More on the WeWork saga - how finance lost its disciplining powers

Nice article on the rise and fall of WeWork in FT.

This about Adam Neumann and...

Investors kept coming, and it was Neumann who brought them in; nobody at WeWork was better at prying cheques from investors such as Benchmark Capital and Fidelity. Despite earlier failed start-ups selling women’s shoes with collapsible heels and baby clothes with kneepads, he had a way of convincing sceptics. Lloyd Blankfein, the former Goldman Sachs CEO, previously told the FT he was “a great salesman”... Salesforce, whose founder Marc Benioff said last year that Neumann was “probably one of the greatest entrepreneurs I’ve ever met”... Neumann was known for exhorting his team to “hustle harder”... Neumann was known for his hard-partying habits, including smoking marijuana on the jet... Neumann, who usually slept only four hours a night, often directed operations from afar.

... and this about Masayoshi Son says it all.

Son and Ron Fisher, the SoftBank vice-chairman who led the negotiation, had concluded that Neumann’s taste for tequila and marijuana was not a deal-breaker, but they wanted a mechanism to take control if things went badly wrong. Lawyers agreed that SoftBank could oust Neumann as chief executive only if he committed a violent crime and was jailed in a common law jurisdiction. Drug use would not be enough to trigger the clause and, even if he were jailed, Neumann could regain control on his release. It was an extreme example of the trust funders placed in founders at a time when venture capitalists liked to boast how “founder-friendly” they were.

If being a "great salesman" is enough to convince investors to pour in millions billions into a company in one of the most well-known industries, real estate company, with a dubious business model, and promoted by an entrepreneur with questionable habits and temperament and without any track record of building or doing anything productive, then that is a problem with the investors.

The problem with investors was the false belief that relentless growth would create enduring companies,

Son had dangled a carrot to focus Neumann on more outlandish growth. If WeWork’s annual revenues shot from $2bn to $50bn in five years, its management’s share of the company could rise from 37 per cent to 51 per cent... Adam would say, ‘We’re not going fast enough; we’re not being bold enough.’” Keen to claw back a majority stake, Neumann told his team to start working towards the new target... “Because Masa was pushing the company so hard in that time we were burning more money than we otherwise expected to spend,” said the executive.

WeWork story will be cited by historians to capture the essence of the last decade of private capital fuelled start-up world!