding… This was made frequently made clear in the documentary. It is not bad/wrong to believe or want to believe. But who should you believe in? Who is your prophet? .
WeWork Lessons : 4 – Excess and Inequality of distribution
A company worth $47 Billion was evaluated again, and found to be much less. There was a substantial degree of inequality of capital distribution that allows us. Can you imagine a company valuation inflated by this much in another country (or outside New York and California)? Maybe, but unlikely.
A big chunk of all the world’s funds and money keep being channeled in a specific direction.
Not only did a company that loses (great amounts of) money get this huge valuation, but it got ridiculous access to cash, that allowed it to buy and acquire many other (proper) companies. If the dream had lasted a bit longer, this might have saved it.
Some countries get disproportionately more money and opportunities. Some cities get disproportionately more money and opportunities.
This same dilemma applied to the individuals too. WeWork is a ‘community’ and a dream. There is no ‘I’ in We (cringe). We are one. Right?
Wrong!
As employees were working till they drop, with hard conditions… Adam was buying multiple homes in different (very expensive) places, a $60 million private jet, and vacationing regularly in Hawaii… Adam was being paid $6 million a year for the ‘We’ trademark. He eventually received $1.7 billion to step down, as others saw their years and efforts evaporate.
In summary, ‘We’ are in this together… You eat the dreams… I will settle for this lousy caviar !!!
This is one of the best WeWork lessons.
“For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away.”
Mathew 25:29 — The Mathew Effect
Dystopian Takes
There are many extremely funny stories that show the level of danger in having this kind of culture.
At one point, a customer leaked some data to the press, after which he was warned that he ‘violated the membership happiness clause’.
Employees were asked (forced) to participate in cult-like cheesy events, and when many expressed lack of interest, their presence was deemed mandatory, and tracked by using bracelets!
Adam would go to the company’s coffee shop (every overvalued company needs at least one), ordered a latte and wanted a cappuccino. Seems he didn’t know the difference. The crazy thing was that people hadn’t told him, so they just started referring to lattes as cappuccinos, and vice versa, to avoid correcting him.
Employees were asked to listen to loud music and fake enjoyment and fun when the offices had visitors… “Smile and Wave Boys… Smile and Wave”.
WeWork Lessons : 5 – Keep dancing – The Show must Go On
Everyone must keep dancing. Everyone must keep pretending.. long enough.
Only at some point it all becomes a pathetic play. The words ‘society of spectacle’ fit as nicely here as does the fart metaphor.
Employees were faking enjoyment, the company was faking success, Adam was faking knowing what he talked about… It doesn’t matter as long as the money was flowing.
Everyone is an actor. Not a creator. Not an Innovator. This isn’t innovation. This is plain acting.
This isn’t how you genuinely create a community. All the discussions of community in the show were suspicious and slimy.
In reality, there is no end goal. In reality, you just have to keep this running as long as possible. You can invent WeLive, WeGrow, WeOS, and WeBS… Doesn’t matter as long as the next sucker (double cringe for Masa Son’s appearance who is investing to catch the ‘singularity’, and tells a megalomaniac with a questionable IQ, who is responsible for many lives, ‘you’re not being crazy enough’) is around the corner.
The Problem with Attribution
Of course, it became easy to see the problems after all this was exposed and researched. This is why I said in the beginning that analyzing the company is not my objective here. Once the cow falls, everyone can be a butcher, and this is why in this post I’ve tried to focus on some psychological and consumer behavior dimensions of the WeWork lessons.
The fault is to a large extent the market’s. In the documentary, one commentator says: “If you tell a 30-something male that he is Jesus christ, he will believe you.”
Additionally, the distance between success and failure is quite short. If the company had remained liquid, we would still be reading Adam’s praise in the popular and business press. In fact, there are many Adam’s with magic cosmic farts leading mega companies now. They command disproportionate wealth and power.
The documentary is rich and thoughtful. I definitely recommend watching it.
WeWork Lessons : Conclusions
Fuzzy understanding is indeed more powerful when we just want to believe something. We conflate different concepts together, and associate things that typically don’t mix. This makes it easier for certain (charismatic) figures to trick us.
Collective identities are quite problematic too. How do we define ‘Us’, ,or ‘our culture’? Can this whole thing be an illusion maintained by events on steroids? How often does the ‘keep dancing’ (or ‘fake it till you make it’) mantra work in entrepreneurial and innovation contexts?
Finally, the bias of markets and their drift towards the preference of differentiation, coupled with extreme centralization is very tricky and dangerous. How can we work to counter this in the interest of more fairness and transparency?