Hulu’s WeWork Documentary: 4 Takeaways for Real Estate Investors
WeWork: Or, Making and Breaking a $ 47 Billion Unicorn is top documentary on Hulu, and it’s not hard to imagine why. Who doesn’t like to see a confident businessman with a “god complex” fall out of favor?
This documentary is about the charismatic Adam Neumann, co-founder of the once booming, hip and sexy unicorn WeWork, and how he managed to sell a standard real estate company that rented office space to investors and millennials next on Facebook or Uber – a company that would change the world.
The crazy thing about WeWork was that investors bought what Neumann sold – $ 47 billion. Here are four things commercial real estate investors should take out of this movie.
1. Be careful with visionaries
WeWork came about at a good time. More independent contractors (freelancers) and entrepreneurs were on site and needed a better option than a cafe to do business with. WeWork got it right. But Adam Neumann wasn’t satisfied with branding his business for what it was: a real estate company redesigning office space. Instead, he wanted to change the world.
Neumann explains in the documentary that instead of “I” on iPhone and iPad, he prefers “We”, which reflects a communal aspect of life that mirrors the Israeli kibbutz he once called home.
Neumann was a millennium with a vision. Sometimes visionaries win big: Steve Jobs, Elon Musk and Walt Disney – and sometimes not: Elizabeth Holmes from Theranos and Adam Neumann. Harvard Business Review examined business visionaries and concluded that “their managers created confusion and uncertainty about what business strategy entailed”. This description describes Neumann and his vision “WeWorld”, filled with We’s: WeGrow (a school), WeLive (small apartments), Rise by We (a gym) and even WeWork Mars (as it sounds). The problem is that after everything was said and done, Neumann just didn’t know what he didn’t know. Investors should be wary of grandiose claims.
2. Do your due diligence: Don’t just ride the waves
WeWork used the “FOMO” (fear of missing out) technique to attract employees and investors. A staff member on the film feared he would miss it if he took just a few days to ponder a life-changing proposal for WeWork. He immediately joined WeWork and even moved into WeLive, a kind of adult dormitory.
Almost from the start, this new hire was so in love with WeWork that he no longer wanted to interact with anyone outside of WeWork. The collaborative atmosphere of friends from the immediate millennium who started partying at 4 p.m. each day was too undecided. And this draw was so much part of the corporate culture that outsiders often asked, “Is that a cult?”
Neumann was drunk (and probably just drunk or high) with power most of the time – at least that was the scene he staged for his followers, aka clerks. Neumann sold a picture from the 4pm beverage festival to the WeWork version of the Fyre Festival.
Millennials and investors saw that something big could happen and they took a leap in confidence – not exactly the best strategy when it comes to investing. Remember the saying, “Don’t judge a book by its cover.” Investors would also be wise to invest in substance over image.
3. Evaluate the board of directors
While not exactly fun, it is to your advantage to evaluate the board before investing in any company. The board at WeWork just couldn’t stand up to Neumann and made him go wild while burning cash.
A scene from the documentary showed Neumann being treated like the emperor without clothes: he called a latte a cappuccino and vice versa, and instead of correcting it, baristas only gave him a cappuccino when he asked for a latte and a latte asked for a cappuccino. Yes, red flag here. This scene shows that no one had the courage to challenge Neumann, and that’s usually not a good sign for a company.
4. Understand the business
Neumann’s company would likely have stayed strong if it had only focused on its main business: a coworking space. But Neumann pretended the company was something it wasn’t: a tech company (probably because millennial-run tech companies are cool). The problem is that WeWork wasn’t a technology company: it used technology and tried to implement some kind of social media for WeWork employees, but nobody used it. If you don’t understand the business model, take that as a red flag. Maybe it’s because the model doesn’t make sense.
The bottom line of Millionacres
It was investors like SoftBank Group (OTCMKTS: SFTBY) who grossly overestimated the price of WeWork. Investors thought they were investing in something profitable. But if they had done their due diligence, they would have found that WeWork was not making any projected revenue. In fact, the company was losing money. Still, investors continued to feed the beast. Don’t be that investor.