Every bubble produces its own poster children. One of the more astonishing is WeWork — a company that promised to defy the gravity of conventional real estate transactions by leasing long-term and renting short-term. At one point, it was valued at $47 billion — now it is warning that it may no longer be considered a “going concern.” How did we get here?
Inspiring vision and great timing
Back in 2020 I had suggested that WeWork and a whole bunch of other highly valued startups were basically a re-run of the dot.com debacle of the late 1990’s. If something is not sustainable, eventually the end will come. And so it seems we are looking at the end for WeWork. Let’s review.
Adam Neumann and Miguel McKelvey came out of the Great Recession with a business concept — “swanky” office spaces that could be rented out to nomadic workers, originally calling the company Green Desk. After three years of meteoric growth (and great timing), they sold that company to the building’s owner and plowed the proceeds into the business now known as WeWork. As Neumann said in 2011, “The next decade is the ‘We’ decade, where collaboration is the future of innovation. This generation watched big companies crumble. They have seen regimes overthrown by Facebook pages. If you look closely, we’re already in a revolution. We want to make it positive.”
What was once hailed as a transformative force in the world of real estate and shared workspaces is now a poster child for the excesses of the 2010’s, fueled by cheap money and a long economic expansion. Among other things was the lack of understanding of the transient advantage phenomenon — WeWork’s initial success masked the ease with which competitors could replicate its model. The IWG Group, operating as Regus, invented the market decades ago, and WeWork didn’t innovate much beyond the fancy architecture and free beer. Flush with investor cash, it was able to out-bid rivals for great spaces (for a while).
The Intoxicating promise of exponential growth
WeWork’s initial ascent was nothing short of spectacular. Neumann painted a picture of a global network of interconnected spaces where individuals and businesses could flourish…