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Those who lived through past market busts will remember enron, worldcom, tyco etc. (2000s), lehman, bear sterns, aig etc (2008s). This time around we have Thera

Those who lived through past market busts will remember enron, worldcom, tyco etc. (2000s), lehman, bear sterns, aig etc (2008s). This time around we have Theranos, FTX, WeWork,... Different names, same story. Market excesses, almost always coincident with some degree of fraud. I'm glad we're saying goodbye to this weird story of excess, and I won't ever have to read about WeWork again.

blackoil 3y ago
One difference between all other and WeWork is that while others were involved in some kind of fraud. WeWork wasn't fraud just pure hubris of founders and investors. Fraud is somewhat common and motive/modus understandable, here it is very difficult to empathise the thought process of all involved.
- starchild3001 3y ago
  WeWork's business model had concerning parallels to the risks that led to the 2008 financial crisis. Banks then made risky bets chasing short-term profits while accumulating long-term vulnerabilities. Similarly, WeWork took on expensive, long-term lease obligations relying on an unstable revenue stream from membership fees. This mismatch amplified risk. Like pre-crisis banks, WeWork did not commit outright fraud but showed poor judgment. Its financial mismanagement echoed 2008's problems.
wpietri 3y ago
Agreed, but the difference for me in some of those companies is that Theranos, FTX, and WeWork were never real companies in the sense that they performed valuable service to the world and turned a profit. In contrast, Enron, Worldcom, Tyco, and AIG were all real, functioning businesses that turned bad via executive accounting shenanigans. And the 2008 crisis was a collective failure of unthinking financialization and deregulation, again mostly among otherwise functional companies. So I'm especially glad to see the current crash, as for me it represents businesses founded on "fuck around" finally finding out what business fundamentals are. I'll be interested to see what happens with other massive capital consumers from this era, with the poster child being Uber. It's plausible to me that even on its own terms Uber will never generate profit above the $20 billion of capital it took. Let alone getting into the black once we count its more obvious externalities.
- jglamine 3y ago
  FTX was insanely profitable (100s of millions in revenue, low expenses). If SBF hadn't have taken customer money they'd still be around. Even now the CEO overseeing bankruptcy has recovered 90 percent of customer assets. Their downfall was absolutely accounting shenanigans, not an issue with the core business. Their product was letting people take leveraged gambles on crypto, so arguably not a social good.
  - wpietri 3y ago
    Exactly. It was an illegal casino dressed up as "investment", while also ignoring the regulations on investment. Part of their explicit plan was to use the house rake to give enough money to politicians that they'd retroactively legitimize themselves. It was an enormous social negative.
  - HDThoreaun 3y ago
    I'm not sure it's so simple. There's a strong case to be made that Alameda was losing money as FTX's liquidity provider and without the alameda money FTX would have much, much lower revenue. I think it's hard to look at just one side of the business because they were so intertwined.
- bjacokes 3y ago
  There are plenty of never-profitable businesses that have gone bankrupt in the past. See e.g. pets.com from the dot com bust. And this downturn has seen "functioning" businesses like SVB and First Republic go under too. So I'm not sure this time is different, at least to the extent you're suggesting. I do agree that this era of low interest rates has led to some companies getting absolutely massive without ever turning a profit. But hey, that playbook worked for Amazon. Most tech companies have substantially lower capital requirements than WeWork, and can weather this sort of downturn as long as they have a reasonable cash position. Sure, Uber might not make back the amount of funding it's burned through, but that's different than it having a business where the unit economics will never work out.
  - wpietri 3y ago
ubermonkey 3y ago
I dunno if they are all the same story. Things like Theranos and FTX were outright fraud from the jump. Enron was a complex mess of both accounting chicanery and yes, some fraud, but they DID actually have assets at the end worth owning. ISTR the banks just got caught out having made egregious poor bets. AIG though is a bunch of fucking criminals. That said, with this I agree 100%: >I'm glad we're saying goodbye to this weird story of excess, and I won't ever have to read about WeWork again.
coryfklein 3y ago
> I won't ever have to read about WeWork again They're just going through bankruptcy, not dissolving the company. WeWork will be around for many years to come.

blackoil 3y ago

One difference between all other and WeWork is that while others were involved in some kind of fraud. WeWork wasn't fraud just pure hubris of founders and investors. Fraud is somewhat common and motive/modus understandable, here it is very difficult to empathise the thought process of all involved.

starchild3001 3y ago
WeWork's business model had concerning parallels to the risks that led to the 2008 financial crisis. Banks then made risky bets chasing short-term profits while accumulating long-term vulnerabilities. Similarly, WeWork took on expensive, long-term lease obligations relying on an unstable revenue stream from membership fees. This mismatch amplified risk. Like pre-crisis banks, WeWork did not commit outright fraud but showed poor judgment. Its financial mismanagement echoed 2008's problems.

wpietri 3y ago

Agreed, but the difference for me in some of those companies is that Theranos, FTX, and WeWork were never real companies in the sense that they performed valuable service to the world and turned a profit. In contrast, Enron, Worldcom, Tyco, and AIG were all real, functioning businesses that turned bad via executive accounting shenanigans. And the 2008 crisis was a collective failure of unthinking financialization and deregulation, again mostly among otherwise functional companies. So I'm especially glad to see the current crash, as for me it represents businesses founded on "fuck around" finally finding out what business fundamentals are. I'll be interested to see what happens with other massive capital consumers from this era, with the poster child being Uber. It's plausible to me that even on its own terms Uber will never generate profit above the $20 billion of capital it took. Let alone getting into the black once we count its more obvious externalities.

jglamine 3y ago
FTX was insanely profitable (100s of millions in revenue, low expenses). If SBF hadn't have taken customer money they'd still be around. Even now the CEO overseeing bankruptcy has recovered 90 percent of customer assets. Their downfall was absolutely accounting shenanigans, not an issue with the core business. Their product was letting people take leveraged gambles on crypto, so arguably not a social good.
- wpietri 3y ago
  Exactly. It was an illegal casino dressed up as "investment", while also ignoring the regulations on investment. Part of their explicit plan was to use the house rake to give enough money to politicians that they'd retroactively legitimize themselves. It was an enormous social negative.
- HDThoreaun 3y ago
  I'm not sure it's so simple. There's a strong case to be made that Alameda was losing money as FTX's liquidity provider and without the alameda money FTX would have much, much lower revenue. I think it's hard to look at just one side of the business because they were so intertwined.
bjacokes 3y ago
There are plenty of never-profitable businesses that have gone bankrupt in the past. See e.g. pets.com from the dot com bust. And this downturn has seen "functioning" businesses like SVB and First Republic go under too. So I'm not sure this time is different, at least to the extent you're suggesting. I do agree that this era of low interest rates has led to some companies getting absolutely massive without ever turning a profit. But hey, that playbook worked for Amazon. Most tech companies have substantially lower capital requirements than WeWork, and can weather this sort of downturn as long as they have a reasonable cash position. Sure, Uber might not make back the amount of funding it's burned through, but that's different than it having a business where the unit economics will never work out.
- wpietri 3y ago

ubermonkey 3y ago

I dunno if they are all the same story. Things like Theranos and FTX were outright fraud from the jump. Enron was a complex mess of both accounting chicanery and yes, some fraud, but they DID actually have assets at the end worth owning. ISTR the banks just got caught out having made egregious poor bets. AIG though is a bunch of fucking criminals. That said, with this I agree 100%: >I'm glad we're saying goodbye to this weird story of excess, and I won't ever have to read about WeWork again.

coryfklein 3y ago

> I won't ever have to read about WeWork again They're just going through bankruptcy, not dissolving the company. WeWork will be around for many years to come.