WeWork Was An Inevitable Response to Incentives

In a matter of weeks, WeWork went from being a $50b unicorn to being mentioned in the same breath as the “b” word. I won’t rehash the We saga, but a recent interview with Scott Galloway who has been spitting acid on them for 2 years is one of the best things I’ve read this year. His colorful metaphors and ruthless candor need to be enjoyed in their full glory. Enjoy.

As I mentioned above, overvaluation has a peace dividend, but that doesn’t mean it was correctly allocated capital. Some say if you hit every pitch you swing at, you are probably taking a suboptimal level of risk. That’s a smart observation. But investors in We look like they took a smart idea too far. When a pitcher notices a batter is willing to swing too far out of the strike zone, he’ll try to get away with less honest pitches. Here’s Matt Levine on We founder Adam Neumman:

If you want, you can imagine him as a diabolical genius who explicitly set out to short the unicorn bubble and then walked away barefoot with a jaunty whistle and $700 million of SoftBank’s money, but that does not strike me as necessary or accurate. My model doesn’t require you to think that your startup is dumb! You don’t need to worry about Neumann’s personal beliefs and motivations at all, really. You can just think of him as a product of the invisible hand of the market. A lot of money was pouring into startups, there was a lot of demand, and the demand called forth supply, and the people who supplied the supply got rich; it is elemental and straightforward and has very little to do with questions like “is this a good business model?”