Maureen Farrell on WeWork’s Investments (Podcast)

than than you would have guessed. All the venture capitalists and and big investors not really doing the appropriate due diligence, relying on each other, and nobody really looking at the numbers, which kind of revealed that this was a giant money losing, fast growing startup that really was a real estate play pretending to be a tech play. You know, tech gets one sort of multiple, real estate gets a much lower multiple.

And Newman was able to convince a lot of people that this was a tech startup and therefore worthy of a you know, a billion dollar and then multibillion dollar valuation. It's fascinating the it's deeply deeply reported. There is just an incredible series of vignettes and stories and reveals that they're just shocking what Newman and Company were able to

fob off on their investors. Everything from ridiculous self dealing um to crazy evaluations, to lackluster due diligence, and then just the craziest, most egregious golden parachute in the history of corporate America. I found the book to be just fascinating and as well as my conversation with Maureen. So with no further ado, my conversation with Maureen Farrell, co author of the Cult of Wheat. This is Mesters in Business with Very Revolts on Bloomberg Radio. My special guest

this week is Maureen Farrell. She is the co author of a new book, The Cult of We We Work, Adam Newman and the Great Startup Delusion. The book has been nominated for a Financial Times Mackenzie Business Book of the Year Award. UH. Previously, she worked at the Wall Street Journal since two thousand and thirteen. Currently she is a reporter investigative reporter for The New York Times. Maureen Farrell, Welcome to Bloomberg. Thank you so much for having me.

So let's uh start a little bit with your background in history. You you covered capital markets and I p O s at the Wall Street Journal. What led you and your co author Elliott Brown to this story because this was really a venture capital on a startup story for most of the right exactly and for me personally, I was covering the I p O market and end

capital markets, this sort of explosion of private capital. So I was looking at we work from both angles basically, um, you know, in this small cohort of the most interesting companies that were going to go public, along with Uber, Airby and be Lift, and it was also part of this group that had raised more capital than anyone ever before. I was looking at soft Bank and its vision fund a lot um and then I mean take within this cohort, there were some pretty interesting companies. But I mean just

along the way kept on hearing. You know, Adam Newman stood out as like a little bit of a different um entrepreneur that the stories you would just hear over time just became more and more interesting and a little insane. So when did you decide, hey, this is more than just a recurring series of articles. When did you say this is a book. We have to write a book

about this. So we were around August twenty nineteen. Um. By then we were writing more and more about the company as it was clear that it was you know, made it known that it was going to go public. Suddenly it's s one the document the regulatory documents you file publicly to go public. Um, we're out there and they were completely bonkers. They sort of captivated, I think

the imagination of the business, uh reading public. But then over the next few weeks we work was on its way to finally doing this I P. O. And my co author, Elliott and I who had been covered He had been covering the company long before me. He was a real estate reporter. He had been covering them since then. He was out in San Francisco covering venture capital, and it just became the most insane story either one of

us had ever reported. Like day by day, there's a playbook for I p. O s and they, you know, things are different, but they sort of follow a formula and nothing was making sense, and um, it just was getting more and more insane until this IPO was eventually called off and Adam Newman, the founder and CEO, was pushed out of the company for all sorts of crazy things. So we're gonna we're gonna spend a lot of time talking about that, But you hinted at something I have

to mention. Your co author covered real estate. Hey, I was told we work was a tech startup and an AI company and everything else, but a real estate arbitrage play. How did they manage to convince so many people that they weren't a Regius? The CEO of Regis very famously said, how is what they do any different than what we do? Well, they tried to convince Elliot Brown, my co author of the same thing. He had heard about Adam Adam Newman

this company. He started seeing the valuation um back then I think it was a billion one point five billion, and when that became a unicorn, suddenly it was like, wait, this is just a real estate play exactly. And he was covering other commercial real estate companies like Regius, and he had followed them and he was like, wait, they only have a couple of locations to even still at that point. So he went in to meet Adam Newman for the first time, and he's got great stories, but

as part of it, Adam was like really horrified. He was, you know, very nice, his charming self, but also saying, hey, you're a real estate reporter for the Wall Street Journal. You're the last person who should be covering this company. Do you have someone who covers like community companies? And Elliott said no, and I'll be following you from here on out. We'll talk about community adjusted even though a

little later also. But but let's talk about the genesis of this because uh, Newman and his partner McKelvey had a legit business green Desk that was the predecessor that we work. It was sold. I don't know what the dollar room that was. Was that ever disclosed, but it was not nothing. It was a real and the two of them rolled that money plus a third partner who was also Joel Riber is a real estate developer in New York not coincidentally, and in they launched we work

with the first site in Soho. So why is this real estate? Sign long term leases and uh sell shorter term leases at a significant markup? How is this not possibly a real estate uh concern? What was what was the argument they were making to people that hey, we're a tech company and we deserve tech company valuations. Sure so, Um, exactly as you said, they had this Brooklyn business that was the genesis of WE Work. It was um It had a lot of that business and it was what

they took to make WE Work. It had a lot of innovation to it in terms of architecturally, the aesthetic of it. I mean, we're probably all Mento WE Works. They're just they're beautiful open glass. We had light streaming through the windows. You put you pack people very close together. So something they started in Brooklyn, it took off, but then there the landlord there didn't want to grow it,

so they split up. They moved on UM Adam and as part of his co founder Miguel McKelvey, And from the very beginning the idea was something so much bigger they say they created. They like sketched out something and

it was like essentially we World. It would be you know, schools and apartments and this whole universe of we But basically, as you said, I mean throughout for the most part, it was this like arbitrage building arbitrage company in terms of getting long term leases and splitting it up all right, So they have a pretty substantial investor list JP Morgan, Chase, t Roe, Prized, Wellington, Goldman, Harvard and Downmond, Benchmark Capital, mort Zuckerman, was this still a rational investment in UM

or when did things kind of go off the rails. Um By then, it still seemed like the valuation was really getting ahead of itself, and it was very much predicated on this idea that you said that being a tech company, and I mean Adam Newman's genius was in marketing and fundraising and what he had the ability to do really each step of the way and it's it's masterful was sort of take take the zeitgeist, like the big business idea of the moment that was captivating investors

and put that on top of we work. So he was very into a little bit before this, like sort of equating it's a Facebook. You know, Facebook was the social network. This was like a social network in person, in real life social network. And he didn't manage to kind of convince people bit by bit. I mean, it's interesting benchmark, you know, as you know, it is like

one of the tip top shelf. Yeah, that's been something had some of the biggest um uber go down the list of just incredible that yeah, eBay, Yeah, they've had it through it for decades. They've been behind some of the biggest companies. So they were willing to take a gamble on them, and then they saw red flags but

just decided to jump in anyway. But for benchmark, I mean we've seen they ultimately they get in at such a low valuation, doesn't matter exactly, like you know, they want their home runs, and I mean it's still they still ultimately got out at a pretty good, really incredible return to billions something yeah, something like that. So, so just to clarify, because I I'm going to be trashing we work for the next hour. But this wasn't a

Sarah No situation or a Bernie made off. This is not an issue of fraud or anything illegal or unlawful. These just were insane valuations. Somebody did a great job selling investors on the potential for we work and it didn't work out. I'm glad you brought that up because a lot of people do ask about the differences and the parallels between Elizabeth Holmes and Adam Newman, and I mean I almost think the story in some ways is more interesting. I mean, the third of story is obviously

the craziest and and horrifying in so many ways. Um, but with Adam Newman on the margins, there are questions about you know, some self dealing and there's some a lot of avarice, and he just cashed out way way early, So you could criticize his behavior, but you know, you end up with the vcs and the outside investors either looking the other way or turning a blind eye. It's not like this stuff wasn't disclosed or anything. He was

very out front. No, I need I need a private jet because we're opening up WE works in China and in a hundred other countries and I have to gen around the world. Yeah, maybe you needlf stream is a different question. But you know there they didn't hide this. They were like proud of it. No, and I think it is every step of the way you see. I mean the investors, and these were some of the most sophisticated investors in the world and some of the you know,

they're thought of as the smartest investors. They saw the numbers that WE Work was putting forth, and they were real, real numbers. They also saw their projections, and the projections were mythical and they never quite reached them. But you could see if you were going to invest in any round of WE Work, you could see what their prior

projections were. How they failed to hit them. But instead the thing that we saw time and time again to this point was very often Adam Newman would meet the head of an investment company, whether it was Men Benchmark or Soft Bank or t ro Price, Like the main decision maker totally captivate this person. You know, it's usually a man. The man would become kind of smitten with Adam and all his ideas and what he was going

to do, totally believe in it. The underlings would look at the numbers, raise all these red flags, point them out, and then the decision maker would say, you know, he's amazing. So I want to talk about the rapid rise of we work, and they're they're really fast growth path. But I have to ask what sort of access did you have to the main characters in the book where people forthcoming? I have to imagine there were some people who had

grudges and we're happy to speak. What what about um the some of the original founders, Adam and his wife Rebecca, who who did you have access to? Sure? So you know, in the interest of privacy, I can't I can't get into specifics, but what I will say the interesting thing was, I mean, we really got access for hours and hours to the vast majority of players at every step of the way in this book. And um, the one of the funny things was, I mean, the pandemic really started

right as Elliott and I took book leave. If we start our book leaving late February, money and we had both planned to sort of be in all around the world meeting people in person. Elliott had moved to New York to meet a lot of the players in person. Obviously, the world shut down, and um, you know, it's kind of nervous about what that would mean in terms of conversations. And the funny thing was, I think people were home

board feeling pretty reflective. So there are a number of people that said there, I didn't know if I wanted to talk to you, and some of these people I probably had like ten conversations four hours with And there are forty something pages of in notes. It's I'm not suggesting that this isn't deeply researched, because a lot of these conversations that you report on like you're flying the wall. Clearly it can only be one of two or three people.

So it looks like you had a ton of access to a lot of senior people, and I guess we'll just leave it at that. Um So, so let's talk about that early rise. In the beginning, they were really ramping up very rapidly. I mean, you could see how somebody interested in investing in a potential unicorn in fourteen, coming out of the financial crisis. Hey, the idea of all these startups just needing me a little bit of space and not a long term lease. It looks very attractive.

It looks like, hey, you could put we works wherever there's a tech community and they should do really well there. Yeah, there was, and it was the marketing was it was very viral at that point. It was you know, people would tell their friends about it and they would fill up very rapidly, and they were building more and more.

I mean, and this is one of the you know, as part of the genius of Adam Newman was you know, he was telling people from day one they were really struggling to even secure the lease on the first building, and he was like, Oh, we're gonna be global, We're gonna be international. He would set these goals of how many buildings they would open, and people internally and even investors would say, oh, this is impossible, and he would and he would hit that. He kept on sort of

defying gravity, defying disbelief for questions. UM. So the growth was incredible and they were filling them up. We could talk about, you know, the lack of the cost of doing so they were paying double to UM real estate agents what everybody else was paying. They were going to competitors and saying we're going to reach out to your UM tenants and we're gonna offer them free rent for a year. I mean, they were really short elbowed and

very aggressive, especially as time went on. We did find that there was one year we we got all their financials. We you know, we got our hands on a vast trope of documents UM. But there was one year I think it was twenty eleven that they I think made two million dollars in profit. Were we were kind of shocked to see that. We didn't think they had ever made a profit. And then from there they did not and the billions and billions just added up in terms

of losses. So so the rapid rise we we mentioned UM, they peaked in tw at more than forty seven billion dollars. UH. Newman recently did a interview with your um fellow Times UH correspondent Animi Ross Sorkin, and he was somewhat contrite. He had um admitted that all the venture money and all the high valuations had uh went to his head. Quote, you lose focus on really the core of the business and why the business is meant to be that way, it had a corrosive effect on my thinking. That's kind

of a surprising admission from him. It was. Yeah, I mean his mayakalpo is very um interesting, and I mean one of the things that people said along the way was, you know, the the higher the valuation, the more out of touch he became. I mean he had he had a narcissism. I don't know what you want to call it, a sociopathological narcissistic personality disorder. I'm just I'm not a psychologist. I'm just guessing, or a really successful salesman slash CEO.

There's like a thin line between the two sometimes it seems and some of it, I mean it seems insane. It was like, oh, he thought of himself in this like same like with along with world leaders. But world leaders were really really wanted to meet him. Yeah, and he was like We have a scene in the book that he was debating whether or not he was going to cancel on Theresa May because he had promised his wife that he would teach a class on entrepreneurship to

their new school. Um. So it was like a few of their kids and a few of their kids friends were in the school and they're about five years old, five or six, and he had promised minister five year old. So when you talk about losing touch with reality, some of the m and a that this startup did We've garden A We've machine was like a surf wave machine, meetup, dot com conductor. They ended up dumping these for action what they paid for them. But what's the thought process,

We're going to become a technology conglomerate. I don't I don't really follow the thinking other than wouldn't it be fun to have a wave machine at our buildings? Like what's the rationality? Okay? So there were there were two parts to that, and part of it was like it was the world was Adam Newman's playground, and he loved surfing and he thought that, you know, he found out this company, this wave making machine, they would make waves. So him and his team went to Spain to surf

on them and test them out. But he could basically convince his board in general, who had to approve the is that anything made sense, whether it was the jet, the wave pool company, or friends of his. I mean Laird Hamilton's, the famous surfer was a friend of his. They invested like in his coffee creamer company. Um. But then the second so it was so many insane investments that really didn't necessarily make any sense. Um. But then on the other side, one of the things that we

thought was interesting. He had this deal with Massa. Who Massa, he's the CEO of soft Bank, became we worked biggest investor, biggest enabler, you might say, and one of them. They were going to do this huge deal that would have actually kept we work private forever. It never came to pass, and that's why it was sort of the beginning of the end when this deal fell apart. But as part of it, a lot of the deal is predicated on

growing revenue. So Adam also became obsessed with acquisitions, like whatever they could possibly do to add more revenue to the company. I mean, he was talking about buying Sweet Green, and he had like got pretty far along in this salad company and conversations with them. So it was this idea of like, let's just throw on anything. We have money, and let's just grow our top line. Who cares about anything else. Let's talk about Rebecca Newman. She was Adam

Newman's wife. What what was her role in we Work? How important was she? Her role is just so fascinating throughout. So, I mean he he met her, um right as he was starting Green Desk, and I think she just sort of opened his eyes. She'd grown up very wealthy, She's Gwyneth Paltrow's cousin. She had all these ties to Hollywood. Um. She gave him a loan early on, UM, a high interest loan. UM. I think even after they were married

that we were reported about in the book. UM. But as time went on, she she really wanted a career in Hollywood, decides to At one point she she was trying to be an actress, and she tells someone that she's done with Hollywood. She's producing babies. Now they've gone on to have six kids. UM. But she's sort of always kind of dabbled in the company, and they retroactively made her a co founder. She wasn't there from day one.

It was only later she got pretty active. Yeah, she told people aboutn't giving tours early on, that she helped pick out the coffee in the um in the early works. But so she became more active, but she would sort of jump in and out. And it was by the one of the things that she had a big focus on. Their kids were growing up. She didn't really like their choices of private or public schools, so she decided to

start She helmed sort of the education initiative. And she was deeply qualified for this because she was a certified yoga instructure and and I know she went to Cornell, which is certainly a good school. What bonifites does she bring to technology, real estate, education, Like I'm trying to figure it out. And in the book you don't really go into any details that she's qualified to do any of these things. I mean, especially with education. It's like

she didn't um she wanted to. Essentially, she wanted a school for her children, and she wanted very specific things in that school. And once again they decided that that would be the next Like Frontier for we work, they're always adding different things, but no one really and then they let them do this. They started this school UM in New York in the headquarters, and they were going

to teach the next generation of entrepreneurs. And I mean they one of the things, I mean it was the education arm more than as much or more than other parts of it is just so tragic because they had a lot of money. She's she like Adam, could just speak like speak so like eloquently and with this vision. So she attracted all these very talented teachers. She sort of wooed them from the schools that they were in before and told them that they were going to start

this you know, new enterprise and change education forever. And it just really devolved so quickly. It became very like kind of petty. I mean people say they have PTSD from her like obsession with like the rugs, like just monessory type school. And yeah, she obsessed over like the color of white of the rugs and made them like send act twenty rugs. What was the most shocking thing you found out about him? Or horror or both? So

one one of these was. I mean, there was a lot of their personal lives, as we said, whether it was a school or other things where their kids were educated in UM just the way in which the personal entanglements on you know, small and huge levels. But I'll give two examples. I mean, one of the things that people said in the school so it's in the we work headquarters, was a whole floor and it's beautiful if you see pictures of it, like just this, like yeah, um.

And they had biarchy engles this UM famous architect design the school and UM. But they basically on Friday nights would have dinners with their friends there and according to many people would cut the team would come in Monday morning. It would be a complete disaster. So it was like really on so many levels, like everything was their personal UM so entitled. Yeah. And the second thing that really shocked us was she was very she had a lot

of kind of like phobias around like health and wellness. UM. And she says, I mean, she had a real tragedy in her family, her brother died from cancer, and so she was always she was very focused on it, and she said it as much in podcasts and things. But she was very fixated on five G you know, and she was worried about vaccines for their kids. UM. And but the five G of like what that could do

for you know, these signals. She wouldn't let them have printers on the floor, like any printers on wireless printers on the floor of the school. But there was a they bought this. Can you even buy five G printers today? What? What was the Yeah, the wireless like freaked her out. So the teachers that have to like run up and

downstairs to just print everything, it seemed ridiculous. But the five G towers, there was one either being built or built right near there being c par Park, Yeah, right nearby. So she was so obsessed with that she didn't want to move in there. They had bought like six apartments in this building that she um the CFO this is around the time they're preparing for the I p O used to work at Time Owner Cable. He was the

CFO of Time Owner Cable. So she said, can you already mention help us get rid of the five G tower? Um and haven't moved And basically he deputized another aide who used to work for Cuomo and work for Governor Christie the form both former governors, and they like that was something that they actually worked on. So that, yeah, that interplay was just kind of seems rational that there was a Vanity Fair article how Rebecca Newman put the woo woo and We Work, And what you're describing very

much is along the lines of that. I've seen Newman described as a vision area, as a crack pot, as as a grifter. But he thinks he's going to become the world's first trillionaire, and and we worked the first ten trillion dollar company. Is any realistic scenario where that happens or is he just completely delusional? I mean, it

seems insane and like he seems completely delusional. But he had a lot of people going along with him, including um the man with one of the biggest checkbooks in the world, who is Massa Yochi Sone, the CEO and founder of soft Bank, who had just the timing of this story. It's like, there's so many things that happened at the Shudi Arabia wanting to diversify, giving a ton of money, you you call son the enabler in chief. He put more than ten billion dollars of capital showered

on onto We Work. How much do you blame soon for all of this mayhem? At least in the last a couple of years of We Works. Um run as a private company. It seems like he was the main, uh, you know, the main person kind of pushing all of this. And when you talk to a lot of people around Adam, they just said they were just such a a dicey match like that. Adam was crazy to begin with. Everyone thought that, you know, it can go both ways, but

people drank the kool aid. It reminded me. You don't mention Steve Jobs in the book, but very much the reality distortion field that Jobs was famous for. I very much got the sense Newman was creating something like that. How did he get everybody to drink the kool aid? Was he just that charismatic and that good of a salesman? I think so. And it was just he could talk about things and make you feel like the reality was there, this reality distortion field he was. He was masterful in that.

Yet the thing that he did was he always found new pots of money all over the world. I mean, it was the time. It was the time when the private capital markets were getting deeper and deeper. The fidelities in the t row that like normally kind of sober mutual funds were jumping into startups and they were we call one of the chapters fomo is like the fun Fomo.

They were fearful of missing out in the next big thing, so that we're sort of in this climate where there is an appetite to go after to just take a chance for the chance of getting the next like maybe not trillion dollar company, maybe no one but him and mass I believe that, UM, but right the next early.

You know, it's always interesting when you see these uh staid old mutual fund companies that have literally no experience in venture capital or uh tech startups, but happy to plow into it because they want to be part of it. And maybe that's how we end up with community adjusted ibadac. Can can you explain to us what that phrase means? I don't even know what else to call it. Sure, so we work was losing every every step of the way.

They were growing revenue more than doubling it. You know, they were expanding all around the world, and with that they were losing just as much, if not more, every

single year, and then they were taking in. So they had this brilliant idea really a lot stemming from the CFO and Adam Newman loved to CFOs creation um his name is Artay Minson, the CFO, and it was this idea that you essentially strip out a lot of the costs of kind of creating all the building out all the wee works and you know, marketing and opening up new buildings. You strip it out and then you're suddenly a profitable Company's let me, let me make sure I

understand this. So if you eliminate the costs of generating that profit, you suddenly become profitable. Have come nobody else thought of this sooner? It seems like a da just

don't it's profits ex expenses. It's fantastic. And the conviction with which certain people inside, especially in the finance team, believe this, I mean they were saying throughout that like, oh, we will be a profitable company if we just The idea was if we just stopped growing, we could be profitable right now we take in more per building than we um spend on it. But um, you know that never was the case. So let's stick with the delusion concept. We talked about we grow, and we talked about we

live a little bit crazy stuff. What made this guy think he can help colonize Mars? You laugh, You wrote it yourself and it's still funny. By the way, I found a lot of the book very amusing, like very dry, Like you guys didn't try and crack jokes, but clearly a lot of the stuff was just so insane. You read it, you start to laugh out loud. I'm glad. I'm glad to hear that, because I think we would joke that, like every day when we were in different

places writing it. We're on calls constantly, and we would call each other, and it was often multiple times a day. We would call each other and say, you will never ever believe what I just heard, and we would crack up, and we had a lot of fun writing it because it's just it was the truth of this story was like more insane than anything we could have made up. Ever, that's the joke that, you know, the difference between truth and fiction is fiction has to make sense and truth

is under no such obligation. So let's talk about Newman colonize at moll. I mean, was that a serious thing or was he just you know, on one of his insane John's and everybody comes along, they're they're speaking of fine lines. I mean, he just I think he believed he started to believe more and more of like these delusions. And so I think he really did, and yeah he got.

He secured a meeting with Elon Musk, and he Elon Musk he was always Adam was always late to every meeting, would make people wait for hours, like even like the bankers in the I p O would just sit around. There'll be rooms of like dozens of people waiting for Adam and he'd show up like two hours late. But

Elon Musk made him wait for this meeting. They sat and sat and sat, and then he told Elon Musk that getting that he thought, like building community on Mars is what he would do and he would help him with And he said, you know, getting getting to Mars is the easy part. Building community is the hard part, because you know, it's very hard to get those beer taps to work in a low gravity, zero atmosphere environment.

It's a challenge. Only we work could accomplish the fruit Honor. So, so I want to talk about the I p OH. But before I get to that, I have to ask about the corporate off sites. The summer camp would were described as three day global subjects of drinking and drug consumption. It was like a Woodstock event, not like a corporate retreat. How did these come about? So Adam would say that he never he grew up in Israel and he moved to the US. He lived for a little while in

the US, but moved later in life. Um, so he said he never got to go to American summer camp. So he was going to recreate summer American summer camp. Literally they started at um his wife's families. Um had a summer camp and upstate New York that's where they started.

They just got bigger and bigger, eventually going to England and taking over this like huge like field, this hugest state there and bringing every single member of the company, flying them from all and there were thousands of employees, thousands upon thousands, and the cost was unbelievable of every piece of it. I mean every year they just got bigger and bigger, and they flew at the height of his fame, not that he's far off of it, but Lin Manuel Miranda, like at the height of Hamilton's they

flew him on a private jet. He he performed on stage, the roots came and they would pay these people like million dollars. Yeah, that's afternoon. Yeah, exactly. Um, and they were um, you know, especially at the beginning. It was like a younger um group of people. Uh, in general, and I mean these these were crazy. There's tons of alcohol sanctioned by the company, handed out by the company. Drugs were in you know, in supply, not handed out at the company, but they were everywhere. And he talks

about um drugs. He says, well, we just not really drugged, you know he um. So yeah, I think it got to a point. And it was also mandatory to come to these events. I mean, and there were like meetings where there are shots. Everybody has to do shots. This wasn't just at these retreats. Like hard partying was pretty common throughout the company or anywhere Newman seemed to have touched when when he was there, everybody was expected to

step up and and party hard, including the investors. I mean, you'd walk into his office at ten am, according to so many different people, and he'd insist on taking to kill a shots with you in the morning in his office. And you didn't have a shot before this, You don't, isn't That isn't how every meeting begins. Breast the breakfast of champions, That's right, so so I got the sense from the book that they always seem to be on the edge of running out of money, and they would

always find another source. But it was all leading towards the I p O. But the S one filing, the disclosures that go with an I p O filing, that seemed to be the they're undoing the public just investing public just tore it apart exactly. I mean. The interesting piece of that, as you said, it was there's always

a new pool of capital. Like just when he thought that he was gonna have to go public and the board and the board, I mean, one of the things we found time and time again was the board would say, you know, he's really like crazy, things are getting out of hand, but like we won't say no to him, but eventually he's going to have to go public. This was back in they thought he was going to run

out of money. The only place to go because they're burning so much cash, um was the public markets, and the public markets will take care of it, which kind of that kind of floored us each step of the way. But yes, as you said, he he knew how to captivate on in one on one or bigger meetings to convince you of this future, to tell you. We always describe him kind of as a magician and think of him like this, like don't look here, look here, like the slight of hand he could. Then this S one

came out. It was a regulatory document. You have to follow rules. There's no slight of hand in S one filing. No, like you have to see and people suddenly he saw the broad public, the revenue, the losses a lot, not even all of these, um you know, the questionable corporate governance, I mean that self dealing, self dealing. Only pieces of that were even in it. Because the jet wasn't in the S one, they didn't have to disclose it then.

And the interesting thing about this, I think there's always like this distinction that people try to make between like, oh, the smart money and the dumb money, and it's like the smart money is like the fidelities and the t rose and the soft banks, and then the dumb money, you know, it's like the you know, the average retail investor. And so it's just so interesting that like he he captivated the the quote unquote smart money, and then the

minute this was all made public, everything was there. The world saw it and just said like what is wrong, Like this is insane. I'm nursing a pet theory that it was Twitter that demolished him because people just had a fee. I remember the day of this filing, Twitter just blew up with like a million people are taking an s one apart, sentenced by sentence, and the most outrageous things bubbled up to the top of Twitter, and it was very clear that they were dead in the water.

There was going to be no I p O and the dreams of these crazy valuations seemed to crash and burn with the the I p O filing, which which kind of raises the question about you know, how was all of this corporate governance so amiss? All the self dealings that were allowed. So my my favorite one was he personally trademarked the word we and then charged the

company six million dollars to use it again. He's given these sort of crazy disclosure explanations and I'm only allowed to say this, but it seems he bought a bunch of buildings in order to flip them too. We work had a profit. I don't understand how the board we mentioned para nos, here's the parallel. How did the board tolerate just the most egregious averaice, lack of interest in the company and only enrichment of oneself. How does the

board of directors tolerate that? I know that was I think if anything from this whole story that just floored us was exactly that this board. I mean, it was a it was a real, like heavy hitting board of directors. They're not and all financial people as opposed to thereinos, you know, it was like people who didn't really politics and generals and secretaries of states, right, it was, and a lot of elderly men who were smitten with her, I mean like men in what was Kissinger on the board?

He was nineties something. So so with this though, the other thing that's shocking is, you know, most founders of a successful company, they live a reasonably comfortable lifestyle. But the thought processes, hey, one day we'll go public and my gravy train will come in and I'll have of a high you know, eight nine figure net worth. Early in this timeline, he was paying himself, um, cashing out stock worth tens of millions, in some cases hundreds of

millions of dollars. Way way, early in the company was five years old and he was worth a couple of hundred million liquid and god knows how much on paper. Again, how how does a board allow that to take place? Yeah, that was what a board. Investors kind of signing off on this or jumping into it, I mean seeing that he's going to sell a lot of stock each round.

I mean, now there does seem to be a shift, and it's kind of a scary one that this is like more private company as the founders are selling more and more. But back then you didn't really see this very much. And one of the things I find very interesting is he was very much following that Travis Kalenik, that uber CEOs playbook and literally like following it that like going after the same invest is going around the world.

Travis had raised more money than anyone before Travis every step of the way made a huge point of um all in I'm never selling any stock until he was kicked out of the company basically, so Adam followed his playbook, but each step of the way was said he took money out and was like, I mean, he was very wealthy for a scrappy startup founder fourteen fifteen sixteen, You would think, hey, he's maybe he's making a decent living, but not hundreds of millions of dollars. It's kind of

amazing or like having many, many many houses. They were like, he didn't hide, um, the way in which he was living. How's it having houses all over the world, jet setting all over the world. Um, you know, And in fact, he almost like you know, wanted everyone to know. That was part of his like allure. So when the I p O filing in twenty nineteen, when when that blows up, it seems to have a real impact on Silicon Valley

for a while. Suddenly um high spending, fast growing, profitless companies look bad and now we're back to we want profit growth and revenue. But that really didn't last all that long, did it? No? It was unbelievable. I mean we also, Elliott and I joke that we rewrote the epilogue like five times because at first we wrote it saying like yeah, and it was I mean Massa. Yoshi soon had his own maya culpa, like, you know, I

believed an atom I shouldn't have. I made mistakes, but also I want my companies to be profitable now, like I'm gonna invest in these companies or the companies have invested already should be profitable. Um I p O investors, public market investors were totally spooked by money losing companies. Then um, you know, then came the pandemic. Then came the FED pumping money into the system, and then um you know. Now in some ways it's like, wow, we

work at least like may generated revenue and losses. It's like now today we have riving and lucid, and you know, it's all potential. Maybe it works out. Maybe Amazon buys a hundred thousand trucks from them, but that's kind of that's a possibility. And you know, more more than just the FED, you had the carezac. You had a ton of money flow into the system, but it doesn't necessarily flow to venture funded outfits. It's just a lot of

cash slashing around. Is that is that a fair statement? Completely? So, how quickly were the lessons of we work forgotten? Incredibly quickly? I mean it felt like it had It felt like it changed everything for a few months. I mean. The other part of it was Mason had had raised a hundred billion dollar fund, the biggest fund ever to invest in tech companies. He was literally about to close his second fund billion dollars, another hundred billion dollar fund to

just go and like pour into companies. And then I mean we've heard from all these people were out and meeting Sovereign Wealth Fund Saudi Arabia and they were just like every meeting it was like what about we work? And you know, one of the things we've heard was he was pushing for it to just go public, um, you know, or to or not to to not go public because he didn't want to take the mark. You

don't want to make all this public. And we have a scene in the book about this that Massa tries to tell him to call off the I p O and try to force his hand, and Adam is confusing. Yeah, right, it's it's it's really quite it's really quite astounding that we end up with, what did he burn through billion? More than ten billion dollars? I think, yeah, that's that's a lot change essentially. So so here's the curve bowl question to ask you. So you're now a business reporter

at the times we work. Obviously isn't the only company led by an eccentric leader? What are you reporting on now? What's the next potential we work out there? You know? I'm just getting started. This is just a couple of weeks in, but so it's I don't quite know what the next we work is. I almost feel like there's a lot of many we works out there, whether it's you know, the companies in the stack market, some of

these unicorns. I mean there's so many, um, so many red flags around these companies, like saying before, like founders taking money out very early and you know investors not really caring and just wanting to get into them, getting these massive packages, um pay packages, compensation. So I think there's there's so many different places to look. I don't get the sense that there's one company now that's sort of of size of Adam Newman. I think there's just a lot of many ones. I mean, he was a

pretty like uh captivating and just insane. It's so many larger than life in so many ways. Um, But I have no doubt we're going to find one of them fairly soon. There'll be more. And what do you think the future holds for Adam Newman himself? He we we have to talk about the Golden parachute. So not only does uh soft Bank refinance a couple of hundred million

dollars in loans that he has outstanding. They give him a hundred and eighty three million dollar package and essentially purchase a billion dollars of his stock, so he leaves we work as a billionaire. Yeah, it was I mean, it was just an incredible thing. And I mean then he got this pay package that they agreed to as part of the bailout. I mean, we were once the I p O Is called off, was on the verge of bankruptcy and they were going to run out of money in a couple of months, so they had to

do this very quickly. They were laid off thousands upon thousands of people. But basically as part of the negotiations to get Adam Newman to give up his super voting shares, these potent shares that would have let him continue to keep control of the company. To do that, they struck this pay package. And I mean it's kind of interesting when we talk about the power of founder is right now that it wasn't a wake up call for Silicon Valley to be more wary of giving this power to founders.

Like when you saw the price tag that Avenue and extracted the cost of pushing out a founder who's kind of a disastrous founder at some point. Yeah, I remember reading that and thinking Sun played it terribly. He could have said, hey, listen, I got a hundred billion dollars worth of other investments. If I take a ten billion dollar right down, it'll hurt, but I still have plenty of other money. If this goes belly up, your broke. Your a disaster, except I'll give you fifty million dollars

or else you're just impoverished. Good luck fighting the lawsuits for the rest of your life. That would have been the play. But he didn't. I guess it was the other second funds he didn't want to put at risk. What Why Why didn't he hardball New Because I thought Son had all the leverage in that negotiation. That was one of the like the enduring mysteries I think of this whole story because all the things you said are right.

Plus Adam had taken out so much money in terms, he had so much lent against his stock at forty seven billion dollars I mean JP Morgan, um Ubs credit sweets. They had lent him hundreds of millions of dollars and he would have gotten to default. He didn't necessarily have the liquidity to pay back everything he had borrowed. So it was I mean, it's kind of amazing in terms of his negotiating um skills that Massa and soft Bank. It was led by Marcello Clara, who's UM now that

we work executive chairman. They blinked first. They gave Adam a lot, and I totally agree with you. One of the things I've heard it was just like the interest of time. They just wanted done ten billion dollars or whatever is and doesn't mean that much. They wanted to just keep on moving, keep on spending, not distract too much, and just get this done. But it's crazy. I mean that the time value of money could be the greatest

golden parachute in the history of corporate America. I mean, I'm hard pressed to think of anybody who on the way out of a failing company, and it was a failing company that moment squeeze more money out of out of their board. And just to say, I mean Andrew Ross working at in his first big interview with Adam, um that he gave was I mean, Adam defended it in different ways. I mean Andrew very much pushed him on,

like why that was okay and very aggressively. There was early November and he was sort of contrite and you know, a little shifty um, but for the most part, surprisingly transparent. I was when I was prepping for this, I watched this and uh, you know, you could see how he constructs that you know, reality distortion field. Um. But there was definitely more humility than we've seen previously. I don't want to say you humble, but just closer on that spectrum.

Pretty clearly he wants to have a future in business and he needs to offer a few minukulpas of his own. It does feel like this was the first step on the comeback tour Adam Newman. I think that's going to be a pretty big uphill battle. That's gonna be quite the kill himan jar or to uh to mount given what a debacle. The interesting thing just so in terms of his next step is I agree with you there's an uphill battle in terms of maybe getting people to to give him money. But he now has a lot

of money and from family office, yeah, exactly. Anecdotally it sounds like a lot of people are very happy to take his money. So the beginning, that's you know, he's seeding a lot of things that who knows where they're gonna go interesting. So I only have you for a limited amount of time. Let me jump to our favorite questions we ask all of our guests, starting with UM, you spend a lot of time researching and writing during the lockdown. Did you have any time to stream anything

on Netflix or Amazon Prime? Um? There, I mean there's still a lot of like downtime. I did probably watch not much, you know, there there was downtime and UM, I did have a few shows, give us one or two favorites, little fires everywhere. I really liked UM never have I ever. I just started watching that last week. It's quite charming. Anything Mindy Kaling does, it's quite amusing. She's amazing. Ship's Creek we got through the whole that

was my favorite pandemic. So the funny thing about that is the first episode of two or like uh, it's like it's like Succession. You don't like any of these people. The difference being in Ship's Creek you quickly start to warm up to them and they start to reveal their own path to um rehabilitation of themselves. It's better like every and then it's so it was really great right that that was one of my favorites. Let's talk about

your mentors who helped shape your career as a business journalist. UM. I guess my earliest UM mentor as a journalist in general was in college. I'd always thought about journalism and I got an internship with UM then I think septagenarian UM journalist. He his name is Gabe Pressman. I grew up in New York. He was an NBC journalist. UM this sort of the political head haunch of local journalism. I worked for him first summer. He was in his I think late seventies, and UM, he was just the

most energetic, passionate journalist I've ever met. He was still like chasing after mayors, grilling them. Um. It was it was the Senate race. It was Hillary in the Senate race, and m it was like the most fun summer I've

ever had. And seeing his energy and and he he passed away a few years ago, but literally he started blogging into his nineties and he would joke, he would say, UM, you know, my wife really wants me to like take a step back and work at Teach, a Columbia journalism school where he had gone, and he was like, I'm just not ready like at some point like scale back, and he never really did. Um so he I would say he was my first mentor just seeing like that. It is the most fune job in the world. He

just seeing that day in and day out. Let's talk about books. What are some of your favorites and and what are you reading right now? Sure, I'll start. Um. You know, I always wish I read more fiction, but um, it's like it's always get pulled into, especially the business genre. Um. So I write At this minute, I'm reading Trillions by Robbin's Wigglesworth. Um. It's really good. It's about like index funds sort of. I'm learning a lot from it. Um.

The right was gaek for two weeks ago. I'm midway through, but I'm really interesting a ton from it. I just um read Anderson Cooper's book about the Vanderbilts. It's I thought it was really great and it's so interesting. You know he talks it starts like the Gilded Age and you just see so many like eerie kind of parallels um between our age right now, and just like the level of like wealth creation and what it leads to.

So um, I've really enjoyed that. I read, Um, this is a little bit dated, but say nothing by Patrick Grad and Keith It's about the troubles in Northern Ireland. It is, I mean, it's it's very sad, but I then it's pretty long and I just could not put it down. It's so great. Yeah, I can't recommend that one highly enough. Quite quite interesting. What sort of advice would you give to a recent college grad who was

interested in a career in either journalism or or business. Um, In terms of journalism, I would just say jump in. I mean, it's such a as opposed to business. I felt like when I graduated from college, you know, so many people had jobs set they were going to make, you know, a decent amount of money. And with the journalism you just have to find your way in and a lot of its internships, and it's just the path

is hard, there's no straight line. So I would just say for journalism it really helps to just jump into the first job you can get, work really hard in it, and you just always have to keep there's no straight line, but jump in, learn from it, meet people, find your mentors everywhere you go, and just keep going. You learn so much on the job. I went to journalism school

at Columbia. It was a super fun year. But it's like, within two days of um working as a journalist, you just learned so much you can ever learn in school. And our final question, what do you know about the world of I P o S. Capital market business journalism today that you didn't know fifty years ago when you

were first starting out. Okay, what I think I've learned and probably the most in writing this book is you think people are rational players, and you think that um, titans of business are supposed to behave in sort of a rational way, and UM that these you know, these check marks, these um like a t ro price or something, or fidelity that they're gonna do a certain amount of

work looking at things. And I think the level of irrationality in business, of just relationships of people sort of um not necessarily making rational decisions and just going with their gut and going with the people they like and think are cool like that that overrides a lot of things. I think it's just so much less rational than you think it would be. And sometimes the things that on their face seemed really um crazy insane maybe are quite

quite fascinating. We have been speaking with Maureen Farrell. She is the co author of the cultive We We Work, Adam Newman, and The Great Startup Delusion. If you enjoyed this conversation, we'll be shown check out any of our previous four hundred interviews. You can find those at iTunes, Spotify, wherever you get your podcast from. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Follow me on Twitter at Rid Halts.

You can sign up for my daily reads at Rid Halts dot com. I would be remiss if I did not thank the team that helps put together these conversations each week. Charlie Volmer is my audio engineer. Uh Attica val Bron is our project manager. Michael bat Nick is my director of research. Harris Wald is my producer. I'm Barry Ri Halts. You've been listening to Masters in Business on Bloomberg Radio.