5 ms·

This isn't that dissimilar from lots of industries. Every airline that takes a loan to buy a plane is banking on future demand for air travel, for example. Or

This isn't that dissimilar from lots of industries. Every airline that takes a loan to buy a plane is banking on future demand for air travel, for example. Or take Amazon Web Services, which is building data centers to lease out on a short term basis. Yes, there are tremendous risks involved, depending on the lease terms. But it's not at all unusual.

munk-a 7y ago
I don't really buy that, WeWork is benefiting off of a demand that is constantly shifting hands - people who are using the workspace should be using it temporarily - maybe they're a contractor on sabbatical, maybe they're starting a company and don't have the momentum and size to consider a lease... but those needs will change. Airlines live an entirely different business, nobody but the super ridiculously rich will ever own their own plane - and AWS benefits from economy of scale, they can deliver computational power below the cost of inhousing the ops cost in all but the most extreme circumstances, running a room full of servers has a lot of costs that don't scale down gracefully. WeWork might be able to survive long term on two factors 1. Prestige & Environs - working in this sort of shared space may be viewed as luxurious in the long term due to rubbing elbows with other well-to-do folks, sorta like going to the opera. 2. Reliability of cost - Owning a condo is a strictly better decision than renting an apartment, but there are spikes in costs when appliances break down and building work needs to be done... though I think to properly reap the benefit of this WeWork needs to be and remain extremely proactive in maintenance, if some vulture capitalists get into the decision making process and let maintenance slip for a bit it'll erase all of this value by forcing the cost (in terms of inconvenience and unavailability) onto the consumer - it's possible this could also be lost if they fail to keep a nice margin of capacity above usage... again, as soon as someone wants to go to work and is unable to secure the space and is forced to either rent or lease conventional office space their competitive edge will dissolve. I am highly skeptical of the long term prospects if WeWork fails to maintain their prestige and banking your company on prestige is an inherently risky approach IMO.
- sharadov 7y ago
  Your assessment of environs is right, they bought Meetup.com for that.
  - mattrp 7y ago
    Does meetup have a revenue model?
    - sharadov 7y ago
      Subscription-based https://techcrunch.com/2009/09/15/leaked-shareholder-docs-meetup-hits-profitability-and-9-million-in-revenues/ https://techcrunch.com/2009/09/15/leaked-shareholder-docs-me...
strange_quark 7y ago
It is dissimilar though. In the examples you gave, the airline or Amazon are taking on debt to purchase a plane or a bunch of servers themselves, so if the demand decreases in the future, they can sell off those assets. They would probably incur a loss, but at least they could recoup some of their investment. WeWork on the other hand is not a landlord and does not own anything other than the furniture in the offices. If (when) the market turns down, they're going to have a really hard time unloading those liabilities because who's going to want to pick up their lease?
- megaremote 7y ago
  Whose going to want to rent a plane? You are really pushing this point hard, when it does not fit.
  - goatinaboat 7y ago
    Umm, everyone? https://en.wikipedia.org/wiki/Aircraft_lease#Dry_lease https://en.wikipedia.org/wiki/Aircraft_lease#Dry_lease
- xyzzyz 7y ago
  If (when) the market turns down, they're going to have a really hard time unloading those liabilities because who's going to want to pick up their lease? I don't see why it would be any harder than selling off a plane in case of market downturn. Both are hard, and in both cases the owners of the asset (whether it's a lease or a plane) will likely incur a loss, so I don't really see any difference here at all.
CPLX 7y ago
Investing in airlines is the worst idea in history, so perhaps that analogy is sound. The Amazon example is less relevant on that specific point as AWS owns and operates its own equipment.
morpheuskafka 7y ago
AWS is really a good comparison. It turned buying a server and getting an annual colo lease into "per-second" billing, and WeWork offers per-day pricing for office real estate instead of an annual lease.
- mattrp 7y ago
  That’s the aws of 2008. If you think that’s still what they do I would suggest revisiting your view. It’s not a very good comparison. I’d prefer to think of wework in the same ways that some might of thought of Enron.
- hn_throwaway_99 7y ago
  Except AWS does a whole lot more than just let you rent generic EC2 instances by the hour. They have sooo, sooo, sooo many custom services that their lock-in is huge. It would be extremely painful for any sizable customer on AWS to switch (my previous comment on the subject: https://news.ycombinator.com/item?id=20339381 https://news.ycombinator.com/item?id=20339381). No such lock-in exists with WeWork. In fact the entire reason for WeWork's existence is it doesn't have lock-in.
  - icelancer 7y ago
    >> No such lock-in exists with WeWork. In fact the entire reason for WeWork's existence is it doesn't have lock-in. This isn't true for their expanding customer base: Businesses who are paying for blocks of co-working memberships to expand through services rather than finding new leases themselves. There is significant lock-in when this occurs, as people may move close to those WeWork locations, arrange their life around it, etc.
    - mtremsal 7y ago
      That's also my understanding of their pitch; have we seen any evidence it's actually happening?
      - 7y ago

munk-a 7y ago

I don't really buy that, WeWork is benefiting off of a demand that is constantly shifting hands - people who are using the workspace should be using it temporarily - maybe they're a contractor on sabbatical, maybe they're starting a company and don't have the momentum and size to consider a lease... but those needs will change. Airlines live an entirely different business, nobody but the super ridiculously rich will ever own their own plane - and AWS benefits from economy of scale, they can deliver computational power below the cost of inhousing the ops cost in all but the most extreme circumstances, running a room full of servers has a lot of costs that don't scale down gracefully. WeWork might be able to survive long term on two factors 1. Prestige & Environs - working in this sort of shared space may be viewed as luxurious in the long term due to rubbing elbows with other well-to-do folks, sorta like going to the opera. 2. Reliability of cost - Owning a condo is a strictly better decision than renting an apartment, but there are spikes in costs when appliances break down and building work needs to be done... though I think to properly reap the benefit of this WeWork needs to be and remain extremely proactive in maintenance, if some vulture capitalists get into the decision making process and let maintenance slip for a bit it'll erase all of this value by forcing the cost (in terms of inconvenience and unavailability) onto the consumer - it's possible this could also be lost if they fail to keep a nice margin of capacity above usage... again, as soon as someone wants to go to work and is unable to secure the space and is forced to either rent or lease conventional office space their competitive edge will dissolve. I am highly skeptical of the long term prospects if WeWork fails to maintain their prestige and banking your company on prestige is an inherently risky approach IMO.

sharadov 7y ago
Your assessment of environs is right, they bought Meetup.com for that.
- mattrp 7y ago
  Does meetup have a revenue model?
  - sharadov 7y ago
    Subscription-based https://techcrunch.com/2009/09/15/leaked-shareholder-docs-meetup-hits-profitability-and-9-million-in-revenues/ https://techcrunch.com/2009/09/15/leaked-shareholder-docs-me...

strange_quark 7y ago

It is dissimilar though. In the examples you gave, the airline or Amazon are taking on debt to purchase a plane or a bunch of servers themselves, so if the demand decreases in the future, they can sell off those assets. They would probably incur a loss, but at least they could recoup some of their investment. WeWork on the other hand is not a landlord and does not own anything other than the furniture in the offices. If (when) the market turns down, they're going to have a really hard time unloading those liabilities because who's going to want to pick up their lease?

megaremote 7y ago
Whose going to want to rent a plane? You are really pushing this point hard, when it does not fit.
- goatinaboat 7y ago
  Umm, everyone? https://en.wikipedia.org/wiki/Aircraft_lease#Dry_lease https://en.wikipedia.org/wiki/Aircraft_lease#Dry_lease
xyzzyz 7y ago
If (when) the market turns down, they're going to have a really hard time unloading those liabilities because who's going to want to pick up their lease? I don't see why it would be any harder than selling off a plane in case of market downturn. Both are hard, and in both cases the owners of the asset (whether it's a lease or a plane) will likely incur a loss, so I don't really see any difference here at all.

CPLX 7y ago

Investing in airlines is the worst idea in history, so perhaps that analogy is sound. The Amazon example is less relevant on that specific point as AWS owns and operates its own equipment.

morpheuskafka 7y ago

AWS is really a good comparison. It turned buying a server and getting an annual colo lease into "per-second" billing, and WeWork offers per-day pricing for office real estate instead of an annual lease.

mattrp 7y ago
That’s the aws of 2008. If you think that’s still what they do I would suggest revisiting your view. It’s not a very good comparison. I’d prefer to think of wework in the same ways that some might of thought of Enron.
hn_throwaway_99 7y ago
Except AWS does a whole lot more than just let you rent generic EC2 instances by the hour. They have sooo, sooo, sooo many custom services that their lock-in is huge. It would be extremely painful for any sizable customer on AWS to switch (my previous comment on the subject: https://news.ycombinator.com/item?id=20339381 https://news.ycombinator.com/item?id=20339381). No such lock-in exists with WeWork. In fact the entire reason for WeWork's existence is it doesn't have lock-in.
- icelancer 7y ago
  >> No such lock-in exists with WeWork. In fact the entire reason for WeWork's existence is it doesn't have lock-in. This isn't true for their expanding customer base: Businesses who are paying for blocks of co-working memberships to expand through services rather than finding new leases themselves. There is significant lock-in when this occurs, as people may move close to those WeWork locations, arrange their life around it, etc.
  - mtremsal 7y ago
    That's also my understanding of their pitch; have we seen any evidence it's actually happening?
    - 7y ago