Business and Industry

Does WeWork Work? Don't Write Off the Innovative Shared Office Concept Yet

Perhaps WeWork will eventually succeed in going public and in reaching profitability. Even if it doesn't, it will have paved the way for dozens of similar companies operating with variations on its co-working model


The conventional wisdom about WeWork these days is that it is some kind of failure.

The privately held company announced that its co-founder, Adam Neumann, would step down as CEO. It also withdrew the planned initial public offering that it had registered with the Securities and Exchange Commission. That was an indication that potential investors were wary about buying into an enterprise that, in 2018, lost about $1.9 billion on revenue of about $1.8 billion. Or at least that the potential investors were wary about buying in at a price that valued the overall company in the $10 billion to $47 billion range.

One can understand the critical tone of the press coverage and of the market chatter. Any company with losses exceeding its total revenues that claims to be worth $47 billion, or even $10 billion, deserves skepticism and perhaps even some derision.

This column, though, does its best to operate in the contrarian journalistic tradition of kick them while they're up, kiss them when they are down. In that spirit, while everyone is bashing WeWork, let us pause to sing its praises.

WeWork is no Enron, no Theranos. Neumann, whatever his errors, has accomplished something genuinely impressive. In less than a decade, he's built out a network of 528 locations in 111 cities in 29 countries. The company claims 527,000 members. Even if it's all worth just single-digit billions, it is not an easy thing to build a billion-dollar company from scratch in less than a decade.

WeWork pioneered and popularized a whole new category of co-working space. Before, with few exceptions, if you wanted to rent office space as an individual or a start-up company, it was an excruciatingly unpleasant hassle. Landlords wanted a five or ten year lease. They wanted a personal guarantee, meaning an executive or owner of a tenant company would be personally on the hook for the remaining rent if a startup failed. Pricing was complex. There might be extra cleaning fees, extra charges due to landlords for utilities, or "loss factors" that were ways of explaining rents calculated based on square footages that exceeded the physical space being rented.

WeWork eliminated all those hassles and complicated costs for customers, making it possible—easy, even—to rent space on a flexible, month-to-month basis. When I took an office at one of the company's first Boston locations, it came not only with good coffee, a desk and a chair, and use of printers and conference rooms and fast wireless internet, but also with a t-shirt and coffee mug that said, "Do what you love."

Critics may find that naïve. There's a certain nobility, though, to this idea that work needn't only be a way to earn a living but that it is also a source of joy and meaning and purpose. As WeWork's mission statement puts it, one of the company's values is to be entrepreneurial: "We are creators, leaders, and self-starters. We try new things, we challenge convention, and we're not afraid to fail."

Neumann went to the City University of New York's  Baruch College, not some Ivy League business school. His innovative, audacious bent is characteristic of both Israel, where he grew up, and New York City, where he lives and where WeWork began.

Perhaps WeWork will eventually succeed in going public and in reaching profitability (and perhaps not in that order), as have other upstart companies from Apple to Amazon to Facebook that have been met with similar skepticism about eccentric founders or high valuations compared to profits. Even if WeWork fizzles, though, it will have paved the way for dozens of similar companies operating with variations on its co-working model—IndustriousWorkbarThe Wing.

There are plenty of good reasons for people to go work for big institutions or long-established companies, or to stay if they are already there. But for those who are restless and interested in starting something new, it's useful to have a commercial real-estate option other than the garage or Starbucks. WeWork doesn't exist merely to indulge just-out-of-college workers who want an office with beer on tap and foosball tables that feels like a fraternity house. WeWork identified a real opportunity. It's serving a genuine economic function—disrupting the commercial real estate industry, offering customers a value proposition good enough that the tenants voluntarily pay to rent the space. The customers—WeWork tenants—have benefited from essentially a subsidy provided by venture capital. How long tenants will stick around if rents increase and service declines as WeWork focuses on attaining profitability is an open question.

My own sense, though, as someone who has been a tenant both at WeWork and in more traditional commercial office leases, is that some team of executives and investors will find a way to make money by doing what WeWork does—offering office space in a customer-friendly, flexible way. The pull of "do what you love" is just too strong. In American capitalism, not every innovator succeeds with every initial public offering at the maximum valuation. In the long run, though, don't bet against dynamism.

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  1. Reporting has painted Neumann as a megalomaniac of sorts, but the concept does seem like it had a market. Someone else should be able to make it work.

    1. “Reporting has painted Neumann as a megalomaniac of sorts”

      This, imho, is pretty much the halmark of all entrepreneurs. At the end of the day, it is their savings on the line and so they look at things a bit differently than their salaried employees. A salaried employee is probably getting a check tomorrow whether he half asses it or not. The founder generally comes from a position of losing his investment unless he puts in 150% each day- and both sides of that equation expect the other party to see their point of view.

      I’ve worked with enough such entrepreneurs to understand how they work. If you act for even a second that you don’t care, they can quickly consider you a liability, and then there is nothing you can do to get them back on your side. They may agree with you periodically, but they will always see you as someone who doesn’t take their money as seriously as you do.

      This is not a defense of such people. Just my experience of what makes them tick.

      1. Neumann, on the other hand, succeeded in selling over $100MM in shares pre-IPO, before his employees could, while also engaging in substantial self-dealing with their aid. So he probably wasn’t looking for the cream of the crop in financial-savvy.

  2. kick them while they’re up, kiss them when they are down

    That’s not how the song goes!!!

  3. WeWork identified a real opportunity. It’s serving a genuine economic function—disrupting the commercial real estate industry

    Uber identified a real opportunity. Fortunately we have benevolent overlords like Elizabeth Warren trying to put a stop to such things.

  4. is that some team of executives and investors will find a way to make money by doing what WeWork does

    Yeah, well, good luck with that. It’s possible leverage your way into super-stardom on the backs of other’s hopes and dreams. Making that profitable? That takes a real working business model.

    1. Subdividing and renting office space was already a workable business model led by Regus. WeWork forced Regus to do a facelift. Regus is still profitable (and boring).

  5. They are not Enron but their concept is not unique, its been done all over the world, they will be replicated here and managed correctly.

    1. WeWork’s fraud is just as real as Enron’s, though it was committed through private equity channels and on the backs of its employees via equity pay that they never intended to make redeemable.

      Check out a WeWork financial statement: community-adjusted ebitda???

      1. community-adjusted ebitda

        lol ok wut?

  6. His innovative, audacious bent is characteristic of … New York City, where he lives and where WeWork began.

    I know what he intended to mean, but progressives are innovative mainly in ways to legalize more theft, dodge said theft, and punish said dodging.

  7. “Does WeWork Work?”

    Of course not.
    It has not been approved by the Ministry of Socialist Labor.
    Nothing works until it is approved by this foresighted and prudent bureaucracy.
    Time and history has shown this many times over.

  8. In the long run, though, don’t bet against dynamism.

    I bet against companies that sell dollars for eighty cents.

  9. Shared office space with month to month rent has been a business for decades. It’s definitely not a new idea.

    1. Absolutely. I was using services like this in the seventies.
      A wonderful thing for software developers. Everybody working at home, get together in a rented conference room only when absolutely necessary to resolve design issues, or for client presentations. Saves money, and makes for happy at home workers.

  10. Duuuuuuddeee… is very likely a scam.

    1. Did you post that medium piece the other day?
      Found it very interesting.
      Definitely a scam

  11. How does their business model differ from established temp office companies like Regus? Other than by not making money, I mean.

    1. The fraud

    2. Reason isn’t a site for contrarians; it’s a site for people who appreciate less government. Believing that markets are better equipped to handle fraud than regulators doesn’t mean that fraud (or even bad business) is ok. Being anti-regulator doesn’t mean being pro-fraud, but this article seems to put Reason in the pro-fraud camp. Don’t be stupid: WeWork deserves all of the ridicule it is getting and more.

      1. More than fair. I always thought WeWork was horseshit. It isn’t LOCAL. The best Big-Buddy startup-support systems are local, with local VC funding and discovery, locally-based offices and headship because those are the ones who know what’s productive in a given locale. It is unbelievable how much money was burned in this debacle. The shared office concept has been out for at least 40 years and I can tell you, not a one of them ever survived a recession.

  12. . . . the Innovative Shared Office Concept Yet.

    Imma let you finish but

    WeWork alternatives.

    WeWork isn’t innovative in any way except in how creative they get in hiding their costs from investors and making up bullshit metrics that look good but have no relevancy when it comes to determining the company’s health.

  13. the point of business is to turn a profit. it’s a good sign if investors are considering that more now.

  14. Shared offices are nothing new. In the early eighties I had a couple of these outfits in my customer base of phone customers. The company would rent a suite of 40 offices (20’X20′ each), install a phone system capable of 60 lines and would have secretarial staff to service the tenants’ needs for typing and whatnot. The tenant would order a phone line, I’d go put it on the phone system and in the tenant’s office. A single receptionist would answer the phones (she knew from labels which company’s line was ringing) with the tenant-company’s name, put the call on hold and let them know they had a call. That was pretty much it. The illusion was, the tenant had a secretary and an office, but it was really a glorified phone booth. The tenant would pay my customer from $1000-$3000 dollars a month depending on whether they needed specialty services like paralegals or real estate settlement expertise. Dan Patrick of ESPN, before there was an ESPN, came through there, Dan Patrick Productions. A few success stories came through there. That’s pretty much the model, but most of them failed, I believe.

    Problem? It’s a business that succeeds while an economy is on the way up and a lot of startups are busy. The recession of the early/mid-eighties and high interest rates tanked my customer’s business. One-by-one the startups folded up their tents, and she was left with 35 of her 40 offices unoccupied and SHE had to fold up her tent. Things picked up after Gulf War I and Bill Clinton’s Washington started to boom. Damned if a half dozen of them didn’t pop up in the DC region, especially Northern Virginia and Silver Spring, Md.. They thrived for a few years but by the mid 2000s, when things started crashing, these shared offices would go broke as the tenants either folded or moved to their own offices. These WeWork-shared office models have to operate on a single-pronged approach of signing new companies/startups and when an economy is crashing, there AREN’T any. WeWork failing the way it is could likely be because the model is failing as the economy slows into recession. WeWork isn’t magic. It’s just another reseller of office space, losing money in a slowing economy. The model cannot survive recessions.

    WeWork may be flash and was successful for awhile, but knowing what I know about that business model from the inside tells me

  15. One can understand the critical tone of the press coverage and of the market chatter. Any company with losses exceeding its total revenues that claims to be worth $47 billion, or even $10 billion, deserves skepticism and perhaps even some derision.

    And yet it happens all the time, especially with drug/biotech companies. Hell, look at BYND.

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