WEBVTT - Maureen Farrell on WeWork’s Investments (Podcast) 0:00:02.040 --> 0:00:07.160 This is Mesters in Business with Very Results on Bloomberg Radio. 0:00:08.280 --> 0:00:11.039 This week. On the podcast, I have a special guest. 0:00:11.240 --> 0:00:14.080 Her name is Maureen Farrell, and she is the co 0:00:14.320 --> 0:00:17.800 author of the book Cultive, We We Work, Adam Newman 0:00:17.880 --> 0:00:21.880 and the Great Startup Delusion. I read this book a 0:00:21.920 --> 0:00:24.800 couple of weeks ago and just plowed through it. It's 0:00:24.840 --> 0:00:28.320 a lot of fun. Everything you think about we Work 0:00:28.560 --> 0:00:33.440 is actually even crazier and more insane and more delusional 0:00:33.960 --> 0:00:37.600 than than you would have guessed. All the venture capitalists 0:00:37.640 --> 0:00:42.639 and and big investors not really doing the appropriate due diligence, 0:00:42.760 --> 0:00:46.599 relying on each other, and nobody really looking at the numbers, 0:00:46.640 --> 0:00:51.400 which kind of revealed that this was a giant money losing, 0:00:52.080 --> 0:00:56.800 fast growing startup that really was a real estate play 0:00:56.840 --> 0:00:59.680 pretending to be a tech play. You know, tech gets 0:00:59.720 --> 0:01:03.240 one sort of multiple, real estate gets a much lower multiple. 0:01:03.720 --> 0:01:06.880 And Newman was able to convince a lot of people 0:01:06.959 --> 0:01:10.440 that this was a tech startup and therefore worthy of 0:01:10.520 --> 0:01:14.280 a you know, a billion dollar and then multibillion dollar valuation. 0:01:14.959 --> 0:01:19.080 It's fascinating the it's deeply deeply reported. There is just 0:01:19.760 --> 0:01:25.040 an incredible series of vignettes and stories and reveals that 0:01:25.560 --> 0:01:29.240 they're just shocking what Newman and Company were able to 0:01:30.280 --> 0:01:35.000 fob off on their investors. Everything from ridiculous self dealing 0:01:35.560 --> 0:01:40.640 um to crazy evaluations, to lackluster due diligence, and then 0:01:40.840 --> 0:01:45.160 just the craziest, most egregious golden parachute in the history 0:01:45.160 --> 0:01:47.760 of corporate America. I found the book to be just 0:01:47.920 --> 0:01:51.640 fascinating and as well as my conversation with Maureen. So 0:01:52.200 --> 0:01:56.680 with no further ado, my conversation with Maureen Farrell, co 0:01:56.920 --> 0:02:02.280 author of the Cult of Wheat. This is Mesters in 0:02:02.360 --> 0:02:08.000 Business with Very Revolts on Bloomberg Radio. My special guest 0:02:08.040 --> 0:02:11.320 this week is Maureen Farrell. She is the co author 0:02:11.360 --> 0:02:13.600 of a new book, The Cult of We We Work, 0:02:13.720 --> 0:02:17.440 Adam Newman and the Great Startup Delusion. The book has 0:02:17.440 --> 0:02:20.880 been nominated for a Financial Times Mackenzie Business Book of 0:02:20.919 --> 0:02:23.919 the Year Award. UH. Previously, she worked at the Wall 0:02:23.960 --> 0:02:27.640 Street Journal since two thousand and thirteen. Currently she is 0:02:27.760 --> 0:02:31.920 a reporter investigative reporter for The New York Times. Maureen Farrell, 0:02:32.080 --> 0:02:34.880 Welcome to Bloomberg. Thank you so much for having me. 0:02:35.200 --> 0:02:39.040 So let's uh start a little bit with your background 0:02:39.040 --> 0:02:41.679 in history. You you covered capital markets and I p 0:02:41.800 --> 0:02:44.760 O s at the Wall Street Journal. What led you 0:02:44.919 --> 0:02:48.639 and your co author Elliott Brown to this story because 0:02:48.680 --> 0:02:51.359 this was really a venture capital on a startup story 0:02:51.480 --> 0:02:58.519 for most of the right exactly and for me personally, 0:02:58.880 --> 0:03:01.520 I was covering the I p O market and end 0:03:01.560 --> 0:03:05.760 capital markets, this sort of explosion of private capital. So 0:03:05.840 --> 0:03:10.280 I was looking at we work from both angles basically, um, 0:03:10.320 --> 0:03:13.280 you know, in this small cohort of the most interesting 0:03:13.280 --> 0:03:15.840 companies that were going to go public, along with Uber, 0:03:15.880 --> 0:03:18.880 Airby and be Lift, and it was also part of 0:03:18.919 --> 0:03:23.280 this group that had raised more capital than anyone ever before. 0:03:23.639 --> 0:03:26.000 I was looking at soft Bank and its vision fund 0:03:26.040 --> 0:03:29.400 a lot um and then I mean take within this cohort, 0:03:29.440 --> 0:03:32.120 there were some pretty interesting companies. But I mean just 0:03:32.200 --> 0:03:35.680 along the way kept on hearing. You know, Adam Newman 0:03:35.760 --> 0:03:38.760 stood out as like a little bit of a different 0:03:38.960 --> 0:03:43.400 um entrepreneur that the stories you would just hear over 0:03:43.480 --> 0:03:47.640 time just became more and more interesting and a little insane. 0:03:48.000 --> 0:03:50.760 So when did you decide, hey, this is more than 0:03:50.840 --> 0:03:54.880 just a recurring series of articles. When did you say 0:03:54.920 --> 0:03:56.520 this is a book. We have to write a book 0:03:56.560 --> 0:04:01.360 about this. So we were around August twenty nineteen. Um. 0:04:01.480 --> 0:04:03.240 By then we were writing more and more about the 0:04:03.280 --> 0:04:05.080 company as it was clear that it was you know, 0:04:05.200 --> 0:04:06.760 made it known that it was going to go public. 0:04:07.360 --> 0:04:10.760 Suddenly it's s one the document the regulatory documents you 0:04:10.800 --> 0:04:14.520 file publicly to go public. Um, we're out there and 0:04:14.560 --> 0:04:17.800 they were completely bonkers. They sort of captivated, I think 0:04:17.800 --> 0:04:22.280 the imagination of the business, uh reading public. But then 0:04:22.320 --> 0:04:24.840 over the next few weeks we work was on its 0:04:24.880 --> 0:04:28.479 way to finally doing this I P. O. And my 0:04:28.640 --> 0:04:30.919 co author, Elliott and I who had been covered He 0:04:30.920 --> 0:04:32.840 had been covering the company long before me. He was 0:04:32.880 --> 0:04:36.200 a real estate reporter. He had been covering them since then. 0:04:36.240 --> 0:04:39.560 He was out in San Francisco covering venture capital, and 0:04:39.600 --> 0:04:42.320 it just became the most insane story either one of 0:04:42.400 --> 0:04:46.720 us had ever reported. Like day by day, there's a 0:04:46.720 --> 0:04:48.680 playbook for I p. O s and they, you know, 0:04:48.720 --> 0:04:51.000 things are different, but they sort of follow a formula 0:04:51.360 --> 0:04:55.159 and nothing was making sense, and um, it just was 0:04:55.200 --> 0:04:59.040 getting more and more insane until this IPO was eventually 0:04:59.040 --> 0:05:02.680 called off and Adam Newman, the founder and CEO, was 0:05:03.279 --> 0:05:06.279 pushed out of the company for all sorts of crazy things. 0:05:06.279 --> 0:05:08.080 So we're gonna we're gonna spend a lot of time 0:05:08.120 --> 0:05:11.359 talking about that, But you hinted at something I have 0:05:11.520 --> 0:05:16.039 to mention. Your co author covered real estate. Hey, I 0:05:16.080 --> 0:05:18.640 was told we work was a tech startup and an 0:05:18.680 --> 0:05:24.000 AI company and everything else, but a real estate arbitrage play. 0:05:24.080 --> 0:05:27.080 How did they manage to convince so many people that 0:05:27.200 --> 0:05:30.840 they weren't a Regius? The CEO of Regis very famously said, 0:05:31.200 --> 0:05:34.640 how is what they do any different than what we do? Well, 0:05:34.640 --> 0:05:36.919 they tried to convince Elliot Brown, my co author of 0:05:36.960 --> 0:05:40.880 the same thing. He had heard about Adam Adam Newman 0:05:40.920 --> 0:05:43.960 this company. He started seeing the valuation um back then 0:05:44.000 --> 0:05:46.240 I think it was a billion one point five billion, 0:05:46.400 --> 0:05:49.279 and when that became a unicorn, suddenly it was like, wait, 0:05:49.320 --> 0:05:52.000 this is just a real estate play exactly. And he 0:05:52.040 --> 0:05:55.400 was covering other commercial real estate companies like Regius, and 0:05:55.920 --> 0:05:57.440 he had followed them and he was like, wait, they 0:05:57.480 --> 0:06:00.400 only have a couple of locations to even still at 0:06:00.440 --> 0:06:03.000 that point. So he went in to meet Adam Newman 0:06:03.160 --> 0:06:05.960 for the first time, and he's got great stories, but 0:06:06.480 --> 0:06:09.919 as part of it, Adam was like really horrified. He was, 0:06:10.040 --> 0:06:13.719 you know, very nice, his charming self, but also saying, hey, 0:06:13.760 --> 0:06:16.640 you're a real estate reporter for the Wall Street Journal. 0:06:16.640 --> 0:06:19.600 You're the last person who should be covering this company. 0:06:19.760 --> 0:06:24.880 Do you have someone who covers like community companies? And 0:06:24.960 --> 0:06:28.320 Elliott said no, and I'll be following you from here 0:06:28.360 --> 0:06:31.640 on out. We'll talk about community adjusted even though a 0:06:31.640 --> 0:06:35.920 little later also. But but let's talk about the genesis 0:06:35.960 --> 0:06:41.200 of this because uh, Newman and his partner McKelvey had 0:06:41.640 --> 0:06:45.160 a legit business green Desk that was the predecessor that 0:06:45.240 --> 0:06:48.400 we work. It was sold. I don't know what the 0:06:48.440 --> 0:06:51.359 dollar room that was. Was that ever disclosed, but it 0:06:51.480 --> 0:06:54.880 was not nothing. It was a real and the two 0:06:54.920 --> 0:06:58.400 of them rolled that money plus a third partner who 0:06:58.480 --> 0:07:01.680 was also Joel Riber is a real estate developer in 0:07:01.760 --> 0:07:06.520 New York not coincidentally, and in they launched we work 0:07:06.640 --> 0:07:10.880 with the first site in Soho. So why is this 0:07:11.040 --> 0:07:16.920 real estate? Sign long term leases and uh sell shorter 0:07:17.040 --> 0:07:20.720 term leases at a significant markup? How is this not 0:07:21.080 --> 0:07:25.200 possibly a real estate uh concern? What was what was 0:07:25.280 --> 0:07:28.360 the argument they were making to people that hey, we're 0:07:28.360 --> 0:07:33.240 a tech company and we deserve tech company valuations. Sure so, Um, 0:07:33.320 --> 0:07:35.760 exactly as you said, they had this Brooklyn business that 0:07:35.880 --> 0:07:38.360 was the genesis of WE Work. It was um It 0:07:38.400 --> 0:07:40.520 had a lot of that business and it was what 0:07:40.560 --> 0:07:43.320 they took to make WE Work. It had a lot 0:07:43.360 --> 0:07:47.720 of innovation to it in terms of architecturally, the aesthetic 0:07:47.840 --> 0:07:50.119 of it. I mean, we're probably all Mento WE Works. 0:07:50.120 --> 0:07:57.400 They're just they're beautiful open glass. We had light streaming 0:07:57.400 --> 0:08:00.800 through the windows. You put you pack people very close together. 0:08:00.960 --> 0:08:04.680 So something they started in Brooklyn, it took off, but 0:08:04.760 --> 0:08:07.720 then there the landlord there didn't want to grow it, 0:08:07.840 --> 0:08:11.280 so they split up. They moved on UM Adam and 0:08:11.320 --> 0:08:14.720 as part of his co founder Miguel McKelvey, And from 0:08:14.760 --> 0:08:18.200 the very beginning the idea was something so much bigger 0:08:18.280 --> 0:08:21.080 they say they created. They like sketched out something and 0:08:21.120 --> 0:08:23.960 it was like essentially we World. It would be you know, 0:08:24.120 --> 0:08:29.880 schools and apartments and this whole universe of we But basically, 0:08:29.880 --> 0:08:33.960 as you said, I mean throughout for the most part, 0:08:34.120 --> 0:08:38.319 it was this like arbitrage building arbitrage company in terms 0:08:38.360 --> 0:08:41.360 of getting long term leases and splitting it up all right, 0:08:41.400 --> 0:08:48.360 So they have a pretty substantial investor list JP Morgan, Chase, 0:08:48.440 --> 0:08:52.560 t Roe, Prized, Wellington, Goldman, Harvard and Downmond, Benchmark Capital, 0:08:52.960 --> 0:08:59.320 mort Zuckerman, was this still a rational investment in UM 0:08:59.440 --> 0:09:01.800 or when did things kind of go off the rails. 0:09:02.440 --> 0:09:06.200 Um By then, it still seemed like the valuation was 0:09:06.400 --> 0:09:09.640 really getting ahead of itself, and it was very much 0:09:09.760 --> 0:09:13.319 predicated on this idea that you said that being a 0:09:13.360 --> 0:09:17.320 tech company, and I mean Adam Newman's genius was in 0:09:17.400 --> 0:09:21.120 marketing and fundraising and what he had the ability to 0:09:21.200 --> 0:09:23.959 do really each step of the way and it's it's 0:09:24.000 --> 0:09:29.480 masterful was sort of take take the zeitgeist, like the 0:09:29.559 --> 0:09:32.839 big business idea of the moment that was captivating investors 0:09:33.440 --> 0:09:36.200 and put that on top of we work. So he 0:09:36.280 --> 0:09:39.320 was very into a little bit before this, like sort 0:09:39.320 --> 0:09:42.080 of equating it's a Facebook. You know, Facebook was the 0:09:42.120 --> 0:09:45.760 social network. This was like a social network in person, 0:09:45.880 --> 0:09:49.840 in real life social network. And he didn't manage to 0:09:49.880 --> 0:09:53.480 kind of convince people bit by bit. I mean, it's 0:09:53.520 --> 0:09:55.880 interesting benchmark, you know, as you know, it is like 0:09:55.880 --> 0:09:59.880 one of the tip top shelf. Yeah, that's been something 0:10:00.000 --> 0:10:03.640 had some of the biggest um uber go down the 0:10:03.679 --> 0:10:07.800 list of just incredible that yeah, eBay, Yeah, they've had 0:10:07.800 --> 0:10:10.360 it through it for decades. They've been behind some of 0:10:10.440 --> 0:10:13.000 the biggest companies. So they were willing to take a 0:10:13.000 --> 0:10:15.360 gamble on them, and then they saw red flags but 0:10:15.440 --> 0:10:19.040 just decided to jump in anyway. But for benchmark, I 0:10:19.080 --> 0:10:21.400 mean we've seen they ultimately they get in at such 0:10:21.400 --> 0:10:25.280 a low valuation, doesn't matter exactly, like you know, they 0:10:25.320 --> 0:10:28.240 want their home runs, and I mean it's still they 0:10:28.280 --> 0:10:31.000 still ultimately got out at a pretty good, really incredible 0:10:31.040 --> 0:10:36.120 return to billions something yeah, something like that. So, so 0:10:36.280 --> 0:10:40.160 just to clarify, because I I'm going to be trashing 0:10:40.559 --> 0:10:43.600 we work for the next hour. But this wasn't a 0:10:43.679 --> 0:10:46.560 Sarah No situation or a Bernie made off. This is 0:10:46.640 --> 0:10:50.160 not an issue of fraud or anything illegal or unlawful. 0:10:50.679 --> 0:10:55.280 These just were insane valuations. Somebody did a great job 0:10:55.400 --> 0:10:58.680 selling investors on the potential for we work and it 0:10:58.679 --> 0:11:01.280 didn't work out. I'm glad you brought that up because 0:11:01.320 --> 0:11:04.200 a lot of people do ask about the differences and 0:11:04.320 --> 0:11:07.640 the parallels between Elizabeth Holmes and Adam Newman, and I 0:11:08.000 --> 0:11:10.400 mean I almost think the story in some ways is 0:11:10.840 --> 0:11:13.440 more interesting. I mean, the third of story is obviously 0:11:13.520 --> 0:11:17.120 the craziest and and horrifying in so many ways. Um, 0:11:17.160 --> 0:11:20.480 but with Adam Newman on the margins, there are questions 0:11:20.480 --> 0:11:23.720 about you know, some self dealing and there's some a 0:11:23.720 --> 0:11:28.600 lot of avarice, and he just cashed out way way early, 0:11:28.840 --> 0:11:35.280 So you could criticize his behavior, but you know, you 0:11:35.400 --> 0:11:39.000 end up with the vcs and the outside investors either 0:11:39.400 --> 0:11:41.560 looking the other way or turning a blind eye. It's 0:11:41.600 --> 0:11:45.040 not like this stuff wasn't disclosed or anything. He was 0:11:45.200 --> 0:11:47.960 very out front. No, I need I need a private 0:11:48.040 --> 0:11:51.439 jet because we're opening up WE works in China and 0:11:51.720 --> 0:11:53.720 in a hundred other countries and I have to gen 0:11:53.800 --> 0:11:57.440 around the world. Yeah, maybe you needlf stream is a 0:11:57.480 --> 0:12:00.719 different question. But you know there they didn't hide this. 0:12:00.840 --> 0:12:03.319 They were like proud of it. No, and I think 0:12:03.559 --> 0:12:05.720 it is every step of the way you see. I 0:12:05.720 --> 0:12:08.000 mean the investors, and these were some of the most 0:12:08.000 --> 0:12:11.400 sophisticated investors in the world and some of the you know, 0:12:11.800 --> 0:12:14.679 they're thought of as the smartest investors. They saw the 0:12:14.800 --> 0:12:17.880 numbers that WE Work was putting forth, and they were real, 0:12:18.160 --> 0:12:22.120 real numbers. They also saw their projections, and the projections 0:12:22.120 --> 0:12:25.520 were mythical and they never quite reached them. But you 0:12:25.520 --> 0:12:27.600 could see if you were going to invest in any 0:12:27.679 --> 0:12:29.880 round of WE Work, you could see what their prior 0:12:29.920 --> 0:12:33.880 projections were. How they failed to hit them. But instead 0:12:34.240 --> 0:12:36.280 the thing that we saw time and time again to 0:12:36.360 --> 0:12:40.760 this point was very often Adam Newman would meet the 0:12:40.840 --> 0:12:44.040 head of an investment company, whether it was Men Benchmark 0:12:44.120 --> 0:12:46.640 or Soft Bank or t ro Price, Like the main 0:12:46.679 --> 0:12:50.839 decision maker totally captivate this person. You know, it's usually 0:12:50.840 --> 0:12:53.040 a man. The man would become kind of smitten with 0:12:53.120 --> 0:12:55.040 Adam and all his ideas and what he was going 0:12:55.080 --> 0:12:59.400 to do, totally believe in it. The underlings would look 0:12:59.400 --> 0:13:03.080 at the numbers, raise all these red flags, point them out, 0:13:03.679 --> 0:13:07.280 and then the decision maker would say, you know, he's amazing. 0:13:08.640 --> 0:13:11.600 So I want to talk about the rapid rise of 0:13:11.720 --> 0:13:15.040 we work, and they're they're really fast growth path. But 0:13:15.080 --> 0:13:18.280 I have to ask what sort of access did you 0:13:18.320 --> 0:13:21.600 have to the main characters in the book where people forthcoming? 0:13:21.960 --> 0:13:23.920 I have to imagine there were some people who had 0:13:24.280 --> 0:13:27.240 grudges and we're happy to speak. What what about um 0:13:27.720 --> 0:13:30.600 the some of the original founders, Adam and his wife Rebecca, 0:13:31.000 --> 0:13:33.880 who who did you have access to? Sure? So you know, 0:13:34.120 --> 0:13:36.800 in the interest of privacy, I can't I can't get 0:13:36.800 --> 0:13:40.280 into specifics, but what I will say the interesting thing was, 0:13:40.679 --> 0:13:43.760 I mean, we really got access for hours and hours 0:13:43.760 --> 0:13:48.040 to the vast majority of players at every step of 0:13:48.040 --> 0:13:51.360 the way in this book. And um, the one of 0:13:51.400 --> 0:13:54.720 the funny things was, I mean, the pandemic really started 0:13:55.000 --> 0:13:57.199 right as Elliott and I took book leave. If we 0:13:57.240 --> 0:14:01.079 start our book leaving late February, money and we had 0:14:01.080 --> 0:14:04.040 both planned to sort of be in all around the 0:14:04.040 --> 0:14:06.560 world meeting people in person. Elliott had moved to New 0:14:06.640 --> 0:14:09.720 York to meet a lot of the players in person. Obviously, 0:14:09.760 --> 0:14:12.760 the world shut down, and um, you know, it's kind 0:14:12.760 --> 0:14:15.959 of nervous about what that would mean in terms of conversations. 0:14:16.480 --> 0:14:18.559 And the funny thing was, I think people were home 0:14:19.000 --> 0:14:23.400 board feeling pretty reflective. So there are a number of 0:14:23.400 --> 0:14:25.680 people that said there, I didn't know if I wanted 0:14:25.720 --> 0:14:29.120 to talk to you, and some of these people I 0:14:29.200 --> 0:14:33.360 probably had like ten conversations four hours with And there 0:14:33.400 --> 0:14:36.240 are forty something pages of in notes. It's I'm not 0:14:36.560 --> 0:14:40.840 suggesting that this isn't deeply researched, because a lot of 0:14:40.840 --> 0:14:44.400 these conversations that you report on like you're flying the wall. 0:14:45.000 --> 0:14:48.120 Clearly it can only be one of two or three people. 0:14:48.560 --> 0:14:50.960 So it looks like you had a ton of access 0:14:50.960 --> 0:14:53.120 to a lot of senior people, and I guess we'll 0:14:53.160 --> 0:14:56.600 just leave it at that. Um So, so let's talk 0:14:56.640 --> 0:15:00.480 about that early rise. In the beginning, they were really 0:15:00.680 --> 0:15:04.080 ramping up very rapidly. I mean, you could see how 0:15:04.120 --> 0:15:10.760 somebody interested in investing in a potential unicorn in fourteen, 0:15:10.840 --> 0:15:13.520 coming out of the financial crisis. Hey, the idea of 0:15:13.560 --> 0:15:16.080 all these startups just needing me a little bit of 0:15:16.080 --> 0:15:19.360 space and not a long term lease. It looks very attractive. 0:15:19.400 --> 0:15:22.040 It looks like, hey, you could put we works wherever 0:15:22.080 --> 0:15:26.160 there's a tech community and they should do really well there. Yeah, 0:15:26.200 --> 0:15:29.120 there was, and it was the marketing was it was 0:15:29.240 --> 0:15:32.400 very viral at that point. It was you know, people 0:15:32.440 --> 0:15:35.080 would tell their friends about it and they would fill 0:15:35.200 --> 0:15:38.680 up very rapidly, and they were building more and more. 0:15:38.880 --> 0:15:40.960 I mean, and this is one of the you know, 0:15:41.000 --> 0:15:43.280 as part of the genius of Adam Newman was you know, 0:15:43.320 --> 0:15:45.680 he was telling people from day one they were really 0:15:45.680 --> 0:15:48.640 struggling to even secure the lease on the first building, 0:15:48.720 --> 0:15:50.760 and he was like, Oh, we're gonna be global, We're 0:15:50.800 --> 0:15:54.040 gonna be international. He would set these goals of how 0:15:54.040 --> 0:15:57.560 many buildings they would open, and people internally and even 0:15:57.560 --> 0:16:00.560 investors would say, oh, this is impossible, and he would 0:16:00.640 --> 0:16:02.840 and he would hit that. He kept on sort of 0:16:02.840 --> 0:16:08.880 defying gravity, defying disbelief for questions. UM. So the growth 0:16:08.960 --> 0:16:11.880 was incredible and they were filling them up. We could 0:16:11.920 --> 0:16:14.040 talk about, you know, the lack of the cost of 0:16:14.120 --> 0:16:18.920 doing so they were paying double to UM real estate 0:16:18.960 --> 0:16:22.000 agents what everybody else was paying. They were going to 0:16:22.160 --> 0:16:25.320 competitors and saying we're going to reach out to your 0:16:26.120 --> 0:16:28.880 UM tenants and we're gonna offer them free rent for 0:16:28.880 --> 0:16:31.680 a year. I mean, they were really short elbowed and 0:16:31.840 --> 0:16:36.040 very aggressive, especially as time went on. We did find 0:16:36.120 --> 0:16:39.200 that there was one year we we got all their financials. 0:16:39.200 --> 0:16:41.640 We you know, we got our hands on a vast 0:16:41.680 --> 0:16:45.720 trope of documents UM. But there was one year I 0:16:45.720 --> 0:16:48.160 think it was twenty eleven that they I think made 0:16:48.200 --> 0:16:51.600 two million dollars in profit. Were we were kind of 0:16:51.600 --> 0:16:53.120 shocked to see that. We didn't think they had ever 0:16:53.160 --> 0:16:56.040 made a profit. And then from there they did not 0:16:56.280 --> 0:16:59.160 and the billions and billions just added up in terms 0:16:59.160 --> 0:17:04.120 of losses. So so the rapid rise we we mentioned UM, 0:17:04.160 --> 0:17:09.520 they peaked in tw at more than forty seven billion dollars. UH. 0:17:09.640 --> 0:17:14.960 Newman recently did a interview with your um fellow Times 0:17:15.640 --> 0:17:20.280 UH correspondent Animi Ross Sorkin, and he was somewhat contrite. 0:17:20.359 --> 0:17:25.359 He had um admitted that all the venture money and 0:17:25.400 --> 0:17:29.000 all the high valuations had uh went to his head. Quote, 0:17:29.880 --> 0:17:32.480 you lose focus on really the core of the business 0:17:32.480 --> 0:17:34.399 and why the business is meant to be that way, 0:17:34.600 --> 0:17:37.440 it had a corrosive effect on my thinking. That's kind 0:17:37.480 --> 0:17:41.639 of a surprising admission from him. It was. Yeah, I 0:17:41.640 --> 0:17:46.120 mean his mayakalpo is very um interesting, and I mean 0:17:46.200 --> 0:17:48.439 one of the things that people said along the way was, 0:17:48.560 --> 0:17:51.440 you know, the the higher the valuation, the more out 0:17:51.440 --> 0:17:53.480 of touch he became. I mean he had he had 0:17:53.480 --> 0:17:56.159 a narcissism. I don't know what you want to call it, 0:17:56.160 --> 0:18:01.360 a sociopathological narcissistic personality disorder. I'm just I'm not a psychologist. 0:18:01.359 --> 0:18:06.280 I'm just guessing, or a really successful salesman slash CEO. 0:18:06.760 --> 0:18:09.560 There's like a thin line between the two sometimes it 0:18:09.600 --> 0:18:12.320 seems and some of it, I mean it seems insane. 0:18:12.359 --> 0:18:14.560 It was like, oh, he thought of himself in this 0:18:14.760 --> 0:18:18.840 like same like with along with world leaders. But world 0:18:18.960 --> 0:18:22.879 leaders were really really wanted to meet him. Yeah, and 0:18:22.920 --> 0:18:24.800 he was like We have a scene in the book 0:18:24.840 --> 0:18:27.159 that he was debating whether or not he was going 0:18:27.200 --> 0:18:29.639 to cancel on Theresa May because he had promised his 0:18:29.720 --> 0:18:33.199 wife that he would teach a class on entrepreneurship to 0:18:33.359 --> 0:18:35.840 their new school. Um. So it was like a few 0:18:35.840 --> 0:18:37.800 of their kids and a few of their kids friends 0:18:37.800 --> 0:18:40.440 were in the school and they're about five years old, 0:18:40.560 --> 0:18:44.040 five or six, and he had promised minister five year old. 0:18:44.920 --> 0:18:47.800 So when you talk about losing touch with reality, some 0:18:47.840 --> 0:18:51.359 of the m and a that this startup did We've 0:18:51.400 --> 0:18:56.000 garden A We've machine was like a surf wave machine, meetup, 0:18:56.080 --> 0:19:00.320 dot com conductor. They ended up dumping these for action 0:19:00.440 --> 0:19:03.800 what they paid for them. But what's the thought process, 0:19:04.040 --> 0:19:07.080 We're going to become a technology conglomerate. I don't I 0:19:07.080 --> 0:19:10.720 don't really follow the thinking other than wouldn't it be 0:19:10.760 --> 0:19:14.399 fun to have a wave machine at our buildings? Like 0:19:14.440 --> 0:19:16.720 what's the rationality? Okay? So there were there were two 0:19:16.760 --> 0:19:19.560 parts to that, and part of it was like it 0:19:19.640 --> 0:19:23.399 was the world was Adam Newman's playground, and he loved 0:19:23.400 --> 0:19:25.960 surfing and he thought that, you know, he found out 0:19:25.960 --> 0:19:29.280 this company, this wave making machine, they would make waves. 0:19:29.680 --> 0:19:31.920 So him and his team went to Spain to surf 0:19:32.000 --> 0:19:34.640 on them and test them out. But he could basically 0:19:34.680 --> 0:19:37.600 convince his board in general, who had to approve the 0:19:37.680 --> 0:19:40.040 is that anything made sense, whether it was the jet, 0:19:40.119 --> 0:19:43.320 the wave pool company, or friends of his. I mean 0:19:43.440 --> 0:19:46.119 Laird Hamilton's, the famous surfer was a friend of his. 0:19:46.200 --> 0:19:51.560 They invested like in his coffee creamer company. Um. But 0:19:51.640 --> 0:19:55.120 then the second so it was so many insane investments 0:19:55.160 --> 0:19:58.800 that really didn't necessarily make any sense. Um. But then 0:19:58.800 --> 0:20:00.480 on the other side, one of the things that we 0:20:00.480 --> 0:20:04.680 thought was interesting. He had this deal with Massa. Who Massa, 0:20:05.440 --> 0:20:09.080 he's the CEO of soft Bank, became we worked biggest investor, 0:20:09.320 --> 0:20:13.440 biggest enabler, you might say, and one of them. They 0:20:13.480 --> 0:20:15.680 were going to do this huge deal that would have 0:20:15.720 --> 0:20:19.480 actually kept we work private forever. It never came to pass, 0:20:19.520 --> 0:20:21.560 and that's why it was sort of the beginning of 0:20:21.600 --> 0:20:24.240 the end when this deal fell apart. But as part 0:20:24.240 --> 0:20:26.399 of it, a lot of the deal is predicated on 0:20:26.440 --> 0:20:31.480 growing revenue. So Adam also became obsessed with acquisitions, like 0:20:31.520 --> 0:20:34.040 whatever they could possibly do to add more revenue to 0:20:34.080 --> 0:20:37.240 the company. I mean, he was talking about buying Sweet Green, 0:20:38.160 --> 0:20:40.119 and he had like got pretty far along in this 0:20:40.240 --> 0:20:44.959 salad company and conversations with them. So it was this 0:20:45.000 --> 0:20:48.320 idea of like, let's just throw on anything. We have money, 0:20:48.400 --> 0:20:51.440 and let's just grow our top line. Who cares about 0:20:51.440 --> 0:20:56.720 anything else. Let's talk about Rebecca Newman. She was Adam 0:20:56.760 --> 0:20:59.720 Newman's wife. What what was her role in we Work? 0:21:00.160 --> 0:21:05.119 How important was she? Her role is just so fascinating throughout. So, 0:21:05.200 --> 0:21:08.159 I mean he he met her, um right as he 0:21:08.200 --> 0:21:10.320 was starting Green Desk, and I think she just sort 0:21:10.359 --> 0:21:14.200 of opened his eyes. She'd grown up very wealthy, She's 0:21:14.240 --> 0:21:17.960 Gwyneth Paltrow's cousin. She had all these ties to Hollywood. Um. 0:21:18.040 --> 0:21:22.000 She gave him a loan early on, UM, a high 0:21:22.080 --> 0:21:25.439 interest loan. UM. I think even after they were married 0:21:25.520 --> 0:21:28.280 that we were reported about in the book. UM. But 0:21:28.359 --> 0:21:31.399 as time went on, she she really wanted a career 0:21:31.400 --> 0:21:34.240 in Hollywood, decides to At one point she she was 0:21:34.280 --> 0:21:36.720 trying to be an actress, and she tells someone that 0:21:36.840 --> 0:21:39.640 she's done with Hollywood. She's producing babies. Now they've gone 0:21:39.640 --> 0:21:42.280 on to have six kids. UM. But she's sort of 0:21:42.359 --> 0:21:46.119 always kind of dabbled in the company, and they retroactively 0:21:46.240 --> 0:21:49.880 made her a co founder. She wasn't there from day one. 0:21:49.920 --> 0:21:52.879 It was only later she got pretty active. Yeah, she 0:21:52.960 --> 0:21:56.120 told people aboutn't giving tours early on, that she helped 0:21:56.119 --> 0:22:01.000 pick out the coffee in the um in the early works. 0:22:01.040 --> 0:22:03.240 But so she became more active, but she would sort 0:22:03.240 --> 0:22:06.119 of jump in and out. And it was by the 0:22:06.560 --> 0:22:08.359 one of the things that she had a big focus on. 0:22:08.400 --> 0:22:10.840 Their kids were growing up. She didn't really like their 0:22:10.920 --> 0:22:14.639 choices of private or public schools, so she decided to 0:22:14.720 --> 0:22:18.439 start She helmed sort of the education initiative. And she 0:22:18.520 --> 0:22:21.840 was deeply qualified for this because she was a certified 0:22:21.920 --> 0:22:26.240 yoga instructure and and I know she went to Cornell, 0:22:26.280 --> 0:22:29.800 which is certainly a good school. What bonifites does she 0:22:30.040 --> 0:22:37.000 bring to technology, real estate, education, Like I'm trying to 0:22:37.119 --> 0:22:40.679 figure it out. And in the book you don't really 0:22:41.160 --> 0:22:44.200 go into any details that she's qualified to do any 0:22:44.240 --> 0:22:47.480 of these things. I mean, especially with education. It's like 0:22:47.720 --> 0:22:51.199 she didn't um she wanted to. Essentially, she wanted a 0:22:51.240 --> 0:22:54.280 school for her children, and she wanted very specific things 0:22:54.280 --> 0:22:58.240 in that school. And once again they decided that that 0:22:58.240 --> 0:23:00.680 would be the next Like Frontier for we work, they're 0:23:00.680 --> 0:23:04.320 always adding different things, but no one really and then 0:23:04.359 --> 0:23:07.920 they let them do this. They started this school UM 0:23:07.960 --> 0:23:10.199 in New York in the headquarters, and they were going 0:23:10.240 --> 0:23:13.640 to teach the next generation of entrepreneurs. And I mean 0:23:13.680 --> 0:23:15.760 they one of the things, I mean it was the 0:23:15.920 --> 0:23:19.360 education arm more than as much or more than other 0:23:19.400 --> 0:23:21.960