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>… and into their own personal net worth, while building businesses that couldn't have possibly been profitable. I disagree with this characterization of WeWor

>… and into their own personal net worth, while building businesses that couldn't have possibly been profitable. I disagree with this characterization of WeWork. Were they extravagantly blowing money on stupid things? Yes. Was the CEO directly enriching himself through his leadership? Yes. However, the business of being a landlord and renting office space is a pedestrian and profitable venture. It’s just not a sexy startup idea worth billions.

Retric 4y ago
Being a taxi company or takeout business doesn’t seem sexy either, but several giant “tech” startups existed in those spaces space.
- olivermarks 4y ago
  Uber has never been profitable
  - Retric 4y ago
    Most startups are never profitable especially in the unsexy spaces like travel agents, used car dealerships, etc.
- bostik 4y ago
  I recall someone on HN pointing out years ago a curious detail about financial metrics, and how they made food delivery apps look FAR better for VC capital than they in reality are. The underlying reason: pass-through billing. The food delivery startups accept payments, take their cut, and pay out to restaurants & drivers. From a purely financial viewpoint they're paying out a lot of money, perfectly normal in VC land. But they are also taking in an absolute mountain of money, and if you squint, can all look quite a bit like top-line revenue. If you then slice open the business operating costs, and look at how much it costs them internally (accounting only for salaries, rents and operating costs) to service a delivery, the per-unit revenue/cost figures are off the charts. Physical retail intake, and virtual goods unit production costs. What's not to drool over? It was an interesting point - and being thoroughly cynical, likely based in reality.
wpietri 4y ago
Being a commercial office landlord can be an ok business, but that doesn't mean WeWork was ever viable. They were often not the building owner but a lessor on their own, taking long-term leases and subleasing in pieces with little or no commitment. That made them vulnerable to shifts in demand and rents. Given how cyclical the office space market has been for decades, I suspect they were always doomed. In a recession a real commercial landlord has existing tenants on long-term leases, limiting their downside. But WeWork's big selling poing was flexibility, so even if the pandemic hadn't happened I think the next recession would have wrecked them. And that's before we get to how it was basically a giant bet against remote work.
- 0cf8612b2e1e 4y ago
  > They were often not the building owner but a lessor on their own, taking long-term leases and subleasing in pieces with little or no commitment. I put that as the CEO self dealing. He purchased buildings and rented them out to WeWork. Had WeWork purchased the buildings themselves, the model would have been on far firmer footing. Again, I agree there was too much glamorous spending and living in the limelight, but landlords can obviously turn a profit if they keep the expenses reasonable.
  - 8note 4y ago
    The same business model weakness would exist -- in a recession, short term renters will stop showing up. While they'd avoid having to pay rent in empty units, they'd still not any leases
  - wpietri 4y ago
    Sorry, what's your evidence that the bulk of WeWork's leases were with Neumann? My understanding is that they were leasing from many building owners, something the article supports.
    - 0cf8612b2e1e 4y ago
      I never said it was the majority? It was just an example of grift. The only correct number of buildings a company should be leasing from the CEO is zero. In a similar vein, the company should not be leasing the We branding from the CEO. WeWork was not operated in a way to succeed. I am only taking issue with the notion that the core business model (renting real estate) is flawed. Had there been a willingness for modest, organic expansion and not jet-fueled-VC-hypergrowth, the company could have succeeded.
PragmaticPulp 4y ago
> However, the business of being a landlord and renting office space is a pedestrian and profitable venture. Right, but that’s what Adam Neumann did for himself, then made WeWork his tenant. Neumann is collecting the rent. WeWork is paying rent. He took the profitable part out of the company and gave it to himself (for a subset of properties, at least). That’s the scandal.

Retric 4y ago

Being a taxi company or takeout business doesn’t seem sexy either, but several giant “tech” startups existed in those spaces space.

olivermarks 4y ago
Uber has never been profitable
- Retric 4y ago
  Most startups are never profitable especially in the unsexy spaces like travel agents, used car dealerships, etc.
bostik 4y ago
I recall someone on HN pointing out years ago a curious detail about financial metrics, and how they made food delivery apps look FAR better for VC capital than they in reality are. The underlying reason: pass-through billing. The food delivery startups accept payments, take their cut, and pay out to restaurants & drivers. From a purely financial viewpoint they're paying out a lot of money, perfectly normal in VC land. But they are also taking in an absolute mountain of money, and if you squint, can all look quite a bit like top-line revenue. If you then slice open the business operating costs, and look at how much it costs them internally (accounting only for salaries, rents and operating costs) to service a delivery, the per-unit revenue/cost figures are off the charts. Physical retail intake, and virtual goods unit production costs. What's not to drool over? It was an interesting point - and being thoroughly cynical, likely based in reality.

wpietri 4y ago

Being a commercial office landlord can be an ok business, but that doesn't mean WeWork was ever viable. They were often not the building owner but a lessor on their own, taking long-term leases and subleasing in pieces with little or no commitment. That made them vulnerable to shifts in demand and rents. Given how cyclical the office space market has been for decades, I suspect they were always doomed. In a recession a real commercial landlord has existing tenants on long-term leases, limiting their downside. But WeWork's big selling poing was flexibility, so even if the pandemic hadn't happened I think the next recession would have wrecked them. And that's before we get to how it was basically a giant bet against remote work.

0cf8612b2e1e 4y ago
> They were often not the building owner but a lessor on their own, taking long-term leases and subleasing in pieces with little or no commitment. I put that as the CEO self dealing. He purchased buildings and rented them out to WeWork. Had WeWork purchased the buildings themselves, the model would have been on far firmer footing. Again, I agree there was too much glamorous spending and living in the limelight, but landlords can obviously turn a profit if they keep the expenses reasonable.
- 8note 4y ago
  The same business model weakness would exist -- in a recession, short term renters will stop showing up. While they'd avoid having to pay rent in empty units, they'd still not any leases
- wpietri 4y ago
  Sorry, what's your evidence that the bulk of WeWork's leases were with Neumann? My understanding is that they were leasing from many building owners, something the article supports.
  - 0cf8612b2e1e 4y ago
    I never said it was the majority? It was just an example of grift. The only correct number of buildings a company should be leasing from the CEO is zero. In a similar vein, the company should not be leasing the We branding from the CEO. WeWork was not operated in a way to succeed. I am only taking issue with the notion that the core business model (renting real estate) is flawed. Had there been a willingness for modest, organic expansion and not jet-fueled-VC-hypergrowth, the company could have succeeded.

PragmaticPulp 4y ago

> However, the business of being a landlord and renting office space is a pedestrian and profitable venture. Right, but that’s what Adam Neumann did for himself, then made WeWork his tenant. Neumann is collecting the rent. WeWork is paying rent. He took the profitable part out of the company and gave it to himself (for a subset of properties, at least). That’s the scandal.