WEBVTT - WeWork Part 5: The Universe Does Not Allow Waste 0:00:00.040 --> 0:00:03.520 We're gonna start this episode with a threat. The threat 0:00:03.600 --> 0:00:06.800 comes from Adam Newman, the CEO of We Work, and 0:00:06.840 --> 0:00:09.800 he was talking to Jamie Hodari, a guy who runs 0:00:09.840 --> 0:00:14.560 a smaller rival coworking space called Industrious. The two CEOs 0:00:14.640 --> 0:00:18.599 were considering doing a deal together. This was in and 0:00:18.680 --> 0:00:21.400 to talk it out, Adam invited Jamie to spend the 0:00:21.440 --> 0:00:23.640 day with him. They were going to fly to Atlanta 0:00:23.760 --> 0:00:26.920 to tour each other's offices, and Adam wanted to fly 0:00:27.080 --> 0:00:32.639 Jamie out on a private jet. I got the calendar 0:00:32.680 --> 0:00:37.000 invite from his assistant, and the plane was leaving from 0:00:37.120 --> 0:00:40.400 the Hampton's and I explained that I don't live in 0:00:40.479 --> 0:00:44.480 the Hampton's. I live very far from the Hamptons in 0:00:44.479 --> 0:00:47.320 in Brooklyn, and I was just going to fly down 0:00:47.400 --> 0:00:49.720 commercially and meet them there and we'd still have the 0:00:49.720 --> 0:00:53.440 whole day in Atlanta. And and she explained that Mr 0:00:53.520 --> 0:00:56.480 Newman insists that you come out, So I had to 0:00:56.480 --> 0:01:00.600 take a like two hour ruber ride or something, you know, 0:01:00.680 --> 0:01:04.280 to get to this six am takeoff. And that definitely 0:01:04.360 --> 0:01:06.760 felt like a bit of a flex. So they're on 0:01:06.840 --> 0:01:10.040 this private jet and at one point Adam pulled Jamie 0:01:10.080 --> 0:01:15.360 aside for a private conversation maybe an hour in he 0:01:15.440 --> 0:01:19.040 asked to sort of sit away from everyone else and 0:01:19.080 --> 0:01:22.640 talk one on one, and he said, look, I respect 0:01:22.680 --> 0:01:25.920 what you guys do. I think you seem like a 0:01:25.959 --> 0:01:28.840 good guy, and as a result, I want to give 0:01:28.880 --> 0:01:32.600 you a heads up that you know if if coming 0:01:32.640 --> 0:01:35.800 out of the next few weeks things don't go the 0:01:35.800 --> 0:01:38.479 way we work, would like them too, I think, he said, 0:01:38.520 --> 0:01:41.760 you know, I have two hundred people waiting for a 0:01:41.760 --> 0:01:44.360 push of a button for me, and their job is 0:01:44.400 --> 0:01:47.000 going to be to bury your business. And what that 0:01:47.040 --> 0:01:49.120 will mean is that we're going to give all of 0:01:49.120 --> 0:01:52.560 your customers a year free, and the ones that don't leave, 0:01:53.160 --> 0:01:55.960 we'll give two years free, and the ones that don't leave, 0:01:56.360 --> 0:01:58.560 we'll give three years free. Until you don't have a 0:01:58.600 --> 0:02:01.320 single customer left, and you will have lost the business 0:02:01.360 --> 0:02:06.120 that you spent the last five years building. Uh. That's intense. 0:02:06.920 --> 0:02:09.640 Jamie didn't know what to think. He says. He felt 0:02:09.639 --> 0:02:12.240 a little scared, but he didn't know how seriously to 0:02:12.280 --> 0:02:15.880 take this threat because what Adam was describing would have 0:02:15.919 --> 0:02:18.920 been such an expensive move. In short, I didn't really 0:02:18.960 --> 0:02:22.880 believe him because what he described again would would mean, 0:02:22.919 --> 0:02:25.520 they were almost by definition, losing a lot of money 0:02:25.520 --> 0:02:29.320 on those customers. He said, well, you know you should 0:02:29.360 --> 0:02:32.040 believe me, and and you're going to see that I'm 0:02:32.040 --> 0:02:37.680 not bluffing. You're listening to Foundering. I'm your host, Ellen Hewitt, 0:02:38.120 --> 0:02:41.600 and this week we're talking about money. How We Work 0:02:41.720 --> 0:02:44.480 was able to raise money and some of the surprising 0:02:44.560 --> 0:02:47.680 things the company did with the cash, and whether having 0:02:47.720 --> 0:02:51.679 money lots of money affected We Work's ability to see 0:02:51.760 --> 0:02:56.320 straight from the moment the company was founded in We 0:02:56.440 --> 0:02:59.600 Work had money to spend, not because it was turning 0:02:59.639 --> 0:03:02.560 a pro fit. In fact, it lost money more and 0:03:02.600 --> 0:03:06.080 more every year. At its peak, we were lost almost 0:03:06.120 --> 0:03:09.520 two billion dollars in one year. We Worked got its 0:03:09.520 --> 0:03:13.320 money from investors, large mutual funds and investment banks and 0:03:13.400 --> 0:03:17.520 venture capitalists, including Masa Yoshi Son. He's one of the 0:03:17.560 --> 0:03:20.960 biggest tech investors out there, and he often preached that 0:03:21.000 --> 0:03:24.679 when it comes to business, the crazier the better. All 0:03:24.720 --> 0:03:27.919 these investors wanted to give We Work cash in exchange 0:03:27.919 --> 0:03:30.680 for owning a slice of the company, which they hoped, 0:03:30.760 --> 0:03:34.640 over time would become more and more valuable by the 0:03:34.680 --> 0:03:37.680 way We Work. And a representative for Adam Newman the 0:03:37.760 --> 0:03:40.960 client to comment on this episode. Now, let's get back 0:03:41.000 --> 0:03:43.120 to the story of Jamie and Adam on the plane. 0:03:43.680 --> 0:03:47.320 According to Jamie, Adam made good on his threat in 0:03:47.360 --> 0:03:50.200 a lot of markets. Customers all of a sudden got 0:03:50.240 --> 0:03:55.880 bombarded with emails from dozens of different brokers saying, you know, 0:03:55.960 --> 0:03:59.320 they basically insert ways we work handid off the dirty 0:03:59.360 --> 0:04:02.120 work to a series of brokers who then went and 0:04:02.240 --> 0:04:04.800 advocated to our customers that they should be leaving us 0:04:04.800 --> 0:04:09.480 for we work. And you know, for two three five days, 0:04:09.720 --> 0:04:12.680 you know, maybe a week, it seemed possible that there was, 0:04:12.760 --> 0:04:15.640 all of a sudden going to be this just wave 0:04:16.240 --> 0:04:22.120 of customers exiting Industrious. And it didn't happen. Jamie said, 0:04:22.200 --> 0:04:25.599 we works attacked, just didn't work. Not that many customers 0:04:25.680 --> 0:04:28.880 left Industrious. When Jamie thinks back on that moment on 0:04:28.920 --> 0:04:33.160 the plane, he's struck by adams naked aggression. Even though 0:04:33.200 --> 0:04:35.520 adams plan didn't work, he was ready to go to 0:04:35.560 --> 0:04:39.200 such extreme lengths to take down a competitor. Jamie couldn't 0:04:39.240 --> 0:04:45.080 understand choosing to burn money that way. It felt like 0:04:45.160 --> 0:04:47.840 we Work could do no wrong. It was growing like 0:04:47.960 --> 0:04:51.360 mad venture capitalists were falling over themselves to try to 0:04:51.400 --> 0:04:54.279 get we work to take their investment. And all around 0:04:54.320 --> 0:04:57.599 Silicon Valley you heard startups talking about how spending lots 0:04:57.640 --> 0:05:00.640 of money was the way to grow fast, to win 0:05:00.760 --> 0:05:06.680 against their rivals. Profits came later, Profits weren't sexy. I 0:05:06.720 --> 0:05:09.360 want to give you a glimpse into how venture capital works, 0:05:09.960 --> 0:05:15.760 how it turns traditional business sense upside down. With most 0:05:15.800 --> 0:05:18.800 small businesses, you want to be making a profit. Let's 0:05:18.800 --> 0:05:21.880 say yourself frozen bananas, and it costs four dollars to 0:05:21.920 --> 0:05:24.839 make each one. That's the cost of the supplies, paying 0:05:24.839 --> 0:05:27.680 your employee, and rent for the banana stand. So you'd 0:05:27.680 --> 0:05:30.520 want to sell the banana for maybe five dollars. The 0:05:30.520 --> 0:05:33.480 first four dollars covers all your expenses. Then you might 0:05:33.560 --> 0:05:37.839 have a dollar of profit. Now, let's say you're raising 0:05:37.839 --> 0:05:41.520 money from venture capitalists for your banana stand. That means 0:05:41.560 --> 0:05:44.719 something different. You've sold a slice of your business to 0:05:44.760 --> 0:05:48.080 the VC in exchange for cash. You now have a 0:05:48.120 --> 0:05:51.640 lot of cash. That's exciting. You can use it immediately 0:05:51.680 --> 0:05:54.800 to hire more banana sellers, buy more bananas, whatever you want. 0:05:56.120 --> 0:05:59.520 Vcs want the companies they invest in to grow. They 0:05:59.560 --> 0:06:02.679 invested in you to become the biggest frozen banana seller 0:06:03.000 --> 0:06:06.040 in the market. Now you need to sell way more 0:06:06.080 --> 0:06:08.960 bananas in way more cities than your competitors, and do 0:06:09.040 --> 0:06:12.240 it first. Instead of opening one banana stand next year, 0:06:12.480 --> 0:06:16.039 they want you to open ten. Vcs. Care a lot 0:06:16.160 --> 0:06:19.080 about how many five dollar bananas you can sell, so 0:06:19.120 --> 0:06:22.240 they may push you to expand to new markets, even 0:06:22.240 --> 0:06:24.480 if it costs more to hire someone or rent is 0:06:24.520 --> 0:06:28.120 more expensive. So it now costs you six dollars to 0:06:28.120 --> 0:06:31.080 make a banana that you still sell for five. You're 0:06:31.080 --> 0:06:34.120 losing money on each banana you sell. That sounds like 0:06:34.120 --> 0:06:37.080 a dumb idea, but in this upside down world, it 0:06:37.160 --> 0:06:41.000 makes sense because you're still growing. You're selling more than 0:06:41.040 --> 0:06:44.360 you ever did, crowding out the competition and cementing your 0:06:44.480 --> 0:06:50.839 name as the number one frozen banana seller. We Work 0:06:50.920 --> 0:06:54.560 knew how to grow. It was growing every year, which 0:06:54.560 --> 0:06:57.720 means it was doubling its business. We had plenty of demand. 0:06:57.800 --> 0:07:00.600 We were not signing real estate fast enough. As far 0:07:00.680 --> 0:07:03.240 as we knew, we were going to keep growing a 0:07:03.320 --> 0:07:07.440 hundred percent until someone told us to stop. That's Dave Fano. 0:07:07.960 --> 0:07:10.640 He was we Works chief growth officer until he left 0:07:10.680 --> 0:07:14.160 in and he saw that the more we Work locations 0:07:14.160 --> 0:07:16.560 they added, the harder it was to keep growing a 0:07:16.960 --> 0:07:21.240 percent year after year. It was harder, significantly harder to 0:07:21.280 --> 0:07:24.400 go from five hundred to a thousand than from a 0:07:24.480 --> 0:07:27.640 hundred to two hundred, just the amount of moving parts 0:07:27.640 --> 0:07:31.080 and pieces. Because there's only so much available real estate 0:07:31.080 --> 0:07:33.400 in a given market, you gotta get bigger blocks of 0:07:33.440 --> 0:07:36.760 real estate. You can't get four million square feet square 0:07:36.760 --> 0:07:38.840 feet at a time. You've gotta start to sign leases 0:07:38.880 --> 0:07:41.880 that are two fifty square feet, and those are more 0:07:41.920 --> 0:07:45.240 complex negotiations and they take longer. So there's just a 0:07:45.240 --> 0:07:50.640 lot of things that got exponentially harder as you got bigger, 0:07:51.440 --> 0:07:54.640 and as you tried to keep doubling to keep growing. 0:07:54.800 --> 0:07:57.320 We Work was expanding into markets all over the world, 0:07:57.880 --> 0:07:59.800 even the ones where it seemed like it was losing 0:07:59.840 --> 0:08:04.080 my me. Here's Jamie again. It was clear that London 0:08:04.200 --> 0:08:06.720 was a bad market for we Work, and yet they 0:08:06.800 --> 0:08:09.600 kept doubling down there. So if you don't care if 0:08:09.640 --> 0:08:12.920 your units make any money, then one thing you can 0:08:12.920 --> 0:08:15.240 do is at a lot of units in London, then 0:08:15.280 --> 0:08:18.280 maybe it's okay to rent space at eleven dollars and 0:08:18.320 --> 0:08:21.120 go sell it for ten over and over. We Work 0:08:21.200 --> 0:08:23.600 may have been losing money, but they didn't stop the 0:08:23.600 --> 0:08:27.239 company from dominating the headlines. Adam's profile at the time 0:08:27.320 --> 0:08:30.440 was huge. He was hanging out with actors, going on TV, 0:08:30.960 --> 0:08:34.079 doing photo shoots for magazine covers. He was an incredibly 0:08:34.200 --> 0:08:39.440 visible CEO where his personality became the company's personality. And 0:08:39.480 --> 0:08:42.640 as his fame grew, so did Adam's vision for we Work. 0:08:43.280 --> 0:08:46.960 We want to help the world to self actualize themselves. 0:08:47.440 --> 0:08:51.160 Here's the beauty. We have actually been given a permit 0:08:51.679 --> 0:08:55.560 from the world, from investors, for our members from the 0:08:55.679 --> 0:08:58.320 universe to actually have a chance to go and tackle 0:08:58.400 --> 0:09:02.320 this problem. That's Adam speaking at an all hands meeting 0:09:02.320 --> 0:09:05.679 in mid You can hear him talking about how big 0:09:05.720 --> 0:09:08.280 and meaningful we Work is going to be. It's not 0:09:08.400 --> 0:09:11.480 just work. It's about helping their members in every aspect 0:09:11.480 --> 0:09:14.400 of their lives to find happiness and to find themselves. 0:09:15.120 --> 0:09:17.679 That might explain some of the side hustles we Work 0:09:17.720 --> 0:09:19.880 got into that seemed to have nothing to do with 0:09:19.960 --> 0:09:24.360 office rental. We Work started planning we Live, which was 0:09:24.440 --> 0:09:28.000 an experiment in building communal apartments kind of like adult 0:09:28.080 --> 0:09:31.120 dorms for millennials. We Work at a grand plan of 0:09:31.200 --> 0:09:34.240 launching thirty locations in a year, but they only ever 0:09:34.280 --> 0:09:37.480 opened up two. But we Live was just the start. 0:09:37.880 --> 0:09:40.480 We work with rapidly trying new things, a lot of 0:09:40.520 --> 0:09:43.000 new things. It was getting a little out of control. 0:09:43.640 --> 0:09:47.280 Here's Adam at an all hands meeting in we have 0:09:47.440 --> 0:09:51.280 four hundred and forty two open projects that are in 0:09:51.400 --> 0:09:55.240 different categories that don't have anything to do with we Work. 0:09:55.320 --> 0:09:58.040 Our buildings are four well margin. The base of our 0:09:58.040 --> 0:10:02.319 brands a hell of a number. I'm personally set us 0:10:02.320 --> 0:10:04.440 on the path of a few projects that were not 0:10:04.520 --> 0:10:06.839 qualified to do. Doesn't mean they couldn't have been cool. 0:10:06.880 --> 0:10:09.160 They could have been amazing. We just happened to not 0:10:09.320 --> 0:10:12.840 be qualified to do. He seemed aware that we Work 0:10:12.920 --> 0:10:15.920 was losing focus. I want to tell you about some 0:10:15.960 --> 0:10:19.320 of we worked crazy expenses, expenses that seem to have 0:10:19.440 --> 0:10:23.280 nothing to do with office space. And here's Jamie recounting 0:10:23.320 --> 0:10:26.200 the time Adam told him about a recent we Work investment. 0:10:26.880 --> 0:10:30.000 It was in a company called Wave Garden. Adam asked 0:10:30.040 --> 0:10:32.360 Jamie if he'd ever heard of it. Jamie said no, 0:10:33.200 --> 0:10:35.200 and so then he pulled out his phone and he 0:10:35.240 --> 0:10:38.320 started playing this video he made some phrase about how 0:10:38.320 --> 0:10:42.559 it makes waves, and I completely misunderstood what he meant. 0:10:42.720 --> 0:10:46.480 I thought he was talking about some construction technology company 0:10:46.679 --> 0:10:49.520 that metaphorically was making waves. It was doing big things 0:10:49.520 --> 0:10:52.720 in its industry. But then the video just kept showing 0:10:52.760 --> 0:10:56.880 people surfing, and at some point I was like, man, 0:10:56.920 --> 0:11:00.480 they are really taking this like wave metaphor. Are really 0:11:00.559 --> 0:11:02.680 far like that they have to explain what they do. 0:11:03.040 --> 0:11:04.679 And then there was a moment where I was like, 0:11:04.880 --> 0:11:10.000 oh my god, this isn't a metaphor. They literally make waves. 0:11:10.400 --> 0:11:14.480 Why are they buying this company? Yep. We Work spent 0:11:14.559 --> 0:11:17.720 thirteen million dollars to buy almost half of a wave 0:11:17.760 --> 0:11:21.920 pool company. Later, we Work investor told me the rationale. 0:11:22.320 --> 0:11:24.720 He said that we Work wanted to build huge corporate 0:11:24.720 --> 0:11:27.840 campuses and put wave pools in them. But to Jamie 0:11:28.000 --> 0:11:31.520 the investment was baffling. It's like when people become really 0:11:31.520 --> 0:11:33.520 wealthy and all of a sudden they think that the 0:11:33.559 --> 0:11:35.840 McDonald's near the house where they grew up is better 0:11:35.880 --> 0:11:37.760 than the McDonald's in the city they currently live in, 0:11:37.800 --> 0:11:41.079 and they have people fly the big Mac over from 0:11:41.120 --> 0:11:43.800 their hometown McDonald There's something like, I don't know, I 0:11:43.840 --> 0:11:45.679 guess that's what rich people do, and I guess that's 0:11:45.720 --> 0:11:48.640 what rich companies do. We worked had so much money 0:11:48.760 --> 0:11:51.800 they were literally giving it away. They launched a pitch 0:11:51.840 --> 0:11:55.520 competition called the Creator Awards, where they handed out twenty 0:11:55.559 --> 0:12:01.600 million dollars in prize money. Hello, Hello, Hello, welcome everyone, 0:12:01.760 --> 0:12:09.720 Welcome to the eighteen Berlin Create Our Awards. Amazing entrepreneurs 0:12:09.800 --> 0:12:13.320 pitched their startup ideas on stage to celebrity judges like 0:12:13.360 --> 0:12:16.880 Ashton Kutcher and p Diddy. We were called the Creator 0:12:16.920 --> 0:12:20.880 Awards marketing events to help spread the word about their offices. 0:12:21.600 --> 0:12:23.720 They held them all over the world in places like 0:12:23.760 --> 0:12:27.880 Tel Aviv, Austin, and Shanghai. When you do something that 0:12:28.000 --> 0:12:31.000 comes from the heart, when you bring it together with intention, 0:12:31.320 --> 0:12:37.120 magic happens. If you're a graphic designer and accountant and artists, 0:12:37.120 --> 0:12:40.400 a singer, or anything in between. Euro creator and euro 0:12:40.520 --> 0:12:42.760 creator and what does that mean? That means that we're 0:12:42.840 --> 0:12:46.840 part of something greater than ourselves. And it wasn't just Adam. 0:12:47.000 --> 0:12:49.520 Other execs also got caught up in the ability to 0:12:49.559 --> 0:12:53.520 spend freely. Here's Carl Pierre, a community manager in d C. 0:12:54.360 --> 0:12:57.480 He's describing how he was instructed one night to find 0:12:57.520 --> 0:13:00.800 a last minute helicopter or private plane for an executive. 0:13:01.160 --> 0:13:04.520 I had another we Work employee communicates me that an 0:13:04.520 --> 0:13:08.839 executive needed transportation immediately, ideally helicopter from Washington, d C 0:13:09.000 --> 0:13:11.400 O a jet to get back to New York City, 0:13:11.640 --> 0:13:14.640 and no context, just told it was very important. I 0:13:14.720 --> 0:13:16.920 was calling my friends who are staffers to see if 0:13:16.920 --> 0:13:20.559 we could pay to borrow, uh, you know, a senator's 0:13:20.600 --> 0:13:22.640 plane or something crazy. I was going through every channel 0:13:22.679 --> 0:13:24.960 and it was nuts. At the end of the day, 0:13:25.200 --> 0:13:27.040 it was almost like midnight, so I'm trying to find this. 0:13:27.400 --> 0:13:28.840 I had a good lead on a on a on 0:13:28.880 --> 0:13:32.079 a on a helicopter, and then uh, it turns out 0:13:32.679 --> 0:13:35.480 that particular we Work executive just needed to get back 0:13:35.559 --> 0:13:38.440 to a party in New York and that's the only 0:13:38.480 --> 0:13:41.920 reason why he wanted to leave DC Again midnight, I 0:13:41.920 --> 0:13:43.480 found a good lead and I was told like, oh, yeah, 0:13:43.520 --> 0:13:45.040 you know, it looks like the party let's be over anyway, 0:13:45.120 --> 0:13:49.320 So he's good. Yeah, nearly lost my mind. So Adams 0:13:49.400 --> 0:13:52.880 executives were willing to spend money in frivolous ways, and 0:13:52.920 --> 0:13:55.720 at the same time, Adam was stretching the truth about 0:13:55.720 --> 0:13:58.800 the company's financial position. Here he is at an all 0:13:58.840 --> 0:14:02.160 hands meeting in twenty six team telling employees that the 0:14:02.240 --> 0:14:05.959 business was profitable when it really wasn't. As opposed to 0:14:06.000 --> 0:14:08.679 other companies that you're reading about, we don't have any issues. 0:14:08.960 --> 0:14:10.719 We don't need to raise any more money. We're in 0:14:10.760 --> 0:14:13.400 an amazing place where the profitable business that's going to 0:14:13.440 --> 0:14:16.079 only get better. That's going to help us fulfill our 0:14:16.200 --> 0:14:20.000 calling and our mission. By shifting this culture, we're gonna 0:14:20.000 --> 0:14:22.120 be able to not only keep doing these things, but 0:14:22.200 --> 0:14:26.040 do them pen times better, move very strongly into positive 0:14:26.080 --> 0:14:28.640 cash flow. No need to rely on raising money, now, 0:14:28.720 --> 0:14:30.840 need to rely on going public, no need to rely 0:14:30.880 --> 0:14:34.480 on anything except for ourselves and fulfill our mission farm members, 0:14:34.680 --> 0:14:36.160 and we're going to do it, all of us together. 0:14:36.960 --> 0:14:40.160 He says here they have a profitable business. I can't 0:14:40.160 --> 0:14:42.560 tell if he's being sloppy or misleading when you're saying 0:14:42.600 --> 0:14:46.160 that we now know that we Work was losing money. 0:14:46.680 --> 0:14:49.520 In the tape, Adam is telling his employees that we 0:14:49.600 --> 0:14:52.120 Work doesn't need to rely on raising money for the 0:14:52.160 --> 0:14:55.760 business to keep growing, but in just a few months 0:14:56.120 --> 0:14:59.360 he'll turn around and raise four point four billion dollars 0:14:59.480 --> 0:15:02.680 from a fame as investor, and this decision will change 0:15:02.760 --> 0:15:06.360 the entire course of we Works trajectory. All of the 0:15:06.360 --> 0:15:10.120 company's impulses to do things that were more random, more grandiose, 0:15:10.200 --> 0:15:14.960 more expensive, They're about to be unleashed. We'll be right back. 0:15:27.880 --> 0:15:30.200 So before the break, we talked about how we Work 0:15:30.320 --> 0:15:33.080 was about to raise money from a new investor, and 0:15:33.160 --> 0:15:35.760 apart from Adam, this investor is one of the most 0:15:35.800 --> 0:15:39.960 important people in the story of We Work, Masa Yoshi's son. 0:15:41.160 --> 0:15:44.080 To explain who he is and why he's so important, 0:15:44.480 --> 0:15:47.400 I want to introduce a colleague of mine, Sarah McBride. 0:15:48.080 --> 0:15:51.720 Here's Sarah. I've been reporting on venture capital for the 0:15:51.760 --> 0:15:54.880 past few years, so I'm spending a lot of time 0:15:54.960 --> 0:15:59.120 on we Work's biggest backer, soft Bank, plus the guide 0:15:59.120 --> 0:16:02.680 behind it. My Sayashi's son, but too many people. He's 0:16:02.760 --> 0:16:07.920 just known as Massa, like share or Madonna. Massa is 0:16:07.960 --> 0:16:11.520 a kingmaker in Silicon Valley, one of the most famous 0:16:11.560 --> 0:16:15.640 investors in the world and one of the spendiest. He 0:16:15.720 --> 0:16:18.800 founded soft Bank when he was only twenty four years old. 0:16:19.280 --> 0:16:24.000 It's grown into a giant investment company in Japan. It's huge, 0:16:24.320 --> 0:16:28.400 it's bigger than Sony or Honda. Even he uses his 0:16:28.480 --> 0:16:31.720 money to make big bets on others. He's best known 0:16:31.760 --> 0:16:34.880 for an investment he made in a Chinese internet company 0:16:34.960 --> 0:16:38.600 called ali Baba. At the time he first invested back 0:16:38.640 --> 0:16:42.320 in two thousand, Ali Baba was small. Nobody knew it 0:16:42.320 --> 0:16:46.000 would take off the way it did. Ali Baba was 0:16:46.040 --> 0:16:49.440 founded by a guy named Jack Ma. He built it 0:16:49.480 --> 0:16:52.760 into kind of a souped up version of Amazon, tailored 0:16:52.800 --> 0:16:56.560 for the Chinese market. Now, Ali Baba is one of 0:16:56.600 --> 0:17:00.680 the most valuable companies anywhere. Jack Ma is an icon. 0:17:02.040 --> 0:17:06.400 Here's what's so interesting. When Massa talks about his famous 0:17:06.440 --> 0:17:09.200 big bet, about why he took a leap of faith 0:17:09.240 --> 0:17:12.840 and invested in jack maa so early. He doesn't talk 0:17:12.880 --> 0:17:15.880 about how smart jack Ma seemed, or how he'd come 0:17:15.960 --> 0:17:20.240 up with an original business plan. He talks about his charm, 0:17:20.240 --> 0:17:24.800 his ability to attract people to follow him. Well. He 0:17:24.920 --> 0:17:34.560 had no business plan and zero revenue employees, maybe thirty 0:17:34.600 --> 0:17:40.880 five for the employees. But his eyes was very strong, 0:17:41.320 --> 0:17:47.720 strong eyes, strong shining eyes. Um I could tell from 0:17:47.840 --> 0:17:51.520 the way he talked, the way he looked at he 0:17:51.600 --> 0:17:54.600 has a klisma, he has a leadership. He can bring 0:17:55.640 --> 0:18:01.560 you know young Chinese people following him. Now, if a 0:18:01.680 --> 0:18:05.440 young entrepreneur catches Massa's eye, he likes to tell them 0:18:05.440 --> 0:18:08.600 they remind him of Jack Ma, or that he thinks 0:18:08.600 --> 0:18:12.520 they'll become the next Jack Ma. The entrepreneurs love it. 0:18:12.520 --> 0:18:15.800 It's the biggest compliment he could give, and it worked 0:18:15.800 --> 0:18:19.920 with Adam Newman too. In fact, Adam told Fast Company 0:18:19.960 --> 0:18:24.080 magazine that he reminded Massa of Jack Ma. In two 0:18:24.119 --> 0:18:28.000 thousand seventeen, Soft Bank announced an investment fund that would 0:18:28.040 --> 0:18:31.679 be one hundred billion dollars. It was a huge amount 0:18:31.680 --> 0:18:36.280 of money, way way bigger than any venture fund, and 0:18:36.320 --> 0:18:40.119 when Massa began investing this money, it actually changed the 0:18:40.160 --> 0:18:45.200 way Silicon Valley works. In the old days, successful startups 0:18:45.240 --> 0:18:48.400 could count on raising tens of millions of dollars depending 0:18:48.400 --> 0:18:52.600 on how they were doing. Now, venture capitalists were competing 0:18:52.640 --> 0:18:55.919 with soft Bank to invest in the best companies, so 0:18:56.040 --> 0:19:01.600 money started flying around hundreds of millions, sometimes even billions 0:19:01.680 --> 0:19:05.760 of dollars to one startup. And that's exactly what happened 0:19:05.760 --> 0:19:10.159 to we work. The story itself is pretty crazy. Massa 0:19:10.240 --> 0:19:13.160 had a meeting with Adam. He told Adam he would 0:19:13.240 --> 0:19:16.840 spend two hours that we Work, but when he showed up, 0:19:17.160 --> 0:19:20.399 he said he had only twelve minutes. When it was 0:19:20.480 --> 0:19:23.080 time to go, he invited Adam to jump into the 0:19:23.119 --> 0:19:26.280 car with him. Adam pulled out his pitch deck because 0:19:26.280 --> 0:19:30.199 he wanted a big investment from SoftBank. Massa told him 0:19:30.240 --> 0:19:33.280 to put it away and took out an iPad. He 0:19:33.400 --> 0:19:37.359 drafted a rough investment agreement between them. They both signed 0:19:37.400 --> 0:19:41.480 then and there. That was late two thousand and sixteen. 0:19:42.119 --> 0:19:44.879 Adam still had a photo of the contract on his 0:19:44.960 --> 0:19:48.520 phone months later and showed it to a reporter from Forbes. 0:19:49.160 --> 0:19:52.400 He said it gave him goose bumps. Adam ended up 0:19:52.440 --> 0:19:55.920 getting a four point four billion dollar investment from soft 0:19:55.960 --> 0:19:59.480 Bank the next year, with more to come. Here's Adam 0:19:59.520 --> 0:20:02.720 on seeing BC. It's a real partnership and I think 0:20:02.720 --> 0:20:04.280 the longer we know each other, the more we can 0:20:04.280 --> 0:20:06.720 build it to Massa is one of the most visionary 0:20:06.720 --> 0:20:09.280 investors in the world. He I don't know if you 0:20:09.320 --> 0:20:11.480 know the story, but his initial decision to invest in 0:20:11.520 --> 0:20:14.800 We Work took approximately twenty eight minutes, including when he 0:20:14.880 --> 0:20:18.800 got in left and drove in the car. Startup founders 0:20:18.800 --> 0:20:21.040 who work with Massa say he loves it when you 0:20:21.080 --> 0:20:24.320 think really big, he asks what you could do if 0:20:24.359 --> 0:20:27.040 you had several times more money than you're trying to raise, 0:20:27.560 --> 0:20:30.800 if funding was no limit. Then he gives you that 0:20:30.880 --> 0:20:35.040 cash and expects you to deliver. And the crazier you are, 0:20:35.119 --> 0:20:37.879 the better. He told me that if two equally smart 0:20:38.040 --> 0:20:42.359 entrepreneurs are duking it out, but one's also a little crazy, 0:20:42.840 --> 0:20:46.960 the crazy one will win every time. He even described 0:20:47.000 --> 0:20:51.560 what he called an animal smell between himself and other entrepreneurs. 0:20:52.200 --> 0:20:55.680 They can smell it, and he can smell it. It's primal, 0:20:56.480 --> 0:21:00.000 and it seems like Massa felt this connection with Adam. 0:21:00.080 --> 0:21:03.600 He kept showering money on We Work, but within soft 0:21:03.640 --> 0:21:07.680 Bank it was a really controversial investment. Some of Massa's 0:21:07.680 --> 0:21:10.760 lieutenants that they were putting too much money into We Work, 0:21:11.240 --> 0:21:15.600 and so did some of his investors, that Massa ignored them. 0:21:15.640 --> 0:21:18.920 He found ways to keep writing we Work checks. That's 0:21:18.960 --> 0:21:21.920 because he believed that in the future, more and more 0:21:22.000 --> 0:21:26.119 people would move to coworking exactly We Works business model, 0:21:26.800 --> 0:21:35.960 and he really believed in Adam. So Massa basically gives 0:21:35.960 --> 0:21:38.600 Adam as much money as you could spend, and Adam 0:21:38.640 --> 0:21:41.159 starts spending and he doesn't have to be that careful 0:21:41.280 --> 0:21:44.119 because there's so much of it. If you talk to 0:21:44.160 --> 0:21:46.639 people inside We Work, many of them will say that 0:21:46.680 --> 0:21:49.960 the Soft Bank investment was this turning point. We Work 0:21:50.000 --> 0:21:54.400 had always been kind of freewheeling, somewhat cookie with lofty ambitions, 0:21:55.000 --> 0:21:57.520 but after Massa wrote Adam a blank check and told 0:21:57.560 --> 0:22:00.440 him to be crazier, it felt like every in got 0:22:00.440 --> 0:22:04.880 dialed up. We Work already had one side business, we Live, 0:22:05.520 --> 0:22:08.439 but it started branching out even more. It started a 0:22:08.480 --> 0:22:12.119 fitness boutique called Rise by We, and then there was 0:22:12.440 --> 0:22:16.240 We Grow. It's an elementary school. Rebecca and Adam have 0:22:16.320 --> 0:22:19.960 five young children together. Rebecca said in interviews that she 0:22:20.000 --> 0:22:22.560 couldn't find a school in Manhattan that was good enough 0:22:22.600 --> 0:22:26.520 for her oldest daughter, so they made their own. Here's 0:22:26.520 --> 0:22:29.600 Rebecca describing We Grow on a podcast called The School 0:22:29.640 --> 0:22:32.960 of Greatness. Once a week they get all local farms 0:22:33.000 --> 0:22:35.120 out they do. They spend one full day a week 0:22:35.160 --> 0:22:38.960 in nature, farming and just running and being and you know, 0:22:39.080 --> 0:22:42.080 meditating in nature like farm animals too, or is it 0:22:42.160 --> 0:22:43.960 just kind of there will be animals There are not 0:22:44.040 --> 0:22:47.760 currently um but they plant seeds, they harvest their crops, 0:22:47.920 --> 0:22:49.720 they bring them back to the city, they run a 0:22:49.720 --> 0:22:51.960 farm stand at We Work, and then they donate all 0:22:51.960 --> 0:22:54.360 of the proceeds to a nonprofit that they are actually 0:22:54.359 --> 0:22:58.520 personally involved in and invested in. She sounds like she 0:22:58.600 --> 0:23:02.480 has a very specific vision for the school. Tuition that 0:23:02.600 --> 0:23:06.159 We Grow costs forty two dollars a year. The interior 0:23:06.280 --> 0:23:10.159 was designed by celebrity architect. We Work came up with 0:23:10.200 --> 0:23:12.520 a way to explain why it was running a school. 0:23:13.080 --> 0:23:17.760 It said the school's mission was to unleash every human superpowers. 0:23:18.359 --> 0:23:21.199 It kind of connects to We Worked brand. But I 0:23:21.200 --> 0:23:24.920 spoke to one employee, Stephen Green. He remembers Adam being 0:23:25.040 --> 0:23:27.560 a bit more blunt in a speech at a company 0:23:27.560 --> 0:23:31.840 off site explaining why they started We Grow. So Adam 0:23:31.880 --> 0:23:35.080 explained that Rebecca had a dream the night before and 0:23:35.160 --> 0:23:39.200