The Bullish Case for WeWork

I'm Joe Wisenthal and I'm Tracy Hallaway Tracy nineteen. There's been a lot of interesting things that have happened in markets so far this year, but one of the defining characteristics I think has to be that it's really been the year of the I p O, or at least i pos have been a big story in a way that they haven't been in a long time, right, and not just any I p as We've had quite a few tech company I p o s. Right, so we had let's see Uber beyond Meat both like relatively uh,

I guess some people would call it unsuccessful giving the share price performance since then. Well, Uber, I guess has been a little bit unsuccessful in the fact that it didn't have a pop and b on Meat is unsuccessful in the other direction, in the sense that it's soared to an insane degree since when public implying that the

the company left a lot of money on the table. Although, to be honest, you know, when when stocks sore, I get this argument that a company left a lot of money on the table, But I doubt anyone who's really complaining because they're all crazy rich now, so oh yeah, you hear that all the time, that the underwriter's messed up or something. But yeah, I doubt anyone who's standing there watching like the listing price, watching their net value go up, is actually upset about that one. Yeah, like,

are they really that upset? And they can always sell more stock at a secondary if they want. But yeah, as you said, you know, like that, we had some like really murky I p o s this year already, Uber being the most notable uh, the largest at the time startup in the world or private company in the world, I think, or close to it. Uh, it's kind of fizzled. But actually it's been a pretty kind of euphoric year now between Beyond Meat and Zoom Video and CrowdStrike was

another reason. One. There's a number of companies that have found very enthusiastic receptions on the public market this year, right, and I believe there's another one that's sort of waiting in the wings. And this is a you know, even compared to Uber, this is a really interesting company that sort of generates a lot of very different opinions. Let's say, yes, so you're talking about we Work, which is the famous

or maybe infamous commercial real estate company that's gigantic. I don't know how many tens of billions it's worth right now. I think maybe just under fifty billion, but right they're known for taking out these big leases from building owners and then re renting the space out to startups, and it's a hip office environment and there's a lot of beer, and they the company is incredibly controversial, to say the least. There have been numerous profiles written of its c O,

who himself seems to be quite a character. Like many uh these startup c e o s are lots of people extremely skeptical that it's going to be a long term money making business. But after Uber, it really is the gigantic one sort of sitting out there waiting in

the wings. I don't think anyone knows exactly when it will become public, but at some point it almost certainly will have to file for an ip O. I like that your description of we work office space is there's a lot of beer, but but it's like a big thing like of of it's office space, but it's supposed to be cool and start up a start that means beer taps and cold brew coffee on tap and stuff like that. But I'm just going to point out you've already sort of betrayed a slight bias because you called

it a commercial real estate company. And of course, the big debate over we Work and its valuation and its future is whether or not it's actually something more than a commercial real estate company. Because if you're attaching a fifty bill in dollar evaluation to something, you know it's probably going to have the words tech in it or some sort of like all encompassing lifestyle brand, and that's the huge debate currently raging, right or it's got to

be a platform in some way to justify that. So the interesting thing about we Work to me is, you know, it's like, if you're talking about Uber, there's very easy to come up with the bull in the bear case. You say, okay, the bowl case is that sort of on demand mobility is going to be gigantic and it's barely even started, and that there's all other kinds of businesses that they can layer into their UM ride sharing business,

like food delivery and other logistics things. And then the bear cases, well, they're losing a lot of money, and you can have a real debate and there seems to be very legitimate. Two sides to it. And what's really striking about We Work is it's extremely rare to find a bowl or even a partial bowl, or an optimist. It's universally, I think people are skeptical about this company.

And that's pretty unusual because usually there's someone or a good contingent that says, no, you don't really get this right. I mean, someone is clearly giving this company money, right, So you know, bowls must be out there somewhere. They're just not very vocal, I guess. So the good news is we have a bowl, or at least a modest bowl. We found one. We're going to hear the uh, the

less pessimistic case on we Work. He tweeted about it a few weeks ago, and it was like it was it was the true unicorn, someone saying something positive about we work on the internet. The real unicorn, the real unicorn. And so I knew we had to get him on the show. So without further ado, let's bring him in. I want to welcome to Odd Lots Sandy Corey. He

has a managing director at Horizon Partners. Out in the Valley is a Silicon Valley investment banker, and we're going to be talking about why perhaps the doom and gloom story about we Work is overrated. So, Sandy, thank you very much for joining us. Thanks a lot for having me So, Sandy, I mean, as I sort of alluded to, everyone kind of knows the pessimistic story about we Work,

and it really is relentless. And there's so many sort of classical red flags that caused people to think that this company will eventually fizzle or that it's a house of cards. They come up with their own bespoke metrics of how to measure their business. They have something I think it was called community adjusted but uh, they lose tons of money. Um. Their CEO is all kinds of eccentricities.

They announced recently they're launching a new off balance sheet vehicle to buy buildings which will then be leased back to WE Work. And somehow that's supposed to make the buildings more valuable. Uh. The CEO had some questionable related party transactions because he owned some buildings that which questions about whether WE Work was getting a fair deal or

not in renting them. It's just like the red flags with this company, which has become ubiquitous and cities all around the world are so numerous, and that is why it seems like almost nobody is willing to step up and say, wait, there might be something here, This might be really something valuable and growing. So, Sandy, what is it at its core that people misunderstand about We Work? Well, thanks a lot, Joe. It's a fascinating company, and it

certainly is polarizing. And I think, you know, I like to try to take historical lens and looking at some of these businesses, and a lot of the critiques that you are presenting, I think have also been applied to other companies over history, you know, that have been misunderstood. You know, in the eighties, there was this wacky financial metric that was being promoted by operators in the cable

industry because those businesses weren't really making money. It was called IBADA and in people thought that was pretty wacky. And of course now everyone uses ebitda as a as a pretty reasonable financial metric, and that the cable industry really did take off. Um, you know, back then and for many years after. So um, I think that the book case with We Work is that, look, you know, in Q one, they released some financial information and Q one.

They they were annualized to three billion in revenue and they were growing a year every year. UM. So I think that's the start of something that potentially could be very valuable. They're in a massive industry, commercial real estate that's very fragmented, UH, and I think that they are in a position to build you know, leverage in that ecosystem in a really unique way. UM. They have a growing brand UH that you know, gives them an advantage

in acquiring new customers or new users. You know. I think they have built a little bit of technology that can give UM leverage. I think they're probably still just scratching the surface there. And in fact, that might be one of the biggest bullish UH factors for the company, which is that if they can dig in in technology in an industry that historically has been allergic to technology,

there's a there's a big source of advantage there. So, Sandy, you mentioned this notion of we work building up leverage in the real estate industry, and Joe and I were talking earlier about how if you have evaluation of this magnitude, it's usually because you have a sort of growth story attached to it, a growth story that might be you know, a big brand, a platform of some sort, or some sort of tech disruption angle. So talk to us about how exactly we work is disrupting the real estate industry

and how exactly are they building up leverage within real estate. Sure, well, I think on the leverage aspect, it's mostly a function of scale. And I think that you know, coming across business, you know, when you have massive scale, it gives you leverage to get better economics and to push around suppliers

and vendors and so forth. Um So I think that's the path that they are you know, kind of taking that that should pay off, you know, with more and more leverage that can kind of squeeze into better you

can unit economics in the future. Look at the core disruption, I think it's just that they're you know, they have a better a better user experience you know, for their customers and so, you know, and that starts with the flexibility of the of the product, which I think, you know, on the one hand, it looks, uh, hey, it's just

month the month, what's the big deal. Well, you know historically that the you know, one of the key aspects of consuming commercial real estate, you know, renting an office is a long term commitment that can be very painful for for many many businesses, and so I think the

flexibility aspect is is very important. And then you know, it also gives them a chance to reorient their business around customers, ideally you know, using the Internet and technology, and that can have really powerful implications and how they operate their business and how they can build a compet advantage of our time, you know, a Netflix or some of the other great kind of disruptors that have built

service layers, you know, leveraging technology and the Internet. So again, you know, in the beginning, Tracy was talking about how to achieve such a big valuation. The idea is typically you have to like, oh, we're a tech company or we're a platform. But it kind of sounds like what you're saying is no, we were just just a really well run innovative landlord in a sense. But well not exactly. Look, it's a very hard business to understand. There's lots of

sources of kind of misunderstanding. And you know, look, one is is valuation. So you can find a valuation headline of forty seven billion, but that that's a you know, kind of based on a preferred instrument that soft bank, which is kind of underrated, and they're there the complexity of their financial engineering, so they you know, they came up with that as part of the last announced round.

But then that I think the real valuation for the company is more like twenty billion, which is the valuation where kind of seller's got so that I think it was a mix of common shareholders and early preferred who sold in into around a few months back, and they had a twenty billion dollar evaluation. And so yeah, look it's a great question, is you know, is this is this a tech company or not? Does it deserve a

software is a service revenue multiple? And I would say no. You know, we're in the market where SASS businesses are easily getting ten twenty times revenue, and so I don't think that that is that is necessarily warranted here for we Work. But is it worth you know, maybe five times, seven times, eight times in this hyper growth mode, I

think it can be. So you mentioned the magic word hyper growth, and of course I guess the key to building up leverage in real estate for we Work is growing so quickly and amassing so much market power that you sort of basically just beat out competitors talk to us about like this notion of hyper growth. How long is it acceptable for a company to not post any profits, you know, for the sake of building up its market share?

And how vital is funding to hyper growth? Well, that's a great question, and I think, you know, we work is a kind of a running experiment on how far you know you can go. But I do think that you know, you've got to keep the context in mind, which is that we are in a world where money is is historically cheap um and and access to capital for hyper growth companies UM is you know, pretty open.

So I think you know, you can look at we were going to say, hey, this couldn't have existed twenty years ago, and it's kind of the meat at least, you know obvious lots of these businesses UM like an uber or a lift um, you know, depend on the access to low cost capital, and so we worked as as well. Um, you know, can they continue to grow acent well into the billions of revenue um? That might

be difficult. Um. I think it's it's it is hard to get too deep into the finances because while they do release some financial formation, there's a lot that we don't know about the kind of cohort economics and the economics by geography, and so my I think the bowl case is that in we Works more mature geographies, the

unit economics are pretty good. I think that's also the bowl case for businesses like uber or door dash as well, and that they are investing a lot in new markets UM, and that is is kind of the big cash depleted. So if in their mature markets, we Work is is hemorrhaging in cash, then that's obviously pretty worrisome. But my guess is that looking at more mature markets like a San Francisco, UM, you know, looking at buildings that they've been uh, you know, kind of leasing out for a

period of time, the uneconomics are are pretty good. And I think with scale, you know that customer acquisition costs advantage gets kind of more and more meaningful. UM. They also are able to kind of squeeze out more efficiencies, you know, from various suppliers and back to find the leverage point once they are are renting, you know, fift the building from a landlord. The landlord might need them more than we Work needs the landlord. And that's just

on a building. The building basis, and I think kind of similarly in a geo area. You know, we work and have a lot of leverage by you know, having a multiple buildings with with various landlords. So I think it's it's an open question just how much uh you know, better economics they can extract from suppliers, but I think they certainly can and they do. I mean, they they've said this that you know, they typically get their landlords to pay ninety percent of build out costs versus industry average,

So that's an advantage. And then look on the flip side, they still need to innovate with their user experience, uh, you know, and their brand, you know, and kind of the social aspect that they offer so that they don't get caught in in a price war. You know, certainly that the bear case on an uber or a lift is that you know, they're selling a commodity there in a price war where the margins that were going to

come from. And you know, with we work, you know that that the better the experience they can offer, hopefully you know, enabled by more and more technology, you know, they'll be able to command that kind of premium pricing. And I think, you know, one of those. One of the cases of skepticism is looking at hey, you know, the average member is only getting you know, fifty square feet, uh, and they're paying you know, six thousand bucks a year.

That's crazy. Well, you know, I don't think it's necessarily crazy. Um, given that what they're selling to their customers is not just space, it's the the experience in the community, and well, it's easy to be able to skeptical of some of that. I do think that that that We Work users are voting with their feet, and you know, seeing their massive growth and high occupancy, it does seem like they really do have that differentiated offering. Obviously real estate. Everyone in

real estate wants leverage. It's a leverage game. But that can really come back to bite you in a downturn. So I'm curious, like, let's say we were to hit a recession. The We Work defenders. Is your argument that a, they have their landlords to some extent over a barrel because they occupy so much of their space that they could renegotiate long term leases and be that obviously their tenants that they would take a hit. But because they offer more flexible terms, maybe they don't get as hit.

As bad as some other uh, some other landlords. Isn't that the idea? Yeah, I think that's that's the book case. And I think that the idea is that, you know, like white bread consumption goes up in recessions because people are switching from the fancy whole weight to the whitebread, at least historically, you know, the flexible offering that they have will be more attractive, you know. And I think that, you know, intuitively, it makes sense, especially if you're a

small business. And so a lot of people say, oh, what about these small businesses and startups, you know, what's going to happen in a recession? And I think that there's there's so many of them that that even in a recession, there's gonna be you know, more than enough to keep we work growing. I think that they're going to be attracted to that we work you know, flexibility.

Um And and I think there's been anecdotal evidence, you know that in a few markets like Salpollo that they're in um where there was some uh, there was a kind of minor recession, you know, they did see an increase in demand. So I do think that that that is a powerful argument they have, and then yeah, I agree that they leverage they have with landlords will allow them to renegotiate if necessary, um to get better terms.

And look, I mean I remember in two thousand and eight looking at all these actors across the financial spectrum and thinking all these are gonna go bust, And I mean it wasn't really something to be happy about. But as a kind of an amateur, you know, retail investor, I tried to make some trades to take advantage of these balance sheets that looked like they were going to blow up. But but guess what, you know, a lot of these institutions survived. And you know it was the

old what was it? What did they say? The amend, extend, pretend And I mean it's nothing to be you know, uh too cheerful about. But I do think that we work will have that that type of flexibility where you know, at the end of the day, a lot of these landlords have their own creditors, um, and they're not going to be looking to a victim major tenant and what are their alternatives in a downturn where there aren't necessarily as many um, you know tenants you know kind of

queued up for for big space. So I think I think that, you know, some of the biggest sources of of kind of misunderstanding what we work are. Yeah, this vulnerability to a recession. Look, I think we're all still scarred from the financial crisis of two, two does and nine, you know, which is reasonable given how brutal it was. But I think that even there is recessions, very unlikely will you'll approach anything like that. And I think we

work as actually pretty well positioned. So I think that that is, to me, actually kind of one of the weaker elements of the bear case. I think kind of there's a there's an adjacent part of the bear case, you know, which is, hey, they're there, you know, and if you look at you know, fin Twitter, people called a Ponzi scheme. You know, they've got these long term releases and long term releases, you know, short term rentals.

That's crazy and it's like well wright liability mismatch. Yeah, a lot of a lot of businesses have done that. I mean, that's the ESPN business model. And ESPN is not doing great today, but but historically, you know, they would send these long term deals with sports leagues to pay them exorbitant rice fees, you know, when they would sign them. You know, people in media say that's crazy, but guess what, you know, they made a lot of money.

And there are cases where you know, owners of assets prefer you know, the certainty of getting paid and will forego some of the short term upside um that you can get when you take risk. And so I think we work, we works path there is actually pretty common. But a lot of folks, I think in the real esty industry look at that and think and think it you know, it can't last. But in fact, I think it's actually been a path that's worked pretty well for

a lot of businesses across industries. So Sandy, I have a different um sort of bear case concern, I guess, and I think when it comes to a lot of sort of disruptive company or unicorns, I think there's a tendency to think that they all come in to the market whatever it might be, you know, cars or in this case real estate, and they come in, they do something different, they disrupt the market, and that that business model can continue forever and that the market basically stays static.

And of course what tends to happen is the market actually adapts quite quickly, usually to a lot of these new business models um and you also get competitors at the same time. So in the case of we Work, you know, they come in with these short term office rental offers. They come in with, as Joe puts it, office space with lots of beer available on tap in this community atmosphere. Is there not a risk that by making those two things so popular in the real estate market,

that those things start becoming the norm. And we Work basically sort of arbitrage as its own edge out of the market because we've already seen some other companies like UM read us for In to start to sort of follow this model. You know, they've redone a lot of their office spaces to make them look more like we Work kind of offering. So is that a risk. That's

a great question, and I think it is risk. I think that you know we Work, you know, and I think you know you you ask that question, I think in a great way, and because it really is, you know, relative to their industry peers, and so you know, I think one of the biggest sources of criticism in Silicon Valley of We Work is, hey, there's not much technology or there's no technology well, you know it's relative. You know,

we Work isn't competing with Google. If they were trying to compete with Google and search, they need to hire you know, a million of the best engineers on the planet. But we're we're talking about an industry that is historically allergic to technology, and so we Works bar wasn't as high I think to to innovate and offer a better,

you know, better user experience. But yeah, that's right. You know, can competitors come in and offer comparable um, you know, experiences and compete on price, and I think Regus, I mean, I think their brand spaces is you know, kind of an attempt at that. You know, there's also Industrious, which is a well funded startup that's that's taking a little bit of a different path, but it's also pretty similar.

And so you know, you kind of get this attack of the clones, right, which you know, that's still I think that was referring to the old kind of laptop wars when Compact came out of nowhere to have a giant business in a couple of years, but but really got beaten up by clones. So what's gonna happen? Do we Work? Uh, They're gonna have to execute, And to me,

that's the biggest question is can they execute? And you know, can they you know, focus on a few key priorities and build technology that can compound to create more and more advantage. They've got more capital than competitors, They've I think they've hired you know, arguably you know better, better folks at technology and engineering. So I think they've got the ingredients to do that. I'm not sure if they are.

I just don't know, but I think that to me, the most compelling Bear criticism is that while you know that the CEO and the leadership you have a ton of credit for for building this company is so fast and doing some pretty amazing things, Uh, they haven't shown

really a kind of a consistency around prioritization. And so when you look at some of the great operators in tech, like Jeff Bezos, they've been super focused and that's kind of created a culture of operational rigor, financial rigor that has um kind of percolated throughout all the different lines of business at a company like Amazon, and so for we work, I think they're getting really good people there, but that doesn't mean that they're going to be able

to execute and and you know, build software and build you know, financial discipline because the growth inevitably will slow down and they will need to kind of trade growth for profitability um and they need to be able to have evidence of that as they approached the public markets. So it's a great question. I think right now, you know, their their brand does still give them an advantage. You know, it might be, you know, look a little thin, but I think a lot of times brands you know, can

look thin if you look from certain direction. On the other hand, I do think that the average non expert potential you know, customer in this space would would go for we Work over a spaces or an industrious or another brand, because we Work does have that brand, but it doesn't necessarily last forever. And they really as a company are going to need to be able to to commit themselves towards focused execution, to innovate and and use

more technology to build that differentiation. So to me, to me, that's really the multibility and all question is, you know, can they execute? Just so people are clear about some of the questions regarding this company's ability to focus or engage in focused execution. In two seventeen, it was reported that we Work had made an investment in a company called wave Garden, which is a company that makes wave pools.

They are reading from the New York Business Journal. Spain based wave Garden is touted as an engineering company specializing mad manmade lagoons that could be used for recreation, surfing, in various water sports, other things that the company has dabbled into. I think it has like a place where you can live. They've opened up a talked about launching a grade school. So that is indeed. I mean it's almost like an understatement to ask whether this company really

knows how to do uh focused execution. Joe, I can't believe you don't understand the synergy sic value of of of wave pools. I just don't think you've got this. I don't have the CEO, Adam Newman. I definitely don't have his vision any like. There have been numerous profiles of him. Business Week our publication here did a great profile. It was just a New York mad profile of him basically about you know, he's like, oh, we're not a

real estate company. Where changed the world? You know, like one of very sort of classic California Silicon Valley style of talking about changing everything. I think to most people it feels like a pretty big red flag. Yeah. Look, I mean I guess the you know, the bowl case

is all publicity is good publicity. But yeah, I've read a lot of this similar things, and is it is a little scary, you know that It's really hard, I think, and this is a really kind of an underappreciated phenomena when you have a startup CEO to have so much success so quickly, I think it's really hard to to not learn the wrong things, or at least some of the wrong things from success. And so that might be

happening here. You know. I hope that the persona that is um that that you see when you read these pieces, you know, I hope that's kind of ironic, you know, uh, And you know, I hope he's got some people around him who are really sharp and who will question him and orn't just going to say yes. I think they've got a strong CFO. I don't know any of the C level folks personally, but I think they have a

very strong discipline CFO. That's really important. So someone has to call the ce on on some of the nonsense, because I can't defend the nepotism. That yeah, that that to me, if we're talking about red flags, that's the one that I would be really focusing on because it's terrible for culture when people are being promoted and given

responsibility for the wrong reasons. Now, I don't think I've got enough information to really judge if there's something that's on toward going on there, but I I you know, back to say like a Jeff Bezos, I mean, it would be ludicrous for anyone, and you know, for one of his relatives in Amazon to get promoted or to get something just because of their their last name or their their family, Like everyone would would realize that would

just be kind of anathema to their culture. So I don't I hope that this is more of just kind of silly stuff that percolates in the media. Is kind of misunderstood. But but it's it's also hard because you can look at Amazon and say, well, what about Amazon, you know, and their focused I mean, aws, what the heck did that have to do with with with retail?

And so we work as starting you know, a school business and this business and that business, and well, you know, I think within reason can make sense to try new products and be innovative and and so you know we work. I think actually has in many ways done a great job moving quickly. UM. They've been very aggressive on M and A. I've seen them kind of behind the scenes on some deals, and I think they're actually pretty pretty

savvy as far as moving quickly. They also I think are are working with a lot of tech startups as a customer UM in ways that I think are pretty enlightened relative to most bigger companies. So, you know, so they're they're kind of ability to move fast can be a real asset. At the same time, if if they're you know, unfocused and priorities are shifting constantly, you know that that's the thing that that worries me the most.

But I think they very well might have a handle that that this is an issue and they might be taking kind of proven measures to build that culture of operational discipline. If they can do that, then I really think it's a business that that could make soft Bank look really smart. But it's to me that that question around execution that is really the one that that I would be studying the most if I was trying to

make a trade on the business. So there's one They're big red flag that a lot of people have focused on, aside from the sort of Silicon Valley cliche type CEO who wants to change the world, although I guess this

other red flag is slightly related. But the community adjusted EBITDAW which has already been mentioned a couple of times in this conversation, this is the thing that we work trotted out ebitdawes basically earnings you know, before interest, tax, depreciation and amoritization and community adjusted ebitdas stripped out a bunch of costs, a bunch of we work costs like marketing, construction,

basically things that we work. Said we're going to go away once it reached some sort of maturity level, whenever that might be. How can investors take companies seriously when it not just unveils adjusted earnings, which are, as you mentioned, you know, fairly regular in the financial industry nowadays, but when it veils adjusted earnings under the umbrella of community adjusted EBITDA because I think to a lot of people that just sounds like the company's sort of not taking

itself seriously. That's a great question as well, And I don't know the strict definition behind that term. But it's really important that they are you know, very serious and

incredibility building in their use of financial metrics. I think it's such an unusual business that it is reasonable that they might have some new metrics that they're sharing, you know, even when they go public and the rumor is that they've already filed, they will have to be very transparent around you know, what does that metric means specifically, and what does the business look like kind of under the you know, under more conventional metrics. UM. So that's really important.

You know, they did a debt offering last summer and that you know, and so you can, you know, by I believe, you know, buy some of that debt on the open market. And it's not priced like the business is about out to go bust. Now it's not. It's not priced like treasuries. There's some risk, but I think that is a good way to look at at how does the market think about the business. And I think the um you know, the yield on that debt is is nine percent, so it's not the most high grade.

But I don't think the folks that are are looking closely at the numbers and really have seen the most I don't think they're showing, um, you know, too much concerned about that, but certainly you know when they are public and filing as a public company that they're gonna have to be really rigorous in their metrics and and they're not gonna be able to be kind of cute and cheeky about about their differential metrics. So yeah, I mean, I'm with you on being pretty curious, if not skeptical,

on how they're using that metric. Sandy, Corey really appreciate you coming on the Odd Lots podcast. I actually think I don't know if I would say I'm what we work bowl after talking uh to, but I feel like I have a little bit more of a grasp about why the whole thing might not be some house of cards that's on the verge of inevitable inevitable collapse. I appreciate your contrarian take and thank you for coming on. Well, thanks to Left for having me. I appreciate it. Thanks Sandy. So, Tracy,

are you convinced? I mean, this is such a cop out. I think there's some value there, but I'm not necessarily convinced about the valuation. I mean, after that conversation, I sort of come out thinking that we work is sort of a leveraged play on the health of the wider economy, but also on free flowing liquidity from venture capital funds,

which is sort of like a double risk to me. Yeah, I mean it seems like the way I think about it after talking to him is the at if they I guess it kind of goes back to the focused execution. But the basic offering of here is a very nice office space that has a pleasing aesthetic that it's very flexible and easy to get in and out of. It's not a bad product to offer. You could see the appeal and that if they can just make that brand

really synonymous with good office space. And we've all been to most offices across New York City or whatever, excluding Bloomberg, which is fantastic, but most offices are very boring and the lighting is bad and the sort of dreary. So if you could have this sort of very good aesthetic to an office and scale it up, uh, you could see the appeal. You could see how that might be

something that could scale up. It's definitely a product. I think again, like the danger in this case when it comes to the valuation is basically when this like huge story starts getting attached to what is actually a relatively simple product and the CEO is actually quite keen on on that story. You know, the things that come across in the Business Week profile and also the New York Mac pieces that he's the sort of self proclaimed visionary who wants to change the world and is starting all

these new other businesses in order to do that. So I think the story is sort of part of the selling point of the company, but probably also its biggest risk. Well, and also, you know, we're talking about what would happen in a downturn, and you know, you could make the argument that, um, you know, because they're flexible offerings, maybe

they won't get hurt as bad. On the other hand, you have to wonder, like how many of the we Work tenants are themselves startups, tech startups who themselves may have visions of one day selling to an uber or we Work, or getting a really big investment from soft

bank one day. And so when you think of like a house of cards, you're like, how much is this all just a really leveraged bet on the same pool of money, the same pool of cheap capital, the same end where you're going to sell to a Google or Facebook or an Uber or lift for or an Amazon.

And if that sort of if the liquidity evaporates, if one day SoftBank doesn't want to fund all these startups or keep backing all these unicorns, or there is a real downturn among major tech companies that could be due to regulation, whether that would just sort of ripple like a bomb through all of their you know, the bread and butter tenants that they have in New York City and Silicon Valley and other big cities around the world.

Like it feels just in some sense like an incredibly concentrated bet on a particular style of doing business that we've really seen to merge over the last decade. Really it's startups all the way down, and all those startups end up going back to you know, Starbucks coffee shops when the when the bubble bursts, right like, if it's really bad, they're just gonna scope out free disks where with a power outlet and WiFi forget we work alright well on that happy note, This has been another edition

of the Odd Loots podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway. And I'm Joe Wisenthal. You can follow me on Twitter at the Stalwart, and you should follow our guests on Twitter. Sandy Corey, He's

at Sandy Corey with a K. He was. It was his tweets where I saw the contrary and we work case, so you definitely want to check him out and be sure to follow our producer on Twitter, Laura Carlson at Laura M. Carlson, as well as the Bloomberg head of podcast, Francesco Leavy at Francesca Today and Bloomberg Podcast has a new home on Twitter. The handle is at podcasts. Thanks for listening, O