Rolling US Economy Into The Shitbin Thread

i'm not trying to like, roast you guys for being old; it's really just a matter of a few years. it's interesting imo that such a small change in experience can have such a strong effect on our priors about the likelihood of some tech startups being overvalued sinking the economy

see zerohedge post above

:/

i thought this thread just randomly started focusing on wework because of ridiculous valuation and drama going on.

yerac otm. there may have been a suggestion that wework was some kind of 'Bear Sterns' harbinger of market craziness becoming exposed, but that was pretty farfetched. wework does exemplify some of the craziness at work in the markets, but it is not a linchpin. it is more an illustration of too much money chasing high returns and the misallocation of capital away from productive investment into stupid speculations.

Wework is not going to cause a global financial crisis

It is notable that one of the most talked about IPOs appears to have been built on exactly nothing and that several other notable internet companies have been built on similarly dubious foundations. There are certainly echoes to the tech bubble in the early 2000s.

It’s the largest renter of commercial real estate in New York, Chicago, and other cities.

And there is serious reason to think they will not be able to meet the financial obligations required by their massive leases.

“what WeWork has undertaken... is in fact $34 billion... of rent obligations to landlords... over the next 15 years... This for a company that grossed less than $2.6 billion in sales for the 12 months through June” https://t.co/90sHEdl76c

— Edward Harrison (@edwardnh) September 25, 2019

Yikes, ok, maybe they will take down the economy, lol

apparently if you had $47bn you could *buy* half the commercial real estate in the US. that's how insane the valuation is.

we've done the "could this be a contagion" thing on this thread before iirc. probably not on its own. but a major tech bust (which "we're done with IPOs for a while" could initiate) absolutely could (e.g. via california being way, way too dependent on tech IPOs for general tax revenue).

apparently if you had $47bn you could *buy* half the commercial real estate in the US. that's how insane the valuation is.

No, that's not correct. The total value of all commercial real estate in the US is over $6 trillion. Office alone is $1.7 trillion.

It's also not the right comparison since (in theory, if WeWork's model actually made any sense), the valuation of a WeWork company should be tied to the value of its income, not to real estate values (it doesn't own many properties).

yeah the wework numbers are tiny, the fact that they're the largest owner of commercial real estate in new york and wherever just shows how low the concentration is in those cities

WeWork is in no way a tech company. Everything it actually, functionally does could be accomplished with a telephone and a ledger.

xp- there's a reason why zerohedge say "single biggest tenant" but doesn't report its share, it's 260 locations in NYC

No, that's not correct. The total value of all commercial real estate in the US is over $6 trillion. Office alone is $1.7 trillion.

yeah i was thinking "that sounds like bullshit" as i was typing it but i decided to post it and be legends.

it was a misremembered version of this $100bn figure from levine yesterday

If a company is a mid-tier office landlord, I mean, the total equity market capitalization of all publicly traded office real estate investment trusts in the U.S. is about $100 billion; also many of them are profitable. If WeWork just replaced all of them tomorrow, then you’d about double your money from that $47 billion valuation. Nobody gets into venture capital because the best-case scenario is doubling their money. For WeWork, maximal office-landlording success would be kind of disappointing.

still, if the office space is worth 1700bn, their IPO was claiming they were worth ~1/20 of the purchase value of all the office space in the US.

ok kate pic.twitter.com/Gy57jEIPW0

— darth™ (@darth) September 26, 2019

(source https://www.reddit.com/r/pics/comments/d93grv/adam_neumann_barefoot_in_nyc_hours_before_being/)

The new Pivot podcast episode, from Toronto, has a good conversation about WeWork about 10 minutes in. (See also: the previous 10 or so episodes as well.)

Wework exemplifies a certain kind of economic crisis in which value or money is allocated in the poorest possible ideas. It going down won’t cause a recession, but it is hard to look at a Wework and not see a lost opportunity.

I just see a guy with a super long neck.

xp- idk it's not that bad of an idea a priori (imo), just seems like the company sucks ass and is run by a huge dumbass

I mean idea at large, like the investment into the whole circus. Not that I think that the initial idea is any interesting.

It's a good idea -- just not a more-valuable-than-Ford idea.

neighbourhood i live in has 4 cafes on every block that are essentially just people renting office space paid for in 5$ lattes. which is a pretty good deal (imo), but what if you don't like coffee?

I don’t think the business proposal of wework can scale very well across many cities.

My latest startup looked at wework and then we chose a serviced office without a fancy brand name for 1/3 the cost.

well, yeah if you're in a position to sign a lease for an office for multiple people then wework is expensive. that's not who it's for.

It is* now. Microsoft are sub-leasing an entire floor from WeWork in Seattle.

*"is"

ok im convinced it’s a dumb idea. there’s a wework next to my jamspace, it looks pretty nice but I’ve never seen anyone inside it

It’s not a lease as such it a a serviced office we pay month to month, based on the number of desks we occupy. We work is actively courting this market and is comprehensively overpricing when compared to incumbents and alternatives. They are expensive and even in comparison to their own category of co-working spaces.

are you comparing like with like in terms of buildings?

maybe this is a local thing, but the situation in LA is that wework is expensive, but so are all the other coworking spaces in similar buildings. they have the fine arts building (which is almost as fancy as the bradbury building!) and the top two floors of the 5th tallest building in LA. if you don't care about that (i don't which is why i'm in a warehouse in chinatown) then they're expensive. but it's not like wework is charging more than their direct competitors.

The space we are in definitely not like for like, TBF it’s pretty crappy but we’d rather spend our investors’ money on building the thing we said we were going to build. However in Sydney and Melbourne you can get equivalent quality and amenities for cheaper than wework.

http://nymag.com/intelligencer/2019/09/what-happened-at-we-why-wework-postponed-its-ipo.html

good shit

Can’t wait for the documentary

Ha ha ha! See ya suckers...I'm outta here.

"Before leaving, Neumann had already cashed out more than $700 million of the company's stock, The Wall Street Journal reported this summer."

beautiful

There were several reasons for haste, including a suggestion by Artie Minson, the company’s then–chief financial officer, that it would be ideal to go public before the loquacious Neumann spent a summer saying things he shouldn’t to bankers and investors in the Hamptons, where the Neumanns have two homes.

http://nymag.com/intelligencer/2019/10/marketing-expert-scott-galloway-on-wework-and-adam-neumann.html

Fun read!

This really got out of hand, huh?

haha that guy is kind of a dick, but it's in a worthy cause

I kind of wish the ipo had been forced through so that JPM, GS and all the other underwriters could've eaten shit and had to deal with their client fallout.

It really does suck that Neumann, thus far, has all this money and is currently free to start another 'venture'.

I don’t want his family to have to go into hiding, as Galloway suggests, but he should certainly never show his face in public for a long time. It’s kind of infuriating this relatively obvious sham - lol math - doesn’t rise to the level of what happened in Theranos, because it kind of feels like it does.

It's a business that in theory COULD have a sound, profitable business model (albeit on a much smaller scale). At least I think so. Theranos made a product that just didn't work at all.

in theory COULD have a sound, profitable business model (albeit on a much smaller scale)

If WeWork had been pursued on the appropriately smaller scale and grown at an appropriately sensible pace, rather than being hothouse force-grown with scads of VC cash, then it would have been a wholly different beast, a legitimate business, rather than a fraudulent vehicle for extracting tons of money from unwary investors.

shoulda been called YouWorkWithoutBenefits

https://www.fastcompany.com/90285552/the-most-powerful-person-in-silicon-valley

Returning to this article nine months later reminds me what the real gambit was

WeWork’s potential lies in what might happen when you apply AI to the environment where most of us spend the majority of our waking hours. I head down one floor to meet Mark Tanner, a WeWork product manager, who shows me a proprietary software system that the company has built to manage the 335 locations it now operates around the world. He starts by pulling up an aerial view of the WeWork floor I had just visited. My movements, from the moment I stepped off the elevator, have been monitored and captured by a sophisticated system of sensors that live under tables, above couches, and so forth. It’s part of a pilot that WeWork is testing to explore how peopule move through their workday. The machines pick up all kinds of details, which WeWork then uses to adjust everything from design to hiring.

I ask what else we can spy on. He taps the screen and calls up a large map displaying each of the 83 cities in which WeWork operates. From here, we can drop down into any of them: Around the world in 80 nanoseconds.

“Basically, every object will have the potential to be a computer,” adds David Fano, WeWork’s chief growth officer, who is overseeing development of this new technology. “We are looking at, what does that world look like when the office is this highly connected, intelligent thing?”

This is why Son is investing billions in WeWork.

First paragraph quote should end in ellipsis (i should cop to snipping the bit where the We guy promises no identity data is captured - but of course that promise is absolute nonsense)

The recent bit where people were mockingly saying 'why were people treating them like a technology company?' - well, in the long run, the idea was that the real money was going to come from the data

The machines pick up all kinds of details, which WeWork then uses to adjust everything from design to hiring.

This quickly glosses over whether the practical benefits produced by all that gee-whiz technology were ever valuable enough to offset its cost. Although it obviously was impressive eye candy to show to investors and journalists.