The Cult of We Summary

How did one man’s charisma and vision inflate a real estate company into a $47 billion tech 'unicorn' – and why did it all come crashing down?

1. The Origin of WeWork: From Baby Clothes to Office Space

Adam Neumann’s entrepreneurial journey began in an unlikely industry – selling baby clothes. But his true aspiration was wealth, and real estate became his vehicle. Teaming up with Miguel McKelvey, an architect he met at a party, Neumann transformed his lofty dreams into action despite having no concrete business results to show initially.

The duo’s first project together, GreenDesk, capitalized on the growing demand for co-working office spaces during the 2008 recession. Big companies were downsizing, and entrepreneurs needed affordable spaces. With minimal investment, GreenDesk took off, and Neumann sold his share for $500,000, hungry to scale the concept further.

Using little more than passion and persuasion, Neumann pitched the idea for WeWork to real estate developer Joel Schreiber. Astonishingly, Schreiber invested $15 million without negotiating terms, valuing the company at $45 million before it had even signed up its first customer.

Examples

• Adam Neumann transitioned from baby clothes to commercial real estate after meeting McKelvey.
• GreenDesk succeeded because recession-era businesses needed flexible, affordable workspace.
• A persuasive pitch convinced Joel Schreiber to invest millions based purely on potential.

2. How Branding Transformed Real Estate into a "Tech Startup"

Neumann understood that bigger investments went to technology companies, not old-fashioned real estate firms. So he rebranded WeWork as a tech startup, aiming for much higher valuations. His idea was framed as “space as a service,” a clever twist on the tech world’s “software as a service” model.

To investors, Neumann pitched WeWork as more than office leases – it was a community-driven revolution. By mirroring tech giants like Google, WeWork promised not just office space but collaborative environments that felt like a “physical Facebook.” Stylish designs, free beer, and shared amenities created workplaces millennials found appealing.

Investors responded eagerly. For instance, venture capitalists backed Neumann’s enthusiasm and projected revenues, valuing WeWork at $100 million early on. His charisma and ability to sprinkle tech buzzwords fooled many into ignoring the limitations of scaling a real estate business compared to software.

Examples

• Neumann branded WeWork’s flexible rentals as “space as a service.”
• WeWork imitated Silicon Valley office perks like communal areas and sleek designs.
• Benchmark Capital disregarded profit concerns, valuing WeWork at $100 million.

3. Charisma over Substance: The Softbank Investment

In 2016, while WeWork’s financial losses ballooned, Neumann consistently sold a vision of relentless growth. Softbank, led by Masayoshi Son, became a game-changing investor. During a meeting, Neumann confidently outlined WeWork’s future dominance in global real estate, even claiming it could “take over every part of the commercial property market.” His audacity worked.

Son’s investment of $4.4 billion, with the promise of billions more, inflated WeWork's valuation to an astonishing $47 billion. This funding allowed Neumann unchecked spending power and emboldened his reckless decisions. However, despite rapid expansion, profitability grew elusive.

Softbank’s support signaled to other investors that WeWork was a game-changing company, yet no one stopped to question its mounting losses. Neumann carefully curated hype, all while sidestepping accountability for financial sustainability.

Examples

• Adam’s “triangle plan” impressed Masayoshi Son, justifying Softbank's $4.4 billion commitment.
• Despite losing millions daily, Softbank still valued WeWork at $47 billion.
• Investors trusted Softbank’s endorsement and overlooked the company’s missing profits.

4. The Cost of Rapid Overexpansion

WeWork’s fast growth across continents brought chaos instead of clarity. While Neumann raced to open new locations and enter markets like China, the company struggled with operational inefficiencies and an unclear focus.

New ventures such as "WeLive" (communal residential spaces) and "WeGrow" (progressive private schools) distracted from the core business. Financial resources were scattered as Neumann prioritized expansion over efficiency and profitability. Expensive parties, retreats, and luxury purchases further drained the company’s cash reserves.

From 2015 to 2018, WeWork burned through billions of dollars without improving its financial situation. It became evident that scaling rapidly without a sustainable business model was driving the company toward instability.

Examples

• Worldwide expansion led to a lack of focus on WeWork’s foundational co-working business.
• The residential WeLive experiment failed after limited success, expanding to just two locations.
• Extravagant spending, including Neumann’s purchase of a $63.4 million private jet, worsened cash flow issues.

5. Reckless Spending and Poor Leadership Culture

Neumann’s leadership style valued flamboyance over accountability. Employees were encouraged to project an image of constant fun and passion, with mandated celebrations and what he called a “mission-driven workplace.” Yet behind the scenes, workers frequently questioned the lack of oversight.

Lavish corporate retreats, such as “Summer Camp,” cost millions and cultivated a hard-party atmosphere, including free-flowing alcohol. Neumann’s financial decisions became increasingly personal, like funding his friends’ businesses and retroactively selling the “We” name to his own company.

This unchecked spending signaled short-term thinking and siphoned resources that could have helped stabilize operations. Employees admired his enthusiasm but felt disillusioned by his self-serving actions.

Examples

• Employees faced bizarre demands, like staging fun scenes whenever Neumann walked investors through buildings.
• Neumann sold the “We” trademark to his own company for $5.9 million in personal profit.
• Wild office parties and expensive retreats, like renting Universal Studios, reflected reckless financial habits.

6. Cracks Emerge as Reality Clashes with IPO Ambitions

Eventually, WeWork’s financial troubles and Neumann’s questionable practices couldn’t stay hidden. When preparing to go public, required documents exposed a long list of red flags. Astonished investors discovered Neumann’s greed-driven arrangements and massive financial losses.

Critics mocked the poetic preface of its IPO prospectus, labeled as “New Age nonsense,” while the numbers revealed an $11 billion deficit. With Softbank pulling back its promised capital, the stock market balked at WeWork’s $47 billion valuation. Suddenly, faith in Neumann’s vision evaporated.

The IPO plan crumbled amidst public scrutiny. Neumann resigned but negotiated an astounding $1 billion severance package – leaving many investors and employees questioning his ethics.

Examples

• Disclosures revealed the extravagant spending on items like the Gulfstream jet.
• Public reaction to WeWork’s losses shattered expectations of a successful stock debut.
• Neumann exited WeWork with a $1 billion payout, even as his leadership faced global ridicule.

7. The ‘Cult’ of Founder Worship

Venture capitalists and corporate boards overlooked warning signs because Neumann embodied what investors sought – a bold, visionary founder. His comparisons to Steve Jobs or Elon Musk warped expectations, giving him excessive control. Investors placed charisma above competence, giving rise to the now-infamous “founder cult.”

During WeWork’s meteoric rise, Neumann relied on his personality and grand ideas to attract ever-growing investments. This founder glorification often led to unchallenged power, even when red flags about his judgment appeared repeatedly.

The blind faith placed in Neumann demonstrates how compelling storytelling can overshadow real results in the startup ecosystem.

Examples

• Venture capitalists like Benchmark poured money into Neumann’s overarching vision, not financial proof.
• Neumann controlled the majority of votes on major decisions, sidelining accountability structures.
• Comparisons to Jobs or Musk helped maintain his mystique despite WeWork’s flaws.

8. The Fall: Exaggeration Meets Harsh Scrutiny

Where private investors accepted inflated numbers and optimistic projections, public scrutiny demanded truth. During its IPO process, scrutiny of WeWork revealed the grim financial flaws hidden by Neumann’s visionary shell. Investors finally acknowledged that WeWork operated as an unsustainable real estate rental service, not a global tech disruptor.

Conflicting valuations showed a stark difference between hype-fueled growth and actual return on investment potential. The public exit painted a sobering picture of tech-driven startups prioritizing appearances over operations.

The fallout illustrated the dangers that unchecked ambition and inflated valuations pose across industries.

Examples

• The IPO revealed not $47 billion value but over $11 billion lost in expenses.
• Investors openly questioned why profitability wasn’t pursued earlier.
• Social media mocked Neumann’s claims of revolutionizing how people live and work.

9. Startup Culture's Dangerous Obsession with Growth

Finally, WeWork’s story is emblematic of larger problems in startup culture, where bigger valuation numbers are prioritized over fundamentals like profitability. Companies are encouraged to grow at breakneck speed to attract attention and leapfrog competitors, even at the expense of long-term stability.

Venture capitalists played a role in enabling this culture, favoring founders who could generate excitement over those who demonstrated financial discipline. Neumann capitalized on this obsession perfectly but left devastation in its wake when the money ran dry.

WeWork became a financial cautionary tale, showing why profits matter as much as ambition.

Examples

• Growth-obsessed investors clashed with more cautious voices questioning WeWork’s profitability tactics.
• WeWork symbolized the "fake it until you make it" ethos of 2010s startups striving for unicorn status.
• The downfall inspired debate about reforming venture capital practices to reduce unchecked risk-taking.

Takeaways

1. Before investing, distinguish between hype-driven branding and sustainable business models.
2. Don’t conflate visionary founders with ethical, effective leaders – scrutinize their decisions and practices.
3. Focus on financial fundamentals like profitability when growing or supporting businesses, rather than chasing unrealistic growth expectations.