WeWork
Neumann’s Owned
New York Magazine interviewed a NYU professor named Scott Galloway recently, and he had some thoughts on WeWork and it’s founder, Adam Neumann.
To back up for a second, WeWork is the company that creates “cool” co-working spaces by placing beer kegs and cold brew taps near a bunch of spruced up IKEA desks and charging a monthly fee. The history of the company is fairly straightforward; Neumann founded it with friends when they were living in New York and started renting out part of their apartment for entrepreneurs to use as work space. His rise as a highly charismatic start-up founder isn’t all that unusual, either. What he decided to do with all the power his investors gave him is another matter.
He bought a $60 million dollar jet with company money. He paid millions of dollars every year to throw company retreats with A-list performers. He invested in wave pools. He assumed a larger than life persona both at his company and among his investors, who poured billions of dollars into the venture.
The problem was, and is, that he was far more concerned with his personal enrichment than he was with running, you know, a business. Galloway:
He and SoftBank entered into a suicide pact, and he jumped out of the plane before it hit the ground. He pulled the rip cord. He has exited the suicide pact with $740 million, and everyone else gets to ride this out to its logical end, which will likely be a bankruptcy file.
I am not a venture capitalist, but I do not think I’d want one of my investments to be characterized as a “suicide pact”. This is the fine line, Galloway argues, between a CEO with grandiose ideas and a con artist.
There’s reports that they were giving 100 percent commissions to put tenants in the buildings and then figuring out some sort of accounting jiujitsu to try to turn those expenses into revenues. The notion that they brought in people to solve the problems of their own making — they’ve invited pyromaniacs to put out the fire. The first thing they did was sold the $60 million plane that the board bought or approved. Either Adam hadn’t told them about the plane or they approved a $60 million plane. At what point does malfeasance become fraud?
Neumann used the company as his personal piggybank, even taking loans from WeWork to buy property, which he leased back to WeWork. When the time came to file for an IPO, the documents he and his wife put together - as opposed to, you know, actual bankers - were so bad it sent ripples through the market, and eventually led the company’s biggest investor to force Neumann and his crew out.
As usual, the real victims here are going to be the workers at We, the clients who are currently paying for co-working space in their properties, and the landlords, though I am sure they will be fine. I’ll let Galloway play this off stage:
If you want to talk about real toll here — the real toll is that there’s somewhere between 5,000 and 15,000 WeWork employees who took a job and a big part of their compensation — the reason they took these jobs was because of equity value. […]
We’re probably talking about several thousand people who were going to be millionaires. Now most of them are probably thinking that in the next 30 days there’s a one-in-two chance I don’t have health insurance. You want to talk about the sheer human toll? The notion that Adam Neumann was fired? My God, he got on the last helicopter out of Saigon.
Epstein Had Another Island
You may be familiar with Jeffrey Epstein. The child sex trafficker to the rich and famous, who was recently indicted, arrested, and committed suicide under suspicious circumstances in federal custody. You may have read the phenomenal reporting by Julie Brown of the Miami Herald, which detailed his many horrific crimes, and helped put pressure on the government to step in and do its job. You may know about his infamous Sex Island, with the inward-locking doors. Did you know he had a second island?
A few years ago, Jeffrey Epstein wanted to buy an island from a Danish billionaire. The billionaire didn’t want to sell it to him, because Epstein was a convicted sex offender and it was well known - to anyone other than law enforcement - that he was an unrepentant criminal.
Unable to buy the island outright, Epstein decided to impersonate a wealthy Emirati businessman and buy the island in his name.
Epstein set up an opaque limited liability company, or LLC, making it appear in the negotiations that the true owner was one Sultan Ahmed bin Sulayem, a wealthy Dubai businessman with connections to the royal family. A $22.5 million deal was worked out.
For much of his adult life, Epstein was involved in scams both big and small. Many have speculated about how he accumulated all his wealth, but the simplest answer is that he was involved in a Ponzi scheme in the 1980s, somehow escaped prosecution, and used that money to get close to more rich people, who he then scammed out of their money. We don’t yet know whether the child sex trafficking was a way he made money, or simply the blackmail he used as leverage to get the wealthy to invest in his fake businesses. It’s certainly a case study in how you can avoid justice for decades if you’re a certain type of charismatic white dude.
“He had two sex islands” may sound like a shocking headline, until you learn that sex islands are depressingly common among rich, disgusting men.
Elon and the Pedo Guy
Oh, Elon Musk. The CEO and founder of Tesla and SpaceX is back in the news for his utter inability to not post online. This time, it’s legal discovery in the lawsuit against him by the British diver who he defamed during the Thai cave rescue in 2018. When Musk tried to insert himself into the rescue efforts by unveiling plans for a tiny submarine, many rightly scoffed at him. Rather than letting it go, Musk took a, well, unusual approach and called the lead rescuer a “pedo guy” which he later insisted was a common insult in South Africa. As you do.
Anyhow, it seems he then made matters significantly worse and responded to a random email from a British man claiming he could dig up dirt on the (alleged) pedo guy.
Recently released court documents from a defamation case in US federal court show that Musk retained Howard-Higgins after the self-proclaimed investigator cold-emailed him offering to “dig deep” into Vernon Unsworth
The problem with Higgins, which I’m sure will come as a shock, is that he was a convicted criminal fraudster. Exactly the type of person you’d want to hire as a private investigator. I wonder if the SEC cut off Musk’s access to Google?
Musk’s representative and the con artist then engaged in what I suppose they considered investigative work into Unsworth’s life, and, well, you can read about it if you enjoy that sort of thing.
As always, the lesson from this story is never Tweet.
Short Cons
Science Alert - “If you signed up for Words With Friends before last month, when the breach occurred, your data might well be among the stolen credentials”
CBC - "He was wearing a suit and they asked him why was he dressed so nicely when he was stealing a bike,"