Hello, Neumann

Every good business book contains certain elements. Excellent reporting, narrative flow, the silky ability to explain financial concepts, a compelling central character (preferably with a huge ego and a can’t-look-away humbling). But a great business book must have something else, as well. In addition to capturing its subject, it must also tell the story of its era.

Press play to hear a narrated version of this story, presented by AudioHopper.

In creating a portrait of an unforgettable founder and placing him amid the totally reckless venture capital industry that’s utterly failed in its duty to protect its investors, Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork has earned a spot alongside Den of Thieves, Barbarians at the Gate, Bad Blood and Conspiracy on the too-small shelf labeled “Great Business Books.”

Reeves Wiedeman began his look at WeWork—the co-working company that became the second-most valuable venture funded company in the world before its planned IPO disintegrated—with a long article in New York Magazine. The piece poked at the idea that a New Age sheen of community magically transformed a guy renting desks in office buildings into a company worthy of FANG-like multiples. He’s expanded that article into the definitive account of the crash and burn of WeWork and its charismatic raven-haired cofounder. He’s also captured and hopefully permanently scarred the morally reprehensible industry of venture capital.

The book depicts venture investors, who market themselves as the world’s shrewdest deployers of capital, as practicing the worst kind of groupthink, the most outrageous gullibility. In supporting insane valuations—the company received almost $21 billion in funding over 17 rounds of raising and the market valued it at $47 billion at its peak—no one should consider the funders “enablers.” By greeting irresponsible behavior with billions of dollars and terms that favor founders over investors, VCs actually create bad behavior rather than simply reward it. Society needs to treat them as co-conspirators.

The roots of Neumann’s unconventional behavior were visible early on.

As WeWork closed on its Series E (ie, its fifth round of private funding), it found itself sharing space at 222 Broadway with The Guardian magazine, an early WeWork tenant:

“One weeknight, Eamonn Store, The Guardian’s CEO, was at an early dinner with an advertiser when his phone began to vibrate. He was getting messages showing what appeared to be video of Guardian journalists shouting obscenities at WeWork employees on the floor below. He called Adam Amar, a WeWork employee who had brokered the Guardian deal, to ask what was going on. “You need to come back, quick,” Amar said. “What do you mean?” Store asked. “There’s about to be a fight,” Amar said. “Like, literally a fight.”

That afternoon, [Neumann] had given another celebratory speech, punctuated with shots of tequila and thumping music queued up on a stereo: “Empire State of Mind,” “Run This Town,” “I Run New York.” The music kept getting louder as Guardian employees tried to finish their workday upstairs. Eventually, a Guardian reporter yelled at the WeWork employees to shut up. Adam heard the request and yelled back, “You shut up!” Another Guardian reporter walked downstairs and found Adam dancing in the middle of the office canteen. When she asked him to please turn down the music, he locked eyes with her and silently reached for the volume knob on the stereo. Without saying a word, he turned it up, then went back to dancing—stacking his hands on top of each other, as if he were building a tower of dollar bills.”

Over and over, Softbank, Benchmark and other brand name venture funders egg on Neumann’s excesses. The flood of capital allowed Neumann to acquire companies such as the architecture firm Case. And that allowed him to ask the Case guys to help install a ventilation system in the company’s Chelsea HQ that “would allow him to smoke pot in his office.”

If this beautifully written account has a flaw, it is the limited access to its central characters. Adam Neumann seems not to have sat for anything but a brief interview midway through the process of the original magazine article, and the author doesn’t seem to have accessed Rebekah Neumann—who is at the heart of WeWork’s kabbalah-themed culture and much of its success—at all.

What made the Neumanns’ inflated view of the company’s mission so compelling wasn’t just the founder’s charisma. It’s the fact that they really did eat their own porridge. When Adam declared the company meat free in Summer 2018, employees wondered if that meant ordinary tenants could no longer bring a turkey sub to lunch. But Rebekah and company co-founder Miguel McKelvey were indeed vegan — they could walk the walk.

As Neumann’s ego spirals out of control, his rhetoric takes on a messianic flair. Early in WeWork’s rise, the kibbutz-born Neumann muses to a colleague that he might want to lead Israel someday. When he returns to hold a town hall with the mayor of Jerusalem, according to the book, he now feels that Prime Minister isn’t a “big enough” job.

Another delicious anecdote takes place after the dismembering of journalist Jamal Khashoggi has made it uncomfortable for the cash-hungry startup to pursue Saudi money. Neumann brings in Stephen Hadley, who had served as national security advisor to President George W. Bush. They meet at WeWork’s headquarters and Neumann expresses the view that Saudi leader Mohammed bin Salman, a millennial wunderkind like himself, “simply needed the right mentor. When Hadley asked who that might be, Adam paused, and then replied, ‘Me.’”

In fact, the Saudis tended to view WeWork much more skeptically than the American and Japanese investors who funded its rise. No matter how many ways the company suggested it was more than a commercial real estate operator, the Arab sovereign investment funds tended not to buy it.

Had Softbank probed a bit harder, things might have turned out far less painfully for the thousands of WeWork employees who lost their jobs after working for years at below-market rates on the expectation of a tech-adjacent stock win.

Venture Capital Takes a Hit

This has been a rough media cycle for venture capital.

A powerful article by Charles Duhigg in last week’s New Yorker makes the point that VCs now have to beg promising start ups to take their money, which means being perceived as “founder friendly.” Even old schoolers like Bruce Dunlevie of Benchmark, who want to exert some discipline, really can’t. So they agree to crazy terms like granting founders super-voting rights that give them ten votes per share. Or using C and D rounds to buy out huge percentages of founder shares, which misaligns the founders’ interests with future small investors.

Given the worship VCs have enjoyed in the business press, where they are regularly treated as visionary yodas who mentor the eBays and Facebooks of the world, it is actually amazing how badly Masayoshi Son comes off in Billion Dollar Loser. The book depicts the legendary startup investor, whose early anointment of Jack Ma changed the fate of the world, as not just impulsive, but gullible and easily seduced. A quick tour of a single WeWork location and a ride in the back of a car resulted in an offer of $4 billion. “The entire exchange, from Masa’s twelve-minute tour to signatures sealing one of the largest venture capital investments of all time, had taken less than half an hour.”

Another Son-powered investment, DoorDash, will hit the public markets in a few weeks. Fueled by $680 million of Softbank cash, the also-ran delivery service shot to first place. WeWork’s story ought to give pause to potential Door Dash investors who may mistake market share for a fundamentally sound business.

Ultimately, Billion Dollar Loser succeeds because it correctly identifies the culprit behind the evaporation of tens of billions of dollars. Adam and Rebekah Neumann are not the villains here. For all their meshegeneh bullshit, they were rational economic actors. If he walked the streets barefoot, smoked weed on private planes and invested millions in a company that makes wave pools or in (several) nutritional coffee creamers, all while she hired photographers from Vogue to improve the “energy” of the S-1 document upon which the company’s entire fate hinged, well, most of that stuff simply resulted in VCs begging the company to accept more cash at higher valuations. Meanwhile, WeWork’s board unanimously approved every single decision its founder made.

In January 2018, I spent a Saturday evening with Rebekah and Adam Neumann at a small birthday party for a mutual friend. I didn’t experience the mesmerizing charmer who employees would greet with thunderous applause at company retreats. Just a curious, funny couple who asked good questions and listened thoughtfully to the replies. When I told Adam I had been investing in crypto currencies since 2012, his eyes widened. Bitcoin had recently hit an all-time high. Adam told me he would be sending me $10 million on Monday morning to invest in crypto currency. I told him I couldn’t accept that. I was not qualified to manage others’ money and didn’t want to do so anyway. “I’m sending you $10 million,” he insisted. He had absorbed from Masa Son the ultimate gambler’s lesson: you can’t win if you don’t play.

Adam Neumann never sent me any money. But within a year, the company he’d imagined with Miguel ten years earlier had received more than $6 billion from Softbank alone.