This archive report was first published on 29 December 2019.
Lessons from Adam Neumann's WeWork ¶
On December 29, 2019, the WeWork debacle serves as a cautionary tale for business leaders and investors alike.
Adam Neumann, the founder and former CEO of WeWork, sold a stake in the company valued at $47 billion in 2017 to SoftBank of Japan. However, the company's business model was fatally flawed, with an overwhelming amount of long-term obligations to landlords and short-term revenue from tenants.
As a result, the company's value plummeted to $8 billion, an 80% loss in value in a few months. Neumann was forced to resign as CEO, but he will still walk away with a guaranteed $1.6 billion payout.
The WeWork debacle offers several valuable lessons, including the importance of questioning CEO decisions and the dangers of prioritizing growth over financial sustainability.
Firstly, it is clear that positioning still matters, and tech is still a popular and trendy industry. WeWork positioned itself as a tech entrepreneurship, leasing large swaths of office space and becoming one of the largest lessors in cities around the world.
Secondly, the time-tested rule of filling one's board with friendly parties who do not question one's judgment still applies. Neumann's board included former partners in Goldman Sachs, a professor at Harvard Business School, and representatives of prominent private equity funds.
Lastly, the importance of appearing successful cannot be overstated. WeWork's founder spent lavishly on unnecessary expenses, including airlifting furniture to locations and investing in unrelated businesses.
Despite the WeWork debacle, there is hope for reform in the business world. The Boeing board has finally come to the conclusion that the 737 MAX is beyond repair, and the former CEO of Uber, Travis Kalanick, has sold all his shares and cut links with the company.
Perhaps the tortoise does win the race after all.
