WeWork: A Success and Failure Story

One question I’ve been getting from clients and friends is whether we’ve invested in WeWork and have had to deal with the severe valuation cuts.

We have not directly invested in WeWork, but we are definitely dealing with the fallout that comes along with the WeWork and Softbank fiasco.

People that want to seem smart will just see everything that Softbank has invested in and assume that the company is the next WeWork.

This couldn’t be farther from the truth. Yes, there are many companies out there that are overvalued. Yes, there are companies out there that are mismanaged. But assuming everything Softbank touches is an easy to make and harsh assumption.

On to WeWork.

First, the good. You just have to be impressed with the unprecedented growth. Never has a company scaled that fast. We’ll get to the bad about Adam Neumann in a bit, but he is an impressive storyteller and negotiator. His vision for WeWork was impressive and if you ever heard him speak, you wanted to believe him.

Those are some impressive qualities for a start-up founder and CEO. What he achieved in his time frame as CEO of We is going to be talked about for the rest of my lifetime. Unfortunately, this will all be overshadowed by the failed IPO and the end of his tenure.

I don’t believe Neumann was a terrible CEO like some are painting him out to be. I believe this to be a classic case of mismanagement by the board of directors.

Adam Neumann had a vision. A pretty darn good one. Softbank and the board didn’t just give him a loaded gun, but a fully automatic machine gun to accomplish his vision. This was the problem.

The job of the board of directors is to supervise the activities of the company and management. Rather than do this, they gave him everything he wanted (including an insane parachute!).

When the scandals of alcohol abuse, private planes, mismanagement, etc. started coming out, the board didn’t remove Neumann as CEO or replace him. Rather they appeased him by giving him more.

Softbank and the board rode Neumann out thinking that the IPO was a means to the end. And well, we know how that ended.

I have yet to sit on the board of a company so I can’t say I’m the expert here, but what I do know is that everyone and everything needs checks and balances. Giving a CEO free reign to do what he wants, when he wants to will lead to dire consequences.

I am not defending Neumann as a person. Afterall, it was his actions and mismanagement that led to his employees getting screwed while he walks away with $1.7b. I just wonder with proper guidance and checks and balances, what Neumann and WeWork could have been.