Adam Neumann?s WeWork debacle wasn?t possible without VC help

(“My soul can’t breathe,” she said.) And Adam had a meeting with SpaceX CEO Elon Musk, where he told Musk that getting people to Mars would be the easy part; building community would be hard.But, the book explains, WeWork was a functional business in 2012, when it made a profit. Another thing working in Adam Neumann’s favor was the tech industry’s cult of the founder, which had become part of the venture capital pitch; the phrase “founder friendly” appears in the book’s index. The two realized they had a book on their hands pretty quickly — “WeWork was the apotheosis of like, every concerning trend,” Brown says — and they wanted to know how the whole debacle had happened.I talked with Brown and Farrell about their book, the venture capital industry, and the spineless cast of characters — the board of directors, for instance, who simply thought it would be easier to let Adam Neumann have his way. “It still is kind of wild to me how Adam Neumann had the ultimate power to make all of this happen and do all the things he did when you have some of the most sophisticated financiers in the world behind him,” Ferrell tells me. People started coming to the reality in mid-2019 [after the IPOs of money-losing ride-share companies Uber and Lyft], that like, wow, companies that lose billions of dollars — that might not be a cool business model long term. And so then a normal, rational human might say, “Okay, well, let’s just grow kind of at whatever pace that allows and not try to take over the planet in the next five years.” But that wasn’t the sort of venture capital mindset.Why did venture capital get involved?MF: Adam Neumann was fixated on making the company as big as it could possibly be and, you know, getting the valuation high as it could possibly be. It’s like “You want this jet?” Everyone would be like, “No, I don’t want the jet.” And then, you look at the minutes — oh, unanimously approved.MF: You know, the easy answer was, “Well, my job as a board director is to have the share price go up.” The share price kept going up and up and up, and they were getting extremely wealthy. Or would people have been like, yeah, sure, we’ve got a bunch of weird shit out here?MF: One of the things we saw on Palantir, even, there are some very extreme steps that the founders had taken — they could have no economic stake in the company and keep voting control. Most of the super-highly-valued unicorns going public are slightly better in terms of, you know, not hemorrhaging cash.Did we learn any lessons from WeWork?EB: No.MF: For a minute, it really seemed like they did. Should you stand up to someone like him?EB: One of the things we really feel strongly about is this isn’t a story about Adam Neumann and WeWork being special. And if it wasn’t Adam Neumann, who, you know, bought a plane and a jet wave pool company and started an elementary school with his VC money, it would have been someone else doing something maybe slightly less crazy.