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Maureen Farrell on WeWork’s Investments (Podcast) · Masters in Business

0:02
Speaker 1: This is Mesters in Business with Very Results on Bloomberg Radio.
0:08
Speaker 1: This week. On the podcast, I have a special guest.
0:11
Speaker 1: Her name is Maureen Farrell, and she is the co
0:14
Speaker 1: author of the book Cultive, We We Work, Adam Newman
0:17
Speaker 1: and the Great Startup Delusion. I read this book a
0:21
Speaker 1: couple of weeks ago and just plowed through it. It's
0:24
Speaker 1: a lot of fun. Everything you think about we Work
0:28
Speaker 1: is actually even crazier and more insane and more delusional
0:33
Speaker 1: than than you would have guessed. All the venture capitalists
0:37
Speaker 1: and and big investors not really doing the appropriate due diligence,
0:42
Speaker 1: relying on each other, and nobody really looking at the numbers,
0:46
Speaker 1: which kind of revealed that this was a giant money losing,
0:52
Speaker 1: fast growing startup that really was a real estate play
0:56
Speaker 1: pretending to be a tech play. You know, tech gets
0:59
Speaker 1: one sort of multiple, real estate gets a much lower multiple.
1:03
Speaker 1: And Newman was able to convince a lot of people
1:06
Speaker 1: that this was a tech startup and therefore worthy of
1:10
Speaker 1: a you know, a billion dollar and then multibillion dollar valuation.
1:14
Speaker 1: It's fascinating the it's deeply deeply reported. There is just
1:19
Speaker 1: an incredible series of vignettes and stories and reveals that
1:25
Speaker 1: they're just shocking what Newman and Company were able to
1:30
Speaker 1: fob off on their investors. Everything from ridiculous self dealing
1:35
Speaker 1: um to crazy evaluations, to lackluster due diligence, and then
1:40
Speaker 1: just the craziest, most egregious golden parachute in the history
1:45
Speaker 1: of corporate America. I found the book to be just
1:47
Speaker 1: fascinating and as well as my conversation with Maureen. So
1:52
Speaker 1: with no further ado, my conversation with Maureen Farrell, co
1:56
Speaker 1: author of the Cult of Wheat. This is Mesters in
2:02
Speaker 1: Business with Very Revolts on Bloomberg Radio. My special guest
2:08
Speaker 1: this week is Maureen Farrell. She is the co author
2:11
Speaker 1: of a new book, The Cult of We We Work,
2:13
Speaker 1: Adam Newman and the Great Startup Delusion. The book has
2:17
Speaker 1: been nominated for a Financial Times Mackenzie Business Book of
2:20
Speaker 1: the Year Award. UH. Previously, she worked at the Wall
2:23
Speaker 1: Street Journal since two thousand and thirteen. Currently she is
2:27
Speaker 1: a reporter investigative reporter for The New York Times. Maureen Farrell,
2:32
Speaker 1: Welcome to Bloomberg. Thank you so much for having me.
2:35
Speaker 1: So let's uh start a little bit with your background
2:39
Speaker 1: in history. You you covered capital markets and I p
2:41
Speaker 1: O s at the Wall Street Journal. What led you
2:44
Speaker 1: and your co author Elliott Brown to this story because
2:48
Speaker 1: this was really a venture capital on a startup story
2:51
Speaker 1: for most of the right exactly and for me personally,
2:58
Speaker 1: I was covering the I p O market and end
3:01
Speaker 1: capital markets, this sort of explosion of private capital. So
3:05
Speaker 1: I was looking at we work from both angles basically, um,
3:10
Speaker 1: you know, in this small cohort of the most interesting
3:13
Speaker 1: companies that were going to go public, along with Uber,
3:15
Speaker 1: Airby and be Lift, and it was also part of
3:18
Speaker 1: this group that had raised more capital than anyone ever before.
3:23
Speaker 1: I was looking at soft Bank and its vision fund
3:26
Speaker 1: a lot um and then I mean take within this cohort,
3:29
Speaker 1: there were some pretty interesting companies. But I mean just
3:32
Speaker 1: along the way kept on hearing. You know, Adam Newman
3:35
Speaker 1: stood out as like a little bit of a different
3:38
Speaker 1: um entrepreneur that the stories you would just hear over
3:43
Speaker 1: time just became more and more interesting and a little insane.
3:48
Speaker 1: So when did you decide, hey, this is more than
3:50
Speaker 1: just a recurring series of articles. When did you say
3:54
Speaker 1: this is a book. We have to write a book
3:56
Speaker 1: about this. So we were around August twenty nineteen. Um.
4:01
Speaker 1: By then we were writing more and more about the
4:03
Speaker 1: company as it was clear that it was you know,
4:05
Speaker 1: made it known that it was going to go public.
4:07
Speaker 1: Suddenly it's s one the document the regulatory documents you
4:10
Speaker 1: file publicly to go public. Um, we're out there and
4:14
Speaker 1: they were completely bonkers. They sort of captivated, I think
4:17
Speaker 1: the imagination of the business, uh reading public. But then
4:22
Speaker 1: over the next few weeks we work was on its
4:24
Speaker 1: way to finally doing this I P. O. And my
4:28
Speaker 1: co author, Elliott and I who had been covered He
4:30
Speaker 1: had been covering the company long before me. He was
4:32
Speaker 1: a real estate reporter. He had been covering them since then.
4:36
Speaker 1: He was out in San Francisco covering venture capital, and
4:39
Speaker 1: it just became the most insane story either one of
4:42
Speaker 1: us had ever reported. Like day by day, there's a
4:46
Speaker 1: playbook for I p. O s and they, you know,
4:48
Speaker 1: things are different, but they sort of follow a formula
4:51
Speaker 1: and nothing was making sense, and um, it just was
4:55
Speaker 1: getting more and more insane until this IPO was eventually
4:59
Speaker 1: called off and Adam Newman, the founder and CEO, was
5:03
Speaker 1: pushed out of the company for all sorts of crazy things.
5:06
Speaker 1: So we're gonna we're gonna spend a lot of time
5:08
Speaker 1: talking about that, But you hinted at something I have
5:11
Speaker 1: to mention. Your co author covered real estate. Hey, I
5:16
Speaker 1: was told we work was a tech startup and an
5:18
Speaker 1: AI company and everything else, but a real estate arbitrage play.
5:24
Speaker 1: How did they manage to convince so many people that
5:27
Speaker 1: they weren't a Regius? The CEO of Regis very famously said,
5:31
Speaker 1: how is what they do any different than what we do? Well,
5:34
Speaker 1: they tried to convince Elliot Brown, my co author of
5:36
Speaker 1: the same thing. He had heard about Adam Adam Newman
5:40
Speaker 1: this company. He started seeing the valuation um back then
5:44
Speaker 1: I think it was a billion one point five billion,
5:46
Speaker 1: and when that became a unicorn, suddenly it was like, wait,
5:49
Speaker 1: this is just a real estate play exactly. And he
5:52
Speaker 1: was covering other commercial real estate companies like Regius, and
5:55
Speaker 1: he had followed them and he was like, wait, they
5:57
Speaker 1: only have a couple of locations to even still at
6:00
Speaker 1: that point. So he went in to meet Adam Newman
6:03
Speaker 1: for the first time, and he's got great stories, but
6:06
Speaker 1: as part of it, Adam was like really horrified. He was,
6:10
Speaker 1: you know, very nice, his charming self, but also saying, hey,
6:13
Speaker 1: you're a real estate reporter for the Wall Street Journal.
6:16
Speaker 1: You're the last person who should be covering this company.
6:19
Speaker 1: Do you have someone who covers like community companies? And
6:24
Speaker 1: Elliott said no, and I'll be following you from here
6:28
Speaker 1: on out. We'll talk about community adjusted even though a
6:31
Speaker 1: little later also. But but let's talk about the genesis
6:35
Speaker 1: of this because uh, Newman and his partner McKelvey had
6:41
Speaker 1: a legit business green Desk that was the predecessor that
6:45
Speaker 1: we work. It was sold. I don't know what the
6:48
Speaker 1: dollar room that was. Was that ever disclosed, but it
6:51
Speaker 1: was not nothing. It was a real and the two
6:54
Speaker 1: of them rolled that money plus a third partner who
6:58
Speaker 1: was also Joel Riber is a real estate developer in
7:01
Speaker 1: New York not coincidentally, and in they launched we work
7:06
Speaker 1: with the first site in Soho. So why is this
7:11
Speaker 1: real estate? Sign long term leases and uh sell shorter
7:17
Speaker 1: term leases at a significant markup? How is this not
7:21
Speaker 1: possibly a real estate uh concern? What was what was
7:25
Speaker 1: the argument they were making to people that hey, we're
7:28
Speaker 1: a tech company and we deserve tech company valuations. Sure so, Um,
7:33
Speaker 1: exactly as you said, they had this Brooklyn business that
7:35
Speaker 1: was the genesis of WE Work. It was um It
7:38
Speaker 1: had a lot of that business and it was what
7:40
Speaker 1: they took to make WE Work. It had a lot
7:43
Speaker 1: of innovation to it in terms of architecturally, the aesthetic
7:47
Speaker 1: of it. I mean, we're probably all Mento WE Works.
7:50
Speaker 1: They're just they're beautiful open glass. We had light streaming
7:57
Speaker 1: through the windows. You put you pack people very close together.
8:00
Speaker 1: So something they started in Brooklyn, it took off, but
8:04
Speaker 1: then there the landlord there didn't want to grow it,
8:07
Speaker 1: so they split up. They moved on UM Adam and
8:11
Speaker 1: as part of his co founder Miguel McKelvey, And from
8:14
Speaker 1: the very beginning the idea was something so much bigger
8:18
Speaker 1: they say they created. They like sketched out something and
8:21
Speaker 1: it was like essentially we World. It would be you know,
8:24
Speaker 1: schools and apartments and this whole universe of we But basically,
8:29
Speaker 1: as you said, I mean throughout for the most part,
8:34
Speaker 1: it was this like arbitrage building arbitrage company in terms
8:38
Speaker 1: of getting long term leases and splitting it up all right,
8:41
Speaker 1: So they have a pretty substantial investor list JP Morgan, Chase,
8:48
Speaker 1: t Roe, Prized, Wellington, Goldman, Harvard and Downmond, Benchmark Capital,
8:52
Speaker 1: mort Zuckerman, was this still a rational investment in UM
8:59
Speaker 1: or when did things kind of go off the rails.
9:02
Speaker 1: Um By then, it still seemed like the valuation was
9:06
Speaker 1: really getting ahead of itself, and it was very much
9:09
Speaker 1: predicated on this idea that you said that being a
9:13
Speaker 1: tech company, and I mean Adam Newman's genius was in
9:17
Speaker 1: marketing and fundraising and what he had the ability to
9:21
Speaker 1: do really each step of the way and it's it's
9:24
Speaker 1: masterful was sort of take take the zeitgeist, like the
9:29
Speaker 1: big business idea of the moment that was captivating investors
9:33
Speaker 1: and put that on top of we work. So he
9:36
Speaker 1: was very into a little bit before this, like sort
9:39
Speaker 1: of equating it's a Facebook. You know, Facebook was the
9:42
Speaker 1: social network. This was like a social network in person,
9:45
Speaker 1: in real life social network. And he didn't manage to
9:49
Speaker 1: kind of convince people bit by bit. I mean, it's
9:53
Speaker 1: interesting benchmark, you know, as you know, it is like
9:55
Speaker 1: one of the tip top shelf. Yeah, that's been something
10:00
Speaker 1: had some of the biggest um uber go down the
10:03
Speaker 1: list of just incredible that yeah, eBay, Yeah, they've had
10:07
Speaker 1: it through it for decades. They've been behind some of
10:10
Speaker 1: the biggest companies. So they were willing to take a
10:13
Speaker 1: gamble on them, and then they saw red flags but
10:15
Speaker 1: just decided to jump in anyway. But for benchmark, I
10:19
Speaker 1: mean we've seen they ultimately they get in at such
10:21
Speaker 1: a low valuation, doesn't matter exactly, like you know, they
10:25
Speaker 1: want their home runs, and I mean it's still they
10:28
Speaker 1: still ultimately got out at a pretty good, really incredible
10:31
Speaker 1: return to billions something yeah, something like that. So, so
10:36
Speaker 1: just to clarify, because I I'm going to be trashing
10:40
Speaker 1: we work for the next hour. But this wasn't a
10:43
Speaker 1: Sarah No situation or a Bernie made off. This is
10:46
Speaker 1: not an issue of fraud or anything illegal or unlawful.
10:50
Speaker 1: These just were insane valuations. Somebody did a great job
10:55
Speaker 1: selling investors on the potential for we work and it
10:58
Speaker 1: didn't work out. I'm glad you brought that up because
11:01
Speaker 1: a lot of people do ask about the differences and
11:04
Speaker 1: the parallels between Elizabeth Holmes and Adam Newman, and I
11:08
Speaker 1: mean I almost think the story in some ways is
11:10
Speaker 1: more interesting. I mean, the third of story is obviously
11:13
Speaker 1: the craziest and and horrifying in so many ways. Um,
11:17
Speaker 1: but with Adam Newman on the margins, there are questions
11:20
Speaker 1: about you know, some self dealing and there's some a
11:23
Speaker 1: lot of avarice, and he just cashed out way way early,
11:28
Speaker 1: So you could criticize his behavior, but you know, you
11:35
Speaker 1: end up with the vcs and the outside investors either
11:39
Speaker 1: looking the other way or turning a blind eye. It's
11:41
Speaker 1: not like this stuff wasn't disclosed or anything. He was
11:45
Speaker 1: very out front. No, I need I need a private
11:48
Speaker 1: jet because we're opening up WE works in China and
11:51
Speaker 1: in a hundred other countries and I have to gen
11:53
Speaker 1: around the world. Yeah, maybe you needlf stream is a
11:57
Speaker 1: different question. But you know there they didn't hide this.
12:00
Speaker 1: They were like proud of it. No, and I think
12:03
Speaker 1: it is every step of the way you see. I
12:05
Speaker 1: mean the investors, and these were some of the most
12:08
Speaker 1: sophisticated investors in the world and some of the you know,
12:11
Speaker 1: they're thought of as the smartest investors. They saw the
12:14
Speaker 1: numbers that WE Work was putting forth, and they were real,
12:18
Speaker 1: real numbers. They also saw their projections, and the projections
12:22
Speaker 1: were mythical and they never quite reached them. But you
12:25
Speaker 1: could see if you were going to invest in any
12:27
Speaker 1: round of WE Work, you could see what their prior
12:29
Speaker 1: projections were. How they failed to hit them. But instead
12:34
Speaker 1: the thing that we saw time and time again to
12:36
Speaker 1: this point was very often Adam Newman would meet the
12:40
Speaker 1: head of an investment company, whether it was Men Benchmark
12:44
Speaker 1: or Soft Bank or t ro Price, Like the main
12:46
Speaker 1: decision maker totally captivate this person. You know, it's usually
12:50
Speaker 1: a man. The man would become kind of smitten with
12:53
Speaker 1: Adam and all his ideas and what he was going
12:55
Speaker 1: to do, totally believe in it. The underlings would look
12:59
Speaker 1: at the numbers, raise all these red flags, point them out,
13:03
Speaker 1: and then the decision maker would say, you know, he's amazing.
13:08
Speaker 1: So I want to talk about the rapid rise of
13:11
Speaker 1: we work, and they're they're really fast growth path. But
13:15
Speaker 1: I have to ask what sort of access did you
13:18
Speaker 1: have to the main characters in the book where people forthcoming?
13:21
Speaker 1: I have to imagine there were some people who had
13:24
Speaker 1: grudges and we're happy to speak. What what about um
13:27
Speaker 1: the some of the original founders, Adam and his wife Rebecca,
13:31
Speaker 1: who who did you have access to? Sure? So you know,
13:34
Speaker 1: in the interest of privacy, I can't I can't get
13:36
Speaker 1: into specifics, but what I will say the interesting thing was,
13:40
Speaker 1: I mean, we really got access for hours and hours
13:43
Speaker 1: to the vast majority of players at every step of
13:48
Speaker 1: the way in this book. And um, the one of
13:51
Speaker 1: the funny things was, I mean, the pandemic really started
13:55
Speaker 1: right as Elliott and I took book leave. If we
13:57
Speaker 1: start our book leaving late February, money and we had
14:01
Speaker 1: both planned to sort of be in all around the
14:04
Speaker 1: world meeting people in person. Elliott had moved to New
14:06
Speaker 1: York to meet a lot of the players in person. Obviously,
14:09
Speaker 1: the world shut down, and um, you know, it's kind
14:12
Speaker 1: of nervous about what that would mean in terms of conversations.
14:16
Speaker 1: And the funny thing was, I think people were home
14:19
Speaker 1: board feeling pretty reflective. So there are a number of
14:23
Speaker 1: people that said there, I didn't know if I wanted
14:25
Speaker 1: to talk to you, and some of these people I
14:29
Speaker 1: probably had like ten conversations four hours with And there
14:33
Speaker 1: are forty something pages of in notes. It's I'm not
14:36
Speaker 1: suggesting that this isn't deeply researched, because a lot of
14:40
Speaker 1: these conversations that you report on like you're flying the wall.
14:45
Speaker 1: Clearly it can only be one of two or three people.
14:48
Speaker 1: So it looks like you had a ton of access
14:50
Speaker 1: to a lot of senior people, and I guess we'll
14:53
Speaker 1: just leave it at that. Um So, so let's talk
14:56
Speaker 1: about that early rise. In the beginning, they were really
15:00
Speaker 1: ramping up very rapidly. I mean, you could see how
15:04
Speaker 1: somebody interested in investing in a potential unicorn in fourteen,
15:10
Speaker 1: coming out of the financial crisis. Hey, the idea of
15:13
Speaker 1: all these startups just needing me a little bit of
15:16
Speaker 1: space and not a long term lease. It looks very attractive.
15:19
Speaker 1: It looks like, hey, you could put we works wherever
15:22
Speaker 1: there's a tech community and they should do really well there. Yeah,
15:26
Speaker 1: there was, and it was the marketing was it was
15:29
Speaker 1: very viral at that point. It was you know, people
15:32
Speaker 1: would tell their friends about it and they would fill
15:35
Speaker 1: up very rapidly, and they were building more and more.
15:38
Speaker 1: I mean, and this is one of the you know,
15:41
Speaker 1: as part of the genius of Adam Newman was you know,
15:43
Speaker 1: he was telling people from day one they were really
15:45
Speaker 1: struggling to even secure the lease on the first building,
15:48
Speaker 1: and he was like, Oh, we're gonna be global, We're
15:50
Speaker 1: gonna be international. He would set these goals of how
15:54
Speaker 1: many buildings they would open, and people internally and even
15:57
Speaker 1: investors would say, oh, this is impossible, and he would
16:00
Speaker 1: and he would hit that. He kept on sort of
16:02
Speaker 1: defying gravity, defying disbelief for questions. UM. So the growth
16:08
Speaker 1: was incredible and they were filling them up. We could
16:11
Speaker 1: talk about, you know, the lack of the cost of
16:14
Speaker 1: doing so they were paying double to UM real estate
16:18
Speaker 1: agents what everybody else was paying. They were going to
16:22
Speaker 1: competitors and saying we're going to reach out to your
16:26
Speaker 1: UM tenants and we're gonna offer them free rent for
16:28
Speaker 1: a year. I mean, they were really short elbowed and
16:31
Speaker 1: very aggressive, especially as time went on. We did find
16:36
Speaker 1: that there was one year we we got all their financials.
16:39
Speaker 1: We you know, we got our hands on a vast
16:41
Speaker 1: trope of documents UM. But there was one year I
16:45
Speaker 1: think it was twenty eleven that they I think made
16:48
Speaker 1: two million dollars in profit. Were we were kind of
16:51
Speaker 1: shocked to see that. We didn't think they had ever
16:53
Speaker 1: made a profit. And then from there they did not
16:56
Speaker 1: and the billions and billions just added up in terms
16:59
Speaker 1: of losses. So so the rapid rise we we mentioned UM,
17:04
Speaker 1: they peaked in tw at more than forty seven billion dollars. UH.
17:09
Speaker 1: Newman recently did a interview with your um fellow Times
17:15
Speaker 1: UH correspondent Animi Ross Sorkin, and he was somewhat contrite.
17:20
Speaker 1: He had um admitted that all the venture money and
17:25
Speaker 1: all the high valuations had uh went to his head. Quote,
17:29
Speaker 1: you lose focus on really the core of the business
17:32
Speaker 1: and why the business is meant to be that way,
17:34
Speaker 1: it had a corrosive effect on my thinking. That's kind
17:37
Speaker 1: of a surprising admission from him. It was. Yeah, I
17:41
Speaker 1: mean his mayakalpo is very um interesting, and I mean
17:46
Speaker 1: one of the things that people said along the way was,
17:48
Speaker 1: you know, the the higher the valuation, the more out
17:51
Speaker 1: of touch he became. I mean he had he had
17:53
Speaker 1: a narcissism. I don't know what you want to call it,
17:56
Speaker 1: a sociopathological narcissistic personality disorder. I'm just I'm not a psychologist.
18:01
Speaker 1: I'm just guessing, or a really successful salesman slash CEO.
18:06
Speaker 1: There's like a thin line between the two sometimes it
18:09
Speaker 1: seems and some of it, I mean it seems insane.
18:12
Speaker 1: It was like, oh, he thought of himself in this
18:14
Speaker 1: like same like with along with world leaders. But world
18:18
Speaker 1: leaders were really really wanted to meet him. Yeah, and
18:22
Speaker 1: he was like We have a scene in the book
18:24
Speaker 1: that he was debating whether or not he was going
18:27
Speaker 1: to cancel on Theresa May because he had promised his
18:29
Speaker 1: wife that he would teach a class on entrepreneurship to
18:33
Speaker 1: their new school. Um. So it was like a few
18:35
Speaker 1: of their kids and a few of their kids friends
18:37
Speaker 1: were in the school and they're about five years old,
18:40
Speaker 1: five or six, and he had promised minister five year old.
18:44
Speaker 1: So when you talk about losing touch with reality, some
18:47
Speaker 1: of the m and a that this startup did We've
18:51
Speaker 1: garden A We've machine was like a surf wave machine, meetup,
18:56
Speaker 1: dot com conductor. They ended up dumping these for action
19:00
Speaker 1: what they paid for them. But what's the thought process,
19:04
Speaker 1: We're going to become a technology conglomerate. I don't I
19:07
Speaker 1: don't really follow the thinking other than wouldn't it be
19:10
Speaker 1: fun to have a wave machine at our buildings? Like
19:14
Speaker 1: what's the rationality? Okay? So there were there were two
19:16
Speaker 1: parts to that, and part of it was like it
19:19
Speaker 1: was the world was Adam Newman's playground, and he loved
19:23
Speaker 1: surfing and he thought that, you know, he found out
19:25
Speaker 1: this company, this wave making machine, they would make waves.
19:29
Speaker 1: So him and his team went to Spain to surf
19:32
Speaker 1: on them and test them out. But he could basically
19:34
Speaker 1: convince his board in general, who had to approve the
19:37
Speaker 1: is that anything made sense, whether it was the jet,
19:40
Speaker 1: the wave pool company, or friends of his. I mean
19:43
Speaker 1: Laird Hamilton's, the famous surfer was a friend of his.
19:46
Speaker 1: They invested like in his coffee creamer company. Um. But
19:51
Speaker 1: then the second so it was so many insane investments
19:55
Speaker 1: that really didn't necessarily make any sense. Um. But then
19:58
Speaker 1: on the other side, one of the things that we
20:00
Speaker 1: thought was interesting. He had this deal with Massa. Who Massa,
20:05
Speaker 1: he's the CEO of soft Bank, became we worked biggest investor,
20:09
Speaker 1: biggest enabler, you might say, and one of them. They
20:13
Speaker 1: were going to do this huge deal that would have
20:15
Speaker 1: actually kept we work private forever. It never came to pass,
20:19
Speaker 1: and that's why it was sort of the beginning of
20:21
Speaker 1: the end when this deal fell apart. But as part
20:24
Speaker 1: of it, a lot of the deal is predicated on
20:26
Speaker 1: growing revenue. So Adam also became obsessed with acquisitions, like
20:31
Speaker 1: whatever they could possibly do to add more revenue to
20:34
Speaker 1: the company. I mean, he was talking about buying Sweet Green,
20:38
Speaker 1: and he had like got pretty far along in this
20:40
Speaker 1: salad company and conversations with them. So it was this
20:45
Speaker 1: idea of like, let's just throw on anything. We have money,
20:48
Speaker 1: and let's just grow our top line. Who cares about
20:51
Speaker 1: anything else. Let's talk about Rebecca Newman. She was Adam
20:56
Speaker 1: Newman's wife. What what was her role in we Work?
21:00
Speaker 1: How important was she? Her role is just so fascinating throughout. So,
21:05
Speaker 1: I mean he he met her, um right as he
21:08
Speaker 1: was starting Green Desk, and I think she just sort
21:10
Speaker 1: of opened his eyes. She'd grown up very wealthy, She's
21:14
Speaker 1: Gwyneth Paltrow's cousin. She had all these ties to Hollywood. Um.
21:18
Speaker 1: She gave him a loan early on, UM, a high
21:22
Speaker 1: interest loan. UM. I think even after they were married
21:25
Speaker 1: that we were reported about in the book. UM. But
21:28
Speaker 1: as time went on, she she really wanted a career
21:31
Speaker 1: in Hollywood, decides to At one point she she was
21:34
Speaker 1: trying to be an actress, and she tells someone that
21:36
Speaker 1: she's done with Hollywood. She's producing babies. Now they've gone
21:39
Speaker 1: on to have six kids. UM. But she's sort of
21:42
Speaker 1: always kind of dabbled in the company, and they retroactively
21:46
Speaker 1: made her a co founder. She wasn't there from day one.
21:49
Speaker 1: It was only later she got pretty active. Yeah, she
21:52
Speaker 1: told people aboutn't giving tours early on, that she helped
21:56
Speaker 1: pick out the coffee in the um in the early works.
22:01
Speaker 1: But so she became more active, but she would sort
22:03
Speaker 1: of jump in and out. And it was by the
22:06
Speaker 1: one of the things that she had a big focus on.
22:08
Speaker 1: Their kids were growing up. She didn't really like their
22:10
Speaker 1: choices of private or public schools, so she decided to
22:14
Speaker 1: start She helmed sort of the education initiative. And she
22:18
Speaker 1: was deeply qualified for this because she was a certified
22:21
Speaker 1: yoga instructure and and I know she went to Cornell,
22:26
Speaker 1: which is certainly a good school. What bonifites does she
22:30
Speaker 1: bring to technology, real estate, education, Like I'm trying to
22:37
Speaker 1: figure it out. And in the book you don't really
22:41
Speaker 1: go into any details that she's qualified to do any
22:44
Speaker 1: of these things. I mean, especially with education. It's like
22:47
Speaker 1: she didn't um she wanted to. Essentially, she wanted a
22:51
Speaker 1: school for her children, and she wanted very specific things
22:54
Speaker 1: in that school. And once again they decided that that
22:58
Speaker 1: would be the next Like Frontier for we work, they're
23:00
Speaker 1: always adding different things, but no one really and then
23:04
Speaker 1: they let them do this. They started this school UM
23:07
Speaker 1: in New York in the headquarters, and they were going
23:10
Speaker 1: to teach the next generation of entrepreneurs. And I mean
23:13
Speaker 1: they one of the things, I mean it was the
23:15
Speaker 1: education arm more than as much or more than other
23:19
Speaker 1: parts of it is just so tragic because they had
23:22
Speaker 1: a lot of money. She's she like Adam, could just
23:25
Speaker 1: speak like speak so like eloquently and with this vision.
23:30
Speaker 1: So she attracted all these very talented teachers. She sort
23:33
Speaker 1: of wooed them from the schools that they were in
23:35
Speaker 1: before and told them that they were going to start
23:38
Speaker 1: this you know, new enterprise and change education forever. And
23:42
Speaker 1: it just really devolved so quickly. It became very like
23:46
Speaker 1: kind of petty. I mean people say they have PTSD
23:48
Speaker 1: from her like obsession with like the rugs, like just
23:52
Speaker 1: monessory type school. And yeah, she obsessed over like the
23:56
Speaker 1: color of white of the rugs and made them like
23:59
Speaker 1: send act twenty rugs. What was the most shocking thing
24:03
Speaker 1: you found out about him? Or horror or both? So
24:07
Speaker 1: one one of these was. I mean, there was a
24:09
Speaker 1: lot of their personal lives, as we said, whether it
24:14
Speaker 1: was a school or other things where their kids were
24:16
Speaker 1: educated in UM just the way in which the personal
24:21
Speaker 1: entanglements on you know, small and huge levels. But I'll
24:25
Speaker 1: give two examples. I mean, one of the things that
24:28
Speaker 1: people said in the school so it's in the we
24:30
Speaker 1: work headquarters, was a whole floor and it's beautiful if
24:33
Speaker 1: you see pictures of it, like just this, like yeah, um.
24:38
Speaker 1: And they had biarchy engles this UM famous architect design
24:42
Speaker 1: the school and UM. But they basically on Friday nights
24:47
Speaker 1: would have dinners with their friends there and according to
24:51
Speaker 1: many people would cut the team would come in Monday morning.
24:56
Speaker 1: It would be a complete disaster. So it was like
24:58
Speaker 1: really on so many levels, like everything was their personal
25:02
Speaker 1: UM so entitled. Yeah. And the second thing that really
25:07
Speaker 1: shocked us was she was very she had a lot
25:10
Speaker 1: of kind of like phobias around like health and wellness. UM.
25:14
Speaker 1: And she says, I mean, she had a real tragedy
25:17
Speaker 1: in her family, her brother died from cancer, and so
25:20
Speaker 1: she was always she was very focused on it, and
25:21
Speaker 1: she said it as much in podcasts and things. But
25:24
Speaker 1: she was very fixated on five G you know, and
25:26
Speaker 1: she was worried about vaccines for their kids. UM. And
25:30
Speaker 1: but the five G of like what that could do
25:33
Speaker 1: for you know, these signals. She wouldn't let them have
25:36
Speaker 1: printers on the floor, like any printers on wireless printers
25:39
Speaker 1: on the floor of the school. But there was a
25:41
Speaker 1: they bought this. Can you even buy five G printers today? What?
25:44
Speaker 1: What was the Yeah, the wireless like freaked her out.
25:49
Speaker 1: So the teachers that have to like run up and
25:50
Speaker 1: downstairs to just print everything, it seemed ridiculous. But the
25:54
Speaker 1: five G towers, there was one either being built or
25:58
Speaker 1: built right near there being c par Park, Yeah, right nearby.
26:02
Speaker 1: So she was so obsessed with that she didn't want
26:04
Speaker 1: to move in there. They had bought like six apartments
26:07
Speaker 1: in this building that she um the CFO this is
26:12
Speaker 1: around the time they're preparing for the I p O
26:14
Speaker 1: used to work at Time Owner Cable. He was the
26:15
Speaker 1: CFO of Time Owner Cable. So she said, can you
26:19
Speaker 1: already mention help us get rid of the five G tower?
26:24
Speaker 1: Um and haven't moved And basically he deputized another aide
26:32
Speaker 1: who used to work for Cuomo and work for Governor
26:34
Speaker 1: Christie the form both former governors, and they like that
26:39
Speaker 1: was something that they actually worked on. So that, yeah,
26:43
Speaker 1: that interplay was just kind of seems rational that there
26:46
Speaker 1: was a Vanity Fair article how Rebecca Newman put the
26:50
Speaker 1: woo woo and We Work, And what you're describing very
26:54
Speaker 1: much is along the lines of that. I've seen Newman
26:58
Speaker 1: described as a vision area, as a crack pot, as
27:01
Speaker 1: as a grifter. But he thinks he's going to become
27:05
Speaker 1: the world's first trillionaire, and and we worked the first
27:09
Speaker 1: ten trillion dollar company. Is any realistic scenario where that
27:14
Speaker 1: happens or is he just completely delusional? I mean, it
27:19
Speaker 1: seems insane and like he seems completely delusional. But he
27:24
Speaker 1: had a lot of people going along with him, including
27:27
Speaker 1: um the man with one of the biggest checkbooks in
27:30
Speaker 1: the world, who is Massa Yochi Sone, the CEO and
27:34
Speaker 1: founder of soft Bank, who had just the timing of
27:38
Speaker 1: this story. It's like, there's so many things that happened
27:41
Speaker 1: at the Shudi Arabia wanting to diversify, giving a ton
27:45
Speaker 1: of money, you you call son the enabler in chief.
27:48
Speaker 1: He put more than ten billion dollars of capital showered
27:52
Speaker 1: on onto We Work. How much do you blame soon
27:56
Speaker 1: for all of this mayhem? At least in the last
28:00
Speaker 1: a couple of years of We Works. Um run as
28:03
Speaker 1: a private company. It seems like he was the main, uh,
28:07
Speaker 1: you know, the main person kind of pushing all of this.
28:11
Speaker 1: And when you talk to a lot of people around Adam,
28:14
Speaker 1: they just said they were just such a a dicey
28:17
Speaker 1: match like that. Adam was crazy to begin with. Everyone
28:22
Speaker 1: thought that, you know, it can go both ways, but
28:25
Speaker 1: people drank the kool aid. It reminded me. You don't
28:28
Speaker 1: mention Steve Jobs in the book, but very much the
28:32
Speaker 1: reality distortion field that Jobs was famous for. I very
28:36
Speaker 1: much got the sense Newman was creating something like that.
28:40
Speaker 1: How did he get everybody to drink the kool aid?
28:42
Speaker 1: Was he just that charismatic and that good of a salesman?
28:45
Speaker 1: I think so. And it was just he could talk
28:48
Speaker 1: about things and make you feel like the reality was there,
28:51
Speaker 1: this reality distortion field he was. He was masterful in that.
28:56
Speaker 1: Yet the thing that he did was he always found
29:00
Speaker 1: new pots of money all over the world. I mean,
29:03
Speaker 1: it was the time. It was the time when the
29:04
Speaker 1: private capital markets were getting deeper and deeper. The fidelities
29:07
Speaker 1: in the t row that like normally kind of sober
29:10
Speaker 1: mutual funds were jumping into startups and they were we
29:14
Speaker 1: call one of the chapters fomo is like the fun Fomo.
29:18
Speaker 1: They were fearful of missing out in the next big thing,
29:21
Speaker 1: so that we're sort of in this climate where there
29:23
Speaker 1: is an appetite to go after to just take a
29:26
Speaker 1: chance for the chance of getting the next like maybe
29:29
Speaker 1: not trillion dollar company, maybe no one but him and
29:31
Speaker 1: mass I believe that, UM, but right the next early.
29:37
Speaker 1: You know, it's always interesting when you see these uh
29:40
Speaker 1: staid old mutual fund companies that have literally no experience
29:45
Speaker 1: in venture capital or uh tech startups, but happy to
29:50
Speaker 1: plow into it because they want to be part of it.
29:53
Speaker 1: And maybe that's how we end up with community adjusted ibadac.
29:58
Speaker 1: Can can you explain to us what that phrase means?
30:02
Speaker 1: I don't even know what else to call it. Sure,
30:05
Speaker 1: so we work was losing every every step of the way.
30:08
Speaker 1: They were growing revenue more than doubling it. You know,
30:11
Speaker 1: they were expanding all around the world, and with that
30:14
Speaker 1: they were losing just as much, if not more, every
30:17
Speaker 1: single year, and then they were taking in. So they
30:20
Speaker 1: had this brilliant idea really a lot stemming from the
30:24
Speaker 1: CFO and Adam Newman loved to CFOs creation um his
30:29
Speaker 1: name is Artay Minson, the CFO, and it was this
30:32
Speaker 1: idea that you essentially strip out a lot of the
30:35
Speaker 1: costs of kind of creating all the building out all
30:39
Speaker 1: the wee works and you know, marketing and opening up
30:43
Speaker 1: new buildings. You strip it out and then you're suddenly
30:46
Speaker 1: a profitable Company's let me, let me make sure I
30:49
Speaker 1: understand this. So if you eliminate the costs of generating
30:53
Speaker 1: that profit, you suddenly become profitable. Have come nobody else
30:58
Speaker 1: thought of this sooner? It seems like a da just
31:02
Speaker 1: don't it's profits ex expenses. It's fantastic. And the conviction
31:08
Speaker 1: with which certain people inside, especially in the finance team,
31:12
Speaker 1: believe this, I mean they were saying throughout that like, oh,
31:15
Speaker 1: we will be a profitable company if we just The
31:17
Speaker 1: idea was if we just stopped growing, we could be
31:19
Speaker 1: profitable right now we take in more per building than
31:23
Speaker 1: we um spend on it. But um, you know that
31:27
Speaker 1: never was the case. So let's stick with the delusion concept.
31:32
Speaker 1: We talked about we grow, and we talked about we
31:35
Speaker 1: live a little bit crazy stuff. What made this guy
31:38
Speaker 1: think he can help colonize Mars? You laugh, You wrote
31:43
Speaker 1: it yourself and it's still funny. By the way, I
31:47
Speaker 1: found a lot of the book very amusing, like very dry,
31:51
Speaker 1: Like you guys didn't try and crack jokes, but clearly
31:55
Speaker 1: a lot of the stuff was just so insane. You
31:58
Speaker 1: read it, you start to laugh out loud. I'm glad.
32:01
Speaker 1: I'm glad to hear that, because I think we would
32:03
Speaker 1: joke that, like every day when we were in different
32:05
Speaker 1: places writing it. We're on calls constantly, and we would
32:09
Speaker 1: call each other, and it was often multiple times a day.
32:12
Speaker 1: We would call each other and say, you will never
32:14
Speaker 1: ever believe what I just heard, and we would crack up,
32:18
Speaker 1: and we had a lot of fun writing it because
32:20
Speaker 1: it's just it was the truth of this story was
32:23
Speaker 1: like more insane than anything we could have made up. Ever,
32:26
Speaker 1: that's the joke that, you know, the difference between truth
32:29
Speaker 1: and fiction is fiction has to make sense and truth
32:33
Speaker 1: is under no such obligation. So let's talk about Newman
32:36
Speaker 1: colonize at moll. I mean, was that a serious thing
32:40
Speaker 1: or was he just you know, on one of his
32:43
Speaker 1: insane John's and everybody comes along, they're they're speaking of
32:48
Speaker 1: fine lines. I mean, he just I think he believed
32:52
Speaker 1: he started to believe more and more of like these delusions.
32:57
Speaker 1: And so I think he really did, and yeah he got.
33:00
Speaker 1: He secured a meeting with Elon Musk, and he Elon
33:04
Speaker 1: Musk he was always Adam was always late to every meeting,
33:06
Speaker 1: would make people wait for hours, like even like the
33:09
Speaker 1: bankers in the I p O would just sit around.
33:11
Speaker 1: There'll be rooms of like dozens of people waiting for
33:14
Speaker 1: Adam and he'd show up like two hours late. But
33:17
Speaker 1: Elon Musk made him wait for this meeting. They sat
33:20
Speaker 1: and sat and sat, and then he told Elon Musk
33:25
Speaker 1: that getting that he thought, like building community on Mars
33:29
Speaker 1: is what he would do and he would help him
33:32
Speaker 1: with And he said, you know, getting getting to Mars
33:35
Speaker 1: is the easy part. Building community is the hard part,
33:38
Speaker 1: because you know, it's very hard to get those beer
33:39
Speaker 1: taps to work in a low gravity, zero atmosphere environment.
33:43
Speaker 1: It's a challenge. Only we work could accomplish the fruit Honor. So,
33:49
Speaker 1: so I want to talk about the I p OH.
33:51
Speaker 1: But before I get to that, I have to ask
33:55
Speaker 1: about the corporate off sites. The summer camp would were
34:00
Speaker 1: described as three day global subjects of drinking and drug consumption.
34:06
Speaker 1: It was like a Woodstock event, not like a corporate retreat.
34:10
Speaker 1: How did these come about? So Adam would say that
34:13
Speaker 1: he never he grew up in Israel and he moved
34:16
Speaker 1: to the US. He lived for a little while in
34:18
Speaker 1: the US, but moved later in life. Um, so he
34:21
Speaker 1: said he never got to go to American summer camp.
34:23
Speaker 1: So he was going to recreate summer American summer camp.
34:26
Speaker 1: Literally they started at um his wife's families. Um had
34:31
Speaker 1: a summer camp and upstate New York that's where they started.
34:33
Speaker 1: They just got bigger and bigger, eventually going to England
34:38
Speaker 1: and taking over this like huge like field, this hugest
34:42
Speaker 1: state there and bringing every single member of the company,
34:46
Speaker 1: flying them from all and there were thousands of employees,
34:49
Speaker 1: thousands upon thousands, and the cost was unbelievable of every
34:53
Speaker 1: piece of it. I mean every year they just got
34:56
Speaker 1: bigger and bigger, and they flew at the height of
34:58
Speaker 1: his fame, not that he's far off of it, but
35:00
Speaker 1: Lin Manuel Miranda, like at the height of Hamilton's they
35:03
Speaker 1: flew him on a private jet. He he performed on stage,
35:07
Speaker 1: the roots came and they would pay these people like
35:11
Speaker 1: million dollars. Yeah, that's afternoon. Yeah, exactly. Um, and they
35:17
Speaker 1: were um, you know, especially at the beginning. It was
35:20
Speaker 1: like a younger um group of people. Uh, in general,
35:26
Speaker 1: and I mean these these were crazy. There's tons of
35:28
Speaker 1: alcohol sanctioned by the company, handed out by the company.
35:32
Speaker 1: Drugs were in you know, in supply, not handed out
35:36
Speaker 1: at the company, but they were everywhere. And he talks
35:38
Speaker 1: about um drugs. He says, well, we just not really drugged,
35:43
Speaker 1: you know he um. So yeah, I think it got
35:46
Speaker 1: to a point. And it was also mandatory to come
35:50
Speaker 1: to these events. I mean, and there were like meetings
35:52
Speaker 1: where there are shots. Everybody has to do shots. This
35:55
Speaker 1: wasn't just at these retreats. Like hard partying was pretty
36:01
Speaker 1: common throughout the company or anywhere Newman seemed to have
36:06
Speaker 1: touched when when he was there, everybody was expected to
36:09
Speaker 1: step up and and party hard, including the investors. I mean,
36:13
Speaker 1: you'd walk into his office at ten am, according to
36:16
Speaker 1: so many different people, and he'd insist on taking to
36:19
Speaker 1: kill a shots with you in the morning in his office.
36:23
Speaker 1: And you didn't have a shot before this, You don't,
36:26
Speaker 1: isn't That isn't how every meeting begins. Breast the breakfast
36:30
Speaker 1: of champions, That's right, so so I got the sense
36:35
Speaker 1: from the book that they always seem to be on
36:38
Speaker 1: the edge of running out of money, and they would
36:41
Speaker 1: always find another source. But it was all leading towards
36:45
Speaker 1: the I p O. But the S one filing, the
36:49
Speaker 1: disclosures that go with an I p O filing, that
36:52
Speaker 1: seemed to be the they're undoing the public just investing
36:58
Speaker 1: public just tore it apart exactly. I mean. The interesting
37:02
Speaker 1: piece of that, as you said, it was there's always
37:04
Speaker 1: a new pool of capital. Like just when he thought
37:08
Speaker 1: that he was gonna have to go public and the
37:09
Speaker 1: board and the board, I mean, one of the things
37:12
Speaker 1: we found time and time again was the board would say,
37:15
Speaker 1: you know, he's really like crazy, things are getting out
37:17
Speaker 1: of hand, but like we won't say no to him,
37:20
Speaker 1: but eventually he's going to have to go public. This
37:22
Speaker 1: was back in they thought he was going to run
37:25
Speaker 1: out of money. The only place to go because they're
37:27
Speaker 1: burning so much cash, um was the public markets, and
37:31
Speaker 1: the public markets will take care of it, which kind
37:33
Speaker 1: of that kind of floored us each step of the way.
37:35
Speaker 1: But yes, as you said, he he knew how to
37:38
Speaker 1: captivate on in one on one or bigger meetings to
37:42
Speaker 1: convince you of this future, to tell you. We always
37:45
Speaker 1: describe him kind of as a magician and think of
37:46
Speaker 1: him like this, like don't look here, look here, like
37:49
Speaker 1: the slight of hand he could. Then this S one
37:52
Speaker 1: came out. It was a regulatory document. You have to
37:54
Speaker 1: follow rules. There's no slight of hand in S one filing. No,
37:58
Speaker 1: like you have to see and people suddenly he saw
38:00
Speaker 1: the broad public, the revenue, the losses a lot, not
38:08
Speaker 1: even all of these, um you know, the questionable corporate governance,
38:12
Speaker 1: I mean that self dealing, self dealing. Only pieces of
38:15
Speaker 1: that were even in it. Because the jet wasn't in
38:18
Speaker 1: the S one, they didn't have to disclose it then.
38:20
Speaker 1: And the interesting thing about this, I think there's always
38:23
Speaker 1: like this distinction that people try to make between like, oh,
38:25
Speaker 1: the smart money and the dumb money, and it's like
38:29
Speaker 1: the smart money is like the fidelities and the t
38:31
Speaker 1: rose and the soft banks, and then the dumb money,
38:34
Speaker 1: you know, it's like the you know, the average retail investor.
38:38
Speaker 1: And so it's just so interesting that like he he
38:41
Speaker 1: captivated the the quote unquote smart money, and then the
38:44
Speaker 1: minute this was all made public, everything was there. The
38:48
Speaker 1: world saw it and just said like what is wrong,
38:52
Speaker 1: Like this is insane. I'm nursing a pet theory that
38:54
Speaker 1: it was Twitter that demolished him because people just had
38:58
Speaker 1: a fee. I remember the day of this filing, Twitter
39:01
Speaker 1: just blew up with like a million people are taking
39:06
Speaker 1: an s one apart, sentenced by sentence, and the most
39:09
Speaker 1: outrageous things bubbled up to the top of Twitter, and
39:12
Speaker 1: it was very clear that they were dead in the water.
39:16
Speaker 1: There was going to be no I p O and
39:18
Speaker 1: the dreams of these crazy valuations seemed to crash and
39:23
Speaker 1: burn with the the I p O filing, which which
39:26
Speaker 1: kind of raises the question about you know, how was
39:30
Speaker 1: all of this corporate governance so amiss? All the self
39:35
Speaker 1: dealings that were allowed. So my my favorite one was
39:39
Speaker 1: he personally trademarked the word we and then charged the
39:43
Speaker 1: company six million dollars to use it again. He's given
39:48
Speaker 1: these sort of crazy disclosure explanations and I'm only allowed
39:53
Speaker 1: to say this, but it seems he bought a bunch
39:56
Speaker 1: of buildings in order to flip them too. We work
40:00
Speaker 1: had a profit. I don't understand how the board we
40:03
Speaker 1: mentioned para nos, here's the parallel. How did the board
40:06
Speaker 1: tolerate just the most egregious averaice, lack of interest in
40:12
Speaker 1: the company and only enrichment of oneself. How does the
40:16
Speaker 1: board of directors tolerate that? I know that was I
40:19
Speaker 1: think if anything from this whole story that just floored
40:21
Speaker 1: us was exactly that this board. I mean, it was
40:24
Speaker 1: a it was a real, like heavy hitting board of directors.
40:27
Speaker 1: They're not and all financial people as opposed to thereinos,
40:30
Speaker 1: you know, it was like people who didn't really politics
40:33
Speaker 1: and generals and secretaries of states, right, it was, and
40:37
Speaker 1: a lot of elderly men who were smitten with her,
40:40
Speaker 1: I mean like men in what was Kissinger on the board?
40:42
Speaker 1: He was nineties something. So so with this though, the
40:46
Speaker 1: other thing that's shocking is, you know, most founders of
40:50
Speaker 1: a successful company, they live a reasonably comfortable lifestyle. But
40:54
Speaker 1: the thought processes, hey, one day we'll go public and
40:58
Speaker 1: my gravy train will come in and I'll have of
41:00
Speaker 1: a high you know, eight nine figure net worth. Early
41:04
Speaker 1: in this timeline, he was paying himself, um, cashing out
41:11
Speaker 1: stock worth tens of millions, in some cases hundreds of
41:14
Speaker 1: millions of dollars. Way way, early in the company was
41:18
Speaker 1: five years old and he was worth a couple of
41:20
Speaker 1: hundred million liquid and god knows how much on paper. Again,
41:24
Speaker 1: how how does a board allow that to take place? Yeah,
41:28
Speaker 1: that was what a board. Investors kind of signing off
41:32
Speaker 1: on this or jumping into it, I mean seeing that
41:34
Speaker 1: he's going to sell a lot of stock each round.
41:36
Speaker 1: I mean, now there does seem to be a shift,
41:39
Speaker 1: and it's kind of a scary one that this is
41:41
Speaker 1: like more private company as the founders are selling more
41:44
Speaker 1: and more. But back then you didn't really see this
41:48
Speaker 1: very much. And one of the things I find very
41:50
Speaker 1: interesting is he was very much following that Travis Kalenik,
41:54
Speaker 1: that uber CEOs playbook and literally like following it that
41:58
Speaker 1: like going after the same invest is going around the world.
42:01
Speaker 1: Travis had raised more money than anyone before Travis every
42:05
Speaker 1: step of the way made a huge point of um
42:07
Speaker 1: all in I'm never selling any stock until he was
42:10
Speaker 1: kicked out of the company basically, so Adam followed his playbook,
42:14
Speaker 1: but each step of the way was said he took
42:17
Speaker 1: money out and was like, I mean, he was very
42:19
Speaker 1: wealthy for a scrappy startup founder fourteen fifteen sixteen, You
42:24
Speaker 1: would think, hey, he's maybe he's making a decent living,
42:27
Speaker 1: but not hundreds of millions of dollars. It's kind of
42:29
Speaker 1: amazing or like having many, many many houses. They were like,
42:34
Speaker 1: he didn't hide, um, the way in which he was living.
42:37
Speaker 1: How's it having houses all over the world, jet setting
42:39
Speaker 1: all over the world. Um, you know, And in fact,
42:43
Speaker 1: he almost like you know, wanted everyone to know. That
42:45
Speaker 1: was part of his like allure. So when the I
42:50
Speaker 1: p O filing in twenty nineteen, when when that blows up,
42:55
Speaker 1: it seems to have a real impact on Silicon Valley
42:58
Speaker 1: for a while. Suddenly um high spending, fast growing, profitless
43:03
Speaker 1: companies look bad and now we're back to we want
43:06
Speaker 1: profit growth and revenue. But that really didn't last all
43:10
Speaker 1: that long, did it? No? It was unbelievable. I mean
43:13
Speaker 1: we also, Elliott and I joke that we rewrote the
43:16
Speaker 1: epilogue like five times because at first we wrote it
43:20
Speaker 1: saying like yeah, and it was I mean Massa. Yoshi
43:24
Speaker 1: soon had his own maya culpa, like, you know, I
43:26
Speaker 1: believed an atom I shouldn't have. I made mistakes, but
43:30
Speaker 1: also I want my companies to be profitable now, like
43:33
Speaker 1: I'm gonna invest in these companies or the companies have
43:35
Speaker 1: invested already should be profitable. Um I p O investors,
43:39
Speaker 1: public market investors were totally spooked by money losing companies.
43:43
Speaker 1: Then um, you know, then came the pandemic. Then came
43:46
Speaker 1: the FED pumping money into the system, and then um
43:49
Speaker 1: you know. Now in some ways it's like, wow, we
43:52
Speaker 1: work at least like may generated revenue and losses. It's
43:57
Speaker 1: like now today we have riving and lucid, and you know,
44:03
Speaker 1: it's all potential. Maybe it works out. Maybe Amazon buys
44:07
Speaker 1: a hundred thousand trucks from them, but that's kind of
44:11
Speaker 1: that's a possibility. And you know, more more than just
44:14
Speaker 1: the FED, you had the carezac. You had a ton
44:16
Speaker 1: of money flow into the system, but it doesn't necessarily
44:20
Speaker 1: flow to venture funded outfits. It's just a lot of
44:25
Speaker 1: cash slashing around. Is that is that a fair statement? Completely? So,
44:29
Speaker 1: how quickly were the lessons of we work forgotten? Incredibly quickly?
44:34
Speaker 1: I mean it felt like it had It felt like
44:36
Speaker 1: it changed everything for a few months. I mean. The
44:38
Speaker 1: other part of it was Mason had had raised a
44:43
Speaker 1: hundred billion dollar fund, the biggest fund ever to invest
44:46
Speaker 1: in tech companies. He was literally about to close his
44:50
Speaker 1: second fund billion dollars, another hundred billion dollar fund to
44:55
Speaker 1: just go and like pour into companies. And then I
44:58
Speaker 1: mean we've heard from all these people were out and
45:00
Speaker 1: meeting Sovereign Wealth Fund Saudi Arabia and they were just
45:04
Speaker 1: like every meeting it was like what about we work?
45:07
Speaker 1: And you know, one of the things we've heard was
45:09
Speaker 1: he was pushing for it to just go public, um,
45:13
Speaker 1: you know, or to or not to to not go
45:15
Speaker 1: public because he didn't want to take the mark. You
45:16
Speaker 1: don't want to make all this public. And we have
45:19
Speaker 1: a scene in the book about this that Massa tries
45:21
Speaker 1: to tell him to call off the I p O
45:24
Speaker 1: and try to force his hand, and Adam is confusing. Yeah, right,
45:28
Speaker 1: it's it's it's really quite it's really quite astounding that
45:32
Speaker 1: we end up with, what did he burn through billion?
45:37
Speaker 1: More than ten billion dollars? I think, yeah, that's that's
45:41
Speaker 1: a lot change essentially. So so here's the curve bowl
45:45
Speaker 1: question to ask you. So you're now a business reporter
45:47
Speaker 1: at the times we work. Obviously isn't the only company
45:51
Speaker 1: led by an eccentric leader? What are you reporting on now?
45:55
Speaker 1: What's the next potential we work out there? You know?
45:59
Speaker 1: I'm just getting started. This is just a couple of
46:02
Speaker 1: weeks in, but so it's I don't quite know what
46:05
Speaker 1: the next we work is. I almost feel like there's
46:08
Speaker 1: a lot of many we works out there, whether it's
46:11
Speaker 1: you know, the companies in the stack market, some of
46:14
Speaker 1: these unicorns. I mean there's so many, um, so many
46:18
Speaker 1: red flags around these companies, like saying before, like founders
46:21
Speaker 1: taking money out very early and you know investors not
46:25
Speaker 1: really caring and just wanting to get into them, getting
46:28
Speaker 1: these massive packages, um pay packages, compensation. So I think
46:33
Speaker 1: there's there's so many different places to look. I don't
46:36
Speaker 1: get the sense that there's one company now that's sort
46:39
Speaker 1: of of size of Adam Newman. I think there's just
46:42
Speaker 1: a lot of many ones. I mean, he was a
46:44
Speaker 1: pretty like uh captivating and just insane. It's so many
46:49
Speaker 1: larger than life in so many ways. Um, But I
46:52
Speaker 1: have no doubt we're going to find one of them
46:55
Speaker 1: fairly soon. There'll be more. And what do you think
46:58
Speaker 1: the future holds for Adam Newman himself? He we we
47:02
Speaker 1: have to talk about the Golden parachute. So not only
47:06
Speaker 1: does uh soft Bank refinance a couple of hundred million
47:11
Speaker 1: dollars in loans that he has outstanding. They give him
47:13
Speaker 1: a hundred and eighty three million dollar package and essentially
47:17
Speaker 1: purchase a billion dollars of his stock, so he leaves
47:22
Speaker 1: we work as a billionaire. Yeah, it was I mean,
47:25
Speaker 1: it was just an incredible thing. And I mean then
47:27
Speaker 1: he got this pay package that they agreed to as
47:29
Speaker 1: part of the bailout. I mean, we were once the
47:31
Speaker 1: I p O Is called off, was on the verge
47:34
Speaker 1: of bankruptcy and they were going to run out of
47:36
Speaker 1: money in a couple of months, so they had to
47:37
Speaker 1: do this very quickly. They were laid off thousands upon
47:41
Speaker 1: thousands of people. But basically as part of the negotiations
47:46
Speaker 1: to get Adam Newman to give up his super voting shares,
47:49
Speaker 1: these potent shares that would have let him continue to
47:51
Speaker 1: keep control of the company. To do that, they struck
47:55
Speaker 1: this pay package. And I mean it's kind of interesting
47:58
Speaker 1: when we talk about the power of founder is right
48:00
Speaker 1: now that it wasn't a wake up call for Silicon
48:03
Speaker 1: Valley to be more wary of giving this power to founders.
48:06
Speaker 1: Like when you saw the price tag that Avenue and
48:08
Speaker 1: extracted the cost of pushing out a founder who's kind
48:11
Speaker 1: of a disastrous founder at some point. Yeah, I remember
48:16
Speaker 1: reading that and thinking Sun played it terribly. He could
48:18
Speaker 1: have said, hey, listen, I got a hundred billion dollars
48:21
Speaker 1: worth of other investments. If I take a ten billion
48:23
Speaker 1: dollar right down, it'll hurt, but I still have plenty
48:26
Speaker 1: of other money. If this goes belly up, your broke.
48:29
Speaker 1: Your a disaster, except I'll give you fifty million dollars
48:34
Speaker 1: or else you're just impoverished. Good luck fighting the lawsuits
48:38
Speaker 1: for the rest of your life. That would have been
48:40
Speaker 1: the play. But he didn't. I guess it was the
48:43
Speaker 1: other second funds he didn't want to put at risk.
48:45
Speaker 1: What Why Why didn't he hardball New Because I thought
48:49
Speaker 1: Son had all the leverage in that negotiation. That was
48:52
Speaker 1: one of the like the enduring mysteries I think of
48:55
Speaker 1: this whole story because all the things you said are right.
48:58
Speaker 1: Plus Adam had taken out so much money in terms,
49:03
Speaker 1: he had so much lent against his stock at forty
49:05
Speaker 1: seven billion dollars I mean JP Morgan, um Ubs credit sweets.
49:09
Speaker 1: They had lent him hundreds of millions of dollars and
49:12
Speaker 1: he would have gotten to default. He didn't necessarily have
49:14
Speaker 1: the liquidity to pay back everything he had borrowed. So
49:17
Speaker 1: it was I mean, it's kind of amazing in terms
49:20
Speaker 1: of his negotiating um skills that Massa and soft Bank.
49:25
Speaker 1: It was led by Marcello Clara, who's UM now that
49:28
Speaker 1: we work executive chairman. They blinked first. They gave Adam
49:32
Speaker 1: a lot, and I totally agree with you. One of
49:34
Speaker 1: the things I've heard it was just like the interest
49:36
Speaker 1: of time. They just wanted done ten billion dollars or
49:39
Speaker 1: whatever is and doesn't mean that much. They wanted to
49:41
Speaker 1: just keep on moving, keep on spending, not distract too much,
49:45
Speaker 1: and just get this done. But it's crazy. I mean
49:48
Speaker 1: that the time value of money could be the greatest
49:51
Speaker 1: golden parachute in the history of corporate America. I mean,
49:55
Speaker 1: I'm hard pressed to think of anybody who on the
49:58
Speaker 1: way out of a failing company, and it was a
50:00
Speaker 1: failing company that moment squeeze more money out of out
50:04
Speaker 1: of their board. And just to say, I mean Andrew
50:06
Speaker 1: Ross working at in his first big interview with Adam,
50:10
Speaker 1: um that he gave was I mean, Adam defended it
50:15
Speaker 1: in different ways. I mean Andrew very much pushed him on,
50:18
Speaker 1: like why that was okay and very aggressively. There was
50:21
Speaker 1: early November and he was sort of contrite and you know,
50:26
Speaker 1: a little shifty um, but for the most part, surprisingly transparent.
50:31
Speaker 1: I was when I was prepping for this, I watched
50:33
Speaker 1: this and uh, you know, you could see how he
50:37
Speaker 1: constructs that you know, reality distortion field. Um. But there
50:42
Speaker 1: was definitely more humility than we've seen previously. I don't
50:46
Speaker 1: want to say you humble, but just closer on that spectrum.
50:50
Speaker 1: Pretty clearly he wants to have a future in business
50:55
Speaker 1: and he needs to offer a few minukulpas of his own.
50:58
Speaker 1: It does feel like this was the first step on
51:00
Speaker 1: the comeback tour Adam Newman. I think that's going to
51:04
Speaker 1: be a pretty big uphill battle. That's gonna be quite
51:07
Speaker 1: the kill himan jar or to uh to mount given
51:11
Speaker 1: what a debacle. The interesting thing just so in terms
51:13
Speaker 1: of his next step is I agree with you there's
51:15
Speaker 1: an uphill battle in terms of maybe getting people to
51:18
Speaker 1: to give him money. But he now has a lot
51:21
Speaker 1: of money and from family office, yeah, exactly. Anecdotally it
51:25
Speaker 1: sounds like a lot of people are very happy to
51:27
Speaker 1: take his money. So the beginning, that's you know, he's
51:30
Speaker 1: seeding a lot of things that who knows where they're
51:32
Speaker 1: gonna go interesting. So I only have you for a
51:35
Speaker 1: limited amount of time. Let me jump to our favorite
51:37
Speaker 1: questions we ask all of our guests, starting with UM,
51:41
Speaker 1: you spend a lot of time researching and writing during
51:45
Speaker 1: the lockdown. Did you have any time to stream anything
51:48
Speaker 1: on Netflix or Amazon Prime? Um? There, I mean there's
51:52
Speaker 1: still a lot of like downtime. I did probably watch
51:56
Speaker 1: not much, you know, there there was downtime and UM,
51:59
Speaker 1: I did have a few shows, give us one or
52:03
Speaker 1: two favorites, little fires everywhere. I really liked UM never
52:09
Speaker 1: have I ever. I just started watching that last week.
52:11
Speaker 1: It's quite charming. Anything Mindy Kaling does, it's quite amusing.
52:15
Speaker 1: She's amazing. Ship's Creek we got through the whole that
52:19
Speaker 1: was my favorite pandemic. So the funny thing about that
52:22
Speaker 1: is the first episode of two or like uh, it's
52:25
Speaker 1: like it's like Succession. You don't like any of these people.
52:29
Speaker 1: The difference being in Ship's Creek you quickly start to
52:32
Speaker 1: warm up to them and they start to reveal their
52:35
Speaker 1: own path to um rehabilitation of themselves. It's better like
52:43
Speaker 1: every and then it's so it was really great right
52:46
Speaker 1: that that was one of my favorites. Let's talk about
52:49
Speaker 1: your mentors who helped shape your career as a business journalist. UM.
52:53
Speaker 1: I guess my earliest UM mentor as a journalist in
52:57
Speaker 1: general was in college. I'd always thought about journalism and
53:02
Speaker 1: I got an internship with UM then I think septagenarian
53:07
Speaker 1: UM journalist. He his name is Gabe Pressman. I grew
53:10
Speaker 1: up in New York. He was an NBC journalist. UM
53:13
Speaker 1: this sort of the political head haunch of local journalism.
53:18
Speaker 1: I worked for him first summer. He was in his
53:20
Speaker 1: I think late seventies, and UM, he was just the
53:22
Speaker 1: most energetic, passionate journalist I've ever met. He was still
53:26
Speaker 1: like chasing after mayors, grilling them. Um. It was it
53:30
Speaker 1: was the Senate race. It was Hillary in the Senate race,
53:32
Speaker 1: and m it was like the most fun summer I've
53:35
Speaker 1: ever had. And seeing his energy and and he he
53:38
Speaker 1: passed away a few years ago, but literally he started
53:41
Speaker 1: blogging into his nineties and he would joke, he would say, UM,
53:45
Speaker 1: you know, my wife really wants me to like take
53:47
Speaker 1: a step back and work at Teach, a Columbia journalism
53:49
Speaker 1: school where he had gone, and he was like, I'm
53:52
Speaker 1: just not ready like at some point like scale back,
53:55
Speaker 1: and he never really did. Um so he I would
53:58
Speaker 1: say he was my first mentor just seeing like that.
54:01
Speaker 1: It is the most fune job in the world. He
54:03
Speaker 1: just seeing that day in and day out. Let's talk
54:06
Speaker 1: about books. What are some of your favorites and and
54:09
Speaker 1: what are you reading right now? Sure, I'll start. Um.
54:13
Speaker 1: You know, I always wish I read more fiction, but um,
54:17
Speaker 1: it's like it's always get pulled into, especially the business genre. Um.
54:22
Speaker 1: So I write At this minute, I'm reading Trillions by
54:25
Speaker 1: Robbin's Wigglesworth. Um. It's really good. It's about like index
54:29
Speaker 1: funds sort of. I'm learning a lot from it. Um.
54:33
Speaker 1: The right was gaek for two weeks ago. I'm midway through,
54:38
Speaker 1: but I'm really interesting a ton from it. I just
54:42
Speaker 1: um read Anderson Cooper's book about the Vanderbilts. It's I
54:46
Speaker 1: thought it was really great and it's so interesting. You
54:50
Speaker 1: know he talks it starts like the Gilded Age and
54:53
Speaker 1: you just see so many like eerie kind of parallels
54:56
Speaker 1: um between our age right now, and just like the
54:59
Speaker 1: level of like wealth creation and what it leads to.
55:03
Speaker 1: So um, I've really enjoyed that. I read, Um, this
55:06
Speaker 1: is a little bit dated, but say nothing by Patrick
55:09
Speaker 1: Grad and Keith It's about the troubles in Northern Ireland.
55:13
Speaker 1: It is, I mean, it's it's very sad, but I
55:17
Speaker 1: then it's pretty long and I just could not put
55:19
Speaker 1: it down. It's so great. Yeah, I can't recommend that
55:22
Speaker 1: one highly enough. Quite quite interesting. What sort of advice
55:25
Speaker 1: would you give to a recent college grad who was
55:28
Speaker 1: interested in a career in either journalism or or business. Um,
55:34
Speaker 1: In terms of journalism, I would just say jump in.
55:36
Speaker 1: I mean, it's such a as opposed to business. I
55:39
Speaker 1: felt like when I graduated from college, you know, so
55:42
Speaker 1: many people had jobs set they were going to make,
55:45
Speaker 1: you know, a decent amount of money. And with the
55:48
Speaker 1: journalism you just have to find your way in and
55:50
Speaker 1: a lot of its internships, and it's just the path
55:54
Speaker 1: is hard, there's no straight line. So I would just
55:56
Speaker 1: say for journalism it really helps to just jump into
55:59
Speaker 1: the first job you can get, work really hard in it,
56:02
Speaker 1: and you just always have to keep there's no straight line,
56:05
Speaker 1: but jump in, learn from it, meet people, find your
56:09
Speaker 1: mentors everywhere you go, and just keep going. You learn
56:12
Speaker 1: so much on the job. I went to journalism school
56:14
Speaker 1: at Columbia. It was a super fun year. But it's like,
56:18
Speaker 1: within two days of um working as a journalist, you
56:22
Speaker 1: just learned so much you can ever learn in school.
56:24
Speaker 1: And our final question, what do you know about the
56:27
Speaker 1: world of I P o S. Capital market business journalism
56:32
Speaker 1: today that you didn't know fifty years ago when you
56:35
Speaker 1: were first starting out. Okay, what I think I've learned
56:38
Speaker 1: and probably the most in writing this book is you
56:42
Speaker 1: think people are rational players, and you think that um,
56:47
Speaker 1: titans of business are supposed to behave in sort of
56:50
Speaker 1: a rational way, and UM that these you know, these
56:54
Speaker 1: check marks, these um like a t ro price or something,
56:58
Speaker 1: or fidelity that they're gonna do a certain amount of
57:00
Speaker 1: work looking at things. And I think the level of
57:04
Speaker 1: irrationality in business, of just relationships of people sort of
57:09
Speaker 1: um not necessarily making rational decisions and just going with
57:13
Speaker 1: their gut and going with the people they like and
57:15
Speaker 1: think are cool like that that overrides a lot of things.
57:19
Speaker 1: I think it's just so much less rational than you
57:22
Speaker 1: think it would be. And sometimes the things that on
57:25
Speaker 1: their face seemed really um crazy insane maybe are quite
57:31
Speaker 1: quite fascinating. We have been speaking with Maureen Farrell. She
57:35
Speaker 1: is the co author of the cultive We We Work,
57:38
Speaker 1: Adam Newman, and The Great Startup Delusion. If you enjoyed
57:42
Speaker 1: this conversation, we'll be shown check out any of our
57:45
Speaker 1: previous four hundred interviews. You can find those at iTunes, Spotify,
57:50
Speaker 1: wherever you get your podcast from. We love your comments,
57:53
Speaker 1: feedback and suggestions right to us at m IB podcast
57:57
Speaker 1: at Bloomberg dot net. Follow me on Twitter at Rid Halts.
58:01
Speaker 1: You can sign up for my daily reads at Rid
58:04
Speaker 1: Halts dot com. I would be remiss if I did
58:07
Speaker 1: not thank the team that helps put together these conversations
58:10
Speaker 1: each week. Charlie Volmer is my audio engineer. Uh Attica
58:15
Speaker 1: val Bron is our project manager. Michael bat Nick is
58:18
Speaker 1: my director of research. Harris Wald is my producer. I'm
58:24
Speaker 1: Barry Ri Halts. You've been listening to Masters in Business
58:27
Speaker 1: on Bloomberg Radio.