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By taking an old stodgy business (commercial real estate) and bringing it in conformance with modern expectations of design, ease of transactions, lease length,

• empath75 7y ago
  They're signing expensive long term leases and then renting them for the short term at a loss, which is like exactly the opposite of how it's supposed to work.
  • harryh 7y ago
    Their unit economics are positive, not negative.
    • Barrin92 7y ago
      with a sufficiently creative definition of unit economics aka "community-adjusted EBITDA", sure. In the actual world, not so much.
      • harryh 7y ago
        You are confusing unit economic vs profitability. They are very different things. If I manufacture a widget for $1 and sell it for $.50 then my unit economics are negative and, unless I manage to either lower manufacturing costs or raise prices I am in trouble forever. If I manufacture a widget for $1 and sell it for $1.50 then my unit economics are positive. My company might still be unprofitable due to other expenses though (R&D, Marketing, whatever). This is the situation that WeWork is in.
        • Barrin92 7y ago
          I am aware of the difference. If you look at their numbers, their literal unit economics are negative, if you employ normal EBITDA. They don't, they employ a so called "adjusted EBITDA", which last year flatout discounted 150 million in marketing as non-recurring trying to make the argument that you just made. But this is hilarious number fudging, because obviously a lot of marketing budget is recurring and goes towarss retaining existing customers and should go into a unit cost metric. They do the same thing that uber did, which is pretending that they can magically 'scale' and that they are a tech company, when in reality they are a real estate business siphoning money out of investors, pretending their losses are somehow magically going to turn into profit.
          • treis 7y ago
            >I am aware of the difference. If you look at their numbers, their literal unit economics are negative, if you employ normal EBITDA. I don't think you are aware of the difference. EBITDA takes overhead into account and is not unit economics.
• puranjay 7y ago
  So many of these unicorns seem so stupidly simple in hindsight. I'm in St Petersburg right now and the taxi outside the train station quoted an initial rate of EUR 50 to drive a grand total of 6km (after haggling, "just" EUR 30). I booked an Uber (operated under Yandex Taxi in Russia now) and the total price was just EUR 5 Take stodgy, often scammy, and downright consumer unfriendly industries, add transparency and accessibility to them, and viola - you have a unicorn.
  • moorhosj 7y ago
    ==Take stodgy, often scammy, and downright consumer unfriendly industries, add transparency and accessibility to them, and viola - you have a unicorn.== And, maybe some day, actual profits.
  • rchaud 7y ago
    > So many of these unicorns seem so stupidly simple in hindsight. The "stupidly" part comes in when you realize that maybe the cabbie had a better grasp of the economics of his business when he accepted your bid of 30 EUR. The gig economy people driving you for a fraction of the 5 EUR you paid might come to the same conclusion sooner or later.
    • thedrbrian 7y ago
      Even worse Uber might have paid the cabbie another €5 to take the job.
      • wetpaws 7y ago
        $10 is still less than $30
        • nolok 7y ago
          Add the taxes, add the commercial insurances (how many Uber has one?), add the much higher maintenance for a car that runs all day every day,... Just because those drivers don't factor in things in legal or financial hindsight doesn't mean they won't need it, or that it won't go seriously wrong when that need gets called on.
• hoodwink 7y ago
  Finally, some clear thinking.
  • arcturus17 7y ago
    Doesn’t quite explain the cash hemorrhage or the path to profitability though.
    • hoodwink 7y ago
      I don’t understand why laypeople are so confused by how real estate investing works. I build an office building and spend $100M. I “hemorrhaged cash” yet I own an asset that’s going to throw off cash flow for years. It’s the same thing with WeWork on a smaller scale. They spend $5M to build our office space to own an asset that’s going to throw off cash flow for years. Albeit a much higher yield for a much shorter term.
      • rsuelzer 7y ago
        The article says they don't own property.
        • hoodwink 7y ago
          WeWork doesn’t own property the same way you don’t own your house. The bank does. You still have an asset though, and so do they. Their asset is what’s known as a leasehold interest. Riskier and shorter duration than owning real estate, but still an asset making this cash hemorrhaging talk complete bosh.
          • arcturus17 7y ago
            The presumption being of course that they’re going to be making a lot of money out of these investments, which is what us “laypeople” as you put it express doubts about when we see half-empty WeWork spaces? Which results in an over the top multiple valuation which has nothing to do with comparable competitors and which the CEO attributes to WeWork’s great vibes (no joke).