Derek Thompson: WeWork and the great unicorn delusion
Neumann proposed that office space could play the kibbutz’s role of fostering community, empathy, and serendipitous creation. “If you understand that being part of something greater than yourself is meaningful,” he said, “and if you’re not driven just by material goods, then you’re part of the We Generation.”
Rather than treat WeWork like a community farm, however, Neumann used the company like a personal ATM.
The most egregious example might be from earlier this year. In January, WeWork announced that it would change its name to the We Company to reflect the fact that its ambitions had grown from office-sharing to every facet of the collective human experience. Under this new umbrella company, the firm would revolutionize living space (WeLive), school (WeGrow), and retail (WeMRKT).
But the name We Company had already been trademarked—by Neumann. And Neumann insisted that his company pay him $6 million for the privilege of using it.
Even though Neumann was eventually goaded into giving back the fee, this gambit was ludicrous, audacious—and telling. Corporate renaming falls squarely in the job description of the founder and chief executive. Neumann easily could have taken no payment at all; instead he tried to extract a $6 million bonus for less than a day’s work.
It is not unusual for founders of billion-dollar enterprises to get rich. What’s deeply unusual, however, is the way Neumann wrapped himself around WeWork’s business to squeeze profit from its every pore, even as he proclaimed his firm’s spirit of generosity.
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In 2013, Neumann tried to buy a small stake in a Chicago building that was in talks to lease space to WeWork. The board pushed back against Neumann, pointing out that it was a conflict of interest for Neumann to stand on both sides of a lease agreement. The next year, Neumann gained control of WeWork and proceeded with his plan of buying up several properties to lease back to his company for millions of dollars. In documents filed with the Securities and Exchange Commission in anticipation of a public offering, WeWork announced that the company had lease agreements with four buildings in which Neumann had an ownership interest. Since 2016, WeWork has paid nearly $17 million to Neumann-owned buildings. Dick Costolo, the former CEO of Twitter, called this level of self-dealing “egregious.”
Within the company, there were other signs that Neumann’s “spirit of we” rhetoric was a cover for “lucre for me” behavior. In 2015, Neumann made tens of millions of dollars selling shares during an investment round. Soon after, the company offered to buy back ordinary employees’ shares, but it offered a much lower “payout per share” than what Neumann had received. Many of Neumann’s kibbutzniks didn’t even know they had been shafted. “Neumann’s sale wasn’t publicized within the company,” according to Wall Street Journal reports.