The $47 Billion Cult

$47 billion had just gone up in Flames wework had been one of the most valuable startups on the planet and the founder believed he was the Messiah who was going to solve The World's problems however wework was now bankrupt being sued for billions and accused of being a cult so what really happened happened here this is a story of obscene wealth power and dead unicorns and as we go deeper down this Rabbit Hole things will just get crazier and crazier welcome to the spectacular rise and fall of weor one of the most insane business stories

you'll ever hear [Music] Adam Newman had an unusual childhood to say the least his family moved to 13 different places whilst he was growing up meaning he never felt settled one of those was was a kabut in Israel which was meant to be a self-sustaining socialist Community whilst Adam enjoyed the communal feel he didn't like that everyone in the community got paid the same amount no matter which job they did and so in 2001 at 22 years old Adam moved from Israel to New York for one simple reason he wanted to get rich he told

friends that New York was where opportunity happens and he soon set up his first business the idea was simple a women shoe with a collapsible high heel so the shoes could turn into Flats Adam quickly found a Chinese manufacturer to produce them however the first person who actually tried the shoes said it nearly sliced their finger off the design was ugly and dangerous So Adam went out with some friends to drown his Sorrows that his first business idea seemed to be going nowhere but in conversation over some beers one friend asked why baby clothes didn't

have knee pads for all the time baby spent crawling across hard floors he'd said it as a joke but Adam took it literally and thought it was a genius business idea the next morning Adam registered a trademark for a new baby clothes company called crawlers the slogan was just because they don't tell you doesn't mean they don't hurt Adam got some seed funding from his grandmother and other connections he'd made in New York and then it fully threw himself into this new business selling baby clothes with knee pads Adam was a great salesman and through

his Charisma and sheer persistence he did manage to sell some baby clothes it helped that he stood out so much at trade shows which were typically filled with mothers and yet here was this 6'5 childless guy with a booming voice passionately telling crowds how babies couldn't possibly be happy in life without builtin knee pads of course there were some obvious flaws with his idea babies had managed just fine for all of human history without knee pads and babies only craw for a few months so would quickly grow out other clothes as a result crawlers was

struggling to make a profit and Adam was becoming increasingly stressed as he burned through his investment money his hands started to shake it was clear to Adam this business was never going to make him Rich he needed to think [Music] bigger Adam walked into an elevator with no shirt or shoes on and struck up a conversation with the strangers inside one of those people was a guy called Miguel mckelvie who would go on to become we work's co-founder alongside Adam Miguel was in many ways the opposite of Adam he was much more shy and introverted

but one thing they did have in common was their unusual childhood Miguel had also been raised on a commune of sorts it didn't seem a hugely happy childhood though as Miguel recalled dumpster diving and surviving largely off food stamps however Adam and Miguel struck up a friendship and soon they began talking about ways of making money Adam said he'd heard of someone running a profitable business simply from renting out office space to small companies it sounded so simple and Adam and Miguel figured they could do that themselves so Adam spoke to his own landlord a

guy called Joshua Gutman who had empty floors in one of his buildings Adam said if Gutman let them use one of his empty floors him and Miguel would get the customers and run everything then they'd split the profits Gutman was skeptical about giving them office space he said you sell baby clothes what do you know about real estate Adam responded your building is empty what do you know about real estate it was a bold move but Gutman clearly did need some help filling the building so he told Adam to come back tomorrow with their business

plan the problem was Adam and Miguel did not have a business plan so Miguel spent the entire night frantically trying to write one however even though the business plan was written in one night Gman like it and offered them several floors in one of his office buildings Adam even convinced Gutman to pay for renovations so he and Miguel could make it look nice they decided to call this new office based business green desk believing they could position themselves as being environmentally friendly but the reality was there was nothing about the business that was particularly eco-friendly

it was just a marketing gimmick to try and stand out as for the business model it was pretty simple the plan was to create a co-working space where lots of small business businesses would all work in the same office they would divide each floor in gutman's building into little clusters essentially mini offices with just two or three desks each then there'd be shared communal spaces with Furniture coffee and conference rooms and a single shared receptionist when a small business signed up to Green desk everything would already be supplied like Wi-Fi printers and drinks so it

was all just ready to go without the hassle of setting up a new office tenants would pay monthly rent to Green desk and it'd be short-term contracts they could EAS cancel the logic was that customers would pay more per desk than in a traditional office because it was much more flexible and convenient not just that but because Adam and Miguel were trying to position this as a co-working space where people from different companies would interact with each other they could pack everyone in very tightly together so they could fit more people in than a normal

office so basically they could make more money from the same amount of space Adam and Miguel also bought most of their furniture from Ikea to keep cost down so that was their plan and once they'd renovated the office space to make it look more modern Miguel started posting ads on sites like Craigslist to get their first tenants now given this was happening in 2008 right after the financial crisis Gman wasn't sure they'd get much interest but it actually turned out to be a pretty great time to start a co-working company there were a lot of

people who'd lost their jobs and were now looking to start their own business and thus many Freelancers and startups quickly signed up most small businesses didn't want a big office with long leases which is what most landlords were selling so what greenes was offering was ideal for them and if their startup failed they weren't locked into to a long-term lease so basically Adam and Miguel seem to have found a gap in the market it wasn't even a new idea it was just good timing green desk was a hit for a monthly fee these small businesses

got access to everything they needed Plus instead of cubicles or drywall between offices there were glass dividers to make the space feel more open lots of light streamed into the office to give it a brighter more modern feel and soon the building was full of small businesses often just a couple of people each everyone seemed to love the camaraderie in the office and it quickly developed into a mini community in fact Adam and Miguel threw many networking events that were essentially more like parties which acted as ice breakers so everyone there could get to know

each other and build connections soon they opened another floor and then another and eventually the whole building was completely filled with 350 tenants however Adam was already thinking a lot bigger he wanted something that could become a giant Empire So Adam spoke to Gutman about this Grand Vision he had to make this into a global movement but Gutman wasn't as Keen to expand so quickly and Gutman also didn't want to lease buildings from other landlords he said that was very risky because then they'd have to take out long-term leases and yet their tenants could easily

cancel so if there was another economic downturn and everyone canceled they'd be on the hook for huge payments and yet they'd have no Revenue Gutman said they had a good thing going why not just keep it simple and low risk but Adam was never going to be content with that he'd finally had a small taste of success and now he wanted to expand rapidly So Adam convinced Miguel they should go solo they didn't need Gutman he just provided the building but they could lease buildings from other landlords and then have full control this would allow

Adam to to do whatever he wanted and expand as much as he desired what's interesting is that if Adam had just stuck with greenes and continued working with Gutman he would eventually make millions the model worked and it was safe as Gutman already owned buildings they could use but Adam was getting restless and droing much bigger he wanted something that could make billions not Millions so in 2009 just a year and a half after starting green desk Adam and Miguel sold their sharing the company to Gutman in exchange for about $500,000 each Adam told Miguel

not to transfer his share of the green desk money though because Adam would just spend it so instead Miguel kept the money safe and they agreed to invest all of it into their new Venture it was time for The Madness of wework to begin [Music] Adam had huge plans for their new business before they even started it and he told friends he was going to become a billionaire Adam said the office spaces would just be the beginning and that soon they could also get into hotels and restaurants and many other Industries Miguel pointed out they

didn't even have a business name yet and so they began brainstorming and eventually decided on Wei work as this captured the community Spirit they were hoping to focus on but it also meant that if Adam's expansion plans came true they could use this we branding for all the other markets they wanted to enter like we live we eat we sleep we anything but first they were starting with officers exactly like they had with green desk wew work was going to be very similar to Green desk but ditching the environmental focus and putting more focus on

community and togetherness and rather than partnering with one landlord who took 50% we work with simply lease buildings from different landlords then they divide the space up and rent out each slice to smaller companies this did mean more risk as they'd be paying for those offices no matter what even if they couldn't sell all the space but it also meant higher potential profits and so Adam set up meetings with every office building owner he could the problem was many of them were skeptical of this brand new unproven company who would be renting out space to

other new unproven companies but Adam was relentless and went back to landlords again and again then Adam met a guy called Joel shrier a young real estate developer still in his 20s who said he wanted to invest in Wei work he asked Adam how much he valued the company at now Adam and Miguel hadn't been looking for another partner but they figured it didn't hurt to just throw out an outrageous number so Adam said the company was worth $45 million even though wework didn't have a single office yet they basically just had the concept and

yet even more shockingly shria agreed to put in $15 million for a third of the company that didn't really exist yet this deal was crucial for wework though because shrier was well known in New York real estate and so him being on board gave them more credibility he also personally guaranteed the company leases and introduced Adam and Miguel to other landlords So Adam and Miguel finally had landlords willing to deal with them and soon enough weor secured the lease on its first office building 154 Grand Street in SoHo would become wework's first office but honestly

it was a rundown mess it had just one small elevator that took nearly a minute to get to the top floor and there were only six floors so Adam pushed hard for low rent and money from the landlord to do Renovations Adam then began selling people on becoming tenants at the first we work office even though they didn't have anything to show yet whilst all the renovations were taking place they actually got some of their first customers by literally going to a nearby Starbucks and approaching people who seem to be working on their laptops they

said wouldn't you rather have a proper desk and office and be part of the community and some of those people did join we were work whilst Adam and Miguel were both doing lots of random jobs to get everything ready it was immediately clear Adam would be CEO leading the overall vision and making deals he spent a lot of his time wooing investors partners and landlords and he also developed a reputation for doing tequila shots during meetings meanwhile Miguel focused on designing the space and wanted to make it more like a boutique hotel than a traditional

office lots of light would be streaming in with lots of open space the offices would be glass cubes to give a feeling of transparency and that everyone in wew work was together the idea was that everyone would get to know each other and connections would form like if you needed a lawyer you could just go and chat with the one working down the hall as all of these small businesses were packed in together Adam also hired their first employee and his first email to her was good morning let's build the largest networking community on the

planet we work officially opened February 2010 with 17 tenants some were startups and some individual Freelancers like an architect and a musician having a desk at wework was meant to be more like being part of a club they even called their tenants Members wework's First it manager was a 16-year-old high schooler with the nickname Joey cables this was slightly problematic as sometimes there'd be a tech issue and they'd have to wait to get it sorted because their it manager was stuck in algebra class meanwhile Miguel designed the company's first logo a stick figure with a

sledgehammer smashing a computer that's because Adam and Miguel felt people want wanted to rebel against the office culture and Corporate America of previous decades Millennials didn't want boring isolated offices and cubicles they wanted more social interaction and work to be more fun and we work tried to tap into that before they barely finished their first building Adam started looking for their second and started hiring more staff all of weworks employees in the early days had to take on a variety of different tasks that weren't in their job description especially doing lots of physical labor when

a new floor of a wework office was about to open everyone was expected to help out whether it was building the desks or painting the walls and they worked extremely long hours too as Adam set unrealistic deadlines the wework team often tried to tell Adam they had to postpone the launch date of an office because they were exhausted and yet Adam somehow managed to convince them they could do it never give up work until you TR everyone would work weekends or pull all nighters to get everything set up if someone left at 600 p.m. they'd

get asked if they were taking a half day despite this most wework employees did really enjoy the job at first it was a very young Workforce who enjoyed the social culture wew work had and the fact that they were being given a lot of responsibility at an early age and since the employees spent so much time together many became close friends plus there weren't many companies that handed out free beers to employees or the CEO skateboarded around the office the employees also seemed to buy into Adam's Vision that they were part of an important important

movement to change the way people worked Adam would say they were a family and a lot of the team bought into his cult-like promises of them changing the world together I was in my mid 20s looking for purpose and here's this person selling this dream and I I was an easy target for that I definitely wanted the world he was telling me about Adam actually bragged that we work underpaid at staff but reassured them because of the stock they were all going to be millionaires one day as they would all get we work stock options

many of the young employees had no idea how stock options even worked and just took Adam at his word that their shares would be extremely valuable and more than compensate for their low wages I'm working 12-hour days and I don't get paid overtime but like it's going to come back to us tfold like at a later date as a result of all this work wework was growing rapidly if you had a startup wew work seemed like a great place to run at it felt modern and there were regular happy hours with drinks where people would

meet and make connections wework also added arcade games Fruit water and craft beer on tap in 2011 wework generated $7.4 million of Revenue and made a very small loss of $50,000 this was pretty good for a new company that had been expanding a lot things mostly seemed to be working however the key to expanding quickly was getting more money from investors so they could open more offices luckily Adam was a great salesman and his extreme conviction and bold Vision one investors over he'd get them excited about all the billions of dollars they were going to

make and their eyes would light up to be fair to investors Adam always put on a good show he'd ask investors to come to a wework office to see it in action and when they arrived he'd give all his wework employees a code phrase activate the space which meant to suddenly throw a party and make sure there was lots of hype and activity happening in the office investors didn't realize it was basically a fake event to create a huge buzz and excitement around the office while the investors were there so to them it just seemed

like wework offices were always like this I'd get this frantic email or call Adam's coming to DC with investors you know activate the space like buy whatever you got to buy but like make sure that like everyone's having fun so I'd like I'd order like $2,000 worth of like nitrogen Frozen ice cream and the cool thing was it totally worked cuz when you walked in it looked like an ice cream party with a million different companies and everybody was laughing and smiling and having a good time so we made to happen so when you first

walked in you're like dude this place is awesome like what is going on however the main reason Adam was able to convince investors to put lots of money in is Adam told them that wework was not a real estate company and this is where things start to get really weird [Music] Adam told everyone that the early 2000s was the I decade iPhone iPod but he said the next decade is the Wii decade focused on community and a new way of working he spoke about a revolution in the way people worked this confused some people sure

wework's offices were nicer than traditional offices but it didn't exactly seem like a revolution but Adam said wework was the first physical social network was actually more like a tech company than a real estate company he said we happen to need buildings just like Airbnb happens to need Apartments he also described wew work as Uber for offices and the next Google hey guys this is wew work the world's first physical social network our mission is to empower the world through collaboration we know that the future of the world is in small business not in Corporate

America so we're building a community that's transparent and that's accountable that is wew work Adam knew that trying to position wework as a tech company helped to make a much more compelling story to investors Venture Capital firms don't often invest in real estate as it's much harder to scale compared to a software company for example software companies may spend a lot of money upfront to develop their product but then they can sell it over and over at almost no incremental cost so profits can be exponential whereas real estate requires finding a new building with a

new landlord and new tenants and lots of new UN avoidable costs of expansion the profit margins are much smaller andless real estate companies make it valued at two to five times their annual revenue but fast growing tech companies can get valuations more than 20 times their revenue and are much more exciting to investors looking for growth So Adam tried to make clear that we were definitely wasn't a real estate company so it's almost like you're a real estate company wrapped in this sort of in in this Tech uh Sheen so we're definitely not a real

estate company we are a community of creators we create environment for entrepreneurs and Freelancers we leverage technology to connect people and it's a new way of working and just like uber is the sharing economy for cars and City bike for bicycle we're the sharing economy for space when stories appeared in the media saying we work was a real estate company their PR team were told to call reporters and make them change it of course in reality companies like uber and Airbnb were very different to we work as they're extremely asset like as their platform based

and can launch their apps literally anywhere in the world with no direct extra cost contrast that with wework where every new office launch locked them into an expensive long-term lease and unlike Airbnb they were responsible for all the maintenance and setup costs of each building not just that but Adam was the furthest thing from a tech entrepreneur he barely ever used a computer couldn't code and struggled to even use his MacBook many also pointed out to Adam that it wasn't going to be easy to scale community building a community took time and a more personalized

approach but Adam disagreed and he did an incredible job of creating a narrative that we work with something new and Innovative Adam also persuaded investors solely to focus on the revenue numbers which were growing rapidly and ignore the fact that the business wasn't actually making any profit Adam would point out that many big tech companies were unprofitable for a while as the idea was they invested heavily in growth initially to gain market share but once they dominated the market they could then slow expansion and become profitable and it's true this strategy could work well for

tech companies where adding new users had very minimal marginal cost but that was not the case with wework some investors did have doubts about the business model but wework's early growth was undeniable and Adam was very convincing he also pitted investors against each other and many investors suffered from fomo and didn't want to miss out on this fast growing company plus investing in private companies is very different to investing in public companies that are listed on the stock market as those companies have a lot more regulations around what they report and they have to fully

disclose their finances whereas private companies don't have to reveal all those details which meant Founders could focus more on telling a story and Adam always told his team to double their projections before he would show them to investors even if those projections were wildly unrealistic and to be fair we's Revenue growth was doubling every year the problem was their costs were going just as fast fast the reality was weor didn't have the network effects of tech companies they didn't benefit from economies of scale they had no real competitive Advantage it was unclear if the business

model even worked or whether it was just being propped up by investor money however there was a prevailing wisdom amongst Venture Capital firms that you bet on ambitious entrepreneurs more than the companies themselves and after meeting with Adam some of the investors said let's give him some money he'll figure it out one of those was a venture capital firm called Benchmark who agreed to invest $16.5 million at a valuation of 100 million Benchmark had backed Instagram Uber and eBay so having them invest was a seal of approval and validation this caused other investors to want

to invest there was a feeling of well if they've invested the business must have a lot of potential and sure enough it was a domino effect where one influential investor led to another and then another and every time new investors came in the valuation of wheel grows further and Adam could keep opening more offices and grow even faster with all this investment money Adam started outbidding all their competitors for new office leases even if it meant massively overpaying but he told them I'm not looking to make money right now I'm just looking to add people

Adam wanted to focus on growth and worry about profitability later before long Goldman Sachs wanted to invest in wework at a $220 million valuation which would mean in just a year weck's valuation had doubled but Adam turned them down saying it was too low most wework employees thought it was crazy to turn down so much money given that they needed the cash as they were spending so much but Adam's gamble paid off shortly after rejecting the deal wework raised $40 million at a 440 million valuation double what Goldman had proposed now the real truth is

that private valuations are fairly meaningless there's no specific formula or maths behind it it's what invest ERS are estimating the company as worth but Adam loved seeing the valuation rise and it helped create a narrative that wework had this incredible upward momentum however more investors would normally mean giving away some control of the company but Adam changed it so his share votes counted 10 times more which meant he could sell more shares but still maintain full control of the company several early investors warned him that absolute power corrupts and questioned if this was the best

decision for wework but Adam Shrugged them off and said I am we work to try and prove they were a tech company we work launched weconnect kind of like their own internal version of LinkedIn to help connect the companies working in different wework offices so if you wanted to hire for a specific role like a graphic designer you could look on WE conect and find someone but the system was buggy and it could take minutes to even load pages hardly any wework members were really using it and it wasn't clear what the benefit was this

was a repeat cheated pattern where rather than just using proven software that already existed wework would try to build their own internal version to make it seem more like a tech company but this meant they had a bunch of poorly developed systems patched together so rather than just using a well-known billing software they tried to make their own which wasn't as good weor even started considering launching their own cryptocurrency for actual tech companies all the millions of dollars Adam had raised could last them a long time but we work at high costs like leases and

renovations and by 2013 they had over 200 employees so it wasn't long before Adam needed to go and Pitch investors for even more money as they would soon be running out of cash due to their rate of expansion luckily investors kept coming Adam convinced JP Morgan and a few other high-profile investors to put in an additional 150 million at a 1.5 billion valuation this officially made wework a unicorn the term used to describe companies with more than a billion despite raising all this money the company forgot to Ren its healthcare plan for Employees leaving them

with no insurance for the month meanwhile Adam often sold some of his shares when new investors came in this was unusual most Founders don't sell shares until their company goes public on the stock market after all the employees couldn't sell their shares yet but it was a different rule for Adam the company was 4 years old at this point and Adam bragged that wework was undergoing the fastest physical growth in the history of the world however Outsiders couldn't make sense of we work why was it valued so high highy for example long before wework ever

existed a company called iwg had been running essentially the same business model by every metric iwg was beating wework more members more locations more profit and yet wework's valuation was Far higher there were a couple of differences like we's offices were more modern and vibrant and appealed more to Millennials but still business model and economics were the same it seemed like the real differentiator was simply the exciting narrative that Adam was pushing that he was building a movement people were getting caught up in the hype Charisma and story Adam was telling and how fast the

company was expanding that's why Adam always took potential investors on an in-person tour of wework as the numbers alone wouldn't have been compelling Adam needed to put on a show and investors who'd missed out on startups like Facebook were Keen not to miss out on the next one and so they didn't scrutinize things as closely as they should have even those who were skeptical felt that once the company went public they could offload their shares this is known as the greater fool Theory speculating on overvalued assets costing a lot more than their intrinsic value believing

those assets can be resold at an even higher price to someone else basically believing there's an even bigger fall we'll pay an even higher price later [Music] every summer all of wework's employees headed off to the company's annual summer camp event a mini festival with live music in the evenings and a variety of events in the day like rock climbing canoeing yoga and ziplining there were also bars everywhere serving unlimited amounts of free alcohol for many of wework's young Workforce it was a perfect weekend they might not have been able to take a vacation so

this was their chance to completely let loose and party you'd see Executives stumbling around high or with a water gun filled with vodka the head of HR got so drunk she was rushed to hospital but by summer camp 2015 the event was costing millions of dollars for a company event they were getting massive artists to perform including Lord and bestile chain smokers played and were paid in wework stock and at the weekend arrived by helicopter to play a surprise set it's like if you went to Coachella but it was run by your boss to me

it's just this perfect example of how we work wanted to blur that line between your personal and professional life blur it so completely it was basically erased most employees loved the event as it was essentially a big party but some of the older employees resented it as it was mandatory and that they had tracking bracelets to ensure staff attended someone actually got fired for leaving early even though Adam actually left early as well Adam always said the idea behind the Wii movement was that everyone was equal and yet whilst the employees slept in tents in

the mud at summer camp Adam had a luxurious trailer at the top of a hill some employees described it as cult-like in the way staff members defended Adam as a kind of god-like figure one employee even got a wework tattoo and nobody partied more than Adam there was one example where a manager showed up at a wework office one morning to find it smelling of weed with cups of alcohol left everywhere he looked at the security tape so he knew which employee was responsible only to find out it had been Adam and another wework executive

drinking all through the night Adam later installed a high power ceiling vent which many believed was so he could smoke in his office or another example during a company ski trip Adam and several Executives grabbed waiters trays to go sledding when a hotel employee asked them to stop Adam said I could buy this whole hotel but parties were a key aspect of wew work they even introduced a thank God its Monday meeting each week which had lots of tequila shots along with big rallying speech from Adam about how they were changing the world and how

fast the company was growing they' then chant we work over and over again and you'd be sitting in your office and all of a sudden you hear chanting throughout the entire building one manager said he was told to drink the Kool-Aid at we work they'd meant it in a positive way but the phrase actually means accepting a deranged or foolish ideology and the term was inspired from a deadly cult was the fun partying atmosphere and rapid growth made it seem like everything was going perfectly in 2015 wework made a $227 million loss Adam said that's

because they had prioritized growth instead of profitability he convinced investors it wasn't a problem as wework was hitting its Revenue targets and Adam said if they wanted to be profitable they could just stop expansion but the reality was their losses were getting bigger each year with no sign of getting even close to profitable and Adam wanted to increase expansion a lot more as he knew that's what would impress future investors and bring more money in which would allow even more expansion in truth Adam seemed to love the process of raising more money and seeing weick's

value grow along with his own net worth so Adam continued to impress investors with the fast growing Revenue numbers and soon enough weor secured $355 million more of funding at a $5 billion valuation Adam said our trajectory looks like Amazon's except our Market is larger and our growth is faster he also said that just like Amazon started with books then expanded into selling everything else we work had started with offices but would soon expand to do everything else and now that he had all this investment money it was time to make his world domination plans

a reality [Music] as early as 2014 Adam had been trademarking names for future product lines like we eat for food delivery or we bike for a bicycle valet service ideas were casually thrown around like wework should make an energy drink one wework member pointed out that even basic things like coffee machines and elevators were broken in the wework offices maybe they should fix stuff like that before worrying about launching an energy drink but as we got more and more money from investors suddenly there was enough funding for all of Adam's World ideas firstly Adam launched

we Studios a movie production company but the main goal of that seemed to be to try and launch the film career of his wife Adam's wife was Rebecca paltro when she first met Adam she'd said I just knew that he was going to be the man that was going to help save the world Rebecca was the cousin of gwynth paltro as she frequently liked to tell people but Rebecca hadn't had the same acting success herself and so wi Studios was meant to help her get more roles but after their first full movie flopped at the

box office they didn't make another however as we were grew Rebecca started to become more involved in the company Rebecca was very spiritual and that definitely rubbed off on Adam and thus it rubbed off on wew work he started talking a lot more about energy and he brought his spiritual adviser into the office to preach about the importance of hard work next they opened a boutique gym offering yoga classes infused with an entrepreneurial Spirit wework also hired a cent artist to create a signature wework fragrance so many of these new Ventures seem like pet projects

based on Adam and Rebecca's personal interests rather than making business sense they seem to think we can make anything work so let's just do everything but it was difficult to see how the company could possibly develop expertise in all these different unrelated businesses it seemed like a distraction given their core business model of leasing office space still wasn't close to profitable the thing is Adam had seen how most of the big tech companies seem to be diversifying just think of all the completely different business lines companies like Google and Amazon have and since he was

adamant wework was a tech company he wanted to do the same he wanted to build an entire Wei World in fact he wanted to go beyond this world because he told a reporter that wew work Mars is in our pipeline he explained how when Elon gets everyone to Mars wew work will build a community like there's never been unfortunately when Adam eventually managed to meet Elon for a couple of minutes Elon didn't seem remotely interested in the idea of a wework on Mars as well as creating new companies Adam was very keen to start buying

them he initially wanted to buy Etsy until someone told him it was a billion dollar public company he also looked into buying a company called magnesis a membership club created by Billy McFarland the guy who would go on to create the absolutely disastrous fire festival and subsequently end up in jail ironically Billy we work as an inspiration for firefest meanwhile Adam had become friends with Jared Kushner Donald Trump's son-in-law and Adam claimed that if Trump got elected Jared would consider letting Adam reimagine America's post offices and libraries nobody knew quite what that meant but Adam

was thrilled with how influential he was becoming however the world spending on random projects didn't seem to matter as Adam kept convincing more investors to come on board during one meeting with a big investor Adam took into the roof of the building to do shots together and then celebrated by spraying the investor with a fire extinguisher one we workor employee commented should Adam have done that maybe not but you have to tip your hat to him we close the deal the next week [Music] Adam was not content with just trying to change the way people

worked he wanted to change the way people lived andless he decided wework was going to launch a new initiative called we live small apartments with big common spaces so residents could easily hang out together a type of communal living that Adam said would change residential real estate forever ironically when he'd been at College Adam had pitched a very similar idea to his Professor who told him he didn't think it would work Adam was determined to prove him wrong essentially it was like a college dorm for adults small rooms communal kitchens and a game room and

lots of happy hours they were starting this in New York and it wasn't clear if the people of New York actually wanted even smaller apartments with more people crammed in just so they could have more communal areas we Liv's economics also made even less sense than we work they would have to build apartments from the ground up to get the layout and architecture they wanted and there were a lot more regulations for apartments than offices that forbid you squeezing so many people into such a tight space not to mention all the plumbing costs but for

Adam expanding into a whole new giant market was a great selling point to convince more investors to give him money Adam told them that we live would be even bigger than we work the initial slide deck Adam showed investors predicted that within 4 years we live should have 34,000 residents and be making $600 million in rent in reality they struggled to even open two locations and they lost lots of money on it but in January 2016 two we live floors finally opened at 110 Wall Streets to help get some momentum we workk employees and members

were offered the chance to stay in a we live for just $500 a month as an initial trial although this meant sharing a small studio apartment with a coworker but many of wew work's employees were on low salaries and this also meant they could live extremely close to their wework office so they accepted the offer however imagine for a moment you're spending the majority of your waking hours at Wei work and then when you come home you're coming back to we live soon you realize your entire life and Social Circle was all connected to this

one company many employees soon realized they had no friends outside of Wei work they said it was starting to feel like a bit of a cult I was working in we work and living in we live my entire life was being propped up by the Wii community and we Works problems were about to get a lot bigger [Music] real estate prices were rising and we work with sometimes paying triple the amount per square foot that it had in its early days and because Adam was opening so many new offices and product lines they were already

starting to think about needing more money soon even though they raised 355 million not that long ago in less than a year we workor had also tripled its employee number and now had over a thousand full-time staff many of the senior positions were held by Adam's friends and family Adam didn't see that as problematic though during a company toast Adam asked one of his team what's that word you always use when I hire my family and friends nepotism he replied yes that's it Adam said cheers to nepotism considering it was meant to be a tech

company weck's infrastructure was quite shocking one member realized that weck's network was so insec cure that they could see data from other wework customers the person who noticed this was from a small data analytics startup called thinknum who were themselves using a wework office using this security loophole in wework system they found out that wework's churn rate meaning how quickly wework members were leaving had been on the rise they also discovered that wework's internal LinkedIn was hardly used at all and only about 20% of users had ever even posted so tham posted this data publicly

on its blog after all the data had been freely available even if it wasn't meant to be but the very next day they were kicked out of wework for violating the happiness Clause of their contract and were told they had 30 minutes to leave an even more worrying stat for wework was that its occupancy rate was falling now that they were leasing so many offices many of which were quite close together the fact that wework offices were normally quite full had been a key selling point Adam showed to investors and so to stop the occupancy

rate from falling and ensure their buildings remain full we work started offering several months of free rent to any new tenants who joined with no contract at all many companies would simply take the free months and then move to a nearby wework to get the discount all over again thus getting unlimited free office space wework was so Keen to boost their numbers they didn't really keep track and the team were told to spend no expense on fancy dinners to Woo new members wew spending and costs were spiraling higher and higher wew work had not always

been this way in the early days they'd worked hard to save money and so So Adam made a big speech about how they needed to start fighting for every dollar again Adam decided to pull back some of his new ideas like we Kids Daycare however many employees felt he was being hypocritical for example in one meeting Adam suggested they buy cheap furniture from China to save money and then he turned to Miguel and asked if he wanted to take a helicopter to The Hamptons one wework employee who was particularly unhappy was Joanna strange her boss

had given her his login details so she could help him with different admin tasks but one day Joan and noticed an email about upcoming layoffs and so she clicked on it it turned out weor was cutting 7% of its entire Workforce and she saw that her name was on the list of people to be fired she also saw that one manager was bragging he'd managed to lay off more staff from his team than the other managers had so Joanna leaked the emails about layoffs to a reporter Adam was Furious the big number of layoffs hurt

the narrative he was pushing about wework's incredible growth and whilst it was true that Revenue was still growing fast the more the revenue grew the more money the company lost overall this meant they were stuck in a cycle of constantly having to raise more money from investors by 2016 wework was losing $1 million a day and once again it would soon be running out of cash wework was big enough now that most companies would go public at this point meaning to list their shares on the public stock markets to raise more money for context Amazon

went public just 3 years after it was founded Apple was four years but even though wework was now into its sixth year Adam still wanted to hold off on going public as long as possible staying private meant much less scrutiny from the press or investors and it meant they didn't have to fully share all their finances however it seemed like there were no options left because there were barely any private investors left who were big enough to invest given how high weworks valuation had become but then all of a sudden Adam struck up a conversation

with just about the only private investor in the world who did have enough money and this meeting was change everything before we dive into Adam's Financial strategies let's talk about how you can keep and grow more of your money with today's sponsor better wealth the truth is big businesses and the wealthy don't just make money they know how to keep it grow it and use it efficiently but most individuals miss out on these same strategies and that's where better wealth comes in they've helped their clients unlock over $2 billion in financial value just to Insurance

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wealthy go to better wealth.com magnates or simply click the link in the description to get started for [Music] free masayoshi son is a fascinating character and a key player in the wework story he's the founder of the Investment Company SoftBank and perhaps more than any other investor in the world masasa is known for making big bets at one point during the dot boom in the year 2000 Massa briefly became the richest man in the world but it lasted just 3 days and then he lost around $70 billion almost overnight when the dotom crash happened which

was the biggest personal loss an investor had ever made but that didn't stop Massa he then invested in Alibaba in its early days when the company had had just a few employees and he turned a 20 million investment into over $70 billion making it one of the best Venture Capital Investments of all time but this is where masassa gets even more intriguing when asked about why he invested in Alibaba he didn't talk about the company he just spoke about the founder Jack Mah well he had no business plan and uh zero Revenue but his eyes

was was very strong strong eyes strong shining eyes um I could tell from the way he talk the way he look at he has a Charisma he has a leadership Masa explained that they just talked about a shared Vision he said jackar had very bright sparkles in his eyes which were as bright as the sparkles in the eyes of Bill Gates and Steve Jobs Massa said that him and jackar were both a little crazy which is what caused Massa to invest in other words Massa bet on people more than anything else and over the years

Massa had gotten even more ambitious Massa had decided to create a hundred billion investment fund called The Vision fund which would be used to invest in tech companies with a particular focus on AI to raise this much money Massa had a meeting with Saudi Arabia's leader as masasa knew the Saudis wanted to diversify away from being so reliant on oil and Massa convinced them to put in $45 billion the largest commitment to any Venture Capital Fund in 1 hour you convinced him to invest $45 billion no no it's not true okay 45 minutes $45 billion1

billion per minute so Mason now had the biggest investment fund and was looking for Innovative companies to invest in and one day in 2017 he was heading to visit Trump after he just got elected as president ladies ladies and gentlemen this is Masa of soft Bank from Japan but on that very same day Masa also scheduled a 2-hour meeting with wework where he was going to listen to a presentation from Adam Adam had everything planned out ready to activate the space on masa's arrival everyone was in position ready to throw a big party when Masa

arrived however masassa was running very late Adam grew more and more anxious as the minutes ticked by and Masa still wasn't there when Masa eventually showed up up he apologized and said instead of 2 hours he only had 12 minutes so Adam launched into a shortened version of his pitch and since he knew Massa like tech companies it was all focused on how wework was indeed a tech company and he took Massa to their research and development lab to show in various random projects they were working on this included a standing desk that automatically adapts

to your height and a phone booth with smart lighting it was unclear why any of this was necessary but Adam's message was simple we're a tech company not a real estate company after the 12 minutes were up Masa told Adam to join him in his car and they'd continue talking there on the way to massa's next meeting Adam pulled out his iPad in the backseat of the car ready to continue his pitch but Masa said it wasn't necessary Massa explained he was impressed at how fast wework was expanding in just the last 30 days wework

had open new offices in 13 different cities but in particular Masa liked the vision Adam talked about how they were essentially going to take over the world and so Messa pulled out his own iPad and started writing out terms for a deal where he would invest around $4.4 billion into wework wework had already raised a lot of money but this was significantly larger than any investment wework had ever had it was also the largest investment so far from the vision fund Mass's own Investment Company SoftBank was also putting some money in and so after just

a 12-minute meeting Masa was now writing up a contract in the back of the car that was one of the largest Venture Capital Investments of all time Massa signed his name then handed it to Adam to sign his normally Adam would ask for more money in any deal but even he was shocked by what was happening and so he just signed immediately before this meeting wework had been in desperate need of more cash and yet now they had more cash than ever before and with this new 4 billion investment SoftBank also gave wework a new

valuation of $20 billion making it one of the most valuable private companies not just that but Adam now had a new mentor Massa son who became a father-like figure to him as Adam's own dad hadn't been around much when he was younger Adam was a foot taller than Massa and their appearance couldn't have been more different but they shared a similar vision and excitement for the future Adam said he had a special connection with Massa and Masa told Adam the last person I felt this with was Jack Mah now why was Masa putting in over

4 billion dollar from a 12-minute meeting well massa's strategy with the vision fund was that because he had so so much money he could basically pick the winner in any industry as the companies he invested in should be able to beat any competitors simply by having so much cash and thus if a company convinced Massa they could become the number one player in their Market he would give them basically unlimited funds to make it happen and he clearly believed in Adam this was happening throughout Silicon Valley some have described it as one of the greatest

wealth transfers in history as investor money was being thrown at startups to offer consumers heavily subsidized product and services from discounted ride sharing to food delivery to unlimited movies and this caused whole Industries to become warped and it became hard to know which business models even made sense anymore as these companies were all burning money to try and win market share quickly however whil Massa was clearly entranced by Adam and believed that weor could dominate their entire industry most of the other people at soft bank and the vision fund did not feel the same way

firstly their priority was meant to be tech companies and Ai and despite what Adam was preaching we would very much seem like a real estate company and secondly looking at weck's numbers more closely painted a worrying picture they'd missed some of their targets by 80% and they were nowhere near being profitable so even though the deal had been agreed in principle by Massa and Adam wework employees worried it would fall through once SoftBank started doing due diligence it was clear that most people at SoftBank apart from Massa were very skeptical but SoftBank was led by

Massa and Massa claimed that his insights in those first few minutes of meeting a Founder are often more meaningful than the months of due diligence his company does afterwards he liked to quote Yoda don't think just feel it use the force now admittedly this all sounds insane but Masa had pulled off several incredible deals before and it was his company so ultimately he had the final say no matter the concerns his advisers raised the $4.4 billion investment into wework was Happ happening the investment was officially announced in August 2017 wework became the fourth most valuable

startup in America behind only Uber Airbnb and SpaceX the deal also allowed Adam to sell some more of his own personal Wei work stock 361 million to be exact this was certainly suspicious if you so strongly believe in the company like you say why sell so many shares now but it's believed a big part of the reason was that Adam needed the money to fund his increasingly expensive lifestyle Adam and Rebecca had built five different homes and their personal spending and luxurious trips seemed to be getting out of control despite this Rebecca talked about how

they had an asset likee lifestyle meaning not having many material Goods even though they just bought a new $15 million house their constant flaunting of wealth was frustrating to wework's underpaid employees but then after the deal closed Massa asked Adam a question who wins in a fight fight the smart guy or the crazy guy MAA said the answer is the crazy guy who is willing to do whatever it takes but he didn't think Adam was being crazy enough he said whatever your current strategy is make it 10 times bigger this was something Masa often told

companies he invested in earning him the nickname Mr 10 times often without even knowing what numbers a company was projecting Masa would simply tell them multiply everything by 10 meaning go much bigger and B however in the case of Adam Newman and wework Adam already had insanely high goals the wework team were genuinely shocked to hear Master say that Adam wasn't thinking big enough most people who knew Adam would say he was already the craziest person they knew and yet now his new Mentor was telling him to think bigger and amplify everything by 10 many

believe this was the defining moment in wework history for the first time in his life someone was telling Adam he needed to act [Music] crazier Adam now had a war chest billions of dollars from masaan and his instruction was simple think bigger act crazier any plans to try and be more restrained with spending were now gone Adam's first step was to try and wipe out any competition he invited the CEO of a competitor co-working firm called industrious onto a private jet and pitched him on the idea of wework acquiring their company but the competitor didn't

want to join forces So Adam told him if industrious didn't join with Wei work his team would approach all of their customers and offer them a Year's free rent if they switch to wework instead if that didn't work Adam said he would offer them 2 years free and if any of their tenants still didn't switch wework would give them 3 years free rent this was unheard of there would be no possible way industrious or any company could compete with that now everyone knew Adam did have a crazy amount of cash after the masaan deal so

industrious was definitely concerned by the threat but industrious couldn't figure out how it made Financial sense for we work to do it the losses would be catastrophic he figured Adam must be bluffing and turned him down but Adam wasn't bluffing and we were excited offering fre years of office space to lure away customers from competitors even tiny competitors with just one office were targeted by Adam by 2017 Adam had threatened to buy or Crush basically every single one of we's competition for one of their competitors they sent an employee over pretending to be a potential

customer but whilst he was getting a tour of their building the Weck employee was writing down the names of every single tenant so that wework could contact them all and offer a year free if they switched to wework for another of their competitors they hired a steel drum band to play outside their offices whilst announcing weworks crazy discounts Adam bragged to investors I can obliterate any co-working company I want wework also began filing a lot more lawsuits there were rival companies called your work we laabs and highw work which they sued because of the similarity

of their names the lawsuit claimed that we work objected to the combination of a two-letter pronoun followed immediately by the word work it seemed a little ridiculous and most of these companies being sued were tiny businesses that weren't even a threat to wework so there was definitely a disconnect between Adam's ruthless warlike strategy versus his message of community and positively changing the world after masson's investment weor also tripled their marketing spending immediately they began hiring 50 new employees a week which soon Rose to 100 new employees each week it took them just one year to

go from 100 locations to 200 locations they had a Gong in their headquarters which they bang when opening a new office but soon that was happening so often they had to stop as it was getting too distracting the problem with such rapid expansion is that they were entering markets they knew nothing about when opening a new wew work in koala lampor Adam asked if it was a city or a country we work had around 100,000 members at this point and yet Adam was somehow predicting they'd have 1 million soon then Massa told him why only

a million and not 5 million so everyone within wew work was told to Inc increase their targets and projections much higher to keep up with these wild expectations for example in the entirety of 2016 we work could generated $400 million in Revenue whilst making a massive loss of course but Adam said he now wanted one single region to bring in over $1 billion alone basically the numbers had no relation to reality as Adam urged his team to open even more wework locations they also had to stop doing the same level of due diligence they used

to they started overpaying commissions they started offering 100% of the first year free to tenants and since everyone knew they had so much money and was so desperate for growth they lost the upperhand in negotiations and often wildly overpaid for the leases they were signing the deals were nowhere near as good as they were in the early days of wework when they'd been much more careful with the budget for example they used to negotiate that landlords would pay for renovations of the building but now we work with funding those themselves perhaps worst of all there

was no real Playbook or system it all seemed very happy Hazard and chaotic but the wework team was on strict instructions not to slow down expansion so there was no real chance to re-evaluate or make the process more efficient the original Target in 2017 had been to make a $500 million profit instead wework recorded a nearly $1 billion loss expenses were growing even faster than Revenue now however Adam would say the strategy had changed they were simply staying in growth mode a lot longer Revenue was still Rising which meant so was wework's valuation and that's

What mattered to Adam profitability would come later right was Masa and Adam were happy with the plan many of wework's earlier investors did express some concerns with this ruthless expansion strategy some of them even started to doubt if Adam was the right person to be CEO but it would be a terrible look for the Venture Capital firms to try and push the founder out that had already happened with Uber's CEO and VC firms were desperate to be seen as founder friendly so no matter what doubts they had they went along with Adam's plan plus Adam

shares had extra votes so he had full control anyway another worry for wework though was that an internal study found there was much less community at wework than they expected 69% of wework members said they didn't have any other friends at wework outside of their co-workers suggesting the initial camaraderie and togetherness from wework's first few offices had been lost during the quick expansion in other words maybe Community couldn't be easily scaled after all but if Community wasn't wework's unique selling point what was it when Adam was asked about this he said our valuation and size

today much more based on our energy and spirituality than it is on a multiple of Revenue but Adam dismissed any concerns by reminding everyone wework was not a real estate company Adam started referring to wework as space as a service to capitalize on the trend of software as a service and Adam said what they were building would be bigger than the iPhone and indeed Adam was spending lots of money on more Tech rated projects within wework one of those he referred to as Google analytics for space it was an internal system that would analyze data

from interviews and sensors they placed around the office and it would organize all that data into valuable nuggets of information that could improve wew work they actually were trying to create some pretty Advanced systems but it was used for very mundane and pointless problems for example one of their findings from this system was that people who lived closer together tended to be better friends than people who didn't and they found that people preferred desks near Windows it was hardly groundbreaking insights given how much they were spending to try and develop these systems when it became

clear they were struggling to engineer their own technology Adam went on an acquisition spree but most of the deals seemed completely unrelated to their actual business one of the strangest deals Adam did was spending 13.8 million for a significant stake in wave Garden a Spanish company that manufactured wave pool for Surfers nobody was quite sure what this had to do with Wei work but Adam liked it he also acquired meetup.com in late 2017 for around $156 million despite being in business 15 years meetups finances weren't very good but that didn't stop Adam buying it it

got to the point where the weick team tried to stop Adam meeting other Founders as he'd always tried to buy their companies he thought that if he controlled it it would perform better besides weor had billions of dollars from Massa what could go [Music] [Music] wrong Adam announced wework was opening a location in Africa he said it was not because he thought it was a good growth opportunity but because of the positive effect he believed weor could have on the continent Adam was talking more and more about how weor could have more influence on world

issues than governments and at one point suggested maybe he would be president of the United States one day someone pointed out that was impossible as he wasn't born in America and asked him what about President of Israel but Adam said the job wasn't big enough for him and he suggested he could be president of the world instead we work employees didn't know what exactly to take seriously but either way it was clear Adam's ego was growing along with wework's valuation but Adam said I want to have the big biggest valuation I can because when countries

are shooting at each other I want them to come to me he suggested weor may be able to help solve the Syrian refugee crisis and help bring peace in the Middle East he declared we are here in order to change the world nothing less than that interests me with the money he had from SoftBank and the vision fund Adam decided to create his own fund where he could invest in companies that interested him there was a competition for companies to pitch him ideas called The Creator Awards which Ashton Kutcher was brought in to host the

Investments hadam made included a medical marijuana company and an app that was meant to be Shazam for TV nearly 20% of the funds went to multiple different coffee creamer companies it was unclear what any of this had to do with Wei work when Adam met founders of other companies he was thinking of investing in he'd say that if they weren't trying to raise a billion dollars how could he take them seriously another sign of Adam's ego growing was that he had a meeting booked with Justin Trudeau Canada's prime minister and yet a before the meeting

Adam said he needed to reschedule basically snubbing a world leader and saying his schedule was more important another example was that whilst wework was trying to cram more people into tighter spaces in its offices Adam's office was being made bigger he installed a private saer and call tub along with a large photo of himself on the wall Adam would also make major decisions on a whim he arbitrarily announced they should fire 20% of employees every year to ensure standard state High even though many felt this would cause huge problems and disruption however one of Adam's

biggest decisions was a new scheme where weor started renting our entire office floors to big companies instead of subdividing the space and renting to small companies like they usually did this meant weor would be leasing office space from a landlord then just immediately leasing the entire thing out to huge businesses this did quickly increase weick's revenue and meant even faster growth however it was even more risky as they were giving massive companies like Facebook and Microsoft short-term contracts they could cancel any time not just that but the whole idea behind wework had been an emphasis

on community and people connecting but if the entire floor of the office building was just one company that was no longer the case it was a totally different business model but the reality was Adam was struggling to fill up all the office space he bought with Freelancers and small companies so he now needed to bulk sell to Big corporations once again they tried to make this sound like a tech company so they called this New Concept woss a platform that allowed businesses to Outsource all their real estate needs one of those big companies was IBM

who in 2017 agreed to rent out an entire office building from Wei work but it turned out the building had a lot of issues the elevators were out of order it had patchy internet connection and so on normally the building landlord would be responsible not we work but it turned out this building was owned by Adam himself and he was the Landlord Leasing it to wework this man Adam was collecting rent from his own company and he'd agreed a special deal where he wasn't responsible for repairs he hadn't publicized this as being the landlord to

your own company was clearly a conflict of interests as he set the price Adam had been paid $12 million in rent from Wei work already Adam seemed to be making more and more controversial decisions like this some within the company urged him to bring in a more experienced operator to help him Runway work just like Mark Zuckerberg had brought in the experienced Cheryl Sandberg at Facebook but Adam said he was both Mark and Cheryl and didn't need any help Rebecca obviously backed him up saying isn't he amazing some people think he's the Messiah the truth

is Adam's leadership had worked well when weor was small by setting high goals being heavily involved and yelling when he was upset he'd managed to get the small team to achieve more than they thought they could but as wew could started hiring thousands of employees the chaotic management structure was becoming a bigger problem of course the team around Adam knew some of what he was doing was crazy but they enjoyed the responsibility Adam gave them and Adam's Vision was compelling they all stood to get rich if even half of what he said actually happened so

nobody really stood in Adam's way Adam was increasingly surrounded by yes men who didn't want to ever push back against him Adam also told staff members they should report back anything people said about him when he wasn't around which created a very paranoid culture where people were scared to speak up or they'd be pushed out one of the executives described it as Game of Thrones with Adam pitting Executives against each other but perhaps one of Adam's most controversial decisions was when he announced wework was buying a private jet this again seemed very hypocritical as Adam

had previously cut back travel budgets for employees so they had to fly coach instead of business class yet he was pying himself a private jet for $63 million up until this point we work had rented private jets when Adam wanted to fly somewhere but on one trip the cabin crew found that Adam had stuffed weed in a cereal box and they weren't happy he transported an illegal drug into a foreign country then on another flight there was so much smoke in the cabin that the crew had to put on their oxygen masks after these incidents

the private jet rental companies were very unhappy and so that's why Adam wanted wework to have its own jet for a venture capital back startup to buy a private jet was pretty unheard of in ters weren't happy but of course Adam had control and 63 million in the grand scheme of things wasn't even that much for a company supposedly worth 20 billion so as always Adam got his [Music] way many of weck's employees came straight from college they'd start off feeling excited but then they'd quickly get burnt out and disillusioned after working more than 60

hours a week people were working themselves under the ground and they're just doing it with this crazy smile like oh my God I'm so happy to be here it kind of felt like everybody is miserable but nobody will say anything by the end of 2018 wew had nearly 10,000 employees and yet half of them had been there less than 6 months some expressed they were worried about leaving the company since their only friends left were other wework employees or if they left they wouldn't be able to buy their wework stock options when the company finally

went public which would mean all this underpaid work would have been for nothing plus wework made them all sign agreements not to work with any competitors so they'd have to find a new career path so some felt stuck then one day hadam randomly announced to all employees that wework was Banning meat this was brand new information even to wework's executive team even Miguel wasn't sure what it meant it seemed like Adam and Rebecca were just making things up as they went along and they didn't clarify what this meat ban actually involved or why they were

doing this but many assumed that Rebecca was behind it as she was vegan she said when you eat something you're also absorbing the energy of that thing so if the animal is sad then you're kind of taking in there the wework executive team tried to spin the meat ban as the company being more eco-friendly even though Adam had just bought a private jet but some employees had health issues requiring meat in their diets and more importantly why should their employ be having any involvement in what they ate and to make matters worse Adam was seen

eating meat in wework after the ban it was just so hypocritical when he was the one who created the rule but when he wasn't inventing random new policies Adam was hyping up we work's potential in a speech at one of weor summer camp events he told his employees there are 150 million orphans in this world today if we do the work right we could wake up one day and say we want to solve the problem of children without parents in this world and do it within 2 years Rebecca added and children who are in abusive

situations Adam then continued and from that we can go to world hunger there's so many topics that we can take one by one and we'll be able to tackle anything we set our minds to and just in case you think I'm exaggerating here's the clip we could wake up one day say we want to solve the problem of children without parents in this world we can win and do it within 2 years and then children abusive situations and from that we can go to world hunger and there's so many topics that we could take one

by one and we will be able to tackle anything that we set our mind stood it seemed like Adam and Rebecca's levels of delusion were reaching new levels genuinely telling employees they could solve world hunger but some of the young Workforce brought into Adam's promises one weick employee proposed to his girlfriend at wework summer camp because he said he wanted to do it was surrounded by his extended family he was then fired a couple of months later meanwhile a female employee complained that a colleague had groped her but her claims were dismissed because he was

a high performer if seemed like wew wasn't quite the family Adam claimed it [Music] was most wework team members were surprised to see the news that wework was launching its own Elementary School called We Grow not even the communications team at wework had known about this it turns out that Adam and Rebecca had looked at many school options over the summer and concluded that none of them were good enough for their daughter so Rebecca decided to Simply start her own School sure she had no formal training in education but she felt confident she could do

better than current schools Adam said he expected we grow to be even bigger than we work before they'd even opened the first school they were already planning to open more and he said eventually they'd launch their own college so they could offer education from birth until death now School curri uls normally have a lot of planning involved but Rebecca was quite literally making hers up as she went along after returning from Hawaii she said we gr should include surfing lessons Rebecca also decided which teachers to hire which was difficult because she said most applicants had

the wrong energy but in the Autumn of 2018 the first weo class finally began with 46 students which included Adam and Rebecca's own children tuition cost up to $42,000 per child although there was financial aid available for those less well off as Rebecca wanted children from all walks of life the launch was chaotic Wego forgot to pay its security team who threatened to quit every day it began with teachers playing ukuleles and Bongos there was then often a congol line and 25 minutes of meditation there were also classes in robotics and Hebrew articles appeared saying

is this New York City's most obnoxious Elementary School and pretty much everyone was asking what do they know about educating kids the school would also have a business focus as Rebecca said children are ready to start creating their life's work when they're five Rebecca did cause a little controversy internally when she removed one of the singers in the student band so that her own daughter could be the lead singer instead and when teachers asked for modest raises Rebecca called an emergency meeting and said it was an honor to even be a part of this and

they shouldn't be doing it for money meanwhile Rebecca also began to become more embedded in other parts of wework's business she was even listed as the company's third official founder in interviews she regularly implied she'd always been one of the co-founders of the company talking about working long nights to help get everything started however the other early employees didn't remember Rebecca ever being involved that much it felt like wew work's story was being Rewritten and Rebecca being portrayed as having much more influence in the early days of wework than she really had Miguel was pushed

to the side and it became the Adam and Rebecca show employees also became quite annoyed that when they were deciding things of the office Adam would ask what does Rebecca think even when she wasn't around one of Rebecca's decisions was that any employee overseeing specific regions would be called a c weo she also encouraged couples at wew work to have we babies as then they could get free education at wework schools so just a recap weor was fundamentally a very basic real estate leasing company and yet now it owned countless random businesses including a wavepool

company meetup.com and now their own spiritual Elementary School that Adam's wife was running and yet despite losing hundreds of millions of dollars a year we work with one of the most valuable private companies ever thanks to Saudi oil money being funneled into it by a crazy investor from Japan so that's where we're up to in the story so far but what if I told you it was about to get [Music] weirder do you want to create videos like this if so you're going to want to know about today's sponsor story blocks I've been using story

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new plans to expand into Airlines Fitness and hotels and at one point Adam looked into buying LT another company that was losing huge amounts of money despite only sleeping a few hours a night Adam constantly had energy he wanted to be the world's first trillionaire and said wew work would be the first trillion dollar company so to help achieve his trillion dollar goals Adam devised a new plan Adam pointed out that they were still paying other landlords rent construction companies were still making money from building the offices management companies were getting rich cleaning the offices

and running security and Brokers were getting big commissions for leasing weor space so Adam said wew work should do all of this themselves and vertically integrate wework would build the buildings from scratch own the buildings lease the buildings manage the buildings and offer services within the buildings like designing the space we work would own the whole system in other words weor could become the real estate company involved in every single aspect of the process it was a little crazy to think you could just take over the entire real estate market but unlike many of Adam's

ideas like surf ball companies wework Executives thought this made a lot of sense if they could pull this off it really would disrupt the real estate market however wework was already losing hundreds of millions of dollars a year just from leasing buildings and buying huge amounts of expensive real estate outright and owning the buildings was going to require far more money plus Adam had previously said we definitely do not buy properties that would make us a real estate company but Adam also knew that buying buildings could help raise wework's valuation which is what he seemed

most obsessed with so weor was going to start buying buildings instead of just leasing them the wework team suggested they need to raise another 1 billion to do that but Adam decided they should start the largest real estate investment firm on the planet within Wei work and he said they should raise a $1 billion instead for context Blackstone the world's largest real estate fund manager was also around the 100 billion Mark but they'd been in business for more than three decades Adam wanted to do immediately of course Adam was great at raising money but this

would need a whole new level of investment so he went to meet Massa to tell him about this plan to take on the entire real estate market wework would be the landlord the tenant and everything else in between there was sort of a logic to it Adam essentially wanted wework to become so large and so dominant in the real estate world that they'd be too big to fail already S&P Global ratings had said there was three billion in commercial Mortgage Debt Securities at risk of default if we were collapsed if so many people rely on

your business they're going to have to help you out if you're struggling and by dominating the market we work in theory should be able to negotiate the best deals this was the exact kind of big thinking Massa had wanted Adam and Massa were both excited and they seem to make each other get even more carried away Massa scribbled some numbers down estimating by 2028 wework would have 100 million members and 500 billion Revenue the math seemed to be just vague calculations in his head but he estimated this plan could make we work worth1 trillion by

2028 for context at this point no company in the world was even worth 1 trillion and the entire value of the US Stock Market was 30 trillion yet wework was apparently going to be worth 10 trillion they would need to raise a lot of money to pull this off but Massa agreed his company would put some of the money in Massa would buy out most of weck's current shareholders for 10 billion leaving mostly just Adam Massa and a few other True Believers he said the vision fund would also put another 10 billion into wework making

it the largest ever buyout and investment in a US startup in total Masa was proposing a20 billion package putting wework's new valuation at 47 billion at the time this meant wework was valued more than public companies like Dell FedEx Ford and Ferrari and yet weor was hemorrhaging money at an insane rate but it seemed like every single year weick's valuation was practically doubling and to Massa and Adam that was all that matters since Adam personally owned a fifth of wework's shares he estimated his net worth would rise to 13 billion making him one of the

richest people in the world and thanks to this new investment we could stay private avoiding the scrutiny that going public would involve it was around this time Adam officially rebranded the business to the Wii company after all wework's office space business was now just a tiny fraction of what the company was planning they already had we live the apartment buildings we grow the elementary school and Adam was busy dreaming up less other product lines they could start now they were getting another 20 billion he had a poster on his wall with a mockup for the

first wi City an entire city run by the company so to try and Encompass everything their business was planning they would simply be known as the Wii company whilst Adam would say these new product lines were a sign of Rapid expansion and growth many would say it was a sign of having no Focus for example Steve Jobs had famously asked his senior Executives to come up with a list of Apple's top 10 PR priorities and then said they could only do three of them the message was simple they needed laser focus on just a very

small number of core things that they would do really well but Adam and wework were going the exact opposite approach the more different product lines the better even if they had no expertise in these other markets Adam was just focused on valuation and being involved in so many different Industries helped him sell people on the company's world changing potential and so over the summer of 2018 Adam and Massa began began planning out the details of this new 20 billion investment every project within wework now seemed to have a code name the New Deal between Adam

and Massa was called project fortitude and Adam spoke as if the deal was already done he had a handshake agreement from Massa they were both on the same page so in his mind there was no way wework would not be getting the 20 billion investment as always Adam negotiated hard whilst the contract was being drawn up he insisted even if he went to jail SoftBank wouldn't be able to remove him as CEO without paying a penalty however whilst Adam and Massa were Keen to proceed with this new investment once again massa's team were analyzing wework's

financials and drawing worrying conclusions wework would lose around $2 billion in 2018 and despite all the billions it had received from investors wework was once again low on cash many urged masasa against the deal but he told them to feel the force and push ahead so after months of tense negotiations project fortitude seemed to be done Adam headed off to Hawaii for Christmas feeling excited in fact everyone was excited as investors were getting bought out and we workk employees were finally getting their big pay day Adam had promised little did they know what was about

to [Music] happen it was Christmas Eve and Adam was serving in Hawaii blissfully unaware the project fortitude was falling apart in order to put in $2 billion like agreed Massa had hoped to use money from the vision fund but Saudi Arabia and Abu Dhabi were two of the biggest contributors to the vision fund and they were refusing to allow any more money to be invested in Wei work whil they had planned to trust Massa with the Investments and not get too involved they'd also expected his Focus would be Innovative tech companies and they had the

right to veto deals above 3 billion which this definitely was this meant Masa would have to use his own company SoftBank to fund the investment instead of course SoftBank had a lot of money but they didn't have 20 billion just laying around and A Series of Unfortunate Events were currently conspiring for Massa firstly the public markets were getting more cautious stock prices were falling worldwide and softbank's own stock fell by a third in just a couple of months if it kept falling lenders could demand SoftBank repay some of its loans meaning it would run out

of cash sending SoftBank into a was spiral secondly softbank's Japanese mobile phone arm went public which Masa had hoped would raise a lot of money but it didn't the stock tanked and lost $3 billion the very first day one of the worst opening days ever and Massa was told that if they made another risky bet like putting 20 billion into Wei workor SoftBank stock would almost certainly tank much further it soon became clear the 20 billion deal was no longer possible on Christmas Eve Adam's phone rang it was Massa and he told told him the

project fortitude was dead this was devastating news to Adam his heart sank not believing what he was hearing Adam flew out to meet Massa hoping he could still change his mind but the reality was masassa still wanted to do the deal it's just with the market crash and all the other investors pulling out it just wasn't possible Adam was crushed by this and felt let down by the man he viewed as a father figure from this point on Adam's Behavior became even more erratic however even though sof Bank couldn't invest the 20 billion they'd initially

told wework they would invest they couldn't just put in nothing wework was burning money at a rapid pace and needed cash and soft Bank was already so deeply invested they couldn't just let wew go bankrupt plus they needed to try and save face so it didn't look like soft Bank were totally bailing on them so instead Massa agreed they put in 2 billion here was a small consolation prize compared to the 20 billion planned and would mean weor would still somehow need to get more money so shortly after the deal fell apart Adam roped in

a celebrity friend of his Ashton Kutcher to do a bizarre interview on CNBC where they tried to make out like everything was totally fine now they have 10 billion do invested in this company so the notion that anybody is projecting that they don't have confidence in the company I think is crazy I have confidence in the company the idea was to convince the world the deal collapsing wasn't an issue Ashton Kutcher was not invested in wework himself he said initially he struggled to see how wework was a tech company but when he had a a

closer look he realized it was a tech company he said I realize that through technology that this company has it has a greater capacity than any other company in the entire world to bring people together and to close the Divide between the Haves and the Have Nots they were trying to control the narrative but it was clear Adam was very stressed and not his usual energetic self Adam also claimed we work had about 5 years of Runway so they didn't need the 20 billion from soft Bank this was a lie wework was on track to

run out cash by the end of the year they literally had just a few months left because they'd been spending money so wildly internally at wew work employees were very concerned it was also around this time that a documentary came out about Theos the story of a startup who'd raised huge amounts of money from investors thanks to the vision laid out by its founder but ended up being a complete fraud wework employees noticed an eerie similarity now to be fair a lot of people have compared wework with Theos but there is a fundament Al difference

theosis blood test never even worked in the first place whereas we Works cor Offa was something real that people did genuinely like but what was not clear is whether it could ever be [Music] profitable wew work was opening 79 new locations in December alone more than it had in its first 6 years by the end of 2018 weick was the largest private tenant in New York City now most companies have economies of scale which is savings and cost advantages that come from being a bigger company for example Walmart can buy items in such huge bulk

quantities that they get a much bigger discount than a smaller shop buying those same items however weor somehow had managed the opposite the bigger wework got the more it managed to spend because the team felt so much pressure to grow they had started wildly overpaying for leases and there was also so much waste one example was the furniture for wework offices at one point they bulk ordered orange couches from China and the idea was they could be kept in storage and used for future offices this made sense as they got a great deal the problem

was that when opening new offices they'd randomly decide the couches no longer looked right or the color didn't fit the space this meant they had to quickly go and find new couches often at retail price for thousands of dollars each sometimes if their new couches were running late they'd pay for expediated Air Freight delivery which cost thousands more extra meanwhile those cheaper couches they'd bought in bulk just sat in storage and would eventually be disposed of plus because they'd expanded so quickly we workor often had multiple people doing the exact same job there were three

different teams working on the same project Adam did sometimes tried to demand cutbacks on spending but then Executives would tell him that this would make it harder to grow Revenue so Adam kept the budgets high and one of the biggest waste of money of all was we were trying to be a tech company they had a team of 1,500 people working on technology projects all on high salaries but there was no clear Direction they were scattered between a wide mix of random unrelated ideas for example they had a team dedicated to artificial intelligence who designed

a system of sensors for wew offices that would supposedly give amazing insights about how people worked and used the space but their findings were extremely simplistic like there was a long line at the coffee station so they should hire another Barista you could have seen these things by literally just looking at the office and yet they spent countless hundreds of thousands of dollars on the project by the start of 2019 we work was in 27 countries around the world and a total of 425 different locations with over 400,000 members using their office space from the

outside it was glorious from the inside the truth was shocking we workor was due to run out of money before the end of the year there were no other PR investors left who were big enough to give Adam the money he needed and the fact soft Bank was reducing its investment looked like a major red flag to other VCS so there was only one option left going public selling their shares to the public on the stock market would mean publicly disclosing all their finances and giving the world a much closer look inside wew work's business

which of course Adam did not want but he didn't have a choice [Music] wework's employees were thrilled at the news wework was finally going public they had stock options and believed this would be the moment they cashed in and got rich employees began discussing all the ways they were going to spend their money there was still huge optimism as it seemed like the company's value had just been growing and growing which surely meant they were on the right path we workor took solace in the fact that Uber was also losing billions and yet there still

seemed to be plenty of excitement about their IPO however when Uber listed its shares on the New York Stock Exchange it had one of the worst opening days ever this was doubly bad for Mason and SoftBank firstly it indicated that the public markets were not looking kindly on these money losing companies with fast growth but it was also bad for Massa because he'd invested heavily in Uber himself he couldn't afford for weck's IPO to go as badly as Uber's but Adam thought he knew how to ensure weck's IPO was more successful you see before Uber

had gone public they had made a lot of effort to cut down their expenses to try and demonstrate their cost were decreasing and they were being more financially responsible but of course this meant sacrificing growth Adam felt that slowing the growth down was the reason Uber's IPO hadn't worked out so well so the lesson Adam took was he needed to put the accelerator down even harder so in the runup to weick's IPO instead of showing restraint weok was signing more new leases than ever on boarding a 100 new employees each week and aiming to wow

investors with the rapid speed they were growing money losing companies like wework often pointed to Amazon who famously were unprofitable for many years but then went on to become one of the world's most valuable companies in hindsight it was clear that Amazon had spent years investing in growth and it had paid off in the long run and allowed them to dominate their Market however we work lost nearly $2 billion in 2018 which was higher than any loss Amazon had ever had and Amazon had made such big losses because they'd invested in systems that would earn

them more money in the long term whereas wework's costs seemed to just be spiraling higher and higher with no end in sight so wework really wasn't comparable to Amazon at all but still despite the concerns over the company's finances Weck was officially going public and the banks were all competing to be involved with the IPO as it would be a huge Payday for them but Adam played the banks off each other and he didn't choose who he was going to work with until the last minute so that all the banks kept trying to sweet talk

him for example Goldman Sachs gave adam a pitch showing wework's potential path to $1 trillion they compared wework to Facebook and said wework was growing even faster of course Facebook was profitable but nobody pointed that out Goldman knew what buttons to push to get Adam excited some of the banks did try to be more realistic and tell Adam they expected weworks valuation might be lower than he wanted but Adam got angry with them and said they just didn't get weor now unlike with private investors where you can sell them on a vision and a story

to list on a stock exchange you have to be fully transparent with your finances that starts by creating a document called an S1 form this is basically a guide book explaining to potential investors what the company does and showing its finances it's normally quite a dry document filled with graphs and disclosing to investors any risks of investing however in 2019 wework began creating their S1 document and it would be nothing like anyone had ever seen before of course like everything else at we work it had to have a code name so they called it project

wingspan the first challenge was that Adam was adamant they should not say wework was a real estate company but then what was it the wework team drafting the document struggled to explain what exactly wework even was the next issue was that selling shares to the public would normally mean giving up some control so Adam decided he wanted to boost his voting power from 10 votes per share to 20 votes per share this was definitely uncommon and would mean Adam still kept total control all the bankers told him this was a terrible idea but Adam disagreed

Adam also insisted on a clause that Rebecca would be the one to choose Adam's successor again this is a very bizarre thing for a public company CEO to have his wife decide who the next CEO should be but Adam told them not to worry as Rebecca was almost always 99% right then Rebecca herself got involved d one day she randomly decided we work needed to have a dedication page at the start of their S1 document she wrote The Following we dedicate this to the energy of Wei greater than any one of us but inside each

of us many people involved begged Rebecca to take this out this was meant to be a serious Financial document to convince investors that we work was a safe bet this bizarre dedication talking about energy was the exact opposite of that but Rebecca overruled them Rebecca also f focused on the S1 documents presentation which is not something companies normally spend much time focusing on given it's a financial document with hundreds of pages of charts and disclosures but Aesthetics and presentation had always been key to wework so Rebecca focused on graphics and adding a picture section in

the middle of the documents Rebecca spent endless hours approving every photo they even paid extra to have a famous professional photographer who shot for Vogue come and take some new photos for the S1 documents so ironically they spent hundreds of thousands of dollars on artwork for the document that was supposed to convince investors they were financially responsible at one point Rebecca actually complained the document was getting weighed down with numbers and facts she said we've got to tell the story of Wii she then told them they needed to print the document on recycled paper but

then complained about the texture which delayed things further the levels of delusion had only increased Rebecca told a group of employees the only reason we work was going public was to say Save the Planet the S1 document proudly stated our mission is to elevate the world's Consciousness we have built a worldwide platform that supports growth shared experiences and true success however the biggest challenge of all they had was presenting the company's finances while they were a private company Adam frequently suggested they were profitable even though they weren't are you actually turning a profit in definitely

turning a profit I'm bored of the businesses that don't turn a profit I don't believe in them but now we work had to reveal its financial situation and ordinarily there is a common Financial acronym used in business called iida which stands for earnings before interest taxes depreciation and amortization in very simple terms it's a standard way of understanding a company's operating profitability and using this metric wework was not at all profitable so rather than using this universally accepted Financial metric wework invented its own version called Community adjusted eida which painted its finances in a much

more positive light basically when calculating their profit they would remove costs like marketing design and admin expenses because we were claimed these would dissipate over time even though it seemed extremely unlikely those costs would ever just disappear but by removing all of these massive costs it meant instead of the company making a 933 million loss in 2017 it looked like a $233 million profit we would claim this figure more accurately showed how profitable they'd be if they stopped spending so much on growth however an economics reporter said the metric was extremely misleading and was just

earnings without all the bad stuff wework's financials were further distorted using accounting tricks that made things seem much better to investors than it really was and so the SEC pushed back many times before the S1 was released firstly they were confused about some of the unnecessary photos Rebecca had added but their biggest concern was we work's madeup Financial metrics as the SEC felt they were completely misleading wework made some changes and renamed it to contribution margin but the SEC and wework went back and forth countless times making edits eventually though after endless redrafts the S1

document was released to the world and nobody at wework expected what was coming [Music] next it's fair to say wework's business model was a disaster and a big part of the problem was how it cost so much money to expand every new office needed extremely expensive leases and furniture and lots of employees but what if I told you there was a business model where you can still make crazy money but you can do it from literally anywhere in the world with zero full-time staff needed and basically no startup costs I'm talking about running a faceless

YouTube channel that's exactly what I've done with magnates media and now I get paid to make videos about whatever topics interest me and because I'm not on camera I can run the Channel with literally just a laptop which means I can work from wherever I want whether that's relaxing at home or traveling the world I literally researched this video while sat on a beach in Thailand but you can do the exact same thing whatever you spend time researching for free right now or whatever you enjoy talking about you could create many documentaries about that it's

like running your own Netflix where you choose what shows to make and with the help of online Freelancers you can just Outsource any parts you don't want to do such as editing and here's the exciting part when you make good content YouTube promotes it for free and you earn money from ads sponsors Affiliates and so many other income streams and look I know the words passive income get thrown around a lot but YouTube is one of the best forms of genuine passive income because once you create a library of videos YouTube can keep pushing them

for years to come and every time someone watches you're making money videos I made years ago still get views and earn money every single day with no extra work from me and that's why I think investing in content is one of the best investments you can ever make because unlike investing in stocks which may go down in value once you've made a piece of content it can just keep printing money and that's why it's never a problem if I take a break for a few months as I have a portfolio of old videos making money

24/7 so given how great the business model is of running a faceless YouTube channel Channel why don't more people do it the reality is most people don't have a system to follow they're just guessing what to do and following bad advice that no longer works so they never get any momentum with their Channel but here is the good news I've already put in 5 years figuring out exactly what works so you don't have to you can literally just copy my system which you already know is proven to work and you can also just copy and

paste all the resources I've spent years making so that way you don't need past experience I'll just show you how to turn your interests into a highly profitable business if you'd like to learn more about this opportunity just click the link in the description that says magnetes media.com since this includes personalized help from me spaces are limited so if you're interested click the link in the description now I'll see you there [Music] when wework's S1 document was finally released the backlash was immense there were just so many issues the S1 laid a lot of the

skeletons in we's closet visible for the world to see they'd had no choice but to disclose everything and it was bad one of the biggest concerns of all was how it seemed Adam was enriching himself off the back of a company for example there was Adam's personal ownership of building he was leasing to his own company weor had already paid Adam 20 million in rent on those buildings with hundreds of millions more to come another shocking Revelation from the document was that Adam had personally owned several trademarks related to the word Wii and he had

apparently sold them to we work for $5.9 million so he appeared to be profiting off the word we and this seemed like yet another conflict of interests where Adam was making money from weor he later said he was donating that money to charity but it was just yet another crazy detail in an already crazy document aside from all the strange extras Rebecca had added in the numbers themselves were quite shocking too it turns out that wework was losing an average of $3,000 every single minute another interesting statistic was that in the S1 filing the word

Community appeared 150 times the name Adam appeared 169 times meanwhile the phrase office space got mentioned just nine times like always wework was trying to focus on some abstract vision rather than the reality of what the company was and even though the company was named Wii it all seemed to be about Adam shortly after release there was a huge outpour of criticism including articles and academic papers detailing the major flaws with weck's business the whole thing became a joke with many people mocking everything about the document some landlords began to fear wework might claps and

started secretly reaching out to its competitors employees weren't happy either they hadn't realized Adam had sold so much of his stock was of course they'd not been able to sell theirs it was revealed Adam had cashed out more money than any other startup CEO not just that wework had also restructured the company in a way that meant Adam and the top Executives would be able to pay a much lower rate of tax than the rest of the wework employees once again it seemed like one rule for Adam a different rule for the rest between loans

and stock sales Adam had taken out close to a billion now Adam had pledged in the S1 to give away a billion dollars to charity over the next de decade which he thought would bring a lot of positive headlines but whilst that does seem very generous the penalty if he didn't do it was that his shares would only have 10 times as many votes as everyone else instead of 20 Adam and Rebecca had not expected this backlash they were shocked Rebecca seemed genuinely confused she asked why the Press hated her and Adam so much and

said we're just trying to help the world this was the first time many people had even heard of Wei work so even though a lot of this craziness had been going on for a while this was the first time the public was hearing the full story and the reaction was not good part of the issue was that an S1 document puts the real hard numbers in plain sight all the previous investors had been pitched by Adam allowing him to craft a narrative explain away the losses and sell them on a vision but the raw number

showed that wework was indeed a real estate company not a tech company and it was losing billions a year it turns out there really wasn't that much that differentiated it from its competition the difference was that they were profitable the tides seemed to have turned at one point the market seemed to welcome unprofitable companies as long as they were growing hoping it had become the next Amazon now normaly seemed to have returned investors wanted businesses that actually made a profit this negativity wasn't something Adam was used to as up until now he'd always convinced investors

to just go along with whatever he wanted but seeing all the backlash he realized he had to make some concessions so they backtracked and said Rebecca wouldn't be able to choose his successor and he wouldn't get 20 votes for each of his shares but the damage had already been done during the road show to advertise the IPO Adam was nowhere near his normal slick self this was a guy known for giving incredible speeches yet the stress of the situation seemed to have got the better of him as he rambled aimlessly it was so bad some

people thought he might be high Adam increasingly seemed like a liability things got worse when an article came out about Adam smoking weed on a private jet to Israel nobody with him we work was surprised to hear this it seemed like a standard Adam thing to do but in the midst of the IPO where they were trying to convince the public they were a serious company it was yet another bad luck during all of this Adam was photographed walking barefoot through New York with frizzy hair it didn't look like a reassuring image of a CEO

in control well-known Silicon Valley entrepreneur Scott Galloway published a scathing analysis of the company he said any Wall Street analyst who believes it's worth over 10 billion is lying stupid or both Banks told Adam the valuation was going to be far lower than originally expected it seemed like every day the estimates were falling 25 billion then 20 billion then 15 billion Adam had put so much focus on valuation so being told these estimates from Bankers was hard to take his Stress and Anxiety increased the bank started to question if they could even go ahead with

the IPO the interest in wew work stock was falling fast with all this negative media masaan called an emergency meeting with Adam he said based on the reaction to the S1 we would couldn't go ahead with the IPO or it'd be a disaster they needed to postpone and try again later Adam had never wanted an IPO in the first place but he knew they needed the money desperately or they'd run out of cash and scrapping it completely would be humiliating and make them look even weaker so despite the negativity Adam tried to press on he

told wework employees that he had played the private Market games to Perfection but they were still learning the rules of the public markets for we were employees who believed they were on the verge of getting rich the public reaction was extremely worrying they thought they'd been part of a company changing the world and were about to get a giant Payday for all their hard work however now wew work had become a laughing stock further articles were released detailing some of Adam's odd behavior and ridiculous purchases and Adam's performances to investors were getting worse his usual

confidence and Charisma was gone for the first time he was negotiating from a position of weakness everyone was skeptical of wework rather other than excited The Narrative had changed Adam even started missing some of the board meetings things seemed to be getting worse and worse and it was clear they had to abandon the [Music] IPL Adam didn't know what to do it seemed like they were no longer in a position to go public but they also didn't have the money to continue if they didn't go public as more and more stories about him got published

in the Press he became increasingly unhinged and paranoid it seemed like someone close to him must be leaking information and then it got worse one by one Adam's investors and advisers all seemed to turn on him and told him he needed to step away he'd become toxic all the negativity around wework was directly linked to Adam and his position as CEO was putting the company at further risk technically because of the extra control Adam got he could just fire the board of directors if they tried to push him out and there must have been a

part of him that wanted to do that and keep fighting but the thing is Adam had taken out a $500 million personal line of credit which was backed by his wework stock if wework's value continued to plummet he could be in serious financial trouble of course Adam didn't want to leave but he knew that him staying was tarnishing the company further and thus putting his own personal Fortune at risk as well all his houses around the world would be at stake eventually with all the board now against him Adam made the decision to step away

from Wei work but not without first negotiating himself an extremely generous exit package Adam wanted a big cash payout to leave or else he wouldn't give up his voting shares in other words he wanted payment to stop hurting his own company SoftBank agreed on $185 million consulting fee for him to walk away many felt it was shocking that after every Adam was getting any payout at all let alone W this big not just that but Adam managed to negotiate that SoftBank would loan him 500 million so he could pay back the line of credit he'd

taken from his bank on top of that SoftBank had to agree to forgive almost $2 million in personal expenses Adam had paid through the company meanwhile SoftBank agreed to put in a little more money to stop the company going bankrupt they now valued we work at 8 billion a huge drop down from their own 47 billion valuation just 9 months ago wework was imploding at a speed very few companies in history ever have over $40 billion of paper value had been wiped out in months and this valuation would be reduced even lower again very shortly

however the idea of this new investment was to try and show SoftBank was still confident in the company even though the IPO had been called off but in reality this was just to try and stop the company going bankrupt wew work employees who had stock options were horrified to see that because we work's valuation had fallen so much their stock stock options were now essentially worthless they were even more horrified to see that Adam could sell up to $970 Million worth of his shares so in other words investors lost billions employees were stuck with worthless

stock options and yet Adam Newman walked away as a billionaire whilst Adam had once Been Loved by wework employees now he had managed to anger pretty much everyone at the company particularly when you've been preached that about it's all about we if that's your deal and you're sitting on all his money and you really believe in what you were saying the whole time you should give some of the money back to help the employees who got screwed his reputation was in tatters that year people dressed up as Adam Newman as a Halloween costume of course

Adam was the reason things had got so big in the first place but he was also the reason it had fallen apart and seeing him leave behind the wreckage whil personally getting a billion doll exit package did not sit right so many wework employees had put so much work in doing all this unpaid overtime believing in Adam's Mission however to fully put all the blame on Adam is honestly unfair those close to Adam from the banks to investors had all encouraged Adam whilst weck's value was rising and they were getting richer they knew about his

crazy behavior and wild spending and they had facilitated it they only turned on him when it threatened to impact them negatively this was a systemwide issue as Adam himself said the people backing him were supposed to be some of the smartest investors and the rising valuation had kept reinforcing to him that what he was doing was right our valuation was given by the most sophisticated valuers in the world but now that Adam was gone what did that mean for we [Music] work after Adam left we work postp own its IPO indefinitely the plan now was

ruthless cost cutting no more summer camps or huge teams no more wild Acquisitions they were going to be a straightforward Office subleasing business and tried to become profitable all those random Ventures we work had started or acquired like surf pools meetup.com and we live would all be closed or sold off at massive losses some of the companies Adams bought would just shut down completely Adam's jet would also be sold we would Clos down many of its buildings and thousands of employes were fired as for the other co-founder Miguel it was very unclear what his role

even was anymore so he left soon as well now Adam had previously told CNBC that wework had four to 5 years before needing to raise more money most people knew this wasn't true but things were even worse than most people thought weor basically had less than two months before running out of cash completely which is staggering when you consider how much money they'd raised from investors already but wework was broke so much so they literally couldn't afford to fire employees they wanted to lay off thousands more staff to cut costs but they didn't have enough

money for their severance pay everything they'd been doing had been focused on growth at all costs with the expectation they'd be getting huge amounts of money from soft bank or the public market but now they had no more investment coming in and no investors wanted to go near them and then just about the worst possible thing that could happen for wework actually happened Chinese researchers say they have identified a new virus Corona virus officially hitting the us today the World Health Organization officially announced that this is a global pandemic for a co-working company who makes

money by squeezing people into smaller and smaller offices and emphasizes communal parties and events covid-19 was about the worst thing that could have happened as City shut down and the majority of people began working from home weick was in a terrible position they'd taken on long-term leases from landlords that they couldn't get out of and had to keep paying whil they'd offered their own tenants very flexible short-term contracts that they could easily cancel which they did the upshot was wework's finances were already dire but the pandemic just added fuel to the fire the pandemic also

caused SoftBank to try and pull out of the latest deal they'd agreed the reason SoftBank had been putting in more money was simply to try and Salvage the company from bankruptcy but now it looked beyond saving SoftBank pulling out again also put Adam's exit package at risk So Adam ended up suing soft bank maason had once been his mentor his partner the man who shared Adam's excitement and vision for Wei work now he was suing him the lawsuit would drag on a while but Adam would eventually get his settlement and walk away with a lot

of money although Adam himself then got sued by some of his former wework employees on the grounds he'd misled them on the valuation as for wework going public was the only way they'd be able to raise the money they needed to keep running but given how badly it had gone last time they attempted that they knew doing it the official way wasn't an option so in 2021 the company reached a deal to become a public company via a special purpose acquisition company known as a spa this is basically a publicly traded shell company with no

assets except cash that merges with a private company thus allowing this company to go public but avoid the usual lengthy and highly regulated IPO process we work struck a deal to merge with back and list publicly it was valued around $8 billion a huge fall from its peak but it was finally going public unsurprisingly though the public markets were not remotely convinced by weor by April 2023 wework faced the listing on the New York Stock Exchange as its stock price had fallen below the $1 threshold the company was now valued at just 360 million later

that year we work once a $47 billion firm fils for bankruptcy after acre $2.9 billion of debt as for Adam Newman given all that had happened you would think he would never be involved in running a company again [Music] right after we work spectacular claps and all the negative media attention Adam and Rebecca and ially went back to Israel but they didn't last long before returning to America Adam was restless and wanted to get back in the game and back in the spotlight he began buying residential real estates and in 2022 he announced a new

startup called flow Adam Newman was back so Flo is an experienced first residential real estate company we're vertically integrated so we have technology we have operations and we have H the people that bring it all together its mission is giving renters a sense of security community and genuine ownership the details are all a bit vague but just like we work Adam is talking a lot about community and saying this new company is the future of living and once again he is also talking about how it's a tech company flow is Tech first and product first

we use technology as a tool to achieve the mission and the goals that we have Flo said its apartment would incorporate crypto wallets and a model where renters could get equity in the apartments amazingly VC firm A6 invested $350 million in Adam's new business this gave the company a 1 billion valuation before it had even launched or made any money but Adam said he would learn from the lessons of we work we built a global brand we had over 10,000 employees that were so passionate we helped redefine a category and every single thing we did

had to do almost anything and everything with Community I am the kind of person that actually learns more from from their mistakes than from their successes so all the great things we did in the past we're going to do again but as well as launching his new company that's already valued at a billion dollars another twist came when Adam tried to buy wework back after it went into bankruptcy co-founder and former CEO of wework Adam Newman reportedly making a $500 million bid to buy the company according to the Wall Street Journal what will happen with

weor and Adam's new company Still Remains to be seen but the reality is this whole story has a pretty troubling lesson because despite everything Adam is still Rich he lives the high life and there were no real repercussions You could argue Adam played the system perfectly time and time again we see that Society is wooed by charismatic Leaders with a big Vision we're all susceptible to a great story and being able to craft a narrative people buy into is arguably one of the most powerful skills in the world what happened with wework was crazy but

it certainly won't be the last time something like this [Music] happens now if you have made it to this point I just want to say thank you as you can tell from the length of this video I loved researching this story and I hope you've enjoyed the wework story as much as I did when I started magnates media I never thought I'd be making movie length videos like this and so I seriously really appreciate you watching and supporting the channel and coming on this crazy ride with me if you do want more business stories like

this feel free to subscribe or click here to check out some of my other videos but either way thanks again for watching I'll see you next time cheers