Fail Better

Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork by Reeves Wiedeman. New York: Little, Brown. 352 pages. $28.

The cover of Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork

IN HIS AUTHORIZED BIOGRAPHY, Steve Jobs explains how he chose the name Apple. In 1975, Jobs was working weekends pruning Gravenstein apple trees at an orchard near Salem, Oregon. A Swiss millionaire owned the land, but he had entrusted the cider operations to his nephew, a Hare Krishna hippie who had recently served two years in Virginia for possessing 24,000 tablets of LSD. Jobs liked the hippie, the orchard, and the fruit. He liked the way the word “apple” sounded—fun and unintimidating. “Apple took the edge off the word ‘computer,’” Jobs told his biographer, Walter Isaacson: it balanced something industrial with something organic.

In 2009, Adam Neumann, a well-connected Israeli in New York City, was trying to name his new business. Neumann was the kind of unemployed person who puts “serial entrepreneur” on his dating profile: since moving to New York from Tel Aviv, the tall, long-haired ex-kibbutznik had founded a string of businesses. One gambit was selling baby clothes with kneepads. No one wanted those, but another idea, called Green Desk, had turned an office in dumbo into a popular space for coworking. When Neumann sold out of Green Desk for $500,000, he decided to replicate the model on a larger scale. What should he call it? He brainstormed for months. One night, Neumann and his wife were hanging out with Andrew Finkelstein, the man who is currently Lin-Manuel Miranda’s talent agent. Finkelstein said, “It’s WeWork.” So Neumann used the name WeWork. Everything in the saga that followed—a swift global expansion followed by a failed IPO that cost investors billions of dollars—retains the hapless, perplexing quality of this initial anti-epiphany.

Neumann leased a building at 154 Grand Street. Then he leased a building near the Empire State Building. Then he leased one near Bryant Park. It cascaded: tens of thousands of desks popped up across the country, then abroad. Rounds of venture funding poured in one after another. Partly because the inhabitants of WeWorks were freelancers with social-media accounts, the business gained a sheen online: people knew it.

Neumann had always been around celebrities because his wife was Gwyneth Paltrow’s cousin, but now he became famous himself. He hobnobbed with Ashton Kutcher and with Jared and Ivanka. He was profiled in magazines, where the image of a hard-charging bad boy was assembled from scant details. Neumann seems to have had three key traits: he was tall, grandiose, and drank tequila. The tequila’s most important, Don Julio 1942. Every journalist mentions it; the beverage becomes an all-purpose signifier of naughtiness. Neumann shoots tequila to close deals. He shoots tequila with his employees. He shoots tequila with Jared Kushner. “Practically every New York landlord, investor, and industry titan could tell a personal story about Neumann punctuating a business meeting with tequila shots,” Reeves Wiedeman writes in Billion Dollar Loser, an expansion of a skeptical New York magazine article from 2019.

Adam Neumann, 2016. STUART ISETT/Fortune Brainstorm TECH/Flickr
Adam Neumann, 2016. STUART ISETT/Fortune Brainstorm TECH/Flickr

As his company’s footprint expanded, Neumann stopped describing WeWork as a real-estate play. It was a “physical social network” overseen by a “community builder” who was going to “change the world.” There was talk of building a kind of LinkedIn network for WeWork members: the graphic designer would hire the accountant down the hall. Never mind that Neumann had no idea how to code, that his first IT director had been a high school student who went by Joey Cables, or that most WeWork members just wanted a place to put their laptops. In fact, the more unlikely the social network seemed, the more Neumann escalated his rhetoric in ways that totally defied meaning. “When I think of ‘We,’” he once told an audience, “I think of an ecosystem that brings it all together. And the fabric of that ecosystem happens at the building, at the neighborhood, and at the city. I think the next one hundred years, everyone sitting here, you’re the leaders of the future. City-states is where it’s at. I think governments from all over the world—without pointing any fingers—are having a very difficult time.”

By speaking the woozy language of a Silicon Valley world-changer, Neumann put himself in the running for the kind of venture-capital money that typically flows toward businesses with minimal physical assets. This is intriguing because WeWork isn’t a tech company. As Wiedeman points out, Neumann’s model differed in one crucial aspect from Uber’s or Airbnb’s: Uber doesn’t own the cars. If they double the number of drivers, they double their revenue, not their costs. Whereas if Neumann doubled his tenant roll, his costs rose in lockstep with his revenue.

Investors ignored the contradiction and gave Neumann a lot of money. People who were usually intelligent became almost delusional in his presence. Bruce Dunlevie, a partner at the legendary venture-capital firm Benchmark Capital—among whose early investments was Uber—said that, when it came to WeWork, he wasn’t worried about the numbers because he had an indefinable feeling “that you couldn’t quite put your finger on.”

The biggest enabler by far, and a man who emerges as a tragic figure in the tale, was the CEO of the Japanese conglomerate SoftBank, Masayoshi Son, whom everyone calls Masa. Masa is known in finance for one of the best investments of all time: the twenty million dollars he’d plowed into the Chinese e-commerce site Alibaba in 2000 was worth one-hundred billion in 2018. Like Dunlevie, Masa adhered to the venture-capital credo that the success of a business comes down to the founder’s personality. It had been the “very bright sparkles” in the eyes of Alibaba’s founder, Jack Ma, that had persuaded him to invest in 2000. Masa had the same inkling about Neumann.

Masa’s financial analysts flew to New York and asked to see WeWork’s projections from all the previous rounds of funding. “There were some projections we missed by 80 percent,” one executive tells Wiedeman. “You figure that’s the gotcha moment where they say, ‘You guys are full of shit.’” Instead, Masa overrode the analysts. “My first insight in the first few minutes is sometimes more meaningful,” he said. “Yoda says use the force. Don’t think, just feel it.” He would ultimately get into Neumann for ten billion dollars, all of which he lost.

Private markets can be a low-key pyramid scheme, where early investors get cashed out by later investors at higher valuations. The system works, theoretically, because you’re ultimately heading toward an initial public offering, which makes everyone from all the investment rounds rich. The final investor before the IPO takes the biggest risk, though. That person was Masa. When he signed the first multibillion-dollar check, Dunlevie cashed out for $129 million.

WeWork burned through Masa’s money on leases and maintenance, so Neumann soon needed to go public. On the road show—the series of meetings where investors vet the CEO of a company trying to list on the stock exchange—the Neumann mythos fell apart. Charismatic among venture capitalists and journalists, he lacked the seriousness to impress public-market investors, who care mainly about numbers. Bits that had always played great in the Valley were tanking on Wall Street. When Neumann bragged that WeWork had never closed a location, for instance, one stock analyst shot back that he was being irresponsible: there was no way all five-hundred-plus locations were profitable enough to justify their cost. On a mandatory disclosure that WeWork filed with the SEC, there was a full-color picture of a Belizean forest that the Neumanns owned, and quotes that sounded like demented Pinterest boards (“the energy of we—greater than any one of us, but inside each of us”). But when investors flipped to the financials, they saw a so-so real-estate company trying to value itself like a Silicon Valley unicorn. Funding vanished, the IPO halted, and Neumann was replaced as CEO. He flew back to Israel. Having cashed out for $361 million during a funding round from Masa, he would never have to wework again.

Multiple versions of the WeWork story are currently in development in Hollywood. One is based on a podcast called WeCrashed, produced by Wondery, whose offices are inside a WeWork. Another takes as source material the forthcoming The Cult of We, by the Wall Street Journal team that got the most WeWork scoops. Another yet-unwritten book has already been optioned, and there’s a documentary underway.

What do people see in this story? The marketing materials for Cult of We compare the book to John Carreyrou’s Bad Blood, about the Theranos scandal, but that can’t be right, because Neumann wasn’t a scammer. He started a business that everyone kind of knew was bullshit, then it turned out to be bullshit. He was a visionary, just of a low-quality vision. Think of how much work Elizabeth Holmes put into her company’s name, a portmanteau of “therapy” and “diagnosis.” Neumann’s name fell into his lap from Lin-Manuel’s future agent. Holmes must be looking at Neumann and thinking, “Why did I work so hard at faking blood tests?”

It’s not a success story either. It’s not Reed Hastings and Erin Meyer’s No Rules Rules, about Netflix’s corporate culture, or Isaacson’s Steve Jobs, or any of the other books that have filled the business best-seller lists since the Obama era: it’s not a story with many lessons for MBA grads. Instead it’s a story about a brief collective delusion shared among Neumann and some finance guys, a story whose central question is not how WeWork failed, but how Neumann convinced so many people that it wouldn’t. Wiedeman’s book implies a possible answer: male envy and status obsession. Neumann embodied qualities that his investors wanted but didn’t possess. Even Neumann’s cofounder was aware of it. Neumann had “a brashness, which I think is cool, but which I don’t have,” he said. Meanwhile Neumann, admired by the straitlaced finance guys, had his eye on a different unattainable persona. Wiedeman interviews a former WeWork executive who talks to him about Michael Gross, a private-equity veteran who became WeWork’s CFO. “Gross was blond and boyish, and moved naturally within New York’s elite circles.” The former executive lands the point: “Michael was everything Adam wanted to be.”

Jesse Barron is a journalist based in Los Angeles and a frequent contributor to Bookforum.