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“There are three ways to make a living in this business: be first, be smarter, or cheat.“ -Margin Call SV ran out of the first two because they are much harde

“There are three ways to make a living in this business: be first, be smarter, or cheat.“ -Margin Call SV ran out of the first two because they are much harder. We are left with the dying gasps of companies trying the third way.

LordFast 7y ago
This needs to be a lot higher.
pbreit 7y ago
How is this comment relevant to WeWork? How has it "cheated"? It definitely is early/first and very smart.
- gtirloni 7y ago
  Early/first in what exactly?
  - pbreit 7y ago
    Massive paradigm shift in office leasing.
    - munk-a 7y ago
      Please elaborate in what was innovative here, their technical infrastructure seems to be nothing to write home about and well appointed office leasing has been around for quite some time. The social focus is indeed different but I wouldn't call that alone a massive paradigm shift.
      - pbreit 7y ago
        The friction eliminated and expanded flexibility from normal office leasing was quite pronounced. Add to that a huge block of delighted customers. Not sure how you are defining innovation but there is clearly a lot going on there.
- JumpCrisscross 7y ago
  > How is this comment relevant to WeWork? How has it "cheated"? They borrowed short, lent long and then pretended it was as sustainable business. To their credit, they abundantly disclosed their shenanigans. (I haven't seen any evidence suggesting investors can reasonably claim fraud.) But they were playing fast and loose with basic economics. At its core, sure, WeWork could have been a business. Its thesis, that office space should be treated as a service versus capital expense, is plausible. But there was so much garbage--the party-at-work hypothesis, thoughtless cross-selling, nepotism, consciousness nonsense, self-dealing, et cetera--that the value got diluted while the price was pumped.
  - ethbro 7y ago
    Furthermore, and this to me is the most damning indictment: where's the moat? SoftBank and Masayoshi Son's hypothesis is: 1. Find a market which can be captured by a business with access to massive capital 2. Provide massive capital 3. Extract profits once a monopoly has been established WeWork is a terrible example of this, because in no way does scale give them unique advantages. And furthermore, "scale" in this context means "scale in the office property market" -- that's a pretty big pool to expect to overflow.
    - konschubert 7y ago
      Same for Uber.
      - ethbro 7y ago
        I was going to include Uber, but there's an argument that creating a realtime, massively-scaled fare-setting infrastructure is a moat. Uber's product isn't rides. Uber's product is being the market-maker between riders and drivers.
        rauchp 7y ago
        Right, but Lyft has the same product. Given enough time, we might see other ride-share companies succeed with the same (yet inferior) tech servicing specific cities. Austin has a non-profit rideshare business that matches riders and drivers. http://www.rideaustin.com http://www.rideaustin.com
- munk-a 7y ago
  Honestly, it wasn't even smart. And the thing it was first at was social focused co-working spaces, there have been more bare bones offerings for co-working spaces for a long time, WeWork just tried to appeal to that SV niche of people that'd like the folks they're subletting with to be the kind they'd like to share a beer with.
djsumdog 7y ago
> or cheat This is called "Being disruptive." Basically, just ignore the law, but make sure you get enough workers and customers that love you so that they turn against politics when you break the law.
- mschuster91 7y ago
  > Basically, just ignore the law, but make sure you get enough workers and customers that love you so that they turn against politics when you break the law. Unfortunately, this seems to be the only way that's not outright massive violence such as Hongkong or France to get politicians to do their goddamn job. Taxi services have had a really massive lobby power in the US.
  - munk-a 7y ago
    Is Uber in it for the social change? If not then this is just a silly point. Some of the regulations were unreasonable and the result of corruption - but Uber also skirted insurance and background check related laws at various times.
    - JumpCrisscross 7y ago
      > Is Uber in it for the social change? The end result is a safer, better-functioning street transit system (in New York at least). I don't care if they were in it for social change or for the money. They delivered results, both themselves and by kicking taxis up a notch. (Many activists aren't in it for altruistic purposes. That doesn't make their work less meaningful.)
    - Jagat 7y ago
      Neither is the taxi lobby out there for the social change. It's better to have two parties competing for user's money than just one party fixing the price and service quality.
      - munk-a 7y ago
        Sorry, to clarify... the comment above was: > Unfortunately, this seems to be the only way that's not outright massive violence such as Hongkong or France to get politicians to do their goddamn job. Taxi services have had a really massive lobby power in the US. This was strongly implying that Uber was causing political change. I don't disagree that the competition has been healthy or that the taxi companies were bad actors - or even that the regulations were legitimately onerous sometimes... I object to the statement that "disruption = positive social change". I think that Uber's case is particularly weak because, while skirting regulation may have gotten accolades, the company itself was toxic to work at and brought in a bevy of sexual harassment charges.
yowlingcat 7y ago
This is a great comment and a great point, but I'm not sure I fully agree with your conclusion. There are still plenty of great companies that are doing the first two, but there certainly is no shortage of the third way. What would be fascinating to me is to categorize, oh, the top N (where N is 5000 or so) of private, growth tech companies that have taken significant recent rounds of VC financing and see how the investment volume skews along these three categories.
deleted 7y ago
[deleted]
abvdasker 7y ago
Oh man, what a fantastic film. It's a been a while since I saw Margin Call, but I still feel like it's one of the films that best captured the 2008 financial crisis. Jeremy Irons' portrayal of a Goldman CEO-like character — I think he's the one who delivers the line you quoted — remains probably the most convincing portrayal of that type of person I can remember. The wonderful board room scene: https://www.youtube.com/watch?v=Hhy7JUinlu0 https://www.youtube.com/watch?v=Hhy7JUinlu0
- dcolkitt 7y ago
  I was working on a credit trading desk during the beginning of the crisis. At least in my experience, Margin Call is definitely the most accurate movie about high finance I've ever seen.
- rags2riches 7y ago
  Ah, yes! Jeremy Irons in that board room... wow!
Angostura 7y ago
Whereas in Margin Call, the message was 'I don't cheat and although I like to think we have some pretty smart people in this building it sure is a hell of a lot easier to just be first'.

LordFast 7y ago

This needs to be a lot higher.

pbreit 7y ago

How is this comment relevant to WeWork? How has it "cheated"? It definitely is early/first and very smart.

gtirloni 7y ago
Early/first in what exactly?
- pbreit 7y ago
  Massive paradigm shift in office leasing.
  - munk-a 7y ago
    Please elaborate in what was innovative here, their technical infrastructure seems to be nothing to write home about and well appointed office leasing has been around for quite some time. The social focus is indeed different but I wouldn't call that alone a massive paradigm shift.
    - pbreit 7y ago
      The friction eliminated and expanded flexibility from normal office leasing was quite pronounced. Add to that a huge block of delighted customers. Not sure how you are defining innovation but there is clearly a lot going on there.
JumpCrisscross 7y ago
> How is this comment relevant to WeWork? How has it "cheated"? They borrowed short, lent long and then pretended it was as sustainable business. To their credit, they abundantly disclosed their shenanigans. (I haven't seen any evidence suggesting investors can reasonably claim fraud.) But they were playing fast and loose with basic economics. At its core, sure, WeWork could have been a business. Its thesis, that office space should be treated as a service versus capital expense, is plausible. But there was so much garbage--the party-at-work hypothesis, thoughtless cross-selling, nepotism, consciousness nonsense, self-dealing, et cetera--that the value got diluted while the price was pumped.
- ethbro 7y ago
  Furthermore, and this to me is the most damning indictment: where's the moat? SoftBank and Masayoshi Son's hypothesis is: 1. Find a market which can be captured by a business with access to massive capital 2. Provide massive capital 3. Extract profits once a monopoly has been established WeWork is a terrible example of this, because in no way does scale give them unique advantages. And furthermore, "scale" in this context means "scale in the office property market" -- that's a pretty big pool to expect to overflow.
  - konschubert 7y ago
    Same for Uber.
    - ethbro 7y ago
      I was going to include Uber, but there's an argument that creating a realtime, massively-scaled fare-setting infrastructure is a moat. Uber's product isn't rides. Uber's product is being the market-maker between riders and drivers.
      - rauchp 7y ago
        Right, but Lyft has the same product. Given enough time, we might see other ride-share companies succeed with the same (yet inferior) tech servicing specific cities. Austin has a non-profit rideshare business that matches riders and drivers. http://www.rideaustin.com http://www.rideaustin.com
munk-a 7y ago
Honestly, it wasn't even smart. And the thing it was first at was social focused co-working spaces, there have been more bare bones offerings for co-working spaces for a long time, WeWork just tried to appeal to that SV niche of people that'd like the folks they're subletting with to be the kind they'd like to share a beer with.

djsumdog 7y ago

> or cheat This is called "Being disruptive." Basically, just ignore the law, but make sure you get enough workers and customers that love you so that they turn against politics when you break the law.

mschuster91 7y ago
> Basically, just ignore the law, but make sure you get enough workers and customers that love you so that they turn against politics when you break the law. Unfortunately, this seems to be the only way that's not outright massive violence such as Hongkong or France to get politicians to do their goddamn job. Taxi services have had a really massive lobby power in the US.
- munk-a 7y ago
  Is Uber in it for the social change? If not then this is just a silly point. Some of the regulations were unreasonable and the result of corruption - but Uber also skirted insurance and background check related laws at various times.
  - JumpCrisscross 7y ago
    > Is Uber in it for the social change? The end result is a safer, better-functioning street transit system (in New York at least). I don't care if they were in it for social change or for the money. They delivered results, both themselves and by kicking taxis up a notch. (Many activists aren't in it for altruistic purposes. That doesn't make their work less meaningful.)
  - Jagat 7y ago
    Neither is the taxi lobby out there for the social change. It's better to have two parties competing for user's money than just one party fixing the price and service quality.
    - munk-a 7y ago
      Sorry, to clarify... the comment above was: > Unfortunately, this seems to be the only way that's not outright massive violence such as Hongkong or France to get politicians to do their goddamn job. Taxi services have had a really massive lobby power in the US. This was strongly implying that Uber was causing political change. I don't disagree that the competition has been healthy or that the taxi companies were bad actors - or even that the regulations were legitimately onerous sometimes... I object to the statement that "disruption = positive social change". I think that Uber's case is particularly weak because, while skirting regulation may have gotten accolades, the company itself was toxic to work at and brought in a bevy of sexual harassment charges.

yowlingcat 7y ago

This is a great comment and a great point, but I'm not sure I fully agree with your conclusion. There are still plenty of great companies that are doing the first two, but there certainly is no shortage of the third way. What would be fascinating to me is to categorize, oh, the top N (where N is 5000 or so) of private, growth tech companies that have taken significant recent rounds of VC financing and see how the investment volume skews along these three categories.

deleted 7y ago

[deleted]

abvdasker 7y ago

Oh man, what a fantastic film. It's a been a while since I saw Margin Call, but I still feel like it's one of the films that best captured the 2008 financial crisis. Jeremy Irons' portrayal of a Goldman CEO-like character — I think he's the one who delivers the line you quoted — remains probably the most convincing portrayal of that type of person I can remember. The wonderful board room scene: https://www.youtube.com/watch?v=Hhy7JUinlu0 https://www.youtube.com/watch?v=Hhy7JUinlu0

dcolkitt 7y ago
I was working on a credit trading desk during the beginning of the crisis. At least in my experience, Margin Call is definitely the most accurate movie about high finance I've ever seen.
rags2riches 7y ago
Ah, yes! Jeremy Irons in that board room... wow!

Angostura 7y ago

Whereas in Margin Call, the message was 'I don't cheat and although I like to think we have some pretty smart people in this building it sure is a hell of a lot easier to just be first'.