Slate Money — "The Cult of We" (August 28, 2021)

Episode Overview

In this episode of Slate Money, hosts Felix Salmon, Emily Peck, and Stacey Marie Ishmael are joined by journalist and author Elliot Brown, co-author of The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion. The group dives deep into the spectacular rise and fall of WeWork, focusing on its charismatic founder Adam Neumann, the culture and financial mania that allowed WeWork to soar and crash, and the broader lessons (or lack thereof) for venture capital, startup culture, and founder worship in Silicon Valley. They also explore persistent gender disparities in VC funding and the structural oddities that fueled WeWork’s collapse.

Main Discussion Points

1. The Adam Neumann Phenomenon

• Portrait of a Founder: Adam Neumann is painted as “a figure you’d have to invent if he didn’t exist,” with an uncanny ability to blend boundless ambition, greed, and charismatic salesmanship. Brown describes Neumann’s relentless drive:

  “[Adam Neumann] takes the standard amount of self-enrichment desire and kind of smothers it in the sand.” (02:12)

• Public vs Private Persona: While Neumann publicly talked about “making the world a better place” and “putting we over me,” in practice he put his own interests first, demanding massive compensation packages even when leaving the company.

  “At the end of the day, he literally is putting ‘me’ over his company, WeWork.” (03:24)

2. Did WeWork Make the World Better?

• Office Space Innovation: Brown acknowledges that, despite its wasteful financials, WeWork’s flexible office spaces with month-to-month arrangements disrupted traditional 10-year leases. This brought real value to many businesses, particularly in a post-pandemic environment.

  “For the perspective of liquidity of office space, [Neumann] has really made the world a much better place.” (04:27)

• Pandemic Downturn and Outlook: Occupancy plunged during the pandemic, highlighting the vulnerability of shared spaces, but a potential rebound is possible as companies reconsider permanent office commitments. WeWork is now seen as “a weather vane” for the future of the office market. (05:27–06:34)

3. The Allure of “Blitzscaling” and Venture Mania

• Blitzscaling Defined: The panel discusses the Silicon Valley belief that the path to dominance requires out-raising and outspending competitors—essentially buying your monopoly (“blitzscaling”).

  “There was this meme in Silicon Valley that everything needed to be blitzscaling… The theory was every business can be a monopoly if you grow fast enough.” (12:09)

• Faulty Assumptions: Brown notes that blitzscaling only fits select businesses with true network effects, not physical operations like coworking or ice cream shops.
• Misapplication in Real Estate: Venture capital’s demand for 10x–100x returns clashed with real estate’s slow, debt-driven returns, leading to financial structures at WeWork that didn’t make sense for the underlying business. (15:37)

4. Financial Alchemy and “Community Adjusted EBITDA”

• Creative Accounting: WeWork famously invented “Community Adjusted EBITDA”—highlighting inflated profit margins by ignoring major costs (like the first year’s free rent in lease agreements).

  “[They] tried to highlight and misdirect with… community adjusted EBITDA. They’re like: look, we’re making tons of money.” (18:37)

• Bond Market Caution: While equity investors were sold a vision, bond investors were less impressed; after WeWork issued debt, its bond prices dropped, prompting Neumann to buy back debt in an effort to bolster perceived value. (20:02)

5. Why Did Investors Buy In?

• Cult of Charisma: Despite Neumann’s cartoonish background (including baby knee-pads and a spiritual advisor), investors were wowed by face-to-face salesmanship and the frenzied belief that “this time it’s different.”

  “If it wasn’t [Adam Neumann], there would have been some other maybe slightly less charismatic, slightly less tequila-drinking guy…” (11:23)

• Investor Rationalizations: Sophisticated investors suspended disbelief, seeing in WeWork the trappings of a high-growth software company, despite glaring differences in cost structure and scalability. (16:09–17:00)

6. The Problem of Founder Control

• Unfettered Power: Silicon Valley’s mythologizing of founder genius has led to dual-class shares and board structures giving unchecked power (and compensation) to founders regardless of outcomes—ironically, neither Jobs nor Bezos ever had this level of formal control.

  “What do you think is going to happen if you… give them literally billions of dollars? How can we expect there not to be more WeWorks if that’s the case?” (25:07)

• Recent IPOs: Even after WeWork’s implosion, tech IPOs like DoorDash, Airbnb, and Robinhood have adopted extreme founder-favoring structures and massive comp packages.
• Notable Quote:

  “Charismatic white men with good hair have always been able to get away with a lot.” —Stacey Marie Ishmael, quoting Alison Stewart, (26:29)

7. Persistent Gender Disparities in Startups

• Systemic Bias: The panel highlights how female founders face repeated VC rejections for successful companies—contrasted with the ease by which charismatic men secure funding, even for questionable ideas.

  “It took a hundred different groups of people being idiots and not able to see the potential market value… whereas dudes with good hair are like, I have an idea for an electric car. Please write a check to me.” (29:00–29:40)

• Incidental Discovery: VCs sometimes only invest in female-led companies when prompted by their wives or assistants’ usage of the product, underscoring how insular and biased the ecosystem can be.

8. WeWork's Legacy, SPACs, and Looking Forward

• Have We Learned Anything? Brown says outright:

  “We’ve learned nothing.” (21:11)

• SPACs as "Loose Money": The capital market’s willingness to continue funding speculative ventures (now through SPACs) signals that the WeWork tale hasn’t curbed risky behavior. If Neumann had tried the same IPO in 2021 via a SPAC, he might very well have succeeded. (33:02–34:02, 41:56)
• The WeWork Number: Neumann and his controlled entities ultimately extracted $2.1 billion from the company despite its $11 billion in losses—a testament to the upside-down incentives at play. (35:08)

Notable Quotes & Memorable Moments

• On Greed:

  “He takes the standard amount of self-enrichment desire and kind of smothers it in the sand.”
  — Elliot Brown (02:12)

• On Venture Funding:

  “There’s just this meme that there’s only one way to create a company now – by raising money from this crazy part of the world that…is looking for messianic founders.”
  — Elliot Brown (13:40)

• On Gender Bias:

  “It took a hundred different groups of people being idiots and not able to see the potential market value... whereas dudes with good hair are like, I have an idea for an electric car. Please write a check to me.”
  — Stacey Marie Ishmael (29:00)

• On Lessons Learned:

  “We’ve learned nothing.”
  — Elliot Brown (21:11)

• On WeWork’s Real Estate Model:

  “[Real estate] has always been a debt-based business... [WeWork] just funded everything with equity... how did Masa Son think that made sense?”
  — Felix Salmon (15:37)

• On “Community Adjusted EBITDA”:

  “That’s a really good trick.”
  — Elliot Brown (17:00)

Timestamps for Key Segments

• Adam Neumann: Greed and Charisma (02:12–04:05)
• WeWork’s Unintended Innovations (04:05–06:34)
• The Economics of Density and the Pandemic (06:34–09:12)
• Why Did Investors Buy In? (09:12–11:23)
• Blitzscaling and Venture Mania (11:23–14:05)
• How Venture Capital Warped Real Estate (14:05–16:09)
• Accounting Tricks and Bonds (17:00–21:01)
• Have We Learned Anything? (21:07–23:06)
• Founder Control and Compensation (23:06–27:01)
• Gender Disparities in Venture Funding (28:51–31:46)
• SPACs and the Future (33:02–34:33)
• Neumann’s Windfall (35:08–36:16)
• Notable Numbers Segment — including “69% of WeWork members didn’t have friends at WeWork” (36:35–37:39), “$5.9 million trademark fee for ‘We’” (40:34–41:56)

Conclusion

This lively and in-depth episode offers a penetrating look at the irrational exuberance, structural flaws, and ongoing problems in tech and venture capital—using WeWork as both symptom and cautionary tale. The panel’s blend of incredulity, sharp analysis, and firsthand reporting makes it a must-listen for anyone interested in Silicon Valley, finance, and the cult of the charismatic founder.

For more bonus anecdotes (including wild stories about Rebecca Neumann), check out the Slate Plus segment as recommended by the hosts.