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I think this assumes there’s some inner core of WeWork that is worth saving. I mean, maybe Softbank will fall for a sunk cost fallacy and pursue it irrationally

by mlthoughts2018 7y ago

I think this assumes there’s some inner core of WeWork that is worth saving. I mean, maybe Softbank will fall for a sunk cost fallacy and pursue it irrationally, but I don’t see why that would be useful instead of just founding a different company to do that small kernel of an idea at much lower scale. It’s actually a big if to me whether there even is a kernel of a business idea. Even if there is, can it (assuming massive rehabilitation) generate profits of a sufficient level for Softbank to care?

raiyu 7y ago
There is a real business there if they can control the costs and get the revenue right and make sure there was no financial fraud. Also, they can't shelve it easily because it's one of their largest investments so it would really destroy any chance of raising a second fund if they can't get this large investment to work. From a customer perspective, while a lot of people on Hackernews do rag on WeWork as a product, personally I think what they have done is tremendous, because we used coworking early on and if you ever stepped foot into a Regus you would immediately understand the difference. Now what they really need to do is clean the business up and see what's left, but there is a solid product there, and they should be able to make the revenue and cost side work.
- mlthoughts2018 7y ago
  I don’t dispute at all that there is a solid product, but it’s exactly the same as for Lyft & Uber. The value proposition to the end user is only worthwhile if prices are held at artificially low levels due to VC subsidy that makes the business inherently not profitable. Once you remove the subsidy and let costs elevate to the required level and/or cut back on amenities, locations, etc., to keep prices down, then the question is whether customers still want the remaining value proposition. In other words, of course consumers like upscale stuff at VC subsidized prices. That tells you nothing about whether there’s a core business idea or not.
- the_watcher 7y ago
  Yea, a coworking space with tech company polish, marketed to tech companies seems like it could easily win the market. It's a much smaller market and the valuation math is different, but I don't see why the business couldn't work.
- _bxg1 7y ago
  > if they can control the costs and get the revenue right and make sure there was no financial fraud And, you know, cut out the random tequila parties with live hip-hop performances
the_watcher 7y ago
There is a business. Long-term real estate leases that then sublease the space short term is an established business model. It just doesn't trade at the same multiples.
- mlthoughts2018 7y ago
  This seems like a nearly completely unrelated point.
  - the_watcher 7y ago
    > I think this assumes there’s some inner core of WeWork that is worth saving. It seems directly related to your first sentence, doesn't it?
    - mlthoughts2018 7y ago
      No. The general viability of subleasing as a business is not meaningfully related to the points about whether a subset of WeWork’s current corporate entity can produce a viable business.
      - the_watcher 7y ago
        Yes, it is. It is, quite literally, the actual business part of WeWork.
        mlthoughts2018 7y ago
        No, WeWork is a certain brand and corporate entity. For example, reputation problems may mean that reducing operations to this smaller scale subleasing strategy would not succeed for WeWork. Or similarly, the profit level may be too smal for the investors to care, given projections of how long it would take to get their money back. You’re missing the point. WeWork is in a position where it likely cannot cut operations and shrink into a smaller scale version of the same business model.

raiyu 7y ago

There is a real business there if they can control the costs and get the revenue right and make sure there was no financial fraud. Also, they can't shelve it easily because it's one of their largest investments so it would really destroy any chance of raising a second fund if they can't get this large investment to work. From a customer perspective, while a lot of people on Hackernews do rag on WeWork as a product, personally I think what they have done is tremendous, because we used coworking early on and if you ever stepped foot into a Regus you would immediately understand the difference. Now what they really need to do is clean the business up and see what's left, but there is a solid product there, and they should be able to make the revenue and cost side work.

mlthoughts2018 7y ago
I don’t dispute at all that there is a solid product, but it’s exactly the same as for Lyft & Uber. The value proposition to the end user is only worthwhile if prices are held at artificially low levels due to VC subsidy that makes the business inherently not profitable. Once you remove the subsidy and let costs elevate to the required level and/or cut back on amenities, locations, etc., to keep prices down, then the question is whether customers still want the remaining value proposition. In other words, of course consumers like upscale stuff at VC subsidized prices. That tells you nothing about whether there’s a core business idea or not.
the_watcher 7y ago
Yea, a coworking space with tech company polish, marketed to tech companies seems like it could easily win the market. It's a much smaller market and the valuation math is different, but I don't see why the business couldn't work.
_bxg1 7y ago
> if they can control the costs and get the revenue right and make sure there was no financial fraud And, you know, cut out the random tequila parties with live hip-hop performances

the_watcher 7y ago

There is a business. Long-term real estate leases that then sublease the space short term is an established business model. It just doesn't trade at the same multiples.

mlthoughts2018 7y ago
This seems like a nearly completely unrelated point.
- the_watcher 7y ago
  > I think this assumes there’s some inner core of WeWork that is worth saving. It seems directly related to your first sentence, doesn't it?
  - mlthoughts2018 7y ago
    No. The general viability of subleasing as a business is not meaningfully related to the points about whether a subset of WeWork’s current corporate entity can produce a viable business.
    - the_watcher 7y ago
      Yes, it is. It is, quite literally, the actual business part of WeWork.
      - mlthoughts2018 7y ago
        No, WeWork is a certain brand and corporate entity. For example, reputation problems may mean that reducing operations to this smaller scale subleasing strategy would not succeed for WeWork. Or similarly, the profit level may be too smal for the investors to care, given projections of how long it would take to get their money back. You’re missing the point. WeWork is in a position where it likely cannot cut operations and shrink into a smaller scale version of the same business model.